Why spend £4.5 billion on poverty yet reduce poverty by not one whit, iota nor pip of a percentage point?
It was, of course, Giles Wilkes who gave us the essential guide to the New Economics Foundation - Not Economics, Frankly. The recent descent of the former head to junior minister in government has not changed this.
In order to cut rising bills all UK households should receive a minimum amount of energy at rates subsidised by the government through North Sea taxes, a thinktank has suggested.
The report is here:
Under this proposal, the portion of “essential energy” would be price protected by the state (a true, but constrained, price cap locked at current unit rates of April-June). We propose that this “bare minimum of protected energy” should be the amount needed to sustain basic household functions, such as heating water and two rooms, and running key appliances (eg a fridge and washing machine). Tentatively, we have put these levels at 2,100 kWh of electricity and 5,400 kWh of gas in a typical dual-fuel home, annually. We estimate providing this to all households would cost £4.5bn,
This does not work. For that’s £4.5 billion to be spent upon reducing poverty but it will reduce poverty by not one whit, iota nor pip of a percentage point.
The thing that NEF has forgotten - if, indeed, they ever knew it. The UK does not measure poverty by anything so sensible as what a household can do with the money it has, what it might be lacking in stale crusts as a result of the resources it does not have. Poverty is a measure of inequality - being under 60% of median household income, suitably adjusted. Those suitable adjustments do not include any non-cash subsidy to energy prices or, indeed, anything else. This suggestion, of a portion of subsidised domestic energy, does not change median household income nor does it change - by that whit, iota etc - the number on less than 60% of it. Therefore this plan spends £4.5 billion on poverty while also changing the number in poverty by not even that pip of a percentage point.
Spending vast sums to achieve nothing is, well, passing water up the palisade? Piddling the parapet?
Now, it is possible to insist that poor people will be made better off by this and we would agree, they would. At least at that level of first order effects they would. Which means that we need to use a measure of poverty which includes this effect - £4.5 billion reduces poverty so how much poverty is reduced by £4.5 billion? Our legal and standard measure of poverty -inequality - does not tell us this so we must use some other method of measure. Which isn’t going to be done for of course it isn’t. For the moment we start to measure UK poverty by anything so gauche as actual living standards we’ll find that by any global or historical standard Britain has no poverty. Then where would be the campaign to expropriate the rich and eliminate the bourgeoisie as a class?
Which is, of course, why groupuscules like NEF have to keep proposing wildly expensive policies which achieve nothing. The reason for their very existence is the insistence that nothing has as yet been achieved therefore they insist upon using measures proving that nothing can be.
It really is true that they’re proposing to spend £4.5 billion on poverty and the effect will be to lift not one single person up out of poverty. Micturation or what?
Tim Worstall