Memo to Duncan Smith: low wages are not an argument for cutting benefits

The fact that benefits have risen faster than wages is an argument for higher wages, not lower benefits.

The latest argument deployed by Iain Duncan Smith in favour of the government's plan to cap benefit increases at 1 per cent for the next three years (below the rate of inflation) is that benefits have risen faster than private sector wages. The Work and Pensions Secretary is highlighting figures showing that the former have increased by an average of 20 per cent over the last five years (in line with inflation), while the latter have increased by 12 per cent. The statistics aren't new but the government's decision to publicise them shows that it fears Labour, which has denounced the policy as a "strivers' tax" (60 per cent of the real-terms cut falls on working families), may be shifting public opinion against the bill. While the polling results are mixed, one recent survey by Ipsos MORI found that 69 per cent believe that benefits should increase in line with inflation or more. (Conversely, a YouGov poll found that 52 per cent believe Osborne was right to increase benefits by 1 per cent, while a ComRes poll put support at 49 per cent.)

Duncan Smith said today: "Working people across the country have been tightening their belts after years of pay restraint while at the same time watching benefits increase. That is not fair. The welfare state under Labour effectively trapped thousands of families into dependency as it made no sense to give up the certainty of a benefit payment in order to go back to work."

In response, Labour has rightly pointed out that over the last ten years, as opposed to five, wages have risen faster than benefits. Jobseeker's allowance, for instance, has increased from £53.95 a week to £71, a rise of 32 per cent, while wages have increased by 36 per cent, from an average of £347 a week to £471. The current trend is a temporary quirk caused by the recession.

But even if we accept Duncan Smith's baseline, his logic is profoundly flawed. The fact that benefits have risen faster than wages is an argument for increasing wages (for instance, by ensuring greater payment of the living wage), not for cutting benefits. Many of those whose wages have failed to keep pace with inflation actually rely on in-work benefits such as tax credits to protect their living standards. The government's decision to cut these benefits in real-terms will further squeeze their disposable income. In the case of those out-of-work, ensuring that benefits rise in line with inflation is essential both as a matter of social justice - cutting support for the poorest means forcing even more families to choose between heating and eating - and of economic policy. Most claimants can't afford to save, so spend whatever they receive and stimulate the economy as a result. If anything, the government should be considering above-inflation increases in benefits to maintain consumer demand.

When Duncan Smith complains that benefits have risen faster than wages, he is really complaining that wages have risen more slowly than inflation (and are expected to continue to do so until at least 2014). But rather than prompting the government to slash benefits, this grim statistic should prompt it to pursue a genuine growth strategy that ensures more people have access to adequately paid employment. That, however, remains a distant hope.

Work and Pensions Secretary Iain Duncan Smith said it was "not fair" that benefits had risen faster than wages. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

Our union backed Brexit, but that doesn't mean scrapping freedom of movement

We can only improve the lives of our members, like those planning stike action at McDonalds, through solidarity.

The campaign to defend and extend free movement – highlighted by the launch of the Labour Campaign for Free Movement this month – is being seen in some circles as a back door strategy to re-run the EU referendum. If that was truly the case, then I don't think Unions like mine (the BFAWU) would be involved, especially as we campaigned to leave the EU ourselves.

In stark contrast to the rhetoric used by many sections of the Leave campaign, our argument wasn’t driven by fear and paranoia about migrant workers. A good number of the BFAWU’s membership is made up of workers not just from the EU, but from all corners of the world. They make a positive contribution to the industry that we represent. These people make a far larger and important contribution to our society and our communities than the wealthy Brexiteers, who sought to do nothing other than de-humanise them, cheered along by a rabid, right-wing press. 

Those who are calling for end to freedom of movement fail to realise that it’s people, rather than land and borders that makes the world we live in. Division works only in the interest of those that want to hold power, control, influence and wealth. Unfortunately, despite a rich history in terms of where division leads us, a good chunk of the UK population still falls for it. We believe that those who live and work here or in other countries should have their skills recognised and enjoy the same rights as those born in that country, including the democratic right to vote. 

Workers born outside of the UK contribute more than £328 million to the UK economy every day. Our NHS depends on their labour in order to keep it running; the leisure and hospitality industries depend on them in order to function; the food industry (including farming to a degree) is often propped up by their work.

The real architects of our misery and hardship reside in Westminster. It is they who introduced legislation designed to allow bosses to act with impunity and pay poverty wages. The only way we can really improve our lives is not as some would have you believe, by blaming other poor workers from other countries, it is through standing together in solidarity. By organising and combining that we become stronger as our fabulous members are showing through their decision to ballot for strike action in McDonalds.

Our members in McDonalds are both born in the UK and outside the UK, and where the bosses have separated groups of workers by pitting certain nationalities against each other, the workers organised have stood together and fought to win change for all, even organising themed social events to welcome each other in the face of the bosses ‘attempts to create divisions in the workplace.

Our union has held the long term view that we should have a planned economy with an ability to own and control the means of production. Our members saw the EU as a gravy train, working in the interests of wealthy elites and industrial scale tax avoidance. They felt that leaving the EU would give the UK the best opportunity to renationalise our key industries and begin a programme of manufacturing on a scale that would allow us to be self-sufficient and independent while enjoying solid trading relationships with other countries. Obviously, a key component in terms of facilitating this is continued freedom of movement.

Many of our members come from communities that voted to leave the EU. They are a reflection of real life that the movers and shakers in both the Leave and Remain campaigns took for granted. We weren’t surprised by the outcome of the EU referendum; after decades of politicians heaping blame on the EU for everything from the shape of fruit to personal hardship, what else could we possibly expect? However, we cannot allow migrant labour to remain as a political football to give succour to the prejudices of the uninformed. Given the same rights and freedoms as UK citizens, foreign workers have the ability to ensure that the UK actually makes a success of Brexit, one that benefits the many, rather than the few.

Ian Hodon is President of the Bakers and Allied Food Workers Union and founding signatory of the Labour Campaign for Free Movement.