Sunday 31 October 2010

Jobs for benefit leavers : SIMPLE!

The most popular pre-order book at present is the autobiography of Aleksander, the cartoon meerkat from those comparison site ads. His catchphrase is : SIMPLE!

This is probably too simple a thought but there does seem, with the news that the UK's contribution to the EU is to INCREASE while everything else is being cut, to be a more widespread questioning of the usefulness of EU membership. Undoubtedly, further revelations of the profligacy of the EU's bloated bureaucracy will follow and further shift public opinion against continuing UK membership of the EU.

In terms of welfare reform, the rhetoric is to 'make work pay'. So far, the coalition has been weak on specifics. They avoid specifying detail but that seems to be because they have not thought it through themselves. They have also failed to think through the implementation issues arising from their broad policy objectives. Will work be made to pay by increasing the minimum wage? That would be a no. Will benefit levels fall below minimum wage levels? Yes.  Will benefits be time-limited? Yes. Will benefits be means-tested? Almost certainly, yes. But will any of these measures create the jobs for people to move to as they come off benefits? That is a different category of question. It's not about pushing people out of one system [the benefits system]; it's about providing places for them within a different system [employment].

How that will be achieved is, at best, vague. Ian Duncan Smith seems to presume that the private sector will fill the jobs gap. I am not even going to touch on the massive task of preparing the long-term benefit-dependent for useful work. That is yet another enormous challenge. I am just considering the potential for job creation during this parliament. What IDS has set out is how people will be moved out of benefits. Will there be employment destinations for them?

So, what has any of this got to do with Europe? Do you remember all those jobs Gordon Brown was so proud of having created? That was until it was established that 98.5% of them had gone to migrant labour. IDS and his colleagues talk about the global economy in terms of international trade. What they seem to have ignored is the European context for the job market. IDS can do all he likes to bring benefit levels and minimum wage into the 'appropriate' balance. That is a UK specific matter. A fruit farmer in Kent said that it was now more than 20 years since her apples were picked by English workers. Now the pickers are from Romania, Poland, Spain. One Polish worker in the UK told me that she could never foresee any economic future where it was to her financial advantage to return home. Are all of these migrant workers about to walk away from jobs they have uprooted themselves to get? They will stay as long as Britain's EU membership entitles them to stay.

In the international politico-economic forum it appears that the EU is preoccupied with the health of the Euro, a currency unrelated to Britain's economic recovery. If the EU is too expensive, not focussed on UK needs, destructive to UK industries [particularly fishing], and adversely influencing the UK job market, then maybe the radical option is to withdraw from membership. 'Think the unthinkable', they say.

If we withdraw from the EU, we would save £ 6.5bn every year in contributions and release the jobs needed for those moving on from benefits. As Aleksandr might say, SIMPLE!

Friday 22 October 2010

SICK AND DISABLED TO BEAR BRUNT OF WELFARE CUTS

As the details of the spending review become available, it is clear that much of the Government’s plan to reform welfare is to be financed by attacking the sick and disabled. Their benefits are to be time-limited and means-tested. In addition, local authority care services are to be reduced to only the extremely vulnerable. How will extreme vulnerability be defined? How will local authorities rationalise the current massive inequities in levels of service provision? And what impact will such radical changes have in the lives of the sick, disabled and, where they exist, their carers?
I am always amused to hear those who say that they know no-one who chooses to be on benefits. They need to get out more. I know plenty. And they are people have accessed benefits by the manipulation of the system to their own advantage. They are agents of their own success, not passive recipients caught in a trap. I don’t blame them. They have simply made the rational choice to conform to the requirements of the financial incentives available to them. More like tax avoidance than tax evasion.  But just as the rich will always find ways to avoid the tax that the rest of us have to pay, the benefits culture will adjust to meet whatever requirements are placed on it to ensure the continuation of state funding. It is hard to imagine the civil servants designing a system smart enough to end practices that have been perfected in some families over three and more generations.
And that leaves the real sick and disabled that these sickness and disability benefits were designed to help. They are the ones who will be vulnerable to being pushed out of benefits. They are also likely to be losing their local authority services. They already have to pay high charges for service in many local authorities. One Occupational Therapist told me that her authority was charging disabled people 80% of the cost of their stair-lift, an item that can cost £5000, and making the user responsible for funding a maintenance contract. These charges will inevitably rise further.
That same local authority already charges disabled people £20 for providing a disabled parking badge. That cost will no doubt rise, and the great irony is that it has to rise so that wealthy 60 year olds can continue to receive their winter fuel and their free bus pass. The sick and disabled will pay a high price for the maintenance of the universal principle in benefits.  

