Your choice: more equality or less inequality?

One could ask that question about all areas of equality policy, I want to see how it relates to claims that we should aim for more financial equality or, as it usually put, for less financial inequality. As I mentioned in one of my previous witterings, "wealth" can refer to income or it can refer to capital assets, for present purposes I will look at income.

The way the policy is argued for is very interesting to me. If you want to narrow the gap between the richest and the poorest you have a choice between arguing for greater equality of income or for less inequality of income. Those on the left seem to argue against inequality far more then they do for equality. Perhaps this explains why their chosen method of securing their aim is to tax the wealthy. It is implicit in that method that the disposable income of the wealthy will be reduced, but it does not follow for one nanosecond that the poor will necessarily receive a penny. Yet, surely, the moral argument must centre around how to improve the lot of those at the bottom of the pile? Simply removing some cream from the top achieves nothing apart from satisfying a rather pathetic form of blood lust. Once they have skimmed the desired amount of cream they say that they have reduced inequality. Indeed they have, as a purely statistical exercise. And what good has it done? Of itself, I can see none.

Equality policy can only be justified if inequality causes a problem. Therefore the problem should be identified and the cure must be just that, a cure for the problem. What is the problem in one person having an income of £1million and another's being just £3,000? The problem is that £3,000 is not enough to pay for him to live. So the problem is not that the one person receives £1million a year it is that the other only receives £3,000. Any policy aimed at curing this problem must find a way to increase the poor man's income.

If making the rich man poorer would achieve this, all well and good, but I see no evidence that that happens to any appreciable extent or that it would happen to a more meaningful extent if the wealthy man were taxed substantially more than he is at the moment. Instead money is taken from the wealthy, laundered through the great black hole known as HM Revenue & Customs - during which process a lot disappears in administrative costs - and is then deposited in the government's spending fund. The spending fund includes some measures for improving the income of the least well-off through payment of benefits, but none of them does anything other than take a few people who would be below the poverty line and put them above the poverty line, it does not make them appreciably wealthier and nor could it ever do so.

A modest increase in marginal tax rates for the wealthy might increase government income a little, although it will also increase incentives to avoid (legally) and evade (illegally) the additional tax. Even if it does lead to an increase in income, because there are so few at the top and so many at the bottom it cannot do anything substantive to solve the perceived problem.

One then has to build into the equation that those who bleat about inequality are generally in favour of government spending money. They believe, erroneously in my view, that government has magic powers and can improve life for all if only it spends enough money. This causes the spending fund to be under permanent pressure to spend more on this, more on that and more on everything. Putting more cash in the pockets of the low earners is just one item on the list. As revenues increase political pressures to give some to favoured groups come into play. We cannot assume that additional taxes on the wealthy would ever be reserved wholly to pay more to the poorest, but even if that were the case how much would they get?

Paying an extra £1 a week to all those claiming "out of work" benefits and tax credits would cost in excess of £350million a year. In other words, for every £350million in additional revenue from increasing tax on the rich the most that could be achieved for those at the bottom of the pile is an extra £1 a week. Let's say the rich are absolutely hammered for additional tax and an extra £1.5billion is raised from them, assuming no extra administrative costs the poorest people would receive enough to buy a packet of cheap cigarettes.

I do not suggest for one moment that an additional £4 or £5 a week would not be most welcome for those struggling to make ends meet, of course it would because every penny helps. But it only happens once, the same tax rates next year will not allow for a further £4 to be paid but they might allow the increase of £4 to remain in place. All that can be achieved by even the most grandiose attack on inequality of income through tax is a tiny increase in the incomes of those at the bottom. It is such a small amount that it does not get anywhere near curing the problem.

Perhaps this is one reason why the left is so keen to complain about inequality. They know that if they argued for more equality rather than against inequality they would have to explain how it can be achieved through tax and the plain fact is that it cannot. Their current approach requires only that they point out the gap between rich and poor, for them that is enough in itself to justify taxing the rich. It is gesture politics of the pettiest and most ineffective kind, they claim to give the poor hope when the measure they promote cannot possibly deliver anything but a tiny sum. To my mind it is a cruel approach to a difficult and important problem.

