Working to End Poverty
One hundred years of poverty and policy
Howard Glennerster, John Hills,
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© Howard Glennerster, John Hills, David Piachaud and Jo Webb 2004
First published 2004 by the Joseph Rowntree Foundation
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List of figures and tables
thanks go to the Seebohm Rowntree Studentship Fund for substantial support for
the production of this publication. Seebohm Rowntree set aside funds in 1943 to
‘help persons who are studying or engaged in research into the causes of
poverty and how these can be removed’, and 60 years later this charity
transferred its remaining assets to the Joseph Rowntree Foundation specifically
to support this publication.
Foundation, and the authors of this volume, pay tribute to the pathbreaking work
of Seebohm Rowntree in his study of poverty throughout the first half of the
twentieth century. They also place on record their appreciation, to Philip
Rowntree, Seebohm Rowntree’s son, to Gordon Thorpe, Secretary to the Seebohm
Rowntree Studentship Fund for over 40 years, to Andrew Rowntree, Seebohm’s
grandson, and to Frank Field MP, for their stewardship of this fund.
are delighted that the name of Seebohm Rowntree can be associated with the
publication of this book during the centenary year of his father’s creation of
what is today the Joseph Rowntree Foundation.
for those involved in the study of social problems and policies in the UK, the
last century does represent a unique period over which we can think about
‘poverty and progress’ (or, at times, lack of progress). This is not just
because of the centenary of the Joseph Rowntree Foundation’s establishment,
which this book marks, but because Seebohm Rowntree’s study of York in 1899, Poverty:
A study of town life,1 gives us the key starting point on which we can
peg our understanding of subsequent trends.
is not our intention to give an evenly paced view of the last century. Rather,
it is to look at current concerns taking the longer view of where we have come
from – to understand the present, in the light of the past, for the purposes
of the future, as John Maynard Keynes put it. In doing this, our perspective,
and the structure of the book, are like the famous New
of a New Yorker’s view of the USA, seen from Manhattan – disproportionately
dominated by what is nearest, with only a little of what is between the two
coasts showing up.
whole idea of what poverty is and how to measure it has changed a great deal in
the past century, although many of the basic issues remain remarkably familiar.
We have not attempted to trace this debate in detail, not least because it has
been done by others, notably Ruth Lister (2004) in her recent book. However,
social scientists’ work in measuring and conceptualising poverty has had an
impact on policy, and we discuss this at various stages in our account.
chapter 2, Howard Glennerster sets out the context within which Rowntree carried
out his study with the earlier development of empirical investigation by Charles
Booth and others, and discusses some of Rowntree’s lasting insights.
chapter 3, David Piachaud and Jo Webb use the evidence from Rowntree’s 1899
study of York to try to understand how what we mean by ‘poverty’ has changed
over the last century. What does Rowntree’s poverty line mean in today’s
terms? How do the causes of poverty a century ago compare with its causes today,
and what are the key social and economic changes that have led to such
differences? In chapter 4 they use evidence not just from Rowntree’s three
studies of York in 1899, 1936 and 1950, but from a series of other studies both
before and after the Second World War, to examine the way in which what was seen
as an appropriate ‘poverty line’ changed over the twentieth century, and
what this tells us about the changing extent of poverty over the period.2
second part of the book traces the evolution of policy towards poverty over the
century. In chapter 5, Howard Glennerster starts by describing the roots of
policy in the poor law tradition, and developments following Rowntree’s and
Booth’s studies. He takes the story from the reforms of Lloyd George, through
the post-war reforms associated with (but not always following from) the 1942
Beveridge Report, and the optimism generated by Rowntree’s final study to the
‘rediscovery of poverty’ in the 1960s, and what some have described as the
‘end of consensus’ in the 1970s.
chapter 6, John Hills looks at much more recent developments since inequality
and relative poverty started rising in the late 1970s, reviewing policy
developments and poverty outcomes under the governments led by Margaret
Thatcher, John Major, and Tony Blair.3
last parts of the book look to the future. In chapter 7, John Hills first sets
out where Britain now stands in international terms, not just against our own
past. While there have been improvements in the most recent period, particularly
in respect of child poverty, Britain’s position does not compare well with
many other countries at a similar level of development. Second, he looks at what
constraints and challenges public opinion places on today’s policy makers.
Third, he looks back a shorter period to the findings of the 1995 Joseph
Rowntree Foundation Inquiry into Income and Wealth to see which parts of the
agenda set out by the Foundation’s Inquiry Group have since been adopted, and
which others may still have relevance today. Fourth, he discusses a key part of
the context within which future policies will develop – the economic and
demographic pressures that will face any British government in the coming
in chapter 8 we reflect on the policy choices and dilemmas we face today in
thinking about policies aimed at reducing poverty and disadvantage, in the light
of where we started from a hundred years ago.
over the last century
two American economists have recently shown, the very different approaches
societies have taken to fighting poverty lie deep in institutional history,
rather than in current economics (Alesina and Glaeser, 2004). This is well
illustrated in Britain’s distinctive history. The moral and political dilemmas
posed by the poor had troubled politicians, social commentators and theologians
from the Middle Ages and indeed before. The coming of modern ‘political
economy’ and demography at the end of the eighteenth century, most notably in
the writings of Adam Smith and Thomas Malthus, added a tougher and more ruthless
logic to the debate. Poverty and starvation might be necessary for population
control; ‘the scantiness of subsistence can set limits to the further
multiplication of the human species,’ as Adam Smith put it (1776, p.182).
need to contain poor relief1 and
how it should be done was a recurrent theme of public debate through the
nineteenth century (see chapter 5). By the century’s end, however, it was
becoming clear to many that the existing order was not able to cope with the
demands placed on it by the new international industrial economy in which the
United Kingdom played a central part. Many argued that there was a hard core of
poverty that was self imposed through wilful indolence and drink. Neither
Charles Booth nor Seebohm Rowntree disagreed. But there was also an appreciation
that there were growing numbers of people whose poverty could not be blamed on
individual failings. The prolonged ‘unemployment’ of the 1880s – a new
term at that time (Harris, 1972) – or the Lancashire cotton famine, could not
be blamed on a few feckless men and women. Fecklessness hardly went in cycles.
The Poor Law was becoming a mainline provider of care to the growing population
of elderly women, and of financial support to widows (though eligibility varied
widely) and to the sick. It was also a major provider of education and care for
Poor Law is at the present time only to a small extent concerned with the man
who is able-bodied. The various sections of the non-able-bodied – the
children, the sick, the mentally defective, and the aged and infirm – make up
today nine-tenths of the persons relieved by the Destitution Authorities.
that the old institutions were simply not designed to cope with the new
situation took a long time. It was a view vigorously opposed by those in the
Local Government Board and the philanthropic Charity Organisation Society whose
remedy was to tighten up the way the Poor Law was administered. In 1869 the Poor
Law guardians were urged to return to the principles of 1834 and relieve
‘able-bodied paupers’ only in the workhouse. But the condition of the poor,
notably in London, was increasingly becoming both a moral question and a fearful
one. The violent demonstrations of the mid 1880s created a fertile ground for
descriptions and explanations of what was happening. Poverty in London had been
the subject of careful descriptive writing by Henry Mayhew (1861–2) and by
others. But it was a powerful pamphlet published by the Congregational Union, The
bitter cry of outcast London: An inquiry into the condition of the abject poor (1883),
which sparked widespread attention in the middle class magazines of the time.
The working poor were beginning to have their say in an organised way through
trade unions. It is at this time that a new social science of poverty
measurement begins to play a decisive part in shaping people’s understanding
and ultimately policy.
the curtain: The contribution of nineteenth century social science
Bitter cry was
an emotional pen portrait. Was it right? Or was it an overblown and unhelpful
description that would lead sober reformers in the wrong direction? That is what
Charles Booth initially thought.
London lay hidden behind a curtain on which were painted terrible pictures:
starving children, suffering women, overworked men; monsters and demons of
inhumanity; giants of disease and despair. Did these pictures truly represent
what lay behind, or did they bear to the facts a relation similar to that which
the pictures outside a booth at some country fair bear to the performance or
show within? This curtain we have tried to lift.
His painstaking house by
house survey in East London was first reported to meetings of the Royal
Statistical Society. It was extended to most of inner London. The accounts of
the economic life of each area, the temporary nature of much employment and the
low wages even regular employment could generate presented a convincing and much
publicised picture. It was not just an attempt to measure the numerical extent
of poverty but a mapping of the gradations of human inequality. It was grounded
in the local economy of small areas of London. The notion of an inner core of
poverty and movements in and out of such areas, which urban sociologists came to
refine, are first charted here (Booth, 1888, 1891, 1892–7).
Booth’s line of poverty
most lasting contribution was the means he adopted to provide a definitive
answer to the question: were these merely exaggerated journalistic accounts of
poverty and distress or were they grounded in solid evidence? In that sense he
can be seen as the father of modern poverty study. Booth himself was very
sceptical of the claims being made. He changed his mind. The evidence amassed by
his investigators convinced him, and his audience at the Royal Statistical
Society was not surprised. The survey method he used was by no means modern. He
relied on information supplied by and judgements made by local investigators
such as the School Board visitors in East London. They went to every family with
children of school age. It was assumed that the other half of the working class
population was in a similar state. Other volunteers supplemented the work,
especially outside the East End. These were not questionnaires filled in or
responded to by heads of household. But his assistants were asked to grade their
households into what were essentially social groups.
was not very forthcoming about how he reached the ‘line of poverty’ used by
the word poor I mean to describe those who have a fairly regular though bare
income, such as 18s to 21s per week for a moderate family, and by ‘very
poor’ those who fall below this standard, whether from chronic irregularity of
work, sickness, or a large number of young children.”
(Booth’s account of his methods given at a
meeting of the Royal Statistical Society, May 1887, Journal of the Royal Statistical
Society, June 1887; Simey and Simey, 1960, p. 184)
Where on earth did this income level come from?
It was much higher than the rates of outdoor relief that the Select Committee on
Poor Relief found in existence in the London of 1888 – an average of 9s 4d (47
new pence) for a family of five. This varied by area and reflected local labour
markets. The Poor Law officials asked themselves what was the minimum market
wage and how much below it did you need to pay to contain the
number of paupers? – a test of destitution. What Booth did was to set a rough
income level that reflected a judgement about its social acceptability. This was
a decisive contribution.
whose judgement? Recent research suggests it was more firmly grounded than many
critics have implied (Gillie, 1996). The source may well have been the fee
remission scales used by the London School Board in Tower Hamlets at the time
Booth was studying the area. Under the 1870 Education Act it was possible for
local boards to make attendance at school compulsory. They were also required to
charge fees. That posed difficulties. How far was it reasonable to reduce poor
families’ incomes? Was there a floor below which it would be irresponsible to
do so? Boards in different cities reached their own conclusions about fee
remission and kept their yardsticks secret. So did the Tower Hamlets divisional
office. But officers had precise guidance about the income at which a prima
facie case could be made that it would be socially unacceptable and prejudicial
to a child to reduce the family income below that point. Guidance took into
account the size of the family and the level of rent paid. It had all the
characteristics of modern income support minima and the result was a net income
very near to the one Booth chose. He would not have been able to cite this as
his source as the Education Board insisted such a scale be kept secret. If this
intriguing possibility is correct, the first statistical/social judgement on
income adequacy used by Booth may well have been based on a real life judgement
by these school board members. But it was not one that could be debated or
challenged. This was Seebohm Rowntree’s critical contribution.
father, Joseph Rowntree, had studied social questions, including
‘Pauperism’, before Seebohm was born. Seebohm was powerfully affected by a
visit to the poorest parts of Newcastle. He discovered Booth’s work and
wondered if his findings would hold outside London. ‘Why not investigate
York?’ (Briggs, 1961, p. 17). The methods he used were, at one level, similar
to Booth’s. House to house visits produced sheets of notes about the
accommodation, the numbers in the family and their working occupations and
personal remarks about the standard of life, cleanliness and respectability of
the inhabitants. The household’s broad band of income was mostly estimated
from knowledge of the worker’s job and the wages paid for that job obtained
from the employer. Sometimes the investigator had to rely on the families’ own
information checked with other observations or a second visit. In addition the
investigator was asked to judge from observation, questioning neighbours or
members of the family whether, in their view, the family was living in
‘obvious want and squalor’. It was this personal judgemental approach that
led to the often quoted conclusion that 28 per cent of the total population of
York were living in such a state. That compared with the 31 per cent Booth had
judged to be in poverty in London. Booth agreed that Rowntree’s figures were
comparable to his own (Rowntree, 1901; 2001, p. 300).
they really were is a moot point. Helen Bosanquet, of the Charity Organisation
Society and member of the Royal Commission on the Poor Laws, questioned why
Rowntree’s survey of a relatively prosperous market town like York should
produce the same result as Booth in the depressed East End of London (Bosanquet,
1903; for an account of contemporary critics see Bowpitt, 2000).
was new, and was to have a long term impact on poverty measurement, was his
attempt to measure the causes of poverty. Rowntree distinguished those whose
income was so low that even if they followed complete sobriety and total
purchasing efficiency they would not be able to live at a level of ‘physical
attempts here have often been misunderstood. He knew that any figure was likely
to be attacked, as it was to be by the Charity Organisation Society and others.
So he sought a harder, he hoped unchallengeable, measure. The adviser he turned
to was an American who was working for the US Department of Agriculture,
Professor W. O. Atwater, whose specialist area was human nutrition and energy,
backed up by two nutritionists from Scotland. How much food of what kind did a
working man need to function as an effective worker? That depended on the type
of work he was doing, Atwater argued, and he produced a range of minimum diets
from that needed by workers who used little physical exercise, through moderate
to active muscular work. The moderate standard was chosen.
Rowntree switched to actual food budgets. Here he took the rations set out by
the Local Government Board recommended for those in workhouses, and the cheapest
one at that. They seemed to produce a diet consistent with the nutritional level
proposed by Atwater for men. The rations for women and children could be roughly
adopted and turned into a household budget by using prices available to the
working class in York and checked against actual working class diets in York and
those of American workers. He concluded that ‘the labouring classes on whom
the bulk of the muscular work falls, are seriously underfed’ (1901, p. 259).
Rowntree was doing was essentially to throw down the gauntlet and challenge his
critics: ‘Are you seriously suggesting that you can expect families to live on
less than this?’ It was this harsher, apparently more ‘scientific’,
measure he called ‘primary poverty’.
difference between the judgemental levels of ‘squalid living’ and his
primary poverty level formed the controversial gap he called ‘secondary
poverty’. These were ‘families whose total earnings would be sufficient for
the maintenance of merely physical efficiency were
it not that some portion of it is absorbed by other expenditure, either useful
or wasteful’ (1901, p. 115; emphasis in the original).
Only 10 per cent of the York population were living in primary poverty, or 15
per cent of the wage earning class.
may be so, but what gave Rowntree his supposed authority was the emphasis he
placed on diet and household budgets, which take up much of the book and its
appendices. It was this idea that appealed to later investigators, as Veit-Wilson
(1994) points out, and they made studies of other English cities, to be
discussed in the next chapter.
himself developed a more generous measure in his ‘human needs of labour’
study (1918), as we shall see. And by the time of his second survey of York in
1936 (Rowntree, 1941), Rowntree had abandoned the idea of secondary poverty:
this survey I have made no attempt to measure the amount of ‘secondary’
poverty by direct observation, partly because the methods of doing this adopted
in 1899 appear to me now as being too rough to give reliable results, and also
because even had I done so the results would not have rendered possible a
comparison with 1899 for ideas of what constitutes ‘obvious want and
squalor’ have changed profoundly since then ... the only figures that are
absolutely comparable are those for primary poverty. (1941,
Rowntree’s original intentions then, the idea of poverty measures based on
diet and physical efficiency had taken on a life of its own.
crucial insight: The life cycle of poverty
was equally important for future poverty study was Rowntree’s attempt to
unravel the causes of poverty. He demonstrated that the rewards the labour
market generated in normal
times were ill
adapted to meet the basic needs of family life for many of the working
population, notably during childrearing and widowhood, sickness and old age.
Observing from his returns the circumstances of families in poverty he
formulated his life cycle of poverty theory, going on to elaborate it later in
the The human
needs of labour (Rowntree,
1918) (see box 1, pages 24–25).
he argued, derived from the interaction of supply and demand for particular
skills. There was no reason why they should take account of the fluctuating
income needs of families over their life cycle especially the coming of children
or the varying size of family. The significant activity of friendly societies,
Rowntree noted, helped to explain the low level of primary poverty experienced
from sickness and old age. The economy was prospering at the top of the economic
cycle. The level of wages relative to the needs of a family with several
children was simply too low to meet the most basic nutritional needs of many
attention Booth and Rowntree’s work has attracted has tended to obscure
important research done at the time by women’s groups, such as the Fabian
Women’s Group and others who were involved in the Suffragette Movement. Much
of their work was qualitative and it explored the meaning and experience of
poverty for individual family members and notably women. It was influential
because it gave an accessible parallel account to that of Rowntree. It provided
accounts of the way in which women struggled to cope on below poverty wages. It
also raised issues about the distribution of income within families that
feminists were to rediscover in the 1980s.
example was Mrs Pember Reeves’ (1914) Fabian pamphlet, Family
Life on a Pound a Week.
It set out to answer the question ‘How does a Lambeth working man’s wife
with four children manage on a pound a week?’ The answer differed not least
because the dietary (and other!) demands of men varied and what was left
determined what was available for the children’s and the wife’s needs. This
was the era of the male breadwinner family but many women were also single and
had family responsibilities of various kinds – more, these studies found, than
Rowntree had claimed. It was an era of significant widowhood. Poverty has not become
it always was (Lewis and Piachaud, 1992).
short, new social science evidence was posing an alternative to the traditional
view of poverty that it was the result of personal failing and could be
countered only by personal change which required the absence of easy state poor
relief. Explanations we are familiar with today – unemployment generated by
economic cycles, the changing needs of families over their life cycle and the
rigidity of wages compared to changing family needs over a life time – were
already formulated. So, too, were the distinctive needs of the sick, the old and
those with long term disabilities who could not be blamed for their situation.
