David Cameron during a joint press conference with his Slovenian counterpart at Brdo Castle on June 18, 2015. Photograph: Getty Images.
Show Hide image

David Cameron has retreated from his promises on child poverty – but will it cost him?

Labour will not prosper if it is viewed merely as a repository of protest. 

History has reduced David Cameron’s modernising phase to gay rights and greenery. “White-collar liberalism” was pursued to the neglect of “blue-collar conservatism”. Yet in his quest to make his party electable he roamed more widely than is commonly thought. He unambiguously committed the Conservatives to a free NHS, pledged to match Labour’s public spending plans for three years and vowed to end the “moral disgrace” of poverty. In his 2006 Scarman Lecture, the then opposition leader declared, “I want this message to go out loud and clear: the Conservative Party recognises, will measure and will act on relative poverty . . . Poverty is relative – and those who pretend otherwise are wrong . . . Even if we are not destitute, we still experience poverty if we cannot afford things that society regards as essential.”

His words were a repudiation of the Thatcherite belief that once a minimum standard of living has been attained, the level of income inequality is irrelevant. After tripling under the Conservatives from one in nine children to one in three, child poverty fell by 800,000 under Labour. To date, Cameron has been able to boast that this progress has continued during his premiership. Child poverty fell by 300,000 to 2.3 million in 2010/11 as middle-class earnings declined and benefits protected the incomes of the poorest. It then remained flat for the following two years. Against expectations, the figures published on 25 June for 2013/14 continued this trend. But the panoply of austerity measures imposed – the household benefit cap, the bedroom tax and the 1 per cent cap on benefit increases – and the nascent recovery in average incomes means it is unlikely to endure. It is forecast that by 2020, the year that Tony Blair earmarked for its abolition, child poverty will have increased by one-third to one in four children.

Just as it was the provision of welfare that enabled the fall in child poverty, so its removal precipitated its rise. Few Conservatives expected to be in a position to impose the £12bn of cuts they promised during the election. The Lib Dems privately planned to negotiate the figure down to £9bn or £10bn in the event that the Tories fell short of a majority – a deal that some Tories willingly would have accepted. The confirmation by George Osborne and Iain Duncan Smith that they will indeed use their mandate to make £12bn of cuts likely guarantees increases in child poverty. Because of Cameron’s decision to ring-fence all benefits for pensioners, the axe will inevitably fall on families and the working poor. The cuts announced so far – a two-year freeze in working-age benefits, the reduction of the benefit cap from £26,000 to £23,000 and the removal of housing benefit from 18-to-21-year-olds – amount to just £1.5bn. The remaining £10.5bn will not be itemised in full until the Spending Review this autumn.

After £21bn of cuts in the last parliament left few low-hanging fruit, it is tax credits that are viewed as the weakest link. They are the largest of the unprotected areas (accounting for £30bn) and have long been regarded by the Tories as emblematic of Labour’s statist meddling. Cameron denounced the payments as a “ridiculous merry-go-round”; Duncan Smith accused the opposition of using them to “buy votes” while in office (his party has performed precisely this trick in the case of the elderly, 47 per cent of whom voted Tory in May). In recent days, Cameron and other Conservatives have sounded like their Labour counterparts as they have denounced companies for failing to pay their employees higher wages. Sarah Wollaston MP told me that large firms were “taking us all for a ride” by forcing the taxpayer to “subsidise their profits” through the welfare system.

Cameron has identified a problem but he does not yet have anything resembling a solution. Unless the Tories annex Labour’s policy of “make work pay” contracts (as some opposition MPs fear they will), which would provide a tax rebate to companies that sign up to become living wage employers, they have no means of ensuring higher salaries. Mere exhortation will not suffice. The fashion for deriding tax credits on the left and the right elides the reality that they are a policy for an imperfect world. Neither salaries nor the personal tax allowance, for instance, take account of family size.

The relative poverty measure that Cameron lauded when it was in his interests to do so is now derided as meaningless. He cited “the absurd situation where if we increase the state pension, child poverty actually goes up”. Yet that example reflects precisely the fiscal gerontocracy that troubles so many. Relative to the old, the young are unambiguously worse off.