Blubber and the noseprods

I suspect I am not really more than averagely bigoted, but I am most definitely fat. Today I heard the Conservative opposition outlining plans to attack the chubby and I just sat here. No rage, no surprise, just a resigned shrug that in the modern world of noseproddery any deviation from a randomly selected norm is fair game for a cheap headline. We are used to it by now. Smoking, drinking, eating red meat, driving a car and being a portly fellow are all on the naughty list and must be quelled by massive taxes and further additional direct penalties when the taxes don't work.

Do not mistake my position. I am not saying that being fat is a good thing. Frankly, I find it a touch depressing when a six foot six hugely muscled boxer weighs in for a super-heavyweight contest and tips the scales at less than than my five foot nine corpulence. It is obvious to any but the most moronic that being fat puts strain on the heart, increases the risk of contracting a number of serious medical conditions, causes joints to wear out, reduces the ability to engage in sports and, in the eyes of many, is aesthetically displeasing. I do not need a politician to tell me that, I know it already because I am not mentally retarded. It is also obvious to any but the most moronic that the vast majority of fat people are fat because they consume more potential energy than they expend actual energy. I could shed my diet of at least 1,000 calories a day if I stopped drinking booze. There is no need for anyone to tell me, I know already because I have a brain.

So, why don't I lose weight? I could do it and have done it before on occasions, the last time was about five years ago when I stopped drinking for a few weeks and lost over two stones in weight. The reason I do not reduce my calorific intake permanently is as simple as simple can be, it is because I enjoy eating and I enjoy drinking. They give me pleasure so I do them. I weigh that pleasure against the health risks and against the shame and discomfort of being a sweating ball of blubber. To date the pleasure wins, hands down. And the reason it wins is because only I can judge how I value that pleasure and how I value the downside. Any number of do-gooders and experts can tell me that I will feel much better if I cut my drinking or eating in half, but in saying that they make a fundamental mistake. They assume my definition of pleasure to be the same as theirs. "Ah, Mr FatBigot, you will feel much happier taking a gentle mile jog every evening so put down that pork pie and pint of cider and shed those naughty pounds!" Who says I will feel happier? Only I can judge whether that would be the case and, having once been younger and fitter, I have experience of gentle mile jogs and can say without fear of falling into error that I am happier at this stage in my life with the pork pie and pint.

You see, it is my life. Only I live it. Only I have lived any part of it or will live any part of it in the future. Only my life began when I was born and only my life will end when I die. Only I have ever enjoyed the collection of experiences that make up my personal history, no one in the future will have the same life and no one has had it before. It is unique. It is mine. It is me.

For a politician of any party to tell me that I must change my behaviour because it will be better for me is for him to prove himself unfit for election to anything. By all means legislate against behaviour that does harm to others. By all means make provision for those who wish to change their behaviour and need a helping hand. But do not ever presume that you have the right to remove my choice of how to live when my choice can harm only me. Mr Cameron and his merry men seem to feel that New Labour interference is now the norm and that they must engage in the same in order to avoid being labelled uncaring. I can tell them they will gain more friends by announcing that they will leave people alone to live their lives as they see fit.

Tackling poverty, part three

Poverty is only a potential problem for those in employment, for those without work it is often a stark reality. I suggested yesterday that subsistence benefits should be paid to those who are unemployed but looking for work. My reasoning is that those who are prepared to take any job rather than exist on benefits should not be dissuaded by benefits being too generous. It is a tough stance but one which I believe to be justified because I have great faith in the inherent decency of people including that strand of decency which makes them want to work rather than, let's put it bluntly, scrounge.

