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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Jeremy Corbyn sat down on train he claimed was full, Virgin says

The train company has pushed back against a viral video starring the Labour leader, in which he sat on the floor.

Seats were available on the train where Jeremy Corbyn was filmed sitting on the floor, Virgin Trains has said.

On 16 August, a freelance film-maker who has been following the Labour leader released a video which showed Corbyn talking about the problems of overcrowded trains.

“This is a problem that many passengers face every day, commuters and long-distance travellers. Today this train is completely ram-packed,” he said. Is it fair that I should upgrade my ticket whilst others who might not be able to afford such a luxury should have to sit on the floor? It’s their money I would be spending after all.”

Commentators quickly pointed out that he would not have been able to claim for a first-class upgrade, as expenses rules only permit standard-class travel. Also, campaign expenses cannot be claimed back from the taxpayer. 

Today, Virgin Trains released footage of the Labour leader walking past empty unreserved seats to film his video, which took half an hour, before walking back to take another unreserved seat.

"CCTV footage taken from the train on August 11 shows Mr Corbyn and his team walked past empty, unreserved seats in coach H before walking through the rest of the train to the far end, where his team sat on the floor and started filming.

"The same footage then shows Mr Corbyn returning to coach H and taking a seat there, with the help of the onboard crew, around 45 minutes into the journey and over two hours before the train reached Newcastle.

"Mr Corbyn’s team carried out their filming around 30 minutes into the journey. There were also additional empty seats on the train (the 11am departure from King’s Cross) which appear from CCTV to have been reserved but not taken, so they were also available for other passengers to sit on."

A Virgin spokesperson commented: “We have to take issue with the idea that Mr Corbyn wasn’t able to be seated on the service, as this clearly wasn’t the case.

A spokesman for the Corbyn campaign told BuzzFeed News that the footage was a “lie”, and that Corbyn had given up his seat for a woman to take his place, and that “other people” had also sat in the aisles.

Owen Smith, Corbyn's leadership rival, tried a joke:

But a passenger on the train supported Corbyn's version of events.

Both Virgin Trains and the Corbyn campaign have been contacted for further comment.

UPDATE 17:07

A spokesperson for the Jeremy for Labour campaign commented:

“When Jeremy boarded the train he was unable to find unreserved seats, so he sat with other passengers in the corridor who were also unable to find a seat. 

"Later in the journey, seats became available after a family were upgraded to first class, and Jeremy and the team he was travelling with were offered the seats by a very helpful member of staff.

"Passengers across Britain will have been in similar situations on overcrowded, expensive trains. That is why our policy to bring the trains back into public ownership, as part of a plan to rebuild and transform Britain, is so popular with passengers and rail workers.”

A few testimonies from passengers who had their photos taken with Corbyn on the floor can be found here