Wednesday, June 11, 2008

Child Poverty "Crisis"

Poverty - the Big Picture (see footnote)

It was very interesting watching the BBC/C4 coverage of the latest "child poverty crisis" last night. Because while the all-too familiar voices of the metro "Progressive Consensus" lined up to demand yet more money, the vox pops they interviewed on the estates up North - even after God knows what selective editing - said "money's not the problem - the problem is how it's spent... and how we can stop those wild chav kids making everyone's life a misery".

The latest "crisis" emerges from the annual release of government figures on the number of households with incomes below 60% of the median. They show that the number of children in such households has increased by a further 100,000 to 2.9m. Which follows last year's increase, also of 100,000 (blogged here). It means the government's grandiose target to eliminate child poverty is in tatters.

We've blogged child poverty many times (eg see here, here, and here). In summary, the government's headline grabbing definition of poverty as this simple Plimsoll Line of relative income is fundamentally ill-conceived. We are long past the days when Tiny Tim starved in a garrett, and pumping ever more cash into dysfunctional families will not help them address their real problems. Indeed, most of us now believe it makes their situation even worse (eg by incentivising single parent baby production, and that old slide into indolence and vice).

Yet again, magic bullets are in short supply. But as a start, we'd redraw the relative income Plimsoll Line from 60% to 50% of the median: it always used to be 50%, which is quite enough to provide the real necessities of life. A lower benefits level automatically increases the incentive to work, and cuts the incentive to have all those welfare kids in the first place.

It also means taxpayers save over £50bn pa (see this blog). And for that kind of dosh, we could further transform incentives by massively increasing the personal tax allowance. According to the HMT ready reckoner, a £100 uplift in the allowance costs c£350m pa. So for £50bn... now, let me see... wow! We could increase the personal tax allowance by £14,000 pa, taking it to around £20 grand pa - ie you could earn £20 grand pa before you have to pay any income tax.

Think what that would do for work incentives. Think what it would mean for that admirable vox pop bus driver who goes to work everyday, even though most of his council estate neighbours lie around living off benefits. WTF should he work to pay taxes to support them? Especially when their lawless kids stone his bus.

So what goes on the heads of the Prog Consensus? You'd almost think none of them have ever lived on a council estate. You'd almost think they don't understand that people on estates calibrate their own situation against their immediate neighbours, not relative to some far away national statistic (see previous blogs for Tyler's tedious reminiscences of his own idyllic childhood on a poor council estate).

No wonder the journos reporting this "crisis" focused so much attention on the "political problem" the stats pose for Labour. Because in the real world of dysfunctional families and lawless estates, this is a non-story. But while we always enjoy watching politicos hoist by their own spinmeister policy targets, it would have been nice to have more on the real issues.

Footnote: The chart is taken from last year's IFS report on these DWP poverty stats. It shows the overall percentage of households with incomes below various percentages of median household income (all measured BHC - Before Housing Costs). As we can see, the proportion on below 60% is around 17-18%, down by about five percentage points since the late 80s. The proportion on less than 50% is much smaller, at about 10%, again down markedly since the late 80s, but virtually unchanged under Labour.

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