Liberal Vision

Review: A New Understanding of Poverty

Liberals frequently find themselves in the middle of debates. That on poverty is little different. What is poverty and how it is measured is an academic discussion, but one that has far reaching consequences for welfare policy and those impacted. The Institute for Economic Affairs, the leading free market think tank, has examined this issue through Poverty Fellow Kristian Niemietz’s new monograph “A New Understanding of Poverty” .

On the wings of this discussion are the two best understood concepts, absolute and relative poverty. Preference for those measures tends to ascribe to the right and left wings of politics respectively.

The study shows that different poverty measures are poorly correlated. Countries that have seen large rises in relative poverty recently have seen sharp falls in the absolute. Even different relative measures are more weakly linked than we might assume. It is then incorrect to assume different measures are just alternate views of the same thing. What measures are used to assess poverty then matters.

Absolute poverty, the measurement of access to some unchanging basic necessities such as water, food, and shelter was popular in the Victorian era (for example the Rowntree Budget Standard Approach) and accurately describes subsistence, but doesn’t adapt to progress. Access to a phone 50 years ago was a luxury, today it is essential. The poor in Britain today are better off than the middle classes in the 1950s. Applying Victorian or third world standards to Britain today tells us mainly that the Northumbia students who compared their tuition fees plight to famine victims last November are getting a poor return on their investment in education.

Relative poverty, for example setting a poverty line at 60% of median income, moves with economic changes, but it does so perversely. RP for example falls in recessions as relatively more expensive employees are laid off. It can increase as everyone gets better off if that growth is uneven. In uncertain times someone might find themselves labelled poor or not poor several times over without any actual change in their standard of living. It depends entirely on what geography is selected.

RP has little relation to what most people think is poverty and breeds resentment of the welfare system. By focusing on income it labels fabulously asset-rich pensioners, future well off students, and temporarily unemployed professionals as poor. Targeting RP leads to policies focusing on the line and shuffling money about not tackling the root causes of deprivation. By making a fetish of redistribution RP targets can encourage high taxes and welfare spending that destroy growth and makes joblessness a lifestyle choice (under socialism we all get poorer together, but none more so than the genuinely deprived).

Targeting inequality as proposed by the debunked pseudo-science of the Spirit Level doesn’t work. Current UK policies aspiring to abolish relative child poverty and other targets, will either never be achieved, or rely on economic collapse.

Subjective poverty measures are usually survey based. Either percentages self-reporting ‘I feel poor’ or based on an income/wealth line where that becomes more true than not. Such emotive measures are interesting studies in self-perception, but don’t tell us much about how deluded those perceptions are or why they matter. As a policy tool they have much of the utility and of an ‘Am I fat’ survey in Heat Magazine. A policy prescription to tackle subjective poverty might include a National Hugs Service*.

Material Deprivation measures are based on reported expenditure on goods and services, weighted by how important they are to the individual, and how widely they are owned (consensual approach). The result is a range of context specfic deprivation scores rather than a poverty line.  Expenditure measures move with economic progress, correlate with popular perceptions of poverty, and can account for spending from assets. The survey element is binary – do you have this, don’t you; do you want it, don’t you – which should mitigate against perception bias.

Another advantage of MD measures is that they improve when essentials get cheaper, usually as a result of more competition or innovation. The deteriorate when the converse is true. Government schemes that increase the price of rent, petrol, electricity, food and clothes for example, and the subsequent household spending adjustments are better captured by an MD scale than RP. They can account for regional differences in price.

The main problem with MD is preference bias. Some who forgo ‘basic’ goods as a matter of preference would count as deprived.

Niemietz then suggests going back to basics by applying some elements of Rowntree’s BSA to a consensual MD measure (CBSA), or less wonkishly applying some common sense and data to the validity of expressed preferences. So for example deprivation of access to a washing machine should depend on the price of available cheap machines not the average price.

The CBSA poverty line could vary by regions and types of household (e.g. families, pensioners, students) according to local prices. Households below the expenditure line that allows you to purchase the consensus view of necessity would be classed as poor. Those above that choose not to buy those goods (they may for example spend more on clothes and cigarettes) would not.

The policy implications of a CBSA would be to more accurately draw attention to government policies that make life tougher for the poor such as planning restrictions, producer subsidies, and minimum prices. It would highlight the importance of economic growth, open markets, removing poverty traps, lowering marginal tax rates, simplifying the benefit system, removing couple penalties, school choice, workfare, and the interactions between such measures.

The rest of the monograph includes an interesting history and analysis of measures and policies in the UK.

All in all this in important and interesting contribution  well worth reading to understand what is often an impenetrable debate.

*When team Cameron propose this, you heard it here first

Life on Mars with the Federal Executive

It’s notable that the highest Liberal Democrat governing body, the Federal Executive,  is deemed so important by the governed, that their page on the party website has not been updated since July 2008.

To get some sense of who is on it today you might go to the internal election fan siteof Councillor Colin Rosenthiel, or find a back-issue of Lib Dem News, the equivalent of hiding the results in a locked cupboard marked ‘Beware of the Leopard’.

So effective is the Federal Executive, that the Leadership set up an appointed Chief Officers Group in 2008 to get stuff done, rather than just talk about it. This leaves the FE with a somewhat nebulous role in debating political strategy and no power to implement it.

