Thursday 16 September 2010

Clegg: poor must accept benefit cuts

The Times predicts that Nick Clegg will stir up controversy in his own party with an op-ed article for the paper, which it reports under the headline 'Poor must accept cuts in benefit, says Clegg'

Nick Clegg puts himself on a collision course with his party today by championing radical benefit cuts and arguing that the State must not “compensate the poor for their predicament”.

The article states that there will inevitably be losers from welfare reform. However, the op-ed, in invoking Jo Grimond to argue that liberals must attack welfare dependency, is mostly a collation of broad-brush soundbites from the standard Clegg repertoire.

Second, liberals believe that people should be in charge of their own lives. Independence is a central liberal value. Dependency of any kind offends against this unwavering liberal commitment to self-reliance: and welfare dependency is no exception.

But Clegg's analysis of welfare dependency - an important issue - appears simplistic. Employment rates of disadvantaged groups rose considerably in the last decade, which Clegg's piece ignores entirely. Prior to the recession, an employment rate of 75% was the highest ever achieved.

And Clegg seems confused and contradictory in his short piece, first complaining about high marginal tax rates as benefits are lost - "Labour presided over a shambolic tax credit system that left too many people receiving paltry rewards for making the brave leap into work. More than half a million people face an effective tax rate of more than 90 pence in the pound, as benefits are withdrawn and tax kicks in".

That attack on a "paltry" system must mean Clegg thinks it gave those in work too little. Yet the same article attacks Labour for putting more money into redistribution, arguing that it entrenches dependency.

In May 1997, the benefits bill was in today’s money £63 billion. By the time Labour left office the cost of welfare was £87 billion — an increase, in real terms, of 40 per cent.

Clegg must surely know that additional resources were very heavily focused on in-work support through tax credits - precisely to make work pay - while out-of-work benefits continued to lose value in real terms.

Clegg would seem to be for more and less redistribution at the same time.

If Clegg wants to make both points, the logic of his argument points towards an approach to ensuring a differential to "make work pay" focused on cutting back significantly on benefits for those out-of-work. But with Jobseekers Allowance at £64.30 a week - worth just over half of the government's official poverty line for single adults (historic comparisons can be found in this paper (PDF, the scope to do this without significantly affecting the well-being of the most vulnerable is limited.

The Liberal Democrats have argued that Labour should have done more to reduce inequality. Labour's redistribution was pro-poor and held inequality in check. Nick Clegg is against it, when his party is not for more of it.

So perhaps Clegg should talk to his own policy adviser Richard Reeves, who wrote of a similar argument from David Cameron that: "It makes literally no sense to argue that inequality needs to be reduced and then to call for a reduction in state benefits. The issue is not ideology; its not politics; its just arithmetic ... Labour's record shows that cash transfers can work to reduce basic income inequality. It also shows that even a broadly centre-left government did not feel able to transfer money on the scale needed truly to make society more equal. So inequality has been checked, not reversed ..."

The Telegraph recently summarised the Office for National Statistics 'Social Trends' report on where welfare spending goes, though taking a broader analysis than Clegg.

About 60 per cent of total benefit spend is now paid to elderly people, mainly through the state pension.

While there are many more pensioners in Britain than ever before, living longer lives, they are also provided with far more money for their retirement. The ONS claims that, adjusted to current prices, the value of the state pension for single adults has risen by 68 per cent, or £38.52 a week, over the past four decades.

A quarter of social security expenditure goes to working-age adults, mainly in Jobseeker’s Allowance Incapacity Benefit, while the rest goes to children through their parents and disabled people. Some 2.68million people now claim sickness benefits.

For the first time in British social history, pensioners are at a
lower risk of poverty than other adults. That is because of redistribution. Would Clegg really oppose this too as the illiberal politics of "compensating the poor for their predicament" - or can he find a way to be in favour of this, while being against the increased social welfare bill which pays for it? If so, there must be Liberals in the Lloyd George and Beveridge tradition who would strongly disagree.

However, pensioner poverty has never been a specialist subject for Nick Clegg - he admitted he "got it spectacularly wrong" when he guessed the state pension was "about £30 a week" during his 2008 party conference.


Anonymous said...

Now would be a good time to refer back to Stuart White's piece on these pages about the "coming battle for liberalism" within the lib dems.

Looks like the Orange Bookers are taking a strong lead in public, even if the long-term battle is still to be fought.

Tom said...

He's right about the problems of high marginal withdrawal rates of tax credits, though. Shame the Budget made these even higher.

T.N.T. said...

The idea that the current rates of benefit - which for childless working age people are completely inadequate to eke out any kind of living anyway - are a huge disincentive to work - is frankly ludicrous. Indeed they are probably SO low that they are actually hindering jobsearch activities because unemployed people don't have enough money for food, clothing and transport.

For families with children the rates are higher - but what would Nick Clegg prefer? That kids unfortunate enough to be born into poor families starve to death?

The Coalition is removing the possibility of jobs for thousands of people with these insane cuts and then they have the gall to blame the victims of those cuts for being out of work. It really is the sickest possible rhetoric and every time Clegg opens his mouth at the moment, just when I think the guy can't be any more of a moron, he surpasses himself with flying colours. Please, Lib Dems with a social conscience - bring down the govt asap so we can bring this hideous far-right experiment to a speedy end.