Monday 18 October 2010

WELFARE REFORM : (some of) THE CHALLENGES

The events of the past few weeks have demonstrated both the ambitions and the weaknesses of the coalition Government as it attempts to cut the welfare bill. Most of the concerns expressed so far have been about the proposal to withdraw child benefit from high earners. While the Chancellor's suggested changes were clearly a mess - a poor policy [that attempted to conflate the largely individual-based tax system with the largely household-based benefits system] and poorly handled [announced at the Tory conference without cover of the Lib-Dems; sitting outwith the comprehensive spending programme; and attacking directly those in the hall ], a bigger mess is yet to come as it becomes clear that the government is engaged in a major exercise in social engineering through the levers of policy available to it. The Chancellor wants to set a cap on total benefits that would force families from high cost housing areas such as London, the South East and some other cities such as Edinburgh. The Culture Secretary has suggested that government will not fund parents to make the choice for large families.

The Conservatives have tried this kind social engineering before. The roots of Britain's present troubles can be argued to be as much a consequence of the Conservative approaches to industry, community and benefits in the 1980's as of the economic mismanagement and over-reliance on the financial sector of the last Labour Government. I am no expert on macro-economic issues in international trade, but I note other comments on the absence of an industrial infrastucture in the U.K. and the low level of British ownership of U.K. based companies [in contrast to the position in Germany, Japan, U.S.A. and others]. Rebuilding British capacity to export high value goods seems to be an absolute requirement of the Government's financial strategy. How can they possibly achieve that in five years?

What I did observe directly in the 1980's was the impact of the government's industrial policy. Shipbuilding towns became former shipbuilding towns. Steel towns became former steel towns. Pit villages became former pit villages. No work replaced the heavy industry that had been destroyed. But what about the workers let go from shipbuilding, coal and steel? They just increased the already high unemployment level that was a major political issue in those years. Government policy incentivised for both benefits staff and benefits recipients a shift from unemployment benefit to long-term sickness and invalidity benefits. The incentives worked and a post-industrial cohort moved from employment to unemployment to long-term sickness benefits dependency, sometimes in less than a year. And now they, their families and their neighbours are established in a culture as well as a process of benefits dependency. I was involved in a survey in one former mining village where we found a level of worklessness of 93%. What had been the solution to the problem of high unemployment levels quickly became a major problem in itself of benefits dependency, and the reluctance of the Labour government to even engage with that [as exemplified by the sacking of Frank Field for actually doing what he was asked to do and "thinking the unthinkable"] simply allowed the problem to become entrenched.

The big problem for George Osborne and Ian Duncan Smith is that the culture of dependency is now firmly established and has knowledge, skills and expertise beyond anything imagined by most policy makers. Some within that culture will relish the challenge as the government attempts to act against their interests. I recall one man who had been on invalidity for years with a 'bad back'. He explained that they were beginning to send claimants for tests that would determine whether they did indeed have a disabling condition. He outlined his plan. 'I am going to my GP to cry', he explained, 'I will tell him that I can't cope and don't want to go on. You see, they don't have any test for depression.' Similarly, those who receive benefits because of drug and alcohol dependency feel that they are safe. The government can shift eligibility thresholds and simplify benefits administration but I have little doubt that the research capacity and creativity of the dependency culture is smarter and more effective than almost anything the government can do to contain it. In this they are the precise equivalent of the financial sector. British governments try to control banks and other major financial institutions and the banks run rings around their plans. Similarly, the benefits culture will simply shift as required to continue to be eligible to receive public support. Worrying about what behaviours will become incentivised because of the changes in benefits eligibility is something that should be keeping politicians awake at night.

The government will have to be a lot more sophisticated and strategic in its approach to its change programme than we have seen in the inept announcement on child benefit. But it will also have to deal with the unfinished business from the 1980's of how to restore exporting industry, and what to do about  all those communities that have lost the reason for their existence.