Social scientists and actuarial statisticians were coming to see that
individuals and families faced a range of economy-wide risks that it was very
difficult for them to insure against privately or collectively in work-based or
local self help societies. Some kinds of employment or even location made the
risks of ill health difficult to insure against in small local or
occupation-based organisations. One way to see the history of the next half
century is the dawning realisation that there were fundamental market and self
help failures that required some kind of state action to correct the causes of
poverty. Incomes were too low and insecure for many to save enough for their own
retirement. Those most prone to ill health were least likely to be able to
sustain sick clubs or private insurance without support. The ‘risk pool’ had
to be widened if families’ risks of poverty were to be minimised (Johnson,
1996). Economy-wide solutions had to be found for unemployment. Moreover, the
scale and depth of each of these groups’ risks were to change through the
coming century. Increasingly the politics of the twentieth century would become
concerned with the question – who should pay the costs of sharing such risks
(Baldwin, 1990)? Should it be the whole community, the rich or only the working
class? We trace threads of that story in part 2.
the following chapters, however, we look at how Seebohm Rowntree’s legacy of
local poverty studies was continued up to the Second World War and how the scale
of poverty on different measures changed over the century. We use the analysis
of the causes of poverty pioneered by Seebohm Rowntree to examine how far those
Piachaud and Jo Webb
1899 study provides a baseline for considering how poverty has changed over the
twentieth century. This chapter reviews the main studies of poverty published in
the twentieth century and compares Rowntree’s first study based on his survey
of York in 1899 with evidence about poverty in Britain at the start of the
twenty-first century. In the next section these studies are described and then
the chapter examines how the poverty lines or standards used in these studies
compare and how the extent of poverty has changed. In the next chapter the
changing causes of poverty are analysed. Examining changes in poverty is purely
descriptive and historical unless it illuminates understanding of why changes
occurred: some the main social and economic changes that occurred over the
century are considered and their impact on poverty is discussed.
A study of town life was
based on York, the home of Rowntree and his family’s chocolate factory. He
wrote that ‘My object in undertaking the investigation . . . was, if possible,
to throw some light upon the conditions which govern the life of the
wage-earning classes in provincial towns, and especially upon the problem of
poverty’ (1901, p. vii). Rowntree is best remembered for developing and
formalising the concept of the poverty line, collecting details about the income
of each household, rather than just making rough guesses, making a distinction
between what he called ‘primary’ and ‘secondary’ poverty, and the
concept of poverty over the life cycle, as discussed in chapter 2.
other investigators followed in Rowntree’s footsteps. In 1903 a survey which
seems largely to have been forgotten was carried out by Mann (1905). It is
interesting since it looked at a rural area, a village in Bedfordshire, whereas
almost all the other early surveys looked at towns.
next landmark in poverty studies was provided by Bowley and Burnett-Hurst (1915,
1920), published under the title Livelihood
The study covered five towns (Reading, Northampton, Warrington, Stanley and
Bolton) and was carried out between 1912 and 1914. They followed Rowntree’s
broad approach but Bowley, a trained statistician at the London School of
Economics, pioneered the use of random sampling, with far-reaching consequences.
Abrams observed that surveys ‘were no longer dependent on the munificence of
millionaire philanthropists and upon the years of toil of wealthy amateurs’
(1951, p. 44). A follow-up to Livelihood
and poverty carried
out by Bowley and Hogg in 1923–4, published under the title Has
poverty diminished? (1925),
dealt with a subject of great contemporary interest, the difference between the
prewar and the post-war world.
biggest survey in the interwar period was the New Survey of London Life and
Labour directed by Hubert Llewellyn-Smith (1930–5), which specifically aimed
to provide a comparison with Booth’s earlier study.
was a flurry of surveys in the 1930s, including surveys of Sheffield (Owen,
1933), Merseyside (Jones, 1934), Southampton (Ford, 1934), Plymouth (Taylor,
1938), and a survey of Bristol (Tout, 1938), which was technically interesting
as probably the first in Britain to use the Hollerith punch-card machine (Wardley
and Woollard, 1994).
second survey of York, published as Poverty
and progress (1941),
was particularly interesting since it showed how much social conditions had
changed between 1899 and 1936. Rowntree measured poverty according to several
different standards, the original 1899 level and a rather more generous line
based on his study of the Human
needs of labour (1937)
– so this study looked forward as well as back. His third survey in 1950, much
smaller and less rigorous than his earlier studies, found that poverty had been
virtually abolished largely as a result of the welfare state, an apparent
achievement of the Beveridge reforms which was widely reported. This was the
last of the old style local poverty surveys.
introduction of the official Family Expenditure Survey (FES) was a watershed for
poverty research. This was carried out on a one-off basis in 1953/54 and then on
a continuous basis from 1957 onwards. Its primary purpose is to collect
information about expenditure patterns which is used to construct the Retail
Price Index, but it also collected information about household incomes.
Initially this information was fairly crude, but the questions became more
detailed over time. FES data could therefore be used to look at poverty at a
national level. The first to recognise and seize this opportunity were a group
of academics based at the London School of Economics. In the early 1960s Peter
Townsend (1962) and Dorothy Wedderburn (1962) presented some preliminary results
from an analysis of the FES for the years 1953/54 and 1960. The final results
were published with much publicity, and the linked establishment of the Child
Poverty Action Group, in December 1965 in a pamphlet by Abel-Smith and Townsend,
called The poor
and the poorest.
further analyses were conducted in the same mould using the FES in the 1960s and
1970s, including those by Atkinson (1969), Fiegehen, Lansley and Smith (1977)
and Beckerman and Clark (1982).
statistics on low incomes became a regular series with the publication of the Low
Income Families estimates
between 1972 and 1985 (DHSS, 1988). These were based on the FES and the format
of the analyses was very similar to those produced by Abel-Smith and Townsend,
although the word ‘poverty’ was not mentioned.
current official statistics on low incomes can be found in the annual Households
Below Average Income (HBAI)
report, which began to be published in 1988 and replaced the official Low Income
Families series. Originally this used the FES but it is now based on the larger,
tailor-made Family Resources Survey carried out on behalf of the Department for
Work and Pensions. As its name suggests, HBAI provides details about various
aspects of the lower half of the income distribution, but many commentators have
chosen 50 per cent of mean income or 60 per cent of median income, as a
convenient poverty line. In 1999 this appeared to receive official endorsement
in the form of a set of poverty indicators published by the government (DSS,
1999) and was used in the Public Service Agreement target for cutting child
poverty by one quarter by 2004/05. The latest target in the Child
poverty review (HM
Treasury, 2004) is to halve child poverty defined as below 60 per cent of median
income level (before housing costs) by 2010/11 relative to the 1998/99 level.
are many differences in the poverty studies mentioned here: in who carried out
and financed the surveys, the population covered, sampling and survey size,
sources of information and their quality, response rates, and
fundamental in describing poverty is what is meant by ‘poverty’ – what
line or standard was used. The starting point is Rowntree.
drew up his ‘primary’ poverty line, as described in chapter 2, based in part
on science and in part on observation. The scientific input was from American
nutritionists whose research (however unethical in retrospect, being based on
involuntary convict subjects) indicated requirements for ‘the maintenance of
merely physical efficiency’. To this was added the cost of clothing, light and
rents, Rowntree wrote:
estimating the necessary minimum expenditure for rent, I should have preferred
to take some reliable standard of accommodation required to maintain families of
different sizes in health, and then to take as the minimum expenditure the
average cost in York of such accommodation. This course would, however, have
assumed that every family could obtain the needful minimum accommodation, which
is far from being the case.
view, therefore, of the difficulty of forming an estimate as above, the
actual sums paid for rent have been taken as the necessary minimum rent
in this item is very improbable, rent being the first thing in which a poor
family will try to economise. (1901,
p. 106, emphasis in original)
issue is still with us – exemplified by the continuing struggles of the
government to reform Housing Benefit. Most subsequent studies of poverty have
either included actual rents in setting the poverty line or, with the same
effect, studied incomes after housing costs. For comparability, the same will be
table below shows the minimum necessary expenditures per week in 1899.2
diet this allowed was bleak indeed. It is set out in box 2.
cost of some components of the diet then and now are also shown in the box.
Costing the weekly diet for a man and for children aged 3–8 at today’s
prices gives totals of £10.70 and £5.60 per week respectively. The cost of the
diet made up over half of the total poverty line for adults and four-fifths of
the total for children.
Comparisons between the poverty lines used in other studies are fraught with difficulty, due to differences in their structures and lack of suitable price indices and measures of living standards. The poverty lines used in the early studies are as consistently as possible compared in figure 1; this relates to a three-child family and is adjusted to the price levels of 2000. It is clear that most of the early surveys used similar poverty lines in real terms and in structure. By the 1930s these lines were very low in comparison with general living standards. The main exception was Rowntree, who in his second and third studies was much more generous than the rest.
In the second half of the century, benefit levels did not change their structure
much until very recently, with higher allowances for children, especially
younger ones. Means tested social assistance benefits increased roughly in line
with average incomes until the early 1980s, and have risen sporadically since
then, as shown in figure 2.
the derivation of poverty lines and the fine details of their construction, such
as the varying treatment of men, women, pensioners, children and people of
working age, have changed over time, but the measures produced have been
surprisingly stable when viewed in relation to living standards. In the first
half of the century, poverty lines for a single man were 30–35 per cent of
weekly personal disposable income per capita, while in the second half they were
around 40 per cent, as shown in figure 3 (page 40). For a three-child family
there was much more variation from about 80 to 140 percent of per capita income.
can compare Rowntree’s 1899 primary poverty level with the equivalised 60 per
cent of median income standard now used by the government. The overall poverty
levels have been expressed as proportions of consumers’ expenditure per
capita, as shown in table 1. It can be seen that for all types of household the
poverty line has not only increased with rising prosperity but has risen
somewhat relative to average expenditure levels. (It may be noted that the
poverty line for 2001/02 is considerably higher than Income Support levels,
which are roughly similar proportions of average consumption per head as were
Rowntree’s primary poverty levels.)
the end of the twentieth century, poverty lines were far higher in absolute
(real) terms than ever before, but in relative terms they had changed rather
little. All the evidence suggests that over a long period of time, the public
has regarded the
poverty line as a relative concept, i.e. bearing some relation to general living
standards although not necessarily rising quite as fast as they do. Although
social policy textbooks often talk about ‘absolute’ versus ‘relative’
definitions of poverty, and the person usually cited as an exponent of the
former view is Rowntree, this is a gross misrepresentation of his work. Budget
standards became stuck in a rut in the 1930s because researchers were
concentrating on making comparisons, either with different places or different
times, not because they were seen as currently valid. Surveys of public opinion
indicate that over time, people’s views of necessities and the income required
to afford them do rise upwards as average incomes grow.3
said in 1982:
benefit today is worth about twice as much as national assistance was as
recently as 1948. So why worry about the poor? Poverty means exclusion from the
living standards, the life styles and the fellowship of one’s fellow citizens.
That exclusion is not experienced merely as a frustrating failure to keep up
with the Joneses. The assistant secretary in charge of the campaign against
fraud who believed that everyone could manage perfectly well with an income
equivalent to the national assistance rates of his boyhood on which his own
parents lived had forgotten that they had an open fire and probably a cooking
range which could burn all kinds of fuel. They were not compelled to live in a
flat with one of the more expensive forms of central heating. They could
probably grow vegetables in the back garden, and walk to the shops every day –
little shops which would give you credit if you were short of cash. They had no
need of a refrigerator for storing their food. They could hang out the washing
in the yard and had no need of launderettes or washing machines. Since no-one
had television sets their children would not have felt at a loss in the
playground and the classroom for lack of what has now become most people’s
main window on the world – almost the only window for those who cannot afford
to go anywhere. (1982,
examples are the reduction in public telephone booths due to the prevalence of
mobile phones, and the much wider range of information and services available to
those with internet access.
current poverty line based on a proportion of average income is convenient to
apply – particularly when making international comparisons – and easy to
understand, but its apparent simplicity disguises a host of technical
definitions and implicit assumptions. It is possible to imagine a very rich
society where nobody lacked what people in any other society would see as
necessities and yet some people still had incomes below half average.
modern approach to defining needs that is closest to Rowntree’s method is the
Budget Standard approach, expounded most notably by Jonathan Bradshaw (1993).
This approach was for a long time associated with discredited notions of
‘absolute’ poverty. But there is nothing intrinsically absolute or fixed
about it, although it is rather laborious to update. It has the great advantage
that it is explicit, and there is no reason why the ‘necessities’ included
should not change over time.4
standards incorporating public opinion could be used to supplement the 60 per
cent of median income measure to counteract the criticism that it is arbitrary
and abstract. Such standards have been constructed recently for several family
types, giving a detailed picture of what different households need to achieve a
particular standard of living in the UK at a specific point in time. Far from
Rowntree’s diet of cocoa, pease pudding and boiled bacon, they take into
account items necessary for modern families, including childcare costs, which
made a big difference to the picture. These budgets have been constructed after
wide consultation with relevant groups, not just by ‘experts’.
is striking that at the end of the twentieth century, budget standards and 60
per cent of median income were producing quite similar results despite being
constructed in completely different ways. The two approaches complement each
other well. One strategy would be that from time to time, budget standards could
be compared with average income to determine what proportion of average income
should be used as the poverty line – a proportion that might gradually change
as time went on. The HBAI report could also discuss how the poverty line
translates in terms of living standards – a way of putting flesh on the bones
of the statistical calculations to make them more meaningful.
problem which has been exacerbated in recent years is the divergence between the
poverty measure in common use and the social security system. Some discrepancies
may be justified: for example, the benefit system uses the ‘inner family’
unit as the benefit unit, whereas the HBAI series is based on households. For
the purposes of poverty measurement it is probably fair to assume that most
individuals in a household share resources with each other, while for the
benefit system to make this assumption would be politically unacceptable. But
there is little rationale for other inconsistencies: 60 per cent of median
income is now considerably higher than benefit level for most family types;
clearly there is a serious gap between what society and the government regard as
an appropriate poverty line and the standard of living it is prepared to grant
in practice to people receiving benefits.
changing extent of poverty
study was confined to York. As Rowntree himself put it: ‘One naturally asks on
reading these figures [on poverty in York] how far they represent the proportion
of poverty in other towns’ (1901, p. 298). He described York as ‘this
typical provincial town’ (p. 304) and before undertaking his study he
satisfied himself ‘that the conditions of life obtaining in my native city of
York were not exceptional, and that they might be taken as representative of the
condition existing in many, if not most, of our provincial towns’. Comparing
his results with Booth’s earlier study of London, Rowntree wrote: ‘The
proportion of the population living in poverty in York may be regarded as
practically the same as in London’ (p. 299).
Bradshaw in his preface to the centennial edition of Rowntree’s study wrote:
concluded that Rowntree’s claim that conditions of life in York were not
exceptional and were fairly representative is remarkably true of the city a
century later (with reservations on ethnic mix). In terms of the key
determinants of living standards, including rates of pay, levels of
unemployment, proportion of the population who are sick or disabled, lone-parent
families, retirement pensioners or people who are in receipt of income-related
benefits, York is extraordinarily close to the national average. (Rowntree,
2000, pp. lxv–lxvi)
Thus it seems justifiable to treat Rowntree’s study as broadly representative of Britain and to compare poverty in York in 1899 with that in Britain at the end of the century – besides which, we have no choice.
found that 9.9 per cent of York’s population were below his primary poverty
line, or living in ‘primary poverty’. In addition nearly twice this
proportion – 17.9 per cent – were living above the poverty line but in
‘obvious want and squalor’, which is Rowntree’s ‘secondary poverty’.
Together this made a total of 27.8 per cent living in poverty.
extent of poverty found in subsequent studies up to 1937 is shown in figure 4,
but with results adjusted to use the same relative
standard as the
‘primary poverty’ line in Rowntree’s 1899 study. The broad picture is one
of some decline comparing the 1920s with the years before the First World War,
and higher rates of poverty in the early 1930s than in the 1920s.
in 1950 was underestimated by Rowntree, and it increased during the 1950s, as
Abel-Smith and Townsend showed. Even then, it was at very low levels by modern
standards, affecting less than 4 per cent of the population if the standard
benefit level was used as the poverty line. Abel-Smith and Townsend’s
‘rediscovery’ of poverty was in part due to the use of a higher poverty
line, 140 per cent of the basic ‘scale rates’ of benefit (on the basis that
this allowed for other ‘extras’ people on National Assistance could get on
top of scale rates), which produced a poverty rate of 14.2 per cent.
5: Proportion of the population below 50 per cent mean
1960s and 1970s were a period of relative stability, with poverty still in
single figures on the standard benefit level measure, and only around 10 per
cent on a half mean income measure. The extent of post-war poverty over the
period for which continuous data are available is shown in figure 5. The great
change came in the 1980s, when it doubled to roughly 20 per cent, and stayed
there until the end of the century. The period since the late 1970s is
considered in more detail in chapter 6.
children, the extent of poverty, as measured by their family income level, was
close to the average of all ages until the 1980s. Since then child poverty has
become markedly more severe, as shown in figure 6.
2001/02, over one person in five (22 per cent) was living below the poverty line
of 60 per cent of median income level (after housing costs). No attempt had been
made since Rowntree’s first study to measure secondary poverty since doing so
involved a highly subjective judgement on the part of the researcher. This in
part reflected the quest for objectivity in poverty research but also the
primacy given in twentieth century social science to the quantitative over the
considered the poverty lines used and the overall extent of poverty in twentieth
century Britain, it is to the changing pattern and causes of poverty that the
next chapter turns.
Piachaud and Jo Webb
distinguished six causes of poverty and divided those in primary poverty
according to these causes. The division is shown in table 2. Over half the poor
were in regular work but at low wages.
examine how far Rowntree’s ‘causes’ continue to explain poverty, data from
the Family Resources Survey for 2001/021
reanalysed using as far as possible the same categories as Rowntree.2
in table 2 show important changes.
biggest group in poverty remains households with someone in work, but these
account for only one third of those now in poverty. Largeness of families (five
or more children) has greatly declined in significance from 22 to 2 per cent.
