George Osborne delivers his speech at the Conservative conference in Birmingham last month. Photograph: Getty Images.
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The OBR shows why welfare cuts won't control spending

Inadequate wages and extortionate rents are pushing up the housing benefit bill. 

George Osborne prides himself on his commitment to bear down on welfare spending, but today's report from the OBR (handily commissioned by the Chancellor) shows how he's struggling. It warns that the new cap imposed on expenditure is in danger of being breached due to the botched implementation of disability benefit reforms and the surging housing benefit bill. 

Between March 2011 and March 2014, forecast spending on incapacity benefits for 2015–16 has been revised up by £3.5bn (34 per cent) due to a higher than expected caseload, slower than expected transfer from incapacity benefit to the new employment and support allowance, and a lower than expected number being found "fit for work" (and therefore ineligible for full support). 

In addition, forecast spending on housing benefit (or, as you might call it, landlord subsidy) has been revised up by £2.5bn (11 per cent) since the expected number of renters and the level of rents relative to earnings have increased at a faster rate than predicted. As wages have continued to lag behind inflation, the number forced to rely on welfare to remain in their homes has surged. The government is now forecast to spend more than £27bn on housing benefit by 2018-19, accounting for more than 11 per cent of welfare expenditure. 

As the OBR notes, one of the main causes of higher spending has been the shift from public to private rented housing. In 2012-13, the number of private renters exceeded the nunber of social renters for the first time in nearly 50 years. Since private rents are usually higher than social rents, the housing benefit bill has risen accordingly. The OBR also notes that "rents have risen faster than earnings and inflation over the past decade." 

What all of this shows is the limits of an approach that focuses on salami slicing the welfare budget (through measures such as the benefit cap and the "bedroom tax"), rather than addressing the structural drivers of higher spending. Unless problems such as inadequate wages and extortionate rents are tackled (through a significantly higher minimum wage, greater use of the living wage, more affordable housing and limits on rent increases, as proposed by Labour) then it will become ever harder to control expenditure. 

George Eaton is political editor of the New Statesman.

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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.