On the second day of ‘term’ after Christmas the Government scheduled the Second Reading of their Welfare Benefits Uprating Bill. This was the outcome of the Chancellor’s Autumn Statement on the Economy. He announced then that he was proposing to break the normal link between benefits uprating and inflation and impose three years of only 1% increase in many working age benefits. He also said then that he intended this to be put to an early vote. It was clear from the start that this was a political ploy , with Osborne sure he was setting a ‘trap’ for the opposition , convinced that public opinion would be in the side of yet another crackdown on benefits.
So on Tuesday 8 January the scene was set for the debate on what Andrew Rawnsley in the Observer dubbed the Welfare (Make Labour Look Like the Party for Skiving Fat Slobs ) Bill. The tone had been set by the Chancellor in his Autumn Statement in setting this firmly in the context of hard working people going out to work and seeing the curtains drawn in the next door house where no-one is working. This was followed by a set of adverts with images of a shiny hard working family contrasted with the overweight couch potato figure. During Tuesday’s debate some Tory and LibDem speakers tried to backpeddle from this language as if they hadn’t started by framing the debate in this way.
It quickly became clear that 60% of those affected would actually be people in work, mainly those in receipt of tax credits, but also maternity pay and statutory sick pay.
This turned into one of those occasions when I put in to speak but didn’t get called, since even with speeches limited to 5 minutes there were more people wanting to contribute than time (although the Tories and Lib Dems ran out of speakers an hour before the end. So here are my notes on some of the things I would have said if I’d had the chance:
We heard a lot from Tory speakers about the alleged faults of the ‘welfare system’. But this Bill isn’t about this. Reforming the Welfare system was what the Welfare Reform Act passed last year was supposed to be all about. We may disagree with the way the Government has set about those reforms, but today’s Bill isn’t about any of that. It is only necessary because the Government’s 2010 deficit reduction plan has failed, and further cuts are deemed necessary.
Much of this debate has followed a typical approach from the Government. They assert an exaggerated ‘truth’, usually about the previous Government and then proceed to argue that this justifies whatever they are proposing. So Labour is accused of trapping people on benefits – the so called dependency culture. But spending on out of work benefits actually fell between 1997 and 2010.
The Government is arguing that since benefits rose by 20% since 2007 while wages rose only 10% it is only fair to reduce rises in benefits. It’s only right , said the member of the Vale of Glamorgan, that benefits shouldn’t rise faster than wages. A colleague intervened on him to ask (rhetorically) whether the Labour Government had done anything to bring benefits in line with earnings. The answer to this is indeed ‘no’ but not in the way these Tories were implying. Until the recession from 1997 to 2008 benefits continued to fall relative to earnings. This fall had been going on for some considerable time – in 1979 Unemployment benefit was 21% of average earnings, but in 2010 it had fallen to 11% of average earnings. So the increases since 2008 were starting from a very low base. (Several of my colleagues who did speak pointed out that in cash terms the amounts involved are relatively low – Job Seekers Allowance has risen from £59 per week to £71 per week over this period. )
Labour’s policies were in fact designed to get people into work, including 350,000 single parents. Prior to the last Labour Government the UK had a very low level of single parents in work, in part due to the lack of childcare and in part due to the structure of benefits. Tax credits helped with both these issues.
Following the Autumn statement at the beginning of December it became increasingly clear how many people in work were being affected by this . Perhaps in response to all the criticism Iain Duncan Smith launched into a bizarre attack on tax credits last week, claiming that the system encouraged dependency,. He then used figures for spending on tax credits which have been demonstrated by Channel 4’s Fact Check to be wholly wrong. For instance he claimed that tax credit payments rose 58% ahead of the 2005 General Election. In fact the rise was only 8%. Just before Duncan Smith’s own article an apologist for him wrote a piece in the Telegraph claiming that IDS was embarrassed by the Chancellor’s language. So maybe the IDS article with all its exaggeration was actually ghost written by the Chancellor? But perhaps the most bizarre aspect of this attack on tax credits is that the Secretary of State’s flagship policy of Universal Credit is based on the same fundamental policy of making payments to low paid employees to encourage them into work and help ‘make work pay’. So the Secretary of State appears to be rubbishing his own policy. Yes there are differences of detail which may prove significant – for instance the taper determining when credit is lost is less generous. There is a debate to be had about why there is indeed a growing reliance on tax credits (and also housing benefit) . Tax credits have grown in part because of changes in the labour market. Some of these changes may be temporary but some may be permanent. For instance in retail where the 7 day a week and late opening culture means that busy times are much more scattered and staffing adjusted accordingly, creating a greater need for short hour jobs.
