During the last century, governments have relied upon just four basic economic paradigms including Monetarism and Keynesianism with the addition of Mundell-Laffer supply side economics in the 1980s and Modern Monetary Theory more recently, which purports to explain how governments create fiat money. This K3M group of policies (Keynesianism, Mondtarism, Mundell-Laffer supply side and Modern monetary theory) has not performed well.

Whereas a declared arbitrary monetary policy target has been 2% inflation, and the other policies possess mechanisms suposedly to control inflation, the average inflation rate in this country between 1945 and 2025 was 5%. This represents a depreciation in the value of the purchasing power of the pound and people's real incomes of 40% each decade over the last eight decades. The real economy has had to struggle against this negative load over this period.

Having lost most industrial and manufacturing capacity and with 80% of the working population now employed in an economy dominated by a low wage, low productivity services sector the ability to counter this rate of depreciation has become difficult and has led to something like 20% of the constituents of this country have experienced a decline in real incomes or purchasing power creating poverty and a rising income disparity.

The increasingly acknowledged problem of the British economy has been a decline in productivity which reduces the ability of the economy to lower unit costs of production and therefore moderate or even lower output prices.

Noneof the K3M paragigms possess policy instruments to increase productivity with this vitalissue being relegated to academic discussions concerning "Britain's productivity puzzle"".

The Real Incomes Approach

The Real Incomes Approach to economics is the only macroeconomic paradigm which places productivity in a central position as the principal inflation reduction mechanism. This has the advantage of avoiding austerity which results from applying raised interest rates or taxes and the principal policy instruments to reduce inflation. According to the economist and systems engineer, Hector McNeill who is the lead developer of this approach, the productivity mystery is the result of an incorrect definition of productivity. He explained this as follows:

"The British government agencies concerned with economic poicy all use the US Bureau of Labor Statistics, OECD and ILO definitions which measure productivity by dividing "value added" or the GDP by the total hours of work." "Given what is included in the GDP, this is not a measure of productivity but rather, a measure of the monetary yield." "Productivity is a physical construct so it is necessary to separate the direct impact of this change in input-output physical productivity from the monetary amounts associated with any particular level of productivity. Usually, the turnover of a company is related to shareholder value, profits, prices, bonus payments and inflation, these are not directly a function of physical productivity but are monetary assignments." "There is therefore a 'financial engineering' or a 'financialization' factor in turnover or GDP. Therefore there is a need to deploy a measure of productivity which reflects the specific contribution of changes in productivity to real incomes, the value of the pound or purchasing power. In other words, the response of unit prices to changes in unit aggregate input costs is a direct measure of the impact of productivity changes. This measure is known as the "Price Performance Ratio" and this is the percentage change in unit output prices in response to aggregate unit input costs."

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Inadequate Political Party Response to UK Poverty

This article sets out the current state of affairs according to the Joseph Rowntree Foundation's Poverty Report 2026 and sets out the ad hoc propositions set out by the main poitial parties, all of which are inadequate.Evidence for this drastic economic policy failure is available in the latest UK Poverty 2026 Report by the Joseph Rowntree Foundation (JRF).

This describes an increasingly desperate state of affairs in the domain of poverty in the United Kingdom.

The JRF defines poverty as insufficient resources (primarily material) to meet minimum needs and participate socially, extending beyond income to include debt, assets, disability-related extra costs, etc. (with reference to the Social Metrics Commission for a broader measure).

This Report provides evidence-based analysis of UK poverty, drawing on official statistics (e.g., Households Below Average Income), surveys, and lived experiences.

The current report covers data up to 2023/24 and documents persistent poverty that is becoming significantly deeper, finding include: Overall poverty affects more than 1 in 5 people (21%) — approximately 14.2 million people in 2023/24. This includes the following breakdown: ~7.9 million working-age adults, 4.5 million children (1 in 3 children, with rises for the third consecutive year), and ~1.9 million pensioners. Child poverty is especially pronounced (43% risk in lone-parent families, higher than other groups). Poverty levels are broadly flat compared to pre-pandemic periods, but this hides problematic trends: minor overall declines often result from falling median incomes (which artificially lowers the relative poverty threshold), while child poverty continues upward. The most concerning development is the sharp increase in very deep poverty, now at record levels. Households with incomes below 40% of the median (after housing costs) of roughly £16,400/year for a couple with two young children. ~6.8 million people (nearly half of all those in poverty) are in this very deep category — the highest number and proportion recorded in over 30 years. This results in widespread inability to afford essentials (food, energy, clothing, warmth, hygiene), contributing to destitution for ~3.8 million people (including 1 million children) in recent periods. Related hardships: High bill arrears (e.g., 44% among low-income non-benefit households), food insecurity, deprivation of basics, and persistent effects on physical/mental health and life opportunities. The report concludes that poverty is deeper and more damaging than at any point in the last 30 years, requiring urgent policy interventions such as bolstered social security, action on low pay, housing costs, and structural barriers.

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