Poverty and “the end of austerity”

7 December 2018
By Andrew Haldenby
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While politics is convulsed by Brexit, it was interesting for the Leader of the Opposition to choose to question the Prime Minister this week on poverty and austerity. Specifically he raised the recent report by Professor Philip Alston, United Nations Special Rapporteur on extreme poverty and human rights.

On such emotive subjects, it is easy for the political debate to generate more heat than light. The exchange at PMQs was like that, with the Prime Minister, unsurprisingly, rejecting any criticism. The UN report has clearly been written in anger, and its emotion will inevitably put Ministers on the defensive. But it is worthwhile looking beyond the tone of the piece because the subjects that it covers are so important. The Ministers have said that they want to move beyond “austerity”. The question is how best to do so.

At heart the report is making two arguments. The first is that “poverty is a political choice” (p.22) i.e. increases in poverty, as measured for example by the increasing use of food banks, is due to the policies of “successive governments”, both on public spending and welfare reform. The second is that Universal Credit is having a particularly damaging effect and should be reformed, in particular by changing the date of payment so that it is paid immediately rather than after several weeks.

On the first, I think the Special Rapporteur oversteps the mark in implying that successive governments have sought to create poverty through their policy decisions. I am happy to believe that proponents of welfare reform – including Gordon Brown, Frank Field, Jack Straw, David Blunkett, Iain Duncan Smith and in the USA, Bill Clinton – have sought to improve the way the system works, in the interests of citizens. The better question is whether their well-intentioned policies have worked.

On that point, it is worth reflecting on the public spending policy choices that the Coalition Government made after 2010. Ministers decided to protect certain areas of spending and so required larger cuts elsewhere.  Specifically they protected the Health Service, schools and benefits for pensioners, while requiring larger cuts in other areas, in particular benefits for working age people and for families and local government. Some of this extra spending, in particular on the NHS, would have helped people on low incomes (and the UN Special Rapporteur should have acknowledged that).  Still, the overall approach was to look for higher savings from benefits from working age people and families.

(At the time, Reform argued against ring-fences on any budget, on the grounds that every budget needed to be examined, and also because of the disproportionate reductions that would follow in other areas).

Interestingly, current Ministers have made a similar decision i.e. to “end austerity” by a big increase in health spending while keeping other budgets flat in cash terms. That may, again, turn out to be an unbalanced approach.

Another policy decision was to rebalance public spending predominantly by spending rather than taxation. The 2010 Government aimed to eliminate four-fifths of the budget deficit through spending reductions and one-fifth through tax increases. There was a good argument for doing this, given the scale of the spending increases in the 1999-00 – 2008-09 period. As the deficit proved hard to eliminate, however, Ministers could have revisited that decision. They should also have pushed harder to get greater value from the money spent on public services, in particular that spent on the NHS, the largest budget, where reform all but stopped in 2011.

On the second, Ministers will certainly be looking to reduce the length of time before claimants receive Universal Credit. The decision to delay payment was well-intentioned i.e. to make a welfare payment feel like a salary cheque, paid at the end of the month. It has been reported, however, that the delay in payment places great pressure on family budgets and is a key reason for the increase in use in food banks. The Special Rapporteur may well succeed in his recommendation to make payments of Universal Credit immediate.

As others have said, the paradox of the Brexit debate in 2018 has been that the furore over the negotiations has prevented politicians addressing the root causes of the vote itself, not least a demand for greater prosperity. Please let us have that debate in 2019.

The paradox of the Brexit debate in 2018 has been that the furore over the negotiations has prevented politicians addressing the root causes of the vote itself, not least a demand for greater prosperity. Please let us have that debate in 2019.