We believe in Government – it’s just not the same as Whitehall…

January 10, 2013 4:04 pm

As a Labour Leader I know just how difficult the next few months will be. What has made a difficult situation almost impossible is the government’s ‘welfare reform’ proposals. We seem to have an economic policy that gives money to banks that don’t spend it and at the same time take money away from people who do. In Oldham alone we have estimated that the welfare reforms will take £20 million out of the local economy – that’s less money for local traders at a time when they badly need it.

But difficult as it is Labour local government has to create a vision of how good government can benefit and improve the lives of its residents. I have a particular interest in this. Oldham like many others is a predominately working class town, loyal to Labour but increasingly unsure what we stand for. At the next General Election we have to have a set of policies that appeals to the lost millions of working class voters and give them a reason to vote Labour. And given recent contributions it is worth stressing that the commuter on the 6.45am from Basingstoke shares many of the hopes and fears of families in Oldham and they would certainly appreciate a 28% reduction in their fares (of which more below!).

So what would such a manifesto look like and what is our role in achieving it?

Making work pay For most people wages have been stagant or declining. That’s why I welcome the commitment of the Liberal Democrats  that those willing to work for the minimum wage don’t pay income tax and trust that my party will commit to this. But Labour has to do more both locally and nationally. I am proud that Oldham was one of the first councils outside London to commit to a living wage. In 2013 with our Trades Unions and Citizens UK we will be campaigning to eliminate the scourge of ‘zero hours’ contracts from Oldham.

However for many of our residents the biggest challenge is to get a job at all. Anyone who has been unemployed knows how corrosive it can be to family life and health. Next year I will be launching ‘Oldham Works’ a major initiative to get 2000 Oldham residents into work/quality training or self employment. It is not going to be easy but it’s what the town really needs.

Bootstrap Politics. No-one realistically expects public spending to increase in the near future (although it could be certainly distributed more fairly).  Labour has to focus more on how it can improve living standards though the social wage. I congratulate Labour Islington on introducing free school meals and a commitment to build 2000 social rented homes. Here in Oldham we have campaigned on bus fares, fair credit and energy costs with impressive results. In Oldham we had some of the highest bus fares in Europe. We launched a ‘Fares Fair’ campaign which has seen a 28% reduction in bus fares and a link up with the local Credit Union to provide even lower fares. We established the most successful energy switching campaign ever with over 20,000 households registered and an average saving of over £170. In 2013 we will work with Stella Creasy MP to take on the legal loan sharks in Oldham. All of these campaigns prove that Labour can appeal to the direct interests of households nationally but to be successful in government there is one more lesson still to learn.

Learning to let go. The Work Programme is failing because it is a nationally prescribed programme with little recognition of local labour markets. Yet the policy of top down targets and an unwillingness to allow local innovation is the default position of all  governments including Labour. As with all addictions, the habit of over-centralised decision making will be hard to let to go and it has powerful advocates in the lobbying media and advocacy world (even well intentioned ones). It might help if some of these were based outside Westminster. Why if the BBC can re-locate to Salford can’t Shelter or the Institute of Economic Affairs? It would certainly give a different perspective on housing and economic policy.

If we really believed in local politics we would ensure local leaders have more direction over the delivery of public services with a renewed emphasis on Community Budgets and City Deals.  The advocates of Big Government (including Labour ones) frequently display a lack of faith in public interest and awareness. Trust me the local hospital in Lewisham would not be closing if the local authority was responsible for its finances! If we have the power and finances, public interest and voting in local councils will increase dramatically – as will the willingness of talented and ambitious politicians wanting to serve as local leaders.

Jim McMahon is Leader of Oldham and will be speaking at the Fabian New year Conference on ‘How Labour can learn to stop worrying and trust its councils’ at the Institute of Education on Saturday January 11th

  • jaime taurosangastre candelas

    I think you need to challenge whoever it is that gave you the report of a £20 million loss to the Oldham economy by the caps on benefits. For a start, the £20 million figure seems about 3 times too high as measured against national benefits payments levels, and Oldham’s own jobless rate****, and secondly there does not appear to be any inclusion of the additional £13 million released into the Oldham economy by the increased personal tax threshold, of which you make no mention. Surely, this is not another in the recent stupidly innumerate lines of argument that Labour have deployed in which the tax threshold increase is completely ignored, in the face of reality?