For working families this proposal builds on what has already been a period of payments being frozen. Working Tax credits have been frozen for the last two years, as has child benefit. In addition childcare tax credits were cut from 80% to 70% of eligible costs and the taper increased from 39% to 41%. This last is an effective 2% cut for the low paid and cost families with one child up to £400 and 2 children up to £500 each year.
The old joke that on being asked for directions the answer is ‘well I wouldn’t start from here’. We are being asked to vote on this narrow issue in isolation, with no option to make other choices. The Coalition has already made those choices, on tax rates for example, or on tax relief for pension contributions (also part of the Autumn Statement) or on stimulating investment in affordable housebuilding to create jobs.
EVENT: Save our Services: Welfare Reform Public Meeting – Friday 7th September
(Not the) Westminster Report
Westminster may be in recess but politics hasn’t stopped. Mid way through the Olympics was the time chosen by Nick Clegg to announce that his House of Lords Reform Bill was being abandoned, and that as a result his Party would be voting against the proposed boundary changes & reduction in the number of Parliamentary seats from 650 to 600.
Most commentators had been expecting that nothing would be resolved on House of Lords Reform until Parliament resumed in September. Was the timing down to it being a ‘good time to bury bad news’? Or an attempt to ‘clear the decks’ for a ‘re-launch’ for the Coalition in the autumn? But I suspect that once Parliament comes back the issues won’t go away as easily as all that. The Tory ‘rebels’ will have grown in confidence. Europe next? There is a considerable (but not exact) overlap between the House of Lords rebels and the ‘euro sceptic’ tendency.
In one article before the summer break I noted House of Lords reform referred to as the ‘Bermuda Triangle’ of British politics. The path to reform (under debate for 100 years) has been stalled yet again.
The Coalition & the Economy
With yet another piece of LibDem policy biting the dust, attention turned to the future of the Coalition. On 13th August the Guardian published a poll showing that the proportion of people expecting the Coalition to collapse within 2 years had nearly doubled in the previous two weeks (the period covering Clegg’s announcement) , from 23% in late July to 43% in the second week of August.
What remains to hold the Coalition together is the often repeated claim that the two parties had to come together to put in place a deficit reduction programme which in turn was necessary to rebuild the economy. The trouble is that two years on economic growth has stalled and even some of the economists who originally supported Osborne’s programme have changed their minds. The New Statesman called up several of those who signed a letter to the Sunday Times on 14 February 2010 in support of George Osborne’s policy. Here is two of the responses:
‘If I were chancellor at this point I would alter the plan. I would stop the cuts to public investment and I might even seek to increase it.’ (Roger Bootle, Capital Economics)
‘We need growth, and that requires investment. In a recession bordering on a depression, public investment in infrastructure that has high pay-off even in good times must make sense.’ (David Newbery, Cambridge University)
Source: The Staggers – New Statesman on line – article by George Eaton 15th August 2012, see http://bit.ly/OUR3nr.
It’s still the economy!
As the dust settled after the Olympics it was still the economy which was dominating the news. Not surprisingly the debate continues along what have become fixed tramlines.
In the ‘red corner’ we have those economists and politician whose position could be summed up by Keynes’ advice to governments in the 1930s:
‘Look after the economy and the deficit will look after itself’.
