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.

Photo: Getty
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Mark Sampson's exit leaves the FA still trying to convince itself of its own infallibility

Football's governing body won't be able to repair the damage to its reputation in silence.

By the end, it appeared as if Mark Sampson was weathering the storm.

Despite personal reflections that the uproar and scandal that has surrounded his recent tenure as England women's football manger was taking a toll, he seemed, as of Tuesday night, firmly ensconced in the post he had held since 2013.

Player Eniola Aluko’s claims of bullying and racism against the coach – given little backing from teammates and, on balance, disregarded by consecutive enquiries – remained a persistent story, yet talk of a fresh investigation were trumped in importance by Sampson’s continued presence at training and in the dugout.

The BBC’s occasionally rabid attachment to proceedings gave the saga prolonged oxygen, but when Sampson seemed to retain the FA’s support – taking charge of the Lionesses’ 6-0 win over Russia on Tuesday night – the worst appeared to be over.

With hindsight, the vultures were simply sharpening their talons.

Sampson’s sacking – less than 24 hours after that Russia game – came after a report was unearthed detailing a historic complaint against him from his time coaching Bristol Academy – a job he left to take up the England post.

In what has long become customary, the FA received these claims nearly four years ago yet failed to act definitively – initially concluding that their new coach was “not a safeguarding risk”. However as the recent crisis depended, the full details of these initial accusations were allegedly not revealed to senior leadership.

Confirming Sampson's departure on Wednesday, FA chief executive Martin Glenn carried a pained expression reminiscent of former incumbent Mark Palios, who, in another entry in the annals of great FA crises, resigned in 2004 as a result of an affair with FA secretary Faria Alam.

Glenn will hope that his own head is not sought in the weeks ahead as his conduct throughout the Sampson saga is probed.

It also marks yet another turbulent 12 months for the beleaguered governing body, who almost exactly a year ago to the day, parted company with England men’s coach Sam Allardyce after just a single game in charge – the former Bolton and Sunderland coach getting the bullet as a result of transfer advice offered to undercover journalists.

The Allardyce departure was handled with uncharacteristic efficiency – a symptom, perhaps, of the initial scepticism behind his appointment rather than any particular reflection on his crimes.

With clear-eyed judgement, it is difficult not to have a portion of sympathy for Sampson – who, cleared by those investigations, maintained the very visible backing of his squad – right up until Wednesday’s bitter denouement.

That he’s been paid in full for the three-year contract signed last summer speaks for how soft a line the FA took on the events that forced the sacking – hoping, perhaps, for as quiet an ending as possible for both parties.

Regrettably, for the FA at least, considerable damage to their reputation will not be something they can repair in silence – not in an era where women’s football enjoys such a high profile in the national consciousness and the body continues to mark itself an easy target for criticism. 

The exact contents of those 2014 allegations and that report are sure to be known down the line – non-disclosure agreements willing – but are as of now only conjecture and innuendo.

Without details, it’s difficult to know how hard to judge Sampson. The facts of his performance on the pitch mark him out as having been an accomplished coach. That is no longer the exclusive measure of success.

Detractors will murmur darkly about there being no smoke without fire, while his supporters will point to the unique nature of the job and the often confrontational elements of its duties.

Sampson, at 34, is still a relatively young man and may be able to coach again once the rancour has subsided – although with a reputation severely bloodied, will look on the two-year salary windfall with some gratitude.

Despite Glenn’s insistence that his former manager is “clear to work” in the sport, it’s hard to envisage his career ever resuming in the women’s game.

The FA itself is again left rudderless as it tries to convince itself of its own infallibility. Flabby management structures and the perception of being an antiquated country club – valid or not – will be revisited with relish.

Perhaps positively, it could herald a more honest conversation behind what success looks like for the national game as a whole. Inclusiveness and development of a robust culture are often the first words to disappear from the vocabulary once on field results start to falter.  

For once, the identity of the next coach is not the urgent dilemma facing the FA.

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