One of the strongest justifications for having a national minimum wage is that it guarantees a living wage for those in full time work. I will not pretend that life on the minimum wage is a bed of roses for a couple with children who decide the best interests of their children requires one of them to stay at home, but a full working week will bring in a living wage provided the income tax threshold is increased to a sensible level. But what of those who do not want to work? To what extent is it appropriate to protect them financially from the otherwise inevitable consequences of their idleness? Merely asking the question would label me a fascist in the eyes of the left, but that is no more than a label and I am not interested in being unfair to anyone, my concern is that the system should do everything it can to bring the best out of people and encourage everyone to support themselves if they possibly can. Not only will that reduce the burden of tax on those who work willingly, it will also improve the lot of those who currently live on benefits a little above subsistence level but would do a lot better if they found a job.

I believe two changes to the current system to be necessary. First, permanent dependency on the State by reason of physical or mental incapacity to work should be limited to those who really are incapable of work. Over the last eleven years the government has made it easier to claim incapacity benefit, so much so that something in the region of 2,500,000 people currently claim a benefit which should be available only to those genuinely unable to work. Idleness and fecklessness are not incapacities, they are idleness and fecklessness. Fictitious bad backs are not incapacities, they are bogus excuses. No one knows how many of the 2,500,000 are really unable to work, but we all know that it is good for unemployment statistics if a vast number who are out of work are classified as unwell rather than unemployed. Yet governmental attempts to hide the true level of unemployment do not fool anyone, it is obvious (according to my personal version of common sense) that in a population of some 30 million people of working age it cannot be the case that 8% are incapable of holding down a job. The most dangerous consequence of trying to mask unemployment by calling it incapacity is that the government has an incentive to continue the pretense. For so long as they feel there is political mileage in reducing the headline unemployment rate by attaching a different label to a large number of unemployed people, they have no reason to change the system. In turn that locks the people on incapacity benefit into that state, they receive more than if they were "ordinarily" unemployed and the financial gap between being on benefits and being in work is reduced.

Secondly, those who are able to work should only be allowed to receive benefits of any kind for a limited time. Will this push them into starvation? No, it will push them into work. For quite some time this country has been able to absorb migrant workers for one reason and one reason only, that those who live in this country have been unwilling to do the jobs the migrants have taken. Not unable, unwilling. How many office cleaners, parking attendants, roadsweepers, kitchen porters, hotel chambermaids and dustmen are white and British? In all cases the answer is very few in proportion to their number in the country. That is not because the foreigners who fill those positions have stolen jobs, it is because those sitting on benefits have not applied for the work. This is a systemic problem caused, I believe, by the easy availability of benefits. I do not believe most of those on benefits would think it such a good life if they tasted work and the self-pride it brings, but there is an underclass who have never worked and have no comprehension at all of self-worth.

Recently we saw a fine example of the hopelessness benefit dependency brings. The by-election in Glasgow East highlighted an area in which generation after generation of families never work. They do not need to because they receive housing for free and enough to live on. They are told by those on the political left that they are victims who can never improve their lot because the system does not allow it. I disagree, they are not victims of a wicked capitalist economy, they are victims of those who have told them for decades they have no hope of improvement. By my definition they are not in monetary poverty but they are certainly a lot poorer than they would be if they took the jobs people travel thousands of miles to fill and they are in poverty of expectation.

It will not be an easy task to change the culture on the sink estates of Glasgow East and the other inner city constituencies and there is no painless way of changing that culture. Yet it must be changed if those people are to have a chance of living a life in which they can walk down the road with their heads held high, knowing that they are providing for themselves and their families. It is a harsh method, but imposing a strict time limit on their State benefits is, I suspect, the only way to get them out of their rut and give them an opportunity to live independent lives and enjoy the satisfaction that brings.

I cannot accept that those on the sink estates want to live on the poverty line forever, nor can I accept that they are unwilling to work under any circumstances. What I can accept is that they have been labelled victims for so long that it will take time to persuade them they can cope on their own. The jobs are there, Glasgow East is a short bus ride from vibrant hotels, pubs, restaurants and clubs who need staff, lots of staff. Thousands of jobs currently filled by transient employees from overseas could be filled just as well by locals if only they felt there was a reason to do them. It is time to be cruel to be kind. That would be real social justice.

