A friend of mine who has lived in poverty for some time – and is an angry, energetic activist – tells of an interview she did with a journalist about her experience of fuel poverty and the choices she has to make living on the breadline.

At the close of the interview, the journalist said to her ‘but you’re not really poor are you?’, with a knowing, conspiratorial nod.

My friend asked ‘what do you mean?’, to which he explained ‘well, you’ve got great hair, posh looking glasses and lipstick.’

So apparently people can’t be poor and have pride in their appearance at the same time.

But the reality is that my friend is one of the world’s best budgeters and is able to find the best bargains (take note Messrs Osbourne, Johnson and Cameron). She chose well when she received her glasses from the NHS. She has her hair done for free at a local training college and her good taste means she selects quality, stylish items from her local charity shop.

But is seems that’s not good enough – she needs to be conspicuously poor.

This story speaks to a much wider issue of hidden poverty, but also assumptions, misunderstandings and stereotypes.

For example, earlier this year I was part of a radio phone-in about people claiming disability related benefits. The allegation was being made – not for the first time – that most people do so fraudulently, when they are actually fit and well and just too lazy to work. The protagonist’s claim was that because he sees people walking around near his local cafe, dragging their walking sticks, rather than leaning on them, and clearly not at work, then they must be faking a disability and thus fraudulently claiming benefits.

But one only needs to remember that we live in a society in which over half of people receiving disability related benefits are doing so on the basis of poor mental health to recognise that people leaning on their walking sticks isn’t a good proxy for the number of people who don’t ‘really need’ benefits. And more than this, the assumptions contained in the journalist’s allegations and assertions are that style and taste is only the prerogative of those with money.

Writ-large this is a dangerous imposition of superiority and social hierarchy, in which people buy taste, and through this demonstrate some sort of higher value – apparently showing the world they have money, are more successful and somehow inherently better than others.

We know that it is getting worse – in Scotland, for example, two fifths of the increase in income during the last decade has gone to the richest 10% of the population).

We know that it is worse than most other European countries – the UK is up there with Greece, Bulgaria and Lithuania.

Many of us know that now the greatest inequality seems to be not between those in work and those out of work, but between those in work – between those who earn mountains and brag about it, and those who earn an hourly wage so low they remain below the poverty line.

And we know that, combined with decreasing social mobility, the UK’s inequality means people have no hope of ever climbing an increasingly steep and sparsely-runged ladder.

What is so amazing is the lack of appreciation of how interconnected the talons of inequality are with our various social and environmental problems.

In an unequal society, in which resources are owned, enjoyed and controlled by the few rather than being shared amongst more people, the (often not very subtle) message to those at the bottom of the hierarchy is that they have lost the competition. Worse, there is an implicit assumption that they deserve their lower status because they are somehow less able, less talented, less gifted.

This ignores the opportunities, privilege and support showered on those who already ‘have’ – the education, the social connections, the resources, the confidence, the exclusive access to jobs and so on. I often wonder why we don’t expect more from such people than ‘socially useless’ work in finance or wallowing in inherited wealth. What happened to ‘from those to whom much is given, much is expected’?

But there is a much more profound, longer term impact of inequality.

Firstly, it corrodes our social institutions that make us civilised and humane. The more distant we are from each other – the more we inhabit different worlds, live in different localities, send our children to different schools, shop in different establishments, experience different health care –, the less we recognise each other.

The less we recognise each other, the less we appreciate our connections with each other.

The less we appreciate our connection with each other, the less we empathise for each other.

The less we empathise with each other, the less we care for each other.

And the less we care for each other, the less willing we are to contribute to shared support systems.

Hence we should start recognising the growing tax evasion and the paring down and tightening up of our mechanisms of social protection as a function of our increasingly unequal society. These shifts will also make inequality far, far worse.

Secondly, inequality fuels materialism that leads to conspicuous consumption – people try to demonstrate their status outwardly through possessions that denote conformity to some social grouping. Materialistic pursuits crowd out our time and emotional energy for more valuable pursuits such as community involvement. It can also lead to debt. And such consumption is completely rubbish for the environment – in every sense of the word ‘rubbish’!

And finally, inequality generates angst and anxiety about one’s status. Evidence from around the world shows that living with stress, anxiety and a sense of alienation leads to socially destructive behaviours and premature death. Inequality really is a matter of life and death.

When looking aghast at the state of the world, we could do worse than remind ourselves that it is the inequality that underpins so many of our dire problems.

To many, all this sounds like a very attractive proposition.  Efficiency always sounds like a great idea.  We’ve all heard far too many stories of extravagance and waste and even outright fraud in the public sector.  No doubt most of us think we could do a better job of spending our money than our political masters.  And I’ve yet to meet anyone who enjoys paying tax.

