WeeklyWorker

05.11.2015
Millions set to lose out

Tories screw ‘hard-working families’

Eddie Ford celebrates the government’s defeat on tax credits, but not the victory of the House of Lords

As readers will know, the House of Lords voted on October 26 to delay George Osborne’s cuts to tax credits by 289 to 272 votes.

Instead, they agreed to a motion by the Labour peer, Lady Hollis, saying the upper house would decline to approve the cuts until the government provided “full transitional protection” for at least three years to all low-paid workers currently receiving tax credits. A “kill motion” tabled by the Liberal Democrats was defeated by 310 votes to 99. Reasonable as always, shadow chancellor John McDonnell said he would “cooperate” with Osborne if he abandoned the cuts altogether, as it was not a “sensible plan”.

The vindictive and petty plan, as we all know, was to rob the lower end of the working class by reducing the earnings level at which tax credits start to be withdrawn from £6,420 to £3,850. In this way, regardless of the misery it causes, he hoped to find £4.6 billion of the total £12 billion he wants to cut from the welfare bill. In justification, the government says eight out of 10 would be “better off” from a package which also includes increases in the minimum wage for over-25s (“national living wage”), rises in the income tax threshold and extended free childcare. But this is totally mendacious, as various studies have demonstrated.

According to the Institute of Fiscal Studies, for instance, more than three million families eligible for tax credits will lose an average of £1,300 a year as from April. The IFS also calculated that overall 13 million families will lose an average £260 a year from the freeze in most benefit rates for four years announced in the summer budget. “Unequivocally,” it states, “tax credit recipients in work will be made worse off” by the measures proposed by Osborne - it is just “arithmetically impossible” that the increase in the minimum wage will provide full compensation for the majority of losses. Indeed, the IFS argues, “all” the personal tax and welfare changes advocated by the Tories are “regressive”, hitting the poor hardest.

Another IFS report published in September pointed out that the cuts would further entrench the divide between higher and lower-income workers. The idea assiduously promulgated by the rightwing press and popular TV programmes of a feral ‘underclass’ of families out of work for most of their lives is a disgusting myth - almost all working class people are in employment for a majority of their working lives. Continuing the argument, the study also showed that in a single year 64% of workers in the UK pay more in taxes than they receive in social security, but extending the period of analysis to a worker’s entire lifetime increases the percentage that pay more in taxes than they receive in social security to an overwhelming 93%.

A far cry from the world conjured up in Osborne’s revolting 2012 speech to the Conservative Party conference, where he asked us to imagine the plight of the striver leaving home in the “dark hours of the early morning”, looking up resentfully - if not enviously - at the “closed blinds” of their neighbour who might be “sleeping off a life on benefits”.

Tory discontent

Unsurprisingly, his heartless penny-pinching has proved to be highly unpopular - including among large sections of the Tory Party, given that his intended victims will be the very “hard-working families” that the Tories under David Cameron claim to admire and support. Now Osborne is screwing them. He is attacking the virtuous working poor, as opposed to the idle poor.

Speaking for many unhappy Tories, the previously obscure South Cambridgeshire MP, Heidi Allen, achieved a certain passing fame when she used her October 20 maiden speech in the Commons to implore Osborne not to treat the cuts as a “spreadsheet exercise” - many of those affected would face a stark choice between heating their homes and putting food on the table. She worried that “our single-minded determination” to reach a budget surplus is “betraying who were are” - the “party of the working person” who “strives to provide for themselves and their family with pride”.1 But, just like all her colleagues though, Allen was not unhappy enough to actually vote against the government on this issue - that would be going too far.

Similarly, the former Tory chancellor, Lord Lawson of Blaby, was “torn” on the issue - he said he backed the Bishop of Portsmouth’s motion expressing “regret” at the tax credit cuts. In the end, however, he insisted the upper house had no right to stop the measures and voted with the government.

In the subsequent Commons debate after the Lords vote, not a single Tory backbencher was prepared to speak fully in defence of Osborne’s proposals. Some warned the treasury front bench that a “large-scale rethink” would be required by the autumn statement. If necessary, others suggested, the chancellor should delay or amend his plans to put the overall budget into a £10 billion surplus by 2019-20 - possibly thereby scuttling his chances of becoming prime minister.

