Economic View: Poverty will outlast policies

We have to take action now if we are going to have a real impact on disadvantage even in 20 years' time

Wars come to an end – but the poor, in the words of Christ, will always be with us. What might we do about inequality?

Governments have short-term horizons and understandably hunt for quick fixes. But the tackling of social problems must inevitably be extended over many years, and so it is down to other bodies, such as charities, to take that essential longer-term view. The latest project from the Joseph Rowntree Foundation therefore deserves a real welcome. Its working paper "Tackling disadvantage – a 20-year enterprise" has just been published, in preparation for its centenary conference in December.

The idea is a simple one. If we are worried about the underlying social ills in our society, we have to accept this very long timescale. For example, if you accept that education is the key variable affecting people's economic prosperity, and that a typical work span is 40 years, what happens now in our schools and universities will influence economic inequality in 2040. So we have to take action now if we are going to have a real impact even in 20 years' time.

What's the problem and what's to be done about it? Rowntree finds that the UK economy has performed pretty well in recent years but that there has been a disturbing increase in relative poverty. During the past two decades the poorest groups have seen the rise in their incomes slowing, as you can see from the first graph above. There has been a near-doubling of relative poverty, defined as the condition of households with less than 60 per cent of the income of the median. This is high by European standards, though not as high as in Italy or the US.

There are other problems associated with income inequality, including the lack of demand for unskilled workers, the growth in the proportion of older people, and the growth of single households, which puts pressure on housing. Rowntree notes how the new jobs have mostly needed skills or professional qualifications. Regional differences have made matters worse, for there are some areas with very high levels of social and economic deprivation and others with great wealth. The result is that families have replaced pensioners as the largest group on low incomes. We do not, as a society, find that acceptable.

So what is to be done? The Rowntree paper suggests action under six heads: education first.

To judge from our 15-year-olds, we do not do badly by world standards; indeed, we do rather well (see next graph). But we have a low staying-on rate in our schools, and young people from disadvantaged backgrounds do less well than their peers in other countries and are far less likely to go on to higher education.

So we need to focus on helping these disadvantaged students and on tackling concentrations of disadvantage. That means putting more resources into the pool.

Next, family poverty. Here we have to try to do something about child poverty, which has been rising even faster than adult poverty. The tragedy here is that children who have been brought up in poor families find that even in their thirties they have less chance of being in a job than other people and, if they are, more chance that it is a low-paid one.

This is not, Rowntree notes, just a question of money. It is also a matter of other family difficulties, including anti-social behaviour and, for some, growing up in care. The foundation feels the Government has made a start, with its attack on child poverty, but needs to press on. It also needs to extend support in other directions, including helping families to get a better life-work balance.

The number three problem is geographical differences, mostly but not entirely a North-South issue. Here Rowntree thinks that the Government could move more of its spending to poorer regions. But it also supports the idea of local projects, such as the staging of events like the Commonwealth Games, which build social capital by boosting pride and identity.

Four is income support for vulnerable groups. Rowntree points out that our unequal skills distribution is associated with our unequal earnings (see right-hand graph). We need to increase earnings from work as well as recognising those who do voluntary and other unpaid work.

Five is housing, an area where Rowntree has long been active. We have uneven demand (thanks to faster growth in the South) but also problems of supply. So we have to increase supply, and that means new thinking about the use of urban land for housing and about high-density housing.

And finally there is the need for long-term care. There will be a growing demand for this for demographic reasons alone. But we have made matters worse by shutting care homes and by cutting home-based services. So we need to face that cost – but also contain the demand. The more we can limit the demand for residential care, the more likely we will be to finance care for those who really need it.

Well, that is a pretty demanding set of tasks. Most require taxpayers' money, and one could debate whether it is politically acceptable for the tax burden to rise. One could also debate whether Rowntree is putting too much emphasis on what governments can do. Many of us see government more as an enabling organisation than an effective problem-solving bureaucracy. My own instinct is that the most effective ways of tackling most of these problems will be bottom-up action, rather than top-down. Maybe, too, the paper does not give sufficient credit to both this Government and its predecessors for supporting an economy that is very good, by European standards at least, at creating jobs.

But that is just the point of this exercise: to get us thinking truly long-term about social problems. We do need to start and we can only start by having some informed heart-searching right now.