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Leader: A universal failure

Rather than minimising the strife and stress that low earners face, the government is intensifying it.

From its conception in 2010, Universal Credit was sold as a transformative reform that would “make work pay”. Iain Duncan Smith, the then work and pensions secretary, vowed that the programme would remake the welfare state and “improve the lives of millions of claimants by incentivising work”. Grandiose comparisons were made with the Beveridge reforms of the 1940s. The merger of six income-related benefits into one would create a simpler and fairer system.

Since 2013, Universal Credit’s implementation has been delayed seven times as a result of management failings and a botched IT system. This year, it is being rolled out across the country but will not be fully operational until 2022, five years later than promised.

For the 610,000 who already claim it, the promise of “credit” is hollow indeed. They are forced to wait six weeks for their first payment, leading to debts, rent arrears and, in some cases, housing evictions. The Trussell Trust, which runs most of the UK’s food banks, found that demand for parcels increased by an average of 16 per cent in areas where Universal Credit was in place. The number of social housing tenants at least a month behind with their rent was five times higher.

Those who struggle to navigate the labyrinthine online system, or who lack internet access, have been forced to call an expensive and understaffed helpline. Only after pressure from Labour did the government finally agree, on 18 October, to abolish the iniquitous 55p-a-minute charge.

As well as Labour, some Conservative MPs, Citizens Advice, the Trussell Trust and the former prime minister John Major have called for the introduction of Universal Credit to be “paused”. (Mr Major called it “operationally messy, socially unfair and unforgiving”.)

Universal Credit’s problems are not merely administrative. Its potential advantages in “making work pay” were overstated. Where claimants once lost 73p for every extra pound earned, they will typically now lose 63p per pound – a marginal shift, not a transformational one. The amount that claimants were allowed to keep was progressively cut by the former chancellor George Osborne, now a newspaper editor. These cuts contributed to the resignation of Mr Duncan Smith, who said that Universal Credit had been “salami-sliced”.

In truth, the majority of claimants will be worse off under Universal Credit than they were under the previous benefits system. According to the Resolution Foundation think tank, when the scheme is fully rolled out 2.5 million low-income working households will lose more than £1,000 a year. The worst affected will lose £2,800. Frank Field, the chair of the work and pensions select committee, warns that the system will revive the kind of “hunger and destitution” that the welfare state was founded to eliminate.

In this week’s cover story, our political editor, George Eaton, examines why the United Kingdom is once again being called “the sick man of Europe”, as it was in the 1970s. After last June’s vote for Brexit, Britain has had the slowest growth and the highest inflation among the ten largest EU economies. Real wages have fallen in Britain for the past six months.

The troubled Conservative government’s economic record is not universally poor. Unemployment remains at a 42-year low of 4.2 per cent and employment is at a 46-year high (75.3 per cent). But too few of these jobs are adequately paid. For the first time in our history, most of those in poverty are also working.

When the market is unable to meet basic needs, the state rightly intervenes. Yet rather than minimising the strife and stress that low earners face, the government is intensifying it.

On the day Theresa May became Prime Minister in July 2016, she promised to look out for the needs of the less privileged and those who were “just managing”.

“The government I lead will be driven not by the interests of the privileged few, but by yours,” she said. The fate of those left destitute by Universal Credit has become a defining test of this fragile Prime Minister’s words.

Read the New Statesman's reporting on Universal Credit here

This article first appeared in the 26 October 2017 issue of the New Statesman, Poor Britannia

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Labour’s renationalisation plans look nothing like the 1970s

The Corbynistas are examining models such as Robin Hood Energy in Nottingham, Oldham credit union and John Lewis. 

A community energy company in Nottingham, a credit union in Oldham and, yes, Britain's most popular purveyor of wine coolers. No, this is not another diatribe about about consumer rip-offs. Quite the opposite – this esoteric range of innovative companies represent just a few of those which have come to the attention of the Labour leadership as they plot how to turn the abstract of one of their most popular ideas into a living, neo-liberal-shattering reality.

