Slipping behind: with benefit reform, keep an eye on the index

Historians generally agree that cutting back public spending is difficult in a modern democracy.  Losers shout louder than winners; the most expensive programmes are generally the ones with the most interests behind them; radical cuts are more likely to provoke strong reactions.  (Similar objections apply to tax rises, of course.)  The current cuts are striking, not just in their sheer unprecedented scale, but in the extent to which they cut back on services on which a lot of people rely in a very visible way.

So governments have always tended to fiddle with the small print of tax and spending rules – it’s hard to twig exactly what’s going on, the consequences aren’t immediately clear and by the time the full impact is clear the deed will already be done.  Freezing the basic-rate limit (or, in days gone by, the personal allowance) for income tax is a classic example.  So, too, with changing the rules for calculating benefit increases.

Of course, the Government’s already played this game.  Nearly £6bn of its £18bn of planned welfare savings come from changing the measure of inflation used in uprating benefits from RPI/the Rossi Index, depending on the benefit, to CPI (see p40 of the Emergency Budget).  This is simply because small changes, repeated each year, add up.  If you look at the chart here, the impact over a long period becomes very clear.  Whether Gordon Brown specialised in stealth taxes or not, George Osborne certainly has a fondness for stealth cuts.

The exception to the rule is the Coalition’s ‘triple guarantee’ on state pensions, guaranteeing annual increases of the highest of an increase in earnings, prices or 2%.  Of course, this will start undoing the work of the last Conservative Government, when it broke the link between pensions and earnings.  The (clearly documented) consequence was that the basic state pension fell further and further as a share of earnings – from 20% in 1978 to under 15% by 1998; it has carried on falling ever since.  That trend will now reverse over time; but note how differently a large, vocal, Conservative-inclined group is being treated from people on low incomes, with disabilities or in need of housing.

We need to spell it out: the decision to uprate benefits by CPI rather than RPI is a straightforward decision to make the very poorest people in Britain poorer.  It hits people on Income Support, on Jobseeker’s Allowance, on Incapacity Benefit or ESA.  As the Government are even cutting the link between Local Housing Allowance and rent levels, it will drive more and more people out of their homes: eventually, given long enough, it will make people out and out homeless.  (This holds even if we ignore the effect of all the other LHA cuts.)  The single biggest policy change, fiscally speaking, in the Emergency Budget and the Spending Review combined is a plain and simple cut to the incomes of Britain’s most disadvantaged inhabitants – one which will be repeated every year, until it changes.

That’s quite bad enough as it is, and it makes the Government’s claim that it’s determined “not [to] balance the books on the backs of the poor” look pretty hollow already.  This September, the difference between CPI (5.2%) and RPI (5.6%) was fairly small, but the long-term effect will be dramatic.  So for the Government to even consider ways of reducing the annual rise again, even for one year only, is a particularly nasty attack on the living standards of a lot of very vulnerable people.  The reason inflation is high is that the cost of living is going up: a lot of that is to do with global food prices, which (as a relatively fixed cost) will bear especially hard on the poorest.  When the IFS says that £1.4bn (out of £1.8bn) could be saved by averaging out six months’ worth of inflation figures, they mean that most of a badly needed boost to incomes for the very poorest people in the country could be removed.

If the Government want to argue that that’s justified, then I’d disagree, but it’s a point for debate.  But they cannot then claim that they’re not “balancing the books on the backs of the poor”.  As a matter of cold, hard, statistical fact – whether they go ahead with this one-off change or not – they already are.

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Organise and divide? Belated musings after the J30 strike

One of the current Government’s core tactics, when it comes to steering through cuts, is defining different groups against each other.  Whether it’s pitting private sector workers against the public sector, justifying cuts to housing benefit on the basis of unfairness to people in work or distinguishing deserving from undeserving social tenants, the Coalition understands the political gain of identifying a particular group, claiming that they’re gaining unfairly and then cutting in the name of fairness.

One nation social democrats?

Left-wingers have tended to argue against this kind of narrative, for obvious reasons.  They reply that, even if ‘divide and rule’ sounds effective, it doesn’t cut much ice in a two-earner household where the only reliable pension is from the public sector employee, the family whose 20-something son or daughter is on ESA but whose parents are in full-time work or the low earner in London who relies on Housing Benefit to pay the rent.  There is, of course, a lot of truth to this: the lives of people in different jobs, different housing tenures and different personal circumstances are often deeply intertwined.

