How Cameron changed his tune on child poverty

In a 2006 speech, the Prime Minister praised the concept of relative poverty.

"I want this message to go out loud and clear: the Conservative Party recognises, will measure and will act on relative poverty.

Poverty is relative – and those who pretend otherwise are wrong."

David Cameron, Scarman lecture, 22 November 2006

David Cameron's government has failed to reduce child poverty, so it will redefine it. That, in short, is the explanation for Iain Duncan Smith's speech today in which the Work and Pensions Secretary will announce that the government is consulting on changing the current measure.

While Labour reduced child poverty by 900,000, soon-to-be-released figures will show that it has risen significantly under the coalition. Indeed, the Institute for Fiscal Studies (IFS) has forecast that by 2015 the number of children in relative poverty (defined as households with less than 60 per cent of the median income) will have risen by 400,000, and that by 2020, 23 per cent of British children will live in poverty.

It this internationally-recognised definition of poverty that Duncan Smith has rejected. In his appearance on the Today programme this morning, IDS contended that it was too narrow (focusing solely on income) and that it could lead to perverse results. For instance, if average incomes fall, the poverty line falls too. Yet it was precisely for this reason that Labour's poverty target also included an absolute poverty line.

Absolute poverty is defined by the UN as "a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services." Yet in a developed country such as Britain, poverty is both absolute and relative.

Relative poverty denotes those who are unable to live to a similar standard to the majority of the population. As the Joseph Rowntree Foundation notes, those  affected may lack "new and not second hand clothes, adequate shoes, a meal with meat or fish once every two days, adequate heating, a television, being able to go to the pub or a social outing with friends once a week, having an annual holiday". And high levels of relative poverty are typically disastrous for a modern society. As the empirical masterpiece The Spirit Level (a book which Ed Miliband asked all his staff to read last summer) showed, those countries with higher levels of inequality suffer from higher levels of crime, educational failure, social immobility, depression, drug abuse and obesity.

There was a time when Cameron appeared to recognise as much. In his 2006 Scarman lecture (quoted above), the-then leader of the opposition declared:

We need to think of poverty in relative terms – the fact that some people lack those things which others in society take for granted.

I want this message to go out loud and clear: the Conservative Party recognises, will measure and will act on relative poverty.

Poverty is relative – and those who pretend otherwise are wrong.

Even if we are not destitute, we still experience poverty if we cannot afford things that society regards as essential.

Fighting relative poverty [is] a central policy goal.

Fine words indeed. Yet he now cynically rejects this measure in order to mask his failure on child poverty and Labour's success. Was Cameron's brief flirtation with the concept of relative poverty merely an exercise in detoxification, or has the Prime Minister undergone a genuine intellectual shift? It is hard to say, but we should ensure he is forced to explain.

The IFS has forecast that child poverty will rise by 500,000 to 3 million by 2015. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.