Not exactly contrite, George Osborne told the BBC that he was “listening” to people’s concerns and would help those struggling in the “transition” period, but he remained determined to “scale back” tax credits, and welfare in general. There must be no return to “uncontrolled” government spending, he declared, which poses a threat to the “economic security” of the UK. Osborne would not “lose sight” of his long-term goal of a “low-welfare, high-wage economy” - a nirvana that exists only in his imagination, whilst the rest of us are forced to live in a wretched low-wage economy where the minimum wage is becoming the new normal for millions. In 1999 one in 50 workers were being paid the minimum wage (which had been set at a cautious low by the Blair government). By 2020 the expectation is that one in nine workers will be on the bare minimum.2

Outrage

With astounding hypocrisy, the Tories have suddenly discovered that there is an unelected second chamber that meddles in the business of the Commons3. Perhaps even worse, the Tories do not have a majority there. Michael Ellis, MP for Northampton North and parliamentary aide to Theresa May, told Sky News that “we cannot have a situation” where the unelected Lords “overrules” the democratically elected Commons - describing it as a “constitutional outrage”.

Seemingly furious, David Cameron complained that the upper house had “ridden roughshod” over parliamentary traditions purportedly dating back to the aftermath of Lloyd George’s People’s Budget of 1909, according to which peers do not interfere in fiscal/budgetary matters or block legislation that had been promised in the governing party’s manifesto.

We were told by a Downing Street spokesperson that the prime minister is “determined” to address this constitutional issue, as a “convention exists and it has been broken”. To this effect, we also learn, the government has launched a “rapid review” led by Lord Strathclyde as to how MPs can be given the “decisive role” over key financial decisions. In the opinion of Strathclyde, the Lords had acted “wrongly, deplorably and unnecessarily” and one of the “more extreme solutions” would be to amend the Parliament Act. He ruled out flooding the Lords with new Tory peers - Tony Blair had “created probably more peers than anybody in modern history”, he noted, and just creating yet more would be the “wrong thing” to do.

This is all bullshit, of course. In fact, just like the tax credit claims, it is a straightforward lie. Chris Bryant, shadow leader of the Commons, rightly said the government had “fashioned a pretend constitutional crisis” out of the Lords vote. Firstly, there was not a single word in the Tory manifesto about cutting working tax credits - quite the opposite, if anything. Secondly, the Tories chose to do this by statutory instrument, not primary legislation, and so is not subject to the usual onerous parliamentary procedure.4 As opposed to finance bills, the Lords are perfectly entitled to vote down statutory instruments - and have done so in the past. The idea that what they did on October 26 was an unprecedented break with convention is nonsense.

True, prior to 1997, the lords defeated a statutory instrument just once, way back in 1968. But since Tony Blair ‘reformed’ the upper house, removing the bulk of its hereditary peers, such defeats have become increasingly common. Rather than the Lords acting unprecedentedly, in an outrageously unconstitutional manner, it is the Tory government that is engaging in cloak-and-dagger parliamentary manoeuvres - trying to introduce welfare cuts by stealth in the vain hope that no-one would really notice or care. So much for the supposed political genius of George Osborne, the best Tory leader that they still might not have.

How do communists respond? It goes without saying that we are utterly opposed to the welfare cuts, which represent a vicious attack on the working class. But that does not mean we support the ‘right’ of a second chamber to vote down the decisions of elected MPs. Whether a breach of convention or not, the Lords could easily behave in the same way when it comes to progressive legislation introduced, say, by a Corbyn-McDonnell government. We therefore repeat our call for the total abolition of the Lords, together with the whole constitutional monarchy system - there should be a unicameral assembly elected under proportional representation.

Secondly, in the longer term, our demand is not to restore the existing level of tax credits - something promised by Kezia Dugdale, leader of Scottish Labour, as part of her attempt to outflank the Scottish National Party to the left. From a socialist perspective, tax credits are unsupportable as they are a direct subsidy to low-paying employers, and in that way favour inefficient small capital over generally more efficient big capital, which tends to pay higher wages and provide better conditions. What on earth is the justification for subsidising capitalists who cannot even pay the basic reproduction costs of labour? Hence communists want to see the replacement of tax credits - in the same way as we think that the subsidy to landlords known as housing benefit should be replaced by an immediate cut in the extortionate rents they charge.

We call for an immediate increase in the minimum wage to a level that sustains the reproduction costs of labour and in general provides for a satisfying, well-rounded, human existence. By definition, this has to be combined with things such as the overthrow of the anti-trade laws. If you genuinely want a high-wage economy, then restore trade union rights and working class political collectivity - which the Tories would never willingly do in a million years.

eddie.ford@weeklyworker.co.uk

Notes

1. www.bbc.co.uk/news/uk-politics-34577535.

2.The Guardian October 1 2015.

3. http://eveningharold.com/2015/10/27/conservatives-astonished-to-learn-of-an-unelected-second-chamber.

4. www.telegraph.co.uk/comment/11955288/Everything-you-ever-wanted-to-know-about-tax-credits-and-the-House-of-Lords-but-were-afraid-to-ask.html.