An example of this can be seen in today’s Guardian that reports:

“Liberal Democrats to fight next election as totally independent party”

“Party executive agrees to fight next general election campaign with ‘no preference for potential future coalition partners’ and reasserts party’s left-of-centre roots”

“Conference re-asserts that the UK Liberal Democrats are based firmly in the historical and global traditions of the liberal and social democratic philosophy”

On the last point first, just how dead does the SDP parrot have to be before the FE pop the corpse in the swing bin? I’m almost surprised the sentence didn’t conclude with an attack on Thatcherism and worries about whether phone privatisation is really working.

Further the end of history implications that no relaigments mattered before the Alliance, none since, and definitively no more in future, concluding with a call for “modern liberalism” makes no sense.

On the first point, the reality of political campaign planning means that come late 2014/15, when the Party Leader, Chief Executive and hundreds of local organisers are deciding what to do and say, this statement of intent in January 2011 will have no meaning or force.

How close or not the party wishes to be seen to the Conservatives, Labour, others or none will in no small part depend on what those parties do. Are we for example really saying that if either main party split, as say happened with the formation of the SDP, we wouldn’t be interested in collaboration with the more liberal faction.

More to the point why isn’t it explicit political strategy to encourage that outcome?

We cannot move from third place by organic growth. Running incremental by-elections worked poorly in opposition and won’t work at all in Government.

The Conservatives further are quite nakedly running a “hug them close” strategy with the party mainstream in order to encourage a National Liberal realignment and antagonise the left.

Nick Clegg should reverse this discomfort. I’d like to see more statements welcoming centrist Conservatives embrace of liberal democracy, and offering a home to New Labourites abandoned by the double-Eded-disaster leading their party.

If the Federal Executive had an ounce of political guile they’d be poking a stick at the fragility of the Conservative and Labour coalitions, rather than amplifying concerns about our own

But I fear this latest statement has once again shown a group obsessed with internal positioning, persistently fighting the last war, and adding little value to the party’s growth and progress. Give them a real internal scrutiny purpose, or scrap it. Save the Cowley Street biscuit budget for something more useful.

Two Eds are not better than one

The long and short of Ed Miliband’s reshuffle is that the Labour party are now represented at the top table by a group wedded to tax and spending as the solution to all ills.

This is a very good opportunity for Nick Clegg to ditch his ‘progressive’ baggage and position the Liberal Democrats firmly in the liberal centre ground.

Left-wingers who have used the Liberal Democrats as a dumping ground for all the mad ideas they could never get past New Labour concessions to electability and  balance sheets now have a very familiar place to call home.

Ed Balls meanwhile will be focusing on his next target, his Leader. It’s the good old days of the Blair and Brown show coming back, without the veneer of aspiration and competence that kept the show on the road.

A good day for liberalism

Well we haven’t had much good news in recent weeks. But today the Liberal Democrats did, when we heard that the Coalition Government is to bring 28 day detention to an end. Damian Green announced in parliament earlier today that  the order, which expires at midnight on Monday, will not be extended.

How unusual to find an “exceptional” piece of legislation, purportedly intended as a short term emergency measure, being removed (at last). And refreshing that a Government Minister goes on public record stating that Government powers should not interfere with the “hard-won civil liberties of the British people”‘!

Of course, the government has also slipped in the fact emergency legislation will be drafted up and put in the Commons library to extend the maximum period to 28 days – er just in case it’s needed. But I think that we can live with that.

Now to the more important issue of Control orders…. surely these have got to go too?

I suspect that the Lib Dems won’t get much credit for this. But whether they do or not, many must be chalking this one up as a win today. Nice one. Let’s hope Theresa May doesn’t spoil the party too much next week.

The Islam & Bankers Forum

We have a campaign solution for Baroness Warsi that will kill two birds with one stone (no inference intended to the criminal justice practices of the Islamic Republic).

She and the Chancellor  should set up a forum for mutual understanding between representatives of Muslim communities and bankers.

These are two groups do mostly good in the world misrepresented by the actions of extremists, some of whom live half a world away. They are united in misunderstanding. Islam prohibits lending money for interest.

Surely if the Muslim Council of Britain and the British Bankers Association can learn to get along, many good things will follow?

Less flippantly her comments about discrimination against Muslims have some basis in fact. Muslims in the UK are more likely to be referred to negatively and unfairly as a group than many other groups.

Whether it is a something that has achieved “dinner-party acceptability” I find less credible. That sounds like a really bad evening out.

It certainly feels less pervasive than the anti-Irish bigotry commonplace when I was growing up in the 1980s. We do not for example see comedians (other than Muslim ones) appearing on popular television making the equivalent of thick-Paddy jokes.

Nor would I expect a Muslim neighbour to introduce himself to me (seriously) as “Don’t worry I’m a loyalist” as happened at college.

The common thread between the two is that the terror threat of the time was linked to extremist elements in both communities. Whilst being born on the island of Ireland did not make you a terrorist, it did not help community relations that nearly all the terrorists were Irish.

Until then, the threat from militant Islamic groups retreats, it is highly likely the threatened and unsophisticated are going to express their feelings crudely and unfairly.

The Conservative Party Chair though feels labels like ‘moderate’ are ‘extremist’ unhelpful.

I find this a little bizarre. It is perfectly correct to label unbending interpretations of religions and political philosophies that exhort violence, with no concern for human life as extreme. It may not be her interpretation of her faith, but she is… well moderate.

If she needs alternate labels perhaps she should consider ‘liberal’.

Meanwhile the Islam & Bankers forum is surely a force for tolerance whose time has come.

Lead on Baroness, lead on.