This Thursday 10th December, the Fabian Society publishes The Solidarity Society, a new book by Tim Horton and James Gregory which is the final report of a two-year research project of what works in poverty prevention, drawing on the best international and UK data.
This week we are writing to the leaders of the three main political parties, all of whom now argue that reducing poverty and narrowing inequality are important goals, to set out some of the key lessons for future anti-poverty strategies.
This is Fabian Research Director Tim Horton's letter to David Cameron, which responds to the leader of the opposition's critique of Fabianism in his recent Hugo Young Memorial lecture, and invites the Conservative leader to speak at the Fabian Society and publicly debate the evidence on poverty.
Monday 7th December 2009
Dear David Cameron,
Congratulations on your success in recent years in raising the profile of poverty and inequality within the Conservative Party’s agenda – including a historic acceptance of the concept of relative poverty. That you have rejected the arguments made by Conservative ministers in the 1980s - that poverty no longer exists and that inequality doesn't matter - is welcomed by many in civil society and across the political spectrum. We hope this will enable a serious and evidence-based debate in which every political party can be challenged to create effective strategies and policies to reduce and prevent poverty.
In that spirit, I am sending to you a copy of The Solidarity Society, a new book resulting from a major Fabian Society research project, supported by the Webb Memorial Trust. The project marked the centenary of the Minority Report to the Poor Law Royal Commission, in which Beatrice Webb argued for the abolition of the workhouse and the creation of a modern welfare state - which in turn shaped the 1942 Beveridge Report.
You have recently set out a detailed analysis of the causes of poverty and a policy agenda that follows from this. Your analysis involves an important challenge to the left – in particular to the tradition of Fabianism, which you singled out for criticism in your recent Hugo Young Memorial Lecture.
So we felt that we should respond to this challenge. And we hope that you will take up our invitation to come and give a speech to the Fabian Society to continue this important debate.
In that speech, you argued that the size and scope of government were “now inhibiting, not advancing the progressive aims of reducing poverty and fighting inequality” and that you “want to move from state action to social action”. You have also recently argued that ‘big government’ causes poverty, and, last year, that “the methods of the centre-left, principally income redistribution and social programmes run by the state…have now run their course. The returns from big state intervention are not just diminishing, they are disappearing.”
However, we do not think that analysis is supported by the evidence on poverty prevention in Britain and internationally.
Both our new book and your Hugo Young lecture discuss the history of poverty trends in the 20th century.
Yet we were surprised that your recent lecture at the Guardian skipped straight from 1968 to post-1997 in analysing poverty trends, so said nothing at all about the 1980s, which saw the largest increase in poverty and inequality in 20th century Britain.
Poverty measured as below 60 per cent median income rose from 12 per cent in 1977 to 25 per cent in 1992 – more than doubling.
Poverty measured as below 50 per cent mean income rose from 8 per cent in 1977 to 25 per cent in 1992 – more than trebling.
So the largest increase in poverty in the 20th century coincided with a political programme to reduce the role of the state. This would seem to be precisely the opposite of the analysis you offered. We are interested in your views as to why you think this happened.
Perhaps you would disagree with our analysis of why poverty rocketed in the 1980s, but the problem is that nobody knows what your view is. For the Conservative anti-poverty agenda to be a serious one, you should give another speech where you tell Britain what you think went wrong on poverty and inequality in the Thatcher years, and how you would avoid making the same mistakes. Will the Conservative Party's approach to taxation and public spending be different enough under your leadership to avoid simply leading to the same results?
Your Hugo Young lecture challenge to the Fabian tradition argued that centrally-directed government action cannot help to tackle poverty. Yet the most significant moment of Fabianism in our welfare history, the creation of the post-war welfare state, helped bring about a huge reduction in poverty. Indeed, academic analysis suggests that there was a reduction in poverty of over 60 per cent between the pre- and post-war years – greater than the “ten or twenty percent” reduction you suggested in your speech.
More broadly, your claim is that “up until the late 1960s, the state was broadly effective at tackling poverty and reducing inequality”, but then became “broadly ineffective”. Again, recent UK history does not seem to support these claims:
poverty fell during the 1970s, including a large fall in the mid-late 70s, when there were important expansions in the welfare state. In the last half century, poverty was at its lowest in 1977.
poverty massively increased in the 1980s and stayed high in the 1990s, during a period of repeated attempts to reduce the role of government and cut welfare expenditure.
reliable measures of poverty have fallen since 1997 as important aspects of the welfare state have expanded once again. Poverty measured as below 60 per cent median income fell from 25.3 per cent in 1996 to 20.5 per cent in 2004 – and today stands at 22.5 per cent.
When the Conservatives came to power in the late 1970s, many of their ideas about the relationship between the economy, welfare and public spending were hypotheses. Since then, international datasets (such as the Luxembourg Income Study and the OECD Social Expenditure Database) have become available that enable these hypotheses to be tested against empirical evidence.
Over the last decade, internationally-renowned research, including work carried out at the University of North Carolina, has analysed extensively the relationship between poverty and welfare spending in different countries. The data show that far from causing poverty, government spending has been the major determinant in reducing poverty and inequality. One recent paper concludes, “The more generous the welfare state, the greater is the extent of poverty reduction”.
This again suggests to us that the idea that 'big government' causes poverty lacks any reliable evidence base. The evidence also contradicts the argument you made that the level of welfare spending increases poverty by weakening work incentives; these studies find no such relationship.
Another key finding from international research is that universalism matters. Over time, welfare states which target resources on the poorest – like those of the US and Australia – are less successful at helping the poor get out of poverty than those welfare states which provide universal benefits and services.
Targeting on those who are poorest sounds like a common sense and fair approach, but the evidence shows why this tends to fail the long-term interests of the worst-off, since the two-tier systems that develop lead to much worse provision for those who need it most. That is what lies behind the famous Fabian argument of Richard Titmuss that "services for the poor will always be poor services".
So we would therefore urge you to rethink your plans to restrict the coverage of policies such as the Child Tax Credit and the Child Trust Fund.
We appreciate that politics is about argument, debate and the clash of ideas.
So we hope you will take up our challenge to continue this important debate. We would encourage you to respond with your own analysis of the huge rise in poverty and inequality during the 1980s, and what would be different under a future Conservative government.
We look forward to hearing from you - and the Fabian Society would be delighted to offer you a platform to continue the debate.