Tuesday, June 10, 2008

A handout is a hand up

The number of people living in poverty in Britain rose in 2007. This included small rises amongst people under 60, which the government had expected, and a larger rise amongst those over 60, which they hadn't. So what went wrong?

When Labour came to power in 1997, they decided to stick to the Tory spending rules. This meant that the number of people earning less than 60% of the average continued to increase, as it had done for the past two decades. So Labour decided to do something about the fact that the rich kept getting richer and the poor kept on getting poorer.

Their plan was this. They would make sure that people could get jobs, and that those jobs would pay people better than being on benefit. And poor children and poor pensioners, who obviously couldn't work, would get higher benefits.

They tried this for about five years, roughly up until the General Election in 2005. And it worked quite well. Many pensioners who had lived all their lives with hardly any money found that they were better off than they had ever been. And lone parents in particular found that they were more likely to be able to work and also had more money to look after their kids. For the first time ever in British history, someone aged over 60 was less likely to be poor than someone under the age of 60, while record numbers of lone parents found jobs. It's worth comparing this with, say, the USA, where levels of poverty have rocketed since George Bush took over (worth remembering whenever you hear David Cameron put forward Bush's policies for tackling poverty).

But there were still problems. More people were in work, but many of them were still living on less than 60% of the average - work wasn't lifting people out of poverty. What's more, many adults weren't able to get jobs, and their benefits were getting to be less and less in real terms. In addition, many people who were entitled to receiving benefits ended up not being able to, or being penalised by the complicated and badly designed way that they were awarded.

And between 2005 and 2007, increases in benefits for children and pensioners didn't keep up with the rise in average earnings, or with the huge increases in the cost of living caused by things like higher fuel bills. And this led to the rises in poverty which were announced today.

In 1997, New Labour talked about giving people 'a hand up, not just a handout'. But this is a false choice. Greater 'handouts' in the form of higher welfare benefits, whether they are called child benefit, child tax credit, winter fuel allowance or pension credit, have transformed people's lives and given them exactly the 'hand up' that they need. And for all the mythology about 'generous benefits' which supposedly made people decide to watch daytime telly instead of getting a job, it was exactly the people who were getting the biggest increases in benefits who were the ones most likely to get a job.

To have a proper debate about poverty and what needs to be done to reduce it, it is absolutely vital to know that one of Labour's greatest successes in their first two terms in office was the thing which no government minister will dare admit - they put benefits up for poor people and it worked.


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