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David Cameron: Tackling poverty is a social responsibility

Delivering the Scarman lecture today, Conservative Party Leader David Cameron said:

"This Lecture marks the twenty-fifth anniversary of the Scarman report into the civil disturbances of 1981.

Lord Scarman concluded that one of the principal causes of those riots was poverty.

Today I want to examine the politics of poverty, looking back over the last twenty-five years, and looking forward to the next twenty-five.

Let me summarise my argument briefly.

I believe that poverty is an economic waste and a moral disgrace.

In the past, we used to think of poverty only in absolute terms - meaning straightforward material deprivation.

That's not enough.

We need to think of poverty in relative terms - the fact that some people lack those things which others in society take for granted.

So I want this message to go out loud and clear: the Conservative Party recognises, will measure and will act on relative poverty.

But there is a crucial difference between how we will act and how Labour acts.

Tackling poverty involves much more than the redistribution of money through the tax and benefits system.

We have to think about the causes of poverty.

We have to disaggregate the problem - to look at the various types of poverty that exist, and the factors that contribute to them.

Because for most people, material poverty is a consequence of other factors.

Family breakdown…

…drug and alcohol addiction…

…unemployment…

…poor education.

The presence of entrenched poverty often reflects the absence of the supporting structures and constructive relationships which help you stand on your own feet…

…and which are the foundation of aspiration, ambition and hope.

This is what government should be focusing on.

Instead, Labour rely too heavily on redistributing money, and on the large, clunking mechanisms of the state.

Of course the state has a role to play in the fight against poverty.

But we will only tackle the causes of poverty if we give a bigger role to society.

Tackling poverty is a social responsibility.

That means making sure that every part of society …

…individuals, families, community groups, businesses, the public sector…

…all play their part in improving our society's wellbeing - and the wellbeing of every member of society.

So that is the Conservative mission: to roll forward the frontiers of society.

More professional responsibility in the public sector.

More personal responsibility, strengthening families.

More corporate responsibility, tackling issues like debt.

And more civic responsibility, empowering local government, community organisations and social enterprise.

Those are the components of the social responsibility agenda that I believe is the only way to tackle poverty effectively for the long-term.

CONSERVATIVE ECONOMIC LIBERALISM

Twenty-five years ago, when Lord Scarman published his report at the beginning of the Thatcher era…

…inflation was 12 per cent…

…and GDP growth was minus 0.5 per cent.

The country was emerging from a long era of failure and stagnation.

Today, after both Conservative and Labour Governments…

…inflation is under 4 per cent…

…and GDP growth is almost 3 per cent.

But what is the story of poverty and politics over the last twenty-five years?

The first period, with the Conservatives, was an era of economic liberalism.

National wealth grew enormously.

Opportunities abounded, and as people's talents and energies were liberated…

…average incomes and standards of living rose together.

When it came to poverty, the Conservatives of that era had a simple analysis.

Poverty was absolute.

John Moore, the social security secretary in the late 1980s, delivered a speech with the title "the end of the line for poverty."

He suggested that because "the stark Dickensian poverty of a hundred years ago" had ceased to exist in Britain, poverty itself was history.

You can understand what he meant.

I was in Darfur, in Sudan, earlier this week, and I visited refugee camps where poverty really is absolute - in the full meaning of the term.

Where people have virtually nothing.

And where outside the camps people are dying for want of food and medicine and shelter.

Thankfully we have nowhere like that in Britain today.

But John Moore was wrong to declare the end of poverty.

Even in Britain, there is such a thing as not having enough money for the basics.

Not everyone always has enough food - and not everyone has a home to live in.

But even if material want did disappear, that wouldn't be "the end of the line for poverty."

Because as well as absolute poverty, there is relative poverty.

We exist as part of a community, as members of society.

Even if we are not destitute, we still experience poverty if we cannot afford things that society regards as essential.

The fact that we do not suffer the conditions of a hundred years ago is irrelevant.

In the nineteenth century Lord Macaulay pointed out that the poor of his day lived lives of far greater material prosperity than the greatest noblemen of the Tudor period.

But as Dickens observed, the poor of those days were still poor.

Fifty years from today, people will be considered poor if they don't have something which hasn't even been invented yet.

So poverty is relative - and those who pretend otherwise are wrong.

This has consequences for Conservative thinking.

