Category: Poverty

Coping with inequalities in wealth

There has been some interest recently in wealth inequalities, for example in work by the Fairness Foundation.  Much of this focuses on the wealth of the very rich.  In recent correspondence, I’ve been struck by the extent to which others considering the issue have focused, not so much on the implications of inequalities in wealth, but on fair taxation and inequalities of income – problems relating to benefits and low wages.  I’m sceptical that either focus can address wealth inequalities in a meaningful way.

Any conceivable redistribution of income will not (by definition) touch the established holdings of people who hold assets as wealth – typically in the form of real property or financial products.  There may have been an argument in the 1950s and 60s for heavy taxation of income (the flow) to prevent the accumulation of wealth (the stock), but the genie is out of the bottle; the wealth has been already been accumulated. Income taxation now can slow further accumulation, but that does not begin to address the issue.

That may seem to some to constitute an argument for wealth taxes, such as property taxes, inheritance tax or taxes on capital transfer.  That makes sense in terms of fairness – subjecting wealthy to the same criteria as others – but it can only ever have a limited effect on the distribution of assets, because they are based on a proportion of wealth at best.

What we need to do, instead, is to reconsider how the problems created by unequal wealth might be addressed.  Wealth inequalities may have seemed harmless to Tony Blair, who said he was “intensely relaxed about people getting filthy rich”, but they have implications for people who don’t share in that wealth.  In particular, they create obstacles to access to land, housing and, to the extent that people have become rich by using their assets to extract money from people who aren’t rich, they make for problems relating to rent, poverty and debt.

I think there are two main directions to go in.  The first is to consider the problems, not of the rich few, but of the many poor – in these terms, those who do not have assets. More income will help deal with issues of poverty, debt and manutrition; and regulations to cover those circumstances, such as protection related to financial services or limiting the interest that any  creditor can receive,  would have direct benefits.  However, in important fields of life – especially rent and residential care  – the main beneficiaries of greater income support will be those who hold the assets on which those services are based.  Supporting income is not enough.

The second direction is to establish a base of assets that will be available to people regardless of their financial circumstances.When the National Health Service was introduced, it had a major effect on the resources available to the poor – an effect that is largely concealed by the way we choose to keep public accounts.  Part of this can be seen as an implicit income: everyone in Britain has, whether they use the service or not, a financial gain equivalent to the value of health insurance. Part, however, is the equivalent of a savings fund: the protection of assets that in other circumstances would be exhausted.  When people have access to social housing, libraries, museums and parks they have gained command over resources – if not quite as good as ownership, something pretty close.   And when those resources are withdrawn from people, they feel the loss.

A wide range of basic services could be treated in this way.  They include, for example, funeral plots, free transport, legal aid, university education, wi-fi, child care, basic banking services and mailboxes.  Provided publicly, these things allow people to act as if they had the assets themselves.  That would have a much great effect than any focus on the assets of billionaires.

A place for anti-poverty strategies

One of the difficulties faced by old-timers in the field of social policy – and I have reluctantly to admit that that description applies to me – is that the same ideas, good or bad, will always come round again.  I was mildly intrigued then, rather than deeply excited, to see a report from LSE about local anti-poverty strategies.  It’s nearly 25 years since I prepared an anti-poverty strategy for Dundee Council, their first.  Some of the lessons that the LSE report draws were evident in that exercise: the importance of ensuring that local actors buy in to the strategy, the need for an action plan, and the necessity of having some means of monitoring implementation and outcomes.

There are, however, some other lessons that it’s important not to lose sight of.  The first was to produce a plan for everyone in poverty, not just those living in deprived areas.  The second was the need to be inclusive – to let people with different ideas about needs and priorities have their say – and not to impose my own definitions or understandings on people.  The third was to allow people in poverty to identify their own priorities.  Before I did this work, for example, I hadn’t understood how important pets were to people’s lives.  That’s the great advantage of open-ended, qualitative research – it gives people scope to say what matters most to them.

I also found, in three successive focus group interviews,  although I’d come to talk about poverty, they all wanted (quite independently of each other!) to talk about deafness.  It wasn’t right for me to tell them that they were off the subject – far too many people in poverty have their concerns overridden by well-meaning academics.  Poverty is a much broader topic than managing on low incomes. The first thing any researcher or planner needs to do is to listen.

 

 

Misreading the SDGs

Although I’ve been booked in for an online conference on the Sustainable Development Goals, I’ve found hardly anything in it I can relate to.  A large part of the problem rests with the SDGs themselves.  There are simply too many tests, and too many priorities.  Wildavsky, in Speaking truth to power,  complains that long lists of targets become “mechanisms for avoiding rather than making choices”.  The Economist commented, when the SDGs were first announced, that “a set of 169 commandments means, in practice, no priorities at all.”

