Osborne's welfare super-cap is a frightening prospect for families

The new limit on "Annually Managed Expenditure" could mean even less support for the unemployed and the working poor.

The Budget was nothing but underwhelming for low income families: cancelling the rise in fuel duty and a penny off the price of a pint of beer do little to offset the increase in living costs that low-income families have had to contend with in recent years. Gains from the much-vaunted rise in the personal allowance all but evaporate for low-income families, who simply see their benefits reduced as their earned income increases. And as many commentators pointed out earlier this week, the winners from the new childcare scheme will be those some way up the income scale.

But perhaps the biggest worry for low income families is not the lack of policies that would help them today, but the threat of what might hurt them still further tomorrow. Tucked away in the Budget statement, the Chancellor made some seemingly technical comments about reforming the spending framework, and the need to put a limit on demand-led Annually Managed Expenditure (AME) in the future.

Critically, a large part of AME is spending on social security, which is supposed to protect us all in times of need. But putting a nominal limit on AME would mean that as these needs increase – in times of rising unemployment, for example, or as a result of growing housing costs – there would be no commensurate rise in social security provision. Consequently, benefits would either need to be spread more thinly, or restricted in some other way.

The Chancellor presented the idea of a limit on AME as necessary to rein in a run-away social security budget. However, as usual, the figures he provided show only part of the picture. While the Budget document speaks of "welfare spending rising in real terms by 20% in the decade before the financial crisis", it fails to mention that social security spending as a percentage of GDP was broadly static during this period.

The only glimmer of hope, perhaps, was the Chancellor's rather cryptic comment that he would establish a limit for AME "that allows the automatic stabilisers to operate". As the International Monetary Fund recently pointed out, social security payments form a critical part of these stabilisers. Clarification from the Chancellor as to how he will square this fact with a limit on AME is clearly necessary.

Of course, the idea of disconnecting state support from assessed need is not a new one for this government: the overall cap on benefits, which will be rolled out from April this year is a perfect example of this model. But the idea of a 'super-cap' on total social security in the future is a genuinely frightening prospect for families already struggling to get by with diminished support from state. 

The balcony of a residential development in the London borough of Tower Hamlets. Photograph: Getty Images.

Lindsay Judge is senior policy and research officer for the Child Poverty Action Group.

Getty
Show Hide image

Everyone's forgotten the one issue that united the Labour party

There was a time when Ed Miliband spoke at Momentum rallies.

To label the row over the EU at Thursday’s Labour leadership hustings "fireworks" would be to endow it with more beauty than it deserves. Owen Smith’s dogged condemnation of John McDonnell’s absence from a Remain rally – only for Corbyn to point out that his absence was for medical reasons – ought to go down as a cringing new low point in the campaign. 

Not so long ago, we were all friends. In the course of the EU referendum, almost all of the protagonists in the current debacle spoke alongside each other and praised one another’s efforts. At a local level, party activists of all stripes joined forces. Two days before polling day, Momentum activists helped organise an impromptu rally. Ed Miliband was the headline speaker, and was cheered on. 

If you take the simple version of the debate, Labour’s schism on the EU appears as an aberration of the usual dynamics of left and right in the party. Labour's left is supposedly cheering a position which avoids advocating what it believes in (Remain), because it would lose votes. Meanwhile, the right claims to be dying in a ditch for its principles - no matter what the consequences for Labour’s support in Leave-voting heartlands.

Smith wants to oppose Brexit, even after the vote, on the basis of using every available procedural mechanism. He would whip MPs against the invocation of Article 50, refuse to implement it in government, and run on a manifesto of staying in the EU. For the die-hard Europhiles on the left – and I count myself among these, having run the Another Europe is Possible campaign during the referendum – there ought to be no contest as to who to support. On a result that is so damaging to people’s lives and so rooted in prejudice, how could we ever accept that there is such a thing as a "final word"? 

And yet, on the basic principles that lie behind a progressive version of EU membership, such as freedom of movement, Smith seems to contradict himself. Right at the outset of the Labour leadership, Smith took to Newsnight to express his view – typical of many politicians moulded in the era of New Labour – that Labour needed to “listen” to the views Leave voters by simply adopting them, regardless of whether or not they were right. There were, he said, “too many” immigrants in some parts of the country. 

Unlike Smith, Corbyn has not made his post-Brexit policy a headline feature of the campaign, and it is less widely understood. But it is clear, via the five "red lines" outlined by John McDonnell at the end of June:

  1. full access to the single market
  2. membership of the European investment bank
  3. access to trading rights for financial services sector
  4. full residency rights for all EU nationals in the UK and all UK nationals in the EU, and
  5. the enshrinement of EU protections for workers. 

Without these five conditions being met, Labour would presumably not support the invocation of Article 50. So if, as seems likely, a Conservative government would never meet these five conditions, would there be any real difference in how a Corbyn leadership would handle the situation? 

The fight over the legacy of the referendum is theatrical at times. The mutual mistrust last week played out on the stage in front of a mass televised audience. Some Corbyn supporters jeered Smith as he made the case for another referendum. Smith accused Corbyn of not even voting for Remain, and wouldn’t let it go. But, deep down, the division is really about a difference of emphasis. 

It speaks to a deeper truth about the future of Britain in Europe. During the referendum, the establishment case for Remain floundered because it refused to make the case that unemployment and declining public services were the result of austerity, not immigrants. Being spearheaded by Conservatives, it couldn’t. It fell to the left to offer the ideological counter attack that was needed – and we failed to reach enough people. 

As a result, what we got was a popular mandate for petty racism and a potentially long-term shift to the right in British politics, endangering a whole raft of workplace and legal protections along the way. Now that it has happened, anyone who really hopes to overcome either Brexit, or the meaning of Brexit, has to address the core attitudes and debates at their root. Then as now, it is only clear left-wing ideas – free from any attempt to triangulate towards anti-migrant sentiment– that can have any hope of success. 

The real dividing lines in Labour are not about the EU. If they were, the Eurosceptic Frank Field would not be backing Smith. For all that it may be convenient to deny it, Europe was once, briefly, the issue that united the Labour Party. One day, the issues at stake in the referendum may do so again – but only if Labour consolidates itself around a strategy for convincing people of ideas, rather than simply reaching for procedural levers.