In the ‘blue corner’ we have the Coalition and its supporters. In the Sunday Times on 19th August (we buy the Sunday Times as a ‘corrective’ to the daily diet of the Guardian – it’s useful top know what the ‘other side’ are saying) the economics editor , David Smith, was still sticking to his belief that in due course the poor GDP figures will be revised up and that things really aren’t as bad as we think. (and to be fair since I first started writing this the Office of National Statistics did revise the drop in GDP for April to June to 0.5% rather than the original 0.7%) That said even Smith told the Government that it should ’find room within its broad fiscal plans to spend more on infrastructure and house building’. Osborne did make a nod in that direction in his 2011 Autumn Statement but most isn’t due to take effect until 2013. Part of the problem is that one of the first things the Coalition did was cancel those much talked of ‘shovel ready’ projects such as school building in England. Changes to the funding of affordable housing meant that virtually no new affordable homes were started in England in the first half of 2011/12. There has since been a slow build up but not to previous levels . Many houses being built will have much higher rents causing affordability issues for low income households and/or increased housing benefit payments. (And before we get comfortable that everything is different in Scotland funding changes here also mean an increase in the provision of higher rented (‘mid market’) homes, and fewer at low rents. )
David Smith and the others in the blue corner base part of their optimism on the most recent employment figures. Between the first quarter of 2010/11 to the first quarter of 2012/13, 670,000 new private sector jobs have been created. 275,000 of these jobs are people becoming self employed. A good sign, demonstrating entrepreneurship? In some cases, however, there appears to be as pattern of firms encouraging employees who might otherwise be made redundant to work as self employed. This can lead to more erratic periods of work and earnings and can mean missing out on such things as sick pay, holiday pay and pensions. Where people are genuinely starting up on their own it will be interesting to see this goes, as self employment is often tougher than people anticipate, and at the moment there is a problem of lack of demand/ disposable income for the goods and services offered by these new businesses. Half of the new jobs (both employees and self employed) have been part time. There is a substantial rise in the numbers of people saying they are working part time not by choice but because that is all that is available. The overall picture is of a fairly precarious and ‘low earnings’ expansion in jobs.
This in turn has other consequences. People working part time are more likely to qualify for tax credits, housing benefit and council tax benefit. In July 2012, compared to July last year, social benefit payments are up 7%. Overall public spending rose by 5% while tax receipts have fallen, in a month which is usually a ‘good’ one for tax coming in. Result = a £600m deficit in July 2012 compared to a £2.8bn surplus in July 2011. It is now expected that Government will have to borrow above target this year.
The story coming through in several news reports is of Government Departments being warned to prepare for the possibility of a fresh round of cuts this year!
A Divided Britain
The north/south divide is not new but at the moment divisions are widening. The South East is doing relatively well, and when Tory MPs pop up in Parliament to say that unemployment is falling in their constituencies they will be reporting a fact. Of course none of this is new. In the 1930s housebuilding and new ‘light’ industries prospered in the south and parts of the Midlands. But after decades of trying to address these problems the divide is getting worse. Successive Governments have deliberately moved public sector departments into ‘depressed’ areas. Current cuts in public spending are seeing that undone.
Interestingly one of the highest increases in youth unemployment has been in Corby with rates rising from 4% to 11% between 2007 and 2012. And of course there is now a by election pending there.
‘The Causey’ – a project for the future & some reflections on history repeating itself
This picture was taken at an event to mark a further stage in a campaign to make West Crosscauseway ‘human friendly’. This wall board is outdoors (hence the coat!) Five years ago the group transformed the area into something resembling a tropical beach. It certainly attracted attention! The aim of the campaign is to make it permanently more pedestrian friendly – though maybe not a beach!
The wallboard also relates some of the history of the area. One thing which stood out for me was that one of the main shops in the row at the start of last century was a ‘house agent’ – and recently a new lettings agency opened. At the start of the 20th century nearly everyone in the area would have been renting from a private landlord. In the 1930s ‘Edinburgh Corporation’ started to demolish some of the worst slums and build new council tenements in the area (you can still see many of these in places like Gifford Park, East Crosscauseway and Richmond Place). Not everyone got rehoused in the Southside and many Southsiders moved to new homes in Prestonfield and Craigmillar.
