Why benefit loans still aren't the answer to Labour's welfare problems

A salary insurance scheme that would impose a 9 per cent tax on jobseekers after they return to work isn't worthy of the name.

I think it’s important to clear up some of the arguments made by IPPR’s associate director Graeme Cook in his response to criticisms of the think-tank’s idea for benefit loans. If you haven’t been following, you can read my original criticism of the plan here.

Graeme says:

To clear up one thing straight away: this proposal is in addition to existing entitlements to Jobseeker's Allowance (we do not want to turn JSA into a loan). This means that, contrary to one claim, it wouldn’t mean people who hadn’t worked get more than those who had.

People who hadn’t worked wouldn’t get access to this scheme, because access is based on NI contributions, so clearly they’re not getting more within the confines of the proposal – that’s not up for dispute. The point is that when looking at welfare benefits as a whole there would be people who hadn’t contributed and who were on benefits who got more in non-repayable benefits than people who were on repayable benefit loans and who had contributed. This would create resentment.

If it’s not immediately obvious why this would be, consider a typical staple of negative press welfare coverage – a workless household with a large family receiving child benefit for each child, and on housing benefit.  There are plenty of examples of this kind of piece, and it is these intensively reported, atypical outliers that shape the negative public perception of welfare.

Yes, these articles are unfair and ridiculous for countless reasons. But now consider sums like £30,000 being banded around for supposedly 'feckless' families in the context of other people who find themselves unemployed, receive less than that because they’re not eligible for housing benefit (maybe they have a mortgage) or child benefit (maybe they don’t have any children) and are then told they have to repay most of their benefits - unlike the person they’ve been told is a 'scrounger'. If Labour are planning to successfully explain to the public why this isn’t as unfair as it looks, they’re in for a shock.

If the policy is aiming to destroy the notion that the welfare state "pays out too much to people who have not worked, but also that it offers so little protection to those who have" (Graeme’s words), treating contributors as second class will not help. This policy has the potential to create a whole new genre of articles about how the welfare state is on the side of the wrong people, even if its intention is to do the opposite.

Graeme:

Some have argued that repayment will create a disincentive for people to return to work. Clearly this risk should be monitored on implementation, and the point at which repayments began and the repayment rate could be amended to reduce this concern.

Apart from this being a bit of a cop-out, I think it seriously misses a wider point: even if there was no deterrent to work from a 9 per cent hike in your tax rate, it’s just not fair to tax people for losing their jobs. To paraphrase Tony Benn: you don’t tax people because they lose their job, you tax people because they can afford it. The fact that it’s probably economically the absolute worst situation you could levy a tax on someone is probably secondary.

If you thought the ‘bedroom tax’ or the ‘jobs tax’ were politically toxic, wait until you hear about the ‘unemployment tax’. It’ would be the Poll Tax and the 10p rate rolled into one, and for good reason.

Graeme:

Critics of this idea have questioned why the extra income protection provided by NSI cannot be attained simply by increasing the level of contributory JSA. The problem of course is where the money would come from (we estimated the upfront cost at somewhere between £1.8bn and £2.6bn, though it is hard to be precise).

The first thing to say to this is that if you’re not prepared to actually spend any money on a group, don’t expect them to actually thank you. There are no free political lunches here: If Labour or IPPR are merely trying to address the perception that some people don’t get enough out of the welfare state, rather than the fact, then they haven’t learned the lessons from the empty, headline-grabbing, initiative-driven spin years of New Labour.

But this needn’t be a problem. The £2bn or so a year needed to substantially increase contributory JSA is roughly what the coalition is planning on spending on the Universal Credit, so it’s hardly a fanciful sum of money for a flagship welfare policy.

IPPR also misses that someone is going to pay this money, it’s just a question of who. Under their proposals, it’s funded by a 9 per cent tax on people who have lost their jobs. A fairer approach would be for everyone to pay before they were made unemployed, as is conventional in any kind of insurance scheme I’ve come across. Why is the think-tank calling this an insurance scheme if the costs are borne by the person who suffers the accident? It’s not really worthy of the name. In its current form it’s more of a bank than an insurance policy.

But the killer here is that the policy doesn’t need to be – and indeed ought not to be – deficit neutral. Businesses are not investing because there is no demand in the economy; putting money in the hands of consumers is a good thing because it creates demand, which allows businesses to invest, which results in growth. There are better and worse places to spend a demand stimulus, and giving it to the unemployed as disposable income one of the best: unemployed people have low incomes, therefore they spend all their money and have a very low propensity to save. This means the money has what is called a "high velocity" in that it changes hands very quickly and has a multiplier effect throughout the economy.

Labour has to some extent been talking the language of stimulus, but politically is scared of committing to spending anything. It should be jumping at the chance to combine Keynesianism with a politically savvy commitment that would restore the political reputation of the welfare state.

A man stands outside the Jobcentre Plus on January 18, 2012 in Trowbridge, England. Photograph: Getty Images.

Jon Stone is a political journalist. He tweets as @joncstone.

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Not since the Thatcher years have so many Tory MPs been so motivated by self-interest

Assured of an election win, backbenchers are thinking either advancing up the greasy pole, or mounting it for the first time. 