Tackling poverty is not just about a safety net below which people must not fall.

We must think in terms of an escalator, always moving upwards, lifting people out of poverty.

And, crucially, an escalator that lifts everyone together.

LABOUR: STATE WELFARE

In 1997, when New Labour came to power, their approach to poverty combined two essential elements.

Their phrase "economic efficiency and social justice" summed up an important truth.

That you need to grow the cake - which means economic efficiency.

And you need to divide it fairly - which means social justice.

As part of this, Labour recognised the fact of relative poverty.

They also recognised that redistributive welfare payments can create a benefits trap.

So in office, their principal means of tackling poverty has been the tax credit, designed to induce people into work by tying benefits to earnings.

The tax credit was introduced by the last Conservative Government, and greatly expanded under New Labour.

Tax credits have reduced poverty among working families with children.

But they have come at a cost.

The system has become extraordinarily complex.

Bear with me while I run through Gordon Brown's main changes to tax credits since 1997.

In order:

He abolished Family Credit

He introduced the Working Families' Tax Credit

He introduced the Disabled Person's Tax Credit

He introduced the Childcare Tax Credit

He introduced the Employment Credit

He abolished the Married Couple's Allowance

He introduced the Children's Tax Credit

He introduced the baby tax credit

He abolished the Working Families' Tax Credit

He abolished the Disabled Person's Tax Credit

He abolished the Children's Tax Credit

He abolished the baby tax credit

He introduced the Child Tax Credit

He abolished the Employment Credit

Finally, he introduced the Working Tax Credit

That's just the headlines.

Imagine the small print.

What kind of incentives does this system create?

People face a hugely complicated system that soaks up their time…

…that reduces their chances of getting what they're owed…

…and leads to the disgrace of the state claiming back from low income families who have unwittingly been overpaid.

With no apology, and no contrition.

It's little wonder that with all these problems, take-up is so low.

For example, only fifty-six per cent of people entitled to the Working Tax Credit actually receive it.

However, even with all the difficulties, we should acknowledge the value of in-work benefits.

Conservatives first introduced tax credits to Britain, and we will keep them.

They can help ease the transition from joblessness into work.

But there are two serious problems with tax credits as a solution to relative poverty.

BENEFITS TRAP

First, while there has been progress in dealing with the unemployment trap, we have created a new, in-work benefit trap.

In-work benefits are supposed to act as a staging post to further earnings and independence from the state.

Today, they're acting as the terminus.

What is sometimes called the "tax credit economy" means that those that do find jobs are dependent on benefits which penalise career progress.

Tax credits are often a subsidy to employers who pay low wages - and a strong disincentive to promotion or salary rises.

The low-paid face effective marginal tax rates of up to 90 per cent on their earnings.

And so you have a paradox whereby getting into work means you are more dependent than ever on the state.

While tax credits have meant that many working families with children are no longer in poverty…

…for the overwhelming majority of those families, it is additional benefits, not additional earnings which account for the move from below the poverty line to above it.

The evidence suggests that we have reached the limit of the effectiveness of tax credits in terms of helping people out of poverty.

Indeed because of the impact on incentives to work harder and gain new skills...

...the Institute for Fiscal Studies have said that the end result of the design of the tax credit system...

... might be to increase rather than to reduce poverty.

Certainly, the current approach cannot succeed in substantially reducing relative poverty without unaffordable public spending increases.

And so we have to look beyond tax credits - beyond state welfare.

"Making work pay" is not enough.

We need to make "work work" - in other words, we must make getting a job an effective route out of dependence.

WORST OFF NO BETTER OFF

The second serious problem with tax credits is that, by definition, they do not reach the very poorest.

The Government claim that two million children have been lifted out of poverty since 1997.

In fact, as the DWP's own figures show, the figure is actually 700,000.

And if you look more closely, you find that almost all of those children have been lifted out of poverty by raising them from just beneath the poverty line, to just above it.

Meanwhile, those at the bottom of the income scale - those the tax credit system does not touch - are actually worse off than before.

Our Social Justice Policy Group has published research this week which demonstrates conclusively that there are more people in severe poverty today than there were a decade ago.

The figures are clear.

750,000 more people have incomes of below 40 per cent of median income than a decade ago.

But there's an even more depressing fact.

