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How Labour’s plan to tackle the housing crisis will work

by Don Paskini     September 28, 2013 at 12:18 pm

In the past six years, both Labour and the Conservatives/Lib Dems have set out policies to tackle the housing crisis. In 2007, Gordon Brown set a target to build 3 million homes by 2020, a goal which was almost immediately killed off by the financial crash. Meanwhile, the Coalition’s policy has been to ask the vested interests for their policy wishlist and then implement it – spending billions on state-backed mortgage guarantees, allowing developers to reduce standards and build fewer affordable homes, allowing anti-development councils to block new homes. Unsurprisingly, this hasn’t worked either.

So why might Ed Miliband succeed where Gordon Brown and David Cameron have failed? The answer is in his revolutionary new approach to the policy development process. In place of grandiose target setting or government-by-vested-interest, Labour’s housing policy has been developed by two groups who are usually shut out of the policy development process – ‘people on low and middle incomes’ and ‘experts who know what they are talking about and don’t have a financial interest in making the problem worse’.

The main features of Labour’s housing policy are as follows. Firstly, a recognition that we need to build more homes at a time when there is a lack of capacity – far fewer firms, fewer workers with skills and so on. Secondly, targeted policies which will make this increase in supply possible – a ‘right to grow’ to stop Tory-run councils from vetoing new homes, new garden cities, and the ‘use or lose it’ policy to prevent landowners gaming the system. For all the hysteria, this particular policy is one backed by filthy communists such as the International Monetary Fund and Boris Johnson. Thirdly, greater housing security for people – from axeing the bedroom tax to reforms to regulate bad landlords and help people who rent privately.

The reason we have a housing crisis in Britain is because housing policy has been dictated by a wealthy, well organised minority, who benefit from house price bubbles and a lack of homes. Meanwhile, the majority who suffer from these policies are less organised and haven’t had a political party for many years prepared to put them first and see off the scare-mongering.

There is further for Labour to go, and in particular it is hard to see how these goals can be achieved unless local councils are given the freedom to borrow to build homes. But in more than a decade of working together with people from ‘Middle England’ and those living in poverty who have been suffering from our dysfunctional housing market, this is the first time that I’ve seen a national political party which really seems to get the problems which they’ve been experiencing and has a credible plan to sort these problems out.

New poll: public trust Labour over Tories on policies

by Don Paskini     June 8, 2013 at 1:48 pm

The conventional wisdom amongst the great and good in the Westminster bubble runs something like this: After a difficult time last year, the Tories are making progress, with popular welfare and school reforms, falling levels of immigration, and growing support for their tough decisions on the economy. Meanwhile, Labour’s policy of just opposing the government without setting out a ‘credible’ alternative means that they are not trusted by the public.

Something which is often instructive is to compare what elite opinion formers think about public opinion with what people actually think when you ask them. For example, in last year’s US elections, the Beltway elite thought that the election would be really close, while those who looked at the data saw that it wouldn’t. Often, elite opinion formers project their own centre right opinions onto the public.

So how do our Westminster pundits’ views stack up against public opinion?

Lord Ashcroft published some research last week which polled people on whether they preferred Labour or the Conservatives on a range of policy areas. Here’s a quick summary:

On the economy, people backed Labour over the Tories by 24 points on ‘cutting the deficit without harming the vulnerable’. Labour was 9 points up on getting the balance right between tax rises and spending cuts, 3 points ahead on helping business. The Tories were 1 point ahead on steering the economy through difficult times.

On other issues, Labour was 30 points ahead on looking after the NHS. This will come as little surprise to anyone except the Very Serious Pundits who criticised Labour for just opposing everything the government does.

The same pundits will also be surprised to hear that far from being popular, Michael Gove’s radical school reforms have propelled the Tories to a 15 point deficit on improving standards in school.

But the NHS and schools are traditionally strong Labour policy areas. What of crime, immigration and welfare abuse? On both crime and immigration, Labour and the Tories are tied. And on ‘tackling welfare abuse’ the Tories are five points ahead. And on all three issues, public opinion has been moving towards Labour since January of this year.

