The Staggers

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The problem with welfare reform? It's the market, not the benefits cap

Labour should focus on reforming the market to support the vulnerable without being labeled as profl

By Rowenna Davis Published 24 January 2012 10:18

Labour should focus on reforming the market to support the vulnerable without being labeled as profligate.

Amanda Jacobs (not her real name) lives down the road from me in Peckham. It's a classic inner London location where deprivation soars as high as the rents. The state pays £900 a month to keep her and her daughter in a tiny, damp flat with failing heating. With 20,000 people on the waiting list, there's not much chance of a council house, and the jobs she's qualified to do would almost certainly leave her worse off.

"I want to work, and I've been looking," she says, "But there's no way I could afford the rent if I lost my benefit, and I have to think about her (my daughter) -- I don't want her changing schools again."

Talking to Amanda, you can't deny that some of the right's critique is spot on. It's true that the threat of losing benefit stops you working. It's true that paying £192bn a year in welfare is outrageous when you're trying to decrease debt. And it's true that the public is running out of sympathy for families like hers. Perhaps that's partly why in a week when the Tories have been talking about capping benefit, they have gained a five-point poll lead over Labour.

So what does the left do? It would fail people like Amanda to follow the coalition and suddenly limit their benefits. As Randeep Ramesh helpfully points out, the government itself acknowledges that this move is likely to increase child poverty and detrimentally affect some disabled groups and even those in work. But the left will also fail people if it leaves them in a position where work doesn't pay.

The answer is not to simply accept a watered down version of the government's proposals that allow a higher cap for higher rent areas like London, or even to just exclude child benefit from the equation. The answer is to change the market as well as the state.

First, we need to understand that the disincentive to work doesn't just come from high benefits from the public sector. It also comes from low wages in the private sector. For most people on benefits, the only jobs available are low skilled, badly paid, insecure and part time. If you had a living wage, regular hours and a chance of rising up through a company, you would be more likely to come off benefits, not because of the threat of eviction, but because of the rewards of employment.

Second, you need stricter regulation on the scandal that is the private rented sector. There is no way that Amanda's flat is worth £900 a month. In a world where housing is limited and ownership concentrated, we need much tighter regulation that so far we're failing to get. Otherwise we're just wasting our money and vulnerable people are still living in substandard housing.

Finally, we also need to promote alternative models of home ownership that give people a stake in where they live. Co-operatives, mutuals and community land trusts need to be much more accessible. What's happening in Rochdale -- where they have just created the largest housing mutual in the country -- is interesting. The left should remember its past and learn from it.

So the problem with welfare reform isn't so much the benefits cap, it's the failure to look at the problems of the market as well as the state. What I wanted to get across on the Sunday Politics this week but didn't have space to, is that the Tories have nothing to say about this. Reforming the market is fertile ground for Labour if the party wants to support the vulnerable without being labeled as profligate. And perhaps most importantly, such measures wouldn't just support Amanda, they'd also leave her more empowered.

Rowenna Davis is a journalist and author of Tangled up in Blue: Blue Labour and the Struggle for Labour's Soul, published by Ruskin Publishing at £8.99. She is also a Labour councillor.

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Tags: Welfare Labour

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23 comments

Tue, 2012-01-24 18:51 — Benjamin Rae (not verified)

Thanks Michael, hadn't thought about the work program. It is a form of slavery

Tue, 2012-01-24 19:12 — Fraziel1

"Demonising the disabled, unemployed and lone parents in this context is an utter outrage"

Except of course this is not what is happening except in the minds of the far left and elitist liberals glued to their ideology.The rest of us see it as badly needed and common sense.

As for the work programme, it is flawed but so far it has shown up approx 20% of the people contacted to be committing benefit fraus as they have withdrawn their claims. And that is a good thing.

Tue, 2012-01-24 19:46 — christinee

As a taxpayer I would prefer to stop subsidizing the Tesco's of this world - they pay poverty wages at the bottom and the taxpayer via tax credits makes this up so they can pay big fat bonuses to the CEO at the top!