A second problem rests in the voluntary nature of the SDGs.  Governments have been left to decide for themselves what they are going to choose from the pick-and-mix in front of them.  In this respect, the process looks a lot like the ‘open method of coordination’ in the European Union – an excuse to carry on with whatever they were doing before.

The third problem, however, rests in the injection of that word, ‘sustainability’. The agenda of the conference I was booked in for seems to be devoted entirely to sustainability – nature, climate change and the planet – and says virtually nothing about development.  As so often happens, the discussion of the needs of the global south has been been diverted into a discussion of the priorities of the developed world.

Nigeria needs to spend more on social support

I was alarmed to read a report in the Nigerian Observer, which told me that the World Bank was pressing Nigeria to ‘reduce the poverty net’.

If structural reforms are not implemented, Nigeria’s future looks bleak, per capita income will plateau, Nigerians will not have a full-time job by 2030 and if the employment rate does not improve, 23 million more Nigerians will live in extreme poverty by 2030,” according to the [World Bank’s] chief economist.

The report goes on to list the kinds of reforms that are being looked for: support for the private sector, ‘unlocking’ private investment, introducing ‘critical’ macroeconomic and structural reforms.  That, on the face of the matter, looks like a call for ‘structural adjustment’ and a return to the ‘Washington Consensus’, which emphasised liberalisation, privatisation and fiscal discipline.  Structural adjustment was not an unmitigated disaster – its effects were mixed – but it did lead to substantial hardship  and in some cases created positive obstacles to development.  One might have hoped it had been left behind in the 1990s.

As it turns out, however, this is not what the World Bank has been saying at all.  The Bank’s Nigeria Public Finance Review bemoans the chaotic arrangements that characterise many of Nigeria’s current policies, but the central theme is very different: Nigeria needs to devote far more of its resources to  public expenditure, and it needs particularly to expand its systems of social support.  Yes, it calls for ‘fiscal adjustment for better and sustainable results’, but it also argues that ‘Nigeria’s social spending is too low, both in levels and as a share of budget resources’; that education and health provision is not enough to raise human capital; and that government and the states need to raise revenue substantially to pay for it.  Nigeria has been shaping up to become one of the world’s largest poor countries – ‘the world’s second-largest poor population after India’. The World Bank’s policies have been misjudged at times, but this is not one of those times.

A few reasons not to cut the value of benefits

The most obvious problem with cutting the real value of benefits is that it will plunge people further into poverty.   It’s not a great surprise that people on benefits and low wages might be going without food; that’s been a recurring problem since at least the early 1980s.  It’s been estimated that there are two and a half million people in Britain who are destitute.  There will be more.  Expect growing malnutrition, and the short and long term harm to public health that goes with it.

A policy of impoverishing benefit recipients, however, will affect more people than just the recipients. There are the macroeconomic effects.  Cutting the value of people’s benefits would cut the demand for goods and services, at a time when the economy is teetering on the edge of a slump.  We know that people on lower incomes spend proportionately more of their income than richer people do – that much is self-evident, because people on lower incomes don’t have resources to save.  Research for the IMF has calculated that benefits for poorer people produce more of a multiplier – a beneficial ripple outwards – than tax cuts for richer people.  Conversely, withdrawing money from poor people will reduce demand  more than withholding it from richer people.

Next, there are sectoral effects.  Poor people spend proportionately more on food and energy than people on higher incomes do. Local shops and community businesses depend on their customer base; if that base withers away, so do the businesses that serve them.

Now to labour markets.    Most benefits, by quite a long way, are not concerned with whether or not people are part of the labour market: pensions, child benefits and disability benefits account for three quarters of the cost of benefits, and other benefits, notably Universal Credit, extend to people who are working as well as those who don’t. The mean-minded reluctance to support people on benefits is often justified in terms of the ‘incentive’ to work.  As benefits for unemployed people currently stand at something like 15% of the average wage, one might have thought that there was every incentive to work for pay. But there’s more going on here.  Many years ago, I heard a senior executive from the Danish social security system explain that they didn’t want to make too little provision, because if people got used to living on very low income that would undermine their incentives to work.  I dismissed that argument  at the time – the evidence didn’t seem to show much of an incentive or disincentive effect in either their system or in ours.  But the speaker had a point.  If we want people to engage in a high-wage economy, the last thing we should be asking those people to do is to survive on a pittance and  take any low-skilled job that comes up.  Forget the gibberish about preparing CVs: we should be training, getting people into education and funding internships.  We have to put more money into the process, not less.

