Socialism for the rich and capitalism for the poor

Political events this week have again illustrated the stark divide between the affluent few at the top and the majority of the population who struggle to remain above water. Whilst the government seeks to create a finite universal benefit, the pay of financial executives – often underpinned by the public purse – continues to soar.

As George Monbiot said in a recent column arguing for the introduction of a maximum wage:

The income of corporate executives ... is a form of institutionalised theft, arranged by a kleptocratic class for the benefit of its members. The wealth which was once spread more evenly among the staff of a company, or distributed as lower prices or higher taxes, is now siphoned off by people who have neither earned nor generated it.

Over the past ten years, chief executives’ pay has risen nine times faster than that of the median earner. Some bosses (British Gas, Xstrata and Barclays for example) are now being paid over 1000 times the national median wage.

At the same time, companies such as Vodafone, Topshop and British Home Stores have had huge tax bills written off whilst banking chiefs have continued to pocket huge bonuses, despite many being heavily subsidised by tax payers’ money.  For instance, following the bailout of RBS, the UK government owns an 84% stake in the company. Yet in 2010, the RBS CEO Stephen Hester was paid a staggering £7.7m of which £2m was a ‘bonus’. I wonder how many people on Jobseekers’ Allowance or Employment Support Allowance received a state-sponsored ‘bonus’ for Christmas.

Vince Cable’s attempt to harness executive pay – through increasing transparency and shareholder influence – represent nothing more than impotent posturing. As Monbiot notes, pay transparency could “create the perverse result that executives discover how much their rivals are getting, and use the information to demand more”.

This highlights a structural paradox between how we conceptualise the public and private sectors. Executive pay in the private sector always seeks to level-up pay and benefits to ensure that companies remain competitive and can attract the best talent. Conversely – as demonstrated by the public sector pensions dispute – the debate around the lower end of the labour force always focuses on eroding public sector pay and conditions in line with the private sector. Both arguments – consistently forwarded by business, media and politicians – are mutually exclusive.  

It is frightening that political and media rhetoric – which habitually demonises benefit claimants as feckless scroungers – can be so weak when challenging the power and influence of big business.  The media is all too eager to attack ‘parasitic’ benefit claimants, but is less vehement in its pursuit of private sector leeches gorging on the public purse.

One of the key reasons for the rising benefit bill – neglected by most mainstream media – has been the cost of subsidising private landlords through housing benefit. It’s time to stop bankrolling private sector sponges – from landlords to banking executives – and use the money to build affordable social housing and create real employment opportunities. 

To paraphrase Slavoj Zizek, John Pilger and Noam Chomsky, it’s socialism for the rich and capitalism for the poor.

Solidarity with the Hardest Hit March

Tomorrow, one year on from the formation of the coalition government, thousands of disabled people, their families, supporters and charities, will march in London to protest against the government’s plans to reform (read: minimise) the welfare state.

The coalition's Welfare Reform Bill sets out some measures that will effectively cut services available to disabled people, and make it harder to claim benefits. For example, abolishing the Disability Living Allowance (DLA) and replacing it with the Personal Independence Payment, which by the way, has has 20% less in its budget than the DLA. The coalition also plans to reassess everyone claiming incapacity benefit, and abolish crisis loans and community care grants. Add into the mix cuts to local services and other benefits on which they depend, its no wonder 9 out of 10 disabled people are worried about how these cuts are going to affect them.

Since the Welfare Reform Bill was announced last October, concern has been voiced by disabled people, their families and carers about how the cuts would leave people struggling to cope and avoid poverty. The Hardest Hit March tomorrow will represent a culmination of the concern voiced over the past 6 months.

Did David Cameron really say “we will always look after the needy, the disadvantaged, the elderly, the frail and the poorest of our country” last May. Really?

Work Won't Pay Under Tories

This week saw the detailed announcement of Iain Duncan Smith’s welfare reforms in what equates to the biggest shake-up of the welfare system since the Beveridge Report. According to the BBC, the new programme:

... proposes consolidating the existing 30 or more work-related benefits - including jobseeker's allowance, housing benefit, child tax credit, working tax credit, income support and employment support allowance - into a single universal payment.

... A sliding scale of sanctions will see those refusing work on three occasions having their benefits taken away for three months. Those repeatedly convicted of benefit fraud could have their benefits stopped for three years.

The stated logic behind much of the reforms is sound but its practical implementation, and the rhetoric employed, is fundamentally flawed. Firstly, it makes perfect sense to simplify the current benefit and tax credit system which is jointly administered by two gargantuan and labyrinthine government departments – the Department for Work & Pensions and HM Revenue & Customs. On a purely bureaucratic basis this is a good idea, but the enforcement of a universal credit cannot act as a ‘catch all’ benefit. The current system takes into account the vast diversity of benefit claimants – single parents, care leavers, ex-servicemen, over-50s, the disabled, ex-convicts etc – and any new system must have bespoke variations which respond to individual needs.