Tackling poverty, part two

My first suggestion for tackling poverty was to increase the income tax threshold to such a level that no one has to pay until they are not just above the poverty level but substantially above the poverty level. The minimum wage means that all those in full-time employment are necessarily above that level and those who work part-time only need to work about 21 hours a week to be avoid poverty. Today I want to look at the position of the unemployed. What can government do to ensure they are not in poverty? Again I use the definition of financial poverty I gave a few days ago - being unable to pay for housing, heating, water, food and clothes.

There are, of course, some people who are unemployed but not in any financial difficulty because they have savings, but for most this is not the case. Government's role, in my opinion, is two-fold. First a subsistence level of benefits should be paid to ensure they do not starve. Benefit activists moan constantly about the amount paid being too low to allow people to live but I have seen no evidence of anyone starving to death because they have not been paid enough to buy food. They might not be able to buy flat screen televisions, computers, Axminster carpets, foreign holidays and cars but it is not the job of government to take tax from people who struggle to buy such luxuries from their wages in order to allow those not working to receive them.

Government's second role is to interfere in the world of business as little as possible. Whether business can employ everyone in the country is a moot point, what is plain fact is that increasing the administrative costs of the productive sector reduces the number of people that sector employs. Whether it be a requirement to undertake equality audits, an obligation to pay for lengthy maternity and paternity leave, the need to comply with petty health and safety regulations or any of the other hundreds of things business has to do to dance to government's political tune, it all costs money. Increases in the costs of any business must result in (i) reduced profits, (ii) other costs being reduced or (iii) increased prices. They cannot have any other effect because money does not grow on trees and businesses cannot magically create money to pay for overheads imposed by government. In all but the most exceptional circumstances, reduced profits result in a business being less attractive to investors thereby putting at risk expansion and, in many cases, making refinancing of existing debts more expensive. Similarly, increasing prices is something a business will seek to avoid because of the obvious risk to sales. That leaves cutting other costs as the first port of call and shedding non-essential staff is often the only sensible choice to make.

Those who suffer most when businesses have to cut staff to pay for bureaucratic overheads are those whose work can most easily be done by others or dispensed with altogether. That tends to be those of fewest skills, the very people who find it most difficult to find work and who, therefore, are most likely to have no cushion of savings to prevent them falling into poverty. It is no answer for government to say they will pay subsistence benefits, there is no benefit in benefits, those people want to work for a living and would be able to if it were not for government piling unnecessary costs onto business.

Regulation makes it more difficult for the unemployed to find work. My second suggestion for tackling poverty is, therefore, for government interference in business through regulation to be reduced to only that which is essential to protect against the greatest dangers. Most health and safety regulations are completely unnecessary because the risk they seek to eliminate is minimal and the cost of implementing them is vastly disproportionate. Equality and diversity targets serve no purpose at all - any employer who rejects the best candidates on the ground of race, sex, sexual proclivity or age ends up with an inferior workforce and should be left to stew in his own narrow-minded juice. In fact I am unable to think of any red tape which is of net benefit to business. It might result in some nice lists of statistics for government to manipulate as it chooses but it achieves nothing other than to increase costs and put at risk the jobs of the lowest paid.

It was not very long ago that vast numbers of wholly unskilled people were employed in small businesses even though they served little useful purpose, it happened because throughout the country there are small businesses based in villages and small towns and those businesses wanted to be seen to be part of the community. If there was a young person fresh out of school or an older person who had lost his job it was a common occurrence to find a broom and a brown overcoat being made available for them so they could be employed at a low wage to sweep the floors and empty the bins. All it took was a quiet word with a sensible owner who knew it was better to create a job and bear the modest additional cost rather than refuse, it kept the existing workforce happy because they wanted to see poor Johnny in work and it cemented relations with the village. Be in no doubt, that happens still, but not as much as it used to. Margins are trimmed by expensive red tape and the obligation to pay Johnny the statutory minimum wage makes him too expensive for many.

