Leading article: Politics, prosperity and the reality of the struggle against poverty

Another day, and another totem of Thatcherism comes crashing down. In a speech yesterday David Cameron declared that the Conservatives under his leadership understand that poverty must be measured in relative, not absolute, terms. In other words, the Tories will henceforth concern themselves with the level of inequality in modern Britain.

Mr Cameron has proved once again that he knows how to create a splash. Some on the right have interpreted these announcements as a threat to the basic principles of liberal economics. Meanwhile, the left cannot decide whether to applaud this development or to label the Tory conversion as disingenuous.

But where does this shift in the political battleground leave the poor? Now is not the time to resurrect the old assumption that the free market inevitably produces poverty. On the contrary, a well-run economy remains the most powerful tool in any government's armoury for enhancing the prosperity of the majority of the nation. The past two decades have shown us that when a country is generating employment and economic growth, its population is generally better off. Recent history also tells us that a morbid preoccupation by society with the wealth of the highest paid is unhealthy.

But that said, there are plainly some at the bottom of the social heap the free market alone is unable to help. This is because the root causes of poverty are often not economic any more. Social factors - mental illness, drug and alcohol addiction, family breakdown and homelessness - are vastly more important in causing deprivation. Those afflicted by such problems find themselves unable to participate in modern society, hence their poverty. Worse still, this inability to cope is often passed on through generations. The welfare state does provide a necessary safety net. But some are getting hopelessly entangled in this net, unable to escape.

If the Conservatives are genuinely concerned with inequality they should start by acknowledging that New Labour has had some success in reducing overall poverty rates. More than a million children have been lifted from poverty through innovations such as tax credits and the minimum wage. Social programmes such as the New Deal employment scheme, and the childcare facility, Sure Start, are helping too. But it is increasingly clear that the Government has mainly been reaching the low-hanging fruit. The real problem cases have been untouched.

And it is here that the Conservative critique of the Government has some force. The powers of the state must be used in a more subtle way. Government policy should reflect the fact that there are many different kinds of poverty. The poverty of a neglected pensioner is not the same as that of a single mother caring for a disabled child. The poverty of an asylum-seeker is not the same as that of someone who has been on benefits for a decade. Politicians must also accept that voluntary groups and charities are often more innovative in their thinking and better equipped to help than the state.

No single party has the solutions at the moment. But it is surely obvious that there needs to be a much higher degree of joined-up thinking in policy-making. There is no use in increasing tax credits if people still live in crumbling housing. Efforts urging those on long-term benefits back to work are doomed to fail unless accompanied by the rolling out of more addiction treatment. The goal of greater social mobility will never be achieved without vast improvement in the quality of education.

It is welcome that the Conservatives are rediscovering their "one nation" roots. Now all that is needed is for politicians to agree on modern methods to defeat an age-old scourge.