[UK] Cameron pledges action on poverty

from The Financial Times

By Ben Hall,Political Correspondent

Tax credits will not lift more people out of poverty, David Cameron, the Conservative leader, said yesterday.

Promising to act against the "moral disgrace" of poverty, Mr Cameron said a Tory government would seek to engineer a "big shift" away from fiscal transfers by the state towards action by voluntary groups and social enterprises.

"Trickle-down economics is not working," he said. "But neither are the mechanisms of centralised redistribution."

In a lecture intended to underline the Tories' shift to the political centre ground, Mr Cameron said he now believed in addressing relative poverty, rather than simply providing a safety net against absolute levels of deprivation.

But while promising to keep tax credits, he appeared to suggest the Tories would not increase them. Tax credits created a benefit trap for people in work, discouraging higher salaries or promotion, and had failed to help the poor who have neither a job nor children, he said.

The £15bn-a-year tax credit system has become the government's principal weapon against child poverty. Unlike most benefits, the child tax credit rises in line with average earnings, helping to lift poorer families out of relative poverty, defined by the government as 60 per cent of median family income.

But a recent report from the Joseph Rowntree Foundation concluded that to halve child poverty would require an extra £4bn in tax credits a year by 2010, and to end it would cost an additional £28bn a year by 2020.

"The current approach cannot succeed in substantially reducing relative poverty without unaffordable spending increases," Mr Cameron said.

He said the solution lay in using charities and non-profit groups to address the causes of deprivation, such as low educational attainment, drug addiction and family breakdown.

Specialised charities were more successful than government agencies at getting the long-term unemployed back into work, he said.

The Conservatives' policy review was drawing up plans to relax planning rules to allow voluntary and community groups to use public buildings and facilities. The party was also looking at how to enable non-governmental organisations to compete with the public and private sectors for government contracts while people doing voluntary work could be rewarded with tax breaks and extra benefits.

But poverty campaigners said Mr Cameron could not simply rely on the voluntary sector but would have to increase welfare payments.

"Now that we have welcomed Cameron to the debate, he must understand that social enterprise is only part of the solution," said Kate Green, the chief executive of the Child Poverty Action Group.