No Time to Waste

In 1999 Tony Blair famously promised to end child poverty within 20 years – and in office, New Labour presided over a huge reduction in the depth and breadth of hardship in childhood. Labour today is very proud of that legacy, and leading Labour politicians know that the rise of hunger, homelessness and destitution since 2010 means that renewed action on child poverty must be a priority.

In the summer, the party committed to a comprehensive, cross-departmental child poverty strategy. So far little has been said about its content, goals, or accompanying institutional machinery. In describing the strategy, Labour has mainly talked about addressing the causes of poverty. It has been cautious to say anything about immediate alleviation because the fiscal position is so dire.

But once in office, Labour will need an agenda for directly raising living standards for families with low incomes. There will be a tough trade-off between spiraling needs and huge fiscal constraints. In this context the party will need to think about the extent of its ambition: by how much does it wish to cut child poverty, and over what timescale? And should there be stepping-stone objectives – for example, to end childhood destitution, child poverty in working households or baby poverty?

Labour should also consider looking beyond children and seeking to tackle poverty in other demographic groups – pensioners, disabled people, carers, and adults in work. For example, in a few weeks’ time the Fabian Society will publish analysis and proposals on poverty in the lead up to state pension age; 60 to 65 is now the time in adult life when poverty is highest.

What is needed in a Labour anti-poverty strategy?

Over the long term, poverty is best tackled by building people’s personal and financial assets. That means three things: (1) improving employability, skills and earnings potential through interventions from early childhood onwards; (2) improving health and capability to work, with a society-wide health inequalities strategy; and (3) building better workplace pensions, more saving and less problem debt. Together, these responses make a difference – but over decades.

Immediately, there are just four routes to poverty reduction:

• Increase employment and hours worked.
• Reduce essential living and housing costs.
• Increase social security payments.
• Increase social security take-up.

These routes all matter and should be progressed simultaneously by a future government. In fact, some policy reforms support more than one – for example, reform of universal credit (UC) could lead to improved payment levels, better employment incentives and higher take-up.

Current work at the Fabian Society is looking at how to reduce essential costs for people with low incomes, because this is something that can be delivered without extra public spending. I won’t say more about that here, as we will be publishing detailed proposals in the spring. We also need more social housing and cheaper homes, even if our broken housing market will take many years to reform.

Ultimately though, there is no viable solution to poverty that does not involve improving employment outcomes and spending more on social security (in the shape of both higher payments and higher take-up). More work and better social security are both needed because people with children, high living costs or who are unable to work full-time cannot escape poverty just by working in a low-paid job. Reforms to markets cannot deliver decent living standards for families in the absence of decent social security.

Social security

From a narrow cost perspective, means-tested benefits are the most efficient way of reducing poverty (though there are well-rehearsed arguments against relying on means-testing alone). Improving universal credit, and the benefits it is replacing, should therefore be the principal lever for tackling poverty. The key early changes needed are: removing the five week wait at the start of a claim; reforming sanctions and budgeting loans; permanently tying local housing allowance to (at least) the 30^th percentile of rents; and removing or restricting the two child limit and benefit cap. These changes are all cheap enough to consider in the next two years.

Looking further ahead, ministers should aim to substantially increase the UC adult and child elements. This would raise incomes for everyone on UC, including millions of people in working households, rather than just targeting those with least, so it would be an expensive policy. To get going quickly (and given the focus on child poverty and early intervention) the first step could be the introduction of a baby premium.

Some of the costs of higher UC payments could be recouped by making offsetting changes to other parts of UC. But there is no denying that a big increase in the level of benefits would be expensive and might not be possible in the short term. As a staging post, new ministers could introduce a new annual indexation policy for working-age benefits. Labour could commit in its first year to increasing these vital payments in line with average earnings or the pension ‘triple lock’.

Increasing take-up is also essential, with over 1 million households eligible for UC or its predecessors but not claiming. The evidence suggests that the punitive nature of social security and employment support drives people away. But many also do not know they are eligible for help. The long-term goal should be to create a more automatic, universal and supportive system. It should use government and third-party data to identify who is eligible for social security and make claiming and payment seamless and near automatic. This is also very important for ‘passported’ entitlements (where eligibility is triggered by receipt of benefits) including council tax support and social tariffs, many of which have very low take-up.

Employment outcomes

Poverty is often caused by limits on people’s capability to work and by barriers and disincentives stopping them working as much as they want to. Illness and disability are the largest challenges and the cause of the post-pandemic rise in economic inactivity. Better public health is the long-term answer, but Labour in office can boost employment outcomes more quickly by improving incentives and support for people to work and to increase their hours. The party has already said it wishes to progressively raise the National Living Wage. It should improve universal credit for people in work by changing the system’s work allowances and taper. It can also reform eligibility rules for things like council tax support, social tariffs and free school meals that often mean people have little or no financial incentive to increase their hours.

Then there are practical barriers that stand in the way of work. Most importantly, parents need comprehensive, adequately funded free childcare to enable them to work the hours they want. Carers of disabled and older people need new employment protections (an issue explored in the recent Fabian Society paper Caring for Carers). And parents of disabled children need particular support to sustain employment.

More also needs to be done to prevent job exits and to help people quickly back into work. The Fabians have proposed a universal occupational health service, building on current government pilots. We think there should be workplace health services in every locality and new OH requirements on businesses, with subsidies for SMEs and the self-employed.

Jobcentre Plus also needs to reformed so that it offers a personalised, supportive offer to all benefit recipients and anyone who is out of work. Conditions and sanctions should be applied less stringently, as they barely affect work outcomes while driving hardship. We will always require conditions within the social security system, but the regime should be sympathetic to personal circumstances and designed based on clear evidence of what will maximise employment.

Start quickly, think long term

Labour will fight the election by asking people if they feel financially better off than they did in 2010. Therefore, if it wins the party will need a plan to show the difference it can make by raising living standards over a parliamentary term, especially for people on low incomes. For reasons of electoral politics as well as social justice, tackling poverty – and child poverty in particular – will have to be a top priority for the new administration.

We know the strategies that have best chance of success. Ministers should chart a long-term roadmap with clear staging posts. Free or relatively cheap reforms can be introduced fast to improve work incentives and plug the worst holes in the safety net. Then, over time, money can be found for sustained increases in living standards for low-income families. Slashing poverty is something the Labour party has done before. It can do it again.

Image credit: Neil Theasby, CC BY-SA 2.0 via Wikimedia Commons