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There are all sorts of caveats which are important to note here. The data doesn’t tell us about how well informed people are about Labour and Tory policies in each of these areas, whether opinion might change as we get closer to an election, or what is driving changes in opinion. So, for example, it might be that the fall in trust for the Tories on immigration is due to people backing a more hardline approach and trusting UKIP’s ‘keep all the foreigns out’ alternative. And there are likely to be lots of people who don’t trust any of the political parties on some or any of these issues.

In addition, the phrasing of these questions is important. Asking about ‘cutting the deficit without hurting the most vulnerable’ is likely to get a more pro-Labour response than asking about ‘cutting the deficit’. Similarly, ‘tackling welfare abuse’ is likely to get a more pro-Tory response than ‘cutting the welfare bill by reducing unemployment’.

But what this data does show is that Westminster insiders have not got a very good idea of what the public think, and when they tell us that Labour’s credibility is being undermined by opposing the government’s public services reforms, that the public back the Tories on the economy and that if the Tories are banking on attacking Labour as soft on crime, immigration and welfare, then they might get quite a shock if they assume people prefer their approach.

If winter fuel payments should be universal, why shouldn’t housing benefit?

by Don Paskini     June 3, 2013 at 2:20 pm

I’ve got no problem with Labour’s plans to means test the Winter Fuel Allowance – it strikes me as a perfectly sensible thing to stop spending £100 million on payments to higher earners which many people value so little that they choose to donate to charity. I think it is vital that the welfare state has a mix of targeted and universal services, and that at times it makes sense to review and make some (such as winter fuel payments) targeted, while extending others (such as childcare) to be universal. Language of priorities and all that.

That said, I’ve read the eloquent arguments from Peter Hain, Owen Jones and others about the evils of means testing. They argue that means testing involves more bureaucracy, misses out lots of needy people, undermines social solidarity and hurts those who are neither rich nor very poor. If this is a principle which applies to the winter fuel allowance, then logically it is one which should apply to the rest of the social security system.

The biggest means tested benefit is housing benefit. Every part of the universalist critique applies to this benefit. The housing benefit assessment system is very bureaucratic. There are lots of needy people who currently suffer with high housing costs, but who are not eligible for housing benefit. The fact that some people get very high housing benefit payments while others pay in and get nothing is definitely a source of resentment which undermines social solidarity (far more so than winter fuel payments).

Yet I have never ever heard any leftie argue that the existence of means tested housing benefit undermines the welfare state, and never seen anyone call for it to be made universal.

I don’t think this is just a matter of pragmatism, focusing on the immediate battles and defending what we have, leaving the longer term goals of a universal housing benefit for another day. I think it is a recognition that different types of problems require different approaches, and that universality is not, ahem, a universal principle for the welfare state.

A liberal left welfare reform plan

by Don Paskini     May 29, 2013 at 11:00 am

Labour MP Simon Danzcuk wrote an article recently attacking the ‘Metropolitan liberal wing’ of the Left for their support of the status quo on welfare and their opposition to any kind of welfare reform. Striking a similar tone, Isabel Hardman in the Telegraph noted ‘the Left’s lack of resolve’ on welfare reform, citing the way that Labour ‘scuttled away’ from reforming the assessment of entitlement to disability benefits.

In both cases, the assumption is that opposing one particular daft idea necessarily implies support for the status quo. Those of us on the Metropolitan liberal left have all sorts of ideas for reforming the welfare state. These include:

1. Introduce universal, affordable childcare.

2. Make work pay by increasing the minimum wage above inflation, expanding the number of employers who pay a living wage, and introducing a Community Allowance, where people can take on ‘mini jobs’ of up to 16 hours per week with community organisations while continuing to receive their benefits.

3. Allow councils to borrow to build hundreds of thousands of new homes, and take on vested interests in the private rented sector.

