Fraser Nelson

Poverty comes in red and blue - a reply to the Guardian’s Michael White

Poverty comes in red and blue - a reply to the Guardian's Michael White
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I have the honour of having my Ch4 Dispatches documentary, now available online, reviewed by Michael White in the Guardian today. I think he was expecting me to lay into Labour, and critiques the show as if I did. In general, I seem to be charged with being in possession of opinions about inequality while being right-wing. I plead guilty, but would still like to offer up a few points in mitigation.

First, let’s take the original headline of his piece: 'Fraser Nelson’s Dispatches show blames Labour for inequality.' I don’t. As I say right at the start:

'Decades of government policy intended to help the poorest is now hurting them instead.'

Blame lies with all parties: hence 'decades', which extend into the Thatcher years and the start of incapacity benefit buildup in the 1980s (the policy I had in mind in that sentence). To me, the heroes (and the villains) lie on both sides of the House of Commons. Baker, Blair, Adonis, Gove. Murphy, Purnell, Grayling, IDS. And villains? Those who tried to stop them.

Now, IDS. This is the second part of Michael’s charge against me. He caricatures my documentary as saying:

'It’s going to be OK because IDS’s universal credit system (UC) will gradually cure that (when they can make it work) and make work pay better.'

If only I thought it was going to be okay. Instead of saying that Universal Credit 'will gradually cure' the problem of people caught in benefit traps, I confront IDS about the fact that UC won't be much of a cure at all. It will still leave people facing an effective 65 per cent of tax if they move from welfare to work (i.e. they lose £6.50 of benefits for every extra £10 they earn).

Here's how our conversation went:-

listen to ‘Iain Duncan Smith on 65% effective tax rates’ on audioBoom

</p><p>(function() { var po = document.createElement("script"); po.type = "text/javascript"; po.async = true; po.src = "https://d15mj6e6qmt1na.cloudfront.net/cdn/embed.js"; var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(po, s); })();</p><p></p><p><blockquote>Me: We met someone in Rochdale - Liam Clark - he’s got two kids, he’s working 12 hour shifts but he reckons he’d be better off if he were to quit and go on benefits - surely that’s a sign that after 4 years your government simply hasn’t helped people like him?</p><p></p><p>IDS: I applaud what he is doing, because it’s absolutely the right thing to do, but universal credit, which is the key big reform which we are bringing in, that will ensure that people like him are always better off in work.</p><p></p><p>Me: "Better off in work" sounds good but in reality it depends how much better off you’re going to be. When your new system comes in they’re still going to be facing tax rates of 65%.</p><p></p><p>IDS: Well first of all right now the current system, you could face a marginal tax deduction of over a 100% …So Universal Credit makes it 1 deduction rate, you're right it’s set at 65% but it also allows you to earn a chunk of money before we even start that deduction.</p><p></p><p>Me: Sure - but that’s no small point. 65 per cent? Nobody watching this programme would work at a 65% tax rate. Surely this is still a huge penalty to place on those trying to better their lives?</p><p></p><p>IDS: It’s lower than it would be right now. And it will mean that always you are better off in work than you are sitting on benefits.</blockquote></p><p>Michael also says that my documentary lets the rich off because I skim over the 'blindingly obvious' point that they put their wealth into assets. Oh, he says, I might mention assets</p><p><blockquote>'in a distant corner of the programme'.</blockquote></p><p>I can only assume that he didn’t catch the first 6 minutes of the 27-minute film: they were devoted to the asset boom and how it has helped the uber-rich by inflating the price of prime property, diamonds, vintage Ferraris and more. (If he did miss this, he can <a href="http://www.channel4.com/programmes/dispatches/">watch it on 4od now</a>). I even go into QE.</p><p></p><p>One final thing. Michael says:</p><p><blockquote><em>'In his Sunday Telegraph article he suggests that, though America is very unequal too, low-paid US workers are “better off than ours”. That’s plain wrong, has been for decades, and a clever chap like Nelson should know it.'</em></blockquote></p><p>I’m not sure about 'decades' ago – Michael’s the man for that – but the<em> New York Times</em> recently commissioned the Luxembourg Incomes Study, a major examination into the situation over the last few years. Household income for the bottom 10pc was found to be $6,534 in the UK, against $7,108 in the USA. Britain is, quite simply, a poorer country. In fact, if we were to somehow leave the EU and join the US <a href="http://blogs.spectator.co.uk/coffeehouse/2014/08/why-britain-is-poorer-than-any-us-state-other-than-mississippi/">we'd be the poorest state in the union, </a>with the exception of Mississippi. This is not something to be proud of.</p><p></p><p>Anyway, truth be told, I'm delighted to have the documentary reviewed by someone of Michael’s stature. He was something of a hero to me when we both worked in the parliamentary press gallery 13 years ago. He took time to chat to the younger reporters from regional titles who are so often treated as invisible by the big beasts of Fleet St. I’m pleased that he has not forgotten me now.

Written byFraser Nelson

Fraser Nelson is the editor of The Spectator. He is also a columnist with The Daily Telegraph, a member of the advisory board of the Centre for Social Justice and the Centre for Policy Studies.

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