Finally, microeconomics.  One of the central arguments that’s made by free-market liberals is that markets need to be able to operate.  Indeed they do, but markets have to be fed.  When people get cash benefits, those benefits are spent in the market.  When incomes are very, very low, people have less ability to participate in markets, and market providers have less reason to engage with them. Lower incomes mean more uncertainty for businesses and for poor people, more debt, and more debt defaults. This is the opposite of anything a free-marketeer should want.

 

Retrenchment after the pandemic

An outstanding report by Isabel Ortiz and Matthew Cummins explains what’s been happening to welfare around the world as the pandemic recedes.  A disturbingly large number of countries – 143, covering 85% of the world’s population – have been introducing ‘austerity’ measures, aiming to scale back the role of the state.  More than 50 countries are planning to cut services back to less than they were before the pandemic.

For many of these countries, the policies which seem most vulnerable have been introduced relatively recently – notably expenditure on health care and cash benefits.  A commitment to health care seems to have been maintained in most, while changes to cash benefits or ‘social protection’ have tended to focus on ‘targeting’ (or limiting entitlement) rather than the wholesale abandonment of such policies.  It’s worth considering, too, that in the past the legacy of managing major crises – famously, through the impact of war – has been to increase, not to reduce, expectations and the role of the state.  On that basis, I don’t believe this retrenchment represents a long-term trend – but it is a major setback.

What kind of support can be offered to people on low incomes?

Many people in the UK are facing destitution; at least 2.4 million people are there already. One of the complaints we hear most about proposals to cope with current threats to household income is that the proposals are not adequately targeted.   What that usually means is that some people on higher incomes will benefit.   The call goes up, repeatedly, for any benefits to be confined to people on low incomes.

It’s not easily done. Introducing a new means test would be complex, hard to roll out and liable not to reach large numbers of the intended population. There are ways forward, however.  The mechanism used for Cold Weather Payment, for example, gets the benefit to recipients of Pension Credit and to a range of recepients of Universal Credit, including those with children under 5 or people with a range of disabilities – there doesn’t have to be cold weather to call that mechanism into play.

If the aim of benefits is to redistribute income in general terms, there’s an  argument for doing something like this.  That’s true because overall, the effect of making payments on this basis is to improve the average income of people in the lowest parts of the income distribution, generally at the expense of those on higher incomes.  What it can’t do, however, is to protect the full range of people who stand in need of protection.  More than a third of all pensioners who should get Pension Credit don’t.  Official figures claim that Universal Credit goes to 80% of those entitled, but that is highly implausible  – Jobseekers’ Allowance had a takeup of less than 60% and Universal Credit has subjected hundreds of thousands of people to sanctions, exclusions and delays.  And that, of course, only takes account of the people who are supposed to get the benefit.  More people are on very low incomes, but not entitled because they have some savings, because they have theoretical or imputed income attributed to them, or because they fail to meet other conditions such as availability for work.

Any process which calls for a selection to be made has to be subject to some kind of test, and any test is likely to exclude the people who we are supposed to be helping.  The situation has been made worse, however, by the progressive limitations on the scope of benefits that have been imposed by successive governments.  We might have been able to argue, forty years ago, that we had a safety net – an effective minimum income, even if there were some gaps.  We no longer have the same.

That, then, leaves the outstanding question: what can we do to help the people who are most at risk now?  Coming back to the figures on destitution, we know there are three factors which come up repeatedly about destitute people.  They are people with complex needs, migrants, and they are likely to be single.  Any scheme which does not cover those three contingencies is not going to protect others from becoming destitute; and we know that this coverage is not on offer within the scope of the existing benefits system.

There are two main options.  One is to address the specific issues which are causing the current crisis – in particular, the costs of fuel, food and housing.   Labour has proposed a temporary cap on energy prices.  A cap on energy costs, certain foods or rents would would imply direct interference with the market.  We have done all of these in the past – the control of milk, eggs and meat in the 1950s and 60s, the use of rent control, and the current price cap on energy – so we can say that this is feasible.    This would, however, require a fundamental change in the way that governments manage the economy, and indeed on how they think.

The alternative is to think about ways that people can manage in a market-based economy, increasing their command over resources overall.  That can be done both by removing limitations which work particularly against people on low incomes (such as the pernicious effect of laws on debt and debt recovery, or the price discrimination against prepayment meters) and by finding alternative ways for essential costs to be met – such as child care, general needs housing and travel passes.  What wouldn’t work, in this context, is simply giving people more money to pass to the energy companies. Giving people generic money will not cope with the pressures that specific commodities are creating – it will just put up the prices of those commodities.

