Friday 25 June 2010

My suggestion for the Simon Hughes amendment

The Guardian reports new LibDem deputy leader Simon Hughes' commitment to try to amend the Budget at Committee stage:

“If there are measures in the finance bill where we can improve fairness, and make for a fairer Britain, then we will come forward with amendments to do that because that is where we make the difference.”

Last night, the LibDem clarification was that this was a "hypothetical" comment, and that it was not a call to amend the budget, so the status of the intention is unclear.

Will Straw of Left Foot Forward is right to say that both LibDem supporters of the Coalition and external critics should try to identify future changes which would achieve this goal. And the Social Liberal Forum is calling on Labour voices to start making constructive suggestions too.

One important political barrier is that the biggest arguments here inevitably involve scrutiny and challenge to the overall strategy of the Coalition: whether the scale and speed of deficit elimination in a parliament is "unavoidable"; and whether the 4:1 cuts/taxes ratio is compatible with the commitment to distributional fairness. These concerns are certainly shared by some pro-Coalition LibDems, as well as most opponents of the Coalition, but Hughes is unlikely to anticipate reopening these issues on the Budget itself. (However, the central issue of whether 25% of departmental cuts are either feasible will be an important debate in Whitehall, Westminster and in the country ahead of the Autumn).

Even within those "Osborne constraints", a second legitimate strategy which can be adopted by both supporters and opponents of the Coalition is to examine specific proposals, and to ask whether those Conservatives (like IDS) as well as Liberal Democrats (like Hughes) who sincerely talk about their commitment to protecting the poorest could in conscience support them and defend them publicly.

Hughes and other LibDem allies have rather more prospect in the short-term of making challenges of this second 'micro' kind, though they are more likely to do so on not on the headline measures which have most impact (like the VAT increase) but perhaps on other smaller issues, but ones which could have a very significant impact on people's lives. (I would support a campaign to replace the VAT change with an income tax change, as the ippr have proposed, but I suspect that would be putting down a marker for the future rather than having any significant change of succeeding).

On that basis, here is my constructive proposal where the government should be challenged to back down - and where I would judge there should be at least some prospect of an effective campaign succeeding. I suspect that the key question may be less the Parliamentary arithmetic - I think the number of LibDem backbenchers prepared in the end to rebel in a Commons vote may be very small indeed - but whether a combination of cross-party Parliamentary pressure, combined with external advocacy from civic and media voices can make both LibDem and Tory frontbenches realise that they will be widely seen as defending the indefensible in claiming that a challenged policy meets the "fairness" test.

So my (fiscally modest) target would be the budget proposal to save £100 million from housing benefit from those on the jobseekers' allowance.

Alex Barker sets out the detail very clearly at the FT Westminster blog.

There are some real little horrors buried in the fine print of this Budget.

Just take the measure to cut housing benefit by 10 per cent for anyone on the dole for more than a year.

The crackdown on the workshy only raises around £100m a year. But it is as tough as nails. It basically delivers an ultimatum to hundreds of thousands of long term unemployed: find a job or move house. This is the Cameroon version of “on yer bike”.

The average local housing allowance claim is around £110 while the average for social housing benfit is around £90. So the measure will basically knock £10 a week, or £500 a year, off the income of a JSA claimant living on £67 a week.

For those without kids or the ability to rely on the income of a partner, this will mean they’ll struggle to stay in their homes. Being forced to move also raises all sorts of administrative complications (with waiting lists and benefit switches) that I’m sure the Treasury haven’t fully considered.

Working back from the Treasury figures, it looks like around 200,000 people will be affected for at least a year. The Treasury put the figure affected for at least a month even higher, saying one sixth of all housing benefit recipients will be hit.

It is difficult to think the proposal is motivated by the £100 million saving.

The public politics of the issue are to play to grievances among 'hard-working families' at anecdotal examples of lavish accomodation for those out-of-work. That will strike a chord with majorities of the public - in cases where they believe that people are not willing to make a contribution, and not trying to do so. That work should pay - with a decent minimum wage, growing interest in the living wage and support through tax credits for the low-paid in work - is strongly supported too, and for similar reasons.

There are several ways to look at reforming housing benefit which could command a broad consensus. But penalising those who are willing to work, but unable to find work in the jobs market, and putting the mother of a six year old on JSA and then threatening their existing homes if they don't find a job that fits, may not prove as popular as the Coalition may think.

There will be real world examples of who is affected. They will not fit the populist media's favourite "scrounger" stereotype.

Both LibDems and Tories who claim the "fairness" banner should help to join and lead a challenge to the Coalition to think again. That would be more effective if mounted by LibDem voices like the Social Liberal Forum - perhaps trying to engage progressive Conservative voices like Demos and ResPublica too - as well as by political opponents.

Iain Duncan Smith says:

“The purpose of my life here is to improve the quality of life of the worst off in society. If somebody tells me I have to do something different then I won’t be here any longer.”

That is not consistent with this change to housing benefit. And I would have thought that would be particularly clear to many Liberal Democrat MPs.

The key point to remember is that the fairness test is not some nefarious trap designed by the Coalition's opponents.

Perhaps that was the case with distributional analysis of the regressive 1980s: there was distributional analysis of the Lawson budgets and their impact on inequality and child poverty from Fabians, the LSE, the Child Poverty Action Group and others - but the government's position was that this was irrelevant. They were not trying to reduce inequality, and did not believe 'relative poverty' referred to anything real, being confident they had abolished poverty in Britain, as John Moore famously claimed in 1988.

This time, it is not just our test; it is theirs too. It is fundamentally the test Nick Clegg has told his party he will guarantee, and that Cameron has told the country they can meet.

And we all now know that the first budget failed this fairness test. Whether we support or oppose it, we should hold the government to live up to the assurances that they remain committed to meeting it in future.

That will become a central debate - both inside and outside the Coalition - in the spending review, and ahead of all future budgets.

And it is why Simon Hughes should stick to his argument that there should remain an opportunity for scrutiny of the detail of this budget too.

External campaigners need to flag up and effectively mobilise around specific issues where change should be possible, to show where external advocacy can make a difference.

The housing benefit changes look to me like one good place to begin.


Tom said...

As much as I'd like to see the VAT rise replaced by an income tax rise, I was under the impression that there was the rule that only governments can raise taxes, and backbench or parliamentary amendments cannot?

Of course, the bulk of the VAT rise could be scrapped by getting rid of the raising of the threshold for income tax, the cut in corporation tax, and the reduction in employer NICs. Then the VAT rise could be taken down to about 18.5% without changing the overall fiscal picture. The 'unavoidable' VAT rise was largely to pay for tax cuts elsewhere...

Sunder Katwala said...

As far as I am aware, there is no barrier to Parliamentary amendments to the Finance Bill making specific taxation changes. This is not usually a live issue because governments have a majority, and must carry budgets essentially as a matter of confidence.

Frank Field's amendments over the 10p rate, which led to a negotiated compromise, would be an example of the model Hughes might be following.