The onslaught against working families continues

The government's response to youth unemployment will squeeze the "squeezed middle" even further.

If today's report proves correct then tomorrow Nick Clegg will announce a further blow for low-to-middle income families in order to pay for a new programme for the young unemployed.

Let's start with the better, latter, half of that sentence. The new programme will, according to insiders, walk and talk like Labour's "Future Jobs Fund", which offered incentives to employers to take on 18-24 year olds who had been out of work for more than 6 months. In case it has passed you by, this is the very programme that David Cameron likes to mock as being profligate and ineffective. Hence the new coalition version of it will under no circumstances be called by the same name (no doubt some Whitehall wag would have proposed the moniker "the fund for future jobs" -- but I'm guessing coalition ministers will have screened that out).

We'll find out tomorrow what the scheme looks like but if, as seems likely, the coalition has decided to swallow its ideological opposition to wage subsidies going to firms in order to encourage them to take on the young unemployed, then that is to be welcomed -- though it is scandalous that it's taken youth unemployment to reach 1 million to bring this about.

Now let's turn to how the nastier element of tomorrow's promised announcement: how it is to be paid for. Assuming the FT hasn't got it wrong, then the money will be found by the decision not to uprate tax-credits in line with inflation. Which is odd, iniquitous, and revealing all at the same time.

 

It's a bit odd because the Treasury has already banked the savings from freezing the working tax credit for the next three years. Which leaves the other big area of spending: child tax-credit. But here the coalition has sought to burnish their progressive credentials by announcing that they will over index the child element for the next few years (in an attempt to demonstrate some commitment to the child poverty target). Doubtless HM Treasury will have some wheeze up its sleeve for changing the indexing system for this child tax-credits - perhaps by uprating in line with earnings for this year, not inflation. But if this is the case they will face the charge they have broken with the spirit of the key spending commitment they have made on helping families with low-income children.

It's iniquitous because this will hit precisely those families who have already been on the end of the most severe squeeze of their lives. This April they already saw a major hit to support for childcare paid out via the tax credit system. This, along with other changes to tax-credits, mean that a single parent on £28k with two kids is losing £1,300 this year; or a couple with two kids on a joint income in the high £30ks is losing £2800 this year. And these cuts are a mere warm up for more than £1bn of further reductions to tax-credits that have already been announced and will commence in April 2012 - all of them targeted at the same families.

And let's not forget yesterday's news that median wages have plummeted 3.5% in real terms this year, far more for the low paid. So families whose wages are falling at a rapid rate, who have already been severely hit by April's budget cuts, and will be made poorer still in April 2012, are about to be told that they are first in line to take a cut to pay for a new programme.

Which is why this decision is also revealing. It demonstrates very clearly the knee-jerk response of ministers when pressed to find resources for a new funding pressure: take it from families getting tax-credits.

To be clear, I'm all for more action to deal with youth unemployment -- indeed, I suspect that I'd want something more ambitious than what is likely to be announced tomorrow. And that, of course, has got to be paid for. But not by low-to-middle income families.

It's not as if there are no alternatives. Labour will pursue their line that this should be funded through a tax on bankers' bonuses - and for all its well rehearsed feel, this will still strike a chord with many. But if the coalition didn't want to turn to the City there are other principled alternatives. The £7bn-£8bn spent on higher rate pension tax relief? Or stopping affluent pensioners receiving winter fuel allowance?

If this goes ahead, then don't let anyone say there was no alternative. Youth unemployment could be tackled without a further unnecessary squeeze on low-to-middle income Britain.

 

Gavin Kelly is a former Downing Street adviser to Gordon Brown and Tony Blair. He tweets @GavinJKelly1.

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Ken Livingstone says publicly what many are saying privately: tomorrow belongs to John McDonnell

The Shadow Chancellor has emerged as a frontrunner should another Labour leadership election happen. 

“It would be John.” Ken Livingstone, one of Jeremy Corbyn’s most vocal allies in the media, has said publicly what many are saying privately: if something does happen to Corbyn, or should he choose to step down, place your bets on John McDonnell. Livingstone, speaking to Russia Today, said that if Corbyn were "pushed under a bus", John McDonnell, the shadow chancellor, would be the preferred candidate to replace him.

Even among the Labour leader’s allies, speculation is rife as to if the Islington North MP will lead the party into the 2020 election. Corbyn would be 71 in 2020 – the oldest candidate for Prime Minister since Clement Attlee lost the 1955 election aged 72.