Private renting never disappeared here because of the student population but the opening of new lettings agencies is a sign of expansion in private renting in the last few years. By the end of the 20th century the assumption was that private letting was in terminal decline other than for students and other young people. But first high prices and now the difficulty of getting mortgages has created huge new demand for private renting with age of first time buyers approaching 40. In addition severe shortage of council and housing association properties has forced more low income families (both working and not) into the private rented sector. This has led to the rise in spending on Housing Benefit which has led to the current Government’s cuts in housing benefit. The Government isn’t wrong in pointing to the ‘unsustainability’ of the continuing rise in the housing benefit bill. But their solution (stripping bits of benefit off lots of low income households) isn’t the right one, and the bill is continuing to rise, despite the cuts, due to a combination of higher rents and more people either unemployed or working shorter hours.
The better answer is sustained and significantly increased investment in affordable housing, which also would bring the benefit of creating jobs and apprenticeships.
Thinking of Working for yourself?
One of the striking employment statistics during this recession is the number of people who are being recorded as ‘self employed’. Succeeding isn’t just about having a good idea. There are business plans to draw up, set up financing to find, the taxman to pay. One of my visits this month was to Cre8te at Castlebrae Business Centre, Peffer Place to hear about their ‘business incubator’ service. They can advise on getting started, and may be able to help with small grants to take that important first step – e.g. to help with transport or equipment.
Drop into Castlebrae Business Centre or phone 0131 661 8888 or email email@example.com
Let’s make Portobello a Fair Trade Town
Along with Councillor Maureen Child I visited the ‘Just World Shop’ at 54 Portobello High Street in August to support the application which is being made to have Portobello declared a ‘Fair Trade Town’. Support from the local community is important in making this application so please sign the petition which is being circulated or call in at the shop to offer your support. It’s not the only place in Portobello which is signed up to ‘Fair Trade’ of course and Portobello and its residents have a good track record in this field.
Over the last two years I’ve received many complaints from constituents about the statutory notice system. The Council is currently consulting on the future of the system – should it be an ‘emergency-only’ system for example? My own view is that this would be a mistake and I’ll be writing further about this next time. I also wrote a piece about aspects of this on my website in early August (ADD LINK – ‘Looking after our tenements’ August 6th). The Consultation continues to the end of October but I would urge those who live in tenements to put in a response, whatever your opinion.
Click here http://bit.ly/NJTzyq to visit the council website on the consultation ‘Property Services Redesign’.
Portobello Big Busk – Saturday 25th August’
No, not an ‘elected representatives Busking Group’ but with Councillors Maureen Child and Joan Griffiths, I was down on Portobello Prom to see the acts and hand out some leaflets asking people for their views on the referendum. After a wet morning the afternoon was dry, even getting warm, so there was a great atmosphere. Well done to the organisers – and all the performers of all ages.
A Sainsbury’s for Portobello
The news that the hardware and garden store ‘Woodwares’ on Portobello High Street was to close has been met with dismay in the area. The owners want to retire. The further news that the owners had reached an agreement for Sainsbury’s to take on a lease and open one of their ‘local’ stores has provoked a lively debate. There is not a ‘change of use’ here in planning terms – as both are ‘retail’ – so there doesn’t have to be a planning application. If Sainsbury’s intend to sell alcohol, they will have to apply for a license from the City of Edinburgh Council. Views in the area are mixed – see some of them on www.talkporty.org: http://bit.ly/NJWZB2
Dates for your Diary
Saturday 22 September – “A Just Scotland” a chance to discuss Scotland’s constitutional future – 1000-1600 – to sign up and obtain further details, go to: http://bit.ly/OUUURo
To sign up to future enewsletters, complete your details here:
The Chancellor went to the Mansion House in the City to announce that the Bank of England would be making up to £140bn available to banks to ‘kick start the stagnant economy’ (words from Daily Telegraph). Up to £80bn could be made available to banks to lend on to business or individuals (e.g. as mortgages), with the rest being a scheme which would offer banks liquidity in tranches of less than £5bn a month.
