This economic model isn’t delivering jobs or decent wages. The real scroungers are greedy landlords and employers
The glee and class contempt with which Britain’s Tory leaders have set about this week’s onslaught on welfare has been an object lesson in the cynical venom at the heart of David Cameron’s coalition. To force through cuts in the living standards of the poorest people in the country, demonisation and division have been the order of the day.
The Conservatives back workers not shirkers, the prime minister declared, as George Osborne pictured an honest shift worker passing the closed blinds of a skiver “sleeping off a life on benefits”. Tory MP John Redwood insisted betting firms target deprived areas because the poor have too much “time on their hands”.
Having softened up their audience with a press campaign of tales of “scroungers” and fraudsters, the Tories couldn’t have been clearer about their purpose: to turn the low paid against the unemployed, just as they’ve tried to set private sector against public sector workers – and the Victorians separated the deserving from the undeserving poor.
Having drawn their toxic dividing line, the game has then been to put Labour on the wrong side, in the scroungers’ camp. Hence the Conservative poster campaign in advance of yesterday’s Commons vote on the coalition plan to make the first general real terms benefit cuts since the 1930s, declaring: “Today Labour are voting to increase benefits by more than workers’ wages.”
But the signs are that the skivers versus strivers talk has been backfiring. Even Cameron’s dog-whistle spinman, Lynton Crosby, has been getting worried about the tone. So no wonder Nick Clegg, who claims to be on a journey to “the centre ground”, wants to dissociate his Lib Dems from the nakedly nasty party.
As the impact of this year’s benefit squeeze hits home, the backlash is likely to grow. Far from targeting “shirkers”, the three-year benefit and tax credit cap doesn’t even mainly target the unemployed. More than 60% of those who will lose out are in work.
Among the “scroungers” Cameron will be clamping down on are 300,000 nurses, 150,000 teachers and 40,000 soldiers. The real terms cut will hit the poorest, lone parents, the disabled and women hardest, according to the government’s own assessment. It will increase inequality and help tip hundreds of thousands of children into poverty.
Just as 8,000 millionaires are about to get an average tax cut of over £107,000 and food banks are booming, the coalition is driving through a benefit squeeze that swamps the rise in tax allowances and targets the most vulnerable – already subject to a string of other cuts and new charges, from disability allowances to council tax.
Ministers claim the end of child benefit for the better-off in some way balances the attack on means-tested benefits. But not only is child benefit set apart in being paid overwhelmingly to women: like all universal benefits it helps to create a common social interest, can be offset with progressive taxation and becomes far easier to hack away at once restricted to the lower paid.
Of course, these cuts are being made in the name of deficit reduction. In reality, even if the logic of the coalition’s austerity programme is accepted, there are plenty of other ways to find the savings made from capping benefit and tax credits (even the Blairite prince over the water, David Miliband, today denounced the cap and floated lower rate pension tax relief instead).
But austerity is failing and the underlying deficit growing. Even the IMF has now admitted it underestimated the disastrous impact of austerity programmes on growth and jobs. And cuts in the incomes of the poorest in any economy will only depress demand when the opposite is urgently needed – including to shrink the deficit.
The Tories feel safe attacking social security because a long-running media campaign has fostered a wildly inaccurate welfare mythology. On average, people think 27% of the welfare budget is claimed fraudulently, when the government’s own estimate is 0.7% – or around £1bn, compared to an estimated £70bn worth of tax evasion. Most payments go to pensioners, and, far from soaring ahead of wages, unemployment benefit has fallen to 11% of average earnings, compared with 22% in 1979.
That’s not to say there isn’t a problem with welfare. It just isn’t the one the political class and media mostly claim it is. Central to the sharp increase in social security costs over the past generation have been rising joblessness and stagnating wages. Since 1980, unemployment has averaged more than three times the postwar rate, while the proportion of those in low-paid jobs has doubled to over 20%.
In other words, welfare has become a prop for the failure of neoliberal capitalism to deliver jobs or decent wages. In Britain, the prop has partly taken the form of subsidising poverty pay through New Labour’s tax credits, and exorbitant private rents through a massively expanded housing benefit bill.
That model has now crashed and the costs of systemic failure have ballooned: long-term unemployment has increased by 146% since 2010. What Cameron and Osborne are doing is to kick away props, not from bad employers and greedy landlords – the real welfare scroungers – but from the most deprived when they’re needed most.
Labour is right to oppose real benefit cuts and support publicly backed work programmes, but wrong to endorse real terms cuts in public sector pay and private minimum wage schemes. If politicians are serious about cutting the welfare bill – instead of driving claimants deeper into poverty – there are obvious alternatives.
A crash council housebuilding programme, backed with northern European-style rent control, would slash the £21bn a year from the housing benefit bill. A living wage across the economy, combined with strengthened workplace rights, would cut the tax credit and other benefit bills. And both, combined with a public bank-driven national investment programme, would boost growth and shrink the dole bill.
Since this government will be doing nothing of the kind, expect instead the social unrest predicted by northern council leaders in response to plans for 30% cuts in local authority budgets. Polling suggests public opposition to the benefit squeeze will also spread as people find out more about who will bear the brunt. Even the Tories may come to regret their war on the poor.