Battleground 2015: Protecting our standards of living

A few weeks ago, we learnt that inflation has increased to 2.7 percent, whilst the Bank of England said that it expects inflation to exceed the three percent mark at some point this year. Meanwhile, the growth of pay has been just 1.3 percent and most social security benefits are either frozen or limited to a one percent rise over the next three years. The squeeze on living standards remains a very real issue, and the growing disparity between social security, the rate of inflation and low wage increases means that living standards are put under severe strain. This is despite growing awareness for things like the Living Wage Campaign that have sought to re-focus efforts on dignity in employment. Coupled with low overall economic growth (coasting at pretty much nil since 2010, and achieving only 0.3 percent in the last quarter) the consequences have been alarming for working people.

George Osborne’s recent Spending Review has reinforced those trends and, given the fiscal commitments he has made, the Coalition has now set the terms of debate for the 2015 election. It will be, as the Institute for Fiscal Studies claimed, an ‘austerity election’ because successive governments will have to impose further spending cuts of £23bn between 2015 and 2017. This is a contentious agenda, which will see public expenditure plunge below 40 percent of GDP – and below that of the US, Germany and Japan. Public spending will fall by over 6 percent between 2012 and 2017; in the US, it will fall by just 1.26 percent. The UK is therefore rebalancing its economy in a very drastic way in a short time period compared with other major economies. Labour must challenge this agenda. But it must also ask a basic question about its raison d’être: what is the purpose of the left in a period of austerity, in a period of low economic growth, and in a period of declining support for the welfare state?

From the mid-1990s, Labour could rely on economic growth to redistribute wealth – in other words, correct the problems caused by capitalism without dealing with the cause itself. Looking towards the horizon of 2015, this is clearly not possible from an economic perspective, nor desirable because popularity for the welfare state has waned. It means that Labour must support social justice and equality – both central to achieve fairness – in a different way. Labour can no longer focus on a large state and solely on the redistribution of wealth to achieve its goals. Things such as working tax credits have perpetuated market inequalities, where the government spends billions to essentially subsidise companies for low pay. This is one of the central reasons that we must turn towards a living wage to support people in jobs. The living wage is as much about economic equality as it is about social justice. Labour was founded on such a principle, aiming to improve social cohesion and fighting for the right for every person to have an opportunity at a good life. This was a founding aim for guild socialism, co-operatives and trade unions. We must remember that greater economic justice is not an end in itself, but the mechanism by which we can achieve a better society – a society in which we, as communities, can determine our collective fate and in which we, as individuals, can pursue our conceptions of happiness. Unfortunately, this seems so have been forgotten sometime after the Second World War, possibly somewhere amidst the creation of a bureaucratic welfare state. The Labour Party focused too much energy on correcting the faults of the capitalist economy: it focused on tidying up inequality, rather than challenging its causes.

Labour would do well to look to the principle of living standards as a central guiding force for policy. The protection of living standards is the belief that all individuals have a right to a minimum standard of living through dignity in work, good mental (as well as physical) well-being and reasonably priced public services available for all. In other words, life should be affordable and not a daily struggle for survival. The Coalition government has entirely abandoned these aims: the cost of essential goods has increased by 25 percent since 2008 without ameliorative efforts. Living standards are now at their lowest level since at least 2004-05, and the IFS has concluded that: ‘Prospects for living standards are […] bleak – further falls are likely to be followed by a weak recovery, leaving average income growth even lower in the 2010s than in the 2000s’. [1]

Labour’s alternative to austerity must be a return to the principles of a decent standard of living. Living standards resonate with people, so long as it is associated with the beliefs of dignity in work, social security based on a contributory principle, and a distribution of wealth based on just deserts. The idea of a ‘squeezed middle’, scoffed at by so many a couple of years ago, was a bold move that has since become an important reference point for debates around austerity. It requires the following commitments from Labour:

