Why the Welfare Uprating Bill deserves to be defeated

Osborne's plan to cut benefits will force more of the poorest families to choose between heating and eating.

After weeks of increasingly fractious debate, MPs will vote today on the government’s Welfare Benefits Uprating Bill, which enshrines in law George Osborne’s plan to raise benefits by 1 per cent per year for the next three years, rather than in line with price increases. With the support of almost all Conservative and Liberal Democrat MPs, the bill will easily pass the House of Commons (Labour, to its credit, will vote against it) but here are four reasons why it deserves to be defeated.

1. It will force even more of the poorest families to choose between heating and eating

By raising benefits by 1 per cent, rather than in line with inflation, which stood at 2.2 per cent in September 2012 (the month traditionally used to calculate benefit increases), the coalition will leave the poorest families even more vulnerable to fluctuations in food and energy prices. Inflation is forecast by the Office for Budget Responsibility to be 2.6 per cent in September 2013 and 2.2 per cent in September 2014, meaning that those families affected will have suffered a cumulative loss of four per cent of income by the end of the period. For many, this will mean being forced to choose between heating their home and feeding their family.

As the Institute for Fiscal Studies reported yesterday, 2.5 million households without someone in work will lose an average of £215 per year in 2015-16, while seven million households with someone in work will lose an average of £165 per year. If, as in recent years, inflation rises faster than expected, these losses will be even greater.

2. It will damage the economy by reducing real incomes

When wages are stagnant and unemployment is high, benefit payments automatically increase in order to limit the fall in consumer demand. While government borrowing rises as a result, these "automatic stabilisers" have long been recognised as an essential tool of economic policy. In October 2012, George Osborne remarked: "We have never argued that you stop what economists call the automatic stabilisers operating - the lower tax receipts and extra government payments [such as higher benefits] that follow if, for example, the global economy turns down." Since those on low incomes are forced to spend, rather than save, what little they receive, they automatically stimulate growth.

But Osborne’s decision to cap benefit increases at 1 per cent will reduce the effectiveness of the automatic stabilisers as payments will now fall, rather than rise, in line with inflation, reducing real-terms incomes. As a result, Britain’s anaemic economy will be even more prone to recession.

3. Low wages aren't a reason to cut benefits

In seeking to justify the bill, the Conservatives have repeatedly highlighted the fact that in recent years benefits have risen faster than private sector wages (see their latest poster). Since 2007, the former have increased by an average of 20 per cent (in line with inflation), while the latter have increased by 11.4 per cent.

But this 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 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 (60 per cent of the real-terms cut falls on working families) will further squeeze their disposable income.

When Iain Duncan Smith says 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 encourage it to pursue a genuine growth strategy that ensures more people have access to adequately paid employment.

Finally, while benefits have increased faster than wages in the last five years, this is a temporary quirk caused by the recession. Until now, their value relative to wages has plummeted. In 1979, unemployment benefit was worth 22 per cent of average weekly earnings. Today, it is worth just 15 per cent.

4. There are fairer ways to reduce the deficit

The coalition isn't wrong when it says the deficit, which stood at £121.6bn last year, needs to be reduced (although at a pace commensurate with the state of the economy). But there are fairer ways to raise revenue than cutting benefits for the poorest workers and jobseekers. While reducing welfare payments, the government is simultaneously cutting the top rate of income tax on earnings over £150,000 from 50p to 45p, a measure that will benefit the average income-millionaire by £107,500 a year. Were the government to reverse this measure, it could expect to raise around £3bn a year, more than enough to fund inflation-linked rises in benefits.

Even in the first year of the 50p rate, when temporary forestalling meant many avoided it (for instance, by bringing forward income to 2009-10, the year before the new rate took effect - a trick they could only have played once), the tax raised an extra £1.1bn. This alone is enough to meet the annual cost of increasing benefits in line with inflation (the government expects to save £0.9bn in 2014-15 by capping increases at 1 per cent). But rather than balancing the budget on the backs of the richest (just 1.5 per cent earn more than £150,000), the government has chosen to do so on the backs of the poorest.

George Osborne leaves 11 Downing Street on 7 January 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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In the 1980s, I went to a rally where Labour Party speakers shared the stage with men in balaclavas

The links between the Labour left and Irish republicanism are worth investigating.

A spat between Jeremy Corbyn’s henchfolk and Conor McGinn, the MP for St Helens North, caught my ear the other evening. McGinn was a guest on BBC Radio 4’s Westminster Hour, and he obligingly revisited the brouhaha for the listeners at home. Apparently, following an interview in May, in which McGinn called for Corbyn to “reach out beyond his comfort zone”, he was first threatened obliquely with the sack, then asked for a retraction (which he refused to give) and finally learned – from someone in the whips’ office – that his party leader was considering phoning up McGinn’s father to whip the errant whipper-in into line. On the programme, McGinn said: “The modus operandi that he [Corbyn] and the people around him were trying to do [sic], involving my family, was to isolate and ostracise me from them and from the community I am very proud to come from – which is an Irish nationalist community in south Armagh.”