Illness or old age of the chief wage earner has grown in importance but
widowhood is less significant. Unemployment is now more important than a century
ago in explaining poverty. There is now a large group whose poverty is not
explained by any of Rowntree’s causes; these include lone parent families,
students and others.
how many fall below a poverty line gives a measure of poverty but it does
nothing to indicate the severity of poverty; in a head count those a few pence
below the poverty line count equally with those far below the level. To indicate
severity it is possible to derive ‘poverty gaps’ which measure the deficit
below the poverty line. Rowntree calculated these for each of his main
categories of the poor. As far as possible this has been reproduced for 2001/02.
The results are shown in table 3. In both years, the group falling farthest
below the poverty level was those in unemployed households, still with an income
less than half of the current poverty line. The relative severity of poverty in
households with one or more in regular work was greater in 2001/02 than 1899.
For widows not only the incidence but also the severity of poverty had
the century as a whole, some conclusions can be drawn about the composition of
the poor and the causes of poverty. Although surveys used different methods and
poverty lines, at any given time there was general agreement about the leading
cause. The earliest studies found that poverty was mainly due to the combination
of low wages and large families, and child poverty rates were very high. In the
1920s and 1930s, unemployment became a huge problem, and the unemployed had a
high risk of falling into poverty, despite unemployment
and assistance. After the war, family allowances eased the problem of low wages,
and unemployment was very low. The largest group in poverty in the 1950s and
1960s were the elderly, many of whom did not claim the National Assistance to
which they were entitled. When poverty was ‘rediscovered’ in the 1960s,
public attention was drawn to the plight of children in poverty. Pensioners were
still more likely than children to be poor, but the picture varies according to
which ‘equivalence scales’ we use to compare the incomes of different kinds
insurance and assistance. After the war, family allowances eased the problem of low wages, and unemployment was very low. The largest group in poverty in the 1950s and 1960s were the elderly, many of whom did not claim the National Assistance to which they were entitled. When poverty was ‘rediscovered’ in the 1960s, public attention was drawn to the plight of children in poverty. Pensioners were still more likely than children to be poor, but the picture varies according to which ‘equivalence scales’ we use to compare the incomes of different kinds of family.
poverty declined in the 1970s, due to increases in the retirement pension. But
in the 1980s, many groups were affected by the great rise in poverty.
Unemployment and lone parenthood soared, and the risk of poverty was very high
for both of these groups. Today unemployment is lower but there are many
households with no adult in work, and child poverty has become a major problem.
There is now no single clear cause of poverty but there is general concern about
incentives to work, with the introduction of measures to ‘make work pay’ and
greater financial support for children (see chapter 6).
there still a life cycle of poverty?
life cycle of poverty, one of his key concepts which had an enduring impact on
social security policy in the twentieth century, was discussed in chapter 2.
Here we attempt to examine how it changed over the century. He illustrated the
life cycle with the diagram shown in box 1 in chapter 2. It is unclear how
Rowntree constructed his diagram. It appears to incorporate some adjustment for
changing family size (or equivalisation) over the life cycle since the poverty
line is constant across the age range. Since Rowntree was at that stage not
conversant or confident with sampling methods, it seems unlikely that he was
familiar with more sophisticated and recent statistical procedures. It seems
likely that he drew his diagram without specific data, impressionistically by
hand, to illustrate the life cycle he had observed and discussed. Since neither
the data nor the researchers are any longer available, we shall never know.
comparison, the modern extent of a life cycle of poverty has been explored,
based an actual data, with results shown in figure 7. There is still, despite
extensive lifetime redistribution of income through the social security and tax
systems, a significant variation of average income levels over the life cycle.
As can be seen, the extent of poverty is highest among children and older
people. This pattern is not very different from what Rowntree found although
there is not now the fall in income level and rise in poverty associated with
the period of having many dependent children when aged between 25 and 45.
further difference between lifetime experiences of poverty is that between men
and women. In 1899 women made up about 60 per cent of all poor adults. In
2001/02 women made up 54 per cent of those aged 16 and over who were poor. Thus
women were and are more likely to be poor. However, as stressed in Chapter 2 and
considered by Lewis and Piachaud (1992), it is misleading to refer to a ‘feminisation’
of poverty in Britain – poverty has for a long time been feminised.
and economic changes
this section some of the most significant and striking changes over the century
are considered. It is not possible to assess the impact
of each of these changes on poverty but they do indicate how some things have
changed a lot, and some not very much.
impact of each of these changes on poverty but they do indicate how some things have changed a lot, and some not very much.
data are for York County Borough, 2001 data for York Urban Authority.
total population increased over the century – as did Britain’s – but,
owing to boundary changes, it is hard to be sure how much. What is more relevant
is the changing age structure. This is shown in table 4.
is apparent is the extent of the ‘ageing’ of the population. In 1901 nearly
one-third (31.4 per cent) was aged under 15 compared to one-sixth (16.5 per
cent) in 2001; those aged 60 or over tripled from 7.2 per cent in 1901 to 21.9
per cent in 2001. There has been a dramatic fall in infant and child mortality,
and those reaching middle age live longer.
proportions of the population who were unmarried (40 per cent), married (52 per
cent) and widowed (8 per cent) were little different across the century but each
category had changed.
2001 one-fifth of the currently unmarried were divorced, one seventh of those
married had been remarried, and 4 per cent of those who were still legally
married were separated.3
third, clear change in population was that in 1901 0.9 per cent of York’s
population was born outside the British Isles; in 2001 this had increased to 4.7
activity, occupations and earnings
extent of economic activity and the principal occupations of all adults (up to
age 75 in 2001) are shown in table 5.
adult men there has been a striking fall in economic activity: only 1 in 14 was
not engaged in an occupation in 1901 compared with 1 in 3 in 2001. Among women
the opposite has occurred, with a rise from 31 per cent to 56 per cent in
occupations. There was a greater difference between unmarried women and women
who were married or widowed in 1901; 61 per cent of the former were in
employment compared to 10 per cent of the latter. In 2001 this difference was
much smaller, with over 70 per cent of married women with dependent children
being economically active. The combination of the decline in employment among
older workers, due to the growth in both early retirement and numbers on
disability benefits, and the rise in female employment have had major
consequences for the distribution of incomes.
economic activity changed greatly, the pattern of earnings was much more stable.
The share of employment income in gross domestic product remained remarkably
constant – between 70 and 80 per cent – through the twentieth century. The
dispersion of earnings changed very little in the first 70 years of the century
(Thatcher, 1968); it fell during the 1970s and then increased from 1980 until
the end of the century (Atkinson, 2000).
distribution of expenditure in 1899 was most fully analysed by Rowntree only for
those on the lowest earnings; the results are compared with results for a
similar proportion of households in 2001/02 in table 6.
far the most striking change is that in food expenditure. In 1899 poorer
households spent over half their income on food: after rent, fuel and lighting,
they had less than one quarter to spend on other things. By contrast in 2001/02
nearly half was spent on other things and food represented only one sixth of
total expenditure. Only 12 per cent was spent on non-basic other things in 1899
whereas this had grown to 40 per cent in 2001/02.
Housing circumstances have changed drastically. First, there has been a change in tenure. Rowntree described the working class population of York in 1899 as tenants – without exception they rented their accommodation. Others in the ‘servant-keeping class’ owned their own homes but he assumed that this did not happen among the working class. In 2001 in York the tenure groups were:
A second major change has been in the quality of housing. In 1899 Rowntree found that over 20 per cent of houses in York had to share a closet with another house, some sharing with five or more other houses. These were not water closets but mostly midden privies, essentially holes in the ground. Not all houses had their own water supply, with 15 per cent sharing a water tap.
Third, the density of living has been greatly reduced. It is not that houses are much larger: in 1899 there were about 5 rooms per household, compared to 5.3 in 2001 (although rooms may be larger and what is counted as a room has changed slightly, making precise comparison impossible). But the number in each household has fallen markedly from a mean of 4 in 1899 to 2.4 in 2001. Whereas in 1899 nearly all households had more than one member and most had dependent children, in 2001 nearly a third of households had only one member, of which half were pensioners, and only one fifth had dependent children.
Rents in 1899 amounted to 18 per cent of total expenditure of the poorest fifth, as shown in table 6. Even in Rowntree’s highest income group rents were 13 per cent of total expenditure. The rent figure for 2001/02 in table 6 is based on gross rent: taking into account housing benefit, rebates and allowances, net rent for the lowest quintile amounted to only 6 per cent of expenditure.
Thus for poorer tenants the net cost of housing is now a much lower burden than in Rowntree’s day, but rent levels vary widely. Similarly, among owner-occupiers the cost of mortgage interest is highly variable. In sum, while the quality of housing has improved enormously, the variation in its cost has greatly increased.
the extension of owner-occupation, the acquisition of consumer durables has
increased the capital ownership of virtually all households. In analysing
consumer durables no comparison is possible with 1899 since Rowntree did not
analyse their ownership – in most cases for the very good reason that the
products had yet to be invented. In 2001 the proportions of households in
Britain with different consumer durables were as shown in table 7.
majority of the population had access to most of the durables listed. In the
case of cars there was more variation in the distribution. In York in 2001
one-quarter (27.3 per cent) of households had no car (or van), half (48.6 per
cent) had one car, one fifth (20.1 per cent) had two cars, and 1 in 25 (3.9 per
cent) had three or more cars.
mass ownership of consumer durables, including by those in the lowest fifth of
income levels, represents an economic and social transformation. How far they
all improve quality of life is open to debate. In the case of cars, the
consequences of non-ownership in terms of mobility and lack of access to
amenities, cheaper shopping and much else are important. Lack of a car is far
more common among poorer households. But in terms of many of the accoutrements
of modern life in Britain the poor are not now far behind those better off.
on one earner
1899 the earnings of households from paid work averaged 32 shillings a week.
This was the total income for most households (excluding payments by lodgers).
The earnings were provided by: Thus over four-fifths of household incomes came
from one earner – literally the breadwinner.
Far more households have two or more earners than in 1899 but in addition far more have no earner at all. The widening of the distribution of economic activity is the greatest single change that has increased income inequality.
relief, social security and redistribution
the start of 1901 the York Poor Law Union provided at public expense for 492
people in York Workhouse and for 1,049 through ‘outdoor relief’ – payments
to people living in their own homes. ‘Outdoor relief’ provided for 1.4 per
cent of the population at a cost of £5,950 (Rowntree, 1901, pp. 365–76);
thus, outdoor relief amounted to at most 0.4 per cent of income from earnings in
2001/02 in Britain, one tenth of households received over half their income from
income related benefits.7 While
Income Support amounted to 1.4 per cent of gross incomes, a more relevant figure
however is total state spending on all cash benefits, which amounted to 12.7 per
cent of gross income.8
role of the state in providing incomes and relieving poverty has changed beyond
any possible imagining of Seebohm Rowntree.
the tiny levels, by modern standards, of expenditure on
poor relief, some of the concerns then are all too familiar now.
In the final paragraph of his study, Rowntree wrote:
is no doubt a considerable amount of abuse in connection with the giving of
out-relief – persons receiving it who are not really destitute, or who have
relations who could and should maintain them, whilst others receive it only to
spend it upon drink. Not a few such cases have come under the notice of the
writer during the course of the present investigation. This does not, however,
necessarily, nor in fact does it at all, reflect upon the honesty or ability of
the relieving officers. But the number of these is inadequate, there being only
two for the whole city. The abuse points, however, to the necessity of
appointing a Superintendent Relieving Officer, for it must be borne in mind that
ill-administered outdoor relief not only entails financial waste, but has a
serious demoralizing effect upon the community.
next chapter turns to the solutions, albeit partial, that were developed over
the last century, both in attempting to reduce poverty, and to cope with such
century of policy responses
century Britain inherited a unique poor law tradition, much derided and much
misunderstood. Reformers in the first half of the century tried to transform
that poor law tradition into a social insurance based model. With the Beveridge
Report of 1942 and the legislative changes of the 1940s, they seemed to have
succeeded. Yet that was not to be. The comprehensive post-war social insurance
schemes never eliminated poverty or major dependence on the old public
assistance tradition. At the end of the century a new modern version of targeted
aid to the poor emerged, including supplementing the wages of the working poor.
Jose Harris has put it:
the 1900s onwards . . . the poor law system in Britain was continually
supplemented, and appeared eventually to be ousted, by a series of alternative
income-support policies based largely on social insurance; the climax of this
process with the formal ‘abolition of the poor laws’ in 1948 was felt by
many to be a defining moment in Britain’s post-war history. Yet from the early
1960s, welfare structures covertly bequeathed from the poor laws began to
re-emerge in British social policy as the major instrument of publicly-funded
income support; at the end of the century Britain once again had the most
profoundly poor-type welfare system of any country in Europe. What accounts for
the strange survival of this supposedly much-hated institution?’ (2002,
order to try to answer that question we need to reflect briefly on the
significance of that poor law tradition in Britain.
roots of poverty relief: A distinct tradition
First Tudor poor laws date from 1495 when the dilemmas posed by the poor were a
topic of moral and political debate across Europe (Innes, 1998, 1999; Michielse,
1990; Slack, 1988, 1990). What balance should be struck between private charity
and public concern for good order?
to that time the predominant view was that the poor were a proper charitable
concern of the faithful. Monasteries, almshouses, guilds, donations to the poor
of the parish were private activities. The state confined itself to punishing
concern for and fear of the poor and the need to think rationally about some
organised responses to poverty were argued by Erasmus and Juan Luis Vives
(1492–1540) and pioneered in both Catholic and Protestant European cities from
Ypres, Strasbourg and Geneva to Lyon and Tudor London.
contrast to the previous system of Christian charity and the medieval view of
poverty, the main characteristics of the new approach to poor relief can be
summarised as follows: the social salvation of the recipients rather than the
spiritual salvation of the donors took precedence; secular rather than church
authorities became the central agents of poor relief; the maze of independent
institutions was replaced by a central institution, the ‘common chest’;
begging was prohibited, no longer an accepted practice of the paupers Christi;
and the central concern was no longer benevolence but the subjection of the poor
to a systematic and disciplinarian program of education and improvement. (Michielse,
1990, pp. 2–3)
fact, the tension between deeply held Christian humanist ideals and a realist
appreciation that charity could go too far, creating a pauper population, has
been recurrent in debates about poverty policy right up to the present.
these innovations and ideas were European-wide, England came up with an unusual
solution. A national framework of duties was placed on parishes in their
treatment of the poor in 1597 and 1601, though with considerable local
discretion about the means employed. Such an approach was not so different from
some other countries but the general power to levy a tax to meet the expenses of
poor relief was. The fact that this taxing power was almost universally adopted
by local parishes meant England was following a distinctive route. It was much
criticised as taking away the personal responsibility to give and leading to the
excessive relief of the poor. It was wrong, critics argued, because it embodied
a ‘right to relief’ (Innes, 2002).
relief took less than 1 per cent of the GDP in 1696 and rose to 2 per cent by
1800. The numbers covered probably rose from about 3.5 per cent of the
population in 1700 to 8 per cent by mid century and 14 per cent by 1800 (Slack,
1990). It was the consequent cost and the very existence of a national
legislative framework that attracted the attention of leading social scientists
of the day – not just Adam Smith and Malthus but a whole range of serious
commentators, political economists and statisticians (Blaug, 1963; Dunkley,
1982; Horne, 1986; Innes, 1999). The concern was not just with the misguided
actions of a few local burghers, as critics saw it. It was a national issue.
Westminster chose to address the early nineteenth century critics by tightening
the rules of access in the famous 1834 reforms, but not
revoking the ultimate right to relief as some had urged. It was outdoor
cash given outside the demeaning and rigorous workhouse that was frowned upon.
1834 Act took poor relief out of the hands of amateurs, creating a body of
professional staff who served the new amalgamated parish ‘unions’. It set
out a national test of need, requiring relief for the able-bodied only in the
workhouse, setting out regulations for the conduct of those institutions. The
level of relief was also set. It should be lower than the standard of life that
could be gained from the lowest wage the market would offer outside. This
principle of ‘less eligibility’ was not new, but it was given its classic
articulation. It would be wrong too to give the impression that these principles
were universally implemented. Local traditions, ideologies of relief almost, the
revenue available from the local rate and local economic circumstances differed
widely. The Webbs made this point but there now is a vast modern literature on
local poor law diversity (see Webb and Webb, 1929; Kidd, 1999; King, 2000, for
significance of national legislation and national guidelines should not be
underplayed, however. After a strong upward trend in poor relief spending that
had reached £7 million in 1830, slightly down on 1820, it fell to £4.6 million
by 1840 despite a growing population, and the scale of relief in relation
to size of the population went on falling until the late part of the century.
