First Conservative Budget in 19 years declares war on poorest and the young

The most eye-catching announcement in today’s Budget perhaps was the one about the “National Living Wage”, set to be introduced for over 25s next April at £7.20 per hour. This falls below the actual living wage of course, said to be £7.85 an hour outside London, but Osborne announced his intention to raise it to £9ph by 2020, which assuming the OBR’s inflation forecasts are right would actually see wages rise (outside London) to above the living wage by 2020. Iain Duncan Smith in particular seemed delighted:

With this announcement Osborne also managed to make Labour leadership hopeful Liz Kendall look a bit daft after she announced last week that she would look for ways to get businesses to voluntarily pay the living wage.

What Osborne didn’t say of course, was that the lowest paid won’t actually be any better off (for the most part) as they will lose their entitlement to tax credits at a similar rate to the increase in the minimum wage. Even so, it seems to me better to have employers pay more and have the government pay out less in tax credits.

At the same time though, these changes don’t apply to those under 25 who still have to make do with a minimum wage at a much lower level.

It was Osborne’s announcements on changes to the social security system that are most controversial, and I would say cruel. He is practically ending benefits for young people, making poor students take on even more loans and worst of all cutting by £30 a week the amount new claiments of sickness benefit ESA (WRAG) are entitled to. He’s also freezing working-age benefits for 4 years. They are already at below subsistence levels. To me it sends a clear message about what people like George Osborne think about the poorest.

It’s a very 19th Century attitude to the poor. George Monbiot spelled out this attitude rather well in a recent column, but in summary, here are some of the underlying assumptions that form the basis of the proposed changes:

• Those who are declared unfit for work will quickly turn into malingerers if they are given too much. Many are outright faking their conditions when they could get a job.
• If you are unemployed, you must not be trying very hard to get a job
• If you are young, you are basically lazy and unproductive and will do nothing useful unless forced.
• Young people all have strong family bonds which they can draw on for support in hard times.
• The only reason the low paid and poor have children is in order to claim more ‘welfare’. They must be stopped.

If these things are true, there won’t be much hardship suffered as a result of the new changes. People will just pull themselves together and find work. Those that don’t, obviously deserve only contempt. If they in fact turn out to be utter bullshit though…

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IPPR Report – Another Case of Garbage In, Garbage Out

Labour leader Ed Miliband launched a heavily-trailed new report this morning produced by Labour’s favourite thinktank the Institute of Public Policy Research (IPPR) called “The Condition of Britain”. It has been said that it’s a report that will “define social democracy in the coming decade” and that it is “a Magna Carta for social democracy in the 21st century“. I think some people are too easily impressed.

The report (all 280 pages of it), contains 28 recommendations, which Labour seems to be largely adopting as party policy. The recommendation that caught the headlines was the one recommending scrapping benefits for 18-21 year olds, and replacing them with a means-tested “youth allowance”. This is so similar to Tory Party policy that George Osborne’s bitch Matt Hancock accused Labour of stealing their policy. Reading through the other recommendations though, it’s striking just how unambitious they are. Nothing is a great departure from the current direction of travel, and any of them could be adopted as Tory or Lib Dem policies without any eyebrows being raised.

Why is this? The IPPR label themselves as “centre-left”, and Labour should be looking for some eye-catching policies to differentiate themselves from the opposition. I think the problem is one of GIGO, or “garbage in, garbage out”. The underlying assumption before the report was even written was that austerity is a given, there is no money and every new commitment must be matched by a cut or tax hike elsewhere. So they paint themselves into a box and then say to themselves “within these constraints we have arbitrarily imposed on ourselves, what can we suggest to be different from the other lot? Answer: not very much it seems!

It seems to me that if they actually want to make a difference, the starting point needs to be “what would we like to do in an ideal world”, and work back from there. So in an ideal world, we might like to build everyone a mansion. Unfortunately, there is not enough land, building materials or labour to achieve that, but there may be enough of those things to ensure eveyone can live in decent accomodation at an affordable price. So what’s the IPPR’s recommendation on housing?

