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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Why haven't we heard more about the allegations of Tory election fraud?

Police and prosecutors have joined a probe into election fraud allegations that could erase the Tory majority.

The facts

The Conservative Party is facing accusations of breaking election spending rules during its 2015 campaign. Following a Channel 4 investigation, it has admitted to failing to declare more than £38,000 of expenses, money it says was spent on accommodation for Tory activists.

It’s up to the Electoral Commission, which met this week with prosecutors and police forces, to decide whether or not to launch criminal investigations into this spending.

Allegations that the money benefited campaigns in individual seats have put the Tories in hot water – they may have illegally exceeded the constituency-specific spending limit. Making a false spending declaration in an election carries a punishment of up to a year in prison and/or an unlimited fine, and anyone found guilty is also barred from running in a general election or holding any elected office for three years.

But the party claims that, as the money was spent on “BattleBus” activists who were driving around the country, it counts as national spending from HQ, rather than being part of individual candidates’ spending.

The Electoral Commission, Crown Prosecution Service and representatives of 15 police forces met this week to discuss the claims. This has resulted in extra time being allowed (an extension on the 12 months allowed under the Representation of the People Act) for relevant police forces to decide what action to take.

Up to 29 Conservative candidates are thought to have benefitted from “BattleBus” campaigning, many of whom were fighting marginal seats.

As Channel 4’s Michael Crick reported yesterday:

“It will be interesting to see if they actually start naming constituencies where they think offences may have occurred. That would then put elected MPs, Conservative MPs, in the frame.

“And indeed, if they were to look at all the constituencies that we’ve been making allegations about over the last few months, it could actually endanger the government’s majority in the House of Commons.”

The conspiracy claims

So why haven’t we heard about this? It undermines the credibility of the entire Tory general election campaign. The claims could even constitute a scandal that would trigger by-elections across the country and potentially erase the Tory majority. The Tories have a working majority of 18, so if they lost in 18 by-elections (were at least 18 MPs to be found guilty), then they would lose their majority.

Some, particularly online leftwing voices, have accused the media of conspiring not to cover this story. Our rightwing press and the cowardly BBC, they argue, are ignoring a story that could potentially call the Conservative general election victory into question.

Anger about this story being low on the political agenda is understandable. It hasn’t been prominent, considering it could result in prosecutions (indeed, the Devon and Cornwall police force is reportedly already investigating, following its meeting with the Electoral Commission). And if, say, The Sun were a left-leaning paper, it probably would have framed it in a dramatic way that would have grabbed readers’ attention.

But there isn’t a media conspiracy of silence. BBC News has been covering developments since the beginning of the year, including similar claims about 2014 by-elections, and Grant Shapps MP (Conservative chairman during the election) was hauled onto the BBC Daily Politics sofa to respond to the allegations. And the BBC’s Today programme put the allegations to Communities & Local Government Secretary Greg Clark this morning. Channel 4 News has been investigating the story, and breaking developments, from the start. The Mirror has done a big investigation into each of the MPs’ campaigns that have been accused. And all of the main papers have published news reports on the story.

The reason it may seem like silence, or lack of due prominence, is because this is an ongoing investigation. So far there have been no arrests, and the allegations remain just that: allegations. Care is required by media organisations not to falsely accuse anyone of criminal activity. And, pushed by journalists, the Conservatives have given their side of the story, so we’re not going to get a great deal more from them. Now it’s up to police forces to decide to take action.

So far, the only things to report on have been what would and would not count as a breach of electoral law (rather a dry subject), and whether or not the Electoral Commission would achieve an extension on the time allowed by law for investigating (also somewhat technical). And, however dull, these things have been reported. They may not have been shared a huge amount online, or bounced to the top of “most-read” boxes – but this is because readers aren’t usually that interested in the ins and outs of the Representation of the People Act, no matter how much those who want this government toppled wish they were.

Anoosh Chakelian is deputy web editor at the New Statesman.