  • A minimum living wage. This, beyond anything else, will be a test for Labour. The Party must commit to the introduction of a living wage across the country. There are calls for the national minimum wage to be raised to become the living wage, which I would echo. [2]
  • Protection of basic economic rights. Calls from Conservatives suggest that austerity may cause the repeal of employment rights. Tory europhobes, too, want to repeal rights in order to create a more ‘flexible’ labour market. If anything, these need to be strengthened to ensure basic rights for workers.
  • Regulating prices. Our utility companies are hardly subject to competitive frameworks. Water companies have monopolies over certain areas, and energy companies make it difficult to switch to cheaper rates. [3] This must be challenged through a regulatory framework, coupled with a green investment strategy.
  • Social investments. For example, we need to continue to invest in education at all levels (from pre-school support to post-graduate funding). This will balance equality of opportunity as social mobility will increase, and it will also act as an incentive for further investment from businesses.
  • A strategy for growth. Social security benefits are rising because our economy is not growing. A growing economy – that is rebalanced towards sustainability, with regulative frameworks in place – has the opportunity to not only lower social security, but also to strengthen dignity in work.

Labour can be radical in its approach towards living standards. It speaks to a positive vision for what economics is for. It is an approach that moves Labour away from the falsely constructed ‘strivers versus skivers’ debate. Ultimately, this is also not about austerity. This is about using the resources we have to achieve radical outcomes for greater social justice and equal opportunities for all, without the need to necessarily increase public expenditure.

mg

[1] Institute for Fiscal Studies (2013) Living Standards, Poverty and Inequality in the UK: 2013, London: IFS, p.28. Available here.

[2] A living wage is important because it would ensure dignity in work for the employed, it would boost the spending power of individuals (gross earnings would be up by £6.5bn) and it would ensure a more productive workforce. Crucially, it would also allow the Treasury to achieve gross savings of £3.6bn if universally applied. See this report by the IPPR and Resolution Foundation for more details.

[3] The Power Book, presented by Caroline Flint at the last Labour Annual Conference was a step in the right direction. For more, see: Local Government Information Unit (2012) The Power Book, London: LGiU.

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Breaking Britain

On 04 April 2013, Mick Philpott was sentenced to life imprisonment for manslaughter. The man caused the death of six of his (many more) children by starting a fire. The Daily Mail’s headline read: ‘Vile Product of Welfare UK’. But it isn’t just the Daily Mail with that view. George Osborne, with the support of the Prime Minister, attributed a role to the welfare state to the rise of Philpott. He said that: ‘I think there is a question for government and for society about the welfare state, and the taxpayers who pay for the welfare state […] subsidising lifestyles like that’. Readers of the tabloids, and many politicians besides, strongly believe that the majority of those claiming benefits are either foreigners or fraudsters. This is not surprising, given that citizens are consistently fed myths about those who rely on benefits. The TUC/YouGov Survey from December 2012 is hugely revealing. For instance, respondents believed that 41 percent of the entire welfare budget is spent on unemployment benefits. In a second example, respondents believed that 27 percent of the welfare budget is claimed fraudulently. It therefore comes as no surprise that 59 percent of all respondents of the poll agreed with the following statement:

Britain’s current welfare system has created a culture of dependency, whereby many people, and often whole families, get used to living off state benefits; the system needs to be radically changed to get such people to take more responsibility for their lives and their families.

The persistent myths spread by the media have therefore had a huge impact to entrench divisions within society about the nature of welfare (despite the fact that the same respondents also believed (by 54 percent) that the media does not give an accurate account of welfare expenditure or the people that claim social assistance). Here is a pie chart on how the welfare budget is actually spent [1]:

Expenditure of Welfare

What it shows is that less than three percent of the welfare budget goes on Jobseeker’s Allowance, and fraud is estimated to cover roughly 0.8 percent (although ‘fraud’ by definition may not be estimated accurately). What is hugely important to note is how widespread the welfare state supports British families: from young families to pensioners, from the sick and disabled to those on low income. Roughly 64 percent of all families receive some kind of social assistance.