4. Cancel Atos’ contract and enable disabled people to co-design a reformed Work Capability Assessment which treats people with dignity and reduces the error rate from 17% to under 1%.

5. Introduce a Right to Paid Work, offering socially useful jobs of at least 25 hours per week paid at the minimum wage to all people unemployed for two years or more.

6. Replace the Work Programme with grant funding for charities to support unemployed people to develop their skills and find work.

7. Develop a national strategy to ensure that by 2020 no one has to rely on a foodbank to feed themselves or their family.

8. Introduce new government targets to reduce poverty for pensioners and working age adults as well as children. Set a target that poverty for all three groups should be lower in 2020 than it was in 2010.

9. Link increases in benefits to increases in earnings.

10. Delay implementation of universal credit, cancel localisation of Council Tax Benefit, and instead focus on improving and simplifying the current system by reducing the error rate, expanding Social Fund crisis grants and loans, and improving the quality of service offered by Jobcentres to claimants.

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The last time that the liberal left had significant influence on welfare policy was between 1997 and roughly 2004, a time which saw record falls in poverty amongst children and pensioners, and increases in employment rates amongst groups such as lone parents and disabled people. The centre right reform agenda, led under successive governments by David Freud over the past few years, has been far less impressive, marked by bold claims about reform combined with remarkable incompetence in delivery.

It might give right wing politicians a thrill to promise yet another biggest shake up since Beveridge or crack down on scroungers, but I think we’ve had quite enough of them overclaiming, underdelivering and then trying to fix the evidence to cover it up. Instead, the liberal left’s approach is focused on achievable solutions to the real problems facing people on low incomes.

Looking back at the Miliband era

by Don Paskini     April 10, 2013 at 11:30 am

22nd November 2026

Ed Miliband’s resignation as Prime Minister, following the rejection of his controversial land value tax reforms to replace the council tax, brings to an end the ‘Miliband era’. It was greeted with jubilation in many parts of southern England, with chants of ‘Eddie, Eddie, Eddie, out, out, out!’ echoing round the wine bars, luxury car dealerships and estate agents of Surrey.

In assessing Miliband’s time as leader, it is important to remember the situation eleven and a half years ago when he first came to power. Having won a narrow majority in 2015 against an exhausted and discredited Conservative/Liberal coalition, he took over a country in seemingly permanent economic decline, and with few allies for his radical vision even amongst his own Cabinet.

Indeed the first three years of the Miliband government saw Labour slump into third place in the polls, behind both the Conservatives and the UK Independence Party. His early economic reforms led to a higher level of inflation that Britain had experienced in decades, and he was forced to scale back many of his plans after threats of an ‘investor strike’ from the powerful financial sector. Some in his Cabinet even urged him to step aside in favour of former leader Tony Blair.

Miliband’s decision to oppose the war on Iran is often cited as a turning point in his first term. Skilfully taking advantage of the diplomatic opportunity to broker a peace deal, he drew a sharp contrast with the pro-war right wing parties, which badly misjudged the public mood with their bloodthirsty rhetoric. The decision of James Murdoch to close the loss-making Sun and Times newspapers later that year, and the curbs on the Daily Mail imposed by the 2016 Press Freedom Act drastically weakened the right wing press’ criticisms of Miliband’s government, and the split between the Tories and UKIP proved catastrophic for the electoral fortunes of the Right.

But it was not just the weakness of his opponents which led to the Miliband landslide of 2020. With unemployment falling sharply, many workers benefiting from higher real wages due to the expansion of the living wage, the building boom of new council and co-operative homes cutting the cost of housing, and new local banks supporting the development of small businesses, many in the ‘squeezed middle’ felt less squeezed by the end of the decade.

It was in his second term that Miliband gained a reputation for the ruthless way that he went about destroying the pillars of the right wing establishment. The number of buy to let landlords had already started to fall, as more people were able to buy, rent from the council or join a co-operative to get their home. Landlords complained about tough new regulations and falling levels of housing benefit payments. In the ground-breaking Budget of 2021, punitive new taxes on multiple home ownership effectively made buy to let economically unviable.

