Overview: How Ed Miliband wants to reform Social Security


8:00 am - June 6th 2013

by Sunny Hundal    


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The Labour leader Ed Miliband is to make a major speech on social security reform this morning. I can hear the groans already.

But bear with me – it’s really not that as bad as everyone expects. Miliband may pull a rabbit out of the hat during the speech but here is what we’ve been briefed in advance.

What the speech is not:

– It’s not an attempt to move away from the principle and need for universal social security benefits.

– It won’t out-tough Cameron on rhetoric or cuts. I highly doubt there will be anecdotes of capable people avoiding work.

– It won’t say which cuts will be reversed and which will be kept. Labour won’t lay out a spending plan two years from an election.

What the speech will say

Very short summary: ‘The Tory approach doesn’t address why social security spending is rising’

Miliband will announce three ways in which Labour would bring down SS spending:

1) Get housing benefit spending down by:
– building more houses
– make immediate savings by negotiating lower rents with landlords through measures such as bulk purchasing
– plus other ways

2) Get unemployment benefit down by:
– focusing on creating jobs
– offer a compulsory jobs guarantee to long term unemployed
– strengthen the route back to employment for parents of 3 – 4yr olds in workless households
– devolve power to local government in how funding for back-to-work schemes is spent
– improve tests for disability benefits (this bit is unclear)

3) Get in-work benefits down by raising wages
– push companies and public employees to get paid Living Wage
– tackle abuse of zero hours contracts and enforcing the minimum wage
– prevent exploitation of agency workers and outlawing recruitment only from abroad

Miliband will make two other major points:
1) Labour would cap structural social security spending in 2015/16 and then in each spending review. This fits in with plans above to bring spending down.

2) Labour will look at how to restore the contributory principle in social security but will make no firm commitments today.
The Policy Review team will be asked to examine:
– how we can change contribution-based Job Seekers’ Allowance in a cost-neutral way so that only those who have paid in for significantly longer than two years are eligible and whether that could mean a higher rate than £71 a week.
– ways of providing extra help through gold standard employment services for older people who have paid into the system and are now trying to get back into work.

That’s it!

Well, there may some big surprise announcements in the speech, but this is what we’ve been told in advance.

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


1. George Hallam

2015 will be just like 2010

Luckily I still have the video.

http://www.youtube.com/watch?feature=player_detailpage&v=ju-G01GEaMs

how does depriving the unemployed get them into jobs? surely it just encourages less formal parts of the economy

However you spin it, Moribund is following the Tory agenda. A welfare cap is stupid, an idea of economic and moral idiocy. Remember it was Moribund who allowed IDS to legalise his retrospective robbery of the poor, bollocks to those who were robbed, saving Ed Balls’s financial credibility (such as it is) and looking tough against “scroungers” was more important. There has been no defence of the poor against constant lies from IDS and the right wing media. The despicable Liam Byrne remains firmly in place and Moribund should be claiming disability benefits himself as there is not a single vertebra in his body.

Here’s the truth about Labour’s policies – an utter mess dictated by right wing tabloids. http://worldofstuart.excellentcontent.com/curran-5jun13-dailypolitics.mp3

Labour should be moving the agenda to tax collection, but that might take hard work, something the opposition (in name only) knows precious little about

“offer a compulsory jobs guarantee to long term unemployed”

So is Mr Ed going to get out the magic set he got for Xmas in 1976? Utterly meaningless drivel.

“1) Labour would cap structural social security spending in 2015/16 and then in each spending review. This fits in with plans above to bring spending down”.

Ah, so no different to the Tories then. What’s the point in voting for Labour? None that I can see.

On welfare reform, try highly recommended piece in FT by Gerhard Schroder on:

France should copy Germany’s reforms to thrive

Schroder was Chancellor of Germany 1998-2005.

7. Shatterface

We’re basically witnessing the end of Labour as a political party.

Millipede has dragged Labour even further to the Right than Tony Blair and he doesn’t have Blair’s admittedly creepy charisma so zero chance of winning an election.