Note, though, how much these examples rely on people’s own specific lives being intertwined.  Not every public sector worker lives with, marries or relies on someone in the private sector; most families don’t have a member on ESA.  In fact, assortive mating means that people are often likely to end up with people like them than not.  (The overwhelming majority of people I know work outside the for-profit world – the state, political parties, universities, charities, NGOs … almost anything, in fact, but a private company.)

Partly as a result, many of these divides are more real than social democrats like to admit.  In my own family, some of our most visceral differences come from the fact that I don’t work for the private sector, but my father does.  Left-wingers’ own attitudes often contribute to those divides: in my heart of hearts, I know that I tend to place the public sector, its values and its ethos higher on my priority list and to treat it as an ethically better option.  I’m not saying I should: I’m saying I recognise my own prejudice – and that it makes it harder, not easier, to win over people who do work in the profit-making economy.

Trade unions suffer badly from this – and it’s very hard for them to get out of the bind.  It’s worth noting that, since May 2010, unions have been keen to ‘speak for society’ and to emphasise their role in defending public services.  Unions 21’s new report highlights some of the problems they face presentationally, both through their own failings and through hostile reporting; but at least part of the problem is intrinsic.  Trying to articulate the national voice is, by its very nature, going to be in tension with action on behalf of members’ specific interests: not necessarily in conflict, but in tension.  When considering responses like the 30 June strikes, this is worth bearing in mind.  The unions’ great opportunity is to be seen as on the side of the public; their great danger is convincing the public, again, that their powers need to be curbed.

Justice versus envy?

Left-wingers can also risk playing to the Coalition gallery in the way they talk about justice.  Much of what we consider to be justice is, of course, decried by the right as the ‘politics of envy’ – when complaining about the super-rich, for instance.  Now, of course, this is spurious: there is a distinction between saying ‘the wealthy in our society have too great a share of the wealth, while millions of people are in poverty’ and saying ‘I haven’t worked my way up the ladder, so I want to pull you down to my level’ – and if we can’t make that distinction, the debate about fair shares is effectively over.  But, rhetorically and in the eyes of people less committed to our own values, the line is a hard one to police.  Arguments about ‘reverse class war’ may make it more difficult, rather than less – though it’s important to remember that defining a privileged minority working against the interests of most people is a long tradition of the left, as well as the right (People’s Budget, anyone?).

This is part of the reason why, when dealing with tax paid by the wealthy, issues like tax avoidance are so useful.  They tap into a very widely held view that the rules should be the same for all of us – providing a way of arguing for the wealthy to pay their share and binding us together, as a society.  (Even Ted Heath talked about ‘the unacceptable face of capitalism’, after all.)  In particular, this argument helps to explain why focussing on paying due rates of tax, rather than just raising the rates, tends to have a wider political appeal.

All in all, I have more of a sense that there’s a problem than I have of the answers.  But for what it’s worth, people on the left need to be aware that they too have prejudices in favour of particular social groups (maybe even vested interests … sometimes).  We need to ask ourselves whether we make enough effort to engage with others – private sector workers in particular, who do after all provide much of the revenue for social programmes.  We need to do more to connect campaigns to the wider good – where union campaigning can be linked to the interests of patients, pupils, parents and families, it should be.  And we may even have something to learn from the language of one nation conservatism: it was, after all, Benjamin Disraeli who first talked of ‘two nations’!

Dear ministers: poverty generally means not having enough money

Yesterday’s furore over Nick Clegg’s former interns rather missed the bigger picture.  Yes, it’s not on for MPs (Clegg is, in this respect, pretty typical) to hire de facto labour and not pay for it: equally, Jonny Medland’s tactics aren’t exactly edifying (it’s not as if he suffered from the experience).  The Social Mobility Strategy seems to contain a number of reasonable-in-principle-but-less-than-earth-shattering initiatives, most of which have already been announced and some of which are new.  Fair enough, to a point: all governments try to reframe a whole series of policy announcements from time to time, and goodness knows oppositions like to repackage old policies too.  It’s worth pointing out that much of it rings hollow in the current climate (commitments to Sure Start would be a bit more plausible if Children’s Centres weren’t closing all over the country …), but few of us are going to argue against the general principle.

