Why it's unlikely benefits increases will be linked to earnings

Gloomy projections all round.

Following another Newsnight scoop, there must be debate in Westminster about whether the coalition are going to change their approach to uprating benefits - increasing them annually in line with inflation - for people of a working age. Coalition splits have already been predicted and then resolved before the pre-Autumn statement debate has even got underway.

This issue arises because the Coalition are on the hunt for welfare savings and playing around with benefit upratings is always one of the first places HM Treasury will turn to save money.  To start with it’s worth recalling that the Coalition has already changed its uprating policy from RPI (or the derived ROSSI index) to CPI for most working age benefits – generating significant savings, arising from lower living standards for recipients - than would otherwise be the case. So any further change in upratings policy comes on top of this.

A straightforward freeze in all benefits, as has been reported in some places, will of course save significant sums – though significantly less than the £10bn annual figure that George Osborne has said he wants. But it is also been reported that as part of the hunt for savings in the future, perhaps after a two-year freeze, benefits would be uprated in line with earnings.

Now, this is rather odd. According to the OBR, earnings are expected to outpace inflation from the start of 2013, with the gap growing to around 2.5 per cent a year from 2015. Based on these projections, an earnings link would be a very expensive policy indeed.

It may well be that HM Treasury no longer believes these sorts of earnings projections. Indeed a new report out today by leading labour market economists Steve Machin and Paul Gregg provides strong grounds for expecting a very slow recovery in wages. That’s because levels of unemployment are having such a chilling effect on pay – far more so than was the case when we were seeking to recover from previous recessions (this research also helps explain why we saw wage stagnation in the years prior to the recession). Indeed, today’s FT takes a bit of a leap by suggesting that the Treasury may seize on this report to pave the way for a much gloomier outlook for wages which would in turn justify linking benefits to earnings in the future.

My guess is that this won’t happen (although you wouldn’t necessarily bet against a freeze in benefits being followed by a move to a new approach of uprating benefits by the lower of either inflation or earnings). That’s because in order for the Treasury to realise any savings by linking benefits to wages rather than inflation they would have to produce some earnings projections that the OBR would need to verify.

These would have to be radically different from the existing OBR numbers. What’s more, they would need to show that typical real-terms wages – flat since 2003, falling since 2009 – are set to carry on falling throughout the next Parliament. That’s announcing that most working people are going to carry on getting poorer during the so-called recovery. Something tells me George Osborne isn’t going to do that. 

A man walks on pennies. Photo: Getty

Gavin Kelly is a former adviser to Downing Street and the Treasury. He tweets @GavinJKelly1.

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25 times people used Brexit to attack Muslims since the EU referendum

Some voters appear more interested in expelling Muslims than EU red tape.

In theory, voting for Brexit because you were worried about immigration has nothing to do with Islamophobia. It’s about migrant workers from Eastern Europe undercutting wages. Or worries about border controls. Or the housing crisis. 

The reports collected by an anti-Muslim attack monitor tell a different story. 

Every week, the researchers at Tell Mama receive roughly 40-50 reports of Islamophobic incidences.

But after the EU referendum, they recorded 30 such incidents in three days alone. And many were directly related to Brexit. 

Founder Fiyaz Mughal said there had been a cluster of hate crimes since the vote:

“The Brexit vote seems to have given courage to some with deeply prejudicial and bigoted views that they can air them and target them at predominantly Muslim women and visibly different settled communities.”

Politicians have appeared concerned. On Monday, as MPs grappled with the aftermath of the referendum, the Prime Minister David Cameron stated “loud and clear” that: “Just because we are leaving the European Union, it will not make us a less tolerant, less diverse nation.”

But condemning single racist incidents is easier than taking a political position that appeases the majority and protects the minority at the same time. 

As the incidents recorded make clear, the aggressors made direct links between their vote and the racial abuse they were now publicly shouting.

The way they told it, they had voted for Muslims to “leave”. 
 
Chair of Tell Mama and former Labour Justice and Communities Minister, Shahid Malik, said:

“With the backdrop of the Brexit vote and the spike in racist incidents that seems to be emerging, the government should be under no illusions, things could quickly become
extremely unpleasant for Britain’s minorities.

“So today more than ever, we need our government, our political parties and of course our media to act with the utmost responsibility and help steer us towards a post-Brexit Britain where xenophobia and hatred are utterly rejected.”

Here are the 25 events that were recorded between 24 and 27 June that directly related to Brexit. Please be aware that some of the language is offensive:

  1. A Welsh Muslim councillor was told to pack her bags and leave.
  2. A man in a petrol station shouted: "You're an Arabic c**t, you're a terrorist" at an Arab driver and stated he “voted them out”. 
  3. A Barnsley man was told to leave and that the aggressor’s parents had voted for people like him to be kicked out.
  4. A woman witnessed a man making victory signs at families at a school where a majority of students are Muslim.
  5. A man shouted, “you f**king Muslim, f**king EU out,” to a woman in Kingston, London. 
  6. An Indian man was called “p**i c**t in a suit” and told to “leave”.
  7. Men circled a Muslim woman in Birmingham and shouted: “Get out - we voted Leave.”
  8. A British Asian mother and her two children were told: "Today is the day we get rid of the likes of you!" by a man who then spat at her. 
  9. A man tweeted that his 13-year-old brother received chants of “bye, bye, you’re going home”.
  10. A van driver chanted “out, out, out”, at a Muslim woman in Broxley, Luton
  11. Muslims in Nottingham were abused in the street with chants of: “Leave Europe. Kick out the Muslims.”
  12. A Muslim woman at King’s Cross, London, had “BREXIT” yelled in her face.
  13. A man in London called a South Asian woman “foreigner” and commented about UKIP.
  14. A man shouted “p**i” and “leave now” at individuals in a London street.
  15. A taxi driver in the West Midlands told a woman his reason for voting Leave was to “get rid of people like you”.
  16. An Indian cyclist was verbally abused and told to “leave now”. 
  17. A man on a bike swore at a Muslim family and muttered something about voting.
  18. In Newport, a Muslim family who had not experienced any trouble before had their front door kicked in.
  19. A South Asian woman in Manchester was told to “speak clearly” and then told “Brexit”. 
  20. A Sikh doctor was told by a patient: “Shouldn’t you be on a plane back to Pakistan? We voted you out.”
  21. An abusive tweet read: “Thousands of raped little White girls by Muslims mean nothing to Z….#Brexit”.
  22. A group of men abused a South Asian man by calling him a “p**i c**t” and telling him to go home after Brexit.
  23. A man shouted at a taxi driver in Derby: "Brexit, you p**i.”
  24. Two men shouted at a Muslim woman walking towards a mosque “muzzies out” and “we voted for you being out.”
  25. A journalist was called a “p**i” in racial abuse apparently linked to Brexit.