The Gods must be crazy

November 25, 2011 2:00 pm

I don’t particularly mind that we are governed by a narrow class of forty-something career politicians who have devoted the entirety of their adult lives to party politics.

I just want all that effort to mean they’re at least quite good at politics.

They’re not. Not at all.

Take today. the government appears to be announcing three things. First, a freeze in Tax Credits for low income working families. Second, a commitment to increase benefits by five point two per cent. Third, spending a billion pounds on a youth jobs scheme which is a slightly re-jigged version of a scheme they’ve spent the last year saying was an expensive waste of money.

I’m trying to picture the scene in Cabinet as the PM explains the plan:

“Right then. We increase benefits by inflation, but freeze help for working families, who face the same inflation, but are suffering from flat wages. At the same time, we launch an expensive make-work scheme, whose efficacy we’ve previously questioned and which will mostly be a subsidy for hiring decisions that would have happened anyway. Agreed? Good.”

Ignore for a moment whether any of these are a good idea. Forget whether Tax Credits are perfect. Does this make sense as a political proposition?

If this is really what they’re planning, and part of me cannot quite believe it, the net impact (in a time of stagnant wages and high inflation) will be to reduce incentives to find work.

Now, there might be a respectable centre-left argument for keeping benefits relatively high in such a scenario, but it’s basically an enormous FU to working people on low incomes.

Why would the government want to do such a thing?

In fact, so stupid does it seem, I wonder if there was a Tax Credit cost bomb somewhere in the public finances. It would work something like this- large numbers of working people face a squeeze on wages. As finances got tighter, some would claim for marginal levels of tax Credits which they’d previously not applied for. Others, as inflation increased and wages stagnated, would find themselves eligible for much higher levels of Tax Credit. Both factors significantly drive up the cost of the programme. I wonder if we’re seeing some sort of trend like that?

Then of course, there’s the question of how the government makes Universal Credit affordable. One way is to radically reduce the welfare/benefits/tax credit bill before the introduction of Universal Credit, thus making the “no-one worse off in cash terms” pledge easier to deliver, as they’ve already been made worse off in the previous three years.

But all that aside. I genuinely cannot understand why on earth the apparent response of this government to the current economic situation is a jobs scheme and an increase in benefits, paid for by a further reduction in the living standards of low to middle income working people.

I’m not sure I’d support that combination if Labour proposed it.

I’m just baffled that the government is.

This post was first published at Hopi’s blog.

  • http://tangentreality.blogspot.com/ tangentreality

    You seem to be over-looking the fact that the brand of 40-something career politicians that have a tendency to screw up the country also dominate the Labour Party. This Government’s no worse than the last one. Problem is, it’s not really any better, either.

  • Anonymous

    Brilliantly incisive Hopi.

    I can’t undertand why you guys are not working in Parliament;
    you’d surely do a much better job!

    Jo

  • Anonymous

    I think you overestimate any persons ability to keep calm and carry on.

    Plan A has failed, so to Plan A+ and Plan A++. Panic and fear make people do strange things.

    I don’t think we should be surprised about the apparent incoherence of the government policies announced, or the number of U-turns recently, and desperate attempts to blame anyone else for policy failings or lack of control of their departments.

    So far George Osborne has backtracked on the extent of debt reduction in big, but low profile steps. When he announces he isn’t going to reduce even the structural debt to zero in this Parliament, we’ll be witnessing him pretty much endorsing Alistair Darling’s whole expenditure level planning at the last election.

    Even the re-introduction of Quantitative Easing by George Osborne has only escaped him being utterly derided because actually it appears in the end, he will do the right thing.

    Shame about the  eighteen months of idiocy leading up to it.

    In November last year the Torygraph was deriding their attempts to promote growth. It’s not clear even now they are doing anything aside from fiddling at the margins, even if some of their other business policies might have an effect in a decades time.

    Lets see the job scheme for what it is. A desperate attempt to reduce the jobless figures temporarily for the next twelve months.

  • Anonymous

    Imagine the righteous furore there would have been if benefits, whose recipients are already condemned to daily struggle to survive on inadequate subsistence levels of income, were increased at some hypothetical increment BELOW the currently very high rate inflation. Even the coalition aren’t daft enough to try pulling strokes like that when unemployment has just rise by over two hundred thousand in the last six months; there are simply too many people struggling to get into the lifeboat for Tories or New Labouristas to justify impoverishing benefit claimants further by blaming their misfortunes on some lack of personal initiative or whatever that qualifies them as being members of the “underclass” or “undeserving poor” as it were.

    As far as tax credits and similar goes the emphasis these days from the coalition and, sadly,  the revenant  Labour Party is to move monies away from the very poor towards the “squeezed middle” as Ed Miliband is wont to call it. Right and wrong matters less these days than currying favour selectively with the right demographic groups with a view to winning their support and so increase your chances of gaining political capital as far as local and general elections are concerned: currently this boils down to promises of financial and other help to people who “do the right thing” – which definition changes with the weather – and being a scourge to benefit claimants whether they are healthy, sick, deserving or undeserving. Expect much more of this kind of demonisation of minorities for the foreseeable future, from ALL of the parties, because politicians have come to believe that they can advance their own aims and win elections by resorting to such baseness.

    The scheme to help the young jobless that Clegg announced today will fail in its aims as surely as Labour’s Future Jobs Fund would have done. The reasons why schemes like these fail is simple: 

    (1)

    The lack of worthwhile sustainable full-time private sector jobs with prospects.

    (2) 

    Trainees on schemes normally only remain placed with private employers for the duration of the subsidy after which they normally end up dismissed. Because trainees are not going to remain permanently with the employer there is no incentive for the employer to lavish any time on or provide proper training for trainees; since they are destined to leave after a couple of months or so there is no benefit to the employer as far as giving the trainee skills or knowledge goes.  

    (3)

    It takes a long time to learn a trade or master a profession. To become really proficient in anything takes a long time and requires both on and off the job training, i.e., practical work experience coupled with theoretical training at a university, college or other educational institution. Thirty years ago apprenticeships to learn skilled trades and traineeships designed to enable people to enter professions often lasted for five years or more if degree level studies were involved.

    The kind of scheme Clegg has outlined normally pays a private employer to take an unemployed youngster and use him/her like a dogsbody for a couple of months or so before sending him/her through a revolving door back into unemployment and then on to the next “work experience” placement or whatever. The trainee will be lucky if he/she ends up with a first aid or health and safety certificate or similar. The youngster will certainly NOT have picked up any real skills, experience, or qualifications that will REALLY end up getting him/her into gainful employment for long. The jam is spread too thin. If there isn’t enough money to help everybody in the way that they deserve it might be much better to institute a voluntary rather than a compulsory “tread water” scheme for a couple of hundred thousand of the most motivated youngsters, devoting enough money and support to them to enable them to be properly trained for, say, eighteen months to two years to enable them to reach much higher levels of skill and experience which might genuinely enable them to secure decent jobs with rewards enough to enable them to support themselves and end up net contributors to the system.

     Unless economic growth and job creation begins the game is over before the game begins.

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