I come to this debate from a number of different perspectives: as a Conservative politician... As someone who’s spent a lot of time thinking about the financial crisis over the last couple of years... ...And as the child of immigrants who arrived on these shores with nothing. I want to stress these different perspectives because there are equally different ways of looking at poverty. To start with there is extreme poverty, as measured by the UN’s Human Poverty Index: the poverty of dollar-a-day living standards, mass-illiteracy and malnutrition. I would strongly argue that this is the kind of poverty that market institutions are the best weapon against. Take mainland China as an example, their last thirty years of market reforms have lifted more people out of extreme poverty than any other government policy in the history of the world. It would be dishonest of me to deny that the breakneck pace of development in the global East has created losers as well as winners. Supporters of free market capitalism like me have to engage with Andrew’s arguments about the costs of growth. But if, like China, you’re creating an economy the size of Greece every three months, it’s undeniable that all the indicators of basic human development - whether it’s life expectancy, infant mortality, or average calorie intake - will be moving in the right direction. But subsistence poverty isn’t the kind of poverty we’re really here to talk about today. Instead we’re talking about poverty in the developed world, poverty measured in relative terms, as a percentage of average incomes, rather than in absolute terms. Yet I would argue that the two kinds of poverty are closely linked - which brings me on to the financial crisis. The sequence of events leading to the crash is well documented. As the two billion people in Asia’s newly prosperous middle classes became connected with the global economy for the first time they also began to save a high proportion of their incomes. Largely through their governments they invested their savings in the Western financial system. Surfing this tidal wave of easy money were the banks - who found they could lend more cheaply than ever before. The lending boom then pushed up the price of financial assets, including the biggest asset class of all: housing. But there was a problem. As those with assets grew richer, those without got left behind. In the West relative poverty was growing at the very moment global poverty was starting to fall. So how did policymakers respond? In Europe the answer was redistribution from the asset rich to the asset poor. This took the form of a more generous welfare state, paid for by a booming financial sector. In the US the solution was more radical: turn everyone into a homeowner. That way the whole of American society could benefit from rising asset prices. This would be achieved by creating a market for a new kind of financial product: the subprime mortgage. These attempts to tackle poverty failed for two reasons. First, because they depended on levels of borrowing in the private and public sectors which were unsustainable. Second, because they relied on a definition of poverty which was far too narrow. In Britain you fall below the poverty line when you’re earning 60 percent or less than the average income. This means that if the government tops up your income with tax credits so that if you rise above the poverty line, even if it’s only by a few pounds, or even 1 pence, you are no longer poor. The Government can then show on one of those green IFS graphs that it has lifted you out of poverty. There are plenty of reasons why this is not a very sensible approach to policymaking. Perhaps the most important is that it fails to distinguish between those who are at a high risk of remaining at or below the poverty line and those who are likely to rise above it, given time. When my father came to Britain from Iraq he may have been short on financial capital but he had a lot of what economists call ‘human capital’: education, skills and business experience. It didn’t take long before he’d set up a business, bought a house and brought the rest of us over. This distinction has implications for the way we design our welfare system. Imagine an accountant in her 40s who’s recently been made redundant. She’s claiming Jobseeker’s Allowance while also dipping into her savings. Now imagine another JSA claimant in his 20s. He has no qualifications, problems with drug abuse and no history of work. Both can be defined as living in poverty but one has a much higher risk of remaining in poverty. So should the system deal with them in exactly the same way? Surely the answer is no. Yet this was the system we inherited. Poverty is too complex to be reduced to a single number. Relative income should remain a measure of poverty, but using it as the only measure distorts policy. Your income is a reflection of many other factors including health, educational attainment and access to the labour market. There’s a growing body of research which suggests that the way a baby’s frontal cortex develops in the first eighteen months of its life has a disproportionate impact on its later life chances. So rethinking poverty might require us to rethink the way we do government. Whitehall has a deeply entrenched silo-mentality, with few incentives for collaboration across government departments. Yet poverty is crying out for a holistic response. The last Government proved beyond all doubt that ever rising welfare spending is not the answer. Despite spending £170 billion on tax credits they failed to meet their child poverty reduction targets. In my view we need to be more imaginative and more ambitious.