Michael Gove is right: some poor families do budget badly - but it's not their fault

As the new book Scarcity shows, a severe lack of money systematically impairs our ability to focus, make decisions and control our impulses.

On Monday Michael Gove landed himself in hot water when, after visiting a food bank in his Surrey Heath constituency, he claimed that the financial pressures which force people to go to food banks "are often the result of decisions that they have taken which mean they are not best able to manage their finances."

The implication of this is that some families run out of money, and thus need to resort to food banks, as a result of their own, avoidable, error. Needless to say, this caused quite a controversy and Labour was quick to denounce his comments as "insulting and out of touch".

So, who is right? Are some families failing to make sensible budgeting decisions, or are they blameless? A new branch of psychology suggests that, paradoxically, both of these answers may be true. Scarcity, a new book co-authored by Eldar Shafir, a Princeton psychologist, and Sendhil Mullainathan, an economist from Harvard, investigates how the feeling of having too little affects the way we think. They report experiment after experiment demonstrating that a severe lack of time, friends, or money, systematically impairs our ability to focus, make decisions and control our impulses. All pretty important skills when you’re trying to develop, and stick to, a tight budget.

Their findings are remarkably general, and the effects are severe. In one study they found that prompting poor people to think about money before conducting a reasoning task reduced their cognitive abilities by about the same amount as missing a whole night’s sleep. This is a remarkable finding - I probably couldn’t tie my own shoelaces in the morning if I missed a whole night's sleep.

What’s worse, the feeling of scarcity causes us to focus on our most pressing needs, to the point that we disregard less immediate concerns. This 'tunnelling effect', for which Shafir and Mullainathan present a wealth of evidence, helps explain why the poor, be they in Manchester or Mumbai, regularly take out payday loans at exorbitant interest rates. Considerations about the additional costs of paying back the loan fall 'outside of the tunnel”, and en; up dragging people into further financial trouble, trapping them in scarcity.

And here's the real kicker; when otherwise rich and successful people have scarcity imposed on them in a controlled experiment, they show very similar reductions in cognitive capacity. The poor don’t make these decisions because they are short-sighted, or lazy. The very fact that they are poor causes them to behave in predictably irrational ways. In other words, if Michael Gove was as hard up as some of his less fortunate constituents, he would be just as likely to end up at the food bank as the result of his own, avoidable, budgeting errors.

To be fair to Gove, he made his incendiary remark as part of a more constructive point about the need to provide education in household budgeting and finance. But this misses the point. It’s not that poor people don’t know how to budget, in fact they have far more experience of managing a tight budget than the rich. The problem is the temporary reduction in cognitive capacity bought about by being hard-up. The authors argue that this makes traditional financial management courses particularly inappropriate. People who are consumed with worry about how they will pay the next bill are simply not in the right frame of mind to take a module on double-entry book keeping. Far better, perhaps, would be to design policies and financial tools in a way that takes into account the effect of scarcity on how we think.

Some hard-up families probably do make bad budgeting deisions; but it’s hardly their fault.

Sam Sims is a researcher at the Institute for Government

Michael Gove at last year's Conservative conference in Birmingham. Photograph: Getty Images.

Sam Sims is a researcher at the Institute for Government

Photo: Getty
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“If not evolution then revolution”: temperature rises in Catalonia as independence vote looms

Clashes between Barcelona and Madrid over the disputed referendum lead to protests and arrests.

Summer may finish today according to astronomers, but the heat in Barcelona has been steadily rising over the past few weeks. Things reached boiling point yesterday when the Spanish police arrested 14 Catalan officials responsible for organising a referendum on independence for the region. They also seized about 9.8 million ballots intended for this vote, which the Catalan government wants to hold on 1 October.

The Spanish central government, the conservative People’s Party (PP), is completely opposed to the referendum and has so far refused even to discuss it with the Catalan administration. This prompted the pro-independence Catalan parties in power to start planning it unilaterally.

On 6 September, the Catalan parliament passed the Self-Determination Referendum Act, which established how the vote will be organised and held. The question would be: “Do you want Catalonia to become an independent state with the form of a republic?” And since the electoral register can only be accessed by the Spanish authorities, whoever is allowed to vote in the Catalan regional elections can have their say.