I am talking about nationalisation – or, more broadly, public ownership, which was the subject of a special conference this month staged by a Labour Party which has pledged to take back control of energy, water, rail and mail.

The form of nationalisation being talked about today at the top of the Labour Party looks very different to the model of state-owned and state-run services that existed in the 1970s, and the accompanying memories of delayed trains, leaves on the line and British rail fruitcake that was as hard as stone.

In John McDonnell and Jeremy Corbyn’s conference on "alternative models of ownership", the three firms mentioned were Robin Hood Energy in Nottingham, Oldham credit union and, of course, John Lewis. Each represents a different model of public ownership – as, of course, does the straightforward takeover of the East Coast rail line by the Labour government when National Express handed back the franchise in 2009.

Robin Hood is the first not-for-profit energy company set up a by a local authority in 70 years. It was created by Nottingham city council and counts Corbyn himself among its customers. It embodies the "municipal socialism" which innovative local politicians are delivering in an age of austerity and its tariffs delivers annual bills of £1,000 or slightly less for a typical household.

Credit unions share many of the values of community companies, even though they operate in a different manner, and are owned entirely by their customers, who are all members. The credit union model has been championed by Labour MPs for decades. 

Since the financial crisis, credit unions have worked with local authorities, and their supporters see them as ethical alternatives to the scourge of payday loans. The Oldham credit union, highlighted by McDonnell in a speech to councillors in 2016, offers loans from £50 upwards, no set-up costs and typically charges interest of around £75 on a £250 loan repaid over 18 months.

Credit unions have been transformed from what was once seen as a "poor man's bank" to serious and tech-savvy lenders where profits are still returned to customers as dividends.

Then there is John Lewis. The "never-knowingly undersold" department store is owned by its 84,000 staff, or "partners". The Tories have long cooed over its pledge to be a "successful business powered by its people and principles" while Labour approves of its policy of doling out bonuses to ordinary staff, rather than just those at the top. Last year John Lewis awarded a partnership bonus of £89.4m to its staff, which trade website Employee Benefits judged as worth more than three weeks' pay per person (although still less than previous top-ups).

To those of us on the left, it is a painful irony that when John Lewis finally made an entry into politics himself – in the shape of former managing director Andy Street – it was to seize the Birmingham mayoralty ahead of Labour's Sion Simon last year. (John Lewis the company remains apolitical.)

Another model attracting interest is Transport for London, currently controlled by Labour mayor Sadiq Khan. TfL may be a unique structure, but nevertheless trains feature heavily in the thinking of shadow ministers, whether Corbynista or soft left. They know that rail represents their best chance of quick nationalisation with public support, and have begun to spell out how it could be delivered.

Yes, the rhetoric is blunt, promising to take back control of our lines, but the plan is far more gradual. Rather than risk the cost and litigation of passing a law to cancel existing franchises, Labour would ask the Department for Transport to simply bring routes back in-house as each of the private sector deals expires over the next decade.

If Corbyn were to be a single-term prime minister, then a public-owned rail system would be one of the legacies he craves.

His scathing verdict on the health of privatised industries is well known but this month he put the case for the opposite when he addressed the Conference on Alternative Models of Ownership. Profits extracted from public services have been used to "line the pockets of shareholders" he declared. Services are better run when they are controlled by customers and workers, he added. "It is those people not share price speculators who are the real experts."

It is telling, however, that Labour's radical election manifesto did not mention nationalisation once. The phrase "public ownership" is used 10 times though. Perhaps it is a sign that while the leadership may have dumped New Labour "spin", it is not averse to softening its rhetoric when necessary.

So don't look to the past when considering what nationalisation and taking back control of public services might mean if Corbyn made it to Downing Street. The economic models of the 1970s are no more likely to make a comeback then the culinary trends for Blue Nun and creme brûlée.

Instead, if you want to know what public ownership might look like, then cast your gaze to Nottingham, Oldham and dozens more community companies around our country.

Peter Edwards was press secretary to a shadow chancellor, editor of LabourList and a parliamentary candidate in 2015 and 2017.