Wednesday, 3 April 2013

The Blindness of Wealth

One of the fundamental lessons that children learn is the socially acceptable practice of sharing. The makers of money from money have forgotten this very basic necessity. If they were likened to a child with a large and a small apple and had to give one to someone else, they would try to sell you a share of the smaller apple and then eat it once you paid them for it. The thing is, you remember as a child what happened to those who didn’t learn to share; they ceased to be your friend and you didn’t play with them anymore. If you get to the end of this blog you will see how the world’s powers are about to do just that.

Meanwhile, in the microcosm of the UK, the battle rages between those who have money, and are doing very well thank you very much, and those who struggle to get by and rely almost inevitably on various forms of welfare benefit. The UK is fortunate enough to have one but recent reforms are about to make them less supportive.

This week, Chancellor of the Exchequer, George (real name Gideon) Osborne attempted to defend the welfare cuts being imposed as from April 2013. His reasons were, as they usually are within the political right wing mindset, to ‘encourage’ people away from the welfare state and into work; as if people claiming benefit are some type of underclass who are reluctant to work and earn more money. Yes, there are a few hundred out of the millions unemployed who may not want to work but not enough to make this outrageous claim. Taking one example that fits your argument and then using it as a template for an a policy that fits your ideology appears to be all the justification one needs to sacrifice a whole section of society who does not conform to it. It is a kind of bigotry that should have no place in a developed society.

In this article I want to explore a couple of the decisions that were made to welfare and attempt to reason why they are such bad decisions. My personal politics are instinctively left of centre but I try to remain objective when rationalising changes of this magnitude. It is certainly not the time for political propaganda. Ed Balls (Labour shadow chancellor), for example, used Osborne’s speech today as an excuse to slam the decision to cut the top rate of tax, giving more money to the rich while taking from the poor. It is a reasonable comment but does not answer directly whether the changes made to welfare benefits are reasonable or not. The tit for tat politics wastes the opportunity to examine properly the changes that are now enforced and demonstrates that left wing politicians are equally as bad as the right. So it is down to us to strip back the political rhetoric and seek the truth. What will be the impact of these changes? Will they produce the desired outcome? Who gets to judge?

The ‘why’ for the biggest welfare shake up in a generation is easy to understand. In the 2013 budget, the UK has income of £612bn and expenditure of £720bn, meaning that this year we have to borrow £108bn just to balance our outgoings. The economy is flatlining, so there is no help here to boost the treasury coffers, increase revenue and claw back the deficit. Too many people are unemployed, so the emphasis has to be on creating jobs in the private sector to reduce joblessness and long -term dependency on the welfare state. According to the Conservatives, there has been over one million jobs created since they took power and yet this does not appear to have translated into tax revenue for them. One would have thought that a creation of so many jobs would have naturally reduced reliance on welfare benefit. So far there has been no explanation why this has not happened and the only explanation is that someone has been more than economical with the truth.

Two of the biggest changes to help people to get that all elusive job is to first slash housing benefit for people living in a house where it ‘appears’ that there is a spare bedroom and second to cull qualifying disability benefit claimants by up to 25%. It may take up to two years to see how devastating these particular policies will be. However, both are worthy of comment in the light of the reasons given why they have been implemented - namely that the policies are designed to encourage people to come off of welfare benefit and get into work.

There are thousands of people on the social housing list who live in overcrowded accommodation and need a house with more rooms. There are thousands of people who live in houses where there is a spare bedroom. Logically it would seem to make sense that those who have more room than they need should swap with those who do not. To encourage the notion, George Osborne has charged a 14% reduction in housing benefit for one spare room and 25% for more than one spare room. Even though this is claimed to be a deduction, the people have dubbed it the ‘bedroom tax’.

Now, the UK people get a bit tetchy when they are asked to uproot themselves from a life where they feel secure. OK, they may be on benefits and jobs in their line of expertise might not be around the area they live in but their family, social network and everything that constitutes the true meaning of life resides in that area. So what George wants them to do is traipse hundreds of miles from their social group to a house that ‘meets their needs’ but leaves them isolated from friends and family and still without work. Sorry. Have I got this wrong? OK let’s try again.

A couple live in social housing where one member has a disability that means they must sleep in a separate own room. No, that doesn’t fit the profile either. OK, one more go.

A family live in a town where they both work on minimum wage and their child has recently moved out of the family home, creating a ‘spare room’. If they move to a smaller property, of which there are none in their area, their minimum wage job becomes untenable because of the additional cost of transportation. So they would lose their jobs and have to claim benefit - ah no!, they can’t do that because they would have left their job voluntarily and would therefore be disentitled to benefit. ....This isn’t working either is it?

