Had i really been asleep for that long? Was it April 1st 2009 already? As i woke up this morning bleary eyed and switched on the news i could have been forgiven for thinking it was April Fool’s Day. The BBC had me momentarily fooled on April 1st 2008 with their footage of flying penguins (’Wow flying penguins thats amazing…wait surely that can’t be right…ah yes its April fools day, good one BBC!’) and this morning i had exactly the same feeling when i heard the Policy Exchange’s proposals for regeneration in the UK. The only difference was this was no joke and it turned out that the only fools were the authors of their report released today entitled ‘Cities Unlimited: Making urban regeneration work’. Let me explain.

I think we can all agree that urban regeneration in UK cities has been a double edged sword and that whilst some areas/communities/residents have benefited others have not which has led to increasing inequality and relative poverty. What we need is a more inclusive regeneration strategy as regeneration attempts over the last few decades have not resulted in the trickle down development contained in the rhetoric. We need to find ways of delivering regeneration strategies that produce good sustainable employment with living wages, provide deprived communities with much needed improvements in service infrastructure and which include local residents at each stage in the consultation process. We are getting there but slowly - these things take time, there is no simple solution or so we thought. Enter the Policy Exchange people.

The Policy Exhange is an independent right wing think tank which has close ties with the Conservative Party. So what is their solution to the complex issue of the regeneration of UK cities, particularly in the North: people in Northern cities which are ‘beyond revival’ like Manchester, Leeds, Liverpool, Sunderland and Bradford should move to ‘the hubs of the twenty-first century’, namely Cambridge, Oxford and London to stop them becoming trapped in poorer areas and because these places have a better prospect of offering them the standards of living to which they aspire. What?

The basic premise of the Policy Exchange’s report is that we need to think about alternative regeneration policies given that billions of pounds has been spent on regeneration in these (and other) places but they show little sign of improvement on a range of inequality and deprivation indicators. The solution, according to the Policy Exchange, is to relax planning laws in the South East and allow these cities to grow outwards to accomodate a migration of people from ‘failing’ Northern towns and cities. For those who are old enough this may sound vaguely familiar. Thats right it takes us back to the days of Norman Tebbit when he told people in the North to ‘get on their bikes’. This Policy Exchange report suggests a similar course of action for people living in Northern towns and cities who ‘have lost their raison d’etre’ because of decline in shipping and manufacturing in these places. 

There are however a couple of sticking points: (i) people are not economic units that can just move around at will; (ii) the South East is already overheated and overpopulated without hundreds of thousands of Northerners descending upon it; (iii) there have been successes on the ground in Northern cities such as Manchester and Liverpool which we can learn from; (iv) there has already been furore about green belt development in the South regarding developments on a much smaller scale than the one proposed; and (v) things are a lot more complex than suggesting that Northerners would be better off moving South and that Northern areas would benefit from a reduced population. In fact just saying it out loud sounds ridiculous or to quote Peter Kilfoyle the MP for Liverpool Walton its ‘bizarre’ and ‘unrealistic’. In sum this idea may work if it wasn’t for the sheer political, economic, social and environmental infeasibility of it all. 

Let’s be clear, moving to the South is no panacea to improving people’s lives - they have poor people in the South too don’t you know. But seriously this report goes to show how fixated those on the right still are with the South East at the expense of Northern towns and cities which this report implicitly suggests we should give up on. Presumably by this logic those that remain poor in the North are to blame for not having the foresight or ambition to move South. Once again this blame the victim approach sounds eerily familiar but maybe, just maybe, rather than it being a case of people, towns and cities in Northern cities having failed maybe politicians on both the political Left and Right have for too long failed the people, towns and cities of the North. Thatcherism is alive and well and for me it sounds a warning about whether the recent emergence of compassionate Conservatism is not simply a wolf in sheeps clothing. Yes Cameron has come out and branded the findings ‘insane’ but it shows that old Tory ideals are still influential to some on the Right and this from a think tank which has close ties to those in the Shadow Cabinet. It will be interesting to hear how other key Conservative figures respond to this report. In the meantime my suitcase is staying firmly in my Northern wardrobe!

If you feel that capitalism could create something better, or that it’s just fine as it is, then check out the Creative Capitalism discussion here. Contributors include: Nancy Birdsall, Esther Duflo, Bill Easterly, Michael Kremer, and Martin Wolf among many others.