Tue, 2012-01-24 21:07 — Benjamin Rae (not verified)

Fraziel,
depends how you look at it. It's perfectly clear that UK politics has shifted very substantially to the right in the past 30 years. The past 3-4 years have shown the failure of these policies. Those of us who didn't shift to the right in the face of Thatcher and New Labour are accused of being being far left.
What is happening now is that the scars left from disastrous economic policies pursued in the past 30 years are being blamed on those who fell foul of them. Much of the media are enabling this.
To understand an issue you have to look at root causes. Pre 1970s the UK didn't have a significant unemployment problem. People didn't just become lazy and stopped wanting to work. Economic policy changed and produced the problem. Tailoring policy under the misconception that people are lazy and need a kick up the ar#e is simplistic nonsense and will to lead stupid, vindictive policies.

Wed, 2012-01-25 00:28 — Fraziel1

"Tailoring policy under the misconception that people are lazy and need a kick up the ar#e is simplistic nonsense and will to lead stupid, vindictive policies"

I agree, but I also do not think that is what the benefit cap is about.There is nothing vindictive about not allowing people to get 40,50,60 grand a year on benefits. I don't see it as right wing either it is just reasonable and justified. i have not heard a single argument as to why it is a good thing to keep paying people these sums when they could never earn it and its more than many families in work get.

Tue, 2012-01-24 10:59 — Arturo Bandini (not verified)

Finally - the low-wage economy is the issue.

It makes coming off benefits undesirable AND reduces our tax revenues that pay for the welfare payments that are necessary in a lot of cases.

Time to ask the market - do you want to create fulfilling employment or simply exploit?

Tue, 2012-01-24 11:14 — Dave C (not verified)

The ICM poll you quote was just one of three that day:

"In this Parliament ICM have tended to show by far the highest scores for the Liberal Democrats and, as a result, some of the lowest scores for the Labour party. This is partially to do with their reallocation of don’t knows (ICM, and to a lesser extent Populus, assume that half of those people who say don’t know will end up voting for the party they backed last time. This gives a big boost to the Lib Dems)"

http://ukpollingreport.co.uk/blog/archives/4704
So ICM showed:
CON 40%, LAB 35%, LDEM 16%

Other polls showed:
CON 37%, LAB 38%, LDEM 13%
CON 39%, LAB 40%, LDEM 8%

Tue, 2012-01-24 11:15 — Jezz (not verified)

The way forward is to stop subsidising low wages in the private sector. In an ideal world we would be able to cut welfare to next to nothing as the private sector should pay a high enough wage for people to live on. This is a fundamental flaw with capitalism - Marx noticed it - Keynes saw it and we have so far papered over it with credit. Workers are simply not paid enough to sustain (what Keynes called)'effective demand' in the economy. This is because the richest 1-2% capitialists (in the true sense - people who own enough capital so they need not sell their labour) extract this value from the worker in the form of profit. This means their is never enough demand to sustain a growing capitalist economy - ergo capitalism does not work - it is failed in theory and in practice. The way we have got round this for the last 150 years has been via recourse to credit to artifically inflate demand to sustain grwoth in the economy - the 2008 crash was the failure of this last ditch attempt to paper opver the casam like crack at the centre of liberal-economic theory.

Tue, 2012-01-24 11:17 — Marxist Nutter (not verified)

Apologies for the spelling/grammar mistakes in the above post - meaning should still be clear.
ADMIN: Why is my name changed from''Marxist Nutter' to 'Jezz' when I post???

Tue, 2012-01-24 12:16 — LondonStatto (not verified)

"There is no way that Amanda's flat is worth £900 a month."

Indeed. But that's what the landlord charges because the State will pay it. Limiting housing benefit will bring down rents for everyone.

Wed, 2012-01-25 04:02 — Red Shift

Cameron benefits from demographics: a large number of voters past child bearing age, with good pensions, or about to retire, home owners, cruise goers.

The poor raising children aren't represented by any party. They have instead been represented as problematic by all parties. Their votes don't matter, as they're socially and economically unempowered so serve usefully as 'other' allowing unity to be established among the comfortable home owning crowds.

It's really obscene they are being scapegoated for decades of political and adminstrative mismanagement.

Tue, 2012-01-24 12:19 — LondonStatto (not verified)

"The ICM poll you quote was just one of three that day"

Indeed, but ICM has consistently show itself to be the most accurate pollster.