So Georges ‘logical’ thinking sounds great on paper but is painfully naive when one attempts to apply the practical application of it. In his defence, George cited the family claiming £100,000 a year in housing (hence the housing benefit cap of £26,000 for a couple and 18,500 for a single person). Considering the average working wage is around £26,000, the actual capping of housing benefit is not an unreasonable policy, as people earning this much would struggle to maintain the rent on a property on 50% of their earnings. While I agree with the logic of capping housing benefit like this, it also has to be seen in the light of housing costs in an area. London’s mainly Conservative Borough of Kensington and Chelsea has bedsits starting at £26,000 a year. Is there some gerrymandering or social cleansing attached to this decision or does it merely highlight the fact that some areas of the UK are to become no-go areas for social housing? Although in fairness, those who do earn the national average wage could not afford a bedsit in Kensington and Chelsea either. So perhaps the real problem is the soaring cost of rent.

Apropos the average working wage, it is a dream scenario for many people struggling to live in the UKs ‘flexible workforce’ (a left wing Labour policy, along with the creation of the minimum wage, that created many insecure temporary and part time jobs). In reality there are many minimum wage jobs in George Osborne’s economic market that are only suitable to people without responsibilities / mortgages / debts etc or economic migrants from countries where the cost of living is considerably less than in the UK. The UK national minimum wage in 2013 is £6.19 per hour, or £247.60 a week or £12,875.00 a year. Compare this to the private rental of a one bedroom flat in East London of £1100 per month (two bedroom house £1200 and three bedroom £1500) and it is clear that two people who both earn a minimum wage would struggle to live in private rented accommodation.

Therefore, the people who George is attempting to penalise for having an extra bedroom, who may well be working but cannot afford to rent privately, may well find themselves between a rock and a hard place, and may be the very people he claims are doing the right thing and working hard to get ahead. Perhaps more insidiously, the plan is to force people with spare rooms to take on lodgers to reduce the benefit bill while at the same time reduce the demand for housing.

The benefit known as Disability Living Allowance (DLA) is assessed apart from the welfare benefits and can be claimed by all whether they are working or not. The benefit is discounted when people claim income assessed benefits because it was designed to be a life line for those who want to participate fully in active daily lives. For some this has meant the difference between working and paying taxes or being excluded from the opportunity to work.

The two main components of the benefit provides money for help with mobility and personal care. The new ‘Personal Independence Payment’ (note the disappearance of the word ‘disability’) has been rewritten to ensure that at least 25% of people who qualify for DLA now will not qualify under the new benefit, thus saving shed loads of money. George Osborne says that people who were given DLA for life had been effectively ‘parked’ as a person who was not going to find work and this new benefit was designed to make people with disabilities included back into the work field. But the stupid thing about this statement is that there are many people who rely on DLA to keep them in work because the mobility element provides them with a car to get from A to B. If the mobility element disappears then the person with a disability will lose their job, because the won’t be able to get there, and will be another disabled claimant on the welfare state.

George Osborne is either lying to the UK public in the hope that those who do not understand the system will simply believe him or he has no understanding of DLA himself and is demonstrating his incompetence to be delivering such egregious welfare reforms with any understanding of the hardship and devastation it will cause.

George Osborne claims that, ‘Britain’s welfare state is broken’. Personally I believe he is making that claim from a perspective that is not objectively reasoned and presumes unrealistically that other things upon which the welfare state is founded are not broken themselves. Ask any smoker to prioritize their weekly shopping and cigarettes will be listed as important as bread or milk, while those who do not smoke will not see it as a priority at all. Ask a conservative what is the priority in government and they will place the promotion of business and profit over welfare and social responsibility. All political spectrums will admit to a portion of both views but the divide is clearly on the percentage of bias given.

With this in mind, when one looks at the political incentive to use business as a vehicle to drive the UK out of recession, one of the most glaring statistics in the 2013 UK budget is the yawning gap between money taken from people through income and VAT against the profits taken from business. Profits from business (£39bn) against income tax (£155bn) seems hugely one sided, given the single-minded goal to get more tax revenue. Likewise, if consumer spending is the vehicle that will lead the country out of recession and provide bigger tax revenues, is it not a consideration that if the minimum wages is half the national average wage that people with little money to spend could be the very engine to drive the economy forward if they had more money?

By the same token it could be argued that if National Insurance (£107bn) were in place to entitle one to expect a good National Health Service (£137bn) that National Insurance contributions should reflect the growing needs of the NHS. However, as a significant proportion of the NHS budget has recently been mauled by the cost of the disastrous Private Finance Initiative (PFI) that  allowed private companies to build hospitals, charge an ever increasing rent for the building and maintenance etc at a total cost of £300bn. It will soon cost as much as £10bn a year and this is coming partly out of the health budget. This particular bombshell should be laid at the door of the previous Labour Government.

