How to fight poverty

What does it mean to be poor? And, perhaps more importantly, how can someone be pulled out of poverty? For years the government has assessed poverty levels using a relative income measure, which means a household is counted as poor if it has 60 per cent of the median income.

This measure certainly has value, but it comes with a risk. If income is the problem, then throwing money at the problem can too often be seen as the only solution, with few questions asked about how that money is spent.

While some progress has been made on child poverty in recent years, I’m concerned that too much of that money was spent on out-of-work benefits, pushing people just above the poverty line without changing their lives. We see this borne out in the figures: from 1998 to 2010 the likelihood of being in relative poverty declined 1.5 times faster for children living in workless families than for children living in families where somebody worked.

So while the government remains committed to the poverty targets, we are not neutral about how they are met. For those who are able to work, employment should be the best route out of poverty. For those who don’t have a job, but could work, we want to provide targeted interventions, using local expertise, to overcome the barriers keeping them out of the labour market.

Consider a real-life case. Barry was a drug addict, brought up by addicted parents and abused by his stepfather. Living in care homes and spending time with boys much older than him, he was using heroin by the age of 15. Turning to crime to fund his habit, Barry spent the next 17 years in and out of prison.

Parked on welfare for most of his life, by the government’s measure Barry was probably living in poverty. But rather than having his life changed through increased benefits, it was changed by a local charity called BAC O’Connor, which helped him get clean and move from recovery to independence. Barry’s life has been transformed—he now has a job and a home, is studying for a degree and, most importantly, he has got his family back.

This transformation wasn’t a result of tax and benefit changes, yet predictions about such changes are the main variables used by analysts to project poverty levels in the future. So while I am concerned when projections suggest that we won’t hit our poverty targets, bear in mind how difficult it is to measure the more dynamic interventions of the kind made by BAC O’Connor.

One thing the poverty projections do recognise is the big impact from the introduction of universal credit: the simpler welfare payment the government is bringing in from 2013, which will replace six of the current means-tested benefits and tax credits, and should ensure that work pays. The Institute for Fiscal Studies has said the universal credit could lift some 450,000 children and 600,000 adults out of poverty by 2020-21. Our own analysis suggests that it will pull the vast majority of children out of poverty if at least one parent works 35 hours a week at the minimum wage—or 24 hours if they are a lone parent.

This raises a final question. If work is the best route out of poverty for those who are able to, should we be doing more to encourage people to increase their earnings once they are in employment? Under the tax credits system we inherited, too many people remained static, with low levels of earnings subsidised by the state when they could potentially have been doing more.

We now have an opportunity to change this. What I seek is a debate on how we could support and encourage people who are already in work to move on and up.

In so doing, we could create a seamless route out of poverty—from targeted interventions that support people into employment, to a welfare system that makes work pay, to a system of work support that encourages progression in work and a shift out of poverty. It is a new narrative, certainly, but one that could have the potential to change lives.