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How would you reform benefits then?

Today, on twitter, a local Conservative councillor asked me if I was against reform of the welfare state and if I wasn’t what would I do?

The context was my ranting about IDS and his reform agenda, as espoused on Andrew Marr’s love in this morning.

We had a debate in full council about welfare reform that was more heat than light and didn’t really add much to the debate on a larger scale.  It highlighted some areas where local council can offset central impacts.

However, the question was to me, given that I believe that welfare reform is necessary what would I do….here goes.

Caveat number 1 – this is my view not anyone else’s – neither Party nor guru and a statement of policy it most certainly is not.

Caveat number 2 – I am willing to accept that I might be wrong or that what I think may be unworkable.

So

Firstly, the benefits and welfare system does not work as we want it to.  It creates perverse outcomes on occasion and sometimes fails to support those who need while supporting those who don’t need the money.  What we need to remember is that our system (if we call it that – and systems theorists wouldn’t call it functional) has evolved to meet a changing situation and at best can be said to be failing to keep up.

When the welfare state was conceived and delivered the situation was not as  it is now.  Strong bodies could pretty much find work and most unemployment was frictional rather than structural.  Today (after decades of change) unemployment is more structural and this has shaped the way benefit calculation and transfers have been manipulated.

Unemployment is a function of changed work environment (death of manual and heavy industry, reduced need for labour as automation increased) and as such has meant that the ‘dole’ initially designed to support in the short-term has become a long-term situation for many.

This worklessness hasn’t led to generations of feckless, lazy worthless undeserving poor as IDS would have us believe.  Although some would argue for their existence.

Welfare is a safety net for our society that allows it to function in this era of reducing employment (full-time and skilled)  and movement to more flexible employment lives of low paid/ lower skill and transient nature.

Welfare is also there to support those who will need support (whether disabled physically or mentally or caring for those who are) and ensure their dignity and quality of life is protected.

Welfare is also there to support those who are being exploited in the race to the bottom in terms of wage rates.  Minimum wage is too low and the living wage is a poor attempt to address the feeble attempt of statute to ensure a fair pay for work.  This support can be in tax credits, housing benefit  or benefits for their families – whatever form that is needed to ensure work pays.

Key phrase work should pay.  However, the system is so perverse at times that a disincentive to employment can occur.  When work is seen to be not worthwhile economically we have a problem.  For me work is always worthwhile in terms of self-esteem but I can understand that self-esteem wont feed the kids.

So, where was I….

IDS wants to simplify the system – agree entirely (£5bn+ goes unclaimed every year purely down to complexity and ignorance).

IDS goal is to cut the size of the budget for welfare and benefits.  Disagree with starting point.  The size of the benefit budget is based on need.  Let me say that again, ON NEED.  If welfare is to maintain our poorest then the price is the price.  It cannot ethically be otherwise.  To do so is to punish the needy for the failure of our economic policy over the last 40 years.

Hair splitting time.  How do we define and agree need?  IDS says that those who don’t work should have a lower standard of living than those who do.  sounds fine doesn’t it? Really?  So if you live in a region blighted by unemployment because successive governments have skewed (and screwed the economy) you are somehow responsible and therefore should be punished economically.

We should define an acceptable standard of living and say that no one should be below this point.  whether you are disabled, old, unable to find work or working in a low paid job.

People should not be looking at those on benefits with envy.  If it was so great we’d all do it.  Fact is, that it isn’t and we don’t.  Daily Mail readers go and froth elsewhere.

So my start point is different.  I want to meet needs, IDS wants to shrink the bill.

Where then, is the most pressing area to focus?  Fraud?  Less than half of 1% is lost in terms of fraud and almost 3 times more is paid out in error by those who design and work the system.  So not fraud then (although not to be ignored – tax avoiders/evaders another day).

Johann Lamont tried to start a debate about universal benefits and their affordability (on which I can see where she’s coming from) but this again starts from a different viewpoint than I would (will do this another day too).

Some examples (which I am sure you want to know – but remember the starting point is entirely different)

  1. Housing benefit is a monster and is the result of failed housing policy (from flogging off council houses to not building sufficient replacements) causing a shortage of supply that is being met by inflated private sector profiteers (invisible hands stuffing pockets).  This needs addressed urgently but can only work if the structure of the rental market is altered (build capacity in public control and drive rents down hard – sadly a slow fix).  Housing benefit needs work but needs to reflect the situation on the ground not be a punishment for being overhoused or used as a tool to cleanse the cities of the poorest.
  2. Winter fuel allowance. small cost at the start and now rapidly out of hand.  Costs a fortune and many do not need it.  Paid to those living abroad in spain too.  Perverse isn’t it.  However, try cutting it and see the backlash.  Hobson’s choice if ever there was one.  It needs to be targeted not universal.  If anyone howls means testing costs a fortune! it shows the lack of thought that is common.  Perhaps linking Winter Fuel allowance to capping energy bills would be more effective.  It is not only the old who struggle to choose between heating and eating.  In Fife 1 in 4 suffer fuel poverty with 40% in poorer areas.  They aren’t all old you know.
  3. Child benefit.  Again this has changed in focus.  What is it for?  To pay for your holidays? (just for daily mail readers who are still frothing).  It is to ensure that children are provided for.  Hmm, High earners, do they need help in providing for their offspring?  Not usually.  However, the universality element is to let all of us tax payers feel we are getting something out for our contributions.  We should be able to think of a solution that effectively gets money to children that need.  I am prepared to accept that this is a very unpopular one to address.
  4. Working tax credits.  These are a response to low pay, a subsidy for firms who pay less and enjoy the low tax regime and readily available loopholes.  This needs to be driven back onto the employer.  Needs to stop being a government subsidy to business and reflected in wages properly.  Structural reform of Labour markets and business taxation.  But we’ll be less competitive and will have a jobs flight to low wage economies in the developing world (howl away), like I said at the start these may be unworkable.