I have attempted to explain why I believe unnecessary regulation hits the unskilled in two ways, they are often the first to be laid-off to cut costs and many of those who would be hired voluntarily become too expensive. The real problem is that these effects do not stand alone, there are already plenty of unskilled people without jobs. Any step taken by government which increases their number makes it all the more difficult for a single one of them to find work and raise themselves above the poverty line by their own efforts.

Tackling poverty, part one

Old jokes often contain interesting messages. Take the joke about a couple who are lost in their car in the middle of nowhere and stop a passing local to ask directions to London, "London, you say? Well, if I wanted to drive to London I wouldn't start from here." The message behind this tale is that you should think carefully about what you do in case it makes your eventual goal more difficult to achieve. This is important when we ask how poverty can be tackled. With prices of food and fuel going up at an alarming rate we will hear a lot about poverty in the months ahead because it is those on limited income who are hit most by increased prices for essentials.

Yesterday I tried to explain why I believe "poverty" is a word best confined to describe the state of those with an income below subsistence level, I also explained (by use of very rough-and-ready figures) that I estimate something like £10,000 a year to be subsistence income for a childless couple and £6,000 a year for a single person, perhaps more in areas where housing is expensive and undoubtedly less in areas with cheap housing. Before asking what can be done about poverty we need to look at why some people have such low incomes. I am not interested in airy-fairy theories, I want to look at real life in the real world.

There will always be those without the skills to earn anything more than a low income and there will always be those who, through indolence or lifestyle choice or bad luck, find themselves with very little money. "Let them eat cake" is a fair approach to take towards those who will not help themselves but I do not believe most of the people in poverty in this country to be in that camp. I believe that the vast majority wish to work in order to support themselves and their families, they do not want to be dependent on the State. Some, of course, have no choice because they suffer from a physical or mental condition which precludes them from earning a living even though they are of normal working age. These people are in a special category which I will return to another time. Others cannot work because of their age, the position of those outside normal working age is also outside the scope of today's thoughts. Today I want to look at the lot of those who are in work but earning very little.

First it is sensible to make clear that for the vast majority in this position their only poverty is financial. A common error on the political left is the belief that those who earn low wages feel resentful towards those who earn more and are unhappy with their lot simply because they do not have much money. That is complete nonsense. Ask the average road sweeper whether he thinks an accountant should earn more than him and his answer will be "yes" because he knows that the accountant could sweep the road but he could not be an accountant. Ask him whether he feels unhappy that he is not an accountant and his answer will be "maybe it would be nice, but I do what I can, I work hard and I support my family ... here's a picture of my little girl at sports day, she won the egg-and-spoon race, she's a lovely girl". Of course he will also say he would like to earn more, but what is most important to him is that he is able to support his family through honest work. Many on the left think his income, social background and employment define him but he knows better, he knows that his values define him.

The road sweeper is employed providing a service and there is a limit to what can sensibly be afforded to pay for that service. So it is also with those in the private sector performing mundane manual tasks. The work requires little skill and adds little value, pay too much for people to do it and you price your goods out of the market. That is why automation in factories has advanced so much over the last thirty years and more. Those without skills who would formerly have been cutting shapes out of sheet metal on a foot-operated press have been replaced by computer guided machines and have had to seek employment elsewhere. Their lack of skills limits the type of work for which they can be hired and necessarily means that anything they do will be low-paid. In turn this means that their poverty is a direct consequence of an inescapable fact of life, that we can only ever be paid what our work is worth.

Government has a part to play in assisting those whose income is below the poverty line and in preventing those above the line from slipping below it when costs of living rise. Government can have both an active and a passive role. The active role involves paying money to those in poverty, the passive role involves not taking money from them. In relation to the unemployed who are seeking work the active role is potentially important but for those in work the passive role is far mightier. To illustrate what I mean I want to look at the threshold for income tax.

