Long before the government had a rescue plan for the banks, it announced a rescue plan for poor families. In 1999 it promised to halve child poverty by 2010 and eradicate it by 2020, using a measure of relative poverty. It recognised that a culture of inequality had left millions of UK people behind and was ruining the life chances of millions of children.
The perpetual financial crisis in which poor families live comes at a tremendous cost to us all. Recent Joseph Rowntree Foundation research reveals that child poverty costs us at least £25bn a year. This is the cost of educational failure, health inequality, disability and social breakdown and it amounts to £1,000 for every UK household. It's the kind of inefficiency that usually brings the Tax Payers' Alliance out in street mobs with pitchforks and flaming torches!
Now, after years of failing those at the bottom, we have seen the very same culture of inequality fail those at the top. It sanctioned the irresponsible excesses that have put the entire economy in danger, throwing us headlong into recession. It is only by rejecting the skewed values and economic failure of this culture of inequality that we can understand the true choices we now face and decisions we must make.
There is not a choice to be made between rescuing the economy and rescuing children from poverty; and there is not a choice to be made between keeping banks afloat and keeping families afloat: the national rescue package must do both. Nations must always pull together when facing a crisis and it is unthinkable that we would punish or desert our poorest families at this time. Our future economic security depends most of all on protecting family security.
Reaching the target of halving child poverty by 2010 will only cost around £3bn more. Far from being unaffordable, this makes it the most affordable part of the rescue package – far cheaper than the tens of billions handed over to the banks and the hundreds of billions of liabilities for the taxpayer.
Instead of breaking its promise on child poverty, the government must go further, and faster, to keep the recession short and shallow. If we put £3bn in the pockets of poor families, research shows they will go straight out and spend it on their children. They will spend in their local shops and on local services, helping keep community businesses afloat. The staff and owners of those businesses can then keep spending too, all of which will help the banks grow in confidence to lend to our small businesses again.
Additional action from the chancellor is essential, but he should be wary of tax cuts that do not target resources to those in greatest need of support. There is no firm evidence generalised tax cuts are a panacea for recession, but cutting the burden through tax credit increases will support the economy where need is greatest, spending is immediate and every pound works its hardest before being siphoned out of circulation.
Prices for basics like fuel and food have rocketed, so the real inflation rate for poor families has been much higher than that used for annual benefit uprating. Inadequate benefit rates are responsible for over 40% of child poverty. A fair uprating of benefits will put more money back into local economies, so families are not left choosing between putting food on the table, clothing their children against the winter elements, or heating their home.
We may have to borrow our way through recession, but we must pay our way through as far as possible too. In this time of national crisis, those with the broadest shoulders, who did best out of the boom years, must do their bit. It would be grossly irresponsible to press ahead with the Bush-era folly of inheritance tax breaks for the richest estates. Pension tax relief should be equalised for rich and poor at the basic tax rate. A one-off targeted windfall tax for the energy firms could tide over the 5 million families who will suffer fuel poverty during a winter recession. As Ruth Lister argues, a 50% tax rate for earnings over £100,000 a year would bring in £8bn in recession-fighting funds.
Government must help protect against job loss. Planned cuts to Jobcentre Plus must be scrapped, or promises of high-quality tailored support for those with barriers to employment cannot be met. Welfare reform plans should be revisited to take account of our new economic circumstances. In a contracting jobs market, harsh new sanctions are senseless, unfair and a tremendous bureaucratic burden on overstretched Jobcentre Plus staff.
The recession and mass unemployment of the early 1980s left a terrible trail of damaged lives and economically moribund communities, resulting in intergenerational poverty. We cannot afford the social and economic costs of this kind of failure again. An end to the culture of inequality must be the legacy of our actions today. We either come through this economic crisis as one nation, or the recession is longer and deeper and we will again suffer the fallout for decades to come.