In 1884, a newly formed Fabian Society published its first pamphlet ‘Why are the many poor?’ Selling a remarkable 100,000 copies, it also asked: ‘Can we or can we not alter it?’ Remarkably, both questions are as relevant today as in the late Victorian age.
Britain achieved a low point for poverty (defined in relative terms as the proportion falling below 60 per cent of the median income) in the late 1970s, a decade that also brought peak equality. This was the high-water mark of egalitarianism. But it was short-lived. The child poverty level has doubled since the 1970s. From falling life-expectancy rates among the most deprived communities to a rising gap in the electoral turnout of the richest and poorest groups and a weakened social state, many of the hard-fought gains of the past have been overturned.
The overriding explanation for these reversals lies in the shift from an egalitarian to an anti-egalitarian philosophy of government. ‘True’ Conservatives need ‘to make the case against egalitarianism’ wrote Keith Joseph in 1976. ‘The pursuit of equality has done, and is doing, more harm, stunting the incentives and rewards that are essential to any successful economy.’ Yet, far from the promised economic renaissance, the anti-equality counter-revolution has turned Britain into a high-poverty, high-inequality and economically turbulent nation.
The post-1980s wealth explosion at the top is less the product of a surge in value-creating productive activity which contributes to wider wellbeing, than of a process of what the 19th-century Italian economist Vilfredo Pareto called ‘appropriation’ or others ‘extraction’. Appropriation has sapped economic strength, helping to turn Britain into a low-wage, low-investment, low-productivity economy. Cutting poverty levels ultimately depends on ending the mechanism of personal enrichment that undermines wider living standards and life chances.
Some question whether cutting relative poverty is even possible. Take this leader in The Scotsman on 14 June 2013: ‘Given this is a relative, as opposed to absolute, measure, then we can say with mathematical certainty that the poor will always be with us.’ ‘A fixation on relative income’, wrote Conservative Cabinet ministers Iain Duncan Smith and George Osborne in 2014, ‘led the last government to chase an ever-elusive poverty target’. Such declarations are simply wrong. It is perfectly possible, if a political challenge, to ensure that everyone enjoys an acceptable living standard based on contemporary – and not past – norms.
A significant cut in poverty is possible, but would require a fundamental shift in the way society works to ensure a much more equal sharing of the cake through an end to extraction. Labour’s ambitious post-millennium goal to abolish child poverty over time achieved some temporary success, but ultimately failed because Britain’s inequality-driving and stability-sapping model of extractive capitalism was allowed to continue unchecked. Today the lowest levels of child poverty in Europe are found in Slovenia at 11 per cent, and Finland at 13 per cent. Even at peak equality in the late 1970s, child poverty in Britain stood at 14 per cent.
Nevertheless, it is possible to do much better than Britain’s recent record. A necessary condition is to lift the income floor. One option would be to tweak the existing Universal Credit system by raising its levels and ending current restrictions such as the benefit cap which has intensified poverty among families. This would cut poverty a little but leave a flawed, heavily means-tested system, and the wider high-inequality economic structure, in place.
A more radical approach would be to introduce a guaranteed, no questions-asked, non-means-tested income floor. This would create a ‘Plimsoll Line’ for incomes, below which no one would fall. Social reformers have long called for such a guarantee and Beveridge believed his 1942 plan would deliver it. Yet 80 years on, we are still far from ensuring such a guarantee.
Such a floor would be more costly than tinkering with universal credits, but would be a powerful anti-poverty measure that would extend the principle of universalism, boost income security and raise personal empowerment. One study has found that even a modest basic income scheme could cut child poverty by more than a half, taking it to an historic low, below that achieved in 1977. The high upfront gross cost of such a guarantee could be met in full through tax changes that would restore the redistributive power of the tax-benefit system which has been so badly eroded over time. Inequality would be lowered, with the payment clawed back from the highest earners and the gains concentrated among those on the lowest incomes.
But raising the floor is only part of the answer. A sustained attack on poverty and social injustice ultimately depends on ending the bias to inequality baked into the extractive practices of big business and the pro-rich, anti-poor politics of recent decades. The lesson from 1945 is that progressive change requires a revival of egalitarianism, with a new set of embedded pro-equality and anti-poverty measures backed by public consensus. Alongside a higher and guaranteed income, such measures should include a new system of asset redistribution aimed at mobilising Britain’s massive private wealth mountain for social reconstruction, a war on corporate appropriation and a new priority on unmet social needs. In 1942, Beveridge warned against ‘patching’, but ‘inequality` was not one of his five giants that needed to be slain. Today, a strategy to tackle widespread impoverishment must recognise the critical effect of the process of wealth accumulation at the top on low incomes at the bottom.
Stewart Lansley is a visiting fellow at the University of Bristol and has written widely on wealth, inequality and poverty. His latest book is The Richer, The Poorer How Britain Enriched the Few and Failed the Poor. A 200-Year History.
The Richer, The Poorer by Stewart Lansley is available on the Bristol University Press website. Order here for 19.99.
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