See fighting poverty as an economic solution

Tackling poverty should be at the heart of economic development, says Neil McInroy, chief executive of the Centre for Local Economic Strategies.

Even having a job is no guarantee you won’t slip into poverty. Recent evidence from New Policy Institute (NPI), commissioned by Joseph Rowntree Foundation (JRF), tells the latest story of poverty in the UK – ‘in work’ poverty is on the rise. The story of poverty in the UK is a lengthy complicated volume, with no end in sight.

This problem of in-work poverty reveals a fundamental aspect of our economy – it is badly failing some people. So those tasked with thinking about our economy and developing it (including local enterprise partnerships – LEPs) need to be involved in writing a new economic story. With tackling poverty at the forefront However, for this to happen we will need to question some of the thinking.

Firstly, local economic power is NOT enough on its own. Some see the solution to our economic woes as resting in the greater powers for cities or local government. However, demand on public services, is already outstripping local resources and changes to council tax, disadvantage the poor and poorer areas.

Furthermore, the poorer areas have less of a tax base to enjoy the re-localisation of any tax such as business rates. Poorer areas may well have less wealth than the wealthier areas to redistribute, even if localism gives them power to do it. Localism which brings more power, but no extra resource, and/or reducing wealth, is of no use to tackling poverty. Indeed it could make the situation worse.

The progressive future is much more about double economic devolution. It is not good enough passing power and responsibility to local areas without more national fairness to begin with. So we require a reform of the prevailing national economic and social policy. We need a significant national economic plan, which spatially stewards the economy away from the existing haves and towards the have-nots.

This requires central action where national economic fairness and inclusion is a priority. This requires a national consciousness, where we are truly in it together. Only then can we have any hope of a poverty fighting economic localism.

Secondly, traditional thinking around a rising economic tide will NOT lift all boats. As I have written before, present economic development plans could be seen as voodoo local economic development. Most historic and present economic development, basically hangs on to the half truth that a growing economy will lift people out of poverty – trickle down.

However, even the good times were not that good for some areas. We need to do something more progressive with growth, wealth creation, and redistribute in different ways. We need shared leadership of place involving poverty coalitions across public, social and commercial sectors.

Thirdly, reducing poverty is not the outcome of economic growth, it’s part of the solution. I have written before about how growth needs the poorest to consume. As Joseph Stiglitz argues and I agree, tackling poverty is part of the economic answer and that unless we do something about poverty, then it may be difficult to restore the kind of prosperity we would like.

Our economy needs the poor to be not poor. Because, low levels of disposable income are reducing local demand. Trickle up economics tells us that the the poorest have a higher propensity to consume.

They will spend a higher proportion of their income, usually locally. They must start earning and spending. Our businesses (especially our SME’s) need this. This relationship means, we have an irrefutable economic rationale for dealing with this shocking situation as regards poverty. Are LEPs listening?

For all the evidence on poverty and talk around how horrific it is, we need action. Economic development needs to forge a new national economic story, make anti poverty a priority and see fighting poverty as an economic solution.

This blog was originally written for New Start, the magazine for making better places. You can find out more about CLES at www.cles.org.uk

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