Additional material, 25th August

The Resolution Foundation has just published a careful and considered approach to targeting.  They recognise that supplementing people on means-tested benefits would fail to reach 40% of everyone in the lowest income quintile – that is, the bottom fifth.  Their suggestion is for a social tariff, more broadly based than current means-tested benefits, covering benefits, pensioners and low earners; but that still suffers from the outstanding problem that it is not possible to target people on lower incomes without introducing ‘a new means-tested benefit outside the benefit system’.   Coverage of people with complex needs could be improved by extending this to cover disabilitiy benefits, and coverage for migrants by removing restrictions on claiming after entry to the country, but there would still be gaps.

The way out of poverty is not to be found ‘holistically’

I attended a session the other day that was intended to discuss the Scottish Goverment’s current plans for tackling child poverty.  A word that was used repeatedly in that document, and so in the presentations, jarred with me.  The word is ‘holistic’.  The plan promises a ‘holistic’   response at many points, and in a range of different contexts – such as employability, support, income generation.  What could be wrong with that?

To my mind, there are three great flaws in this approach.   The first is the implicit assumption, in much of this, that the appropriate way to respond to poverty is ‘person-centred’, personal or individualised.  Here are some examples:

We will invest [in] Whole Family Wellbeing Funding … This will help transform services that support families to ensure that all families can access preventative,
holistic support which is wrapped around their needs, and provided when they need it and for as long as they need it.

Through direct efforts to get more cash in the
pockets of families now, alongside a genuinely holistic, person-centred package of family support, we can help to ensure families receive the right support at the right time, for as long as they need it, creating the  conditions for families to navigate their way out of poverty.

It takes all of us, across Scotland, working together – united in focus  and purpose – to deliver the change to  how public services are delivered, moving to a person-centred holistic approach to supporting families.

In the published document, there are more than thirty similar phrases to choose from.  It should be recognised, however, that the circumstances that lead people to be in poverty are not, for the most part, specific to the individual or of the family.  The central purpose of the strategy is not to deal with the individual circumstances of poor families, but to reduce overall the numbers of people who are falling into poverty.   To do that, the focus has to be, not just on those who are poor currently, but on the throughput – the very large numbers of people, actually most of the population, who will pass through poverty for an extended period.  That calls for a structural perspective, not an individualised one.

There are strong hints in the figures where the problems are likely to be concentrated.  Why, for example, are most children of young mothers likely to be poor?  The answer has little to do with personal or individual factors.  It’s because the capacity of women to earn is critical to household income,  the children of young mothers  are far more likely to be young, and young children have to be looked after.  The situation calls for higher income for people with responsibility for children, and extensive, affordable  child care – ours is almost the most expensive in the OECD.

The second problem about the claim to be providing ‘holistic’ services is that it’s not true.   It doesn’t happen, anywhere, ever.  The reason why we have medical practices delivering health care, schools providing education and social security providing money is that these are all things that matter, that need to be done, and require specific routes and channels to be delivered.  We often hear the complaint that Scottish services are based in ‘silos’.  Of course they are. The doctor doesn’t teach your children to read, the social security officer doesn’t allocate houses  and the social worker is not there to take your appendix out. It’s true that specific services can be transformative, changing every part of a person’s life. Decent housing can turn someone’s life around in days, but that doesn’t happen because of an holistic assessment; it happens because housing is so important for people’s lives. The most effective strategies for  dealing with poverty have generally worked by focusing on one of the elements that lead people to be deprived – elements such as health care, education, income support or housing – and removing part of the burden from poor people.

The third issue is about policy. Targeting resources on  poor families has a clear value here and now, but it is not the only  way to deal with the problems.  We could do much more. To safeguard people now and in the future, we need to change the conditions which underlie the experience of poverty.  I have already given the  example of  child care; that needs to be done as a universal basic service, not a process targeted on poor families.  Let me take another: the case for free school meals.  That contributes to poverty reduction precisely because it is universal and basic.  Neither  child care support, nor free school meals, are ‘holistic’ policies. The same arguments extend to a wide range of services – energy, communications, transport.  Public services can make a major contribution in improving the command over resources of people on low incomes.

Poverty in Scotland 2021: a report from the JRF

I was listening today to a seminar for Challenge Poverty Week, covering the latest report from the Joseph Rowntree Foundation on Poverty in Scotland . The report identifies six main ‘priority groups’ which put children at a greater risk of poverty.  The groups are

  • families with children under 1
  • larger households
  • single parents
  • people in minority ethnic groups
  • families with a disabled person, and
  • workless families.