The site expands on Bill Gates’ talk about creative capitalism in his 2007 Harvard commencement speech, and at the last World Economic Forum. In Time, he says:

“Capitalism has improved the lives of billions of people — something that’s easy to forget at a time of great economic uncertainty. But it has left out billions more. They have great needs, but they can’t express those needs in ways that matter to markets. So they are stuck in poverty, suffer from preventable diseases and never have a chance to make the most of their lives”

Many of those are the chronically poor. Read the 2008-2009 Chronic Poverty Report here. We recommend increased social protection: put money into the hands of the poor through measures like contingent cash transfers. Then they have more resources with which to shape the markets and societies in which they make their livelihoods and their lives. But watch out for the counter-attack by some of the world’s wealthy who don’t want the poor to challenge their political power: not everyone is as generous as Bill Gates.

This just in from the folks at the International Poverty Centre.

“IPC is pleased to announce a new section on its website: Poverty Networks. This new resource brings together web-based platforms that share development-related publications and initiatives. You will be able to access IPC’s collaborating networks on this website”.

Tax food speculators, and use the money to subsidize the poor. That’s the conclusion of ‘Investors Punish the Poor’ in today’s The Australian. Raghbendra Jha of the Australian National University argues that the huge spike in rice prices over the last year is mostly due to speculation.

A steady upward trend in food prices is driven by the switch of cropland to biofuels and other structural factors (including the rising demand associated with growth in China, India and the other emerging economies). But the huge jump in prices from late 2007 accompanied the credit crunch in financial markets: hedge funds and others shifted from stocks and bonds into commodoties — which have relatively fixed supplies in the short term, and so prices take most of the (upward) adjustment).

The price spike hits the poor hard, and threatens the MDGs. Raghav concludes:

“This eruption of food prices represents the most regressive form of taxation…. This also represents a significant shift in the global distribution of income and calls for the taxation of speculative profits and the subsidisation of the poorest consumers”.

We agree. So how best to organize the tax? And how best to get the poor the help they need? Suggestions please.

More people now live in towns than in the countryside. And up to one-third of the world’s urban population is poor. That’s more than one billion people — and growing. Lacking adequate services and with poor health standards, the slums are home to many of the world’s chronically poor people. Often close to the water line (as in Dhaka) or on hillsides (as in Caracas), slums are vulnerable to natural disasters of all kinds.

The Nobel Peace Centre in Oslo is now running an exhibition by Magnum photographer Jonas Bendiksen.  “The Places We Live” presents 16 homes in four different slum areas: Kibera (Nairobi); Dharavi (Mumbai); Barrios (Caracas); and Kampongs (Jakarta). Nairobi’s Kibera is home to at least one million people, while Dharavi is close to Mumbai’s booming financial centre — a gross example of the rising inequality that takes the shine off India’s “economic miracle”.

The second chronic poverty report is released on 8 July, folks. A launch will take place at Houses of Parliament. It will be available to download from the CPRC web site, and we are launching as well in Bangladesh, Brussels, Washington DC and Uganda (with more to come). Watch this space for further news.

The horror of landmines is set out in a new exhibition at the Imperial War Museum North. It presents the photos of Sean Sutton who  works for the Mines Advisory Group (MAG) International. MAG trains locals to clear the mines. Interviewed in the Manchester Evening News, the photojournalist said: “the majority of people who are injured by landmines know they are in a mined area but have no choice but to travel through to get food and water”. Landmines continue to impoverish communities long after war ends, with children being especially vulnerable — walking to school or to collect water.

In a previous post I examined the recent ruling from the WTO Dispute Settlement Body over the EC’s banana quotas for ACP countries. This was simply the latest in a number of issues that have been damaging to the interests of ACP countries. Another concerns the dispute between Brazil, Australia and Thailand on one side and the EC on the other over sugar. This had the positive effect of reducing the EC’s colossal sugar subsidies. In the latest year reported to the WTO these were reported to be €5.6 billion, on a crop of sugar worth a total of €4.8 billion. But the ruling also had a strongly negative effect on ACP countries because it removed the preferential market access quotas that they previously had. These quotas allowed ACP countries to export a certain amount of unrefined sugar to the EC at the EC’s high internal price rather than the much lower world price. The effect of removing this was estimated to cost the ACP countries $352 million a year.

Finally, there is the issue of Economic Partnership Agreements (EPAs) currently being negotiated by the EU. These result from the expiry at the end of 2007 of the previous Cotonou Agreement that granted preferential market access to ACP countries into the EC market. The Cotonou Agreement was not compliant with WTO rules since it did not include any reciprocal preferential market access for EC exports into ACP countries, but was entirely one-way. As such, it could be challenged by other developing countries that were not part of the ACP group that felt that their exports were harmed by the arrangment. In order to prevent this, the EU had to have a waiver and to compensate those countries that were disadvantaged by the agreement.