Legal experts are divided over whether this kind of independence referendum is allowed by the Spanish constitution, which was approved in 1978. This was just three years after the death of fascist dictator Francisco Franco, and one year after the first democratic elections since the 1936-39 Spanish Civil War.

According to the constitution, sovereignty resides with the Spanish people. Opponents of Catalan independence claim it is therefore up to the whole of Spain to decide such a matter – and that in any case, it would have to be approved by the Spanish government.

But those in favour of the Catalan process argue that, given the complete lack of political will in Madrid regarding the referendum, the unilateral way is legitimate even if it may be declared illegal according to Spanish law.

As expected, two weeks ago the constitutional court suspended the Catalan Self-Determination Referendum Act, and yesterday’s police operation followed. Shortly after the raid began, during a government control session in the Spanish parliament in Madrid, prime minister Mariano Rajoy said “the rule of law has worked and it’ll continue doing so”. He insisted that the government was just “doing its duty”.

In this charged atmosphere, while Rajoy was still speaking, the MPs of the Catalan parties supporting the referendum walked out of the room, while those of the ruling PP chanted: “Leave here your salaries!”

Later in Barcelona, the Catalan regional prime minister, Carles Puigdemont, said Spain had “de facto suspended self-government in Catalonia and de facto applied the state of emergency”. Surrounding him during his speech, several other high officials looked funereal.

Applying further heat to the situation, the head of the Spanish tax agency signed an order on Tuesday that gave control of the Catalan public finances to the Spanish state. From then on, and at least until the end of the year, the Catalan administration isn’t allowed to allocate any money that hasn’t been sanctioned by Madrid.

However, the Spanish central government could still go even further and, using Article 155 of the constitution, suspend self-government in Catalonia – not de facto but officially. This extreme measure, never used in modern Spain, would in theory make possible what Catalans often joke about: tanks from the Spanish army would drive down the avenues of Barcelona.

Catalonia is the richest Spanish region, last year contributing 19 per cent of the country's GDP, while its population represents about 18 per cent of the total. It has long considered itself historically and culturally different from the rest of Spain, and yet just a decade ago an independence referendum would have been inconceivable.

In 2006, just 15 per cent of Catalans wanted “an independent state”. But that year the ruling PP referred the Catalan statute to the constitutional court, which declared part of it illegal. Then, after the PP won the general elections in 2011, the Spanish government started refusing to engage with Catalonia on the issue. 

Support for Catalonia becoming an independent state remains at around 41 per cent in favour and just under 50 per cent against. However, when Catalans were asked if they would vote in a referendum not sanctioned by Madrid, 67.5 per cent said yes, and of those, 62.4 per cent would vote “Yes”.

As of today ballot boxes are still being kept in a secret location, and Puigdemont and other Catalan officials insist the referendum will be held one way or another. In the past, the Catalan PM has said that if “Yes” wins, Catalonia will declare its independence within 48 hours.

For now the atmosphere is tense. On Tuesday, thousands of people took to the streets of Barcelona to protest against the police operation, in front of several offices of the regional government that were being searched.

The biggest demonstration was next to the Catalan finance ministry, which was being searched by the Guardia Civil, the Spanish paramilitary police. Many protesters were carrying the estelada, the unofficial flag of the independence movement – some worn it as a cape, others waved it in the air.

“We are protesting against this unjust situation”, said 47-year-old sales rep Ferran Batalla. “[The referendum] is not an aggression, it’s an option to have justice, an option to ask the people what they think."

The protesters chanted in Catalan, “We will vote!”, and in Spanish, “We want to vote!” Some were distributing flyers that read in Catalan, “We vote to be free”, and graffiti on a telephone booth said in Catalan, “Voting is not a crime.”

In English a giant banner on top of the building that hosts the Catalan finance ministry read: “Welcome to the Catalan Republic”. At one point, police coming out of the building were met with deafening whistles before the crowd started chanting in Catalan: “Out with the occupying forces!”

“I don’t want to fight anybody in Spain, but we’ve reached a point in which we can’t understand each other any more”, said Batalla, who complained about the fact that the central government has always sternly refused to talk about planning a referendum. “When the state doesn’t want to negotiate, and doesn’t want you to leave, and doesn’t want to hear from you, and mistreats you… They think we are stupid, and we are fed up and this is over, because they are making us feel as if we are the bad ones."

