The worst of both worlds

A brief from Merrill Lynch, one of the world’s leading financial management companies, in 2011 began: “Recessions don’t just happen; they are created.” Looking at the losers in yesterday’s spending review anybody who didn’t know would assume the poor and the unemployed created it, for they are the ones most punished.

The government has now committed to imposing a seven-day wait before jobseekers can claim benefits. The current wait is three days – already too long for the most hard-up. Chancellor Osborne has just made life harder for those with the least money.

As it has been noted elsewhere the treasury have calculated that the seven-day wait will save approximately £245m, however axing the 50p rate will lose £1bn in tax revenue. To top that off by saying “we’re all in this together” is vile.

But what makes matters worse is the opposition response. Ed Balls has not yet come out to oppose this move, which drags back to light the accusation that Labour will implement “Tory-lite” cuts.

This is treading the worst of both worlds. While Osborne can get away with calling Labour the “party of welfare” – as though this were a bad thing, defined as the provision of a minimal level of well-being and social support for all citizens – Labour are unable to show strong disagreement to the very worst aspects of Tory economic catastrophe.

To the voter this might look like Osborne getting one over on Balls and Balls responding weakly. This doesn’t help with the image, nor does it show Labour being on the side of what’s fair and right in a democratic society.

If instead it pursued a programme of good welfare reform, in-keeping with Labour’s historical link to social democratic politics and fairness, this could start to challenge the view that welfare is a drain on society.

The following four interventions would be a good start:

Introduce better back payments

A contributions-based JSA claim for someone over 25 is £71.70 per week. On just over £280 per month a person is expected to cover all their costs and hope that their housing benefit (which doesn’t pay bills on top) will cover all rent. To somebody living on the financial knife-edge, losing a quarter of this payment (based on the time a person loses their job to the time they are allowed to make a JSA claim for example) might save the treasury money, but what options do they have?

Benefit delay is said to be one of the reasons people visit foodbanks; payday lenders, too, will see an increase in their customer-base. If this happens the government will have successfully made sure debt is privatised; the treasury makes a small saving, dwarfed by the cost of axing the 50p tax rate, while more people go into poverty.

Instead what ought to happen is that a back payment is made from the time a claim is made until the first visit to an adviser in a job centre. That way no loss is incurred by the individual, the risk of going to a food bank or high cost lender is reduced, and nobody is punished for the time it takes for the DWP to process a claim.

Crisis loans made available to people awaiting a decision on their claim

At the moment if an individual is in receipt of state benefit and it is called into question and investigated, you are paid at a reduced level and are able to apply for a crisis loan if you can prove you are in dire need. This is not something open to new claimants awaiting a decision. Labour should champion a revision of this rule, to ensure new claimants waiting don’t drop off the radar.

The social fund restored and made available to people awaiting a decision on their claim

The social fund should be immediately reinstated and centralised, so as to avoid the trappings of a postcode lottery. Government needs to reform the fund so it is fit for purpose, helping families in the face of severe financial shocks. At the moment it is without ringfence so is not guaranteed. It is also not open to new claimants waiting for clearance. The social fund could have been reformed and packaged as an alternative to home credit or payday loans, less expensive, not exploitative, and run by the state. Instead it was scrapped. Labour should call for its return.

Raise the amount a person can claim

This is obviously the most controversial, but unemployment, zero-hour contracts, the rise of the working poor, and low job prospects is a quadruple whammy of evidence that poverty is very much in season. If the amount a jobseeker could claim was increased it would help reduce relative poverty, mitigate against the suffering experienced by families and ensure everyone can benefit from basic living standards.

This is the kind of input Labour and Ed Balls should have. Not this dilly-dally approach. Moreover, if this government wants to cut welfare dependency it should ensure work pays. Ask the 4.3m people in the UK in receipt of benefits whether work pays for them.