With the expiry of the waiver at the end of 2007 the Cotonou Agreement had to be brought into conformity with WTO rules. The EU therefore embarked on the neogtiation of so-called EPAs with all those countries that stand to lose their preferences, although Least Developed Countries can opt to take advantage of the EU’s Everything But Arms initiative instead. However, the EBA is unilaterally given by the EU, which therefore has the right to alter or even withdraw it should they want to. EPAs are receiving growing criticism from a range of NGOs. Analysis of the agreements as they stand being undertaken at ODI has concluded that these concerns are at least partially well-founded and that the ACP countries should be worried.

Whatever the outcome of the EPA negotiations as they grind on past the original deadline of 31st December 2007, they form just an element of the negative effects WTO rules, in particular non-discrimination, has been having on ACP countries, half of which are also Least Developed Countries. Non-discrimination and the banning of preferential trade agreements was written into international trade rules right back in 1947 and the creation of the GATT, when the US wanted to remodel the global commercial system to ensure that it had access to the markets and exported raw materials of the rest of the world, which required the dismantling of Britain and France’s preferential trading agreements with their colonies. Sixty years later, this principle is having the unintended consequence of dismantling some of the (already weak) measures taken by the EU to provide markets for the exports of some less developed and vulnerable states.

Last week, the WTO’s Dispute Settlement Body issued its decision on whether or not the EC had complied with the previous ruling in the long running banana dispute. In brief, the EC allows 775,000 tonnes of bananas to be imported from the African, Caribbean and Pacific (ACP) countries duty-free each year, while imports from other countries have to pay a (fairly substantial) tariff. The US has challenged this, leading to a seemingly endless dispute.

The ruling is that the EC’s preferences are inconsistent with WTO rules on non-discrimination. The Dispute Panel appeared to accept the EC’s contention that the preferences did not reduce the value of US banana exports in any way, but nevertheless the US has faced diminished ‘competitive opportunities’ due to the EC banana rules. That is, the handful of banana growers in the US were unfairly affected by not having full access to the EC market.

In reality it is not bananas grown in Florida and Puerto Rico that motivated the US to challenge the EC preferences. Rather it is the very many more bananas grown by US corporations in Ecuador, Columbia, the Philippines, Costa Rica and other countries that it is concerned about. Over 50% of total banana exports are controlled by just two companies, both of which are American, grown mostly in those four countries. That these countries already account for around 60% of EU banana imports doesn’t seem to matter.

The US’s ‘competitive opportunities’ that the WTO is steadfastly protecting come at the expense of some of the poorest countries in the world. Estimates made by the FAO have suggested that if the EU abandons the quota, as they have been instructed to do by the WTO, and replaces it with a tariff of €75 per tonne with ACP countries given duty-free access, exports from Caribbean ACP countries will decline by 30% by 2010. For many of these countries, bananas account for a huge share of their total export revenue - over 30% for the Windward Islands for instance. The loss of this revenue will be devastating to their economies.

While it should be recognised that the ruling will potentially increase the exports of a few countries that are themselves developing countries, notably Ecuador and the Philippines, the degree to which the people of these countries will benefit is a debatable point. With such a large concentration of the banana production and export market controlled by a handful of companies based in the US or indeed Ireland (Fyffes is an Irish company that is the fifth largest banana exporter), the control they exercise over the banana trade is likely to ensure that the benefits of any liberalisation remain firmly with themselves. What is certain is that the people in ACP countries relying on growing bananas for a living will suffer.

This is the latest in a series of adverse decisions the WTO Dispute Settlement body has made that impact very negatively on ACP countries. Over the coming weeks some more of these will be examined here, so keep reading!

In the 2007 Budget Gordon Brown, then Chancellor of the Exchequer, announced that the 22p tax band would be reduced to 20p in the pound as of April 2008. In addition, the 10p tax band was to be abolished. The aim was to create a simplified and fairer tax system and raise some much needed revenue for the government – they expect to make £3.7bn from the changes. A year has passed since then and the planned tax system changes have been implemented but only now are we beginning to understand the implications of these changes. As the tax band changes have the effect of ‘making poor people poorer’ (to quote Labour MP David Anderson) Brown is facing a substantial backlash from backbench Labour MPs, other political parties and the general public.

