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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If there’s no booze or naked women, what’s the point of being a footballer?

Peter Crouch came out with one of the wittiest football lines. When asked what he thought he would have been but for football, he replied: “A virgin.”

At a professional league ground near you, the following conversation will be taking place. After an excellent morning training session, in which the players all worked hard, and didn’t wind up the assistant coach they all hate, or cut the crotch out of the new trousers belonging to the reserve goalie, the captain or some senior player will go into the manager’s office.

“Hi, gaffer. Just thought I’d let you know that we’ve booked the Salvation Hall. They’ll leave the table-tennis tables in place, so we’ll probably have a few games, as it’s the players’ Christmas party, OK?”

“FECKING CHRISTMAS PARTY!? I TOLD YOU NO CHRISTMAS PARTIES THIS YEAR. NOT AFTER LAST YEAR. GERROUT . . .”

So the captain has to cancel the booking – which was actually at the Salvation Go Go Gentlemen’s Club on the high street, plus the Saucy Sporty Strippers, who specialise in naked table tennis.

One of the attractions for youths, when they dream of being a footballer or a pop star, is not just imagining themselves number one in the Prem or number one in the hit parade, but all the girls who’ll be clambering for them. Young, thrusting politicians have similar fantasies. Alas, it doesn’t always work out.

Today, we have all these foreign managers and foreign players coming here, not pinching our women (they’re too busy for that), but bringing foreign customs about diet and drink and no sex at half-time. Rotters, ruining the simple pleasures of our brave British lads which they’ve enjoyed for over a century.

The tabloids recently went all pious when poor old Wayne Rooney was seen standing around drinking till the early hours at the England team hotel after their win over Scotland. He’d apparently been invited to a wedding that happened to be going on there. What I can’t understand is: why join a wedding party for total strangers? Nothing more boring than someone else’s wedding. Why didn’t he stay in the bar and get smashed?

Even odder was the behaviour of two other England stars, Adam Lallana and Jordan Henderson. They made a 220-mile round trip from their hotel in Hertfordshire to visit a strip club, For Your Eyes Only, in Bournemouth. Bournemouth! Don’t they have naked women in Herts? I thought one of the points of having all these millions – and a vast office staff employed by your agent – is that anything you want gets fixed for you. Why couldn’t dancing girls have been shuttled into another hotel down the road? Or even to the lads’ own hotel, dressed as French maids?

In the years when I travelled with the Spurs team, it was quite common in provincial towns, after a Saturday game, for players to pick up girls at a local club and share them out.

Like top pop stars, top clubs have fixers who can sort out most problems, and pleasures, as well as smart solicitors and willing police superintendents to clear up the mess afterwards.

The England players had a night off, so they weren’t breaking any rules, even though they were going to play Spain 48 hours later. It sounds like off-the-cuff, spontaneous, home-made fun. In Wayne’s case, he probably thought he was doing good, being approachable, as England captain.

Quite why the other two went to Bournemouth was eventually revealed by one of the tabloids. It is Lallana’s home town. He obviously said to Jordan Henderson, “Hey Hendo, I know a cool club. They always look after me. Quick, jump into my Bentley . . .”

They spent only two hours at the club. Henderson drank water. Lallana had a beer. Don’t call that much of a night out.

In the days of Jimmy Greaves, Tony Adams, Roy Keane, or Gazza in his pomp, they’d have been paralytic. It was common for players to arrive for training still drunk, not having been to bed.

Peter Crouch, the former England player, 6ft 7in, now on the fringes at Stoke, came out with one of the wittiest football lines. When asked what he thought he would have been but for football, he replied: “A virgin.”

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 01 December 2016 issue of the New Statesman, Age of outrage