One hears despair from Labour not just about probable defeat, but from MPs who felt they had three years to improve the party’s fortunes, or to prepare for personal oblivion. In the Conservative Party, matters seem quite the opposite. Veterans of the 1983 election recall something similar: a campaign fought in the absolute certainty of winning. Theresa May talked of putting the interests of the country first when she engineered the poll, and one must believe she was sincere. However, for those expecting to be Tory MPs after 8 June there are other priorities. Theirs is not a fight for the national interest, because that for them is a foregone conclusion. It is about their self-interest: either advancing up the greasy pole, or mounting it for the first time. They contemplate years ahead in which to consolidate their position and, eventually, to shape the tone and direction of the party.

The luxury of such thoughts during a campaign comes only when victory is assured. In 1983 I worked for a cabinet minister and toured marginal seats with him. Several candidates we met – most of whom won – made it clear privately that however important it was to serve their constituents, and however urgent to save the country from the threats within what the late Gerald Kaufman later called “the longest suicide note in history”, there was another issue: securing their place in the Thatcher revolution. Certain they and their party would be elected in the aftermath of the Falklands War, they wanted their snout in the trough.

These are early days, but some conver­sations with those heading for the next House of Commons echo the sentiments of 1983. The contemporary suicide note has not appeared, but is keenly awaited. Tories profess to take less notice of opinion polls than they once did – and with good reason, given the events of 2015 and 2016 – but ­imagine their party governing with a huge majority, giving them a golden opportunity to advance themselves.

Labour promises to change the country; the Liberal Democrats promise to force a reconsideration of Brexit; Ukip ­promises to ban the burqa; but the Tories believe power is theirs without the need for elaborate promises, or putting any case other than that they are none of the above. Thus each man and woman can think more about what the probability of four or five further years in the Commons means to them. This may seem in poor taste, but that is human nature for you, and it was last seen in the Labour Party in about 2001.

Even though this cabinet has been in place only since last July, some Tory MPs feel it was never more than an interim arrangement, and that some of its incumbents have underperformed. They expect vacancies and chances for ministers of state to move up. Theresa May strove to make her team more diverse, so it is unfortunate that the two ministers most frequently named by fellow Tories as underachievers represent that diversity – Liz Truss, the Lord Chancellor, who colleagues increasingly claim has lost the confidence of the judiciary and of the legal profession along with their own; and Sajid Javid, the Communities Secretary, whom a formerly sympathetic backbencher recently described to me as having been “a non-event” in his present job.

Chris Grayling, the Transport Secretary, was lucky to survive his own stint as lord chancellor – a post that must surely revert to a qualified lawyer, with Dominic Grieve spoken of in that context, even though, like all ardent Remainers in the government, he would be expected to follow the Brexit line – and the knives are out for him again, mainly over Southern Rail but also HS2. David Gauke, the Chief Secretary to the Treasury, and the little-known Ben Gummer, a Cabinet Office minister, are tipped for promotion with Grieve if vacancies arise: that all three are white men may, or may not, be a consideration.

Two other white men are also not held in high regard by colleagues but may be harder to move: Boris Johnson, whose conduct of the Foreign Office is living down to expectations, and Michael Fallon, whose imitation of the Vicar of Bray over Brexit – first he was for it, then he was against it, and now he is for it again – has not impressed his peers, though Mrs May considers him useful as a media performer. There is also the minor point that Fallon, the Defence Secretary, is viewed as a poor advocate for the armed forces and their needs at a time when the world can hardly be called a safe place.

The critical indicator of how far personal ambition now shapes the parliamentary Tory party is how many have “done a Fallon” – ministers, or aspirant ministers, who fervently followed David Cameron in advising of the apocalyptic results of Brexit, but who now support Theresa May (who is also, of course, a reformed Remainer). Yet, paradoxically, the trouble Daniel Hannan, an arch-Brexiteer and MEP, has had in trying to win selection to stand in Aldershot – thanks to a Central Office intervention – is said to be because the party wants no one with a “profile” on Europe to be added to the mix, in an apparent attempt to prevent adding fuel to the fire of intra-party dissent. This may appease a small hard core of pro-Remain MPs – such as Anna Soubry, who has sufficient talent to sit in the cabinet – who stick to their principles; but others are all Brexiteers now.

So if you seek an early flavour of the next Conservative administration, it is right before you: one powering on to Brexit, not only because that is what the country voted for, but because that is the orthodoxy those who wish to be ministers must devotedly follow. And though dissent will grow, few of talent wish to emulate Soubry, sitting out the years ahead as backbenchers while their intellectual and moral inferiors prosper.

Simon Heffer is a columnist for the Daily and Sunday Telegraphs

Simon Heffer is a journalist, author and political commentator, who has worked for long stretches at the Daily Telegraph and the Daily Mail. He has written biographies of Thomas Carlyle, Ralph Vaughan Williams and Enoch Powell, and reviews and writes on politics for the New Statesman

This article first appeared in the 27 April 2017 issue of the New Statesman, Cool Britannia 20 Years On

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