While Corbyn is said to be enjoying the role at present, he still resents the intrusion of much of the press and dislikes many of the duties of the party leader. McDonnell, however, has impressed even some critics with his increasingly polished TV performances and has wowed a few sceptical donors. One big donor, who was thinking of pulling their money, confided that a one-on-one chat with the shadow chancellor had left them feeling much happier than a similar chat with Ed Miliband.

The issue of the succession is widely discussed on the left. For many, having waited decades to achieve a position of power, pinning their hopes on the health of one man would be unforgivably foolish. One historically-minded trade union official points out that Hugh Gaitskell, at 56, and John Smith, at 55, were 10 and 11 years younger than Corbyn when they died. In 1994, the right was ready and had two natural successors in the shape of Tony Blair and Gordon Brown in place. In 1963, the right was unprepared and lost the leadership to Harold Wilson, from the party's centre. "If something happens, or he just decides to call it a day, [we have to make sure] it will be '94 not '63," they observed.

While McDonnell is just two years younger than Corbyn, his closest ally in politics and a close personal friend, he is seen by some as considerably more vigorous. His increasingly frequent outings on television have seen him emerge as one of the most adept media performers from the Labour left, and he has won internal plaudits for his recent tussles with George Osborne over the tax bill.

The left’s hopes of securing a non-Corbyn candidate on the ballot have been boosted in recent weeks. The parliamentary Labour party’s successful attempt to boot Steve Rotheram off the party’s ruling NEC, while superficially a victory for the party’s Corbynsceptics, revealed that the numbers are still there for a candidate of the left to make the ballot. 30 MPs voted to keep Rotheram in place, with many MPs from the left of the party, including McDonnell, Corbyn, Diane Abbott and John Trickett, abstaining.

The ballot threshold has risen due to a little-noticed rule change, agreed over the summer, to give members of the European Parliament equal rights with members of the Westminster Parliament. However, Labour’s MEPs are more leftwing, on the whole, than the party in Westminster . In addition, party members vote on the order that Labour MEPs appear on the party list, increasing (or decreasing) their chances of being re-elected, making them more likely to be susceptible to an organised campaign to secure a place for a leftwinger on the ballot.

That makes it – in the views of many key players – incredibly likely that the necessary 51 nominations to secure a place on the ballot are well within reach for the left, particularly if by-election selections in Ogmore, where the sitting MP, is standing down to run for the Welsh Assembly, and Sheffield Brightside, where Harry Harpham has died, return candidates from the party’s left.

McDonnell’s rivals on the left of the party are believed to have fallen short for one reason or another. Clive Lewis, who many party activists believe could provide Corbynism without the historical baggage of the man himself, is unlikely to be able to secure the nominations necessary to make the ballot.

Any left candidate’s route to the ballot paper runs through the 2015 intake, who are on the whole more leftwing than their predecessors. But Lewis has alienated many of his potential allies, with his antics in the 2015 intake’s WhatsApp group a sore point for many. “He has brought too much politics into it,” complained one MP who is also on the left of the party. (The group is usually used for blowing off steam and arranging social events.)

Lisa Nandy, who is from the soft left rather than the left of the party, is widely believed to be in the running also, despite her ruling out any leadership ambitions in a recent interview with the New Statesman.However, she would represent a break from the Corbynite approach, albeit a more leftwing one than Dan Jarvis or Hilary Benn.

Local party chairs in no doubt that the shadow chancellor is profiling should another leadership election arise. One constituency chair noted to the New Statesman that: “you could tell who was going for it [last time], because they were desperate to speak [at events]”. Tom Watson, Caroline Flint, Chuka Umunna, Yvette Cooper, Andy Burnham and Liz Kendall all visited local parties across the country in preparation for their election bids in 2015.

Now, speaking to local party activists, four names are mentioned more than any other: Dan Jarvis, currently on the backbenches, but in whom the hopes – and the donations – of many who are disillusioned by the current leadership are invested, Gloria De Piero, who is touring the country as part of the party’s voter registration drive, her close ally Jon Ashworth, and John McDonnell.

Another close ally of Corbyn and McDonnell, who worked closely on the leadership election, is in no doubt that the shadow chancellor is gearing up for a run should the need arise.  “You remember when that nice Mr Watson went touring the country? Well, pay attention to John’s movements.”

As for his chances of success, McDonnell may well be even more popular among members than Corbyn himself. He is regularly at or near the top of LabourList's shadow cabinet rankings, and is frequently praised by members. Should he be able to secure the nominations to get on the ballot, an even bigger victory than that secured by Corbyn in September is not out of the question.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog. He usually writes about politics.