With billions flowing to the Treasury from the renewable energy boom, vindicating Miliband’s investment in green industries, he was able to turn his attention to the ‘Enemy Within’ of the City of London. His Financial Transactions Tax, new regulatory regime and work with other governments to crack down on tax havens and speculation were bitterly opposed by the financial sector and their remaining allies.

Overall, the collapse of the City of London caused by Miliband’s war on predatory capitalism affected very few people. Most people, particularly in the Midlands and North, benefited from the rising share of national income that went to wages rather than profits, and the explicit focus on full employment as the main goal of economic policy.

It is important to remember, however, that the PM who came to power promising ‘One Nation’ presided over decline of towns in the Home Counties dependent on the City of London. The brutal police response to the notorious ‘stockbroker riots’ of 2023 in Beaconsfield and Haslemere reinforced the notion of a divided Britain with a prosperous North and impoverished South.

As Miliband approached his tenth anniversary in power, he became increasingly dogmatic and unwilling to compromise. The mutualisation of the railways failed to improve the quality of service from the old days of Virgin Trains, and he was embroiled in scandal after the arrest of several members of the ‘Primrose Hill set’ over price fixing in the solar power industry.

Despite the return of Nick Clegg from the European Commission to lead the new ‘Progressive Conservative’ party and the decline of UKIP, Miliband was easily re-elected for a third term in office in 2025. At that time, little attention was paid to the section in the Labour manifesto about the need to reform the council tax system. How ironic that, just like another long serving Prime Minister, it would be local government finance that brought an end to his career.

What does ‘contributory welfare’ mean?

by Don Paskini     April 8, 2013 at 9:00 am

Labour has just announced what they are calling a ‘radical shift’ to welfare payments. They want ‘a return to the contributory principles of Beveridge’, where what you get out of the welfare state should be based on what you put in. This is possibly not what lefties had in mind when urging Labour to rediscover the ‘Spirit of 45’, but let’s explore further what this might mean.

Labour haven’t yet explained what ‘the contributory principle’ would mean in practice, though the IPPR think tank have previously suggested ‘National Salary Insurance’, where people who have paid taxes before becoming unemployed would be entitled to receive interest free loans from the government, which they pay back when they get a job.

The idea behind ‘the contributory principle’ where ‘you get out what you put in’ sees the welfare state as a kind of insurance system. It is intended to appeal to people who, in Labour minister Liam Byrne’s words, ‘feel like they put an awful lot more in than they get back’. It appears that by ‘contribution’, Labour means ‘pay national insurance’. In practice, this means a welfare system which provides greater financial support for men, older people and able bodied people, and less support for women, young people and disabled people (as the former are all much more likely to have paid national insurance before needing support from the welfare state).

This seems to me to be a very limited view of what it means to ‘contribute’ to society. It doesn’t recognise parents who work hard to give their children the best start in life, people who spend their time caring for others rather than in paid employment, or the person who is too sick or disabled to hold down a job (by everette devan). It is not obviously ‘fair’, for example, that a millionaire ex-banker who loses their job should be deemed to have contributed more and receive more help from the state than someone who doesn’t work because they are caring for their severely disabled children.

Even on the narrow measure of ‘contribution to government revenues’, it is hard to see why the only measure should be national insurance payments. To take just one example from one of the best parts of the modern welfare state, someone with severe mental health problems who attends a peer support group and helps others to manage their condition might end up saving the taxpayer tens of thousands in reduced social care costs through their contribution to the wellbeing of others, even if they’ve never paid a penny in national insurance.

So as Labour develops their ideas about ‘contributory welfare’, rather than being transactional and focused on one particular measure, it should recognise all the different ways in which people contribute.

Another concern about ‘the contributory principle’ as it is currently described is that it aims to answer the question ‘how can we identify who the contributors are, so as to be able to pay them more in welfare payments than the non-contributors?’ Instead, I think that ‘contributory welfare’ should be about making changes to the system so as to answer the question ‘how do we enable people to contribute more to society, and to live with dignity?’

Answering that question necessarily goes beyond the issue of welfare payments and helps to shape decisions about spending priorities across a much wider range of areas, from support for childcare, primary and secondary education, job creation and so on. Rather than dividing people into those who contribute and those who do not, it recognises that we all have the potential, with help at the right times, to contribute more and help each other. For some, that support comes from universal services such as primary and secondary education. For others, it might mean financial help when out of work, alongside advice to help get a job. For others still, it might involve prompt, targeted interventions such as reducing domestic abuse by working with perpetrators.

Rather than looking back to try to recreate an insurance system from the 1940s, I think there is a real opportunity here. The definition of what ‘contribution to society’ should mean is, to paraphrase Ed Miliband, too important to be left to politicians and people who work for think tanks. Labour could bring together people from all walks of life to discuss and come up with proposals about the different ways in which people in modern Britain contribute to society, and come up with a report what kinds of support they need in order to be able to contribute more.

And I can think of just the person to chair this kind of review).

Who are the real ideologues that will push Labour to a huge defeat?

by Don Paskini     March 15, 2013 at 8:50 am

Dan Hodges attacks “the ideologues of Left and Right” who are “doing their damnedest to pull defeat from the jaws of victory”, by insisting on pure dogma instead of thinking about what the electorate may want.

Reading his piece, I was reminded of one particular group of ideologues.

These people have set out what they call, with all due modesty, “a programme for national renewal”. Like Liam Fox, they think that we currently spend too much money on the NHS. In particular, they have identified that we have far too many hospitals and ought to close some.

They are also keen to tackle the pressing issue of old people keeping their home warm in winter, and the problem of too many pensioners leaving their homes and travelling around on public transport. They therefore plan to means test the winter fuel allowance and remove free bus passes from most pensioners. They’ve also noticed that the government is doing too much to protect pensioners from rising inflation, and that there are too many incentives for people to save money rather than getting into debt. So they’ll end the ‘triple lock’ which guarantees that the state pension won’t wither away, cap ISAs and tax savers more heavily.

They think that the government is spending too much on fighting crime, and too much on educating our children, and so propose to ‘hold down overall public services programme budgets’.

They plan ‘a large-scale broad tax increase’ to squeeze the incomes of people who are struggling to get by, and to keep every single welfare cut implemented by the Tories and reduce the welfare budget still further.

Who are these ideologues? Our old fiscally conservative friends from ‘In the Black Labour’.

Two years on from their original pamphlet, they’ve managed to come up with a policy platform which makes Labour’s 1983 ‘suicide note’ manifesto look like the Beveridge Report.

They refer to this approach as ‘hard realism’, taking ‘tough choices’ and so on. They also worry that opposition from ‘vested interests’, ranging from pensioners’ groups to the Labour Party, would prevent them from being able to take this message to the British people.

It’s easy to take pot shots, and they deserve credit for setting out their stall. But there is nothing particularly ‘hard’ or ‘realistic’ about putting together a wishlist of policy priorities, entirely unconnected from any sense of what is remotely politically feasible. And while it is indeed ‘tough’ to advocate sharp reductions to the living standards of elderly people, I’m not sure that many people would regard being ‘tough on grannies’ as something to boast about.

In opposition, it is all the more important to avoid sweeping pledges which threaten the services which people support most strongly. Promises from politicians are treated with extreme skepticism, and fears are magnified. Far from securing Labour’s credentials as a party prepared to take tough decisions, cutting the NHS and squeezing pensioners would reinforce the notion of a bunch of politicians who are out of touch and who don’t get how tough it is in the real world.

The problem with ‘In the Black Labour’ is not that it will antagonise vested interests who are unprepared to take the hard decisions needed for national renewal. It’s that they’ve fallen into the trap of believing that ideological radicalism is the route to disaster for their opponents, but the route to success for themselves. This is a trap which catches centrist technocrats just as easily as socialist revolutionaries or right-wing Thatcherites.