The very idea of ‘welfare’ is now under siege. For many people, the term has connotations of big state, dependency and laziness. It is now even used as an insult, when it was once a source of pride. To take the headline from the Guardian, a ‘war on welfare’ has begun. This ‘war’ is fought amidst growing divisions in British society, in which welfare is linked to the rise of ‘shirkers’ (demonising the unemployed) and connected to the rise of immigration (with consequent rises in xenophobia). These are just two examples of a pervasive trend in an attempt to turn the public against social security in order to legitimise the Coalition’s austerity agenda.

As with the ‘debt versus growth’ debate, the Coalition are winning the argument. The terms of debate have shifted significantly: ‘welfare’ is no longer about supporting those in need; it is now about a ‘culture of dependency’. Setting the agenda in such stark terms means that the Conservatives have been able to pose a particular problem of the welfare state that implies a particular solution: cut welfare and you cut dependency. This narrative has proved to be very powerful – regardless of its faulty analysis. The policy consequences are as radical as the narrative has been powerful. However, the austerity agenda pushed by the Coalition has done far more than changed attitudes to welfare. It has had significant material consequences. A recent report by Oxfam showed that more than 500,000 people are reliant food aid. This is a failure of the social safety net to ensure that families have access to sufficient income to feed themselves adequately. This is a worrying trend, but most disturbingly of all it is almost entirely unopposed. The centre-left, on the whole, has relinquished ownership over the debate on welfare, and the vacuum has allowed the Conservative-led Coalition to fill it. Even Polly Toynbee has given up.

This is despite the fact that the austerity agenda will, as many have already pointed out, disproportionally affect the poor. Analysis by the Institute for Fiscal Studies backs this up, epitomised by the following graph [2]:

photo

The inevitable rise in inequality is hugely damaging. It was only a few years ago when the idea of ‘equality’ had a resurgence through the popular book by Richard Wilkinson and Kate Pickett, The Spirit Level. Inequality will have a negative impact on public health, crime and violence, happiness levels, mental health, work ethic and education. [3] Their persuasive arguments were at the top of the political agenda, having the support of David Cameron, Michael Gove, Ed Miliband and Jack Straw – to name a few figures that have publicly quoted the book. Of course, since then, the very idea of ‘equality’ has come under attack. In The Spectator, for example, the book was called ‘junk food for the brain’.

The Conservative Party’s agenda has been hugely effective. It has divided the public and portrayed the Labour Party as squandering public resources on ‘wasteful’ benefit claimants. The story has become one characterised by ‘unfairness’ to hardworking families for the benefit of the lazy. However, this strategy also presents an opportunity for Labour. Using Cameron’s own term of ‘Broken Britain’, which he first coined in 2009, Labour has the opportunity to argue that the Conservatives have further intensified social divisions. Ironically, it is the Conservatives that are ‘breaking Britain’, which Labour must articulate in three important ways. First, it must shift the language from ‘welfare’ to ‘fairness’. This must demonstrate the unfairness of the austerity agenda. Second, it must emphasise the squeeze on living standards and that the Labour Party will protect living standards in a period of low economic growth. Third, Labour must articulate a narrative that unites the public. One Nation Labour must be more than a buzzword; it must show substantive commitment to equality and well-being.

Slowly, the Party leadership has begun to take on this challenge. Last week was hugely important for Labour, and Ed Miliband’s speech was one that delivered. Although nuanced, it hit the right chord for many. Labour cannot win by solely presenting ‘the facts’ of welfare. As Miliband’s speech demonstrated, the Party must be committed to welfare reform with a narrative on social justice (epitomised by the return to the contributory principle), living standards (Miliband once again vowed to push forward with the living wage) and a commitment to equality. This is emblematic of what One Nation must stand for, and it is something that Labour has begun to articulate.

mg

Notes

[1] Taken from A. Coote and S. Lyall (2013) Mythbusters: “Strivers v. skivers: the workless are worthless”, London: New Economics Foundation. Available here.

[2] R. Joyce and D. Phillips (2013) Tax and Welfare Reforms Planned for 2013-14, London: Institute for Fiscal Studies. Available here.

[3] R. Wilkinson and K. Pickett (2009) The Spirit Level: Why equality is better for everyone, London: Penguin.