Dominic Lawson: This poverty debate is fuelled by anger at the rich, not sympathy for the poor

If a company makes its money honestly, it is entirely its own business how much it pays staff

A few years back I was asked to dinner by a billionaire. When I cast my eye over the other guests I couldn't help noticing that they, like my host, were all fabulously wealthy. As one of the many Filipino staff offered me yet another blini with beluga, it occurred to me if the incomes of all the people in the room were plotted on a graph, I would appear very close to the waiters, way below the dots marking the other guests.

In that, admittedly artificial, environment I was relatively poor. But by no stretch of the imagination could I be described as poor; still less would it make sense for me to claim that the state should act to make it possible for me to afford even one of the Modiglianis that hung on my host's walls, envious though I was of his collection.

The Government's definition of a household in poverty is one that lives on an income below 60 per cent of the national median. Any family at that level could be certainly described as "hard up". But suppose in the next few years there were to be a doubling of all incomes in real terms. Many of those below 60 per cent of the median could no longer then be described as hard up. The Government, however, would say that they were exactly as poor as they had been before their income had doubled. The relatively poor are always with us.

Ever since President Lyndon Johnson declared "war on poverty" in his 1964 State of the Union address, the United States has published detailed statistics on poverty; but unlike Great Britain, it has always used an absolute measure, based on an assessment of the cost of food, consumer durables and housing, adjusted for inflation. Currently, the American poverty line for a family with two children is about $20,000 (£10,400) a year. It's important to note, however, that this is a pre-tax figure. It does not take account of income from state subsidies such as the Earned Income Tax Credit and housing benefits.

What this mean is that when an American government says that it plans to reduce poverty, it really does mean that it intends to make the poorest families better off. When a British Government, such as this one, says that it plans to reduce poverty, it could fulfill that commitment simply by organising a recession in the City of London. If Mr Peter Hain has his way, that might indeed be the chosen method. In a newspaper interview last week the Northern Ireland Secretary declared that: "Most people find it pretty grotesque that a couple of dozen City executives can share a billion pounds of bonuses between them. That's not where hardworking families and people are at ... I mean, what do they do with their money? We need a debate about this."

Even allowing for the fact that Mr Hain has prematurely launched his campaign for the currently occupied job of deputy leader of the Labour Party, these remarks are, at best, gratuitous. I rather enjoyed the retort of the blogger known as Mr Eugenides, who commented: "Personally I find it pretty grotesque that a couple of dozen Cabinet ministers can spend £550bn of hard-working families' money between them. I think we need a debate about that, not the bonuses paid to some private-sector bosses. Their remuneration, however exorbitant to the rest of us, is none of Peter Hain's fucking business."

He's right; it isn't. If a company makes its money honestly, it is entirely its own business how much it pays its staff. Indeed, since 40 per cent of those City bonuses go immediately to the Exchequer by way of income tax, Mr Hain ought not to complain, given that the Northern Ireland economy is so grotesquely - to use his word - reliant on the taxpayer. The City of London as a whole pays about £20bn a year in taxes. Those are not revenues which will stay here regardless: the capital of the money markets is immensely mobile and the US Treasury Secretary, Hank Paulsen, has stated his aim of pulling those funds - and the companies generating them - back across the Atlantic by emulating the light regulatory touch of London. Perhaps Mr Hain intends to be Mr Paulsen's fifth column in Whitehall.

While the Conservative Party has not yet joined in the call to limit the amount of money that private-sector companies can pay their employees, that might not be long in coming, given David Cameron's strategy of never allowing himself to be outflanked on the left. On Wednesday his "Social Justice Policy Group" under Greg Clark MP produced a pamphlet describing as an "outdated Tory nostrum" that "poverty is absolute, not relative". He castigated the former Tory Cabinet Minister, John Moore, for declaring in 1989 that "relative poverty is in reality simply inequality".

John Moore was, as a matter of fact, right in his identification of the true objectives of those who will define poverty only in relative terms. It is not the living standards of the less well off that most offends and angers them; indeed they are probably rather appalled by the vast numbers of Sky satellite dishes sprouting from the nation's council estates. It is the disparity with the living standards of the affluent that they wish to eliminate. Perhaps, given that he died last week, we need to resurrect one of Milton Friedman's characteristically elegant formulations: "A society which puts equality - in the sense of equality of outcome - ahead of freedom will end up with neither equality nor freedom."

None of this is designed to deny that there is poverty in the Great Britain of the early 21st century: there is terrible poverty of aspiration, of education, of ambition. Its roots lie in mass unemployment disguised by official figures, which frequently redefine joblessness as sickness. Three months ago I wrote here in praise of Bill Clinton's welfare to work programme, which in 10 years led to a doubling of employment among single-parent families; I wondered how a New Labour government had simultaneously allowed this country to be one in which 4.3 million are on either unemployment , incapacity, or lone-parent benefits while hundreds of thousands of east European migrants gratefully take jobs which require no special talents.

Yesterday, as if to make this paradox even more painful, the Home Office released the first detailed breakdown of the sort of jobs the east Europeans have taken; they include 2,450 bus drivers and 2,020 bakers. The figures also demolish the claim that this is just a phenomenon of the overheated economy of the South-east of England. Only a minority of the east European migrants have headed for London and its immediate environs: almost 70,000 have settled in Scotland, Wales and Northern Ireland, areas of the highest domestic levels of unemployment.

It is almost incredible that the politicians of our actual and prospective governing parties think that this problem can be addressed by redistributing more money from the employed to the unemployed. You might describe it as poverty of thought.

d.lawson@independent.co.uk