Lessons for Labour from Eastleigh

by Don Paskini     March 1, 2013 at 2:18 pm

My former boss Andrew Smith, MP for Oxford East, often spoke about the importance of good local campaigning. The aim of this, he argued, was to build strong relationships with the electorate, so that whatever was happening at Westminster or in the newspapers didn’t influence how people chose to vote. Rather than remote politicians having their views filtered through the media to the electorate, this is about local politicians and people working together, while the remote media chatter away in the background.

This isn’t a particularly new insight, but the value of this approach can be seen by the success of the Liberal Democrats in winning the by-election in Eastleigh. While the hundreds of volunteers, thousands of contacts and hundreds of thousands of leaflets over the past three weeks played their part; they actually won the election months ago, when they built their local organisation, made sure that people had a positive view of their local work, gathered the data and set up their delivery networks.

I think the key lessons for Labour from this by-election are not about whether “One Nation Labour” is reaching “southern voters”, or whether Labour needs to adopt policy x, y or z. Instead, the Eastleigh result poses two questions which Labour need to consider:

1. Why did Labour fail, in so many of the seats that we held between 1997 and 2010, to build the kind of local organisation which the Lib Dems have in Eastleigh?
2. How can Labour ensure by the time of the next election they have this level of local organisation in at least, say, 340 constituencies?

Over the past few years, as trust in politicians and politics has fallen, the added value of local campaigning and effective incumbency has risen. Parties which campaign all year round and mobilise volunteers well before an election beat those which wait until the last minute, whatever the national political context.

The value of ‘early intervention’, identifying and sorting out problems early and enabling people to develop their skills and talents, is just as evident in political campaigning as it is in public services. The Tories matched the Lib Dems leaflet for leaflet, door knock for door knock during the short campaign period. But six months, 1 year, 2 years ago, the Lib Dems were active and the other parties weren’t.

Arguably, Labour should have asked its volunteers not to head to Eastleigh, where the impact of their valiant efforts was always going to be minimal, but to Derbyshire, Staffordshire, Kent and other areas which have county council elections in a couple of months.

There’s a key challenge for local councillors here, as well. Voters in Eastleigh generally agreed that the local council was doing a good job, and that the credit for this should go to the Lib Dems. I wonder how many Labour-run authorities are places where people would spontaneously say that their council was doing a good job, let alone attribute this to the Labour Party? That should be a key goal for every Labour councillor.

Getting as many county councillors elected as possible in May is much more important for Labour than their share of the vote in Eastleigh, especially if those councillors are signed up and committed to talking to voters once they are elected, organising locally and building support well ahead of the next General Election. As Eastleigh shows, it is never too early to start getting ready for the next election.

Why can’t we just spend more on benefits?

by Don Paskini     January 22, 2013 at 10:00 am

Kate Green, Labour MP and former CEO of Child Poverty Action Group, has forgotten more about social security than I’ll ever know. Her defence of Labour’s spending on social security is well worth a read:

Prior to the recession, expenditure had remained pretty constant, falling slightly from 11% of GDP in 1997/08 to 10.9% in 2007/08. But, more importantly, we were spending more on Labour priorities – cutting child and pensioner poverty – and less on the costs of unemployment: spending on children had increased from 1.3 to 1.9% of GDP, spending on pensioners increased from 5.7 to 5.8% of GDP, while spending on working age benefits (including JSA and Working Tax Credit) decreased from 3.9 to 3.2%. As a result, over that period, child poverty fell by 500,000 and pensioner poverty by 200,000.

Sounds great, right? Spending less on working age benefits as a result of falling unemployment, and using the resources freed up in order to reduce poverty amongst children and pensioners. But there’s just something which troubles me about this argument.

What Kate didn’t mention was that reduced spending on working age benefits led to a rise in poverty amongst working age adults. Their rate of poverty increased throughout the decade that Labour was in power, reaching 20% in 2009/10, and they were likely to be in deeper poverty than other age groups. So not such a success.