To the libertarian, the welfare state is fundamentally immoral and inefficient.  Not only does it remove the incentive to work for some, but it also unfairly forces all workers to contribute to their support.  The libertarian capitalist argument says that everyone is responsible for their own wellbeing and, without the “something for nothing” approach of the welfare state, people will work harder to find and retain the best job they can.  Those who are unable to work will be recipients of the noblesse oblige of the rich, whose philanthropic instincts will be encouraged by the absence of a state-sponsored welfare system.

The approach starts to fall down when you consider some of the practicalities, though.  If a corporation wishes to start an industrial process with significant environmental impact then how wide does its negotiating circle have to go, especially if it expects to produce a high level of carbon emissions that may affect the whole world?  How strong are the relative bargaining positions of the wealthy business-owner and the unskilled worker she wishes to employ on very low wages, or the powerful corporation and the area of very high unemployment to which it relocates?  And what happens if the wealthy (and even the not-so-wealthy) don’t keep up their end of the implicit bargain with those who are unable to work?  After all, a safety net is never needed until someone actually falls down.

That’s not to say that we can’t learn some useful lessons from this kind of philosophy.  Above all, I think it helps us ask some serious questions about “corporate welfare” and corporate responsibility.  We often hear politicians arguing that people must take personal responsibility for their circumstances and do whatever is required to improve their lives.  Libertarians hold strongly to this view, but they also insist that corporations must stand on their own two feet as well.

In Britain recently, not only have we seen major companies receive massive government subsidies, but also the ongoing effects of a system that effectively allows them to abdicate their responsibility, in order to pay their own way. Our “corporate welfare state” distorts the market drastically and, as the libertarian model predicts, this leads to inefficiency, excessive state intervention and worse outcomes for low-paid workers.

For example, I pay taxes that go into a central pot, some of which goes back out to other workers as child or working tax credits – a complicated arrangement that sees workers on low pay, who pay tax, claiming credits from the government to top up their income.  While this has been a fairly effective way of lifting children out of poverty, it doesn’t seem like the simplest solution. Given that the tax credit system is one of the most notoriously unreliable bureaucracies we have, wouldn’t it also be easier – and much more efficient –to cut out the middle-man by increasing the basic tax allowance to the living wage, and, as a result, not have those people paying tax in the first place?  It just doesn’t seem fair to have low earners paying taxes before they’ve made enough to feed their families. The losses to the Exchequer could even be offset by a slight increase in the tax rate for those earning above the new threshold, if that was deemed necessary.

People working in poverty reduction often talk about the importance of increasing government-sponsored childcare so that people, especially women, with children can enter (or re-enter) the workforce more easily.  But why should this – a direct cost of employing someone with a family – come out of the taxes of other workers who are already financially stretched? Why not reduce everyone’s taxes by the amount the country spends on such initiatives, and instead demand that employers come up with decent childcare provision themselves?  Better yet, we could insist that companies just pay their workers at a level that lets those workers choose the childcare provider that bests suits their needs, whether that’s a nursery close to home or paying grandma appropriately for the caring work she takes on.

And why in the world should anyone who has a full-time job need to claim any kind of benefits just to survive? Shouldn’t we be asking why wages are so low in some jobs that people can’t afford a decent life without a state subsidy? Government ministers insist that welfare reform is vital if people are to escape a “culture of dependency” and if they are to “make work pay”. But if a company is only profitable because other people’s taxes are enabling it to keep wages low, who is really “dependent” and who is really responsible for work not paying?

All these questions would be answered if the welfare state was, indeed, only providing ordinary people with a measure of protection from the vagaries of a sometimes cruel economic system. But some benefits given to ordinary people ultimately “subsidise” the low wages of many jobs.  In the end, that’s welfare for companies at the expense of everyone else.  I don’t think many of us believe that’s a healthy way for our economy to operate.

My taxes (and yours) should go towards insuring the nation against an economic downturn that forces many of us out of work, or against the existence of people who are simply unable to work.  My taxes (and yours) shouldn’t go to fund systems that, whether by accident or design, keep other people at or near the poverty line.  I’m happy enough to contribute to the welfare of people who are struggling to make ends meet on their own. I’m not at all comfortable paying for profitable corporations to keep them that way.

Kenny McBride works for Oxfam’s UK Poverty Programme in Scotland.  He wouldn’t know who to vote for in an American election.