So finally the Chancellor admits there’s a problem – but is this the right answer?
Since the election we’ve had around £300bn of ‘quantitative easing’ which was meant to assist, but many feel that this has simply disappeared into the banks. While that has hopefully made the banks more stable, it has done little to stimulate the economy and has had some adverse consequences, for example to pension funds.
Then we had Project Merlin which was an agreement between Government and the banks to lend to business – seems this didn’t work either. And what about ‘credit easing’ which was announced with a fanfare in the Chancellor’s Autumn Statement? Surely this was meant to get lending going again? I asked a question about this in PMQs earlier this year and the PM was quick to say it was ‘coming’ and sure enough it was announced as ‘in place’ the day before the March budget. We have heard remarkably little about this in the nearly three months since the Budget. Are we to assume from these ‘emergency’ measures that this scheme hasn’t done much?
So it is perhaps not surprising that there is a lot of scepticism about these latest proposals. Will this extra money mean that banks will stop asking quite such high levels of deposit to would be home owners? Most people report the biggest problem being the deposit rather than being able to repay a mortgage. Will people have the confidence to consider buying when jobs are at risk? A report last week told us that it isn’t just first time buyers who are having problems but also those who might in easier times have wanted to ‘trade on’. They too find it difficult to get lending to ‘bridge the gap’ but are also likely to be wary about considering a move when they may not be able to sell.
And even the banks are pointing out that many of those businesses who are desperate for lending may already be in considerable difficulties – and lending to them could be risky. There is in fact considerable evidence that British businesses have capital but are not using it because the demand for their goods and services is simply not there.
Far from being a Plan B this looks like yet more of the same.
What would be better? Just before writing this I was listening to Any Questions on BBC Radio 4. One of the panellists suggested the money would have been better spent given to Housing Associations to build affordable homes. The Tory on the panel rejected this saying that ‘recovery’ would only come from the private sector. Which is odd really because the main beneficiaries from giving the money to housing associations (or councils) would be private building firms! What the Tory Government can’t seem to accept is that public and private sectors are inextricably linked. More people in jobs in turn helps the rest of the local economy as people in work have more disposable income.
Labour has been advocating direct stimulus to sectors like housing – there are many sites in places like Edinburgh which already have planning consent. In addition we have advocated a reduction in VAT and a bank bonus tax.
So panic from the Government yes – but no real sign that things are going to improve!
Edinburgh East MP Sheila Gilmore has slammed the Tory-led Government’s budget and the way it has one rule for the rich, another for the poor.
Sheila Gilmore was speaking after a budget debate in the House of Commons. She compared the decision to cut the 50p rate of tax for those earning over £150,000 to the cuts in Working Tax Credits that take effect from the end of the month.
Sheila Gilmore said:
On the one hand the Chancellor has justified scrapping the 50p tax by claiming it wasn’t bringing in money due to high earners fiddling their finances. While this claim is doubtful – HMRC estimate the tax would bring in £3 billion next year – this shows the Government are willing to pander to the rich.
On the other hand the Chancellor’s cuts to working tax credits mean that couples who at present have to work at least 16 hours per week to qualify will now have to work 24. If families can’t get the extra hours, they stand to lose up to £3,000 a year. Faced with this change some may judge that they would be better of not working at all. The Government would then no doubt call them scroungers and workshy.
So on the one hand the Government carefully adapt policy to discourage the rich from tax avoidance – and are very polite in the process – but are happy to plough on regardless when their decisions will encourage people to give up work – vilifying anyone who does.
Clearly, the Government see tax planning as a perfectly rational and sensible reaction to tax changes. However, if a working couple who are about to lose £3,000 in tax credits make a sensible and rational decision to stop work because that will make them better off, will they be seen as merely making a sensible and rational decision, or will they be seen as lazy, as scroungers, and as people who prefer to watch daytime television than hold down a job? If they make that decision, which is rational for them, the outcome will be wholly irrational for the Government, because it will cost the Government more if that family stop work.