Conservatives fear that the rise in child poverty and the coming raid on tax credits will provide a depleted Labour Party with vital ammunition. But the opposition has its own problems to contend with. If the Tories are thought to be too unwilling to spend money on the poorest, Labour must counter the impression that it is all too willing to do so. The shadow work and pensions secretary, Rachel Reeves, fought hard in private to ensure that the party committed to voting for the reduced out-of-work benefit cap. A sharper distinction between welfare for the employed and for the unemployed is regarded as an unavoidable consequence of Labour’s defeat. As the working poor lose tax credits, they are even less tolerant of those perceived to be gaming the system.

Even in this case, however, Labour will not prosper if it is viewed merely as a repository of protest. It must convince voters that it is as devoted to saving public money as the Tories. As Cameron’s 2006 speech showed, uncharacteristic clothes must be worn in opposition – even if they are later discarded in government. 

George Eaton is political editor of the New Statesman.

This article first appeared in the 26 June 2015 issue of the New Statesman, Bush v Clinton 2

Getty Images.
Show Hide image

Brexit is teaching the UK that it needs immigrants

Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past.

Why did the UK vote to leave the EU? For conservatives, Brexit was about regaining parliamentary sovereignty. For socialists it was about escaping the single market. For still more it was a chance to punish David Cameron and George Osborne. But supreme among the causes was the desire to reduce immigration.

For years, as the government repeatedly missed its target to limit net migration to "tens of thousands", the EU provided a convenient scapegoat. The free movement of people allegedly made this ambition unachievable (even as non-European migration oustripped that from the continent). When Cameron, the author of the target, was later forced to argue that the price of leaving the EU was nevertheless too great, voters were unsurprisingly unconvinced.

But though the Leave campaign vowed to gain "control" of immigration, it was careful never to set a formal target. As many of its senior figures knew, reducing net migration to "tens of thousands" a year would come at an economic price (immigrants make a net fiscal contribution of £7bn a year). An OBR study found that with zero net migration, public sector debt would rise to 145 per cent of GDP by 2062-63, while with high net migration it would fall to 73 per cent. For the UK, with its poor productivity and sub-par infrastructure, immigration has long been an economic boon. 

When Theresa May became Prime Minister, some cabinet members hoped that she would abolish the net migration target in a "Nixon goes to China" moment. But rather than retreating, the former Home Secretary doubled down. She regards the target as essential on both political and policy grounds (and has rejected pleas to exempt foreign students). But though the same goal endures, Brexit is forcing ministers to reveal a rarely spoken truth: Britain needs immigrants.

Those who boasted during the referendum of their desire to reduce the number of newcomers have been forced to qualify their remarks. On last night's Question Time, Brexit secretary David Davis conceded that immigration woud not invariably fall following Brexit. "I cannot imagine that the policy will be anything other than that which is in the national interest, which means that from time to time we’ll need more, from time to time we’ll need less migrants."

Though Davis insisted that the government would eventually meet its "tens of thousands" target (while sounding rather unconvinced), he added: "The simple truth is that we have to manage this problem. You’ve got industry dependent on migrants. You’ve got social welfare, the national health service. You have to make sure they continue to work."

As my colleague Julia Rampen has charted, Davis's colleagues have inserted similar caveats. Andrea Leadsom, the Environment Secretary, who warned during the referendum that EU immigration could “overwhelm” Britain, has told farmers that she recognises “how important seasonal labour from the EU is to the everyday running of your businesses”. Others, such as the Health Secretary, Jeremy Hunt, the Business Secretary, Greg Clark, and the Communities Secretary, Sajid Javid, have issued similar guarantees to employers. Brexit is fuelling immigration nimbyism: “Fewer migrants, please, but not in my sector.”

The UK’s vote to leave the EU – and May’s decision to pursue a "hard Brexit" – has deprived the government of a convenient alibi for high immigration. Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past. Brexit may have been caused by the supposed costs of immigration but it is becoming an education in its benefits.

George Eaton is political editor of the New Statesman.