The problem is incomes, not prices

Tweet Fuel poverty is a term with which we’ve all become increasingly familiar, but I’ve always had a nagging doubt about whether “poverty” is really the right word.  For those on low incomes, it’s accurate enough; but any definition based solely on the relationship between cost and income is always likely to include some for whom the term “poverty” is a misnomer.  After all, draughty old mansions can be expensive to heat as well.

A couple of weeks ago, I heard the term “transport poverty” being used to describe a situation where people spend a large proportion of the disposable income on running their car.  Again, it may be accurate for some – but I’m sure that Rolls-Royces can cost a lot to run as well.

Last week, Peter Hain referred to “food poverty”.  Again, I don’t doubt that some people, particularly the poorest, spend a disproportionate amount of their disposable income on basic foodstuffs.  It would be stretching a point to suggest that better-off people with expensive tastes might also spend a high proportion of their income on food, but it’s at least theoretically possible.

There’s a common thread in all of these types of poverty, though; or rather there is a common thread in the way they are described.  They are invariably portrayed as being price problems – the price of fuel, the price of running a car, the price of food – with the politicians demanding action on prices in response.  But the problem isn’t really about prices at all; it’s about incomes.

Fuel prices in particular are on an inexorable upward trend.  There’ll be variations in both directions en route; but the overall direction over time is going only one way.  And as recent events have demonstrated, demands that food should be both cheap and wholesome are probably incompatible.

I want to lift people out of poverty – all types of poverty – as much as anyone else; I just don’t believe that attempting to control prices in a market economy is ever going to be an effective way of doing that.  The distribution of income between the richest and the poorest is excessive and the gap is becoming larger.  Accumulation of resources in fewer hands; redistribution from the have-nots to the haves - that’s the inevitable outcome of free market capitalism.

Correcting that, and giving people fair access to resources, involves redistributing income, not controlling prices.  I don’t hear many politicians even suggesting that; it’s far too easy to criticise others over prices.  But if we really want to tackle poverty, it has to involve redistribution of income and resources.  Anything else is just empty rhetoric.