Secondly, a key motivation behind the reforms is that “work should always pay and that you should be better off in work that out of work”. Few could disagree with this statement, but the easiest way to incentivise work is to replace the National Minimum Wage with a Living Wage and increase the threshold at which people pay income tax.

Eyes on Power has been a long-term critic of the rhetoric surrounding the unemployed and Smith’s assertion that it is a “sin” that people fail to take up available jobs further demonises benefit claimants. Anyone working with the long-term unemployed will tell you how easily people become demotivated. Claiming benefit for over 6 months whilst submitting tens of applications without response seriously erodes confidence and causes people to disengage. One person I work with “completely lost confidence” after submitting hundreds of applications without reply and, in the end, he “didn’t see the point in applying anymore”. It was only a bespoke government youth employment initiative – the Future Jobs Fund – which allowed him to return to sustainable employment and undertake NVQ training. Under the new system he would have lost his benefit for three years.

The overwhelming majority of unemployed people are desperate to find work but cannot do so because of a lack of employment opportunities or lack of experience and confidence. Resources should focus on training, qualifications, job searching, interview techniques and improving soft skills. This should be given to all jobseekers – not just those ‘easy to help’ as private sector providers do. Furthermore, obliging employers to provide feedback to unsuccessful candidates – however extensive – would help buttress jobseekers’ confidence. The new programme could even have the adverse effect of discouraging employers from recruiting benefit claimants because they perceive them of being forced into work.

The real problem with welfare reform, however, lies in forcing people into unpaid work after a period of unemployment – although the consequences are not entirely undesired by the government. Firstly, the manual nature of the proposed work – road sweeping, litter picking, gardening – is not necessarily appropriate for all jobseekers. Cheap/free labour will have the effect of forcing companies to sack people already employed in these roles and/or forcing down wages and working conditions. There is also the legal consideration of when the National Minimum Wage should be paid as, in effect, claimants would be working for little more than £1 per hour.

There is also a danger that many of the proposed placements are identical to those undertaken by those on probation community orders. This, again, has the effect of equating those on benefits to criminals and furthers the marginalisation and demonisation of those dependent on benefits.

The welfare reforms of the Conservatives and Lib Dems illustrate in whose interest the government serves. 23 members of Cameron’s original cabinet were millionaires – so why would they be bothered about those who can’t rely on family wealth or influential contacts to succeed? . The Coalition’s economic strategy is predicated on private sector growth and welfare reforms such as Iain Duncan Smith’s will have the effect of keeping wages low. From a neo-liberal perspective – and I think there’s little doubt that the Coalition are neo-liberal – the functioning of a capitalist economy relies on a reserve of labour to drive down wages and working conditions. Admitting this, however, would be political suicide and instead the unemployed must be characterised as workshy layabouts and scroungers. There is no reason why people can’t be paid to do these enforced work placements. If the government’s aim is to “make work pay” then they should do exactly that – pay people to work. The Future Jobs Fund has already demonstrated that the money saved on Jobseekers Allowance and Housing Benefit is sufficient to subsidise employment opportunities and, without work available, the government cannot expect jobseekers to remain engaged and motivated.

Image by Steve Bell @ The Guardian

Welfare state under attack

George Osborne’s announcement that child benefit will be cut for high earners is a blatant and cynical example of political prestidigitation and policy misdirection. Osborne’s contention that “it’s very difficult to justify taxing people on low income to pay for the child benefit of those earning so much more” threatens to end welfare state universalism and reduce it to a safety net. The move erodes the legitimacy of a welfare system which relies on universal benefits to give mandate to redistributive state spending. If middle and high earners no longer receive universal benefits then it fundamentally undermines the intellectual premise of our welfare state and questions other overarching benefits such as the state pension and the NHS.

But the curbing of child benefit is not just about challenging universalism, it also acts to mask more punitive welfare cuts. The vocal middle-classes affected by the cuts will distract media attention from other austerity measures and, as Deputy Political Editor of the BBC James Landale states, the move gives Osborne “political cover for other cuts that will affect the less well off”. It gives credence to the dictum “we’re all in this together” and attempts to justify Draconian benefit cuts for the most vulnerable. After all, if those horribly oppressed middle-class parents are paying the price of recession, why shouldn’t an impoverished pensioner in Middlesbrough?

The subsequent proposal to cap state benefit at £26,000 further demonstrates the government’s desire to attack not just the welfare state, but the most unprotected and defenceless in society. The planned cap will apply to combined household income from benefits including Jobseekers’ Allowance, housing benefit, council tax benefit and child benefit but without variations to correct for regional differences in the cost of living, it will serve to further ghettoise the country. With housing benefit to be reduced year on year, it will not be long before London and the whole South East is purged of all those reliant on benefits.

The Conservative cuts are not simply about tackling the deficit. At best they are aimed at reducing the welfare state to an unrecognisable husk and, at worst, they are aimed at cleansing the South of undesirables. The government may advocate a small state – but when the state determines where citizens can and can’t live through social engineering – it seriously challenges positive and maximalist conceptions of liberty, freedom and equality of opportunity.