Chill winds are sweeping Britain’s economy with a general expectation that poverty will increase in the coming years, and that poverty reduction targets will be missed. Alarm bells rang loudly after hints that the Government is considering changing the way it measures poverty. They wouldn’t just do this because unmet targets are embarrassing. Difficult times mean that politics in Britain has primarily become an exercise in allocating pain, not spreading butter. It may be tempting to just try to protect those with access to power, a voice, or those likely to vote because they still believe the status quo can work for them.

But this would be like applying sticking plasters to a breaking dam. Ignoring the 13.5 million people suffering below the poverty line wouldn’t just be immoral, it would be nonsensical. For two reasons, economic weakness has made tackling poverty more important, not less. Firstly, the solutions to Britain’s economic malaise require the inclusion of people on low incomes. Secondly, poverty in Britain is caused by a dysfunctional economy, and in this financial crisis, this underlying dysfunction is dragging down the living standards for growing numbers of people.

Why is solving poverty more important than ever?

If Britain is going to rebalance its economy to take advantage of new global opportunities in the way that the Government and business organisations like the CBI want, then our people and their skills will become more important determinants of growth. Some economists argue that because middle classes have become more educated, they are likely to provide fewer productivity gains in future. This means that improving poor peoples’ economic inclusion is even more important – a stable, decent standard of living is a precondition for realising potential.

Instead, increasing numbers of people are being subjected to the kinds of pressures and vulnerabilities that have existed at the bottom for years. The share of national income that goes to workers has not only declined inexorably during recent decades, but has kept falling during recession. This problem is affecting the majority of people in Britain as well as those below the poverty line. People are increasingly realising that while they’re working for the economy, the economy isn’t working for them.

This isn’t really new, it’s just worse than ever. UK economy has become supremely ineffective at including people. The proceeds of growth are not allocated where they are due. So as the numbers of those struggling with unemployment, underemployment and in-work poverty all rise, the gap between an “underclass” of the workless and millions more people in work will become more blurred. Now is the time to make common cause, to commit to tackling the underlying drivers of poverty, because it is more obvious than ever that doing so will benefit the majority. This is why a plan to come together to deal with the fallout of the economic crisis is an essential part of a bright, attainable vision of the future.

What needs to happen?

Firstly elites need to change the way they talk and think about poverty, being clear that it’s a problem for everyone. For most people, although extreme deprivation persists, poverty is decreasingly a question of ‘them’ and ‘us’.

Secondly, Britain needs big changes that work for the majority. Policymakers must make sure new forms of growth include society from the bottom up, and commit to reversing the rise of economic inequality that is making the financial crisis more painful for millions. And economic policy must focus on increasing the quality as well as the quantity of work. Work is now a debasing experience for millions of people: it offers low pay, few chances of progression, and little security. This is why, if you are a British child in poverty, the chances are, at least one of your parents is working. A work ethic can’t thrive when work is becoming an increasingly ineffective way to support a family.

Thirdly, policymakers need to inject urgency into making policy across the board pro-poor. There are plenty of low-cost and no-cost ideas out there that need a hearing. For example improving the Welfare Reform Bill should be an urgent priority, a Robin Hood Tax to protect services and safety-nets for the poorest should be another. Strong signals from the top that reducing poverty is a priority will give bureaucrats and junior ministers the courage to innovate.

Finally, leaner years require a more equitable distribution of the crop. A majority of people seem to think two things about the deficit: it is real and needs to be dealt with (56 per cent in a November YouGov poll), and that it’s not being closed fairly enough (57 per cent). In Westminster, closing the deficit can seem like the crucible of the political contest. But people outside the bubble know it’s not a game. For some communities it’s a question of life or death. To policy elites deficit reduction looks like a myriad of ‘difficult decisions’, each one subject to intense lobbying by those who can afford a voice. But the important question is do we get through this together or split apart? Does society share the burden, ensuring a decent standard of living for everyone – or do various interests fight over the scraps in a contest that can only condemn the vast majority to a poorer future? It’s the decision over the kind of society we want our children to grow up in.

Ben Morgan is Oxfam Advocacy and Policy Officer on poverty in the UK.

We are living in financially difficult times and everyone is feeling the pinch and having to tighten the purse strings. Now, following the announcement of rises in the price of gas and electricity by fuel giants over the summer, there are millions of people out there anxiously holding their breath in fear of the arrival of their energy bills.  These increases are having a devastating impact on households, and a study by Deutsche Bank has predicted a quarter of UK homes will be in fuel poverty by the year 2015.

As a charity that helps people in financial need, we know that the issue of fuel poverty is of paramount concern to the people we assist, with nearly two fifths indicating that they couldn’t afford to heat their homes before coming to us.  Moreover, just under a third were regularly skipping meals.

