The coalition's cap on benefit increases will mean a surge in child poverty

Raising benefits by less than the rate of inflation is a poverty-producing policy.

Internal Treasury documents do not make for a thrilling bedtime read but a flick last night through the government’s Impact Assessment (IA) toolkit proved quite instructive. It tells us, for example, that an IA should be prepared when a proposal "involves some kind of redistribution affecting the public, private or third sector", and that an IA "must be published when a Government Bill… is introduced into either House of Parliament".

Yet on the day the Welfare Benefits Uprating Bill 2012 receives its second reading in Parliament, we still have not seen a formal assessment of the government’s decision to cut an estimated 4 per cent from the real value of key benefits over the next three years.  So, in the absence of any official statement as to how this policy will affect child poverty, we decided to work it out for ourselves.

Our starting point is the study produced by the Institute for Fiscal Studies (IFS) in October 2011 projecting child poverty rates for the UK over the next five to ten years. The picture, according to this report, looked bleak: an estimated 400,000 more children would be living in relative poverty by the end of the current parliament, while the number living in absolute poverty looked set to increase by 500,000 over the same period.  

Critically, the IFS singled out the decision to index most working-age benefits to the consumer price index (CPI) as opposed to the more generous retail price index (RPI) from 2011 onwards as the most significant policy driving child poverty upwards in the next five to ten years. But these projections do not now tell the full story. Since they were produced, the government has made other adjustments to the way it indexes benefits and tax credits, and now plans to add into this already potent brew the decision to uprate most in- and out-of work benefits, and going forward key elements of Universal Credit (UC), at a sub-inflation 1 per cent for three years.

As our new report published yesterday shows, the simple truth is that a sub-inflation uprating will be a poverty-producing policy. Delinking benefits from prices will result in a fall in the real standard of living for anyone who is reliant on the state for all or part of their income over the next three years. As a consequence, in the absence of any compensatory changes, the number of children living in absolute poverty will rise, while those children in families reliant on out-of-work benefits who already live below this threshold will see their poverty deepen further.

And alongside worsening absolute poverty rates, the relative fortunes of low income families can only deteriorate too. The government is presenting the 1 per cent uprating as ‘fair’ in light of the average earnings levels observed during the recession, as well as future public sector pay agreements. But what is conveniently obscured in this debate is that for many years prior to 2008, benefits rose at a significantly lower level than wages. In fact, the above-average earnings upratings of the last five years have had limited effect on the relative value of benefits eroded over a long period of time, showing how difficult it is to correct the damage done by year after year of under-indexation.

Nor is it clear where the equity is in pegging benefits to public sector pay rises going forward. With the Office for Budget Responsibility anticipating average earnings growth for the whole economy of between 2.2 per cent and 3.9 per cent over the next three years, the Uprating Bill will open up a gap between the poorest and the rest of the population. As a result, the minority will become further disconnected from the majority, and under these conditions, relative child poverty can but rise.

Looking at the historical picture should make us all pause for thought. Decoupling benefit levels from wages is widely recognised as the most significant policy that drove the dramatic increases in child poverty through the 1980s and 1990s, and the decision now to delink benefits from prices looks set to propel child poverty back up to levels we haven’t observed since the Thatcher years.

Given this, the Uprating Bill risks history repeating itself, with one significant difference: this time round we are likely to witness significant rises in child poverty against the backdrop of the Child Poverty Act (CPA) 2010, a law which requires the government take action to improve both the absolute and the comparative fortunes of children growing up in the UK today.

Yet three years of benefit uprating that is linked to neither prices nor average earnings will deliberately lock in both real and relative losses for low-income families, at the same time as locking them out of the mainstream.

Small wonder, then, that the required impact assessment has yet to materialise, but when it does, it will be interesting to see how the government squares the child poverty circle.

A young girl spends the half term school holiday playing in an an alleyway in the Gorton area of Manchester. Photograph: Getty Images.

Alison Garnham is chief executive of the Child Poverty Action Group

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“We don’t BeLiviu”: how Romania is rising against corruption

Night after night, activists gather in Victory Square to demand the resignation of the government.

For much of the year, the large tarmac square in front of the main government building in Bucharest is little more than a glorified roundabout, busy with traffic and surrounded by towering, communist-era blocks on one side and a wedge-shaped park on the other.