£Councils should be able to retain and reinvest a share of any savings achieved by local action to reduce housing benefit spending in their area. In addition to their existing powers, they should also be given greater freedom to borrow responsibly against their housing assets and income.”

We have quite a convoluted suggestion where somehow it is worked out a council has “saved” on housing benefit through their actions, and they can then use some of these savings to build houses, or they can borrow money to do the same. I’m not sure we should be encouraging councils to borrow more. They can go bust, and won’t be able to borrow at as low rates as central government (who can always borrow at 0% should they wish). Implicit is the IPPR’s recommendation is that there is enough land, labour and materials to build enough houses. If that’s so, wouldn’t a better suggestion be that central government just gives the money to build housing directly to local councils? Why over-complicate things?

Similar criticisms can be levelled at other recommendations. If you start with garbage assertions about the inevitability of austerity, the solutions you come up with are bound to be severely limited. It just makes Labour look a bit, well pointless.

Iain Duncan Smith defies all logic (again). And then there’s Liam Byrne…

Iain Duncan Smith was interviewed for today’s Sunday Telegraph, and is sounding increasingly deranged. Under ever increasing pressure to reduce the welfare bill (an impossible task given the Coalition’s fiscal stance), Smith appealed to wealthy pensioners to ‘hand back their benefits’ if they didn’t need them. So rather than changing the rule on universal benefits (which is a bad idea in itself), he is resorting to trying to make little old ladies feel guilty about their winter fuel payments as though it is costing the nation billions (it’s not). That’s not what I wanted to write about today though. Duncan Smith also said this:

“We want to say to people, you’re claiming unemployment benefit but you’re actually in work paid for by the state: you’re in work to find work. That’s your job from now on: to find work.”

Duncan Smith’s tried this line before. We people objected to job seekers being forced to work for nothing in Poundland he said (of Caitlin Reilly):

“She was being paid for it (working at Poundland), what do you think the taxpayer was paying her for God’s sake? Her job seekers allowance. The taxpayer is paying her wages.”

IDS persists with this idea that the unemployed need to be constantly harassed to get off their lazy arses and look for work, and it informs every aspect of the Coalition’s employment policy. The elephant in the room though is always the tyranny of the maths – 2.5 million unemployed is a much bigger number than the (less than) 500,000 vacancies currently available.

Duncan Smith’s views on unemployment and the unemployed just doesn’t stand up to more than 5 seconds scrutiny, so it got me wondering if maybe he just hasn’t met many unemployed people, and I thought I’d see if there was a negative correlation between an MPs view on unemployment and the unemployment rate in their constituency. Maybe if unemployment is very low where your voters live, it informs your view on the problem and those who are unemployed? So I downloaded the March 2013 JSA claimant rates from Nomis by constituency to see how much of an issue unemployment is in the constituencies of Cabinet and Shadow Cabinet MPs. Here’s the average claimant rate in Cabinet and Labour front-bench constituencies:

The claimant rate nationally is currently 3.9%, but in the constituencies of the Coalition “Cabinet of millionaires”, the average rate is just 2.2%, while in the constituencies of Labour front-benchers the average rate is 5.2%, much higher than the national average. Looking at the rates in individual Cabinet Minister’s constituencies we see a pretty common pattern. Unemployment in the constituencies of Cabinet members is typically very low – David Cameron, 1.4%; Nick Clegg, 1.5%; George Obsorne, 2.0%; Theresa May, 1.8%; Michael Gove 1.7% etc. So it may be that in these parts of the country the issue of unemployment is secondary to other issues like planning, wind farms etc. So my hypothesis that low unemployment at home leads to skewed attitudes towards the issue looks plausible.

There are in fact only two members of the Cabinet who have above average levels of unemployment in their constituencies – Welsh Secretary David Jones (who he?) and – wait for it – Iain Duncan Smith! I was surprised to discover that in Chingford and Woodford Green, 4.2% of the working age population are in receipt of JSA. So if Duncan Smith spends any time in his constituency at all, it must be obvious that not all of these people can be lazy scroungers and that there must be an issue around a lack of jobs. Does he think the people of Witney (Cameron’s constituency) are all “hard-working families who want to get on”, while his constituents are all skivers and scroungers? Only someone wilfully blind could dismiss the lack of jobs as the problem and instead blame the attitude of individuals couldn’t they?