In essence, what the tax band changes amount to is a reduction in the tax paid by higher earners and an increase in the tax paid by those on the lowest incomes. Let me repeat that. A Labour government, which is intent on tackling poverty, has implemented a change to the tax system which sees the better off in society gain money and the poor lose money. As The Times put it, it amounts to a robbing Peter to pay Paul type of situation but in this case Peter was notably poorer than Paul in the first place. It has been estimated by the Institute of Fiscal Studies (IFS) that 5.3 million households will be negatively affected by these changes with poor households losing out by up to £232 per year. This is shameful enough but when this is juxtaposed against the fact that the tax changes mean that everyone earning above £41,435 will have an extra £297 a year in their pockets there is little wonder there has been a substantial and sustained backlash.

The Government’s position on the emerging tax rebellion has changed several times in the last few weeks from outright denial that the changes will negatively affect anybody to some form of commitment to do something about it somehow in the future. For now, Gordon Brown and the current Chancellor of the Exchequer, Alistair Darling, are attempting to stave off criticism by pointing to the role of the tax credits system in making up any short fall in household income. Admittedly this would be an effective mechanism if the tax credit system was infallible and was available to all workers and if homo-sapiens became homo economicus - the optimum economic being - but this is not the case. Current estimates suggest that around only half of those eligible for Working Tax Credit actually claim it. In my work with working poor households in Manchester I found that many households did not claim tax credits because of (i) a perceived stigma around being seen to claim benefits despite the fact that they were a form of in-work support and (ii) because of the complex nature of the system. In addition, the recent problem of tax credit overpayment had dented the confidence of many low income households in the system and has put many off from claiming. In the last three years nearly £6 billion has been overpaid to hundreds of thousands of households. The government’s attempts to claim this back from low income households has exacerbated the experience of poverty for many recipients. Some claimants have even been forced to sell or re-mortgage their homes to afford the repayments. As such, the tax credits system is no longer seen by many as an effective poverty alleviating tool let alone a makeshift tax compensation tool. Indeed, Frank Field, the former welfare minister and MP for Birkenhead, noted recently that ‘tax credits are clearly the bluntest of anti-poverty weapons and are the equivalent of attempting delicate key hole surgery with a hacksaw’. Then there is the problem that Working Tax Credits are not available to all workers – anyone working under 16 hours a week and all childless people under 25 or not working 30 hours a week are ineligible. As such, these workers are some of the hardest hit by the tax band changes because they do not have access to tax credits to plug the shortfall in their income. Other groups that have been hit hard include those in childless households because they are unable to access child tax credits to make up the shortfall. So maybe the tax credits system is not best placed to make up the shortfall for those households who lose out as Brown and Darling suggest.

At a broader level the tax band changes also go against the Labour Governments making work pay strategy - promoting work through National Minimum Wage legislation and the tax credits system. New Labour has put paid work at the top of the political agenda since 1997 due to a belief that it was central to combating the Conservative legacy of rising poverty, social exclusion and social inequalities since the early 1980s. The  making work pay strategy was implemented to ensure that those moving into work (and those already in work) were financially better off vis-à-vis being on benefits. However, the 10p cut makes a mockery of Labour’s strategy of making work pay as the tax changes hit the take home pay of the low paid. Frank Field has argued that ‘this is a group we should be saluting, who do some of the best jobs in our society for the least money’. Indeed, the majority of workers I spoke to in Manchester were employed in local hospitals as cleaners, porters, security and health assistants on wages just a few pence more than the minimum. The majority of these workers will open their pay packets and find they have a little less money this month for food, rent, fuel, clothing and leisure. These workers should be applauded for their valuable work and not punished by a regressive tax system which further undervalues their work meaning that for some work becomes a less viable option.

So what has been the government’s response? Brown has attempted to play down the furore behind the abolition of the 10p tax band by pointing to Labour’s longer term record on dealing with poverty. Speaking at the Scottish TUC on Monday (21^st April) Brown stated that ‘we have done more as a government in the last fifty years for poverty than any other government’. He is correct and should be rightly applauded but surely this does not justify the ‘pre-meditated tax grab’ (in the words of opposition leader David Cameron) on the working poor. Brown has, throughout his political career, shown his concern for the poor both at home and abroad which makes the tax band fiasco all the more surprising, or does it? Brown has always been concerned with poverty in households with children. Indeed, they have fared well under New Labour with things like the Child Tax Credit and other pro-family labour market legislation. However, poor households without children have fared less well with Mike Brewer from the Institute for Fiscal Studies (IFS) suggesting that this group has only gained a 1% income increase through New Labour’s tax and benefit changes. It seems in Brown’s admirable aim to eradicate child poverty in the UK by 2020 he has ignored the concerns of households without children – the very people who have been hardest hit by the tax band changes. As the Treasury Select Committee have stated these workers are ‘an unreasonable target for raising additional tax revenues to fund the benefits of tax simplification and meeting the needs of children in society’. Child poverty is something which SHOULD be eradicated but not at the expense of other poor people. Surely a more socially just way of tackling all forms of poverty is through progressive redistribution from the super-rich rather than having the poor subsidising the poor.