Reallocating don't knows is reasonable. In the case of 2010-LD, now-DK people, most of these will be tactically-minded natural Labour voters who currently feel betrayed and don't know if they will still vote LD.

When push comes to shove and it's about voting against a Tory in a real election, most of them will.

Tue, 2012-01-24 12:55 — mary8

Thoughtful and thought-provoking.It highlights the need for Labour to put forward the case for state regulation to protect everyone from the excesses of the market. If you accept that markets are essentially amoral, then fair rents, wages, working practices, food labelling etc. need to be carefully regulated. Presently, it is easy to label Labour as the "nanny state" or hit them with the :"You never regulated when you were in power," mantra. However, Vince's puny attempts to curb executive pay, the forthcoming bankers' bonuses and both Clegg and Cameron's unconvincing conversion to moral capitalism are setting the agenda for state regulation.

This week the welfare cap is a big issue and Labour has not handled the "cuts agenda" well. However, Lansley's reforms are not going away, tax evasion and avoidance and high executive pay are also emotive issues, to say nothing of high unemployment. These issues should be highlighted at every opportunity, alongside the examples of individuals who are being unfairly punished for the excesses of the banking sector. If the right wing can come up with examples of high benefit payments, surely the left can detail the predicament of many disabled, ill and unemployed people who simply cannot cope in the current economic climate: M.P.'s and councillor' posts and surgeries must be full of such cases.

Thu, 2012-01-26 22:38 — Politico (not verified)

Sorry Rowenna.David Cameron is right and got this issue spot on. His policy on welfare resonates well with the British people.

Lets not forget it was New Labour, the previous Labour leader and his folly who have created a welfare state where you are better off not working than earning a living. That is not right.
And do you this policy is popular with thousands of labour voters.

Please don't make excuses for those who can't work won't work.

Remember it was Labour who created this Monster

Wed, 2012-01-25 11:16 — joetheplumber

Nothing wrong with capitalism per se; the problem, as we all know, is capitalist. Similarly, there is nothing wrong with democracy but politicians. Unfortunately, we have all been moulded in their image, i.e greedy and selfish. So the problem is a moral one and at the centre of our dilemma is apathy.

Tue, 2012-01-24 14:12 — Stuart Madewell (not verified)

The solution is to return to rent control. This is fairly straight forward. Each borough has a Rent Officer who can establish a Market rent for an individual property and also establish a local reference rent for that property.
Each RO would visit each property and establish a local reference rent for that property taking into account the condition of the property, state of repair etc.

Housing Benefit would only be paid at the rate set by the RO.

Its fairly easy as it is the system which was in place before Local Housing Allowance was introduced by James Purnell

Tue, 2012-01-24 14:29 — Flomple (not verified)

LONDON LONDON LONDON LONDON LONDON

It's like the rest of the country doesn't exist at all.

What a silly place.

Tue, 2012-01-24 15:06 — Des Demona (not verified)

Have to agree that certain landlords see the welfare state as a licence to print money. Capping payments would also potentially reduce rental rates in general and help us poor working stiffs a little.

Tue, 2012-01-24 15:09 — Benjamin Rae (not verified)

Low wages and neo liberal economics as a whole are the issue. Private enterprise can only do so much and is unable and unwilling to provide full employment.
Full employment is undesirable from a profit point of ciew because it pushes real wages up.
That's the reality of free market policies. Demonising the disabled, unemployed and lone parents in this context is an utter outrage. Labour are a disgrace on this area as they have not only gone along with the media campaign against welfare they've also contributed to it.
Before they start quoting Beveridge in an attempt to lecture they should always point out that full employment and a decent living wage have all been abandoned as desirable outcomes.

Wed, 2012-01-25 14:55 — Fraziel1

"It's really obscene they are being scapegoated "

Again, no they are not.

Tue, 2012-01-24 17:27 — Sir Michael (not verified)

Benjamin is absolutely correct.

In addition to his extremely salient points it should be notied that much vaunted "work program", which compells people to work for their benefit, actually carries the risk of both raising unemployment and severely hitting wages.

Reintroducing slavery, and removing even administration and substinence costs of slavery by handing them off to the taxpayer, means that even expanding companies do not need to hire anyone. They can simply ask the state to provide laborers for free.

The market is part of the problem, not part of the solution.