Moreover, in its concern to contain the scale of relief, central government
created the most centralised national pattern of poverty relief anywhere in
Europe. A powerful group of poor law inspectors began to shape local
administration and did so through to the 1930s. This involved ‘a degree of
centralised bureaucratic control largely unknown in the poor law systems of
mainland Europe’ (Harris, 2002, p. 420). There was still much local variation
and variation in treatment by types of client – a hierarchy of
‘deservingness’. But it was an increasingly centrally regulated safety net
that became, by stages, a nationally administered and calculated safety net by
1948. This was again a step ahead of European countries and North America. It
was to have important implications for the eventual fate of the social insurance
model in the twentieth century.
writing accounts of the history of social policy as recently as the 1970s
(Fraser, 1973) could present the story as one of gradual ‘progress’ – the
Poor Law in all its evil forms gave way, in gradual stages, to a growing range
of social insurance schemes that secured households against the main causes of
poverty. All this was underpinned by a comprehensive safety net that caught the
few who fell through. This insurance system had its faults but they were being
systematically put right. The state had learned how to prevent long term
unemployment. That was the story in outline. Yet, as the quote from Professor
Harris with which we began shows, this is not a storyline modern social
historians can adopt. Yet, at least until 1948, it seemed a plausible account.
the Poor Law? 1900–48
Royal Commission on the Poor Laws which sat in the early part of the last
century reflected, in its famous majority and minority reports (1909), the clash
of ideas about the causes of poverty we discussed in our opening section – a
clash that was embodied in the formidable personalities of two women
commissioners, Helen Bosanquet and Beatrice Webb. Both believed that some of the
poor were beyond relief and that those on relief could not just be left to do as
they pleased in seeking or not seeking work or in the care of children. But the
majority view was that poverty was essentially a moral problem that lay with the
poor and it was exacerbated by the lax and overgenerous way in which the Poor
Law was being administered. Part of the solution lay in active help and
counselling for those entrapped by it. But that required tougher action with
those who would not respond. We can see clear parallels with modern debates
about welfare reform. The minority report saw the causes of poverty as largely
the result of basic structural factors in the economy and argued that provision
for the poor should simply become part of a range of services for the whole
community like health, education and child care. This proved a durable thread in
the debate over the coming century. The minority report became the centrepiece
of a campaign to abolish the Poor Law.
first group to escape the old Poor Law was the able-bodied elderly. The reasons
lay not just in a concern for their deserving welfare but in a determination to
bear down on the able-bodied feckless who were seen as a cause of rising poor
law costs. Older people had always been relatively well treated by poor law
authorities but posed a problem if the rising costs of poor relief were to be
contained. The changing industrial structure of the country, the political
economy of poor relief and the newly politically organised working class all
contributed. In rural areas it was not unusual for men and women to continue
working part-time in less physically demanding ways well into their sixties and
early seventies. Old-established family firms may have moved workers into less
onerous jobs as they aged (Macnicol, 1998). The more competitive international
environment of the late nineteenth and early twentieth century and the new
industry of the time meant that employers were less able or prepared to keep men
on much beyond their peak productive period. (We were to see comparable effects
in the 1980s.) Yet life expectancy was growing. The risks of poverty in old age
were growing because most workers had little opportunity to save significant
sums for themselves and their wives. Local ratepayers were unhappy at the rising
costs. If the central government took on this responsibility, they would be
relieved. Trade unions believed older workers posed a threat to jobs. They also
genuinely believed that a decent pension was a fair reward for a lifetime of
paid out of taxes became a rallying cry of the new radical Liberals as well as
the new Labour movement and social reformers including Booth. This solution also
appealed to those who wanted to see a more decisive return to the principles of
1834. Detach the more favoured elderly from the Poor Law and a more rigorous
application of the workhouse test would become easier. The old guard in the
Charity Organisation Society did not see things that way. They saw any extension
of state relief as undermining individual independence. But this combination of
rather unusual allies and the election of a Liberal government in 1906 produced
the first important ‘welfare’ legislation of the twentieth century, though
it would pose increasing long term problems, as we shall see.
Old Age Pensions Act 1908 was
radical and popular measure. All those who had been continuously resident in the
UK for 20 years before they were 70 could qualify subject to a means test. The
pension was 5 shillings a week (10s for a couple) and was reduced if income rose
above £21 a year. There were all kinds of bad behaviour disqualifications, such
as convictions for drunkenness, which were later dropped, and the residence
requirement was shortened. Moreover, 94 per cent of pensions were for the full
amount, showing the limited incomes or savings people had. This was the first
anti-poverty measure to be financed out of central taxation and marked the
beginning of the trail to the modern welfare state. But it also posed
dilemmas that are still with us. The pension was means tested. It was a boon to
those who had never had the chance to save. But what would it do to the saving
habits of those in the next generation? Those who had saved, or been members of
a friendly society or other scheme, lost any benefit as their state pension was
docked pound for pound. Pressure grew to remove the means test or raise the
income limit for the pension, lower the age at which it could be drawn and make
it more generous, especially as the pension lost value with the inflation of the
war years. The Treasury began to worry that it had let loose a tiger that would
eat up its revenue.
way out was favoured by many Liberals, the Treasury itself and the ‘new’ Conservatives led by Chamberlain. The strategy was to adopt the route taken for
the sick and unemployed in 1911 – ‘National Insurance’. Calls on the
Exchequer would be limited by making the worker and his employer responsible for
the cost of pensions in the long term. Pressure for higher pensions would be
tempered by the knowledge that this would result in higher contributions from
existing workers. The costs would not be passed on to the well-off income tax
payer. On the other hand, rights to benefit would be earned by virtue of the
contribution record, not a means test, which would have advantages for the
elderly person. More than one committee began work on the issue and the failure
of the minority Labour government of 1924 to come up with any alternative left
the new Conservative government with the opportunity to take the decisive step
towards a social insurance model – the 1925 Widows’, Orphans’ and Old Age
pension would be paid at 65 to all those who had been contributing to the
National Insurance schemes for sickness and unemployment and to wives and widows
of contributors. The old age pension scheme for those aged 70 would remain but
would no longer be means tested. In 1940 the old age pension was paid from the
age of 60 for women who were insured in their own right or where the husband had
reached 65. The 1908 scheme had been good for women. Right to benefit was based
on age and residence. Married women received the same sum as the husband. Under
the new scheme women became covered dependent on the husband’s work record.
of these measures removed all old people from poverty and the Poor Law, however.
Many women who were single or who had been deserted, divorced or separated were
on poor relief, as were those of both sexes who were not covered by a full
contribution record or whose rents brought them below the means test level.
about 10 per cent of pensioners claimed public assistance. But in 1940, yielding
to growing pressure for increased pensions across the board, the Treasury
responded by suggesting a much cheaper solution – an increase in the
supplement the poorest pensioners could receive on public assistance. This was
adopted in that year. Old age and widow pensioners could receive support from
the national agency set up to provide assistance to the unemployed several years
earlier, renamed the Assistance Board. The Treasury was convinced that few would
be eligible. In fact 1.25 million applied in the first two months. Freed from
the stigma associated with the local public assistance committees, more old
people were prepared to apply. This and the earlier creation of the Unemployment
Assistance Board, as well as the later creation of the National Assistance
Board, were decisive moves. Faced with mounting all party pressure to raise
pensions for all, the Treasury was able to persuade the government, as it was to
persuade succeeding ones, that a much cheaper and more effective strategy lay in
relieving the plight of the poorest alone through a national agency applying a
national test of need. It was to emerge as the winning strategy of the latter
half of the twentieth century.
were the next most blameless group. They could least of all be blamed for their
poverty. Male age-related mortality rates were a third higher than female rates
at the turn of the century (Kiernan, Land and Lewis, 1998). Widows’ causes had
been successfully championed in the United States at the end of the nineteenth
century in a political climate very hostile to federal government action. In a
situation where most women were dependent on a man’s wage and premature male
death was common, widowhood was a major risk and one that commanded public
sympathy. Widows’ pensions were introduced for the wives of insured workers in
the 1925 Act but the test of respectability remained. ‘Evidence of a new
relationship undermined a widow’s claim to support because it was assumed the
man involved would support her’ (Brooks, 1986).
absence from work for short term ill health was again a deserving cause. It was
something better off workers had clubbed together to support. Simple statistics
suggested larger groups would be less vulnerable, hence the growth of some large
national friendly societies. The fact that workers were paying for each
others’ sickness absence meant there was a strong incentive to police false
claims or overlong absence. It was this feature that Lloyd George thought would
help prevent abuse of any national scheme. Moreover, politically the friendly
societies were both powerful and useful. They had the spread of administrative
capacity and were organised to do the job of giving out cash benefits to the
sick and paying for treatment by the general practitioner. They would need to be
incorporated in the administration of any national scheme. So, too, would the
profit-making industrial insurance companies that provided insurance to cover
the costs of burial on a large scale to the working class and who promised to
make things difficult if they were left out.
set a pattern for later social legislation. State provision was built around and
accommodated existing nongovernmental provision, though in the process it often
stifled or restricted it. In many ways the rather complex administration of a
state benefit through very varied not-for-profit and profit-making organisations
worked remarkably well (Whiteside, 1983). It was, however, seen as deeply unfair
by those who were not in employment or insured occupations, and who were
excluded. Small societies and those whose members were sickest could not provide
the range of benefits others could. The rising level of unemployment put
pressure on the finances of the schemes and was to lead to many losing their
rights until the unemployed gained rights to medical benefit. Whiteside
concludes: ‘In short and simple terms [in a work based insurance scheme] the
best lives, and the highest wage earners, win the best treatment; the system
penalises those not in the labour market and those dependent on them including
the unemployed’ (1983, p. 191).
good times at the turn of the century Rowntree had not found unemployment to be
a major reason for poverty in York. In the 1920s and especially the 1930s it was
to become the major scourge. The major industries that had been the main
exporters in the nineteenth century struggled after the First World War and
through the 1920s. They were then hit by the world economic crisis after 1929.
This reached into many people’s lives and affected those who had never had to
undergo the experience of poverty or the indignity of relying on the local
public assistance committee.
this experience was not uniform. New industries were growing in the south.
Prices fell, new mass produced consumer goods began to appear and those in work,
especially in these new industries, did reasonably well. Most people were better
off in 1939 than they had been a decade earlier.
rates in 1932 varied for the different regions of the country between 36 per
cent in Wales and 13 per cent in London and the South East. By the mid 1930s the
disparity was even more striking, with unemployment rates in some towns in the
depressed areas revealing tragic stories of the decay and impoverishment of
whole communities; places such as Brynmawr, Dowlais, Jarrow, Gateshead, Greenock
and Motherwell had almost three-quarters of the insured population out of work
in 1934, while other parts of the country were experiencing almost boom
conditions (Stevenson and Cook, 1979, p. 5). Special areas received rather late
and inadequate assistance, but this was the beginning of what we today would
call area based policy.
theory was turned upside down. Unemployment was clearly not temporary or self
correcting. Government came to see it had a responsibility to affect the total
level of demand. The Budget of 1942 was the first to recognise this
scale of unemployment shook the localised system of public assistance to the
core and transformed it. The means test and
the local administration of poor relief became the focus of bitter working class
protest. Local areas could not support the burden out of local taxes. In 1931
the Treasury had to take responsibility for those who were unemployed long term
and who had lost their insurance rights. A national Unemployment Assistance
Board took over responsibility for this group in 1935 and administered the first
nationally funded safety net for the unemployed, not as a way of being more
generous or equitable but to contain spending. The administration of welfare
became the object of huge organised protests that did succeed in reversing
benefit cuts. The logic of national responsibility inherent in the Tudor poor
law had finally come home to roost.
and child poverty
central feature of Rowntree’s original diagnosis, the particular needs of
families with children, had not been addressed despite the analytical and
advocacy work of Rathbone (1917, 1924), many in the suffragette movement and the
conversion of key reformers like Beveridge to family allowances and Rowntree’s
minimum wage proposal. The issue had
in France and the reasons are interesting. The British trade unions saw children
as a useful bargaining chip in arguing for a living family wage. French
employers saw the advantages of denying that lever. If employers collectively
redistributed the rewards of labour to reflect the number of children in the
family, pressure to raise the total wage bill might be mitigated. The pro-family
attitude of the Catholic Church and the pro-natalist stance of government were
conducive to this strategy succeeding.
In 1932, the state extended these benefits by requiring all employers in industry to affiliate to one of the private, business-controlled funds (caisses de compensation) that had been set up to equalise the costs of such benefits across firms in particular sectors or regions. Family allowances were extended to agricultural workers and small farmers in the years immediately before the Second World War. (Pedersen, 1993, p. 17)
thus made far more extensive and explicit provision for dependent children in
the interwar period than did Britain. Yet it did not do so in the way Eleanor
Rathbone would have hoped.
we can characterise British social policy as the articulation of a male
breadwinner logic of welfare, French policies come to rest on a very different
logic, which I will term ‘parental’ . . . Put simply, while male-breadwinner
policies compensate men for dependent women and children during legitimate
interruptions of earnings, states with parental policies compensate adults for
dependent children irrespective of earnings or need. (Pedersen,
1993, pp. 17–18)
Beveridge Report and the end of poverty?
as the Second World War approached the gradual evolution of a social insurance
state was well underway (see table 8).
was this complex system of multiple and partial social insurance schemes that
Beveridge was appointed to sort out. But Beveridge interpreted his brief in a
much more ambitious way (Harris, 1997). He saw his role as setting out a
programme of reform – ‘a social plan’ – that would, once and for all,
abolish poverty. In those heady post-war days many thought this had been, or
would shortly be, accomplished.
growth of social insurance (numbers insured in 000s)
the ending of long term unemployment through budgetary policy and demand
the creation of a free National Health Service at the point of use;
family allowances set at a level that would cover the basic costs of the
second and subsequent children (for an account of how and why this came to be
accepted for reasons that had little to do with poverty relief, see Macnicol,
for those who slipped through this comprehensive ‘cradle to grave’
cover, a new National Assistance Board that would provide a final safety net.
notes (found in his own papers) on Rowntree’s book make his logic clear:
‘the causes of poverty directly amenable to social insurance accounted for one
quarter of primary
poverty in 1899 and for five-sixths of the primary poverty in 1936’ (Evans and
Glennerster, 1993). These contingencies, unemployment, old age, widowhood and
large families, sickness including industrial injuries, could be covered by a
range of insurance benefits covered by a single national insurance contribution,
he argued. It is notable that if Beveridge had used Rowntree’s more generous
measure of the human needs of labour, low wages would have formed a larger part
of the explanation.
would be set at a level sufficient to raise all those on benefit above a
‘minimum needed for subsistence’. Beveridge suggested taking Rowntree’s
primary poverty line as a marker for this subsistence level. To which Rowntree
objected, though he compromised downwards from his human needs of labour measure
to help Beveridge keep his costs down (Veit-Wilson, 1994). In his report
Beveridge gave himself a let-out clause: ‘If social policy should demand
benefits on a higher scale than subsistence, the whole level of benefit and
contribution rates could be raised without affecting the structure of the
scheme’ (1942, para. 27).
family allowances would ideally be set at the cost of bringing up a child –
they never were, as we shall see. No one would have to face the costs of medical
care or education. Most people would therefore be taken out of poverty. Only a
small number would have to be caught by the National Assistance safety net. The
logic seemed elegant and it has dominated much mainstream thinking on the left
of politics ever since. But the utopia was never to be. The benefit levels set
were never enough to raise those wholly dependent on them above the levels set
by the National Assistance scales, in their turn linked to the bottom of the
wage scale, let alone more generous notions. Family allowances were left to
stagnate in real terms and were never set at a level sufficient to provide for a
child’s basic needs. Some have blamed politicians, the Treasury and powerful
economic and private insurance interests.1 But
at root the logic and the political dynamics of the scheme itself were at fault.
30 or more years after the national insurance scheme was founded in its modern
post-Beveridge form Labour governments sought to remedy some of its defects
while Conservative governments resisted, never having accepted the cost
consequences its full logic demanded. Nor, it has to be said, did Labour
governments, in practice.
Beveridge to the 1970s
flaws in the Beveridge model
of the flaws were evident at the time. The cost of what Beveridge wanted to do
was simply not acceptable to the Treasury then or subsequently. In trying to
squeeze the package into an acceptable cash constraint the integrity of the
package fell apart. A few examples illustrate this:
The assumption was that setting universal flat rate insurance benefits at
Rowntree’s primary poverty level would lift all those on such benefits out of
poverty. This ignored the wide diversity of rent levels faced by people in
different parts of the country, as Rowntree and others pointed out (Glennerster
and Evans, 1994). Excluding rent from his calculation meant that most poor
people would still be subject to a means test by the National Assistance Board
to meet their rent. Housing Benefit now covers the rental housing costs of the
poor but it does so at the cost of including a wide range of households in a
means tested poverty trap. Sixty years on we have not solved the problem that
If the model were to work, it had to work for pensioners and it did not (Macnicol,
1998). Giving a universal flat rate pension meant spending most money on the
non-poor and limited the generosity possible given the budgetary limits the
Treasury was setting. If the funds were not to come from taxation (as Beveridge
agreed they should not in the long run), the funds had to come from a flat rate
insurance contribution. This would bear heavily on the poor. Beveridge stuck to
the notion of a flat rate contribution established at the beginning of the century
as a way of restricting the scope of the potential cost. The Treasury was
determined the scheme should not be a burden on the general taxpayer. The trade
unions argued that the costs on the low paid should not be excessive. What gave
was the benefit level. Though the pension proposed by Beveridge was raised by
the 1945 Labour government, the essential problem was never solved by it or by
successive governments. The attempt to introduce benefits related to previous
wages came too late. The political dynamics set up by the initial low rates of
pension proved irreversible (see below).
The scheme confined married women to the status of dependents. Single
women would be treated as contributors like men. Marriage was an insurance
contract, Beveridge argued. A woman’s needs were met by her husband. They
should be treated as a unit and she would be insured, as would her children, as
dependents of her husband. Rights to benefit relied on the husband’s work.
Women’s incentives to work, especially for low pay, were small. Since
Beveridge was so concerned with raising the birth rate this was a virtue for
him, but it was to lay up serious problems for the future.
The disabled who were not disabled at work or by war were not included in
his scheme of things.
some of these flaws were capable of remedies. The basis of the contributions and
benefits could become income related, as was to be the case in other European
countries and America. Women could be treated as insured in their own right.
Special tax based schemes for the disabled could be introduced. Benefit levels
could be made more generous. All these were to become the stuff of successive
attempts to reform the national insurance system from 1958 to 1975. In the end
they too failed.
political dynamics set up by the Beveridge plan were to prove disastrous to any
coherent poverty programme in the next decades.
State benefit levels were constrained by what the poorest could
contribute – deliberately so, many would argue. It was one of the attractions
of the flat rate model to the Treasury. This meant that skilled workers, let
alone the middle class, never saw the state pension scheme as sufficiently
generous to rely on in old age. They negotiated their own occupational pension
alternatives. This created a powerful set of interests that opposed going down
the road of a generous wage-related alternative. When the Labour Party began to
discuss a wage related alternative, moving to a copy of the US, Swedish and
German models, in the 1950s, the trade unions were some of the strongest
opponents. Private pension companies had a powerful voice and no state scheme
could be introduced which threatened them. The basic Beveridge pension scheme
became less important to the median voter and to the poor. When Mrs Thatcher’s
government broke the link between benefit rates and average earnings in the
1980s (see chapter 6) it did so largely with political impunity.
