The Big Society: the Anatomy of the New Politics

On Ed Miliband's journey to the good society, Jesse Norman is a fellow traveller. In previous works, he has developed a form of Toryism that shares a language with ethical socialism. In his new book, he embeds this thinking in the rhetoric of David Cameron's "big society" and gives that notion some much-needed intellectual ballast. We agree with Norman about the importance of virtue and a "connected society". But we part company on the terrain of political economy. We turn left, in defence of labour and a common wealth. Norman turns right, in support of capital and existing property rights.

Over the past three decades, a neoliberal model of capitalism has created endemic work­lessness and an economy that has transferred wealth and resources from the many to the few and from the public sector to the private. By the 1990s, anxieties about social disorder and a loss of community had led to a shift of the centre ground of British politics. In an era of poverty, selfish individualism and free markets, what was our relationship to each other and to society? New Labour attempted an answer. Its social democracy by stealth blunted the cruelty of the new capitalism. It rebuilt public services and skimmed off the profits of an overmighty financial sector, but this strategy collapsed along with the financial markets.

As Norman points out, New Labour's use of the market and the state as instruments of reform led to a technocratic modernisation that did not take sufficient account of the human relationships and trust that lie at the heart of public services. One consequence is that New Labour failed to make political capital out of its huge social investment. With embarrassing speed, the Conservatives were able to detach New Labour from its own achievements. By a sleight of hand that redefined the failure of the banks as a crisis of public debt, its spending in government has been successfully characterised as irresponsible and profligate.

New Labour's turn to the right opened up a political space for a Conservative revival. In November 2005, a month before his election as Tory leader, David Cameron gave a speech to the National Council for Voluntary Organisations. He broke with laissez-faire Thatcherism: "I want my party to be one that says, loudly and proudly, that there is such a thing as society - it's just not the same thing as the state."

The social Toryism of Edmund Burke was making a return. In contrast to New Labour's embrace of utilitarian modernity and apparent contempt for conservative ways of life, Burke's "spirit of the nation" represents a society that values continuity and cultural familiarity. It is one that is "made by the peculiar circumstances, occasions, tempers, dispositions, and moral and civil and social habitudes of the people, which disclose themselves only in a long space of time".

Norman argues that the "big society" is a coherent expression of this pro-social, anti-statist, conservative tradition. It is, he asserts, "fundamental to our moral, civic and economic renewal". He is certainly right that our economy and society are in grave difficulty. Labour's model of state-directed social reform had limited success in curing our social and economic ills. But the two dominant conservative traditions of paternalism and libertarianism are also inadequate: the first lacks a critique of the state, the second lacks a critique of the market. Norman argues that these discredited ideologies are not being challenged, because the country's ruling elites and technocrats are in the grip of an outdated and highly damaging conception of economics.

He calls this "rigor mortis economics". It reduces the real world to statistics and mathematical formulae, and it relies on a number of fantasies: that markets assume perfect competition and always reach an equilibrium; that asymmetries of information are unknown; and that human beings are rational, self-interested actors. Until these ideas change, there can be no debate about the kind of capitalism Britain needs to develop.

Norman's politics are rooted in Adam Smith's notion of sympathy. In this view, social renewal lies in our being guided by our concern for and empathy with others. We need to build intermediate civil society institutions in a three-way relationship with the individual and the state. These will be central to social renewal because they promote good order, curb excessive power, give shape and meaning to our lives and command loyalty and affection.

For Norman, the problem of capitalism is the ideas that govern it, and it is here that we have to part company. These ideas do not emerge from thin air. Their dominance serves the interests of the social and political forces that sustain the status quo. The coalition's extreme policies on deficit reduction bear no relation to economic prudence, nor even to the realities of the bond market. The British state is undemocratic and in great need of democratic reform, but it has not crowded out the private sector. Rather, the reverse is true. The state and the taxpayer have supported a private sector that has proved incapable of sustaining the livelihoods of the British people by providing decent jobs, homes and pensions. The banks and big corporations have power without responsibility. Capitalism needs to be brought to democratic account and rebuilt.

To many on the left, the "big society" is nothing more than a naive scheme to obscure the Conservatives' ideological objective of dismantling the state. But we can ill afford such complacency. Using a series of skilful manoeuvres, Cameron has stolen Labour's language. He has appropriated its ethical traditions of mutual improvement, solidarity and reciprocity to begin reconstituting the centre ground around a centre-right, pro-social politics. The coalition with the Liberal Democrats has only increased the potency of this strategy. Labour has been slow in recognising the dangers and it has still to tell a story of its own.

Labour should begin reopening a route back to power with a story of how the people of our country have been dispossessed. The neoliberal model has accumulated capital through dispossession, not by productive wealth creation. It has expropriated private savings, private pensions, private debt and large parts of the public sector by means of privatisation and marketisation. The price paid by the "squeezed middle" has been a reduction in their share of the national income. The coalition's ravenous assault on the welfare state and the poor presages even more dispossession.

Socialism shares Burke's language of a common life. Ruskin railed against the machine age with his rallying cry "There is no wealth but life"; he, too, belongs to socialism. Coleridge and his ideas of society are ours, as is Words­worth. Socialism has always been about a militant defence of human life and creativity against commodification and the destructive impact of capitalism. Unlike Toryism, Labour is for a popular democracy that goes all the way down and all the way up, and which does not stop at the door to the firm and the economy. Labour is for "liberty in common" - we cannot be free by ourselves alone, but only through our institutions of democracy and the common law. Liberty is true only when there is an equality of relationships. An aspirational life for all is meaningless without a common wealth. Norman has written a book that challenges Labour to rediscover the best parts of itself and to forge a new politics of liberty, democracy and the common good.

The Big Society: the Anatomy of the New Politics
Jesse Norman
University of Buckingham Press, 156pp, £10

Jon Cruddas is MP for Dagenham (Labour). Jonathan Rutherford is professor of cultural studies at Middlesex University.

This article first appeared in the 13 December 2010 issue of the New Statesman, The radical Jesus

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.