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.

Photo: Getty
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The UK press’s timid reaction to Brexit is in marked contrast to the satire unleashed on Trump

For the BBC, it seems, to question leaving the EU is to be unpatriotic.

Faced with arguably their biggest political-cum-constitutional ­crisis in half a century, the press on either side of the pond has reacted very differently. Confronting a president who, unlike many predecessors, does not merely covertly dislike the press but rages against its supposed mendacity as a purveyor of “fake news”, the fourth estate in the US has had a pretty successful first 150-odd days of the Trump era. The Washington Post has recovered its Watergate mojo – the bloodhound tenacity that brought down Richard Nixon. The Post’s investigations into links between the Kremlin and Donald Trump’s associates and appointees have yielded the scalp of the former security adviser Michael Flynn and led to Attorney General Jeff Sessions recusing himself from all inquiries into Trump-Russia contacts. Few imagine the story will end there.

Meanwhile, the New York Times has cast off its image as “the grey lady” and come out in sharper colours. Commenting on the James Comey memo in an editorial, the Times raised the possibility that Trump was trying to “obstruct justice”, and called on Washington lawmakers to “uphold the constitution”. Trump’s denunciations of the Times as “failing” have acted as commercial “rocket fuel” for the paper, according to its CEO, Mark Thompson: it gained an “astonishing” 308,000 net digital news subscriptions in the first quarter of 2017.

US-based broadcast organisations such as CNN and ABC, once considered slick or bland, have reacted to Trump’s bullying in forthright style. Political satire is thriving, led by Saturday Night Live, with its devastating impersonations of the president by Alec Baldwin and of his press secretary Sean Spicer by the brilliant Melissa McCarthy.

British press reaction to Brexit – an epic constitutional, political and economic mess-up that probably includes a mind-bogglingly destructive self-ejection from a single market and customs union that took decades to construct, a move pushed through by a far-right faction of the Tory party – has been much more muted. The situation is complicated by the cheerleading for Brexit by most of the British tabloids and the Daily Telegraph. There are stirrings of resistance, but even after an election in which Theresa May spectacularly failed to secure a mandate for her hard Brexit, there is a sense, though the criticism of her has been intense, of the media pussy-footing around a government in disarray – not properly interrogating those who still seem to promise that, in relation to Europe, we can have our cake and eat it.

This is especially the case with the BBC, a state broadcaster that proudly proclaims its independence from the government of the day, protected by the famous “arm’s-length” principle. In the case of Brexit, the BBC invoked its concept of “balance” to give equal airtime and weight to Leavers and Remainers. Fair enough, you might say, but according to the economist Simon Wren-Lewis, it ignored a “near-unanimous view among economists that Brexit would hurt the UK economy in the longer term”.

A similar view of “balance” in the past led the BBC to equate views of ­non-scientific climate contrarians, often linked to the fossil-fuel lobby, with those of leading climate scientists. Many BBC Remainer insiders still feel incensed by what they regard as BBC betrayal over Brexit. Although the referendum of 23 June 2016 said nothing about leaving the single market or the customs union, the Today presenter Justin Webb, in a recent interview with Stuart Rose, put it like this: “Staying in the single market, staying in the customs union – [Leave voters would say] you might as well not be leaving. That fundamental position is a matter of democracy.” For the BBC, it seems, to question Brexit is somehow to be unpatriotic.

You might think that an independent, pro-democratic press would question the attempted use of the arcane and archaic “royal prerogative” to enable the ­bypassing of parliament when it came to triggering Article 50, signalling the UK’s departure from the EU. But when the campaigner Gina Miller’s challenge to the government was upheld by the high court, the three ruling judges were attacked on the front page of the Daily Mail as “enemies of the people”. Thomas Jefferson wrote that he would rather have “newspapers without a government” than “a government without newspapers”. It’s a fair guess he wasn’t thinking of newspapers that would brand the judiciary as “enemies of the people”.

It does seem significant that the United States has a written constitution, encapsulating the separation and balance of powers, and explicitly designed by the Founding Fathers to protect the young republic against tyranny. When James Madison drafted the First Amendment he was clear that freedom of the press should be guaranteed to a much higher degree in the republic than it had been in the colonising power, where for centuries, after all, British monarchs and prime ministers have had no qualms about censoring an unruly media.

By contrast, the United Kingdom remains a hybrid of monarchy and democracy, with no explicit protection of press freedom other than the one provided by the common law. The national impulse to bend the knee before the sovereign, to obey and not question authority, remains strangely powerful in Britain, the land of Henry VIII as well as of George Orwell. That the United Kingdom has slipped 11 places in the World Press Freedom Index in the past four years, down to 40th, has rightly occasioned outrage. Yet, even more awkwardly, the United States is three places lower still, at 43rd. Freedom of the press may not be doing quite as well as we imagine in either country.

Harry Eyres is the author of Horace and Me: Life Lessons from an Ancient Poet (2013)

This article first appeared in the 20 July 2017 issue of the New Statesman, The new world disorder