There are no great surprises in that.  I think, from memory, that this pretty much reflects the findings of the Royal Commission on the Distribution of Income and Wealth in the 1970s, with a substitution: pensioners don’t feature, leargely because this is about child poverty, but the position of minority ethnic groups has been recognised.

The next question, however, is what to make of the information. Shona Robison, for the Scottish Government, clearly thought that a focus on these priority groups was the way to break the ‘cycle’ of poverty.  She suggested that the government would be offering ‘bespoke’ responses to families in this position and recommended better paid work as the way out.

There are problems with that.  The place to start, perhaps, is with the statement that these people are at greater risk.  Yes, the risk is higher, but that doesn’t mean either that all these people are poor (the highest proportions are those in minority groups, and people who are disabled) or that people are trapped in poverty.  Low-income poverty is a position that many people pass through.  Very young children are important, because women’s capacity to earn is impaired.  Worklessness is important, but work is no guarantee of coming out of low income.  Precarious work is widespread, and part of the problem.

The other main problem relates to the assumption that people and families can be targeted on an individual basis.  Poverty is a moving target, and most attempts to deal with it by targeting are doomed to failure: people’s incomes fluctuate, their household status changes, they do whatever they can to improve their situation.  What we need is not a set of individualised responses, but a reliable, predictable foundation of the benefits and services that make it possible for people to secure their position.

If not now, when?: a report on social renewal

The title of the new report from Scotland’s Social Renewal Advisory Board is, ‘If not now, when?’  It’s a great title, but not a great report.  There are some areas about which I’d have minor reservations, and others where I’d have major ones.  The minor reservations are, for example, the recommendations that:

      • “It is time to trust (third sector and community) organisations to do good work without onerous requirements.”  Have we forgotten the abuse of charitable status that led to the reform of charity regulation?  Look up ‘Moonbeams‘ on Wikipedia.
      • “There are several themes that run throughout the report, again with links to Christie.  We need to make sure we embed the best partnership and practice.”  Partnership is already embedded.  On the positive side, it can focus attention on issues that get overlooked, such as poverty or learning disability, and it puts agencies into contact (such as the NHS and the police) where there didn’t used to be much.  On the negative side, it eats time and resources, and it can be as much an obstacle to delivery as a help.  The Christie Commission took the misconceived  position that every organisation should have a ‘common set of duties and powers’, including  a general power to ‘advance well-being’ (pp 46-7).  That would make every agency responsible for the work of every other agency.   Do we really want the health service to share the responsibility for developing railways?  If we want agencies to work together, we need an appropriate functional division of responsibilities, effective liaison at the sharp end, and budgeting practices that don’t set up walls between agencies.
      • “Hate crime must be addressed for all affected groups. We want to see significant investment in preventative approaches to hate crime, based on evidence of what works. … we want to see a significant improvement in the accessibility of reporting a hate crime or hate incident over the next five years so that hate crime reporting is more closely aligning with actual incidents. We also want to see an increase in people reporting street harassment to Police Scotland whenever they experience it.” This is saying nothing that isn’t already happening.  Yes, as someone who’s been responsible for maintaining a synagogue, I’ve been on the receiving end of hate crime; no, sharpening the criminal law is not going to stop it.

All right, these points are not really that ‘minor’.  But the ones that got my goat are in a different class.  On universal basic services, the Board has this to say:

“calls on the next Scottish Government to adopt the principles of ‘Universal Basic Services’  … In particular, the Scottish Government should undertake pilots into specific actions that could deliver reductions in energy, travel, housing, childcare and digital costs … These could include: … Social tariffs for broadband and other essential digital services – providing free and discounted digital access to low-income families across Scotland. …”

This misses the point of universal basic services completely.  They’re not meant to be targeted on people on low incomes; they’re supposed to be there for everyone.  I carried on to specific example of broadband, because it shows the point clearly – they’re talking about means-tested or passported services, not universal ones.   We should be looking at open-access, community-based broadband.

And then there is anti-poverty policy, where they recommend that the Scottish Government should “develop an approach to anti-poverty work,
including personal debt, that is designed around the needs of the individual”.  Of course I want to see well-funded advice and support for individuals, but it’s not an anti-poverty strategy.  It’s not even an anti-debt strategy.  People are in debt because (a) their incomes are inadequate and (b) the legal terms on which debt is enforced are pernicious.  The Scottish Parliament has the power to do something about both of those.