The poverty of the poor

Posted on April 5, 2007
Filed Under Policy |

The Business has picked up on another of Brown’s failings. Using data from the Department of Work and Pensions, they show that the poorest 10% of the population are worse off now than in 2002. Not a good legacy for a Chancellor or a Labour Government committed to helping the poorest off in our society.

This change conincides with the introduction of the Working Tax Credit and Child Tax Credit in April 2003, which replaced the Working Family Tax Credit. This enlarged the number of people eliglibe for Tax Credits, but also made it more complicated. As the Business points out it “defeats one in four eligible workers”. The major problem with the type of Tax Credit Brown uses is they are only applicible to the over 25 year olds working more than 16 hours a week. Tax Credits are good at getting people into work, but they offer little or not incentive to work extra hours (more than 16 hours) because the marginal loss of benefits and leisure outweighs the gains. This creates a low wage, or poverty, trap.

Brown has always been keener on means tested benefits compared to Blair who favours a more universalist approach (one of the few clear differences between the two rivals). But the means tested benefit approach is not helping the poorest in our society. Brown must take up this challenge, or soon the polls will be suggesting that the public trust the Tories to deal with poverty more than they do a Labour Government.

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