Food stamps are just capital controls for poor people

If you want to introduce higher prices for poor people, at least do it openly.

The Guardian's Patrick Butler reports that food stamps are to replace the cash payments currently received by vulnerable people in short-term financial crisis. He writes:

Rather than, as now, offering a cash loan, most councils will from April offer new applicants who qualify for emergency assistance a one-off voucher redeemable for goods such as food and nappies.

Many of the 150 local authorities in England running welfare schemes have confirmed that they will issue the vouchers in the form of payment cards, which will be blocked or monitored to prevent the holder using them for alcohol, cigarettes or gambling.

In classic economics-blogging style, here's another news story. Cyprus is to impose capital controls, for a seven-day trial period. The FT's Joshua Chaffin reports:

Capital controls will be deployed to prevent a stampede of withdrawals by panicked depositors when the banks reopen, possibly on Thursday, after a closure that has dragged on for nearly two weeks.

In broad terms, they will limit the ability to withdraw money, or shift it between accounts or across borders, according to officials. The measures might also delay the processing of cheques.

The link is that both measures won't have the absolute effect that their promotors might hope; rather, they impose a huge, uncontrollable and grey-market tariff on attempts to do what people are used to being able to do freely.

The Cypriot capital controls are the more obvious example of this. For the next week, a euro in Cyprus is worth less than a euro elsewhere. How much less, we don't know, and there will probably never be a clear market rate – especially if the controls are lifted in early April, which the people of Cyprus will surely be hoping will happen.

Nonetheless, if a Cypriot finds themselves urgently needing to get a large number of euros out of the country – say, to close a purchase on a house in the French Riviera – it's relatively obvious what they have to do. Offer someone in the "real" eurozone a quantity of euros in Cyprus to spend the money for them. The premium offered depends on the risk that the capital controls will not be lifted, as well as the value our outsider places on euros which can only be spent in Cyprus, but it's fairly doable from a technical point of view.

Of course, if the premium is too high – if you'd need to promise €5m (Cypriot) to get someone to spend €1m (non-Cypriot) – then you'll likely see movement from the grey market to the black market. In other words, suitcases full of money crossing the Adriatic.

Those effects are basically the same as what we will see if food stamps become widespread. It's best to think of food stamps as a separate currency; one which can only be used buy a certain list of items. Just like the Cypriot euro, it has "capital controls" – you can't just walk up to a bureau d'exchange and hand food stamps in and get pound sterling in return. But just like the Cypriot euro, there are ways – easy ways – of getting around them.

The legal way – analogous to the complicated deal to hand over money in two nations – is as simple here as offering someone a £20 food stamp for a £12 bottle of gin. Given most people buy food, that's a relatively good deal for the person who ends up with £8 profit; they essentially get a portion of their groceries paid for by someone in crippling financial need.

Since food stamps are useful for most people, the premium is unlikely to be very high. But if it is, we get to the suitcase-full-of-money option: find someone who'll take food stamps in exchange for "contraband". Given the ease with which 15-year-olds get drunk in this country, it's a fairly good bet that there are a few shops happy to sell booze to people they aren't allowed to. They might charge rip-off prices, knowing that the buyer's hardly going to complain, but they'll do it.

In the end, then, what is the outcome of food stamps? All things considered, they don't force people in financial difficulty to spend their money on "necessities" rather than "luxuries" (with the two categories odiously defined by government, rather than the individuals themselves). Instead, they impose a tariff on purchases of "luxuries" for those people.

The same economic effect could be had more directly by requiring shops to display two prices for booze and fags: a regular price, and a higher price for "poor people". Given the bizarre crossover between those in favour of welfare cards yet against minimum pricing because it hits the poor hardest – a peculiarly Tory type of libertarianism (fauxbertarianism? libertoryanism?) – perhaps making the doublethink explicit might change their minds one way or another.

US style food stamps. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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