For the tax year 2008-2009 the income tax threshold is a touch over £6,000, less than £120 a week. Yesterday I explained how I estimate that figure to be subsistence income for a single person living alone and renting a small room. It is an income level at which saving for the future is impossible, even the need to replace a broken kettle would cause hardship, and yet additional earnings trigger a requirement to pay 20% of the extra money in tax. This is simply obscene. What makes it absurd as well as obscene is that we now have a statutory minimum wage which is meant to represent the fair minimum amount someone should be paid if they are working. It was said to be a recognition of the minimum earnings required to be able to live to modest but acceptable standard and is not, therefore, a definition of a subsistence income. The current minimum wage for someone aged 22 or over is £5.52 per hour, £220.80 for a 40-hour working week, £11,481.60 per year.

So the government tells us that £11,481.60 is the very least anyone should be paid for a full working year, yet on that sum almost £1,100 will be payable in income tax. This might not involve any chicanery because by saying £11,481.60 is the minimum to be paid the government knows it amounts to just over £10,000 after deductions. The absurdity, however, is in setting the tax threshold below the figure the government considers necessary to live a tolerable existence. Reverting to what I said yesterday, it is important to bear in mind what subsistence level income means - it means being able to afford housing, heating, water, food and clothes and having a tiny amount for discretionary spending. To impose tax at 20p in every pound above such a low level of earnings is nonsensical.

The first thing government should do to tackle poverty among the employed is to raise the tax threshold to a much more realistic level. The net income resulting from the statutory minimum wage would be a good start because it would put the threshold at a nice round figure of £10,000. We could make it £10,400 so that it is exactly £200 a week. That is hardly a fortune. Such a change would acknowledge that people in this country should not be dependent on the government to keep them out of poverty if they are able to do so by their own efforts. It would also acknowledge that it is beneficial for those in work to have use of as much of their own money as possible because they can, if they choose, save it, but the government cannot save it for them. You want to be fair to those in employment? You don't start from here, you don't start with a tax threshold so low. If it were not for years of allowing the threshold to lag the problem would not have arisen.

So, that is my first suggestion. It is not a new idea but it is fair. It will also reflect the values of those in low paid employment who take great pride in being able to pay their way. One problem with charging income tax at the margins of subsistence earnings is that it tilts the balance of power towards the government. "We will allow you a bare subsistence income but after that you must pay us one fifth because we have plans" is the current position. I want the narrative to go from the taxpayer to the government, not vice versa; I want to hear "I now earn enough to support myself in a modest lifestyle, I will now allow you to have one fifth but don't waste it." My further musings on poverty will be made against that background.

Financial poverty, a definition

It makes me cringe to hear poverty defined by reference to a given percentage of average national income because there is no principle to it. The average and percentage used are just random choices and can be selected to suit political preconceptions. If we are to find a principle by which to define poverty we have to ask what poverty means in practice and extrapolate a principle from that. Logically there is a prior step, which is to decide whether we mean relative or absolute poverty and I have no doubt that we can only ever talk of relative poverty because it would be to abuse language to define someone with a weekly income of £50 in Britain as not being in poverty simply because such an income would provide very nicely for all their needs if they lived in a mud hut in deepest Africa.

So, what is involved in being in poverty? I suggest that it means being unable to pay for the essentials of life: housing, heating, water, food and clothes. Housing is the most complex of these needs because it is not enough to have four walls and a roof, you also need furniture, cooking and eating equipment and all the other bare essentials which make it possible to keep yourself alive. Generally speaking heating, water, food and clothes do not vary enormously in price throughout the country but housing costs do and being able to share some of the costs of living with others also affects the amount required for someone to be able to maintain a basic life.

One can find all sorts of measures for these costs and I want to take some general figures for the purposes of this essay. Rather than relying on massaged statistics produced by government or academics I thought I would find out for myself by asking people I know who do not have a lot of money; I asked two of the chaps who deliver pizzas for a local shop, one of them lives by himself and the other lives with his girlfriend, they are both in their early twenties and have no family or property in the UK.

