Reposted from The Guardian on line
I really don’t know why the government is making such heavy weather of cutting £12bn off the benefits bill. That sum, and much more, could be cut at the stroke of a pen – though it would mean that the government would have to put its money where its mouth is and make it a legal requirement for employers to pay the living wage. If a company really can’t afford to, then it’s the company that should be applying for supplements, not the people who work for it.
Cameron wants to curb in-work benefits. No wonder: just £8bn on benefits goes to the unemployed, while an estimated £76bn, according to James Ferguson of Money Week, goes to people who are working. The government says this shouldn’t be happening. Cameron insists employers should be paying wages people can live on – which, funnily enough, is the sort of thing unions say, although they no longer have any power to make it happen.
It’s what Labour says, too, now the party is out of power. When it was in power, it avoided confrontation with employers offering poverty wages, and with the unions, by kindly offering to make up the difference between the minimum wage and a living wage via the benefits system.
It would be funny if it wasn’t so sad. The Tories excoriate Labour because Labour accepted the Conservative idea that employers should be freed from the burden of social responsibility. Labour spent a lot of money on protecting employers from such irksome duties. The Conservatives still don’t want to impose such irksome duties, but don’t want to stump up for the hefty bill that ensues from failing to do so either.
Just one of the woeful consequences of Labour’s drive to support employers by supplementing employees is that it makes the figures look like the Department of Work and Pensions is showering taxpayers’ money on the feckless, when it is actually showering taxpayers’ money on businesses. Employing someone has come to be seen as such a noble pursuit that businesses are paid to do it. Businesses don’t, of course, complain that this interferes with the free market. Money spent supplementing wages should be coming from the Business and Enterprise budget, with companies vetted to assess whether they are justified in offering pay below the living wage. Those who are can be offered loans to cover the difference, repayable in much the same manner as student tuition fees. They are hiring staff to grow their own businesses, after all. Such entrepreneurial risk-taking is seen as admirable. But when the taxpayer is taking on so much of the cost, and the benefit-receiving employee is getting so much of the blame, there’s really only sheer nerve and hypocrisy left to be admired.
Businesses, of course, would hate having to admit that they expect the state to prop up their poverty wages. They despise “red tape”, after all. Although that doesn’t stop them employing individuals who must submit themselves and their families to miles of red tape and minute government scrutiny because their wages aren’t enough to live on.
Work in the retail sector is notoriously badly paid, so it should be no surprise thataround £11bn in in-work benefit is paid each year to people working in retail. Employees at Next receive more money in pay-rate supplements than the company pays in tax (about £2,087 per low-paid worker). In the last year, Tesco has cost the Treasury £364m in pay-rate supplements. Cameron talks about dysfunctional merry-go-rounds of tax and spend. But the culprits aren’t ordinary people scraping by. The culprits are employers milking the system.
The in-work benefits system also encourages businesses to employ lots of people part-time, rather than fewer people full-time. A couple has to work 24 hours a week to qualify for in-work benefits, and a single person 16 hours. The more part-time people you employ, the more the government is supplementing your payroll, and the easier it is to get competent staff on the cheap.
Much of the reduction in unemployment seen over the last couple of years is because people are taking part-time work when they would prefer full-time work. The government may trumpet the decline in unemployment. But its complaints about the cost of in-work benefits are an acknowledgement that the Department of Work and Pensions is paying out a lot of cash to make that happen.
A system that minimises costs while maximising profits is bound to result in a mismatch between what people earn and what it costs them to live. This tendency can be seen most clearly in the housing market. In 2009-10,according to House of Commons figures, 478,000 people with jobs claimed housing benefit, at a cost of £2.2bn. By 2014-15, it was 962,000 and £4.6bn, and it’s set to continue rising if things don’t change. What things?
It’s endlessly said by everybody that the social housing supply has to increase. But no one seems willing to take their valuable piece of land and render it much less valuable by building social housing on it, when they could keep it as an asset or sell it to private developers instead. Private landlords are the obvious beneficiaries.
But again it’s the person claiming the housing benefit that is seen as the problem, not the person who wants the “market rate” when the market isn’t paying it. Again, the person making the profit gets the benefit, rather than the person who doesn’t have enough income to put a roof over his head. Just as it’s time to restrict state benefits paid to employers via employees, it’s time to restrict benefits paid to landlords via tenants.
The Conservatives, I’m afraid, seem to do nothing at all in government except complain that Labour spent too much money on mitigating the effects of the previous Conservative government’s policies. Employers are allowed to set wages and landlords allowed to set rents without regard to the amount of money people have to live on. The least the state can do is be honest about the amount of state money that is spent on defending the right to make profits, instead of blaming the hapless citizens from whom the profit is wrung.