When the post-war pension scheme was re-examined in the 1950s, and on
subsequent occasions, the killer question was: why should we spend a lot of
money raising the basic pension or other benefits for most people when the
poorest are already catered for by the National Assistance scheme? The Wilson
government of 1964 did significantly raise the level of the basic pension and
other basic benefits. But it came under political pressure to raise the level of
National Assistance too. Otherwise the poorest, and especially poor elderly
people, would not gain. So a very expensive policy ‘floated off’ very few
people from means tests.
The 1974 Labour government again raised the basic pension, this time by
30 per cent in money terms and 12 per cent in real terms. It also brought in the
State Earnings Related Pension Scheme. This was the last attempt to make the
universal National Insurance model work. But it came too late. Mrs. Thatcher
came to power and both reduced the generosity of the scheme and encouraged many
not to join it, with significant
tax relief for joining private pension schemes instead. There was no large body
of middle class pensioners who saw it as in their interests to defend the state
scheme, as there has been in the US.
disappears and reappears
took time for the weaknesses of the post-war settlement to sink in. Compared to
the 1930s, the 1940s were indeed an improvement. Rowntree’s third study of
York (Rowntree and Lavers, 1951) made the case. It was based on a sample survey.
Rowntree had at last convinced himself that this was a legitimate method! It was
brief. The baseline was again a primary poverty line. The diets of 1936 had been
slightly modified and some changes had been made in the estimates of a
family’s need for clothing, fuel, light and sundries. In 1936, 17.7
per cent of the total population had been below the poverty line. In 1950 the
figure was only 1.6 per cent. Old age was the main contributory factor at 68 per
cent of the total, and the sick made up 21 per cent. Rowntree and Lavers claimed
that without the welfare measures including food subsidies introduced after the
Second World War, poverty would have been much higher than it actually was –
25 per cent!
disappeared from the political radar in the 1950s until the end of the decade,
when work on poverty among the elderly resurfaced (Cole and Utting, 1962). Later
work on Rowntree’s last results threw some doubt on them. Abel-Smith and
Townsend (1965) used the national sample provided by the Family Expenditure
Survey and updated Rowntree’s poverty line in line with prices as a check on
their own findings for 1953/54 (see below). They found 5.4 per cent of
households in poverty. When Atkinson and colleagues (1981) reanalysed
Rowntree’s data using the then National Assistance Board scales as the poverty
line they found that 14.4 per cent of working class households would have been
recently Hatton and Bailey (2000) have reanalysed the same material to test
Rowntree and Lavers’ claim that povertyhad fallen so dramatically because of
the impact of post-war social policy. They find it did fall but by nothing like
as much as the earlier study claimed. Rowntree and Lavers claimed that the fall
in poverty had been 20 percentage points. Hatton and Bailey suggest it was about
10 percentage points and much of that was the result of food subsidies: ‘It is
unfortunate that, in the absence of other comparable studies for the 1950s, this
produced a somewhat distorted picture of poverty in the early post war period,
an impression which took two decades to counteract’ (2000, p. 537).
Townsend, as a new young researcher at the Institute for Community Studies, was
asked to review Rowntree and Lavers and was not convinced. It led him to a
lifetime of work that has changed the way we think about poverty in most
developed economies, with the exception of the United States (Glennerster,
central point was that we cannot determine a level of adequacy simply by virtue
of some expert calculation of dietary or health needs. Social custom requires
that we share cups of tea with neighbours or buy presents for our children at
Christmas, even have the occasional pint. It is certainly true that Rowntree
recognised this in 1901, as Veit-Wilson (1986) has so forcefully argued. But, as
we have shown, the primary poverty notion took on its own life and even Rowntree
had in practice abandoned the secondary measure by the time Townsend was
writing. To be income poor, in Townsend’s terms, was to be excluded, by virtue
of one’s income, from the normal activities of social life. Townsend thought
that it should be possible to construct a list of activities which were the ones
that people should be able to undertake if they were not to suffer what we might
today call social exclusion (Townsend, 1979). This led to considerable
controversy about those activities and whether there was any clear point at
which not to be observed doing them could be linked to a poverty line (Piachaud,
1981; Desai and Shah, 1988).
the interim, however, Townsend and Brian Abel-Smith, his colleague at the London
School of Economics, took a pragmatic approach to measurement. Each year
Parliament itself made a judgement about what was a minimum acceptable level of
income in the UK when it set the National Assistance rates. Why not take that
National Assistance rate, plus rent which the Board usually paid, plus some more
to cover the extras many people gained as additions to the basic rate, and use
that as an indication of ‘low levels of living’? To take the crude basic
rate would have ignored the fact that some income was ‘disregarded’ by the
Board – small earnings, disability pensions, war savings and the like. Various
percentages above the base rate were chosen but the favoured one was 40 per cent
made it clear that this was only a crude first step and that better ways of
measuring relative poverty were needed (Abel-Smith and Townsend, 1965, pp.
an official sample survey of the incomes of families (designed to be used to
construct the Retail Price Index), they were able to estimate how many people
were living below this poverty line (Abel-Smith and Townsend, 1965). In 1960
they found it was nearly 18 per cent of all households (14 per cent of people).
The comparable figure in 1953/54 had been 10 per cent of households and 7.8 per
cent of persons. Numbers of elderly poor had grown but, as the authors put it,
‘Possibly the most novel finding is the extent of poverty among children. . .
. This fact has not been given due emphasis in the policies of political
parties’ (1965, p. 65).
was controversy about the report and criticism particularly of the comparisons
with 1953/54. National Assistance rates had risen in real terms since 1953,
critics said, so of course the numbers of poor had risen. Relative standards of
living had risen and, just as with Rowntree, the official poverty line had risen
to take that into account, as the authors had argued in the report itself (1965,
meet these criticisms later official measures were to use income relative to a
national mean or median income – 40 per cent, 50 per cent of the mean income
or more recently 60 per cent of the median.
technical arguments aside, the wider public, assisted by the work of the Child
Poverty Action Group (CPAG), absorbed and accepted the basic argument. The
result was to put poverty back on the political map. Social science had
‘lifted the curtain’ once again so that the comfortable majority had to
confront the reality of life at the bottom.
poverty became a political issue again. Family allowances had been held constant
in cash terms since the early 1950s. They were gradually wasting away in real
terms and relative to earnings. They were increased in 1968 as a result of the
political pressure CPAG was able to exert across the political spectrum. The
standard rate taxpayer had the extra cash fully taxed away. The Conservative
government that followed introduced the Family Income Support (FIS) scheme as
one of its first measures in 1970 – the alternative the Treasury had favoured
all along. It was a separate tax-funded benefit that low income families had to
apply to get through local social security offices. Many did not – initially
about 30 per cent though take-up gradually rose to over 80 per cent in the
1980s. Numbers on the benefit, and its successor, the Family Credit, rose from
about 100,000 in 1973 to over half a million by the mid 1990s, mostly because
family poverty grew.
Labour government that followed kept FIS but introduced an extended version of
the old Family Allowance called Child Benefit, which we still have. It was both
more generous and went to the first child as well. It was paid for in large part
by removing the tax advantages previously derived by taxpaying families and
especially those paying tax at high levels from child tax allowances.
same government tried to remedy the deficiencies of the flat rate state pension
by introducing a wage related scheme on top, the State Earnings Related Pension
Scheme (SERPS). This has since, indeed, topped up the pensions of many
pensioners to raise them above the poverty line. But those in occupational
schemes were always able to opt out. It never had time to become embedded in the
political landscape and attract the powerful support enjoyed by the American,
Swedish or German pension arrangements.
other significant development of the 1970s was the recognition of the particular
needs of those with disabilities and resulted from well organised groups and
well articulated needs. Beveridge had largely ignored them except for those
disabled at work or fighting in a war. The Attendance Allowance was introduced
in 1972. A Mobility Allowance for those who found difficulty in getting about
and who needed more costly forms of transport, an Invalid Care Allowance for
those looking after those needing special attention, and other non-contributory
benefits were introduced in 1976. They took some account of the extra costs
disability caused. A given level of income might be above the poverty line for a
fully mobile person but not for someone who needed more income to be
equivalently mobile. This was an extension of the meaning and concept of
poverty, as well as being important to those receiving the benefits. Numbers
receiving Attendance Allowance rose from 145,000 to over 900,000 between 1973
and 1991. Numbers on Invalidity Benefit and Severe Disablement Allowance rose
from 104,000 to 326,000 between 1973 and 1994. Numbers receiving Mobility
Allowance rose from 62,000 in 1977 to nearly 700,000 in 1991 (Evans, 1998).
important feature of social science research begun in the 1970s and 1980s was
the re-emergence of a feminist perspective on poverty. Poverty had its most
profound impact on women and yet this was not seen or appreciated –
‘Invisible Women, Invisible Poverty’ as Jane Millar and Caroline Glendinning
(1987) put it. Some of the insights were not new, as we saw earlier, but they
were deepened and extended. New work was done on the distribution of income
within the family and the importance of getting income to the mother (Pahl
1989). That was, in the end, to bear some fruit in the changes that were made to
the tax credit schemes in the New Labour period. The work on the financial and
other needs of carers which began in this period was mostly done by women
(Parker, 1985; Glendinning, 1992). So, too, was the thorough and non-judgemental
work on the change in families and single parenthood (Kiernan, Land and Lewis,
1998). Policy makers no longer have the excuse that these poverty situations are
anti-poverty measures up to the mid 1970s do therefore have some kind of logical
sequence. The needs of new poverty groups came to be articulated and pressed
home. The scale and breadth of the safety net was gradually widened, even if its
generosity was not. Social insurance remained the preferred social policy method
for poverty avoidance, even if individuals in the top income groups had come
increasingly to rely on occupation based forms of insurance against old age and
short term sickness. It was the late 1970s and 1980s that brought the
significant change both in the scale of the poverty problem and in the nature of
the social policy response (Glennerster, 2000; Lowe, 1999).
New Right to New Labour
is tempting to try to divide periods of social policy and the evolution of their
outcomes by neat political divisions – the election of the Conservative
government of Margaret Thatcher in 1979, or of the ‘New Labour’ government
of Tony Blair in 1997 being two of the most obvious discontinuities. However,
events and policies do not necessarily change with such abrupt boundaries.
instance, one of the defining features of the Thatcher government was its aim of
reducing public spending, particularly that on the ‘welfare state’. But the
post-war growth of social spending as a share of national income ended not in
1979, but in 1976, after the Labour cabinet minister Tony Crosland had announced
that ‘the party is over’ and after the visit of the International Monetary
Fund. And public spending restraint continued after May 1997, with New Labour
fulfilling its election pledge to stick to Conservative spending plans for two
years. By 1999/00, overall public spending (Total Managed Expenditure) had
fallen to 37.4 per cent of GDP, fully two percentage points of national income
below the lowest level achieved under the Conservatives (in 1988/89), and four
points below the minimum under the Heath government of the early 1970s.
perhaps the most important change in policy towards social security and poverty
introduced by the Thatcher government was its decision in 1981 to adjust (‘uprate’)
the value of social security benefits each year only in line with price
some key benefits, such as the basic state retirement pension, this broke with
the previous policy of adjusting values in line with earnings
makes it easier for the public finances to cope with benefit spending (as tax
revenues tend to rise at least in line with incomes) but leaves those dependent
on benefits further and further behind general living standards, and deeper in
poverty (if a relative poverty line is used, as discussed in chapter 3 above).
But New Labour has not reversed this decision as a default for most benefits.
Instead, since 1999 it has been making selective increases in some benefits but
not others, and devoting resources to reforms such as the new ‘tax credits’.
Many people have done better than they would have done under a policy of
returning to earnings indexation without reform, but others have not and
continue to live on incomes that are falling in relative terms.
terms of outcomes, we have already seen in chapter 3 (figures 5 and 6) that
relative poverty for the population as a whole reached a low point in the late
1970s. So did measures of the inequality of the income distribution. But
depending on the exact measure chosen, the low point can be seen to be any of
the years 1977, 1978 or 1979. The turning point in what some had come to see as
Britain’s steady progress towards becoming a more equal society did not
necessarily coincide with the change of government, even if some of the
Conservative government’s policies would greatly accelerate that change.
chapter therefore tries to take an overview of the last 25 years, looking across
some of the themes which have been discussed in earlier chapters: overall policy
towards poverty; public spending; the structure of social security; families and
children; unemployment and incentives; and old age. It then looks at the
outcomes of these policies and of other pressures on poverty rates.
inequality, and policies to reduce them, were not high on the Thatcher
government’s agenda. The Royal Commission on the Distribution of Income and
Wealth established by Labour was wound up. The government tried hard (if
unsuccessfully) to bury the report commissioned by Labour from Sir Douglas
Black’s committee on health inequalities and their links to poverty when it
appeared in 1980. An interdepartmental Group on Poverty Study was tellingly
renamed as the working group on Work Incentives and Income Compression (of which
the author became a member), and its priorities for policy reform changed
accordingly. Famously, in 1989 the then Social Security Secretary, John Moore,
announced ‘the end of the line for poverty’, arguing that it was ‘false
and dangerous’ to talk as if large parts of the British population were in
dire need on the basis of poverty lines that rose with national prosperity (Timmins,
1995, pp. 450–1).
one sense, the change in political priorities is understandable. Income
inequality and poverty (whether measured in relative or absolute terms) were
near to their
alltime lows in 1979. Equally, economic growth and growth of average living
standards had also been at post-war lows since the oil shocks of the early
1970s. The diagnosis of the incoming government was that the two were connected
– via the disincentive effects of overgenerous social security benefits on the
one hand, and by the effects on economic and productivity growth of an overlarge
public sector on the other. Its policies were therefore aimed at restraining and
reducing public spending – of which social security was a major part – and
at changing the system to improve incentives to work. If challenged on the
impact of such policies on the poor, the response echoed that of the parallel
Reagan administration in the US in the 1980s – that the benefits of faster
growth in living standards for those with high incomes allowed by lower taxes
would ‘trickle down’ to those at the bottom.
was little evidence of this happening in the 1980s. Instead, poverty and the
response to it became dominated by four upward pressures. First, Britain went
into deep economic recession in the early 1980s, followed by a brief boom in the
second half of the decade, and then a renewed leap in unemployment at its end.
Much of the subsequent evolution of social security can be seen as a response to
this and its impact on public spending. Second, at the same time as the rise in
unemployment and economic inactivity, the position of unskilled workers was
weakening more generally in the labour market – the real value of the level of
wages below which the bottom tenth of male earners fell was no higher in the
early 1990s than it had been in the mid 1970s (Barclay, 1995, fig. 6). Third,
society was changing. While 12 per cent of children were living in lone parent
families in 1979, 20 per cent of children were by 1997. Such families were much
more likely to be without an income from work and in poverty than others, and
the ‘breadwinner’ based social insurance system bequeathed by Beveridge did
little to help. Fourth, the country was ageing and the number of pensioners
growing. While this was not in itself at such a dramatic rate, the cost of state
pensions was set to grow rapidly as Barbara Castle’s State Earnings Related
Pension Scheme matured. Under its rules, full rights could accrue in 20 years,
so someone with average earnings retiring in 1998 could receive an extra
earnings-related pension from the state almost equalling in value what the basic
pension had been in 1978. Although the rules were made less generous (for those
retiring later) in 1988, proposals to abolish SERPS outright were rejected, and
its cost grew.
this left a contradiction in policy which has yet to be resolved. Attempting to
restrain public spending growth in the face of such pressures, while avoiding
outright cuts in benefits for the poorest, pushed governments particularly in
the 1980s towards more reliance on the social safety net of what was
Supplementary Benefit (and became Income Support) and on other forms of means
testing. But this reliance increases the number of people affected by the
disincentive effects of withdrawal of means tested benefit, contradicting the
other overarching aim of policy of improving incentives.
John Major’s government of the 1990s, policy became less harsh. The regressive
Poll Tax, used to finance local government through a flat rate charge on all
adults, was abolished and replaced with the property related Council Tax.
Crucially for the poorest, the right to an income related rebate of up to 100
per cent of the new tax’s value was restored, whereas in theory everyone had
been liable to pay at least 20 per cent of the Poll Tax, no matter how low their
income. When tax rises came after the 1992 election, they bore more heavily on
those with higher incomes. For a period in the mid 1990s, while average living
standards rose only slowly, relative poverty fell slightly, and the growth in
overall inequality halted.
election campaign in 1997 said and promised little about poverty. The manifesto
contained just two references to poverty, one in the context of tax and benefit
reform to reduce welfare dependency, and the other about helping people into
jobs. It did promise to tackle educational disadvantage, to introduce a minimum
wage, and to reduce long term unemployment, particularly among young people. One
of the five ‘early pledges’ around which Labour built its campaign was to
cut youth unemployment, using resources from a ‘windfall tax’ on the
office the first move was indeed the introduction of the ‘New Deal’
programmes designed to get people off benefits and into work. Shortly after the
election the government announced a new Social Exclusion Unit , reporting
directly to the Prime Minister, and focusing on problems of compounded
disadvantage, particularly those that cut across Whitehall departments. At one
point, Tony Blair described the unit as ‘the defining difference’ between
New Labour and the Conservatives. However, in the autumn of 1997, New Labour
found itself embroiled in a row around the abolition of special additional
benefits for lone parents. This had been built into the Conservative spending
plans to which Labour had committed itself, and the government pushed it through
despite significant opposition from its own Members of Parliament. By the time
of the March 1998 Budget it became clear that benefits and new tax credits were
to be improved for all low income families in a way that meant few lone parents
would actually lose out (indeed, they have been the largest gainers from New
Labour’s reforms). But by then many people’s views of New Labour’s
priorities had been set and they would be slow to change.
terms of policy presentation, the decisive moment came in March 1999, when Tony
Blair used a lecture in memory of William Beveridge to announce: ‘Our historic
aim will be for ours to be the first generation to end child poverty. It is a
20year mission, but I believe it can be done’ (Blair, 1999). This was followed
up by a specific target to cut child poverty in relative terms (against a
benchmark of 60 per cent of current median income) by a quarter between 1998/99
and 2004/05. In 2004 that target was further extended to achieve a cut of a half
by 2010/11, with the 20-year target now defined as being ‘amongst the best in
Europe’ in terms of relative poverty – still very ambitious given
Britain’s starting point as the worst in Europe in the mid 1990s, with rates
three to four times those in some Scandinavian countries.
