George Osborne’s false choice between spending on social security and spending on infrastructure

From the Telegraph:

“Britain’s welfare budget should be used to fund new transport links in the north which will bring a “real economic return” rather than “trapping people in poverty”, the Chancellor has said.”

The article goes on to quote Osborne as saying:

“I think the real choice in our country is actually spending money on this big economic infrastructure, trans-pennine rail links, Crossrail 2 in London and the like, and spending money on, for example, welfare payments which are not generating a real economic return and at the same time are trapping people in poverty.”

This creates the very strong impression that Osborne really wants to ramp up infrastructure spending, but is being prevented from doing so by people “trapped in poverty”. I’m not entirely sure what the ‘real choice’ means in policy terms, but it’s a completely false choice.

The social security bill is not preventing the Chancellor from increasing spending on roads and rail, if that’s what he wants to do. If there are enough skilled workers, spare land and building materials available, then we can afford to do it. If there aren’t, then cutting the social security budget further is not going to make much of a difference.

Osborne seems to misunderstand what social security is for. It functions  to prevent individuals from falling into penury, but it also has a macroeconomic function, in that it dampens economic shocks by stopping people’s incomes falling below a certain point meaning as people lose their jobs, they can still afford to buy things – sales which other people’s jobs rely on.

The flipside of this is that when an economy is recovering from a recession, the social security bill naturally contracts, as people find jobs and go back to work. Increasing spend on infrastructure will help aid this contraction further by creating additional jobs.

So far from needing to cut social security spending to be able to afford extra spending on infrastructure, the extra spending itself would actually contribute towards Osborne’s stated aim of reducing the social security bill.

Of course what actually traps people in poverty is low pay, which again could be partially addressed by creating decent paid construction and engineering jobs through – you’ve guessed it – additional infrastructure . Of course, this type of spending is not a solution to all problems. To really start to tackle low pay, the government should get serious about job creation and remember that governments actually can and do create jobs. A full job guarantee would be a more complete answer.

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9 thoughts on “George Osborne’s false choice between spending on social security and spending on infrastructure

  1. I think you may have over-thought this. For a long time the various think tanks have been muttering about using the unemployed as forced labour on the HS2 and other infrastructure projects. Hence the floating of the two together to start the softening up of public opinion by propagandising that one is at the expense of the other. I think we all know how the res of it goes.

  2. Reblogged this on TheCritique Archives and commented:
    I’d take the argument against the old “we-need-cuts-in-one-area-to-make-money-available-in-another” fallacy a stage further than this. I would go so far as to suggest that if social security spending were truly bad for an economy, and a serious drain on “resources” (why do so many people think that *money* is a resource, by the way? It’s not, it’s a token), no Government would ever have let the Welfare State be introduced in the first place. And the country would have collapsed into permanent economic ruin before about 1965. Instead, the British economy flourished with almost unprecedented consistency from the earliest days of the Welfare State right through to the mid-1970’s. The economy has only reverted to its wild old “boom-‘n’-bust” instability since Margaret Thatcher started dismantling the Welfare State.

  3. Benefits are paid by the poor, from the 75 per cent of personal taxation that comes from stealth taxes embedded in daily life, including food.

    There are some who even say the poor pay up to 90 per cent tax rate, whether in or out of work.

    Pensioners short of a state pension are also within the poor, with a huge majority on just state pension, many women far below the full state pension, within the working poor, and / or lost disabled / sick benefits.

    £100 was taken off the Winter Fuel Allowance from the oldest pensioners, when it is known around 30,000 die each winter from living in frozen unheated homes. Me included.

    The state pension is payable whether remain in work or choose to retire.

    Far worse is to come, with huge numbers of women, and a great many men, left without food money for life by the Flat Rate Pension 2016.
    https://you.38degrees.org.uk/petitions/state-pension-at-60-now

    The Tories have never understood the poor, or even who they are, throughout UK history. And their ilk have left us to starve many many times in English history. And the extreme event of the Irish Potato Famine, where the elite simply would not believe the Irish were dying in great numbers, til a Lord went out to Ireland to see for himself and saw the dying crawling on all fours in the streets in the process of death.

    We don’t need think tanks.

    We need a rejuvenated Labour that takes on board The Greens manifesto pledge for 2015 general election of:

    – universal non-means tested Citizen Income, non-withdrawable.

    And the 1997 socialist manifesto pledge:

    – state pension for men and women at 55 at £320 per week

    – 50 per cent rise for current claimants of state pension and pensioner benefits.

    Then adults of all ages are taken out of poverty and no-one is left to starve at all, every again.

    Anybody?

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