Conor here: Murphy discusses the situation in the UK in this post, but the issues highlighted are likely to resonate with readers from the US and beyond.
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future.
The question of why poverty persists was raised by Mark Littlewood during a live budget discussion with Jeremy Vine and me on November 26th. Having collaborated with Mark and Jeremy for nearly 15 years, our differing perspectives often make for lively debates. Radio Two has even dubbed us a “dream team” due to our disagreements.
Mark Littlewood, the former director of the Institute of Economic Affairs, a right-leaning think tank, now serves as the economic spokesperson for a Tory group supporting Liz Truss. Given our contrasting views, it’s unsurprising that we seldom find common ground. However, I was shocked when Mark bluntly stated, “Surely poverty should be over now, when benefits of £300 plus billion a year have been paid for so long?” This comment was alarming, as it attempted to shift responsibility for poverty onto individuals, despite the economic structure he supports being a primary contributor to ongoing poverty.
To clarify, Mark was not genuinely querying the existence of poverty, as it clearly affects many in our country despite the significant amount spent on benefits. His words were more about deflecting blame toward beneficiaries rather than acknowledging the systemic failures creating their harsh realities.
For the past 45 years, neoliberal economic policies have cultivated a system that extracts wealth from the working class. This structure transfers the earnings of hardworking individuals to a small elite, resulting in significant wealth concentration at the top while creating economic instability for those merely trying to make a living. This model uses the threat of poverty as a means of coercing workers.
This is not coincidental; poverty has become a tool of policy within the realm of neoliberalism. The fear it instills serves to suppress wages and erode workers’ rights.
Of the £300 billion in benefits Mark mentioned, approximately £175 billion comprises state pensions. His rhetorical question—“Why are we paying that to people who don’t need it?”—was directed at me, but it overlooks my lifelong contributions through taxes and National Insurance, which entitled me to this support.
Additionally, Mark raised doubts about the £35 billion allocated to disability support, seemingly questioning the legitimacy of those claims. He seems unaware that many disabilities can be invisible. Conditions like depression, anxiety, autism, and ADHD prevent individuals from working, yet they still require financial support to lead a basic life.
Moreover, around £30 billion is spent on housing benefits, which primarily aids landlords rather than the recipients of housing assistance. This turns the social safety net into a subsidy for property owners.
Universal Credit, which mainly assists those in employment, is essentially a wage subsidy for companies failing to provide livable wages. This setup is more about safeguarding wealth than genuinely alleviating poverty.
The £300 billion in benefits is often misunderstood; while it does provide essential aid, it’s primarily a measure to prevent societal collapse, ensuring that vulnerable groups, including pensioners and individuals with disabilities, do not end up homeless or in desperate situations. The system supports large corporations that neglect to pay adequate wages—wealth is not trickling down as promised but rather accumulating at the top.
Poverty continues to thrive due to inadequate wages, soaring rents, high costs of living, privatization, and cuts in support services, all while businesses treat their workers as expendable costs. Furthermore, many economists appear indifferent to these struggles.
While benefits keep many people afloat, ensuring they can meet basic needs, the majority of this £300 billion doesn’t cater exclusively to those with low incomes; it predominantly stabilizes an economy that favors the wealthy. The poverty Mark questions arises directly from the neoliberal economic model he endorses.
So, what truly would eradicate poverty? Raising wages is a critical step; although there was a recent increase in the minimum wage, it still falls short of what is necessary for living. Providing accessible housing would significantly change the landscape, yet proponents of market-driven solutions, like Mark, resist implementing regulatory measures. As rents continue to soar, securing housing becomes increasingly unattainable.
Enhancing public services would also enable individuals to gain the support needed to integrate into society and secure employment. Additionally, enforcing workers’ rights is vital to ensuring inclusivity for individuals with disabilities in the workforce.
Most importantly, a shift toward income and power redistribution would tackle systemic issues head-on. This means reforming tax policies to target unearned income and regulating monopolistic profits. Ultimately, addressing income inequality equates to achieving justice.
Should we remain inactive, we can expect escalating poverty, weaker democratic institutions, rising violence, and societal fragmentation. These are tangible issues we face today, fueled by widespread frustration over a failing system. Individuals like Mark Littlewood fail to recognize how deeply entrenched interests contribute to these challenges.
The persistence of poverty is an inherent trait of the neoliberal capitalist framework promoted by figures like Mark Littlewood—this structure thrives only because it relies on the existence of poverty, which, in turn, sustains the prosperity of a select few. Benefits, therefore, serve a critical purpose in mitigating the harmful effects of this economic management model supported by various governments since the rise of Thatcher and Reagan in the late 20th century.
In conclusion, the singular solution to poverty lies in redistribution through effective taxation. To understand why poverty remains a pressing issue today, we must acknowledge that inadequate taxation is at the heart of the problem. This doesn’t necessarily call for an immediate wealth tax, although that may be necessary in the future. As discussed in my prior works, there are various alternative approaches to achieve meaningful redistribution, which could lead to substantial economic growth and improved conditions for everyone involved. By providing those living in poverty with better financial support and reducing their living costs, we can create a more equitable society, ultimately benefiting all, including the wealthy.
What are your thoughts? Do you attribute poverty solely to individuals or believe our economic system’s failings play a larger role? Are we grappling with the greed of the affluent and the politicians catering to their interests?