The Government’s Child Poverty Strategy was also published yesterday.  Of course, it received much less attention: poor children are always of much less interest to the British press than who ends up interning for the Deputy PM.  But a key strand running through it was a commitment to ‘broader’ definitions of poverty.  This ‘broader’ definition seems to stretch through from access to health services to – you guessed it – social mobility and life chances.  Frankly, the Government seems to be in serious danger of confusing the words ‘broader’ and ‘different’: throughout the document, we get references to opportunities, to generational cycles of poverty, to unfair educational outcomes – to anything, in fact, which avoids the question of whether poor families have enough money.

Perhaps I’m narrow-minded, but it seems to me that poverty has rather a lot to do with not having enough money.  It’s all very well to say that poverty isn’t all about money or that poverty plus a pound doesn’t equal fairness (not a statement, I suspect, that anyone who finds themselves one pound above the poverty line would ever make) – but ultimately, if a family struggles to put decent meals on the table, it’s about money.  If an unemployed parent can’t afford the transport to a job interview, it’s about money.  Finding the money for school uniforms is a question of, well, money.  Children whose parents can’t afford enough space for them to study in peace and quiet are struggling with their schoolwork because their parents don’t have enough money.

There’s a cynical conclusion to draw here, which has a large degree of truth to it.  This Government needs to have targets which go broader – and longer-term – than the current set: it knows perfectly well that its chances of the current targets going in anything other than the wrong direction, fast, are vanishingly small.  £18bn of welfare cuts will cut savagely into poor families’ incomes; Housing Benefit cuts will mean that many poor people will find themselves forced to give up jobs as they move out of their reach, one bus ride too many to sustain or one extra half hour too much to juggle with another job; closed Children’s Centres translate into parents who find it that much harder to stay in work.  All in all, income-based targets which can be measured in 2015 are unlikely to hold much comfort for Cameron and Clegg.

But it isn’t just that.  The Government doesn’t really believe that income poverty is the measure of fairness.  It pays lip service to it – it’s obliged to by law, after all – but in its view, as per its Social Mobility Strategy, ‘The true test of fairness is the distribution of opportunities.’  The Child Poverty Strategy trumpets the Fairness Premium for education – and the Child Poverty Commission will now be set up as a Social Mobility and Child Poverty Commission (note the order, by the way) – because the Coalition thinks that poverty and mobility can be elided.  It believes that the question of whether people are poor is basically the same as the question of which people are poor in a generation’s time.

Well, it isn’t.  Poverty is poverty: it is a grinding, day-to-day inability to share in the common life.  As Polly Toynbee said of social exclusion, “It is a No Entry sign on every ordinary pleasure”.  And if we subordinate tackling poverty to promoting mobility, not only will we fail to do either: we will condemn another generation of poor children to growing up in poor housing, without birthday presents, with the fear of falling into debt, with parents trying to make ends meet (often with several jobs at once) and often divided from each other under the strain.  It’s very easy to treat the lack of money as a sideshow when you’ve always had plenty of it.  Our Government ought to remember that.

Afterthought: A partial exception to this, in fairness, is a focus on getting people into work.  This is something the last government worked hard on, and found dauntingly difficult, at a time of economic plenty.  At a time when the best part of a million people are about to be put out of work by government policy, I find it hard to believe that the Universal Credit is going to get us very far towards raising employment in the next few years – especially when no one’s even going to start receiving it until 2013.  Smoothing out some of the kinks of the current system is a good thing: but it’s a smoothing out, not a revolution, and it’s accompanied by plenty of benefit horrors – many of which, like the lowering of the maximum award for childcare from 80% to 70% of costs, will actually make it harder for people to enter or to stay in work.

Housing policy poses similar problems: the arguments around the Coalition’s plans to allow higher social rents in order to create revenue streams for building more homes are complex, but higher rents combined with Housing Benefit tapers mean that the barriers to work rise even higher.  (And the need for this particular expedient might have been reduced had the Government not decided to cut the social housing budget in half.)