Every current benefit needs to be examined to see if it actually does what it should do and tested to see that it helps those it is meant to.  We should not be afraid of removing benefits that are poorly targeted as long as the right support goes to the people who need, which might mean new benefits being introduced (is this the antithesis of simplification? if screwed up it could be).

As I write this I realise that there is no way to encapsulate my feelings effectively without going on and on.  Considering that the request was on twitter  with 140 characters at my disposal, it was obviously unanswerable.

So I’ll be brief then.  Welfare (benefits & pensions) are a means to ensure dignity and well-being in our society.  The complex mess we have doesn’t work but the wrong-headed reforms by IDS are about punishment of the poor to pay for the systematic failures in other areas.   The starting point is everything.

Better to review the way each benefit works and systematise the actual outcome you need than take a blunt instrument (like IDS’ Brain obviously).

Sadly we are looking for simplicity to meet the needs of the most complex set of needs and lives we have ever encountered.  Simple(tons) just don’t cut it.  They just cut.

(sorry Dave this isn’t the answer you are looking for).

 

 

 

 

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Minimum wage erosion – a family affair

When the minimum wage was introduced it was hailed as a great step forward for working people everywhere. It was.
However, it was too low and had age bands built in, all to placate the business community and make it affordable. So those of us, on the left, were disgruntled from the off. Happy that the minimum wage was there unhappy that it was so low.
Fast forward a few years and the minimum wage has grown a bit, not enough, and only a little ahead of rising costs. We find that being in a minimum wage job needs to be topped up with benefits to a large degree to make it possible to live on. A government subsidy if you will to those firms making use of cheap labour.
Enter stage left ‘A living wage’ designed to up the ante and get employers to lift wage levels off the floor. Widely adopted? not bloody likely. adopted by Government departments (some did) after all it is public money so just another form of benefit / subsidy.
Minimum wage legislation is the right way forward, but the rate needs to be set at which people can afford to live on it, otherwise it is a failure before it starts.
The threat from business (which made Tony run for the hills) was that higher rate would mean less jobs. As if businesses could just make do with less staff, in the short term they can but if the work is there then the need for labour exists also. Capitalism is about those with the capital reaping the rewards of it, well maybe we should point out that if workers cannot live on the wages you offer they wont work for you, demand will be weak for your product,  and this will slow your business.
Anyway, I digress, I wanted t relate a tale that got me very angry indeed. It involves my 20 year old Daughter who is looking for a job.  She has just finished a degree in Interactive media  but is generally looking for anything.  Along comes a job interview for a marketing post (all good so far) then a second interview (lasting all day involving work trial).

Like most parents, I expect, I am at the end of the information chain.  ‘All day?’ I query my wife who, knowing me well, gives me the look.  I am now somewhat irked that I am off the pace on this.  Add to this that the job is in Edinburgh (20 miles away) and she doesn’t drive, my level of dubiousness is growing.  Fast forward to a happy daughter arriving (after 11pm) to tell me she has a job!!

I ask all about her day and find the following (spanish inquisition has nowt on me), that there is no basic pay (commission only), it is 6 days a week from 10 am to 8.30pm, it involves walking around door to door selling.  The no basic pay was only made clear after a day long ‘trial’.  Needless to say the conversation went downhill from there.  I had the unhappy duty of bursting her balloon and explaining exploitation.

Having, myself, worked for £1.60/hour as a security guard (72hr wk) during John Major’s time I am an ardent supporter of the need for a minimum wage.

How these companies can get away with not paying the minimum wage is beyond me.  It is law and therefore needs to be applied.  No ifs no buts.  I will be reporting the company when I work out exactly where to report it to.

I know that there is a provision for commission only (as long as the equivalent period meets min wage condition) but this is being flouted and I expect it only to get worse.  Young people are preyed upon by these companies and it has to stop.  Yes, times are hard but this exploitation is not the answer.  I don’t expect action by Dave and the gang on this front.  In fact the opposite is true as this amendment to Minimum wage act shows.

http://www.publications.parliament.uk/pa/bills/cbill/2010-2011/0029/cbill_2010-20110029_en_2.htm

This will allow the Secretary of state to allow exemptions from minimum wage requirements as necessary.

Minimum wage and Working Time Directives are there to prevent callous abuse of workers from unscrupulous business owners.  We should oppose any watering down of the minimum wage and push for a much better deal.

Remember that at 16 you can be married, have children, and run a home.  So why does the minimum wage discriminate on grounds of age.  Young people are badly discriminated against on many fronts this is just another.

Minimum wage was a hard-fought win in the UK and we had better gird our loins and fight to avoid its erosion and disappearance.