In the last decade, there has been no improvement at all in the length of time that people spend in poverty.

Persistent, long-term poverty - the sort that really damages someone's aspirations, confidence and life-chances - is just as bad as it was a decade ago.

One implication of deepening poverty is that it is so much harder to climb the income scale.

A child from a family in poverty today is less likely to rise to the top of the income scale than a child in 1970.

Social mobility in Britain is falling, and is now among the lowest in the developed world.

Worklessness among the young is getting worse.

The number of young people not in work, training or education has increased under Labour…

…to the point where we have the highest proportion of young men out of work in the developed world.

At the same time, health inequalities are widening.

Infant mortality rates among the poorest groups are 19 per cent higher than the average - up from 13 per cent in 1997.

The gap between life expectancy for the richest and poorest in our country is now greater than at any point since the time of Queen Victoria.

Britain also suffers serious relative poverty in geographic terms.

Again, you can see it most clearly in the statistics on health.

In Kensington and Chelsea, life expectancy for men is 82.

In Glasgow, it's under 70.

BIG PICTURE

So there is a clear conclusion to the story of poverty and politics over the last twenty-five years.

Neither economic liberalism, nor state welfare, are capable of tackling entrenched and persistent poverty.

Economic liberalism is necessary - but it is not sufficient.

State welfare is also necessary - but it is not efficient.

"Trickle-down economics" is not working.

But neither are the mechanisms of centralised redistribution.

Benefits are a vital lifeline for anyone in poverty.

But they don't deliver what we need: the escalator that's always moving upwards, lifting everyone out of poverty together.

In the next twenty-five years, we certainly need to make progress on both fronts...

…strengthening our economy to create more jobs, wealth and opportunity in a more competitive world...

…and reforming state welfare to remove confusion and perverse incentives.

But let us not pretend that this will be enough to tackle entrenched poverty and multiple deprivation.

I believe that over the next twenty-five years, we need to do something different.

We need to do something that's really difficult.

Rather than attacking the symptoms of poverty - a lack of money - we need to attack its causes.

CAUSES OF POVERTY

So what are the causes of poverty?

They are legion.

I have often spoken about the need to recognise, alongside GDP, GWB - general wellbeing.

Well, poverty is negative wellbeing.

It means a lack of those things - not just a lack of money - which make for a fulfilled life.

A secure family.

A good education.

A safe neighbourhood.

A job.

A healthy environment.

In place of these things, poverty is the experience of poor housing…

…low educational attainment…

…drug addiction or alcoholism…

…family breakdown…

…and a host of other social forces and factors.

What do all these things have in common?

They are all problems that can never be tackled by the state alone.

They are social problems - and they require social solutions.

That is the key.

So we need to identify the causes of poverty.

We need to disaggregate them.

And we need to deal with each of them - separately, and appropriately.

That means understanding the complexities of the causes of poverty…

…complexities that are often human, personal, emotional…

…and which therefore need to be addressed through the power of society, not just the state.

I'd like to touch on just a few of them today.

DEBT

To start with, we have to recognise that poverty is about more than income.

The sixty-per-cent-of-median-income definition of the poverty line is useful, but it is only useful in its own terms - at measuring relative income.

The fact is that assets matter as much as income.

For the poor, what matters is often the absence of positive assets and the presence of negative assets - in other words, debt.

Yesterday, we launched a new online service to help tackle the problem of debt among the young - negative assets which hold back a young person's life.

Tackling the problem of personal debt is a vitally important social responsibility.

Research suggests that the balance of debt versus savings - or other assets such as property - is a far better indicator of someone's life chances than their nominal income.

That is why not only we, as borrowers, should exercise personal responsibility when taking out loans…

… but lenders should exercise corporate responsibility too, when offering loans at punitive rates of interest to the poorest people in our society.

That's why at our Debt Summit on Monday we announced a range of policy proposals to help address the issue, including:

Tighter rules on the marketing of Individual Voluntary Agreements…

Ensuring that home credit companies are subject to the same data sharing requirements as mainstream lenders…

Requiring credit card companies to provide clearer information on repayment terms…

And a cooling-off period for store cards.

FAMILIES

As well as assets, circumstances - including family circumstances - play a huge part in causing poverty.

We all know the direct, causal link between the strength and health of a child's family and that child's prospects in life.

