Belfast Telegraph

Sunday 21 December 2014

No benefit for the poor as the Tories slash and burn

Cutting the incomes of the poor is a stupid indignity that will cause untold misery to thousands of people, argues Robin Wilson

This week sees a series of cuts to benefits for the low-paid and unemployed which will represent a tsunami of human indignity. And, if that were not enough, they are not necessary and they will not work.

Tax credits and jobless benefits should have gone up by 2.2% this week in line with inflation.

They are only rising by 1%, representing a real cut for households already living on what is not even a subsistence income.

This will drive the desperate further into the clutches of moneylenders, the black economy or even crime just to survive.

The Secretary for Work and Pensions, Iain Duncan Smith, foolishly declared while under pressure in a radio interview that he could survive on £53 a week (close to the benefit rate for a young unemployed person) if need be.

Since that would represent a 97% drop on his current weekly disposable income, this was an insult to the intelligence of his listeners.

And there lies the nub of the problem. A year ago, Prime Minister David Cameron and Chancellor George Osborne were described by a fellow – but female – Tory MP as "two arrogant posh boys who show no remorse, no contrition and no passion to want to understand the lives of others".

There will be further indignities. The spare-bedroom tax will force many tenants in social housing to move into smaller, private-rented accommodation – the only 'subsidy' involved now being that their housing benefit will go to private landlords.

People with disabilities will have to endure humiliating tests of their ability to do some form of work, to secure what will now be called their 'personal independence payment'.

All this, ministers claim, will make the system 'fairer'.

Yet, to add insult to injury, this week also sees the reduction of the top rate of income tax from 50% to 45%.

This will only serve to foster the 'rent-seeking' behaviour of company executives and City brokers who can use their power at the top of the social hierarchy to bid up their salaries and bonuses, which their paymasters would be much less likely to sanction if most of their gains went straight to the Treasury.

And it gives the lie to the Government claim that there is no alternative to austerity.

The chancellor has had to keep revising his forecasts of a recovery that never comes. This is because when the private sector – households and firms – is 'deleveraging' (saving) to reduce its outgoings, as it does in a recession, the public sector must spend to sustain demand (spending) in the economy.

With interest rates close to zero, there are plenty of public-investment projects out there which would more than pay for themselves over time, as well as lifting demand in the meantime – and so increasing tax revenues, reducing welfare spending and easing the budget deficit.

Ministers also claim their measures will 'make work pay', seeking to drive a wedge between the poorest 'skivers' and the only slightly less poor 'strivers'.

But there are about 73,000 unemployed in Northern Ireland, according to the latest official statistics.

There are just 5,405 unfilled vacancies.

So even if every unemployed person competed tomorrow to fill every one of those vacancies (and many could not because of skills or location), 13 out of 14 would still be unemployed the next day.

It all comes back to depressed demand.

And depressing demand by cutting the incomes of the poor is particularly stupid, because, unlike the rich whose taxes are being cut, they must spend all they have.

True, there will be some delay to the full application of the cuts in Northern Ireland, as devolved ministers have tried to 'negotiate' with London over the detail.

But the Executive has strapped itself for cash with its refusal to raise the £200m or so per year it would glean if the rates included the full cost of water.

And, instead of having any coherent policies to boost the demand for employment, such as the Green New Deal backed by the social partners, it is instead to squander £80m on a 'social investment fund' – which even insiders admit will simply be a slush fund for political patronage.

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