Nick and Margaret with some of the "stars" of their BBC show. Photograph: BBC
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Laurie Penny on welfare: The BBC is colluding in the government’s attack on benefit claimants

The cruellest thing about the benefits cap is not that it could make thousands of people homeless or force more families to depend on food banks (three of these open every week). It’s that it’s not really about people on benefits at all.

The camera may not lie but sometimes it tells truths you weren’t expecting. As the government’s flagship benefits cap is rolled out across the nation, amid protests from homelessness charities, women’s rights groups and food banks already overwhelmed by demand, the BBC is devoting hours of its prime-time schedule to pitting the underpaid against the unemployed. The spectacle of one single mother telling another in the tin-can aisle at the supermarket that she’s greedy because she wants her kids to have a hot meal says a great deal about modern Britain. It tells us whose suffering matters and whose children will never have their dinner dissected for our scorn on national television.

The BBC1 programme Nick and Margaret: We All Pay Your Benefits (11 and 18 July, 9pm), echoing the rhetoric of the Department for Work and Pensions, pits “taxpayers” against “shirkers” and asks how we can “make work pay”. Of these gristly little semantic nuggets of state propaganda, “making work pay” is the most noxious – a mantra that’s incanted by every jobsworth Tory in every debate, in line with the logic that if one repeats a lie for long enough it will function as truth.

Taking away benefits will not “make work pay”. The reason why work doesn’t pay is not that benefits are too high. It is that wages are too low. The latest figures from the Office for National Statistics show that, with the rising cost of living, there have been 40 consecutive months of contraction in real wages in the UK. In many occupations, the basic pay is too low to cover rent, food and bills, especially in London and the south-east, where housing costs are out of control. This is why a large proportion of housing benefit is paid on behalf of those who are in work, straight into the pockets of private landlords.

Then there’s “the taxpayer”, a phrase that is deliberately misused to imply that only those in waged work pay taxes. Everybody who buys a warm Cornish pasty puts pennies into the Treasury. Drawing an arbitrary distinction between “taxpayers” and “people on benefits” implies that those who rely on state support are taking money directly out of the pockets of workers, when they are being supported by a system to which we all contribute, which is there to help all of us should we find ourselves ill or unemployed.

The anxiety to separate the interests of “taxpayers” from those of the unemployed falsely suggests that unemployment benefits are now the main drain on the state. Despite savage welfare cuts, state spending on unemployment remains high because unemployment remains high, for the simple reason that one cannot “incentivise” people into jobs that aren’t there. A far higher proportion of state spending goes on subsidising tax cuts for multinational corporations and arms dealers, maintaining our nuclear weapons programme and having a military presence abroad. “Taxpayers”, though, are not being invited into the homes of devastated Afghan families, taken on tours of the Trident base or shown around the mansions of offshore millionaires and asked to make judgements about how their taxes are being spent. The idea is preposterous. Poor people are supposed to make moral judgements about other poor people only. We can afford to offer Vodafone billions in tax breaks but God forbid some kids in Ipswich get a second-hand PlayStation.

That’s the judgement call that representatives of the working class are invited to make in We All Pay Your Benefits, deciding whether or not the unemployed are being indulged, as Nick and Margaret, a pair of well-spoken, pension-age presenters, ride around in a taxi prattling on like something out of a David Lynch film. For most of the show, the camera leers at the jobseekers but the truly fascinating characters are those who have been invited on to the show to judge.

Their anger that their hard slog has not raised them above the level of a family on Jobseekers’ Allowance is distressing to watch. Clearly they all work hard – for not enough money and with few prospects of improving their circumstances as rents rise and essential services are dismantled. It is hardly the fault of a disabled single father-ofthree that a care worker who runs her own business is still struggling to cover the bills. But that is the only conclusion that this programme and this government are permitting us to voice.

On any other channel, a programme such as this could be written off as a crass cash-in on public mistrust of the welfare system, treating the unemployed as a telegenic cross between criminals and animals in a zoo. That it was given the green light by the BBC, a publicly funded and supposedly impartial broadcaster, indicates something more. It suggests a culture shift: the wilful misdirection of public anger towards those who least deserve it.

The cruellest thing about the benefits cap is not that it could make thousands of people homeless or force more families to depend on food banks (three of these open every week). It’s that it’s not really about people on benefits at all. They aren’t the voters this government is interested in attracting. It’s about placating public rage and persuading people who would vote for a tin of beans if it had a Tory ribbon on it that this government is tough and in charge.

Like any pack of bullies, the Conservative Party likes to prove its strength by picking on the weakest people within reach. In this case, the targets include single mums and the mentally ill. That tens of thousands of children will spend their school years going to bed hungry because of this policy is incidental. The benefits cap is first and foremost a public relations exercise. With a former PR man for Prime Minister, what else would it be? Behind the relentless campaign of spin, though, is the truth – and the truth is that those on benefits have nothing, absolutely nothing, to be ashamed of.

Laurie Penny is the contributing editor of the New Statesman

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

This article first appeared in the 22 July 2013 issue of the New Statesman, How to make a saint

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation