The case for increasing wages to cut the welfare bill

Learning from Joseph and the Chocolate Factory.

Writing in today’s Times Philip Collins produces a powerful and eloquent article arguing that we should cut the welfare bill by increasing wages. What’s more, he argues for a more moral form of capitalism to underpin it.

So what’s brought this on? Well, today JRF published our annual Minimum Income Standards report. This research asks members of the public what are the goods and services every household needs to be able to afford in order to achieve a minimum acceptable standard of living in the UK. As Collins notes:

Whether or not you agree that a few pence a week for Blu-tack is necessary, most of the costlier items are hard to dispute and they come to quite a price.

And our research shows the cost of that decent standard of living is rising fast – up 25 per cent over the last five years, higher than the official rate of inflation, which was 17 per cent for the same period. This means people today need much higher earnings just to afford the same standard of living they had five years ago. As Collins argues:

The gap between the minimally decent life and reality is growing. People on low incomes are subject to a higher rate of inflation than those who are a little richer … The gap between the life that people think others should be able to afford, in a rich and lucky country, and the life that most people lead is huge.

So what would it take for people to afford a better standard of living? The research costs the basket of goods and services people say they need for a decent standard of living, and works out what that means for how much you need to earn, once tax and benefits have been factored in. The resulting hourly wage rates are substantially higher than the national minimum wage (which is currently £6.19 per hour). A single person would need to earn £8.16 an hour while a couple with two children would need to earn at least £9.91 an hour each. 

Collins argues employers have responded to this challenge before and they should do so again, learning from historical figures like Joseph Rowntree:

When he opened his chocolate factory in York in 1869, Rowntree established good pay, housing benefits and the first occupational pension scheme for his workers...

He understood that the corporation was and is a public entity, underpinned and given a license to operate by the laws of limited liability. He felt, as all the pioneers of the American joint stock company did too, that his private accumulation came with a public obligation, which he fulfilled by paying his people well.

Low paid jobs remain prevalent in the UK, and a fifth of the workforces is on low pay. This costs us all dear as the state subsidises low income working households through the tax credit system. 

For those employers not persuaded by the moral case for change Collins argues the rate of the minimum wage should be ratcheted up as a backstop, a view that is starting to gain more support. This undoubtedly has to be part of the solution, but alone will not solve the problem. Instead a more comprehensive strategy is required that looks at why we have such an endemic low pay problem in the UK; what is driving up the cost of essential like housing, childcare and energy; and yes, as unpopular as it is right now, how best to support people through the social security and tax systems.

Katie Schmuecker is a Policy and Research Manager at the Joseph Rowntree Foundation (JRF) 

Joseph Rowntree. Photograph: Getty Images
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Hilary Benn has been sacked. What happens now?

Jeremy Corbyn has sacked Hilary Benn, effectively challenging his critics to put up or shut up.

Hilary Benn been sacked from the shadow cabinet, following an article in the Observer reporting that the former shadow foreign secretary had told Labour MPs he would challenge Jeremy Corbyn should Corbyn lose the vote of confidence in his leadership that the PLP are due to discuss on Monday.

Anti-Corbyn plotters are convinced that they have the numbers to pass the no confidence motion in Corbyn’s leadership. Passing that motion, however, would not formally trigger either Corbyn’s resignation or a leadership challenge.

The word from Corbyn’s inner circle is that he would remain in post even if he were to lose the confidence vote, and dare his opponents to collect the 50 names they would need to trigger a leadership challenge.

Should that come about, Corbyn’s allies are certain that they would triumph over whoever ran against him. As one senior source said “they lost really badly in September and that’s not gonna change”.

Labour’s rebels are convinced that they have the numbers necessary to trigger a formal challenge to Corbyn’s leadership.

What happens next is fraught as the relevant clause in Labour’s rulebook is unhelpfully vague: 

“ii. Where there is no vacancy, nominations may be sought by potential challengers each year prior to the annual session of party conference. In this case any nomination must be supported by 20 per cent of the PLP. Nominations not attaining this threshold shall be null and void.”

The question that no-one is certain of the answer to: whether the challenged leader would have to seek nominations as well or if they would be on the ballot as by right. My understanding is that the legal advice that Corbyn’s critics have is that Corbyn would not automatically have a place on the ballot. But Jolyon Maugham, a lawyer who writes regularly for the New Statesman, looked over the clause for us and believes that he would.

More important than the legal basis, though, is what the party’s ruling National Executive Committee, which would rule on whether Corbyn had to seek nominations to stand, believes.

Although Corbyn has received the backing of 12 of Labour’s affiliated general secretaries, a well-placed source tells me that they are confident the NEC would rule that Corbyn will need to seek nominations if he is to stand again.

But control over the NEC is finely balanced, and could shift decisively towards Corbyn following this year’s elections to the NEC; one reason why Corbyn’s opponents are keen to strike now.

In that situation, Corbyn’s allies believe they can secure the 50 nominations he would need – the threshold has been raised due to a rule change giving Labour members of the European Parliament the same nominating powers as their cousins in Westminster – thanks to a combination of ideological support for Corbyn and pressure from the party’s grassroots. Senior sources believe that once Corbyn reached shouting distance of 50 nominations, the bulk of the shadow cabinet would quickly fall in line. Another estimates that the “vast majority” of the PLP accept Corbyn requires more time and that the plotting is the result of “a rump” of MPs.

But Corbyn’s critics believe that the European result, which saw Labour voters reject the party line in large numbers, has left Labour MPs with large majorities in the party’s ex-industrial seats more spooked by their voters than by their activists, putting them in the same group as those MPs with small majorities. (The two groups who currently pose the biggest danger to Corbyn are MPs who are old enough to be eligible to collect their pension at or before the next election, and MPs with majorities of under 2,000.) 

Who's right? Much depends on the disposition of Labour's 20 MEPs. Prior to Britain's Brexit vote, they were believed to be the most sensitive to the concerns of the party's activists, as Labour members vote on the order of the party's list, making anti-Corbynites vulnerable. Now all 20 MEPs are out of a job at, or before, the next European election regardless, the question is whether they decide to keep Corbyn off the ballot, or try to curry favour with Corbyn's supporters in the membership prior to making a bid for seats at Westminster. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.