Others in the Labour Government have been dismissive of the impacts of the tax band change. John Hutton, the Business Secretary, argued that for those who lose out the losses are relatively small. Indeed, the losses wouldn’t buy John or any of his other MP friends much in John Lewis but to low income households a loss of only a couple of pounds a week can be extremely significant. To return to my work in Manchester, I interviewed low paid workers in the city to better understand what life was like on a low income. The findings of this research will soon be available as part of the BWPI working paper series but let me briefly contextualise what a couple of pounds a week meant to them. It was the difference between getting the bus to the shops and having to walk; it was the difference between affording a bit of fresh food in a diet consisting mainly of cheap calories and eating another high fat/low nutrient microwaveable meal; it was the difference between being able to unwind at the end of the working week with friends and staying in unable to socialise; and it was the difference between being able to put a little bit of money aside for future emergencies and being forced into debt. When put in the context of a small, stretched and finely balanced budget of a low income household a couple of pounds makes a lot of difference particularly at a time when food, fuel and council tax costs are rising disproportionately to income and the working poor face ever increasing pressures on their household income.

However, despite these problems Alistair Darling insists that he cannot change the Budget. He says it will be too expensive to reinstate the 10p tax band (although finding £50bn to bail out the banks as part of the credit crisis is no trouble!) and that he will see what he can do in future budgets to help cushion the blow to low income households. The most recent announcement suggests that the next inquiry into child poverty will be broadened out to include those negatively affected by the tax changes. However, Darling has argued that the next opportunity to change the decision will be his pre-Budget report in November/December 2008. What is needed is action which addresses the problems now and that does not rely on some vague promises in the future. The low income households affected by the tax changes cannot afford to wait six months as they are facing very real problems this week and they can’t eat promises. This has caused Frank Field to argue that ‘the idea that somehow we’ll do something undefined in the future to protect the poorest people in work, just is not on for most Labour backbenchers…it’s against everything we stand for’. Hence the recent backlash by backbenchers led by Field himself. They have argued for the need to announce within the next week a compensation scheme which helps all those affected by the tax band changes and to back date the compensation to the beginning of the tax year. This amendment to the finance bill has just passed its second reading in the Commons and a vote is scheduled for next week.

This issue is one which refuses to go away for the increasingly troubled Brown government which, in recent weeks, has been characterised by disagreement and internal conflict. Nick Clegg, the leader of the Liberal Democrats, has argued that the tax band decision is a ‘defining moment’ in British politics and has been likened to the ‘poll tax’ that brought down Thatcher. I am not sure whether these parallels are valid but what is clear is that the tax changes have been very unpopular and could be the final straw for many Labour supporters affected either directly or indirectly by the crisis. It is the local MPs currently canvassing for support in the May 1st local elections that are feeling the wrath of the electorate with low income households unhappy at losing money and higher income voters uncomfortable with the fact that they are gaining whilst millions of poor households have to struggle that little bit more to make ends meet. Hopefully Labour will react swiftly and positively to help all the low income households affected by these changes. The sad fact is that whilst those in power sit around debating the effects of the tax changes and drag their feet on possible solutions as they attempt to get their own house in order the real impact of a few less pounds in the pocket is affecting the budgets of low income households today, tomorrow, this week, this month. With rising costs and declining incomes I am not sure how much more Britain’s low paid workers can take.

Breaking news (added 23/04/08 12:30): ‘Darling u-turn on 10p tax rate’ http://news.bbc.co.uk/1/hi/uk_politics/7362283.stm

In sum, a compensation package for those losing out as a result of the tax changes will be announced in Autumn and will be back-dated to April. The exact nature of the package is unclear but it will involve changes to the winter fuel payment system, tax credits and the minimum wage. Darling also suggested that the Government are willing to look again at the youth minimum wage rate (currently £3.40/hr for 16-17 year olds and £4.60/hr for 18 to 21 year olds whereas the adult minimum wage is £5.52/hr). As a result Labour’s Frank Field said an amendment calling for compensation and backed by 46 Labour MPs would be withdrawn.