In September 1999 the government also published its first annual report of
progress on poverty and social exclusion, Opportunity
for All. This
outlined what the government saw as the key features driving poverty and
exclusion: lack of opportunities to work or acquire education and skills;
childhood deprivation; disrupted families; barriers to older people living
active, fulfilling and healthy lives; inequalities in health; poor housing; poor
neighbourhoods; fear of crime; and discrimination (DSS, 1999, p. 2).
Policy has followed along most of those dimensions, some of which are discussed in more detail below.1 Promoting work and ‘making work pay’ has been prominent, involving not just the New Deals and the macroeconomic policies aimed to promote economic stability, but also the introduction of Britain’s first National Minimum Wage, and the transformation of social security benefits into more generous tax credits. But at the same time, and in contrast to policies in the US, allowances for the children of those who are out of work have also been increased well above inflation. After dropping to a low point in 1999, public spending on education is rising, with particular emphasis on poorly performing schools. Policy towards pensioners has been selective, focused on increasing the value of the means tested minimum (now known as the ‘guarantee credit’ of the Pension Credit). The universal basic pension has remained linked to prices in most years, although all pensioners have benefited from various other measures, such as an annual ‘winter fuel allowance’. At the 2002 Labour Party Conference Gordon Brown pledged that ‘Our aim is to end pensioner poverty in our country’, although unlike the child poverty commitment there is no timescale or specific benchmark for this.
accumulation of evidence had shown the ways in which the country had become more
polarised between different kinds of area, not just as the old industrial
regions declined, but also within towns and cities across the country (Hills,
1995). The biggest part of the Social Exclusion Unit’s work led to the
establishment of a National Strategy for Neighbourhood Renewal and to New
Labour’s most ambitious target, that ‘within 10–20 years, no one should be
seriously disadvantaged by where they live’. A set of ‘floor targets’ has
been set for achievement in employment, education, crime, health and housing in
the most disadvantaged areas. Some of the related policies have been for
‘mainstream services’, such as health, education and policing, but others
have been targeted on particular areas, such as the New Deal for Communities,
neighbourhood wardens, the Sure Start early years programmes, and Excellence in
Cities for education.2
the US in the early 1960s, there has been no declaration of ‘War on
Poverty’, and nor is there any overarching target to reduce poverty overall,
as there is in Ireland. But none the less, by the start of the twenty-first
century there was a commitment to tackle poverty and disadvantage that had not
been seen since the 1960s, if not the 1940s, and a raft of specific policy
initiatives aimed at particular aspects of the problem. The issue for the future
is whether the scope of these is enough, and what could be done to fill the gaps
in them (see chapter 7).
governments can affect income distribution and poverty in other ways, the
largest effects come from the combination of public spending and the taxes that
pay for it. This is not just a matter of spending on social security benefits,
but also that on other elements of what is sometimes called the ‘social
wage’ – health care, education, housing, and personal social services (Sefton,
figure 8 shows, the total of the three largest elements of social
spending, health, education and social security, had reached 10 per cent of
national income in the 1930s. Its main period of growth came in the 30 years
after the end of the Second World War, taking the total to 20 per cent of
national income by 1976/77.
social spending, health, education and social security, had reached 10 per cent of national income in the 1930s. Its main period of growth came in the 30 years after the end of the Second World War, taking the total to 20 per cent of national income by 1976/77.
The solid line shows the position for someone retiring back in 1978,
before SERPS was introduced. Both the basic pension and the minimum income
guaranteed by what was then Supplementary Benefit were around 25 per cent of
average earnings, so state support was virtually flat rate.
The lighter dashed line shows the position for those retiring in 1998,
when earnings related rights through SERPS were at their highest, but both
Income Support and the basic state pension had fallen in relation to average
earnings. State support had fallen for low earners, but had risen for higher
The heavier dashed line shows a projection of state support in 2038 if
current indexation policies continue. The minimum level of state support would,
as now, be higher than in 1998 in
relation to earnings (figure 11). For those with lifetime earnings below three
quarters of the adult average, the level of support would also be higher than in
1998 as a result of the combined State Second Pension and Pension Credit
reforms. However, for average and above average earners, entitlements would be
lower (reflecting a considerable fall in the basic pension in relation to
average earnings, as well as slower accrual of rights to the State Second
perhaps stands out from the diagram is the extent to which the effect of the
reforms of the last few years has been to unwind the earnings related pensions
introduced by Labour (and associated with Barbara Castle) in the late 1970s,
eventually returning the support given by the system to something not so far
from the original flat rate system of 1978 (itself dating from the reforms of
the Attlee government in 1948). The emerging system does this in a far more
complex way, however, with much more reliance on means testing.
combination of the impact of these social policy changes and the macroeconomic
story of the last quarter century has led to contrasting fortunes for different
parts of the income distribution and kinds of family. Figure 15, based on
analysis by the Institute for Fiscal Studies, contrasts what has happened to the
annual growth rates of net incomes (adjusted for family size) of those in
successive fifths of the income distribution under the last three prime
ministers (up to 2002/03 for Tony Blair).
Mrs Thatcher was Prime Minister, incomes at the top grew rapidly. Lower down the
distribution they grew much less fast, and at the bottom by very little. Average
living standards grew, but income inequality widened rapidly, and the poor fell
behind. During the Major years, the growth in inequality was partly reversed,
but there was only slow growth in living standards for any of the groups. After
1997, all income groups enjoyed quite rapid growth in living standards. This has
only meant a slow decline in relative
poverty, but it
did involve much faster growth in living standards for the poor than either of
the earlier periods, and so resulted in rapid falls in absolute
many concerned with disadvantage, the latest period is clearly preferable to the
other two, even though it has not resulted in a fall in inequality between the
incomes of the top and the bottom. Indeed, inequality between the very top and
the very bottom was still greater in 2002/03 than it had been in 1996/97. It
was, however, falling if measured between those near
the top and
those near the
bottom (Sefton and Sutherland, 2005).
16 gives a more detailed view of the changes in relative poverty over the last
40 years that we previously showed in figure 5, showing the composition of the
population with incomes below half the contemporary average. Key features
By contrast, there has been no recent fall in poverty rates for working
age single people and couples without
10 illustrates this last point in a little more detail for the period since
1979, in this case using poverty lines based on the current official measure of
60 per cent of median income. It shows poverty rates both in relative terms in
the upper panel and against a fixed real line in the lower panel. For the
1996/97 to 2002/03 period, it shows how the slight fall in poverty rates for
people of working age has resulted from a fall in poverty for those with
children – falling child poverty has to involve falling parent
poverty – but
a rise in
poverty for working age adults without children. While some of this group have
benefited from New Labour’s welfare-to-work programmes and the buoyant
economy, others still dependent on benefits have had living standards which have
fallen in relative terms.
lower panel of the table gives a measure, however, of just how hard it is to
achieve reductions against the moving target of a relative poverty standard when
overall living standards are rising as fast as those shown in figure 15.
Instead, it shows poverty rates against a fixed real standard – of the kind,
for instance, used to measure official poverty rates in the US. Fewer people
were poor in 1996/97 against this fixed line than
had been in 1979. The fall was particularly large for pensioners, but much less
for children, despite the increase of more than 40 per cent in average real
incomes. In the period since 1996/97, the rate of fall has been faster. Indeed,
child poverty against this kind of standard more than halved in just six years.
figures are the most recent available at the time of writing, but do not take
into account some of the largest changes that have been made by New Labour,
those associated with the introduction of the Child and Working Tax Credits in
April 2003 (replacing the Working Families Tax Credit – successor to Family
Credit – and the child allowances previously in Income Support), and of the
Pension Credit in October 2003.
work suggests that these changes will add to the redistributive effects of the
reforms. Figure 17 shows the results of one such exercise. It shows the effect
on the incomes of successive tenths of the income distribution if one compares
the actual 2004/05 tax and benefit system with the system that would have been
in place if the 1997 system had been retained, simply uprated for price
things are clear from this. First, the reforms overall have been progressive,
with the largest proportionate gains for the lower income groups. Second, it is
pensioners and families with children that have been the largest gainers –
gains equivalent to a quarter or more of income for those in the poorest tenth.
On average, there has been little effect on people of working age without
children, although even here there have been gains for some with low incomes
(reflecting some reforms such as the National Minimum Wage and changes to
National Insurance contributions as well as the Working Tax Credit, which now
goes to some without children). Using this modelling, Sefton and Sutherland
(2005, table 11.5) project that, other things being equal, the poverty rates
shown in table 10 would fall further by 2004/05 to 15 per cent for children, 19
per cent for pensioners (each from 21 per cent in 2002/03), but would remain at
13 per cent for working age people without children. This would mean that the
government would hit (on this basis, measuring incomes before deducting housing
costs) its target for cutting child poverty by a quarter.
is one caveat to this way of measuring the impact of policy on poverty. This is
that the base used in figure 17 is that of the 1997 system adjusted only for
price inflation. It could be argued that this gives an unduly positive
impression of the impact of New Labour’s policies at the bottom. After all,
the comparison being made is with a world where (price linked) benefit rates
would be falling behind other living standards, and so relative poverty rates
would be rising.
At the same time, tax revenues would be rising faster than national income, as
‘fiscal drag’ pulled more people into the tax net and into higher tax rates.
This would not be a ‘steady state’ – the public finances would be
continually improving while the poor were left behind.
an alternative, the actual system can be compared with what it would have looked
like if the 1997 tax and benefit system had been adjusted by earnings
growth – in
other words one where an ‘Old Labour’ policy of uprating benefits in line
with earnings had been followed, but without any reform. If this is done,
similar modelling suggests that the actual 2004/05 system produces almost
incomes to an earnings adjusted 1997 system (Hills, 2004a, fig. 9.5). Overall,
New Labour’s reforms have been fiscally neutral compared with the hypothetical
‘Old Labour’ alternative. However, the bottom five-tenths of the income
distribution as a whole are better off with New Labour’s reforms than they
would have been under earnings indexation, while the top four-tenths are worse
off. On this kind of comparison, New Labour’s reforms actually come out as
more clearly redistributive from those with high incomes to those with low
incomes (especially to families with children).
contribution of social science to the recent debate
the 1980s and indeed right up to 1997, the discussion of ‘poverty’ passed
out of official currency. This was despite – or even because of – the way in
which government policies were compounding the growth of inequality. But at the
same time poverty re-emerged as a focus for social research in a way it had not
done since the nineteenth century and the 1960s. Strikingly, an important
facilitator was television.
Weekend Television commissioned the polling organisation MORI to conduct a
survey as background to a series of four programmes on ‘Breadline Britain’.
Two of the programme’s writers, Joanna Mack and Stewart Lansley, discussed the
survey with social policy academics – Vic George, Peter Townsend, David
Piachaud, Richard Berthoud and Peter Taylor-Gooby, a roll call of the leading
poverty analysts of the day. They came up not just with a new survey, but a new
conceptual approach to the whole problem. As we discussed in chapter 5, Townsend
(1979) had argued that poverty was socially constructed and depended on
individuals’ capacity to be included in the mainstream of society. The
question was, how to decide which activities and items were necessary for such
inclusion? What income was needed for participation? Townsend’s view (1979, ch.
6) was that he could construct such a line statistically from consumption
patterns. Others disagreed, arguing that, in the end, poverty was a subjective
social measure of what people thought was a minimum below which people should
not live. The way to find that out was to ask the population, not just rely on
experts. The approach of Mack and Lansley (1985) was to ask a sample of the
whole population what items they thought were necessities, and then use majority
views of this to define which items people should not go without. They could
then identify who was poor as lacking such necessities because they could not
afford them. This approach has since been repeated in other studies, including
the 1999 Poverty and Social Exclusion Survey of Britain (Gordon et al., 2000).
approach owed much to the work of Amartya Sen (1983), an economist whose work
included the study of famines and who had debated the concept of poverty with
Townsend in the 1960s. There is, Sen argued, an ‘absolutist core’ to
poverty. Starvation and death are not relative concepts, and in the developing
world they are the key to poverty. Yet his work provided a framework that took
the debate beyond just ‘absolute’ versus ‘relative’ concepts of need.
Adam Smith had framed poverty in terms of being able to ‘appear in public
without shame’. Sen’s ‘capabilities’ framework developed the way in
which such benchmarks for participation depended on the society and time within
which people lived. This has had a major influence on the notions of poverty
employed by the United Nations Development Programme in its annual reports and
on the UN Copenhagen Agreement in 1995. This committed signatories to
eradicating poverty through national actions and international cooperation. It
distinguished ‘absolute’ and ‘overall’ poverty and led to attempts to
give these terms distinct meanings (Gordon et al., 2000; Gordon and Townsend,
the UK, evidence accumulated through the 1980s of the extent to which there had
been a dramatic shift in income distribution, not least from official statistics
such as the new Households Below Average Income analysis. In 1992 the Joseph
Rowntree Foundation commissioned a programme to research this and bring all the
evidence together, and also an Inquiry Group chaired by one of its trustees, Sir
Peter Barclay, to consider the implications of the findings (Barclay, 1995;
Hills, 1995). When the Inquiry Group’s report was published in 1995, its
findings and concerns resonated widely; indeed public concerns about the gap
between rich and poor reached a peak that year. As in Charles Booth’s and
Seebohm Rowntree’s time, hard empirical evidence made such concerns more
difficult to ignore.
last quarter century has seen large swings in policy towards poverty. The
priority of fighting poverty was greatly reduced in the 1980s, and reforms were
made to social security, taxation and public spending that were intended to
improve incentives and economic growth. As unemployment grew and society
changed, many more people found themselves depending on social security benefits
that were falling behind average living standards. As a result of both factors,
poverty grew. However social spending remained much the same share of national
income, and the growth of means testing had negative effects on incentives, both
despite the intentions of the reforms. Since 1997, New Labour has followed a
mixture of policies, with reducing child and pensioner poverty of increasing
importance. Its macroeconomic success in maintaining steady growth and falling
unemployment has helped, but it has had to grapple with much the same underlying
pressures and dilemmas – specifically how to make progress against poverty
when there are escalating demands on social spending for other purposes, and
when political pressure to keep down tax rates remains as tight as ever. It is
to such pressures that we turn in the next chapter, and then in the final
chapter to ways in which this conflict might work out over the next 20
are we now? The UK in international perspective
of the factors which has helped push poverty, particularly child poverty, up the
policy agenda in recent years has been the body of evidence on Britain’s
comparatively dismal record by comparison with other countries.1
gives the position in 15 comparable countries (members of the European Union or
of the ‘G7’ major industrialised countries) in 2000 or the nearest available
year, based on Luxembourg Income Study analysis of national data sources on a
comparable basis. It shows poverty rates based on a line of 60 per cent of each
country’s own median income, together with a measure of severe poverty
(numbers below a line of 40 per cent of median income in each country).
only the US and Ireland had worse relative poverty rates, only the US had a
worse child poverty rate, and only Ireland a worse poverty rate for its elderly
population. In four countries, the child poverty rate was less than half that in
the UK, and in two the poverty rate for the elderly was less than half that
here. Against the severe threshold of 40 per cent of median income, the UK was
not so far above the average, but its level was still the fourth worst shown. By
contrast, in one of the earliest uses of this data source, Mitchell (1991) found
that in the late 1970s and early 1980s, the UK had the lowest poverty rate
against a severe poverty line out of the 10 countries examined.
some perspectives a poor performance in relative poverty rates might be seen as
less serious if a country’s income was so high that the absolute standard of
living of its poor population was still high by comparison with living standards
elsewhere. However, analysis by UNICEF (2000) of the position in the mid 1990s
suggests that even on this kind of comparison the UK was doing badly in terms of
child poverty. It calculated child poverty rates against a fixed international
standard, based on the US poverty line (converted at purchasing power parities).
This showed the UK to have a child poverty rate of 29 per cent against this
standard, better only than that in Italy and Spain within the EU, and twice the
rate in the US.2
are now indications that the UK’s international position is improving. Figure
18, for instance, shows that in the indicators published by the European
Commission, the UK moved from having the worst relative child poverty rate in
the EU in the year up to 1997, to fifth worst in the year up to 2001. The rate
in the UK fell, while it rose in most other EU countries. None the less, there
was still a long way to go for the UK to fall to the EU average, let alone to
reach the government’s target of being ‘among the best in Europe’ by 2020.
The same data source suggests little change in the rate of adult poverty in the UK over that period, but a deterioration in five of the other EU members (Stewart, 2005b, fig. 14.2). Within this, there was a very slight fall in poverty among the retired population in the UK, but this contrasted with increases in eight other member states.
picture of recent improvements in the UK, particularly against absolute
standards, is confirmed by figure 19. This shows the reduction in the proportion
of the population counted as poor between 1998 and 2001 within each EU member
state, using both relative and absolute standards. Against a relative
UK’s performance was the best in Europe, and against an absolute
standard it was
one of the four recording the largest falls.
position is notable here: its combination of rapid growth in average living
standards combined with a smaller but still significant increase in real incomes
for the poorest meant that it had both the fastest growth
poverty, and fastest fall
absolute standard. This illustrates the importance of looking at movements in
both relative and absolute incomes in trying to understand the position of the
poor. Under the ‘tiered’ approach the British government is now taking to
tracking what is happening to child poverty, it will be seen to be falling
unambiguously only when both
measures, and a
third including indicators of material deprivation, are all falling (HM
Treasury, 2004, p. 17).
UK’s poor record on poverty in international terms can be traced back to a
number of factors, each of which gives a clue to policies that might help reduce
it. First, the UK has a high proportion of households without income from work.