Taking the single man first, he pays £55 a week to rent a small room in a local house, water and electricity are included but heating is by a metered gas fire costing him about £10 a week for about six months of the year. He has some meals provided free of charge by the pizza company and spends about £25 a week on food, Leaving aside special items, his clothing comes from low-priced chain stores and costs him about £200 a year. His annual expenditure just to keep himself housed and alive is around £4,600.

The man who lives with his girlfriend also rents a room and for this he pays £110 a week including heating, lighting and water. He and his girlfriend spend about £40 a week on food, his clothing costs are the same as the single man and his girlfriend's clothing costs about £450 a year. Their combined expenditure to stay alive is just under £8,500.

Renting basic accommodation like this in many other parts of the country would cost a lot less, they both live close to their work in Islington, North London, which is an expensive area. There is nothing scientific about these figures, they are just a snapshot, but they suggest that something like £6,000 for a single person and £10,000 for a couple is a subsistence level of income in modern Britain. This will allow a meagre social life to be financed together with a television and telephone. To my mind, these are appropriate figures to take as the poverty line. By coincidence income tax bites on earnings just above £6,000 for the current tax year. It goes without saying that children will increase the subsistence costs of a couple and that we have to add on something to get a figure that matches their circumstances.

Those earning a little more than these figures are not, on the hypothesis I am advancing, in poverty although they are certainly on low incomes. I believe "poverty" should be reserved for those whose income is not sufficient to allow them to pay for housing, heating, water, food and clothing. In other words it should be measured by subsistence costs not by the random application of a mathematical formula.

Once we see poverty in these terms we can distinguish clearly between those in poverty and those who are merely poor. As costs of subsistence rise so the poverty line figure rises and some who were previously poor and taken into poverty. Recent steep rises in electricity and gas prices will almost certainly require landlords to charge a higher rent to lodgers and the enormous rise in food prices over the last year have also increased the poverty threshold. The rough figures I have given might be £500 or £1,000 short of the mark in a few months time.

The importance of defining poverty by subsistence costs is that it gives a fixed point of reference which does not do damage to language (after all, defining poverty as not being able to afford a subscription to Sky and a flat screen television would be absurd). "Poverty" is a strong and highly emotive word, it describes an extreme situation and to use it for anything else is to undermine the seriousness of that situation. Someone who cannot afford to live the most basic existence is in a terrible position and deserves to have their plight recognised for what it is. By setting the bar too low you risk undermining the seriousness of the situation faced by those below subsistence income.

The measure used in this country by government and by so-called anti-poverty campaigners is 60% of median national income. I believe median income to be around £23,000 at the moment, so 60% is just under £14,000. For a couple with two children living in central London that is probably not far off subsistence but for those in areas of the country where housing rents can be £300 or £400 a month lower than for a similar modest property in London it is absurd to say they are in poverty because they have several thousand pounds more spending power than the Londoners. And why take 60%, why not 50%? After all £50% has been the conventional figure in many countries for decades. The truth is that £14,000 is no more an accurate poverty line than £13,000 or £15,000 or even £10,000. These are just random figures which might or might not represent the difference between the poor and those in poverty in each village, town and city.

I believe it to be important to define poverty accurately because different policy considerations come into play depending on whether the subjects of them are in poverty or merely poor. To raise people from below to above the subsistence line is far more important than to lift those already above the line a little bit further above the line. Over the next few days (or weeks if I get distracted or run out of ideas) I want to talk about some of the policy issues which affect the poor and those in poverty and I will do so against the definition I have sought to explain today.

What is poverty?

With food and fuel prices rising by huge amounts we will hear much over the coming months about poverty and it will all concentrate on money. It is quite right that money should feature high on the poverty agenda because most definitions of poverty look at nothing else. My intention is to address the monetary side of poverty in a series of ramblings over the next few weeks, but today I want to challenge the concept that a lack of money is an adequate definition of poverty.

