December 2004, Joseph Rowntree Foundation, 2003, 48 pp., pb., 1 85935 091 7, £11.95. Order this book
This report has been written in preparation for the Joseph Rowntree Foundation’s centenary in 2004. Using the normal poverty-line of 60% of median income, it finds that over the past twenty years poverty has nearly doubled, so that now 14% of the population are in poverty (with a slight fall recently). The report suggests that we should aim to tackle this problem within the next twenty years, concentrating on income poverty, as that is a major determinant of disadvantage.
The report studies the causes of poverty (such as a rise in the number of no-earner households, and a fall in the number of one-earner households); who is most affected is then discussed (with families with children having replaced pensioners as the largest group of people in poverty); and the extent to which income would need to be redistributed is calculated: £25bn out of a possible GDP growth of £500bn over the next 20 years. The bottom quintile could see an annual growth of 7% if other quintiles see only modest rises of 2.5% per annum.
A strategy is then outlined to: (1) “increase the capacity of poorer households and communities to gain from the market economy,” (p.16), and (2) “ensure an adequate floor income that relates to what as a society we believe are the necessities of contemporary living” (p.16), etc..
The second part of the report makes proposals in the fields of education, geographic differences in the labour market, housing, long-term care, and, of course, income poverty, and especially the poverty of families with children and the poverty of particularly vulnerable groups such as people with disabilities. The report commends the Government for implementing the Child Tax Credit, the New Deal for Lone Parents, and tax credits for childcare. But the authors note that progress will now slow down, as those who have been most helped by existing policies are mainly those near to the poverty threshold, i.e., low-income working families. It is those in the deepest poverty who will be the most difficult to lift above the poverty line. The report is right to say that external factors might make it difficult to sustain progress, and that “courage and determination will be needed” – but the logic of the argument suggests that new policies will be needed, not just the existing ones. Particular proposals are to ensure that the overall income of non-working families with children should rise relative to median incomes and that the causes of lack of take-up of Income Support and tax credits should be addressed.
In response: The first of these two proposals would deepen the poverty and unemployment traps and would make it more difficult for families with children to earn their way out of poverty; and the complexity of claiming Income Support and tax credits is bound to discourage take-up.
A most sensible recommendation is that government and employers should provide choice to parents so that they can balance employment with the needs of their children; but it is the tax and benefits system which is the major cause of the rise in no-earner and two-earner families and the fall in the number of one-earner families, not employers, and the report makes no policy recommendations which would tackle this problem.
In relation to the growing numbers in vulnerable groups who are below the poverty line, the report recognises that reliance on means-tested benefits has increased. The authors correctly note that income guarantees “work better if they are a back-up to other measures” (p.32), otherwise incentives to earn or save are reduced. In addition, take-up rates are low for minimum income guarantees because of continuing stigma, so income is in practice not guaranteed for large numbers of pensioners and families with children. “38% of those entitled are estimated not to claim Working Families Tax Credit and between 22 per cent and 36 per cent do not take up the Minimum Income Guarantee. This contrasts with near-universal take-up of non-means tested benefits such as Child Benefit and the State Retirement Pension” (p.33). Quite so.
The report recommends that the introduction of a second state pension should be speeded up, that the main state pension should rise with earnings, and that tax credits for people with disabilities should not be withdrawn if they are in short-term or poorly-paid employment.
The report’s policy recommendations, when taken together (and the concluding section suggests that they should be taken together), would indeed help to reduce the numbers of people with incomes below 60% of median income, and Government and others will find the report useful.
But what the authors have not done is to ask whether policy change, rather than policy adaptation and enhancement, might not be the better way forward. In particular, a small and growing Citizen’s Income would meet many of the authors’ policy objectives, and without some of the attendant problems, such as poverty and unemployment traps and lack of take-up. Further work along these lines from the Joseph Rowntree Foundation would be very welcome.