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Poverty is the great drain at the heart of the budget

Poverty costs 40 per cent of the UK's annual budget to keep people afloat. Why are we not looking more widely at ways to prevent poverty, rather than merely sustaining it?

Margaret Thatcher

Against her principles, Thatcher ended up spending big. Image: PA Images / Alamy Stock Photo

For the life of me I cannot understand much of the debate around the recent budget. The economists talk about minimal growth, some inspired by the minuscule increase we have seen, some disappointed that it wasn’t much more. Obviously, no mention is made at times like this that growth harms the environment because most growth has a negative impact on planetary health. Green concerns apart, I can’t understand how you could have a whole government budget debate without factoring in the 40 per cent of government spending that goes into the damage caused by poverty. An economist must, I would have thought, consider that 40 per cent an enormous figure.  

Economists are split into the two camps that divide much of politics: pro-big government and anti-big government. Labour is seen as pro-big and Conservatives pro-small. They do try and swap around a bit, Johnson being a big spender even before Covid because he wanted to shore up his red wall support in the north. Thatcher was an enormous big government spender because of her war in the Falklands and her taking on of the trade union movement. She did try to save some money with her closing of the poorly providing Victorian mental institutions, because nothing was put in their place. So this was a cost saving – on one side.  

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But largely it is the right-wing economists who defend small government, and this was in evidence in the debate in Parliament over the budget. However, I can’t see why they would not pause and look at that vast poverty bill and not be astonished at its size. And though they will call for tax cuts and express other rightward-sounding opinion, they simply accept that large budget, mostly because it’s dressed up as smaller budgets.  

The right-wing Parliament debated as if we must go for high growth, high productivity and low government spending. But how can that be achieved without looking at the composition of the 40 per cent spent on coping with poverty, spent in numerous small budgets that add up to the 40 per cent?  The 50 per cent of the NHS budget that is spent on keeping poor people as healthy as possible. The largest part of the prison and police bill that is spent on poor people being banged up and brought before the courts. The education bill, a large part of which goes on containing the problems of people coming from poverty. The social security bill that spends most of its budget on people in and around poverty. The last time I added these up it totalled a figure of 40 per cent.  

Now a good economist would look at ways of achieving growth. And would interrogate the 40 per cent, because within that figure is the key to the growth they are looking for.  How to improve productivity? Answer: a better-educated workforce that can realise profits and surpluses. More growth? Answer: more people in work because the early stages of life have worked for them, bringing them into a higher earning band. Smaller government? Answer, make sure less people are pushed into need which is then passed on to their children, who then remain in need for generations.  

There must be an exciting school of economics out there that could look at the enormous bonuses that could be garnered from mining that 40 per cent bill and come up with exits out of poverty so that government doesn’t have to pay so much on caring for the poor.  

Growth through productivity and a reduced need for government spending should be the answer. Alas I didn’t see an economic argument for dismantling the greatest drain on government spending in the recent budget arguments. Kicking the poverty can down the road seems eternally to be the intention of governments. So once again it is time to raise the question of the need to reinvent government thinking. To insist that poverty busting is the only way the UK will become prosperous for all and not just for some.  The greening of capitalism and society is obviously the key. The green revolution does offer new growth, but a growth that is no longer destructive. We don’t want just more of the same.  

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Of course, I am not an economist and most economists would pooh-pooh my innocence and naivety. I suppose they might, however, accept the simple fact that if you do see growth as necessary for a fully functioning, profitable society, then a reduction in that 40 per cent bill is required. And to halt the stupid attacks on the standard of living of people who are caught in poverty, which only pushes up health and social security bills, as Thatcher found out: her attempt to reduce the social cost to government pushed it up even further. The number of people on social security doubled in her time because of the dumb way that sections of British industry that lived off government support were closed down. This was not a wise move.  

For instance, closing the mental institutions as a cost-cutting exercise meant that the streets, the hospitals and prisons filled up as there was no adequate alternative to the Victorian asylums. Making poorer people poorer, as has been their lot in the last two decades of government, has pushed up health, social, police and educational budgets. Dismantling poverty through poverty busting is essential. But who is going to run that mission in this or the next government? 

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John Bird is the founder and editor in chief of The Big Issue. Read more of his words here.

This article is taken from The Big Issue magazine. If you cannot reach your local vendor, you can still click HERE to subscribe to The Big Issue today or give a gift subscription to a friend or family member. You can also purchase one-off issues from The Big Issue Shop or The Big Issue app, available now from the App Store or Google Play.


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