When it comes to poverty, adequate policy responses require adequate measurement

Imagine our government managed to enact policies that brought down the cost of essential goods and services in this country, resulting in a pronounced improvement in the living standards of the poorest. What do you think would happen to the national poverty rate? You’ve probably guessed wrong – because the real answer is nothing. Such is the madness of the current way that poverty is measured in this country.

The government could, for example, start by thoroughly liberalising the system of land use planning and building regulations, boosting the supply of housing. Artificially inflated housing costs hit the poor hardest, both directly and through their several knock-on effects.

At the European level, the government would aggressively push for an opening of agricultural markets, and for an abolition of quotas and price controls. It would be more concerned about the humble consumer than about the farmers’ lobby.

At the domestic level, there would be a clampdown on regressive taxes. On average, households in the bottom decile of the income distribution pay about £2,500 per year in ‘sin taxes’ and ‘green taxes’.

All of these moves would help bring down the cost of essential goods and services; but they would not help alleviate poverty because, when talking of poverty, governments over the years have been shackled to the idea of ‘relative poverty’.

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Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).