But when Romanians gather to protest, as they have done these past weeks in record numbers, it becomes a place of pent-up frustration; against the ruling class, the direction in which the country is heading and the way many politicians continue to use the public purse as a source of cash for their personal use. This was not how it was supposed to be, ten years after the country joined the European Union.

On 31 January Romania’s new government, in power for less than a month, sneaked in a piece of emergency legislation during a late-night session to weaken the punishment for abuse of power, negligence while in office and conflict of interest. In effect, the move decriminalised some forms of corruption, if the financial damage caused amounted to less than roughly £38,000.

Many Romanians and international observers saw it as a brazen attempt to help politicians facing legal problems, prominent among them Liviu Dragnea, the leader of Romania’s largest political party, the Social Democrats, and the president of the Chamber of Deputies (Romania’s House of Commons). Dragnea is facing trial for supposedly getting colleagues added to the public payroll even though they do not work for the state. He is one of many public officials facing a day in court; in fact, he has already faced the courts, earning a 2015 conviction for electoral fraud that barred him from becoming prime minister despite his party’s strong showing in parliamentary elections last December.

The backlash against the ordinance was swift, as night after night tens of thousands, even hundreds of thousands, and, once, half a million took to the streets to protest. On 5 February, between 500,000 and 600,000 people protested across Romania, with 300,000 in the government square alone. Demonstrations have also taken place in 50 towns and cities in the country, as well as in the Romanian diaspora.

The government backed down on its immediate plans and repealed the decree, but trust was by then long gone. Protests are now in their third week and, despite snowfall, show little sign of ending.

“This government needs to go. You can’t be elected in December and have hundreds of thousands on the streets in a month,” said Dorial Ilie, a 33-year-old PR worker, one cold evening in the square.

Romanians are fed up with corruption. The country sits 57th in Transparency International’s corruption perceptions index – up from 69th place in 2014, but corruption remains endemic, and Romania is near the bottom of the list when it comes to EU countries.

Despite the efforts of the country’s much-admired National Anti-corruption Directorate (DNA), set up in 2003 and responsible for the successful prosecution of thousands of politicians, civil servants, judges and business leaders, there is a sense that the rich and powerful still operate as if they were above the law. This was certainly not helped by the attempts to change the anti-corruption legislation.

“They had been planning to do this for years,” said Dan Popescu, a 46-year-old priest protesting in the square, echoing the sentiments of many of those around him.

The demonstrations, the largest in the country since the fall of Nicolae Ceausescu in 1989, have been an impressive display of people power in a country that is increasingly using the streets as a communication platform. Large-scale protests in Romania also brought down the last elected government in November 2015, after corruption was blamed for a fire in a Bucharest nightclub that left 64 dead, and before that, mass protests during the 2014 presidential election, this time over mismanagement of diaspora voting, arguably helped tip the balance in favour of the now-incumbent, Klaus Iohannis.

Protesters are hoping for a similar impact this time around, although, having survived a no-confidence vote in parliament on 8 February, the new government shows little willingness to depart.

At the same time, most of those gathering night after night in Victory Square – as the drab square outside the government building is officially known – are still loudly demanding the resignation of the government, but would probably settle for the resignations of Dragnea and the prime minister, Sorin Grindeanu.

After so many nights standing out in the cold, protesters have become very creative. Elaborate banners filled with puns (“We don’t BeLiviu”) have appeared, as have messages written with lasers and projected on to nearby buildings. Some have shone the Batman symbol on to the roof of a nearby museum, a funny (or perhaps desperate) plea for help. The national anthem is often sung. On Sunday, a sea of protesters held up pieces of paper coloured over their phone lights to create a vast Romanian flag.

Despite these touches of humour and inventiveness, there is a steely determination evident and it has only grown since the first night or two.

On 13 February the national parliament approved a referendum related to the fight against corruption, as proposed by the protest-supporting president. But most of those on the streets these past weeks would argue that they have already given their opinion on the matter.

Many Romanians are increasingly frustrated that they have to head out to protest time and again in order to hold their elected officials to account. Few believe that the present political class can change. “They’ll try again, in another way. Maybe in parliament, where they have a majority,” said Ioana David, an administrative worker for a construction company.

Even so, she – like so many others – is likely to continue to go out into Victory Square in the days and perhaps weeks ahead, in order to make sure her voice gets heard.

This article first appeared in the 16 February 2017 issue of the New Statesman, The New Times