While its recorded unemployment rate is now one of the lowest in the EU, it
still has one of the largest proportions of working age adults in jobless
households overall, a manifestation of the growth of economic inactivity
discussed in chapter 6 (Hills, 2004a, table 3.7). Its rate of 10.9 per cent of
those aged 18–59 living in jobless households in 2003 was exceeded only in
Belgium. This is a particularly important driver of child poverty –
in the mid 1990s a fifth of all children in the UK were in workless households,
double the OCED average and the highest of 18 countries surveyed by Gregg and
Wadsworth (2001). By 2003, the rate had fallen a little, but was still the
highest in the EU (Hills, 2004a, table 3.7). As figure 20 shows, this is partly
driven by the combination of a high rate of lone parenthood – only New Zealand
and the US exceed the UK’s 22 per cent rate – and the low proportion of lone
parents who are employed. This latter factor has been changing recently, with a
10 percentage point increase in the employment rate of lone mothers from 44 per
cent in 1996 to 54 per cent in 2002 (HM Treasury, 2003a, chart 4.4). Whether the
current government’s target of a 70 per cent employment rate for lone mothers
by 2010 can be reached is an open question but, as the figure shows, many other
countries do achieve something close to this or higher.
second factor is the low level of social security benefits for those out of work
in the UK in relation to poverty standards, in European
terms at least. Figure 21, based on work by Behrendt (2002), shows social
assistance entitlements in relation to median incomes and hence relative poverty
lines in the mid 1990s in Sweden, Britain and Germany for six different family
types. In the Swedish case, social assistance rates are above the poverty line
for all six cases, and in the German case in three of them, but in the UK all of
them fell short (although a pensioner couple came close to it). Since then, UK
social assistance (Income Support) rates have fallen further behind median
incomes for most of these cases, although they have improved recently for
families with children and pensioners. For a lone parent with two children,
Income Support rates exceeded 60 per cent of median income by 2004/05 (Stewart,
2005b, fig. 14.12). But for working age adults without children, Income Support
rates are well below the effective poverty line. As a result, the UK has one of
the highest poverty rates for the unemployed in the EU
European terms at least. Figure 21, based on work by Behrendt (2002), shows social assistance entitlements in relation to median incomes and hence relative poverty lines in the mid 1990s in Sweden, Britain and Germany for six different family types. In the Swedish case, social assistance rates are above the poverty line for all six cases, and in the German case in three of them, but in the UK all of them fell short (although a pensioner couple came close to it). Since then, UK social assistance (Income Support) rates have fallen further behind median incomes for most of these cases, although they have improved recently for families with children and pensioners. For a lone parent with two children, Income Support rates exceeded 60 per cent of median income by 2004/05 (Stewart, 2005b, fig. 14.12). But for working age adults without children, Income Support rates are well below the effective poverty line. As a result, the UK has one of the highest poverty rates for the unemployed in the EU– just under half in 2001 on the basis used by the EU,3 compared to under 40 per cent in the EU as a whole.
Lone parenthood and employment in the late 1990s/early 2000s
the UK also has a relatively high rate of poverty among those with income from
work – 28 per cent of working single parents and 19 per cent of single earner
couples in 2001, compared with EU averages of 22 and 20 per cent respectively
(Stewart, 2005b, fig. 14.9). In the case of lone parents, this reflects the
gender gap in pay generally, but also high rates of part-time working and the
particularly low rates of pay for women working part-time in the UK (Harkness
and Waldfogel, 2003).
But the UK’s problem of low pay is wider than this. As figure 22 shows, the UK had one of the largest increases in wage inequality between 1980 and 2000 of the ten countries shown – only New Zealand and the US had a larger increase, and three of the ten had a decline. This divergence in experiences suggests that we cannot look solely for global explanations for the increase in the incidence of low pay in the UK. It is true that unskilled workers in many industrialised countries have been hit by ‘skill biased technological change’, and this has driven both unemployment and relative wages (Hills, 2004a, ch. 4). But the UK has been hit worse than most. First, institutional restraints on low pay weakened in the 1980s – both through the decline of trade unions and the abolition of limited wage protection through the wages councils. Second, Britain had a relatively large number of unqualified workers to start with, and therefore a larger proportion of the population was potentially affected by both technological change and developments in world trade. The UK’s unequal earnings distribution is related to its unequal distribution of skills.4 These factors may interact – in countries where labour market institutions have resisted growing wage dispersion, as in continental Europe, this may have encouraged investment in technologies that have increased the productivity of less skilled workers, and hence slowed the extent to which technological change has been skill biased by comparison with, say, the US (Acemoglu, 2003).
recently, two factors have changed in the other direction. The National Minimum
Wage, introduced in 1999, may not have affected a large proportion of workers so
far, but it has put a floor to further drift downwards right at the bottom. At
the same time, New Labour’s tax credit reforms described in the previous
chapter have increased net incomes for those in low paid work, particularly, but
not only, those with children. By 2001 the UK had one of the most generous
‘child benefit packages’ in the world for low paid workers, if we look
across support through the tax and benefit system and help with housing costs
for families with children, compared with those without children (Stewart,
2005b, table 14.2, based on analysis in Bradshaw and Finch, 2002). This is a
considerable improvement on earlier international comparisons in the 1980s and
1990s (although the means tested nature of the UK system means that it is around
the international average in terms of support for families with children and on
one feature of poverty in the UK – and in the US – that stands out from
recent international comparisons is that when it occurs, poverty is more likely
to be persistent here than in some other comparable countries. For instance, an
OECD comparison of poverty durations in the early 1990s suggested that for those
who were affected by poverty in a six year period, the average duration was 2.4
years or less in the Netherlands, Sweden, Germany and Canada, but 3.0 years or
more in the UK and US (Oxley, Dang and Antolín, 1999). Accelerating the rate at
which those who fall into poverty can escape it would have a major effect on the
proportion of the UK population who are poor at any one time.
do we want? Public attitudes, poverty and policy
considering how policy towards poverty might develop, a crucial factor is what
the public as a whole thinks – either because policy makers will have to
operate within the constraints of those attitudes, or because attitudes might
have to change before policy can follow. Here responses to the long-running
British Social Attitudes (BSA) survey have given very enlightening information,
now stretching over 20 years.5
the survey has consistently shown unhappiness with the extent of income
inequality in Britain. For instance, in 2002, 82 per cent of respondents to the
survey said they thought that ‘the gap between those with high incomes and
those with low incomes is too large’, with only 13 per cent thinking it is
‘about right’, and very few that it is too small. The proportion agreeing is
higher now than it was 20 years ago, when income inequality itself was less, but
even in 1983 more than 70 per cent agreed (Hills, 2004a, fig. 2.11).
Furthermore, this inequality is not seen as functional: in 1999, 54 per cent of
respondents rejected the idea that ‘large differences in income are necessary
for Britain’s prosperity’, with only 17 per cent agreeing (Jowell et al.,
2000, p. 324).
the survey produces support for the idea that people see ‘poverty’ as being
at least in some way related to contemporary living standards. When offered
three definitions of poverty, around 60 per cent of the population say that
someone would be in poverty if they had ‘enough to eat and live, but not
enough to buy other things they needed’ (Hills, 2004a, table 3.8). This is
clearly more than a bare subsistence level, but how much more – and how what
constitutes ‘poverty’ changes over time – will depend on what people class
as ‘needs’. Here the results of the 1999 Poverty and Social Exclusion Survey
of Britain (PSE survey) indicate that as general prosperity grows, so does the
range of goods and activities that people see as necessities. The PSE survey
asked, as did the earlier ‘Breadline Britain’ surveys in 1983 and 1990,
whether people thought that particular activities or possessions were
‘necessary, which all adults should be able to afford and which they should
not have to go without’. For instance, in 1983 only 43 per cent thought that a
telephone was a necessity; by 1999 72 per cent thought it was (Gordon et al.,
2000, table 12). Similarly, in the 1983 and 1990 surveys, fewer than 40 per cent
thought that the ability to ‘have friends and family round for a meal, snack
or drink’ was a necessity; by 1999 65 per cent thought that it was.
evidence that people see poverty in largely relative terms can be seen in table
12. When asked what they thought had happened to poverty over the previous ten
years, half of respondents in 1986 and 1989 said it had been increasing – two
thirds in 1994 – and just under a third that it was steady – a quarter in
1994. Few thought it had been decreasing. By 2000, roughly equal numbers thought
poverty had been steady over the 1990s as thought it had increased. Looking back
at table 10 and figure 16 in the last chapter, these perceptions are consistent
with the trends shown in poverty against a relative line. They are not
consistent with people taking an absolute view – if they had, they would have
reported poverty as decreasing in the ten-year periods up to 1994 and
particularly up to 2000.
to the level of the poverty line, the BSA survey regularly asks respondents
whether people receiving particular benefits or with certain incomes have enough
to live on. Two features of the results are notable. First, when asked about
people receiving benefits while unemployed, respondents are more likely to say
they have enough to live on than when they are told the actual weekly income the
benefits give (although in both cases a majority say the people would not have
enough to live on). Second, the results suggest that when asked about the
incomes equating to the 60 per cent of median income line, about half of
respondents say this is enough to live on, about half that it is not (Hills,
2004a, table 3.13). Below these levels, large proportions say that income is not
enough to live on. In other words, the closest we have to an ‘official’
poverty line appears
roughly in line with the views of the median respondent.6
that poverty exists and has been increasing does not necessarily mean that
people think government should do something about it. However, in 2000 only 23
per cent blamed ‘laziness or lack of willpower’ for people’s own poverty.
The majority blamed factors outside individual control – bad luck (15 per
cent); ‘an inevitable part of modern life’ (34 per cent); and ‘injustice
in our society’ (21 per cent) (Hills, 2004a, table 3.14). It is true that the
proportion blaming individual factors is higher than in earlier years (19 per
cent in 1986 and 1994, and 15 per cent in 1994), and the proportion doing so is
the highest in the European Union apart from Portugal (Gallie and Paugam, 2002).
However, most people in the UK clearly see poverty as the result of factors
outside individual control.7
only 28 per cent respondents to the BSA in 1994 agreed that, ‘British
governments nowadays can do very little to reduce poverty’; 70 per cent
thought they could do ‘quite a bit’. Since the 1980s, a majority has agreed
– 58 per cent in 2000 – that ‘it is the responsibility of government to
reduce the difference in income between people with high incomes and people with
low incomes’. In 1998, just over half (53 per cent) said that ‘government
should increase taxes on the better-off to spend more on the poor’, with only
a sixth preferring an alternative statement that ‘the better-off pay too much
tax already’ (Hills and Lelkes, 1999).
All this suggests public backing for anti-poverty policies – if they too can go with the grain of public opinion. In selecting policies governments may be more constrained, as table 13 suggests. When people are asked whether government should spend more on ‘welfare benefits’ for the poor, even if it means higher taxes, more agree (44 per cent in 2002) than disagree (26 per cent). But the balance in favour has narrowed since the 1980s and early 1990s. Similarly, the balance, while still in favour, of the proposition that ‘government should redistribute income from the better-off to those who are less well-off’ has also narrowed over the period. The most important items within the social security budget – pensions, benefits for disabled people, and support for families with children on low wages – command support for increases, but benefits for the unemployed do not. Scepticism about the latter appears to reflect worries about the disincentive effects of benefits and the extent of fraud that became stronger over the 1990s (Hills, 2004a, figs 6.11–13). Instead, people believe that government should make sure that anyone who can work should be guaranteed a job. In short, the New Labour slogan of ‘work for those who can, security for those who cannot’ has strong public resonance. Whether what is being done to deliver it is enough, and whether views would be different if there was wider knowledge of just how low some benefit levels are, are different questions.
unfinished agenda? The JRF Income and Wealth Inquiry ten years on
February 1995 the Joseph Rowntree Foundation’s Income and Wealth Inquiry
Group, chaired by Sir Peter Barclay, published its report. The group, with a
broadly based membership, had been convened by the Foundation as evidence
accumulated on the extent to which income inequality and relative poverty had
grown since the late 1970s.8
reviewed evidence, both from official sources and from a research programme
specially commissioned by the Foundation. Most of the statistical evidence
available then covered the period up to between 1991 and 1993.
group concluded that ‘Policy-makers should be concerned with the way in which
the living standards of a substantial minority of the population have lagged
behind since the late 1970s. Not only is this a problem for those directly
affected, it also damages the social fabric and so affects us all’ (Barclay,
1995, p. 8). Given that conclusion, the group produced a wide-ranging series of
recommendations, headline versions of which are listed in box 3. As well as this
list of specific measures, the Inquiry Group argued that ‘It is hard to
overstate the importance of raising education and training standards in Britain
. . . Nor is it a matter of choosing where to redirect existing resources at the
expense of currently favoured sectors; greater investment is required at
virtually every level’ (Barclay, 1995, p. 10). Tony Blair’s three priorities
of ‘education, education, and education’ before the 1997 election sounded a
similar note (although the new investment did not come until after 1999).
the list in the box is a short note of what has happened to related policy since
then. This gives a convenient checklist against which to compare recent policy
developments summarised in the previous chapter. An immediate observation is
that there is a substantial overlap between the Inquiry Group’s
recommendations and policy as it has developed since 1997. Roughly half of the
46 recommendations itemised in the box have been adopted largely as suggested,
and only 8 have clearly not been followed. In some respects policy has gone
further than the Inquiry Group argued for – notably perhaps the child poverty
commitments and structure of the new tax credits, the labour market measures
associated with the New Deal, and some aspects of the National Strategy for
Neighbourhood Renewal. The differences also highlight some key features of New
Policy as it has developed has more emphasis on means testing than
implied by the Inquiry Group, particularly for pensioners, but also for the
While low income pensioners and those with children have benefited from
above inflation increases in benefits (and tax credits), working age people
without children have not.
While the New Deals have gone further in many ways than the Inquiry Group
programme, there has not been much by way of ‘direct provision of employment
opportunities’, and the benefit treatment of those remaining unemployed has
generally remained tougher than several of the Group’s recommendations
Policy has covered a wider range of issues than touched on by the Inquiry
Group, for instance, in some of the groups of vulnerable young people focused on
by the Social Exclusion Unit and related policy change, the emphasis now being
given to early years policy, and the attention – if limited specific action9
– devoted to health inequalities.
striking feature of New Labour has been the lack
of emphasis on
inequality overall – between top and bottom – as a focus of policy since
1997, as opposed to the strong focus on inequality between the bottom and the
middle. What is also clear is that despite the many areas in which there have
been policy initiatives, there are still gaps. The discussion above highlights
the position of working age adults without children who are dependent on
benefits. Other groups have also had their rights reduced
aspects of government policy – most notably asylum seekers (Burchardt, 2005):
the commitment to ‘inclusion’ has, literally, had borders.
and pressures on future policy
opinion is not the only constraint on policy makers. Looking ahead, there is
little sign that life will become easier for those trying to reconcile public
demands for a more equal society, public services that meet the demands of an
ageing and more affluent society, and political constraints on resources
available through taxation.10
most obvious pressure comes from an ageing society. It is not inherent in
increased life expectancy that social spending should increase as a share of
income. After all, one could imagine a world in which the ages at which all
events related to economic activity and social needs grew in proportion – ages
of entering education, leaving education and entering the labour force,
retirement, onset of greater medical and care needs, and eventual mortality. The
overall balance between social spending and national income could stay the same
without strain – but with periods at work and periods receiving transfers in
cash and kind lengthened in proportion. But as things have developed and seem
likely to develop, this does not appear to be happening:
There is no sign of
delay in entering education, quite the reverse, but ages to which people remain
in education are rising.
Retirement ages have begun to creep back up in the last ten years, but
had previously fallen rather
than risen as life expectancies increased. Expectations for the future are still
dominated by the idea of retirement at a particular age – say, 65 – rather
than one which relates to growing life expectancies.
Britain’s population structure has not been in a steady state.
Fertility rates have been in decline long term. This has been masked by the
‘baby boom’ generation, born after the Second World War, but when this
generation reaches 65, the ratio between those aged over 65 and those of working
age will rise sharply.
We simply do not know how health and long term care needs will develop as
the population ages. An optimistic view would be that needs would be delayed
until people were older – this would actually put off needs for social
spending, and help the public finances. Alternatively, such needs could remain
the same for people of any given age, and so pressures on social spending would
increase fast as a greater proportion of the population exceeded any given age.
the same time, the presumption that we will continue to become a more affluent
society does not necessarily help things. If we could keep the salaries of
doctors, teachers, nurses and road-menders fixed indefinitely in real terms, the
cost of providing public services might fall in relation to national income.
However, the evidence is that if public sector pay lags behind other incomes,
there is eventually a period of catch-up to cope with the problems of quality,
retention, recruitment and low morale. Equally, if productivity in providing
services grew fast enough, the share of GDP required could fall. The problem is
not necessarily that productivity does not improve – but rather that public
expectations for service quality, based on experience elsewhere in the economy,
rise just as fast. Even worse, the very services where public provision is
important – health care and education – are ones to which people appear to
want to devote an increasing
their resources as they become better off. As a result, quite apart from any
factors associated with ageing or tackling disadvantage, one might expect the
demands for social spending to rise as a share of national income over time.
There certainly seems little reason to assume that they will fall as a result of
if we saw poverty in absolute terms, tackling it would become easier as real
incomes grew. Funding social security benefits merely with a stable real
incomes (and taxes) are growing reduces the pressure on public finances quite
considerably, as we know from the last 20 years. However, the evidence reviewed
above suggests that views of poverty and inclusion actually relate to
contemporary living standards. The real cost of relieving poverty in these terms
rises as incomes rise – unless other factors move rapidly in the right
direction, and incomes from other sources fill the gap.
give an idea of the magnitude of these pressures, we can calculate what would
happen to social spending if we carried on in future spending the same amount on
each person of a given age as we do now in relation to average incomes, allowing
for current official projections of the future age structure of the population.