We know that Angela, who is her disabled son’s primary carer, survives on a low income and with winter approaching, she told us she is dreading her gas and electricity bills arriving. She is worried she will struggle to make ends meet.

And then there is Jayne. As well as being blind, Jayne has fibromyalgia, arthritis and Raynaud’s syndrome – conditions which mean that she needs to keep warm to reduce the pain in her aching joints. She is struggling to afford her energy bills and now goes to bed without any heating at all, often waking up to find her feet and hands have turned blue.

In Britain in 2011, there are still many individuals – just like Angela and Jayne – who are being forced to choose between whether they ‘Heat or Eat’. Is it right that companies make money at the expense of vulnerable people?

Our Turn2us service is highlighting the issue of fuel poverty through a social media campaign. We will be asking people to submit information on how much they pay for energy as a percentage of their income and the results will be automatically plotted on an interactive map. To join in or follow the campaign visit www.FuelPovertyMap.org.uk.

Rob Tolan is the Head of Policy & Research at the national charity Elizabeth Finn Care, which runs the Turn2us service. Turn2us helps people in financial need gain access to welfare benefits, charitable grants and other financial help – online, by phone and face to face through our partner organisations.

It followed from the ensuing debates over the inextricable causal links between deep rooted poverty and inequality that there was a need to propose solutions that work to address these damaging characteristics of the political economy of the UK and Scotland. The consensus across academics, the Church, trade unions, and community and voluntary sector members of civic Scotland – informed by UK and European commentaries – was that a better future was and has to be possible.

That many of the levels of inequalities and drivers of poverty have been persistent over generations was confirmed over and again, suggesting that what has been evolving over time represents failure, but also design. The strategies and policies of successive UK Governments of recent, present and, we are promised, future times have not only been reproducing these but exacerbating life chances for many while enhancing the riches of the few. The failure to reverse relative and absolute declines in economic and social performances whilst pursuing illegal wars and rearmament through a new generation of Trident missiles – not a strategy adopted by our competitors – was highlighted.

Security and safety seemed to be flexible concepts in this country, missing for those seeking relief from insecure jobs and housing, but paid for by us all to ensure others with high incomes and pensions never suffer hardship or the consequences of their own actions. Bringing the economy to ruin through bankers’ speculative games and massive bonuses has allowed the Westminster Coalition to claim a need to launch massive attacks on collective provision of health, education and welfare in England, with Scotland now facing the choice of where to make deep and damaging cuts to the lives of the vast majority.

It was stressed throughout the seminars that the economic system and the pursuit of growth meant that those who had not gained from the speculative bubble of growth in the 1990s and 2000s were paying the price for the recession now and in years to come; yet those who had created the crisis were hardly affected. This led to repeated discussions and demands for a new approach, a paradigm shift with society prioritising sustainable development and not growth for its own sake. Participants made clear the links to the debates and development of the Oxfam Humankind Index for a better Scotland, a fitting legacy to the seminar series.

The seminars confirmed the need to learn from history is essential, and that small countries in northern Europe hold much better ways forward to a more prosperous, fairer and sustainable Scotland than the usual look across the Atlantic to neoliberal ideas and madness. International comparisons of standards of living, of quality of lives, of levels of health, happiness and satisfaction consistently show how our closest neighbours offer much better prospects than we are subject to here.

This seminar series was not an end in itself but rather both a contribution to setting the agenda for this better future and to establishing the framework and structures for exploring how to get there. We look forward to welcoming colleagues from across the nation in that conversation and journey.

Mike Danson is Professor of Scottish and Regional Economics in the University of the West of Scotland and co-organised the ‘Whose Economy?’ seminar series with Katherine Trebeck, Research and Policy Advisor for UK Poverty in Scotland.

That average incomes are set to continue to fall until ‘at least 2013-14’ is bad enough. But scratch beneath the surface, as the IFS do, and it’s clear that the poorest face the heaviest burden. Essentially, the poorer you are, the higher the proportion of your income that you will lose over the coming years. (With the exception of the super-rich, largely due to the under-threat 50p rate of tax for earnings over £150,000 a year.) Inequality and poverty will rise as a result – reversing the trend of the recession years.

The reason is relatively straightforward. Where the previous government cut regressive, indirect taxes and introduced a new, progressive top rate of income tax, the current government has raised VAT and introduced swathes of benefit cuts. Overall, the poorest fifth of people will, on average, lose 6% of their incomes as a result of changes to the tax and benefits system. Those are the outcomes of the political decision to make the poor pay for the hangover of an economic boom from whose benefits they were systematically excluded.