Needless to say, the Labour leader’s office has continued to deny any such thing, but while we may nurture some suspicions about his behaviour, McGinn was also indulging in a little airbrushing when he described south Armagh as an “Irish ­nationalist community”. In the most recent elections, Newry and Armagh returned three Sinn Fein members to the Northern Ireland Assembly (as against one Social Democratic and Labour Party member) and one Sinn Fein MP to Westminster. When I last looked, Sinn Fein was still a republican, rather than a nationalist, party – something that McGinn should only be too well aware of, as the paternal hand that was putatively to have been lain on him belongs to Pat McGinn, the former Sinn Fein mayor of Newry and Armagh.

According to the Irish News, a “close friend” of the McGinns poured this cold water on the mini-conflagration: “Anybody who knows the McGinn family knows that Pat is very proud of Conor and that they remain very close.” The friend went on to opine: “He [Pat McGinn] found the whole notion of Corbyn phoning him totally ridiculous – as if Pat is going to criticise his son to save Jeremy Corbyn’s face. They would laugh about it were it not so sinister.”

“Sinister” does seem the mot juste. McGinn, Jr grew up in Bessbrook during the Troubles. I visited the village in the early 1990s on assignment. The skies were full of the chattering of British army Chinooks, and there were fake road signs in the hedgerows bearing pictograms of rifles and captioned: “Sniper at work”. South Armagh had been known for years as “bandit country”. There were army watchtowers standing sentinel in the dinky, green fields and checkpoints everywhere, manned by some of the thousands of the troops who had been deployed to fight what was, in effect, a low-level counter-insurgency war. Nationalist community, my foot.

What lies beneath the Corbyn-McGinn spat is the queered problematics of the ­relationship between the far left wing of the Labour Party and physical-force Irish republicanism. I also recall, during the hunger strikes of the early 1980s, going to a “Smash the H-Blocks” rally in Kilburn, north London, at which Labour Party speakers shared the stage with representatives from Sinn Fein, some of whom wore balaclavas and dark glasses to evade the telephoto lenses of the Met’s anti-terrorist squad.

The shape-shifting relationship between the “political wing” of the IRA and the men with sniper rifles in the south Armagh bocage was always of the essence of the conflict, allowing both sides a convenient fiction around which to posture publicly and privately negotiate. In choosing to appear on platforms with people who might or might not be terrorists, Labour leftists also sprinkled a little of their stardust on themselves: the “stardust” being the implication that they, too, under the right circumstances, might be capable of violence in pursuit of their political ends.

On the far right of British politics, Her Majesty’s Government and its apparatus are referred to derisively as “state”. There were various attempts in the 1970s and 1980s by far-right groupuscules to link up with the Ulster Freedom Fighters and other loyalist paramilitary organisations in their battle against “state”. All foundered on the obvious incompetence of the fascists. The situation on the far left was different. The socialist credentials of Sinn Fein/IRA were too threadbare for genuine expressions of solidarity, but there was a sort of tacit confidence-and-supply arrangement between these factions. The Labour far left provided the republicans with the confidence that, should an appropriately radical government be elected to Westminster, “state” would withdraw from Northern Ireland. What the republicans did for the mainland militants was to cloak them in their penumbra of darkness: without needing to call down on themselves the armed might of “state”, they could imply that they were willing to take it on, should the opportunity arise.

I don’t for a second believe that Corbyn was summoning up these ghosts of the insurrectionary dead when he either did or did not threaten to phone McGinn, Sr. But his supporters need to ask themselves what they’re getting into. Their leader, if he was to have remained true to the positions that he has espoused over many years, should have refused to sit as privy counsellor upon assuming his party office, and refused all the other mummery associated with the monarchical “state”. That he didn’t do so was surely a strategic decision. Such a position would make him utterly unelectable.

The snipers may not be at work in south Armagh just now – but there are rifles out there that could yet be dug up. I wouldn’t be surprised if some in Sinn Fein knew where they are, but one thing’s for certain: Corbyn hasn’t got a clue, bloody or otherwise. 

Will Self is an author and journalist. His books include Umbrella, Shark, The Book of Dave and The Butt. He writes the Madness of Crowds and Real Meals columns for the New Statesman.

This article first appeared in the 25 August 2016 issue of the New Statesman, Cameron: the legacy of a loser