You’ll Never Live Like Common People

I was homeless from 3 January 2009 to 27 April 2010, and I can tell you - poverty is another country. You have either lived there or you have not.

I get extremely annoyed at governments pontificating on how poor people can help themselves. “Tough Love” involves two concepts; moving from a place of understanding and compassion while setting realistic boundaries. It does not come from a cold hard place of judgement and superiority. Politicians appear to get off on “tough”, while ignoring the “love” aspect. Practically every sentence uttered on the subject betrays a total lack of understanding, based as it is on the assumption that all one needs to escape the poverty trap is a get-up-and-go attitude.

Contrast measures such as the 45p top rate of tax with the demise of tax credits, the capping of benefits with the refusal to cap grotesque bonuses, the imposition of a bedroom tax with the refusal to consider a mansion tax, and a pattern of medieval disconnect between the ruling class and the reality of peoples’ lives emerges.

I was homeless from 3 January 2009 to 27 April 2010. Through a combination of circumstances – a landlord not returning a deposit, a spell of illness, a bad break-up, a change of job – I ended up destitute. I couldn’t claim benefits, as I was working. I was turned down for help with housing as I lacked a “sufficient local connection”. I slept in a smelly sleeping bag in a rat-infested cupboard of the office in which I worked.

I had always espoused socialist sensibilities. I had always been sympathetic to those less fortunate than me. But the basic economic concept of Scarcity was academic construct rather than unforgiving reality. The fact is that I had never truly understood poverty until that January day. I thought it was having little in the fridge or raiding the jar for coppers at the end of the month or not being able to afford basic things for your home. Then I experienced having no fridge, no jar, no home, nothing.

The overwhelming shame and self-recrimination that went with my feelings of failure, meant that most of my friends were unaware of my situation. The few to whom I did reveal it, would invite me round to see me, but really to feed me. I would appear at their door without a bottle of wine; their birthday parties with no card. Soon we settled into a silently negotiated truce of avoiding each other.

Being poor is very expensive; it sucks you underwater and holds you there. Working in central London means you have the non-choice of crippling travel costs or overpriced bedsits. Small local shops are more expensive than big drive-to supermarkets. Electricity and gas meters are dearer than direct debits. Payday loans attract interest a hundred times higher than personal bank loans. Six bad pairs of shoes that fall apart after a month cost twice as much as one good pair that will last for years.

During my homelessness, I showered at the public facilities in King’s Cross station at £3.50 (later rising to £5) a pop. I saved 20p coins all week and took my clothes to an expensive launderette on a Sunday. I estimate I spent around £2,000 on such basic hygiene during that time; much more than I needed for a deposit and first month’s rent. But I had no choice. I couldn’t afford for work to catch on. I woke up at six every morning, went out through a side alley, showered, shaved, dressed and came back pretending to “open up” for people waiting outside the building. Dissembling was my full time job; being ashamed my hobby.

I find nothing more disingenuous than rich MPs or celebrities experimenting on television to see whether they can live on a weekly amount of X or Y and conclude “gosh it’s very hard, but doable”. Such meaningless exercises ignore the cumulative effect of poverty; they never start from a position of empty food cupboards, looming debt, threadbare clothes and shoes with holes in them. They ignore the devastating financial effect that a visit to the dentist or a child’s birthday or one late charge can have. They also ignore the fundamental psychological difference of “I know this will be over in a week” as opposed to “this may never end; this may just get worse”.

Whenever the “poshboy” or “cabinet of millionaires” charge is levelled at the government, voices rise in defence; even intelligent voices: this is unfair, it’s class war, ad hominem, their background does not invalidate their views. They miss a fundamental point. An individual view on solutions to any particular problem is not invalidated by the bearer’s background. However, lack of understanding of the problem can render it ill-informed. It is not a war on accountants to say that they are not the best placed group to make medical decisions. If homogeneity of background means that a group collectively lacks experience in a particular matter, then it is perfectly reasonable to suggest that it is not the right caucus for solving the problem.

Talking of a difficult period in her life, a friend recently said: “Things wear out and you can’t afford to replace them. You wear out and there is nothing to replace.” Poverty is another country. It exists like an alternate reality in parallel with the rest of society. With time, humility and openness, empathy may develop. But let us not kid ourselves – an MP can visit poor estates from a position of comfortable plenty; all the visits in the world cannot replicate the experience of living in such hopelessness. He is merely a rich tourist on a depressing safari in a queer land.

The poor are no longer content to die romantically of tuberculosis, while the kindly rich visit to offer broth and advice on thrift. Their lives cannot continue to be reduced to Jane Austen novelettes. If the government is serious about solving the problem, they must be listened to and understood.

A still from Pulp's "Common People" video.

Greek-born, Alex Andreou has a background in law and economics. He runs the Sturdy Beggars Theatre Company and blogs here You can find him on twitter @sturdyalex

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.