Osborne sets a welfare trap for Labour and a test for the coalition

The Chancellor's plan to increase benefits by just 1 per cent creates an awkward dilemma for Labour and Lib Dem MPs.

Everything George Osborne does is notoriously drenched in political calculation. The Autumn Statement was no exception. The Chancellor did not have much room for manoeuvre, given the enduring parlous state of the public finances, which remains (or should remain) the biggest story of the day. Inevitably, he fell back on familiar devices.

Much of the hard work of deficit reduction will be done, as was widely advertised in advance, by cuts to the benefits bill. The main new development, also much anticipated, is the decision to limit the up-rating of benefits to 1 per cent. Since that is lower than inflation, it will feel like a cut. The Chancellor rather sneakily announced the move in a passage that compared the burden faced by hard-working folk with the leisurely life of people on benefits. He repeated his favourite homily of the dogged commuter heading off to work, eyeing the feckless neighbour, blinds drawn, sleeping away a life on the dole. It is a popular theme with the Conservative press and in focus groups.

The problem is that, bundled up with Osborne’s supposed idle scroungers, are people who have jobs, work hard, struggle to make ends meet on low wages and currently depend on some combination of tax credits, child benefit, housing benefit, council tax benefit. The freeze affects them as much as it does those who are out of work (who, in any case, might reasonably be thought of as unfortunate jobseekers instead of pilfering dossers). Once all the number-crunching is done it will be interesting to see if the raising of the personal allowance adequately compensates people on low incomes for the hit they are taking in frozen, cut or withdrawn benefits*.

But politically the most significant element of the freeze is surely the announcement that it will be contained in a separate “Welfare Uprating Bill.” That is plainly an attempt by the Chancellor to put the opposition in an awkward dilemma. Either Miliband appals his party and signs up to the government’s position, which is highly unlikely, or he opposes the freeze/cut – a move that the Tories and most of the press would present as a profligate defence of scrounging. It is the same manoeuvre that was deployed with some effect in votes on Osborne’s benefits cap earlier this year. As I’ve noted before, this ploy has diminishing returns for the Tories. It presumes that the public will stay boundlessly enthusiastic about welfare cuts, regardless of who the recipients are and regardless of the social consequences. That is a risky calculation given the vulnerability of the Conservative brand to charges of heartlessness.

It is worth noting also that the Liberal Democrats were hardly more relaxed about the benefit cap than Labour. Nick Clegg’s party demanded changes to the measure in the Lords and some rebelled against it. As the squeeze on low-earning households is likely to deepen over the next few months and as the Lib Dems feel the need to assert their credentials as the in-house conscience of the coalition, their position on the latest benefits freeze will become very interesting to watch.

There are bound to be Lib Dem MPs with an impulse to reject Osborne’s latest assault on benefit-claimants. Labour will be more than usually glad of their company in a Commons vote on an issue that probes one of the party’s great electoral vulnerabilities – the charge of excess welfare spending. Osborne has set a trap for the opposition with his Uprating Bill. He has also set a potential test for coalition unity.

*Update: The Resolution Foundation has crunched the numbers and the answer is "no, it doesn't."

 

Labour leader Ed Miliband and shadow chancellor Ed Balls. Photograph: Getty Images.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Brexit is teaching the UK that it needs immigrants

Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past.

Why did the UK vote to leave the EU? For conservatives, Brexit was about regaining parliamentary sovereignty. For socialists it was about escaping the single market. For still more it was a chance to punish David Cameron and George Osborne. But supreme among the causes was the desire to reduce immigration.

For years, as the government repeatedly missed its target to limit net migration to "tens of thousands", the EU provided a convenient scapegoat. The free movement of people allegedly made this ambition unachievable (even as non-European migration oustripped that from the continent). When Cameron, the author of the target, was later forced to argue that the price of leaving the EU was nevertheless too great, voters were unsurprisingly unconvinced.

But though the Leave campaign vowed to gain "control" of immigration, it was careful never to set a formal target. As many of its senior figures knew, reducing net migration to "tens of thousands" a year would come at an economic price (immigrants make a net fiscal contribution of £7bn a year). An OBR study found that with zero net migration, public sector debt would rise to 145 per cent of GDP by 2062-63, while with high net migration it would fall to 73 per cent. For the UK, with its poor productivity and sub-par infrastructure, immigration has long been an economic boon. 

When Theresa May became Prime Minister, some cabinet members hoped that she would abolish the net migration target in a "Nixon goes to China" moment. But rather than retreating, the former Home Secretary doubled down. She regards the target as essential on both political and policy grounds (and has rejected pleas to exempt foreign students). But though the same goal endures, Brexit is forcing ministers to reveal a rarely spoken truth: Britain needs immigrants.

Those who boasted during the referendum of their desire to reduce the number of newcomers have been forced to qualify their remarks. On last night's Question Time, Brexit secretary David Davis conceded that immigration woud not invariably fall following Brexit. "I cannot imagine that the policy will be anything other than that which is in the national interest, which means that from time to time we’ll need more, from time to time we’ll need less migrants."

Though Davis insisted that the government would eventually meet its "tens of thousands" target (while sounding rather unconvinced), he added: "The simple truth is that we have to manage this problem. You’ve got industry dependent on migrants. You’ve got social welfare, the national health service. You have to make sure they continue to work."

As my colleague Julia Rampen has charted, Davis's colleagues have inserted similar caveats. Andrea Leadsom, the Environment Secretary, who warned during the referendum that EU immigration could “overwhelm” Britain, has told farmers that she recognises “how important seasonal labour from the EU is to the everyday running of your businesses”. Others, such as the Health Secretary, Jeremy Hunt, the Business Secretary, Greg Clark, and the Communities Secretary, Sajid Javid, have issued similar guarantees to employers. Brexit is fuelling immigration nimbyism: “Fewer migrants, please, but not in my sector.”

The UK’s vote to leave the EU – and May’s decision to pursue a "hard Brexit" – has deprived the government of a convenient alibi for high immigration. Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past. Brexit may have been caused by the supposed costs of immigration but it is becoming an education in its benefits.

George Eaton is political editor of the New Statesman.