What is ‘poverty’? It might sound a basic question but, when we hear about x
percent of people ‘living in poverty’, what does that actually mean? The policy review conducted by Frank Field last year offered a number of insights into the issues of life chances
and their determinants. But it failed to address that fundamental question: what is poverty? Until we know what we are measuring, it is impossible to attempt to tackle it.
Poverty continues to preoccupy us. According to the British Social Attitude Survey, the majority view is that there is “quite a lot” of poverty in Britain today, and many expect it to
increase over the next ten years. Domestic poverty featured in the manifestoes of all major parties, and keeps dozens of campaign groups busy. But given the widespread attention the topic receives,
it is surprising how little we know about poverty. As I argue in my IEA research report A New Understanding
of Poverty, the poverty measures employed by the government omit information and important factor.
On the one hand, there is a long-term success story which is concealed by prevalent poverty measures. Fifty years ago, an average British household had to reserve a third of its budget for food,
and another tenth for clothing. Today, the least well-off (the bottom tenth of the income distribution) spend only 17 percent of their budgets on food, and 5 percent on clothing. They can afford to
spend 11 percent of their budgets on activities related to recreation and culture, 7 percent on restaurants and hotels, and 4 percent on communication services. 99 percent of all British households
have a telephone, a TV, a washing machine and an indoor bathroom. In a sense, the poor today lead more comfortable lives than the middle classes two generations earlier. And yet, because of the way
we measure poverty, relative poverty is considerably higher today.
On the other hand, there have been a number of adverse developments; again which the government’s poverty measures fail to record. In the 1960s, low-income households (the 10th percentile of
the income distribution) spent about 19 percent of their budget on their rent or mortgage and utility bills. In the 2000s, this figure was up to 28 percent, consuming many of the gains made
elsewhere. Britain’s excessively restrictive land use planning system constitutes a heavy penalty on the poor, by raising the cost of housing. Agricultural protectionism and ideologically
motivated ‘green taxes’ and ‘sin taxes’, borne disproportionally by the poor, do not improve matters either.
Poverty measurement without reference to what the least well-off can actually afford is like a Harry Potter story without any references to witchcraft. It is no surprise, then, that recent
anti-poverty policies have proved so ineffective.