8. Richard W

I think capping structural social security spending is the wrong approach to the problem. The issue that the UK has with benefits is not that they are too high. International comparisons show that UK benefits are far from being too generous when compared to peers. The fundamental problem that the UK has is too many people are eligible for benefits. Successive governments that implicitly thought that getting as many people on the state teat as possible would naively build social solidarity for higher spending and taxes created the problem. It should be obvious that strategy failed. Probably the next Labour government will bury the corpse.

Raising wages in order to reduce social protection spending is motherhood and apple pie stuff. Nobody is going to disagree that it would be good for the economy if people on low wages earned a higher wage. However, just trying to will higher wages for low earners by ordering firms to raise wages is not going to work. Fewer people earning a higher wage is the most likely outcome. Skills and training is fundamental to raising wages for low earners. It is all very well wanting low earners to earn a higher wage, but unless they have skills with some value it ain’t going to happen. The problem is not the UK benefits system, the problem is there are too many people in the UK looking for jobs at the bottom of wage distribution that have literally nothing to offer prospective employers. We do not have a problem of high unemployment for skilled workers. The unemployment problems especially youths and long term unemployment is with the unskilled low earners. One employer looking to recruit apprentices recently said 80% of youth applicants were unemployable to do anything. In light of that 20% youth unemployment is probably remarkably low.

Labour are right to say that the way to tackle social spending is to reduce the amount of people who require social protection spending. However, just attacking benefits and reducing eligibility will not solve the problem. Raise the skill levels and wages will follow.

9. SANDRA CRAWFORD

The most deceitful and appalling thing that is said by Ed Miliband at the moment is that there will be less money around in 2015. It makes me want to cry, because I fell for this man when he was on is hustings and calling the “big society a bi word for abandonment.”

I know its a lie. He knows its a lie. The shrinking money supply is causing deflation, which as Keynes said is a transfer of wealth from the poor to the rich.

A Labour government can make money available to the poor in three different ways.
1) Collect the 120bn avoided and evaded in tax. 2)Monetary reform.This involves creating money debt free and just spending it into the economy as advised by Lord Adair Turner and Martin Wolf of the financial times. Study the “Positive Money Website” for more explanation. Positive Money have spoken to Ed Balls and stated that he is fully aware of how money is created by banks as loans.
3)Give a debt jubilee to students and morgagees, and businesses. This advice was given by economists Steve Keen and Michael Hudson. Their rationale is that banks caused the debt crisis by creating too much money as debt to make a profit on the interest. Therefore people are in debt peonage above their necks to the rich. The only answer is a debt jubilee as was given to soem third world countries in 2000. Michael Hudson believes this is essential for any left wing politician, anything less favours the rich and is fiscally conservative.

The two Eds back caution in tough times. This is capitulation to the banks and the rich.

10. SANDRA CRAWFORD

In my last post I should have said that the money supply is shrinking because banks have reduced their lending, and this causes deflation. As Keynes said, government can step in and borrow more, or they can simply “print money and hide it in coalmines.”

Miliband’s a Tory. He doesn’t represent real Labour members. What gives him the right to decide Labour Party policy, shouldn’t it be conference?

12. Luis Enrique

we’re having a govt debt jubilee – BoE is buying it and will roll it over.

a fund for debt forgiveness for poor households attractive idea but too close to rewarding irresponsible whilst careful poor households who avoiding borrowing have to struggle on.

Not clear what other debts would be forgiven. Are you suggesting cancelling some of my mortgage? That would bankrupt Nationwide.

Forcing holders of bonds issued by banks to take haircut would help stability, raise equity levels, but legal nightmare.

13. SANDRA CRAWFORD

Luis Enrique;

Study the Positive Money website. 97% of the money supply is created by banks when they make loans. Deregulation allows them to blow up house prices by lending too much to make a profit on interest.
Government is responsible for allowing banks to extract the economic surplus by uncontrolled credit creation. A debt jubilee redresses the balance. Regulation of banks must follow. The status quo is debt peonage to the top 0.1% of the rich finance industry. study Steve Keen and Michael Hudsons blogs.

14. Luis Enrique

yes I understand bank money creation. I’m asking whose debts to who will be written off and how.

