The Gods must be crazy

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.