But what of Labour? We saw above that unemployment is significantly higher in Labour constituencies than Coalition ones. Does that mean they have more empathy with those who are unemployed and a better understanding of the issue? Ed Miliband (5.9% JSA rate) has talked about returning to the idea of full employment, while Ed Balls (3.2% JSA rate) proposes a new jobs programme for young people. Labour’s ideas are timid and also place a too much of a focus on the individual, but they at least acknowledge the need to actually create jobs. Again then, there’s an argument that higher unemployment in Labour seats makes them more attuned the problem of unemployment.

But there’s one front-bencher’s constituency that has much higher unemployment than any others, with a whopping 9.6% of working age adults claiming Jobseeker’s Allowance. He more than any other must understand that is a chronic lack of jobs that has kept unemployment high surely? So who is this person? Step forward MP for Birmingham Hodge Hill Liam Byrne. This is the man who led Labour’s decision to abstain from the Bill retroactively made legal the Government’s sanctioning regime and consistently tries to ‘talk tough’ on welfare, giving credence to the idea that there are hundreds of thousands out there who are on the take. How can he come out with this garbage representing the constituency he does?

So what can we conclude? In general we might think that if an MP’s constituents are unemployed in greater numbers, the greater will their concern be for the unemployment issue and vice versa. If you are a welfare spokesman though, it seems you have to check your brains in at the door, and compete to see who can talk the toughest. Is that what they mean by good politics?

APPENDIX

JSA Claimant Rates by Constituency March 2013

LABOUR
MP	Constituency	Number of Claimants	Claimant Rate
Ed Miliband	Doncaster North	3,594	5.9
Harriet Harman	Camberwell and Peckham	5,403	6.2
Ed Balls	Morley and Outwood	2,159	3.2
Douglas Alexander	Paisley and Renfrewshire South	3,294	6.0
Yvette Cooper	Normanton, Pontefract and Castleford	3,475	5.0
Sadiq Khan	Tooting	2,329	3.2
Rosie Winterton	Doncaster Central	4,354	6.8
Andy Burnham	Leigh	3,030	4.7
Stephen Twigg	Enfield, Southgate	2,015	3.4
Chuka Umunna	Streatham	4,158	5.3
Jim Murphy	East Renfrewshire	1,340	2.4
Hilary Benn	Leeds Central	7,521	7.0
Angela Eagle	Wallasey	2,719	4.9
Caroline Flint	Don Valley	2,761	4.6
Maria Eagle	Garston and Halewood	3,474	5.5
Liam Byrne	Birmingham, Hodge Hill	6,810	9.6
Ivan Lewis	Bury South	2,567	4.1
Mary Creagh	Wakefield	3,301	5.3
Jon Trickett	Hemsworth	2,849	4.7
Tom Watson	West Bromwich East	3,907	7.6
Vernon Coaker	Gedling	2,215	3.7
Margaret Curren	Glasgow East	3,811	6.7
Owen Smith	Pontypridd	1,932	3.6

COALITION
MP	Constituency	Number of Claimants	Claimant Rate
David Cameron	Witney	920	1.4
Nick Clegg	Sheffield, Hallam	944	1.5
William Hague	Richmond (Yorks)	1,208	1.8
George Osborne	Tatton	995	2.0
Danny Alexander	Inverness, Nairn, Badenoch and Strathspey	1,738	2.8
Theresa May	Maidenhead	1,194	1.8
Philip Hammond	Runnymede and Weybridge	968	1.4
Vince Cable	Twickenham	1,283	1.7
Iain Duncan Smith	Chingford and Woodford Green	2,151	4.2
Chris Grayling	Epsom and Ewell	1,010	1.5
Michael Gove	Surrey Heath	1,121	1.7
Eric Pickles	Brentwood and Ongar	1,194	2.0
Jeremy Hunt	South West Surrey	876	1.4
Owen Paterson	North Shropshire	1,954	3.1
Justine Greening	Putney	1,772	2.6
Michael Moore	Berwickshire, Roxburgh and Selkirk	1,962	3.4
Ed Davey	Kingston and Surbiton	1,525	1.7
Patrick McLoughlin	Derbyshire Dales	675	1.4
Maria Miller	Basingstoke	1,825	2.6
Theresa Villiers	Chipping Barnet	1,986	2.6
David Jones	Clwyd West	1,722	4.1
Kenneth Clarke	Rushcliffe	1,180	1.9
George Young	North West Hampshire	1,124	1.8
Francis Maude	North Warwickshire	1,585	2.8
Oliver Letwin	West Dorset	688	1.3
Grant Shapps	Welwyn Hatfield	1,758	2.4

