Friday, 30 October 2015

Tories are chasing their tails on the economy.

The trick continues. Mr Cameron's inability to give assurances that nobody would be worse off from any changes in working tax credits left him floundering and blustering in the House of Commons. But slowly the defence has been mounted outside parliament and it is the usual trick, tainting those who receive benefits as 'work-shy' and 'on the take'.

The first line of argument was that it is necessary to cut welfare in order to cut the deficit, but why should hard working people on low pay be made to pay for the deficit?  That fairness question is difficult to answer.

They do try of course. 'The £30 billion cost of tax credits', they say is 'too big'.  But welfare is big because wages of the poorest workers are too low.  The bill is big because millions have been forced into low payed insecure jobs.

But that £30 bn isn't the real cost.  The real cost would subtract the costs of unemployment if these people were not in work.   Tax credits keep people in work.  That is what they are for. It makes work pay.  But it wasn't designed for the creation of so many low paid jobs.

It is right that the government should address the problem of low pay and part time work.  Recent surveys show that the majority of people on low pay and with part-time work want to work more hours.  The scandal of employment under the coalition was that the recovery was predicated on pushing people into low paid jobs with low hours and with poor contracts.  This is why reducing unemployment has cost so much.  It is the cost of driving people into low pay and insecurity.  It is a cost of the government's own making.  Nobody envisaged working tax credits would end up costing so much. This is because is never envisaged so many being pushed into low pay by such a long recession.  It is also a result of the wrong tactic: deficit reduction rather than growth.

Insecure, low-paid jobs have left record numbers of working families in poverty, with two-thirds of people who found work in jobs for less than the living wage.  That is the scandal. That is the trick.  The government systematically created a low payed work force.  Millions are trapped on low wages. 

According to research by the Joseph Rowntree Foundation, nearly 1.4 million people are on the controversial zero hours contracts that do not guarantee minimum hours, most of them in catering, accommodation, retail and administrative jobs. Meanwhile, the self-employed earn on average 13% less than they did five years ago.  The truth is that the tax credits problem is one of the Tory government's making.  The bill has risen because of the madness of their economic strategy.  A strategy to 'tackle the deficit' which has failed.  It created the very increase in spending that makes it difficult to cut the deficit. It is a failed economic strategy, and now the government are chasing their tails trying to square the circle of deficit reduction.  

The truth is we are an underemployed country.  Sluggish productivity growth continues. Tax credits need to be replaced by real jobs with a living wage. But cutting tax credits won't in itself achieve that.  The government should only cut tax credits when a real living wage is in place. The government got it the wrong way round.

The reason they got it wrong is because they saw only one objective, to cut the welfare bill.  Ideologically, they don't really believe in a 'living wage'. They pinched it from Labour to establish a background for welfare cuts and declare themselves a party for the workers. This is why they got it the wrong way round.  Cutting welfare for the Tories has priority over the 'living wage'.  It is a trick that has caught them out.

Austerity is presented as the only viable alternative. This is another trick the Tories have been good at. Economic credibility was predicated on accepting this. Labour made the mistake under Miliband of doing so.  The alternative would have been a strategy of real investment for growth - reducing the deficit by increasing revenue.  Indeed, I would argue that this is the only way to effectively tackle the deficit and pay down the debt.  Tragically,  the Tories won the argument by default.  Labour failed to present the alternative.  They allowed a false narrative to gain credibility - that the deficit was the problem that led to the financial crisis. That narrative led to economic madness - a madness the Liberal Democrats helped along.

This is why we need a new narrative, a realistic narrative on the economy.  It makes sense from a number of angles. Without social objectives, economic objectives are meaningless and self defeating.


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