    The net effect being a £5-6 million boost in the Oldham economy.

    (I have much more detail in a spreadsheet to “show my working”, because your single statement seemed to me to be doubtful and to be worth checking, but it seems a waste of time to publish it here if you are one of those (in the majority) LL writers who does not ever bother to respond to any comments. If anyone sees this comment, and is interested in seeing my rationale, I will certainly publish it)

    Also, I wonder why you feel the need to wait for a further year before starting your “Oldham Works” initiative? It seems like a clearly good idea. Why not start now?

    **** For a start, that raw £20 million figure implies that each and every one of Oldham’s 110,000 residents is receiving annually £15,150 in benefits, man, woman and child, and thus the “delta” in increase from the capped 1% to the expected 2.2% is £20 million.

    • MonkeyBot5000

      He refers to the welfare reforms in general so he may be including the changes to Housing Benefit.

      However, it’s debatable how much of that can be considered to be spent in the local economy when the ultimate recipients may live nowhere near Oldham.

      • jaime taurosangastre candelas

        No, still not that. Even including housing benefit cuts,**** you are still at a net £4-5 million pound local boost to the economy (and as you say, most housing benefit “ultimate recipients” may live elsewhere).

        It remains to be seen if the Council Leader will return to these comments to engage in dialogue. If he does, I will gladly email to him my spreadsheet. He can give it to his Finance Department for a different view, including all of the formulae in working it out. But I gain a “horrible suspicion” that his figures are either mathematically flawed, or politically flawed by deliberate exclusion. Or a combination of both, which would sum up modern politicians with their complete inability to be realistic about numbers.

        (Given that local councillors have little national leverage, the only question any one of us voters should concern ourselves with is not the prospective councillor’s political allegiance, but whether he or she can count to 11 without taking a sock off or moving the mouth, or has ever even heard of compound interest. Most probably cannot, whether tory, Lib Dem or Labour. After all, it is our money that the prospective councillor wishes to control)

        **** Oldham at 0.2% of the population is simply too small to make a significant contribution to national figures. For the Housing benefits to have the sort of £20 million effect (by cuts), you would expect a 90%+ cut in housing benefit locally, applied across 100% of the population of Oldham, and that would be on top of the £15,150 per head of non-housing benefits his earlier figures imply.

        • MonkeyBot5000

          Have a look at Google Docs.

          You can put a spreadsheet up there for anyone to see so he doesn’t even have to give out his email address.

          • jaime taurosangastre candelas

            Thank you MB5000 for this suggestion. The Google Docs appear to be more complex and slightly intrusive than I imagined, and require me to download some software to my Mac and also open a “Google Drive” account. I do not particularly wish to let Google into my computer, and certainly not to store my documents with them.

            This is mostly in response to Paul Wheeler, who has posted a reply from the Oldham council, but it has not yet appeared for reasons of moderation (I can see it with Disqus).

            Firstly Paul, thank you for your response. It is very unusual for LL. Secondly, it seems that your figure of 220,000 population is for the entire Metropolitan Borough, mine of 110,000 was the figure for the town which I looked up. Clearly, we must work with your figures, so the immediate observation is that the per-person benefit value halves to £7,500 or so. Nevertheless, that still to me seems very high, and I find no reference in the original article to the positive offset of the increased tax threshold.

            As a matter of “anti-Spin”, I do not believe it to be politically useful for any politician to post some shocking number without taking into account any offsetting other number, when clearly they are linked. It is the politics of the playground. In fact, that is my major point. It actually does not matter so much what the numbers are, it is the principle that counts, whichever party is guilty.

            As I note to MB5000 above, the Google Docs seems quite complex, if I merely email to you the spreadsheet no one else will see it, so as a compromise, I will try to “show my working” in text.

            Initial Assertion: Oldham loses £20 million as a result of the welfare reforms.

