Nothing to be smug about


Britain's Prime Minister Gordon Brown seems very smug that his government has 'taken a million people out of poverty'. But has he any right to be so? The truth, as always, is more complex and less rosy than Mr Brown presents it.

The government's poverty target is 60% of median income: below that, you are in poverty, above that, you are not. And yes, by giving people just the wrong side of the line a little extra cash, you can move them to just the right side of the line. A great deal of politicians' time and effort (and our money) has been expended on achieving just such a change. Look at a graph of income distribution and you see a slight shift from one side of the line to the other. This does of course represent millions of people. But it doesn't mean that previously they were in abject poverty and now they are enjoying la dolce vita. A few extra pounds might be very welcome, but all this political effort hasn't exactly changed people's lives.

And what has happened to those who really are in abject poverty – say, those who have incomes below 40% of the median? Well, that depth of poverty is the highest in thirty years, both in terms of numbers (over five million) and as a proportion of the population. Two-fifths of those who the government defines as being in poverty are in fact in this, severe poverty.

Then, of course, you have to remember that many people would fall below the government's poverty target were it not for in-work benefits. And the number of us receiving those has rocketed – from around 4% of working-age households in 1997 to around 15% today. We've taken people out of 'poverty' by making them more dependent on the state.

There's something rotten with this. Our over-regulated, state-dominated economy with its perverse tax and benefits system – which taxes people who are below the minimum wage – is not encouraging self-help, hard work and enterprise. So we distort it even more in order to cover up the fact. It's time to restore incentives and trust the market.