Wednesday, 23 January 2013

The political convenience of blaming the poor


The government talks of 'fairness' in distribution of benefits.  But what is fair? During the boom years the poor got poorer, the middle class got richer. The biggest beneficiaries of government largesse have been the middle classes, not the poorest.

Over the last decade, the relief on income tax and National Insurance Contributions totalled a staggering £358.6 billion. The middle classes benefited from tax exemption through personal equity plans and ISAs in which they were able to accumulate savings with tax free interest. The huge expansion of higher education from the 1960s onwards created educational opportunities for their children on an unprecedented scale, whilst the opportunities for the poorest were restricted. University education remains to this day largely a middle class preserve.

The middle classes benefited from child allowances and expansion of nursery school provision. Until it was abolished by Gordon Brown in 2000, the middle classes benefited from mortgage tax relief. Gordon Brown referred to it as the 'middle class perk'. The largesse and opportunities distributed to the middle classes have been substantial.

So when we talk of fairness, let's have a reasonable assessment. Fairness doesn't mean pushing the poor deeper into poverty. The middle class have been the greater dependants on state handouts not the poor. It is unfair now to make the poorest suffer the most. Unfair, but politically expedient. The rhetoric of 'welfare dependency', of 'strivers' and 'shirkers' is aimed largely at the the C2s, the skilled manual workers who abandoned Labour and voted Conservative at the last election.

It is politically convenient to blame public spending and to blame those receiving welfare benefits. Savage cuts in welfare spending hit the poorest most, and middle Britain the least.  The political map requires it. The confluence of the maps of poverty and the political map is no coincidence (see figure). It is politics at its most cynical.

Distribution of poverty in England (left) and the distribution of seats won by conservatives (blue), Labour (red) and LidDems (yellow) at the  2010 general election  (right)
The economic policy of the coalition government is based on a lie, the premise that the financial crisis was due to profligate spending by the Labour government. Yet we know the truth.  Unsustainable consumption by the middle classes, fuelled by corrupt and inept practices by the banks, created the financial crisis. The failure of previous governments is that they did not see this; they failed to regulate the banks, they stoked up the politically convenient 'live now, pay later' approach of the middle classes.

The middle classes are to blame; and for that the poor are expected to pay a disproportionate price. The fallacy, the downright lie, that public spending is responsible is not only absurd, it also fails to address the real causes of the financial crisis; the fundamentals are not addressed, the poor, the sick and the disabled are made to suffer the most, and yet Osborne and company are seeking to restore the status quo, another unsustainable boom.

They grind away at an engine that is broken. Its cam belt snapped and all cylinders that drove the economy were irretrievably damaged, but Osborne insists on restoring it, and it trundles along on one cylinder, pop, pop, pop. And each spark and bang, each whistle and grunt, is hailed as a sign of economic recovery. The Bank of England pumps more money in; Osborne sucks it back out. He can't balance the books because revenue falls. It is the economics of hope rather than reality.

And so we see another absurdity. At best, the economy trundles along; at worst in a triple dip recession. Yet the government insists on taking more money out by swingeing cuts in spending. Benefits are cut, libraries close, the NHS collapses, local services are squeezed, more people are driven into poverty. It really is remarkably short sighted.

The government it seems is more worried about credit ratings; the ratings of organisations whose credibility must surely be in question. They are mesmerised by the very organisations who were responsible for creating the mess. If we don't do as they suggest, we will lose our credit rating, be downgraded, as if this was a terminal sickness. Most of us had never heard of these ratings organisations, now our government would rather follow their dictate rather than listen to the people they represent. Creating  a shibboleth out of credit rating is an absurd way to run the economy.

I am reminded of the futility of Wilson and Callaghan back in the early 1960s desperately propping up the value of sterling, only to ignominiously admit defeat.  It was all a matter of confidence they said. In the end, devaluation set us on the road to recovery.



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