Then I looked at the different policies which have been advocated by Labour and lefties in order to ‘cut the benefits bill’. I read the Resolution Foundation report on the living wage, a terrific piece of work about a fantastic policy. I found that the living wage would save up to £2bn in reduced social security payments – or ‘a tiny proportion of the overall welfare budget’ as we call that sum of money when referring to the similar amounts lost in fraud and error. In addition, far from the living wage replacing the need for benefits and tax credits, it relies on them – if benefits go down, the amount needed for the living wage goes up.

A jobs guarantee for long term unemployed people? It would reduce the amount spent on unemployment benefits, but it has a net cost to the taxpayer. Reducing housing benefit by building more homes involves the government borrowing tens of billions more, and may involve stuffing the mouths of buy to let landlords with gold. Increasing employment rates and productivity through universal childcare could be funded by equalising pension tax relief, but it still involves higher spending by the state.

For all our economic problems, we live in a country where we collectively have the means to ensure that everyone lives in a decent home, has the opportunity to work and earn enough to live on, where the costs of care are made more affordable for those that need them most, and where people unable to work are able to live with dignity. The policies which are currently being considered by Labour and the left have the potential to take a big stride towards creating this society.

In the long term, I am absolutely on board with the argument that such a society would enable everyone to contribute more and therefore be enormously more productive and better off. But in the short to medium term, getting from here to there involves spending more, not less, on social security.

It’s a tough argument, but I think we need to persuade people that creating this kind of society is something worth spending the money on, rather than competing with the government about who’s got the best ideas for cutting the benefits bill.

Why benefits shouldn’t rise faster (or slower) than earnings

by Don Paskini     January 10, 2013 at 12:45 pm

The main way that the Tories justified their rancid Welfare Uprating Bill is by claiming that ‘benefits shouldn’t rise faster than earnings’. They obviously think it is the most powerful part of their argument. So what if there were a simple, progressive way of disarming this argument?

Peter Kenway and Tom MacInnes have, for many years, written the annual report on Monitoring Poverty and Social Exclusion, and suggest that the principle about how benefits are uprated is one that both the Labour Party and anti-poverty campaigners should want to revisit.

They argue that:

Osborne’s underlying principle is the correct one: out-of-work benefits and in-work tax credits should move in line with some suitable measure of earnings not prices. Technically, this is the right principle because it is the only one that over the long term – and benefit uprating is very much something that should be judged over the long term – preserves the necessary proportions, both between earnings and benefits, but also between the money available (from taxes on earnings) and the total value of those benefits which need to be funded.

Agreeing with George Osborne’s underlying principle?!? Surely, by definition, a grotesque attack on the poor?

Except that linking benefits to earnings, rather than inflation, would have actually been better for people on lower incomes over the past ten years (or any other long term measure that you care to consider). As MacInnes and Kenway put it, ‘Taking the last decade as a whole, rather than the five year horizon the Chancellor prefers, earnings rose by 36% while prices rose by 30% (CPI). Frankly, if earnings continue to rise more slowly than inflation then we have bigger problems than benefit uprating to worry about.’

They conclude that ‘a favourable principle, stated by a Conservative Chancellor, is an opportunity not to be missed. Instead of mere outright opposition, the principle of linking benefits to earnings should be extolled at every opportunity, with an eye to the years beyond 2014 and 2015 about which something could still be done’.

With the current link to inflation which we’ve all been trying to defend, during times of growth benefits fall further and further behind earnings, increasing inequality. Then during hard times, benefits are meant to grow faster than earnings, providing an opportunity for the Right to pit people on low incomes against each other and pass populist attacks as they did this week.

I think that the level of benefits need to be revisited anyway to enable people to live with dignity (as MacInnes and Kenway point out, the short term consequences of linking to earnings are very tough for people on low incomes). But as a long term principle, uprating benefits with earnings rather than inflation would be more redistributive and take away one of the Tories’ biggest sticks.


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