To avoid Osborne’s benefit trap Labour must change the debate

14th December, 2012 5:34 pm

From a political point of view George Osborne’s autumn statement was a success, in that a week since he stood up in the Commons, the biggest issue is not any mistakes he has made but Labour’s quandary on what to do about his proposal to rise benefits 1%. In a budget which has been covered far more for political calculations made by the Chancellor than economic ones, those on the lowest incomes find themselves in a position of being his political football. This does however offer Labour the opportunity to stand up for fairer policies which are better for vulnerable people and for the economy.

This move by the Conservatives is clearly rank opportunism. Conservatives are acting in government in a way more becoming of an opposition party – trying to create dividing lines through populist but bad policies – in taking on this Tory manoeuvre Labour can show ourselves to be a competent party of government, against a government far more interested in political games than in helping the poorest and building the economy.

It is entirely right that Ed Balls has recently indicated that Labour will oppose this measure. However the problem with the debate around benefits is that for too long we have let the Conservatives and the conservative press define the term and even now we need to be bolder in arguing that it is for the good of the economy that we are opposing this. To address the cost of benefits we need to help people find more work, not take money away from those who don’t have it. As recent polling suggests the public are open to these arguments for higher benefit levels.

An important step to becoming a credible governing party is to take on this argument and change the political narrative, discussing benefits as a way of helping people into work and stimulating our economy. An important first step to this is arguing that the 1% measure will hurt both the poor and the economy.

When adjusted for inflation the Conservative proposals mean a 5% cut in benefit levels for those who receive both in-work benefits and out-of-work benefits over the next four years. There has been a tendency by the Labour party to focus on the effect that this will have on people who are in work, but on benefits such as tax credits. This is for understandable reasons, but it reinforces prejudices about the ‘deserving’ and ‘undeserving, feckless’ poor in the media. Working in policy around unemployment and benefits, I have seen very little evidence for a statistically significant number of people unwilling to work. Fraud and error only account for around 1% of the benefit bill, while far more of those on out-of-work benefits are made up by people like Vince, a man I interviewed in 2009 who was incapacitated for 20 years having been hit by a lorry and who had worked hard to get to a position where he could go back to work all that time. Not ‘skivers and strivers’ but people who have been failed by the system and need our support.

To be successful in winning the welfare debate, Labour have to start answering those prejudices. To avoid Osborne’s opportunistic trap, we need to challenge the argument that those on out-of-work benefits can be persuaded to find work if only we force them into sufficient poverty.

The affect of a 5%  cut in benefits

The proposed changes will lead to out-of-work benefits falling further behind wages which will lead to more chaotic lives for those out of work and who lose their jobs. At the moment Jobseekers allowance stands at around 10% of average waged income. When the Thatcher government broke the link between wages and benefits in the 80s it stood at 20%. The new proposals mean this gap will widen at an even higher rate.

The result of benefits falling so far behind earnings is that losing your job creates the prospect of not being able to keep up other financial commitments that could, and often does, lead to people losing their homes and damaging families and relationships. Changes in housing benefits now mean that the government will no longer keep up your first 13 weeks of payments immediately after you lose your job making this a very real possibility for more people. Countless studies have found that one of the best ways of helping people into work is protecting the stability of their lives – which is exactly what current policies are failing do by forcing Jobseekers off a financial cliff and putting their rent at risk.

There are many who argue that Labour must show themselves to be a sensible party of government with a plan to cut the welfare budget. I believe that if we are to do that, we have to start arguing that taking money away from people does not reduce the cost of welfare as it pushes them further away from finding sustainable work, increasing the length of time they have to rely on benefit measures. If we “spend to save” by providing adequate support, we will have a lower total benefit bill and more people in work contributing taxes in the long run.

With the unemployment high and a real possibility of unemployment rising a further 200,000 in 2013 more of the population know people who are unemployed and see evidence in their own lives that the problem is not people being unwilling to find work, but the jobs not being there. It is Osborne’s policy of punishing the poorest and most financially vulnerable for his inability to create growth that is not offering serious solutions to our economic problems. In reality, there is a greater advantage, in terms of stimulating the economy, by giving those on low incomes more money as they spend a higher proportion of their income on necessities rather than saving it as the better-off do.

Labour should respond to Osborne with a policy of restoring the link between wages and benefits, a measure that passes a key test of appearing fair, and which will also allow Labour to start a much needed conversation about using social security as a means to support people into work rather than punishing people for being out-of-work.

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