The debt interest (£51bn), if it were all paid up, would not bridge the borrowing gap (£108bn) and what is not reported here is the huge hole that is the public sector pensions.   Perhaps when Labour were in government they should have saved some money to pay for new buildings while revenue exceeded expenditure. They did not because short term politics does not reward long term thinking. This is a particularly thorny problem that dogs democratic political systems.

Clearly, we’re in an economic mess, created it must be emphasised by the rich people and exacerbated by short term politics, that must be reconciled. However, the right wing view of cutting support mechanisms that merely injures the poorest in society is nothing short of adhering blindly to an ideology that conforms to the blinkered view of capitalist meritocracy.

That view has been pronounced widely and with the puffed up chest of those who believe themselves to be an example of its success. The budget was designed for ‘people who want to work hard and get on’, implying that people claiming welfare benefit are people who do not want to work and do not want to get on. Mr Osborne would really like the electorate to believe this assertion but the facts do not support his claim. Not everyone was born with the disposition to rise through the ranks to fame and fortune. Not everyone was born with the intellect to ascend the academic ladder to brilliance and notability. In fact not everyone was born with the capability of rising to more than the most menial of low paid jobs. 

So if a portion of the UK society find it difficult to fit their square pegs into the round holes of the labour market, it must be their fault. Apparently the elite point of view is makes no concession for people who for, whatever valid reason there may be, do not have a job, and the lottery of human ability is punishable by almost Darwinian means; you could say it is the survival of the richest.

Unfortunately this attitude is contagious. People who are fortunate enough to be in work and maybe not to have claimed benefit for any length of time, are often susceptible to the right wing ideology that people who do claim benefit are most likely work-shy or lazy. This is why George Osborne’s budget is connected to the notion that cutting welfare helps people who ‘work hard and want to get on’. In my opinion this is simply a paradigm that promotes the illusion that anyone who wants to work hard and get on are only prevented by circumstances they create around them.

Disability, for example, is often created by the way the world is designed rather than by a persons inability to perform tasks just as well as  people without a disability, like designing a building without wheelchair access excludes all wheelchair users from it. Likewise designing a recruitment system that excludes large sections of society from it will foment unfilled jobs and long term unemployment. Ask any graduate who complains that employers want people with experience but they can’t get a job so how can they get experience? 

The worst aspect of this illusion is the attitude that leads one towards justifying changes to a system purely for economic purposes accordance to the perspective that business cannot be at fault - only people claiming benefit. It tends to attract individuals with narrow lens perspectives, like the guy I conversed with recently who suggested that he didn’t owe anyone a free lunch so why should he pay for freeloaders, holding most righteously to the Hayek principles of economics in it’s human guise and thereby agreeing with Ebenezer Scrooges analogy that those in need of welfare should hurry up and die to decrease the world’s economic problems.

Politics to one side, the welfare system does need streamlining and made simpler (as does the tax system and the blocking up of about £120bn of tax avoidance). And there should be caps on benefits that ensure the amount of benefit paid does not exceed what one would be capable of earning. It makes sense to ensure that people are better off in work but cutting benefit, particularly personal benefit, is simply a race to the bottom that is penury for those at the bottom of societies financial ladder.

But reforms that affect so many people in so many different ways are reforms that should be considered carefully and outside of political ideology. The bedroom tax is an ill conceived reform and may well prove to be unworkable. One has to make sure that sufficient housing stock exists to house people in smaller properties before punishing them  for not living in one. 

The DLA reform is perhaps one of the most execrable. The rules for disallowing disability benefit should not put people out of work but it will. It is bad and ill thought out legislation.
When the true results of the change become known it will lead to a repealing of a number of policies and yet another costly reorganisation; it is always the case with ill-considered legal and ideologically motivated changes.

The elephant in the room is the need to reform the capitalist system itself. In its present state there will, as George Osborne mentioned, indeed be the need to compete with emerging economies like Brazil, Russia, India, China and South Afirca (BRICS) who are presently in talks about creating their own rival bank to invest in said developing industries. . Even at this point these countries are dumping the Euro at a furious rate . The danger is the obvious capitalist intention to drive down wages and working rights instead of harmonise the cost of living in order to compete effectively. But the rich would rather abandon a sinking country before losing a penny in profit. George Osborne said that the welfare system was broken. On the contrary I say. Rather it is the capitalist system that is broken and reform must take place if we are to see a future beyond the rise of emerging economies.

But the blindness of wealth refuses to accept what is really broken. And those with so much would rather risk losing everything than sharing.

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