- In the past intellectual movements promoting free trade in particular and a free economy more generally were regarded as having a pro-poor agenda. The current poverty lobby, however, is focused entirely on government benefits as the solution to poverty and very rarely addresses government interventions that raise living costs. By way of example, when the debate about liberalising planning laws was at its height last year, all seven of the articles in the Child Poverty Action Group newsletter were about government benefits.
- Some progress was made in reducing poverty through increases in income transfers after 1997. Indeed, at the current time, the UK spends a greater proportion of national income on transfers than many Germanic and Scandinavian countries. Also, the extent of redistribution through state welfare systems is as great as that in Sweden. Furthermore, we have now reached the position where at least 68 per cent of all households with children in Britain are in receipt of one form of major transfer payment other than universal child benefit.
- Housing costs are a huge problem for the poor. Over the last 50 years, incomes before housing costs for the least well off have doubled. Incomes after housing costs, however, have risen by only 60 per cent. The evidence suggests that high housing costs are largely policy driven.
- The poverty lobby’s response to this problem is to propose extending housing benefit. It seems oblivious to the huge problems that this policy would cause. Increasing housing benefit would exacerbate the already very serious poverty traps as the benefit is withdrawn and increase housing demand (and therefore prices). It is a myth that our population density justifies the UK’s restrictive approach to land-use planning. Reforming the planning system should be the focus of policy.
- Liberalisation of the planning system could reduce housing costs by around 40 per cent. However, planning reform needs to run with the grain of the market so that development decisions reflect the value of environmental amenities. This would involve localisation of planning responsibilities and tax-collecting authority.
- Food prices in the UK are considerably higher than in comparable EU countries. Again, restrictions on building are an important aspect of this as they reduce the productivity of the retail sector and reduce competition. Further reductions in food prices could be achieved by liberalisation of the Common Agricultural Policy. A conservative estimate suggests that policy changes could bring about a reduction in food costs of about 25 per cent.
- Policy reforms in other sectors could also bring about considerable benefits for the least well off. Specifically, childcare costs are very high in the UK compared with other European countries despite high levels of government subsidy; energy prices are raised by incoherent environmental policies; and many indirect taxes are especially targeted o