When is a Job Guarantee not a Job Guarantee?

The Labour Party’s new ‘job guarantee’ idea is getting a lot of coverage this morning, but is it any good? They are proposing to introduce a guaranteed minimum wage job offer to those aged over 24 who have been claiming Jobseeker’s Allowance (JSA) for more than two years. If the claimant turns down the job offer, they risk losing their benefits. Currently, there around 130,000 people who fall into this category. The jobs will be for a 6 month duration, after which the individual will have to find work elsewhere, or go back on benefits.

First then, the positives. By proposing this, Labour are tacitly accepting that even in the good times, there will always be some people left behind, meaning Government does have an active role to play in the Labour market. Once this principle is established, perhaps we could move to something more ambitious. It also get the issue of long term unemployment back on the map, and puts pressure on the Government to respond given the current failure of the Work Programme.

That’s where I run out of positives though I’m afraid. I think if you set out the design the weakest possible job guarantee scheme that had the least impact upon the economy, this would probably be it. Labour’s proposal is very similar to something the IPPR have been proposing for a while, only even less ambitious. I briefly mentioned that here, although I was probably a little too positive about it. The IPPR want the job offer to be made at 12 months rather than 2 years, but other than that it pretty much the same as what Labour is proposing.

I have a number of issues with this idea and the way it’s being presented. Here are the main ones.

• It only applies to those who have been unemployed for over 2 years. This is less than 10% of those claiming JSA, and an even lower proportion when measured against all those out of work who want a job. So the impact on the economy would be negligible.
• The guaranteed jobs would only be for a 6 month duration – probably not long enough to give someone the skills and experience to make a smooth transition to better paid work.
• The way this is being presented is that there is a need to be tough with those who are long-term unemployed. You need to force people to work on threat of losing their benefits. The evidence just doesn’t bear this out. Research undertaken recently by the Joseph Rowntree Foundation found an almost universal “commitment to conventional values about work”. JSA is already conditional upon the individual actively seeking work. No further sticks are necessary.
• The proposed scheme would apparently cost £1bn and be ‘paid for’ by restricting pension relief for high income pensioners. The tax relief restrictions may be sensible and fair, so may be worth doing on its own merits, but it has nothing to do with paying for anything. This idea that every policy proposal must be ‘fiscally neutral’ is very damaging as it severely limits the effectiveness of any spending programme.

So what would a job guarantee worthy of the name look like? Here’s some features it might have:

• Job offer at 3 months or less
• Jobs last for an indefinite period
• All jobs come with training
• Paid at a living wage
• Genuinely full time work available, but with flexible and part time hours for single mothers, those with health issues etc.
• Optional, i.e. the person can choose to remain on benefits and seek their own job (subject to Jobseeker’s agreements as now)

I’ve expanded on the my preferred type of job guarantee here and here.

To sum up then, while Labour are calling their idea a job guarantee, it is a million miles away from what a true job guarantee would look like. It lacks ambition, scope and retains the nasty undertones of the current climate – not wanting to appear to be soft on ‘scroungers’. To me it represents a step back from Labour’s last foray into job creation schemes – the Future Jobs Fund. That was also quite timid, but remained optional, people had a fair amount of choice about what jobs they applied for and the ethos of ‘community benefit’ was a good one. This new idea junks the first two principles and weakens the third. In short, not great. Another ‘big announcement’ that turns out to be anything but.