Children who have suffered family breakdown are seventy-five per cent more likely to suffer educational failure.

There is a cycle of generational poverty caused by family breakdown.

Those who are taken into care are sixty-six times more likely than other children to have children themselves who are taken into care.

And children who are taken into care are overwhelmingly more likely to end up in prison.

Of course those are the extreme cases.

But family breakdown is traumatic enough even if the child remains with one parent.

So we need to do more to help single parents out of poverty.

Single parents who work part time can't get help paying for their childcare unless they use services provided by the state.

And yet it's often informal care - neighbours, friends, grandparents - who provide the best and most flexible care.

If we allowed families to decide where the money for childcare went, rather than leaving it up to government…

…we could liberate many thousands of people from unemployment.

I believe passionately that families are the ultimate source of our society's strength or weakness.

Families matter because in the end almost every social problem we face comes down to family stability.

That's why I've said that I will set a simple test for each and every one of our policies: does it help families?

All families do a vital job, and they all need our support.

But I also believe that marriage is a great institution, and we should support it.

I'm not naïve in thinking that somehow the state can engineer happy families.

Nor do I think that supporting marriage is just a question of tax breaks.

It's insulting to the human spirit to believe that a relationship between two people is just about money, or even mainly about money.

Flexible working.

Family centres.

Relationship advice.

All of these things matter.

We need as a society and as a culture to value and recognise marriage more.

DRUGS AND ALCOHOL

And we need to wake up to the crisis of substance abuse in our country.

Alcohol and drugs are the surest route into poverty, and in most cases have to be tackled before you can get out again.

In this area, there is an urgent need for central government to allow greater freedom to public service professionals.

For instance, local Drug Action Teams are pressurised by central targets to devote more money to low-cost outpatient treatment - notably methadone…

…than to the more expensive but ultimately more effective residential programmes.

That's a false economy, a classic example of the distortion created by well-intentioned government targets.

What's more, people now recognise that alcohol abuse is as great a problem as drug abuse.

Yet Drug Action Teams are required to chase government targets which prioritise drugs - leaving not enough money left over for tackling alcohol.

The DAT in my constituency in Oxfordshire has decided to take matters into its own hands…

…and is raising money from local businesses to support its alcohol strategy.

This is a great example of innovation and enterprise within the public sector at local level.

SOCIAL ENTERPRISE

But as we all know, some of the best innovation comes from beyond the public sector.

Even if we reduce the target culture, the box-ticking and the bureaucracy, as I dearly want us to…

…the public sector will still be the public sector, responsible for fulfilling national priorities in line with national guidance.

We have to look to a different model.

And here I want to make a vital point.

For the last twenty-five years people in poverty have been treated as the passive recipients of state services.

I want to treat them differently - as the agents of their own escape from poverty.

I am enormously optimistic about this.

Because I know that in every poor community there is enormous wealth - a hidden wealth - of talent, enterprise, and innovation.

You are still eight times less likely to set up a business if you live in one of the poorest post codes.

What a terrible indictment of current policies.

But what an opportunity, too - what potential is there.

People in poor areas are no less entrepreneurial than those elsewhere.

They simply need the opportunities, and the encouragement, and the confidence to live up to the potential inside them.

The same goes for communities as a whole.

Even in poor neighbourhoods there is great material wealth - assets and land and facilities - which simply need to be turned to good account.

That is the insight that drives the Scarman Trust, and I salute the work you do.

Of course, all voluntary organisations are constantly on the look-out for funding.

Some are able to earn their own revenue directly.

Most look to the large trusts and to government funding of one sort or another.

I'm sure you know that we are approaching the edge of a cliff with regard to government funding.

The ending of the Single Regeneration Budget and of EU funding for the community sector will amount to a loss of 170 million pounds a year.

I want to ensure that it's not the small scale, local organisations that lose out in this reduction.

We need to make sure that local government and the large voluntary groups act less as final recipients of government funding, and more as conduits.

In many cases this happens already.

The Scarman Trust is a great example of an effective conduit - giving small, no-strings grants to grass roots organisations.

But too often that sort of unconditional giving is impossible.

The Government - and the Treasury in particular - set stringent rules on exactly how the money should be spent.

I want to see more discretion in the funding system.

I have spoken before about the need for "permissive legislation", to allow local authorities more freedom to pursue local goals.

