Message to Mr Milburn: This is Called Poverty
Alan Milburn was talking about child poverty on the radio this morning. He said that the government’s targets on reducing child poverty will not be met.
The target in question was adopted by the last government. When Mr Cameron and the Tories came into power, they kept the target.
For good measure, Mr Cameron appointed former Labour Minister Mr Milburn to oversee progress. Since Mr Milburn is a Labour politician, it is not particularly surprising to find him criticising the Tories for not helping the poor.
What is surprising is that he was appointed at all by Mr Cameron. It was one of those tactical errors to which Mr Cameron seems to be awfully prone – he thought that bringing Mr Milburn on board would neuter his opposition to the government. He seems to have forgotten that in his new position, Mr Milburn would actually be given a platform and more credibility for his criticisms.
We need to really understand what we are talking about here.
The target in question is that child poverty should be eliminated by 2020.
On the radio this morning the BBC presenter explained that the target was based on “relative poverty”. He claimed it meant people being much less well off than their peers, such that they were not starving, but they did not have enough money to play a full part in society.
That was particularly disingenuous nonsense from the BBC.
The government’s definition of poverty is having a household income less than 60% of the median. For a couple with two children, the latest figures show a median income of £631 per week. The “poverty line” is therefore 60% of that, or £379 per week (2009/10 figures). In terms of income per year, the poverty line for that family is £19,708 per year.
Note that these figures are for “net disposable income”. In other words, they are figures after tax, but including benefits received. That couple with two children would be receiving child benefit of around £25 per week, and also tax credits.
Now let’s imagine a household with two children, in which one of the adults has a job, and earns just enough to put him or her into the higher rate (40%) income tax bracket. That would mean a salary of £43,875, or £844 per week. (I couldn’t find the rates and thresholds for 2009/10 so have used the ones for 2010/11. The outcome won’t be exact, but it will give you the general idea.)
That earner would be paying £7,480 in income tax and a further £4,198 in national insurance, leaving an income of £32,197. The family would receive no tax credits, due to their income, but would receive £23 a week in child benefit, or £1,196 per year.
That family’s total net income would be £33,393 per year, or £642 per week. 60% of that is £385 per week. Remember that “poverty line” of £379 per week? That was defined as 60% of median income. But that family, with one earner nudging the 40% tax bracket, is at almost exactly the median income!
If you have two kids and only one of you is working, you need to earn two thirds of the higher rate tax bracket in order to avoid “poverty”.
What was that the BBC guy was saying? Poverty means not being able to take part in society because you don’t have enough money? What was he smoking?
There’s more, I’m afraid. That target was to eliminate child poverty by 2020. “Eliminate”, note, not even just “reduce”. That means, effectively, giving enough benefits to people out of work to take their income up to nearly two thirds of the 40% tax bracket.
But it’s even worse than that. If you did give those benefits, the median household income would magically rise, moving the target further out of reach and forcing even higher benefits.
Alternatively, of course, you could reduce the incomes of better off people by increased taxes, bringing down the median. This is indeed what the government is doing. That strategy means that you are reducing child poverty by making better off people poorer, without helping “the poor” at all.
These targets are absolute junk. As such, they are fully worthy of a New Labour clone like Mr Milburn, and indeed of the Tory Prime Minister who appointed him. A plague on all of them, and on their mates in the BBC.