Which poverty tests matter most?

The Coalition government was unlikely to meet its commitments to progressive austerity, and ensuring the poor were not hit hardest by spending cuts, given the scale and nature of its deficit and spending plans, said thinkers and campaigners from a range of different political perspectives.

Yet the debate between left and right was between a focus on the Coalition to devise policies which would match the scale of their ambition, and meet the child poverty targets that the government is committed to, and an argument that income inequality and relative poverty should have a less prominent focus in strategies to attack poverty and improve life chances. The fringe debate 'Is the Coalition delivering on fairness?' saw Phillip Blond of ResPublica and Julian Astle of CentreForum, from think-tanks influential with the coalition parties discuss the poverty agenda with Kate Green MP from Labour and Alison Garnham, new chief executive of the Child Poverty Action Group, in an event cohosted by the Fabians, CentreForum, Respublica, CPAG and the Joseph Rowntree Foundation on the Labour party fringe in Manchester Town Hall.

Phillip Blond of ResPublica thought there was too much attention paid to the "conventional" distributional analysis represented by the IFS work:

“Welfare isn’t a particularly effective way of challenging poverty. What welfare seems to do is trap people through economic and social means in a type of serfdom”, said Blond.“I am much more interested in asset welfare and trying to capitalise welfare streams, to allow people to bounce themselves out of that situation”

Garnham said she was wedded to the 'old methods' because she wanted to maintain the common ground over the objective of ending child poverty.

“All parties signed up to the Child Poverty Act and the goal of ending child poverty". This had made a difference in policy decisions: "If it wasn’t for the Child Poverty Act, I don’t think we’d have seen a compensataory tax credit", she said. "We are in a very different position to the 1980s when the Conservative government refused to accept that relative poverty existed”.

Yet the analysis showed that the budget had been regressive: double-income childless families had lost least, and had also gained most from the Coalition's tax changes, said Garnham.

Astle said that the government had got itself into the position of accepting targets and definitions of child poverty which it was sceptical about, arguing that the Coalition had accepted the targets "for largely political reasons". He was not questioning the sincerity of ministers in addressing poverty. But what really motivated ministers was the question of intergenerational mobility, he said, rather than the child poverty objectives themselves.

Astle warned the government against a protracted public argument over whether its budget had been progressive:

“I am not sure it is very clever for any government to have a protracted row with a think-tank and the IFS is pretty much universally respected for the work it does and the impartiality of the work it does. But it is also right to say that a snapshot picture of how different people are affected at a particular point in time is always a partial picture”, he said.

Kate Green, elected to Parliament in 2010, wanted to maintain the achievement of a consensus on challenging child poverty, though also seeking one on the means to achieve it.

The new government are now coming to understand – having accepted the target in opposition – but that it is extremely difficult to meet if you are not going to redistribute, and if you are not going to have a progressive fiscal agenda.

This was not simply a question of income redistribution, said Green. She highlighted a number of areas where the government's agenda in its first weeks seemed at odds with its stated aspirations. For example, the government was pro-savings, but had disincentivised savings among low-income households; it was concerned about wealth inequalities, yet had cut the child trust fund. Its proposed benefit changes had in some cases increased marginal tax rates, despite these being a strong focus of political concern.

Astle stressed that it was too early to judge the government's record, but said the early evidence suggested that it would be enormously difficult to deliver a pledge of 'progressive austerity' in terms of regional impact or distribution.

"On fairness between regions, I think the Coalition is really up against it here. The public sector retrenchment is going to hit some regions a lot harder than others. Precisely how the government can help those regions which are most hit is not clear", said Astle, who was sceptical that policy responses, such as tax incentives to businesses in the most affected regions, would match the scale of the impact.

He warned that the scale of the government's commitments on deficit reduction and spending cuts meant it could not expect the Comprehensive Spending Review to meet the commitment to 'progressive austerity' on the distributional 'IFS test'.

“When we see the CSR, it is going to be pretty grisly for a simple reason: if you are going to cut public expenditure on the scale that the government is going to, it is going to inevitably hit hardest those who depend most on public spending, and that is the poorest”, said Astle.

Blond worried about the lack of innovation in the Coalition's approach to deficit reduction:“What worries me about the austerity agenda is, where is the innovation? Where are, running alongside the welfare cuts, genuinely innovative approaches to mutualism and assets. We risk getting cuts to create a smaller state which does the same things. That would be the worst of all worlds", he said, while also criticising a focus on traditional redistribution.

“All the stuff about lifting families out of poverty: I doubt that those families feel that they have been lifted out of poverty. I doubt £10 or £15 a week extra really makes a transformative difference. I completely want a pro-poor political economy. But nothing we are talking about here is going to produce long-term transformation of the type we need”, said Blond, while stressing that he wanted

Kate Green disagreed, describing Blond’s argument as “harsh ... visionary but harsh”, arguing that her experience of constituents would £10 or £15 a week in tax credits could make a significant difference to whether mothers felt it was worth working, while arguing that the task of poverty campaigners and egalitarians was to rebuild support for redistribution.

How we re-engage a public that became very sceptical or disregarding of the way in which Labour was redistributing, in a way which was positive for a majority of families, rather than what came to be seen by many people as a way in which we were giving money to a few at the bottom who did not want to work

Astle said he was “always nervous about saying that money doesn’t make a difference to those living on low incomes: £10 or £15 a week can make a huge difference”, a point also made by Alison Garnham.

But Astle agreed that moving people across the poverty line was not ambitious enough. So Astle’s own idea for a more visionary agenda would involve taxing unearned wealth more vigorously – looking at a land tax, and considering property and wealth taxes, such as the mansion tax which “If you can generate significant additional revenues in these ways – into the billions – it allows you to reduce income taxes, increase incentives at the bottom end, and properly fund pre-school and education. The links between poverty and educational achievement are much much stronger in Britain than in other European countries and it doesn't have to be like this”.

Blond also suggested more radical approaches to wealth taxation, particularly highlighting the way in which gains made by landlords from social housing benefitted neither the government nor tenants.

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At a CentreForum/Fabian/ResPublica/CPAG debate on the same theme at the Liberal Democrat fringe the previous week, Sarah Teather had also spoken about the limits of focusing on moving people across a relative poverty line. But at the same time she stressed that the government was absolutely committed to meeting the goals in the Child Poverty Act, and that she would be coming forward with a child poverty strategy which would deliver these goals, working closely with child poverty advocacy campaigners.