Lack of money is a common theme in politicians' rantings whenever problems arise in the inner cities. Many examples can be given: teenagers terrorise a council housing estate, the child of a teenage mother starves to death, children are found to be eating burgers and chips as their main meal seven days a week and so it goes on. Often, the first thing that is said is to blame lack of money. If that really is to blame, an increase in income for the people concerned would prevent the problems being repeated. I doubt very much that that is the case. I can explain why by looking at the particular examples I have given.

When a gang of teenagers terrorises an estate you can be sure of one thing. There are far more teenagers living on the estate who do not join the rampage. When a child dies in horrible circumstances you can be sure that many more children of teenage mothers are being cared for very well. For every child eating burgers and chips every day you can be sure there will be many eating sensible balanced meals. The well-behaved teenagers will not have parents markedly wealthier than the parents of the hooligans, the teenage mothers of living children will not be markedly wealthier than the mother of the dead child, the parents of the children on balanced diets will not be markedly wealthier than the parents of those fed burgers and chips. It is not money that differentiates between those who behave well and those who behave badly, it is values.

That is not to say that values are absolute things, they can be affected by all sorts of external influences. Peer pressure can persuade a teenager to join in with the terrorising gang even though he would never dream of threatening anyone if acting alone. A bad example can temporarily override a strongly held opinion that something is wrong. Money can also play a part, as in the case of many poor people who steal goods from shops when they would not do so if they could afford to buy them. Of course that raises the question why they chose to steal when others would just go without and the answer is simple, the values of those who steal are less powerful than the values of those who go without. It must not be overlooked, however, that financial poverty is only a cause of theft when the theft is necessary to be able to provide the basics of life (housing, heating, food, clothes) which, in my view, is never the case in this country.

I do not suggest for one moment that life is easy for those on low incomes. They have little if any opportunity for discretionary spending, the vast majority of their money has to go on housing, heating, food and clothes. I can understand why someone in that position who has become accustomed over many years to having two packets of cigarettes a week will buy smuggled smokes at £3.50 rather than paying £5.80 for exactly the same product in the shops, the difference of £2.30 a packet is significant to them. What I cannot understand, and do not accept, is that a lack of money causes people to behave in a way that is harmful to others. Such behaviour is a consequence of the people concerned not having good values.

There is another non-monetary aspect to poverty. So far I have discussed only poverty of values. Values are taught by our parents, our schools and others who have had a significant effect on our lives. Those influences generally apply in our early years and they provide us with the individual moral standards we carry into adulthood. When in adulthood, most people have children and they hope their children will learn the values they learned. They also hope their children will receive a good education to give the opportunities they had to build a career or start a business or have a steady job. Sadly we seem to have reached a position in this country in which education is viewed by government as a means for social engineering and a statistical resource rather than a means for developing minds and teaching skills. Unless schools allow each pupil to develop to the best of his or her ability they fail in their central purpose.

These days the curriculum is crammed with touchy-feely eco-multicultural nonsense. Children are taught that Nelson Mandela is more important than Isaac Newton, Al Gore more important than Winston Churchill, rights more important than duties and equality more important than quality. There are so many tests and league tables that it is more important to get the marginal fail up to a marginal pass than it is to teach the bottom few to read or the top few to excel. One of the greatest successes of schools in the fifties and sixties was to get those from modest backgrounds into the best universities and the most challenging professions. Means tested grants were given to the best students so that their nascent talents could flourish. Naturally some withered, but that will always be the case, those who flourished were able to pursue careers their parents could only have dreamt of, but not now. There is genuine poverty of opportunity because state schools have to follow political diktats.

Lack of money is the third type of poverty, third in my list and third in importance. If you have no values it does not matter how much money you have you will harm others throughout your life. Poverty of opportunity condemns future generations to under-achievement and, necessarily, condemns the country to fail to benefit from their talents. Monetary poverty is not a barrier to high values and should not be a barrier to good education. I will return to various aspects and effects of monetary poverty in future musings, today I have endeavoured to explain why I believe that poverty of values and poverty of opportunity are more detrimental than monetary poverty.