Well I want local authorities - and large voluntary organisations - to be more permissive themselves.

To take more risks.

To put more emphasis on funding organisations themselves, and less on funding specific measurable outcomes.

To sustain the continuity of care, so that social enterprises can develop proper relationships with the people they're trying to help.

And in the most deprived areas I want us to be especially proactive.

Just as economic growth in the inner cities was kick-started in the 1980s by Enterprise Zones with low taxes and regulations...

...so I believe we need Social Enterprise Zones today.

Our Policy Review is developing proposals for areas where the planning rules are relaxed, so communities can use buildings and space more flexibly...

...where there is a level playing field for the voluntary sector to compete with the public and commercial sectors...

...where the funding streams for social enterprise are simplified and longer contracts awarded...

...and where voluntary work is rewarded in the tax and benefits system.

A REALISTIC AGENDA

The poverty-fighting agenda I have outlined today is a radical one for my Party, because for the first time it commits us to tackling relative, not just absolute poverty.

But it is also a radical agenda for politics in this country, because it involves a dramatic decentralisation, a big shift in emphasis…

…from the state to society.

It will empower the individuals and organisations that hold the key to tackling the stubborn poverty that still blights too many communities in Britain.

But as well as being a radical agenda, I believe it is a realistic one.

I am not naïve or starry-eyed about this big shift - from state to society.

I know some have questioned whether the voluntary sector actually wants to assume such a prominent role.

Of course not every voluntary organisation wants to.

But let me tell you, most of the ones that I meet do.

Throughout Britain there is a yearning for more control and more responsibility.

People are fed up with having their communities managed for them by the state - especially when they are often managed so badly.

There is more than enough energy and compassion and ingenuity and enterprise in Britain to get to grips with all of our problems…

…especially in the places where those problems are most concentrated.

Some people may be nervous that our faith in social enterprise and the voluntary sector is a cloak for an agenda of spending cuts to finance tax cuts.

Wrong.

I know full well how important funding is.

The task is to ensure that money goes where it's needed and where it will make the most difference.

Of course, some may fear that state funding of smaller, local organisations will crush the independence and flexibility that makes them effective in the first place.

Well, it depends on the state's attitude.

It depends on how the funding works and how the contracts are managed.

There's no reason to think that state funding automatically damages a local organisation.

We need to be more trusting, more open to risk.

That way we will avoid the voluntary and social enterprise sectors becoming indistinguishable branches of the state.

Finally, some ask whether there is enough capacity in the voluntary sector to do the job.

The straight answer is - no, not yet.

That's why I will never pretend that the big shift from state to society can be achieved overnight.

But I am supremely confident that as we allow communities to take over responsibilities for their own neighbourhoods…

…as we change the funding system to reward creativity and innovation…

…we will witness a fantastic flowering of social enterprise, the like of which we cannot even imagine today.

CONCLUSION

For years, we Conservatives talked about rolling back the state.

But that is not an end in itself.

Our fundamental aim is to roll forward the frontiers of society.

We understand that a strong society means moving forward together, no-one left behind, fighting relative poverty a central policy goal.

We recognise that reducing poverty is not an automatic consequence of creating wealth…

…that economic liberalism must be matched by economic empowerment.

And we will show that social responsibility for tackling the causes of poverty - complex, organic, emotional…

…is the way to succeed where state welfare - blunt, mechanical, impersonal - has failed.

As we do that, this country will see a new generation of social leaders emerge.

Leaders in every community who take control and make a difference.

People to serve as inspiring role models, changing the culture from resignation and despair to aspiration and hope.

On my first day as leader of the Conservative Party, I went to meet just such a social leader.

Ray Lewis, giving young black men in East London the confidence, discipline and inspiration to make something positive of their lives - to fight their way out of poverty.

On that occasion, nearly a year ago, I launched our Social Justice Policy Group, led by Iain Duncan Smith.

In a few weeks' time, he will deliver his mid-term report, the most comprehensive survey of poverty and its causes that we have seen for years.

That is just the beginning.

We have much work to do.

Since Lord Scarman wrote his report twenty-five years ago, many things have changed for the better in our inner cities.

But too much has not.

So in the next twenty-five years, I want my Party to be in the vanguard of the fight against poverty…

…with the ideas, the imagination and the energy to create the strong and just society we all want to see."

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