In nearby Plaça de Catalunya just a month ago, barely a flag could be seen among the huge vigil following the terror attack on Barcelona. And if that proved to be a show of social and political unity between Madrid and Barcelona, today the Spanish government on the one side, and the Catalan authorities and many of their people on the other, couldn’t be more polarised.

Many Catalans mention the Scottish independence referendum in 2014, and the agreement with Westminster that preceded it, as an example of how things could and should happen. But the two situations are actually very different.

Catalonia makes up a far larger chunk of Spain's population and economic output than Scotland does of the UK. Meanwhile, Spain has a constitution that the government considers untouchable, while there is nothing similar in the British legal framework.

Late Tuesday, Rajoy made an official statement urging the Catalan government to get back to  law and to democracy, and stop at last this “escalation of extremism”.

"This referendum can’t be held, it has never been legal nor legitimate,” he said, before adding: “And every illegal act and every infringement will get its response, which will be determined, proportional and rigorous”.

The PM’s intervention was followed by a huge cacerolada in Barcelona and many other Catalan cities – meaning people started banging pans in their windows in protest. In the streets, demonstrations went on through the night as people tried to prevent the Guardia Civil from leaving the Catalan finance ministry. The protest was mostly peaceful, but police cars parked outside were destroyed while people chanted a rhyme in Spanish: “¡Esta noche os vais sin coche!”, or “Tonight you will leave without a car!”

Finally, at around 4am the first Guardia Civil agents started leaving the building. There were moments of tension between the protesters and the Mossos d’Esquadra, the Catalan regional police, who opened the way for the Guardia Civil.

Wednesday began calmer, as both sides considered their next steps. The Spanish government remains focused on preventing the vote from happening, but has said it will be open to dialogue afterwards. “On 2 (October) we will talk and this new dynamic will take us to look for solutions because the coexistence of all Spaniards must continue in Spain... We’ll have to sit together and talk, and that we will do”, Íñigo Méndez de Vigo, the spokesperson for the government, told Spanish Radio. 

By the afternoon, there hadn’t been word of response from the Catalan authorities, but having invested so much in the referendum and seeing the atmosphere in the streets, it’s not clear how they could backtrack.

In a bar in the Eixample area of Barcelona, right outside the city centre, people discuss the situation over their mid-morning coffee. “What happened yesterday was shocking, independently of whether one supports independence or not,” says 37-year-old Italian IT consultant Paolo Mosca, who has lived Barcelona since 2013.

“I understand that within the Spanish legal frame the referendum isn’t legal, I know this, but within the Catalan legal frame it is legal because it was approved in the Catalan parliament”, says Sergi Pedraza, a developer and who was born in Catalonia as the son of Andalusian parents.

“The only possible solution, because the situation has become unsustainable, is a referendum, but one well planned and agreed with the state”, says Álex Castaño, 28, also a developer, originally from Seville and who has lived in Barcelona since 2015.

All three would be eligible to vote and Sergi says he’d vote “Yes” while Álex says he wouldn’t vote. Paolo says he’d vote “Yes” because he understands and supports the will of those who want independence. But he and Álex say they’d probably leave if Catalonia becomes independent, because of the uncertainty of what may happen to today’s cosmopolitan Barcelona.

By noon the street demonstrations had resumed, this time in front of the Catalan High Court, where hundreds of people, many of them again carrying and wearing esteladas, were protesting against yesterday’s arrests. Loud Catalan music could be heard.

“The government in Madrid is insulting the intelligence of the Catalan people,” says retired businessman Enric T Coromina, who adds that he studied law and is “politically from the right”. He is wearing a barretina, a Catalan traditional red wool hat, and a T-shirt saying in English: “Make no mistake, I’m Catalan, not Spanish”. He’s sitting on a folding chair; has brought food, water and a blanket, and says he’s ready to spend the night here. He’s sure the vote will happen – he will back “Yes”– and will be legitimate even if not legal under Spanish law.

"If evolution is not possible from within the system, then there’s only one other way left and that’s revolution, civil disobedience,” he concludes, as more and more people join the protest.