Alas, it gets worse. The government’s deficit reduction plans do around a quarter of the work through tax increases, and three-quarters through spending cuts. The IFS focus in their analysis on private incomes (which include tax increases, but also £18 billion a year of benefit cuts), but decline to factor in the impact of cuts to public services. Even excluding benefit spending, the planned cuts to public services are estimated to equal 20.3% of the household income of the poorest tenth of households, compared with just 1.5% for the richest tenth. Public services may be an irrelevance to the rich few who can afford to opt out, but they’re utterly essential to millions of people.

After becoming accustomed to incomes largely going up and up, we face a prolonged period of getting poorer as a society. But those golden years were a lot more golden for some than for others. For three decades, inequality has been rising, as the rich have done better than ever, and the poorest have been left behind. There are myriad reasons, moral and economic, to tax progressively and protect the incomes of the poorest. Yet the opposite is happening.

It seems that, when we were getting richer, no-one cared that we weren’t all in it together. But as we struggle with the aftermath of the biggest recession since World War II, is it really fair that those with the least should be paying the most?

So far, so typical. A new government scores cheap and easy points with sections of the media and the public by talking tough on benefit claimants, selectively quoting statistics to further that aim. Public attitudes having been softened up over time by successive governments so that this kind of talk ceases to shock. The Need Not Greed campaign, of which Oxfam is a member, is clear that it is the outmoded benefits system, which has failed to develop with the modern labour market, that forces people into working informally (“cash in hand” and “off the books”), just to get by. We’re not talking about massive defrauding of the system, but people who want to work, but are held back by the system.

But perhaps it’s better to let the government – in the form of the recent consultation paper on welfare reform, championed by Iain Duncan Smith – speak for itself: ‘fraud is always wrong, but we must recognise that the benefits system is making matters worse by pushing valuable work, and the aspiration that this can engender, underground’. If Cameron is serious about tackling fraud – and not just chasing headlines – then it is this systemic failure that he needs to devote his energies to.

Oxfam argues that, by raising the amount of money people can earn before their benefits are affected, and lowering the rate at which they are withdrawn thereafter, work that is now informal will be brought into the light. People who can only do small amounts of work – because that’s all that’s available, because that’s all that they can manage right now, or because that’s what fits with their caring or other responsibilities – will be empowered to do so.

Policymakers also need to engage seriously with the vulnerability of people living on benefits and seeking to get back into work – putting security back into social security. Forced to subsist on tiny incomes, and with few assets to draw upon, such people are understandably risk averse. Benefits should help them manage that risk, stepping into the breach whenever work dries up, or if a new job doesn’t work out. At the moment, it can take weeks to process claims for various benefits, and taking those difficult first steps into work can become a debt crisis from which it can take years to recover.

Happily, the government’s consultation paper on welfare reform engages with this, and some of the solutions it proposes would genuinely make a difference. I’d suggest the Prime Minister joins his Work and Pensions Secretary in engaging with the substantive, structural problems in the welfare system – of which benefit fraud is but a symptom – and leave the sensationalism to the tabloids.

Strikingly, yet again, the cost of living for the poorest has risen faster than for the rest of society. At around 5%, the Minimum Income Standard rose half a percentage point higher than average inflation. Over the past decade, this has added up: the minimum cost of living has risen by 43% compared with 27% and 35% for CPI and RPI inflation respectively. That difference has been largely driven by the soaring cost of essentials like food and energy. Earlier this year, food price inflation peaked at 5.7%, compared with 4.4% for overall inflation. In August 2008, those figures were 14.5% and 4.7%, and there’s every chance there are further food price spikes around the corner.

All this means that the poorest need above-average increases in incomes just to stand still. Indeed, the JRF calculates that a family of four needs to earn 24% more than a year ago, while a lone parent with one child needs 20% more. This is partly about the rising cost of living, and partly because of the freezing or cutting of in-work benefits. There’s more detail in Chris’s blog.

In reality, however, government action is driving incomes in the opposite direction. A swathe of benefit cuts are reducing the incomes of millions of people, while a change to uprating to the lower, CPI measure of inflation will see decreases locked in year-on-year. Meanwhile, the National Minimum Wage continues to fall in real terms, with decreases in October 2008 and 2010 and a freeze in 2009. That’s before accounting for the fact that average inflation underestimates the real cost of living for people in poverty.

The Minimum Income Standard was a groundbreaking piece of work, as it tells us what ordinary people see as the minimum required to take part in society. This latest annual update is no less important, as it shows that much more is needed to meet the basic imperative of making sure poor people don’t continue to fall further behind.