            Observation / Assumption: without any amplifying detail, it is uncertain as to the scope of “welfare reforms” the author refers to. In this week of political argument about the cap in rises of a “basket” of welfare payments, it is topical, and therefore assumed to refer to the basket of welfare payments capped at 1%.

            Welfare Reforms: instead of paying an expected 2.2% annual increase in many forms of welfare, the rise is capped to 1%. Therefore, a “delta” of 1.2%.

            The £20 million loss therefore represents 1.2% of benefits paid locally (see Observation / Assumption).

            By calculation, the welfare benefits paid in Oldham are therefore currently about £1.667 billion, in order to generate a 1.2% delta of £20 million. (£20M / 0.012) = £1.667 Bn, then ((1.667 Bn x 1.022) – (1.667 Bn x 1.01)) proving £20M.

            £1.667 billion / Population Met Borough Oldham = £7575.76 paid in welfare benefits to every citizen (child, working, unemployed and pensioner) in Oldham.

            This seems to me to be too high even as an averaged measure, and becomes extreme when you discount the reality that the large majority of Oldham will be a combination of pensioners, children, and those employed on a high enough salary to not be paid significant amounts of benefits.

            The Met Borough of Oldham’s population is 220,000 (per Paul Wheeler’s figure). It is therefore about 0.35% of the country (63 million people). You would expect Oldham’s share of the total £115 billion benefits bill to be about £402.5 million. Clearly, Oldham is a relatively poor northern town, and so you would expect the benefits payable to be higher, but if even double the national average per head, still only about £800 million. Hence my suspicion of the £20 million figure (which extrapolates to £1.667 billion) being very high.

            Then there is the increased tax threshold. Clearly, this is only applicable to those in “enough” employment to earn £9441, whether part or full time. I found a report on Oldham’s own council website declaring unemployment in Oldham to be 8,127 (as in April of 2012, still reasonably recent. See http://www.vaoldham.org.uk/sites/vaoldham.org.uk/files/Oldham%20Economic%20Review%20April%202012_0.pdf ). At this point, there is some confusion between the population of Oldham (town, = 110,000) vs Metropolitan borough (= 220,000), and to which to apply the 8,127. My instinct is to the town itself. But happily, one is half of the other and so the arithmetic is not complex.

            Taking the national standard of 60% of a population being of working age, we find the working age population of the Metropolitan Borough to be about 132,000, of whom possibly 16-17,000 are unemployed, leaving about 115,000 of working age and in employment. Clearly, not all will earn the tax threshold of £9,441. Assume that 70% of working Oldham’ers do, or about 81,000 people (among a total population of 220,000) earning at least £9,441.

            £9,441 is a tax threshold rise of £1,335 (over the 2012/13 previous threshold), and therefore not paying tax at 20% on this amount is a tax saving of £267. £267 x 81,000 working Oldham’ers = £21.627 million.

            So, if you have followed my working, what we have is:

            A figure for the loss of welfare benefits payments of about £5-8 million locally, even on estimates that allow for Oldham’s current welfare bill to be twice the national average. And a net increase in the local economy of possibly £21 million, as a result of tax threshold increases. Netting out at about £13 million positive increase for the Metropolitan Borough economy****.

            *** The difference from my earlier statement of £5-6 million being accounted for by increasing the size of Oldham’s population.

            ((All of that is slightly “too” exhaustive, and easily de-railed by a simple statement of “Aah but we also included some other previous cuts we did not mention in the article”, and if so will lead me to feel slightly foolish if the case. But the article seems quite clear, and the arithmetic is not complex, and I enjoy the “evidence-based” style of politics. The spreadsheet took about 5 minutes, my writing above maybe half an hour, so if I am wrong I have wasted not so much of my own time, and only a few minutes of yours’))

        • paul.wheeler

          jamie couple of issues population of Oldfham is 220,000 plus not 110,000 as you state. The article does refer specifically to the cuts on the income tax thresholds (but you obviously need to be in work to benefit). Oldham Works is starting in 2013 (one of the perils of articles in January)
          We would be interested in seeing the spreadsheet and can comment. Please send to paul.wheeler@oldham.gov. Regards

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