How do we halt the slide towards becoming a nation of haves and have-nots?
Now that the British economy appears to be growing again, it's a good time to remember that David Cameron used to talk about "sharing the proceeds of growth". If he still thinks this will happen automatically — the old idea of "a rising tide floats all boats" — he should read two reports out this week.
Implementing Universal Credit from the Joseph Rowntree Foundation warns that, far from incentivising people into work and out of poverty, the way this new benefit operates is likely to leave many households barely better off and trap others in perpetual penury. And, instead of simplifying the benefits system, it risks turning it into a post-code lottery because of the localisation of Council Tax Benefit and Social Fund loans. It also warns that (highly likely) breakdowns in IT systems risk driving desperate people back to rely on charity hand-outs. And all this before George Osborne and Iain Duncan Smith have slashed another £10bn from the welfare budget.
The other report, from the Commission on Living Standards, covers both the jobless and Ed Miliband's "squeezed middle" (Mr Cameron's "strivers"), those who work hard for modest rewards. They thrived under Labour, partly because of tax credits but largely because of the large numbers of women returning to work. But since 2008, at best they have been running to stand still. For them, calculates the commission, the recession has no end in sight because the skilled administrative and manufacturing jobs that gave them a leg up are disappearing faster than snow in summer. New jobs are at the top of the income scale and the bottom. Universal Credit is set to create a mountain of poorly-paid "mini jobs" of up to 16 hours a week, which are currently not worthwhile because of the ridiculous earnings disregard. But if these workers attempt to better themselves by stepping up into full-time work, they risk ending up worse off after commuting and childcare costs.
Even assuming fairly healthy growth figures up to 2020, the commission reckons that by then a low income household will be 15% worse off in real terms than in 2008 and a median income family will be 3% worse off.
Meanwhile the top half of earners will enjoy a return to annual rises in living standards.
There is nothing inevitable about all this. One area where both reports agree is that more needs to be done to remove barriers to work, especially in households with two adults of working age. That is why the level of the earnings disregard under Universal Credit and the rate at which benefits are clawed back must be as generous to second as to first earners. That is a Westminster decision.
Just as important is what happens to "passported benefits", like free school meals, legal aid, educational maintenance allowance and concessionary travel. These are in the gift of the Scottish Government and such decisions will be a real test of its commitment to tackling poverty. Most important of all, particularly for female employment, is the level of help with childcare costs. Unlike England, where there's a legal obligation on councils to provide affordable childcare, in Scotland these budgets are not ring-fenced and provision is patchy. Scottish households cannot work their way out of poverty without better subsidised childcare. The recent non-means-tested extra childcare money simply does not go far enough to helping the most deprived families.
The Commission on Living Standards too calls for better childcare subsidies but also wants more action to raise wage levels. Personally, I'd go for a Living Wage and end the scandal of state subsidies (tax credits) for mean employers. (After all, far from destroying jobs, the national minimum wage created thousands of them.) Finally, rather than slashing college courses, as in Scotland, it calls for a major expansion of vocational education. Amen to that. If we are to share the benefits of recovery, we can't afford to do nothing.
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