Looking just at health, education and social security, this would imply spending
rising from 21.8 per cent of GDP in 2001 to 26.3 per cent of GDP in 2051 (Hills,
2004a, table 10.2). For some this will be seen as clearly feasible
it is an increase of less than 0.4 per cent per year, and much of the increase
in health spending is already built into government plans, for instance. For
others, if translated into today’s money, it would mean extra spending – and
taxes – eventually of an amount equivalent to £50 billion per year, a
politically very alarming figure if it was needed all at once. There are reasons
why fiscal life might be easier – the projected increase in life expectancy
might turn out to be mostly of ‘healthy’ life, for instance, and both
retirement ages and the age of onset of health care needs could both rise. But
there are probably more factors that would make things harder – the
calculation does not allow for making progress in reducing poverty, or for
rising long term care needs. The latter could be substantial.11
of the things we do not know is whether the other factors referred to above will
‘move in the right direction’, that is in ways that reduce the market
inequalities that the social security and tax credit systems end up compensating
for. Economic growth in the last 20 years in the UK and US has been associated
with widening market inequalities. However, this has not been the case in other
countries, and in previous eras the presumption was that income inequality would
economies developed. It would be optimistic to assume that the trends of the
last few years will suddenly reverse. On the other hand, these trends are not
inevitable, and policies towards the labour market, minimum wages, skills,
education, discrimination, childhood poverty, disadvantaged areas and investment
may all make a difference to people’s ability to derive incomes from the
of the pressures on the public finances can be kept in check while making
progress on poverty if there is more reliance on ‘targeting’ services and
benefits on the poorest. Indeed, this has been an important part of the story of
the last seven years. But there are limits to how far this can be pushed. On the
one hand, figure 13 has already shown the wide income range across which the
quite high effective marginal tax rates associated with the new tax credits now
stretch. On top of these come other income tested transfers from the state –
Education Maintenance Allowances for families with 16–17 year olds; student
finance support worth at least £3,000 a year for students from families with
low or moderate incomes by comparison with those with higher incomes; or
repayment of student loans at a rate of 9 per cent of earnings above a
threshold. Some families will face more than one of these at once. Adding to
them through further income testing means either deepening or widening what was
once the ‘poverty trap’ but which now affects those with incomes nearer to
is also a political problem: if the government is raising taxes to improve
public services, but all of the proceeds are concentrated on the poorest, many
voters will see little return for their money. Of course, ensuring that the
poorest gain disproportionately is the aim of a poverty reduction strategy. But
a policy of ‘progressive universalism’ as New Labour has tagged it (and has
delivered in the case of support for children), means that spending has to
increase even faster than under a policy where general needs are kept up with,
but nothing extra is done for the poor.
of this leaves policy makers with some acute dilemmas: there is public backing
for a continuing assault on poverty, but both the instruments and resources
available to mount it look likely to be even more tightly constrained in the
next few years. In the final chapter we discuss alternative ways in which these
pressures may play out.
complex and difficult
Seebohm Rowntree was writing a century ago he could talk about poverty as it
affected a relatively homogeneous working class population in the town, York,
that he studied. What drove poverty could be narrowed down to a fairly narrow
set of factors, several of them related to variations in needs and earnings
capacity over the life cycle – large families, loss of earnings due to
sickness and old age without any other income source.
years ago, Beveridge could take results from Rowntree’s 1899 and 1936 surveys
to suggest that poverty could be tackled without much by way of redistribution
between social classes through the combination of a social insurance system
covering old age and risks of unemployment and sickness, together with a system
of family allowances and a National Health Service. Problems related to the life
cycle and to risks to which most were exposed could be dealt with through life
cycle redistribution and insurance. Even then, Beveridge was skating over the
problems of low pay and of what could really be achieved without progressive
ways of raising money and redistribution between classes.
both the drivers of poverty and the policies that might be marshalled to tackle
it are more diverse, and the politics of doing so correspondingly more
complicated. Wider conceptualisations of disadvantage increase the dimensions
across which failure to achieve inclusion is seen as a problem. Problems have
changed their shape as well – in 1899 children in large families represented a
major cost in money and cause of poverty; now families are smaller but children
also represent a time
cost that leads
to earnings forgone for some parents but also pressured lives for others.
we have done better
one conclusion from this review of the last century is that some of the issues
have become more complex. A second is that increasing affluence by itself does
not solve the problems or necessarily make it easier for policy makers to do so.
A third is, however, that there have been periods when we have done much better
than recently. The post-war welfare state and full employment may not have led
to quite the abolition of poverty suggested by Rowntree’s flawed analysis of
his third survey of York in 1950, but they certainly led to major progress by
comparison with the first half of the twentieth century. The records of the
Labour governments of the 1960s and 1970s were criticised at the time for slow
progress in reducing poverty and inequality, but some aspects of their records
look enviable today.1
common factor in the periods of progress – and in the areas where undoubted
progress has been made since the mid 1990s – is that policies have
simultaneously tackled the ‘causes of social ills’ and
address their ill effects. Where it has been assumed that poverty can be tackled
through just one of these, or that they are alternatives, we have been much less
successful. Hoping that economic growth will trickle down to the poor or that
welfare-to-work programmes by themselves will solve working age poverty without
any change in the incomes of those remaining out of work have not worked. But
nor have strategies relying only on the redistribution of income to ameliorate
the impact of market income inequalities that reflect much deeper differences in
economic opportunity. This is not just because the underlying problems are left
untouched, but also because political support for such a strategy is much harder
dynamics of anti-poverty policy
insights in identifying the relationship between the risk of poverty and the
life cycle can be seen as an early example of social science concern with the
dynamics of poverty. Recent analysis of this kind helps suggest fruitful areas
for policy, whether it is addressing intergenerational links between childhood
circumstances and later disadvantage, or the factors associated with short term
movements in and out of poverty. This kind of approach also suggests that we
should not be seeing ‘passive’ and ‘active’ social policies as
alternatives. Rather we should be thinking about whether we have policies that
tackle all four of the quadrants shown in figure 23, which divides policies
according to whether they are concerned with affecting the risk of something
happening or affecting its impact when it does, and whether they are concerned
with adverse or positive events. This suggests that policies can have one or
more of the following impacts:
an event or reduction of the risk of entering an undesirable state – for
instance, training to improve job retention, or adaptations at work or in
working patterns so that people can continue working after the onset of an
impairment or a change in demands on them for caring.
exit or escape – for instance, ‘welfare to work’ policies to help people
move out of unemployment or economic inactivity.
the impact of an event, for instance paying benefits to those who become
from adverse circumstances by reinforcing the benefits of exit – for instance,
the effects of the in-work benefits on the incomes of those leaving
unemployment, or post-employment support to ensure that the next career move is
Importantly, policies can have more than one of these impacts at the same time. For instance, paying benefits and tax credits to low income families with children may be ‘protective’ today but may also have long run ‘preventive’ effects if children are no longer growing up in poverty.
this point of view one of the great strengths of policy towards poverty and
social exclusion since 1997 has been that it has been multifaceted, and the most
promising parts of it – for instance those concerned with childhood
disadvantage – have indeed begun to address all four of these impacts of
intervention at once. Given the multiplicity of drivers of poverty, it makes
sense to address it with multiple policies. It is hard to see anything in the
current policy mix of which we need less
we are to make real progress (Hills and Stewart, 2005). But there are gaps and
challenges still to address, some of which we have touched on in earlier
Continuing high levels of economic inactivity and numbers of working age
households that are jobless. The initial impact of the ‘New Deals’ appears
to have slowed (McKnight, 2005).
Benefit incomes of those without children who are out of work. The group
in poverty that are deepest in poverty – have the largest ‘poverty gap’
– are single adults without children,2
unsurprising given the level of their benefits in relation to the
poverty line shown in figure 21. Income Support for a single adult
is now lower than the support given for a family’s first child – and the gap
will widen since the former is price linked, but the latter earnings linked.
The very low wages of many women working part-time.
Achievement levels in secondary schools in poor areas.
Particularly high rates of poverty among particular groups – for
instance, those from certain ethnic minorities, and disabled people –
reflecting a mixture of problems encompassing both discrimination and levels of
skills and qualifications.
Pensioners who fail to take up the income that should be guaranteed by
the ‘guarantee credit’ in Pension Credit, particularly older women.
ahead it is possible to take optimistic or pessimistic views of how policy
towards poverty will develop over the next 20 years. On an optimistic view,
policies will begin to establish a virtuous circle, as measures aimed at
tackling the causes of poverty start to change underlying inequalities, reducing
the numbers dependent on state assistance, and so freeing up resources to allow
more generous treatment of those who remain so and the extension of policies to
cover current gaps. Thus if policies succeeded in raising the skills of
disadvantaged young people and in reducing the economic disconnection of the
most disadvantaged areas, incomes from work of the otherwise poor would rise,
and the costs of social security benefits and tax credits for them would fall.
This could liberate resources3 to improve the value of
benefits to those receiving them, also reinforcing the political will to do so,
backed by the public desire for governments to reduce poverty discussed in
chapter 7. While the demographic pressures on social spending will be upwards,
reductions in economic inactivity, increases in the average age of retirement,4
and ‘healthy ageing’ would make them easier to cope with. This
could make possible a more general strategy of ‘progressive universalism’
social provision improves for all, but most for the poor, making gradually
rising taxation acceptable – all taxpayers would be getting something for
their money, while seeing poverty falling.
a bleaker, pessimistic view, any success in tackling underlying inequalities
would come too slowly to counter continuing polarisation of economic
opportunities. Those without access to capital, home ownership and good
education for their children would fall further behind – widening wealth
inequalities would continue to reinforce intergenerational links, for instance
as those with most wealth purchase houses near good schools. Even if policy
succeeded in raising the skills of some young people, the lowest wages would
still be set by an increasingly cut-throat global market. While the rising cost
of policies to ameliorate the effects of growing market inequality on relative
incomes (such as the new tax credits) would be visible, progress in reducing
poverty would be slow or non-existent, and political support for pushing such
strategies further would be weakened. Rapid increases in age related demands on
social spending could mean that taxes would have to rise, but without taxpayers
seeing what they were getting for their money, squeezing the political headroom
for more resources to tackle poverty, and pushing governments further back into
means tested programmes with incomplete take-up, disincentive effects and weak
political support. Reinforcing the latter, if the poor are seen as ‘other’
it is easy to stir up prejudice, as we saw in Britain in the nineteenth century,
and as has been suggested as a reason for differences in attitudes to poverty
policy in the US and Europe.5
is no easy way of saying which of these scenarios is the more likely. But we are
more likely to establish a virtuous circle if the need for progress on reducing
poverty has a high public and political profile. Charles Booth and Seebohm
Rowntree showed that sound evidence was one answer to prejudice about the poor.
‘Lifting the curtain’ and shining an honest light on reality in the poorest
parts of our society is a contribution social scientists can continue to make.
was the first country to develop poverty measures, and the science has a
distinguished and influential history in this country. The early poverty
researchers were businessmen who were concerned enough about social problems to
devote their spare time to investigating them. Their successors have been
academic sociologists, statisticians, economists and civil servants, all
attempting to produce rigorous research into this thorny and complex problem.
Good policy making requires solid facts to go on, but definitions of poverty are
invariably subjective and can alter our impressions of the magnitude or source
of the problem. Different methods lead to different results, but a general
picture of the historical trends and current situation emerges. It is
pessimistic in that Britain had very high poverty rates for the last 15 years of
the twentieth century and still has higher poverty rates than most other
European countries. It is almost inevitable that parts of society become
disaffected as a result. But it is optimistic in that poverty was much reduced
by the Beveridge reforms, full employment and by the sharing of national
prosperity with those living on benefits in the 1960s and 1970s. Recent reforms
and the decline in unemployment have also led to a reduction in poverty,
particularly in child poverty. This all suggests that, if the political will is
there, there is no reason why policies cannot be as effective today in further
reducing poverty as they were in the past. Rowntree’s own conclusion from a
century ago remains apposite:
in this land of abounding wealth, during a time of perhaps unexampled
prosperity, probably more than one fourth of the population are living in
poverty, is a fact which may well cause great searchings of heart. There is
surely need for a greater concentration of thought by the nation upon the
wellbeing of its own people, for no civilization can be sound or stable which
has at its base this mass of stunted human life. The suffering may be all but
voiceless, and we may long remain ignorant of its extent and severity, but when
once we realize it we see that social questions of profound importance await
in a centennial edition published in 2000.
This chapter draws extensively on Jo Webb’s ‘Always with us? The evolution
of poverty in Britain, 1886–2002’ (2002).
The discussion of the period since 1997 draws heavily on a book written
alongside this one, A
more equal society? New Labour, poverty, inequality and exclusion,
edited by John Hills and Kitty Stewart (2005). More detail on some of the trends
and issues discussed here can also be found in Inequality
and the state by
John Hills (2004a). Research for these books was financially supported by the
Joseph Rowntree Foundation, and by the Economic and Social Research Council
through its general support for the Centre for Analysis of Social Exclusion
(CASE) at the London School of Economics. The authors are very grateful to our
funders, to colleagues within CASE for their support and assistance,
particularly to Lucinda Himeur in preparing the typescript, and to Fran Bennett
and Anne Power for their advice on recent changes in the social security system
and in housing policy. The views expressed, and any errors and omissions, are
those of the authors alone.
The context for Rowntree’s contribution
Assistance to the poor from local parishes under the Poor Law.
Changes in poverty
These are analysed in Webb (2002).
For the benefit of younger readers, 12 pence (d) made one shilling (s) and 20
shillings made one pound (£).
Hills (2001), p. 4 (see also chapter 7 below); Kilpatrick (1973); Hagenaars and
Van Praag (1985).
alternative deprivation indicators approach has many similarities to the budget
standard method but constructs the poverty line in a less transparent manner.
Why has poverty changed?
Family Resources Survey data are Crown Copyright. For their use acknowledgement
is made to the Department of Social Security, the Department for Work and
Pensions, the Office for National Statistics and the UK Data Archive.
Households were assigned to the first of the following categories that they
corresponded to: (1) widows; (2) head above pension age or permanently sick or
disabled; (3) head unemployed; (4) four or more children; (5) in paid work; (6)
all others. Categories are close, but not exactly the same, for the two years.
1901 Census, table 28; 2001 Census, table KS04; the base for both years is all
aged 16 and over.
4 1901 Census, table 36;
2001 Census, table KS04.
Office for National Statistics, 2003.
Since earnings of the servant-keeping class are not recorded, a low estimate of
their earnings has been used to determine this figure; if a higher estimate were
made this would reduce the figure.
Family Resources Survey, 2001/02. 8 Lakin (2003).
policy from 1900 to the 1970s
See a collection of retrospective views in Hills, Ditch and Glennerster (1994).
The last quarter century
See Hills and Stewart (2005) for a comprehensive discussion of policy since 1997
and its results.
For an assessment of the impact of these policies, see Lupton and Power (2005).
Note that the indices for prices and earnings used by DWP in these two series
are applied at different points within the year, so the two diagrams show
slightly different patterns over time.
Partly financed by the final abolition of the Married Couple’s Allowance
within income tax.
However, those whose incomes increase by only a relatively small amount (£2,500
in 2003/04) do not in fact have their tax credits cut back for the tax year when
the increase occurs, so, for a time, effective marginal tax rates are lower than
the 70 per cent figure. Equally, under the 1997/98 system, Family Credit was
only adjusted every six months, so for some income ranges the impact of changing
incomes was also delayed.
For details of how the systems result in these outcomes, see Hills (2004b).
In fact, many higher earners would have ‘contracted out’ of SERPS and would
receive part of the amount shown through their occupational pension scheme in
return for having paid reduced National Insurance contributions while they were
Again, many ‘contracted out’ higher earners would actually receive less than
this from the state, but would have had the offsetting advantage of lower
National Insurance contributions when at work.
Policy challenges and dilemmas for the next 20 years
This section draws heavily on research by Kitty Stewart (2005b).
Given the rapid reduction in child poverty in the UK against this kind of
standard since 1996/97 (see the lower part of table 10), this position may well
now have improved, particularly by comparison with the US.
Stewart (2005b, fig. 14.13), using incomes before housing costs and the OECD
equivalence scale. As we saw in table 2 above, after housing costs and using the
McClements equivalence scale, 73 per cent of households with a chief wage earner
out of work were counted as poor in Britain in 2001/02.
See Darton, Hirsch and Strelitz (2003), fig. 30.
See, for instance, Park et al. (2003) for results from the 2002 survey,
including a description of the survey and how it is carried out in its
appendices. For more detailed discussion of some of the results discussed in
this section, see Hills (2001, 2004a).
It is also true that when respondents were asked in 2001 what proportion of
children were poor, the median response was 25 per cent, also roughly in line
with the official figures for child poverty against the 60 per cent of median
income line (Taylor-Gooby and Hastie, 2002, appendix figure). However, responses
to other questions of this kind, such as the proportion of social security going
to unemployed people, were a long way from the mark, so some might temper the
weight put on this finding.
By contrast, in the US, when people were asked to choose between two reasons for
people living in need, 61 per cent blamed laziness or lack of willpower rather
than society treating them unfairly (Hills, 2004a, p. 69, based on World Values
John Hills acted as Secretary to the Inquiry Group.
See Sassi (2005) for a discussion.
Hills (2004a), ch. 10, for a more detailed discussion, and the first report of
the Pensions Commission, chaired by Adair Turner, published in October 2004, for
a discussion of future prospects for pensions.
et al. (2004) show that there is a very large ‘funnel of doubt’ about future
long term care costs, but the upside risk is considerable. On one scenario, if
age-specific needs did not decline as life expectancy lengthens and care
standards improve moderately, then with current demographic projections, total
public and private long term care costs could rise from 1.4 per cent of GDP now
to 3.4 per cent in 2051, with the state component rising from 0.9 to 2.3 per
cent of GDP. If free personal care was extended from Scotland across the UK, in
this scenario, the public costs would be another 0.75 per cent of GDP higher.
Poverty and progress for the next generation?
Hills and Stewart (2005), table 15.1.
2 Darton, Hirsch and
Strelitz (2003), fig. 7.
Darton, Hirsch and Strelitz calculate that eradication of poverty within 20
years would require incomes of the poorest fifth to grow annually by 7 per cent
per year, while other incomes grew by 2.5 per cent (2003, p. 15). They suggest
that the aggregate ‘poverty gap’ to be closed is equivalent to about a
fortieth of national income, or about a twentieth of expected gains from growth
over the period. If this was achieved simply through income transfers, the
cost would be higher, of course, as it is hard to imagine successful policies
that would affect only the poorest.
See the first report of the Pensions Commission, published in October 2004, for
a discussion of the trade-offs between future pensioner living standards,
retirement ages and levels of public and private pension contributions.
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