Since he doesn’t seem to know that unemployment benefit was replaced by jobseekers allowance years ago, I’m not convinced he knows what he’s on about.

I also have a strong suspicion that as he’s mentioning disability benefits under unemployment, he doesn’t realise that the main disability benefit, disability living allowance, is not exclusive to people out of work and its abolition and replacement by PIP is going to mean more disabled people having to leave their jobs because they simply can’t get to work. Being able to walk/wheel 20m won’t get a lot of people as far as the front gate to get a taxi, much less to a bus stop. But then none of the main parties seems to have a clue about disability benefits and their impact on ordinary disabled people.

Labour abandoned us years ago. We don’t have a credible left of centre party to vote for any more.

16. Charlieman

Does anyone care to reflect on a point that I raised elsewhere?

Ed Balls: “Do we need more admirals than ships and more officers in our forces than our international counterparts at a time when frontline armed forces are under pressure?”

Parkinson’s Law was outlined in 1955 and published as a set of essays in 1958. It is comforting to learn that Ed Balls is keeping himself up to date.

17. SANDRA CRAWFORD

Luis Enrique;

It is a complicated issue, but people with mortgages and student loans, or any debt they cannot pay. As the debt would be destroyed on payment the banks would only lose the interest. As they are the biggest tax avoiders in the world some economists see this as justice to release the poor and middle class from debt peonage as this represents a transfer of wealth from the poor to the rich.
Public serices are being cut due to banks and other rich not paying their taxes so there is not even compensation.
Steve Keen has said that government could just create the money debt free (quantitative easing style) give to the public for the purpose of paying debt only. People without debt could be compensated for savings.
It does make sense when you consider that private debt + public debt in the uk =2.5 trillion, and is the cause of endless stagnation and debt peonage to banks.

18. Richard W

@15. Sue

There is not a credible leftwing party because there is not a leftwing constituency that is big enough to win elections. There are plenty of parties offering a far left agenda in UK elections. They are easy to find near the bottom of election results, they are the ones with the lost deposits and derisory vote shares. Genuine ideological leftwingers probably amount to less than 5% of the UK population. Labour moved to slightly lefty social democrats because that is the is the only place on the political spectrum where they can win. They are hardly going to listen to advice from leftwingers on how to win elections when it is the left who lose them elections.

19. Luis Enrique

right, well if those who didn’t accumulate debts also get a cheque, that’s not a debt jubilee that’s known as helicopter drop monetary policy.

if you start trying to send larger cheques to people who owe more you get in big trouble, for example I might owe a lot because I bought a BMW or big house or took expensive holidays. Not viable.

20. SANDRA CRAWFORD

Luis Enrique;

Steve Keen insists that it is a debt jubilee because he says the money must be used to pay down debt. The only reason for compensating savers is the moral hazard created by squeezing the banks. Look at what happened in Cyprus.
When you look at the economic bubble caused by a credit boom you can see the moral sense in this: the debts to wealthy bankers remain in place causing chronic debt peonage of the populace, and stagnating the economy to chronic recession because people have less maoney to spend. This in turn is exacerbated by the fact that the banks and the wealthy are avoiding billions in tax and cuts to public services.

A debt jubilee is brilliant thinking outside the box and would work.

21. mike cobley

@18 “Labour moved to slightly lefty social democrats because that is the is the only place on the political spectrum where they can win.”

Just not the case at all – if Labour were authentic social democrats they would be running on policies from the true political centre which is substantially to the left of the current 3-main-party setup.

22. Luis Enrique

Sandra,

you can forget about the morality if what you’re doing involves handing out money so that those debts owed to greedy bankers are repaid.

you can’t force money to be used for debt repayment, if you give me £100 to repay a loan but I want to buy an ipod, I can repay the loan, take out another loan and buy that ipod.

Steve Keen … well let’s just say he’s not right about everything.

Unless Miliband can help people like the writer of this piece he will have failed: http://pawprintsofthesoul.wordpress.com/2013/06/06/a-view-from-the-precariat/

From the BMJ, how an attack on universalism is an attack on the welfare State: http://www.bmj.com/content/343/bmj.d7973?tab=full

How has that suddenly changed?


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