Britain’s richest are even better-off – but how did they get that way?

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The Sunday Times Rich List has confirmed what some of us have been saying for years – that Austerity has funnelled Britain’s money into the hands of a very few, very selfish people.

The 1,000 richest Britons now own one-third of the nation’s gross domestic product, with their combined wealth rising from last year’s total of £449,654,000,000 to £518,975,000,000.

That’s an increase of 15.4 per cent, an average rise of £69,321,000 each and an average income of 518,975,000.

Average wages in the UK are stagnant at around £26,500, with average pay for the lowest earners having fallen by 14 per cent since David Cameron’s Tory government got its nose in the trough in 2010.

There are only two points to make from this.

Firstly, bearing in mind Gary Barlow’s recent appearances in the news for taking part in a tax avoidance scheme: How many of these 1,000 very rich people are participants in the same or similar – legal – procedures for avoiding tax? How many of them pay the full 45 per cent and how many only throw one per cent into the national pot (from which they get as many public services as the rest of us)?

Secondly, bearing in mind that many of these people take their money from very large corporations who employ very many people, how many of them pay very low wages to their employees?

The answers should provide enlightenment – not only on these people and their reasons for living in Britain, but on the policies of a government that intentionally impoverishes the defenceless in order to make this country more attractive to these fellow parasites.

Marcus Brigstocke v the Government – has he been reading Vox Political?

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This is the first pic I could find of Marcus Brigstocke, as he might have looked while delivering the piece quoted below. He’s a known beardie so he probably had face-fuzz as well.

What a rare and pleasant thing we’ve enjoyed for the last few days – a Bank Holiday weekend with good weather! And isn’t it a shame that this means most of you will have been out, and therefore missed Marcus Brigstocke’s turn on The Now Show.

Here’s a guy who knows how to take the government apart; it seemed as though he’d been reading Vox Political for the last few months because he touched on some of our favourite subjects:

1. The economy

He led with the 0.8 per cent increase in economic growth, mocking the government’s celebratory tone with impressions of how ordinary people took the news, up and down the country (some of the accents were beyond belief).

“Well done, George Osborne,” said Marcus, his voice dripping with sarcasm. “You have proved your theory right, using the Grand Theft Auto model. You have successfully shown that the poor really are like video game prostitutes – if you kick them hard enough, eventually money will come flying out of them.”

Doesn’t this fit nicely with what this blog has been saying about the economy being dependent entirely on the movement of poor people’s money? Those with less spend all – or almost all – of their income and it is this money, being pushed around the system, that boosts profits and keeps Britain going.

He continued: “I know that the state of the economy matters but for the vast majority of people it is as mysterious and cryptic as the shipping forecast… What makes a difference to people is not zero-point-eight-per-cent growth; it’s actual wages and the cost of living.

“The National Institute of Economic and Social Research (NIESR) showed this week that the average worker is £2,000 worse-off since the financial crisis hit,” another common theme here on VP, except in fact it’s £2K per year worse-off. Let’s do a quick shout-out to Jonathan Portes, NIESR’s director, whose Tweets are well worth a read: @jdportes

“I say, ‘hit’. That makes it sound like the crisis swerved towards us. The reality is, the average worker is £2,000 worse-off since the financial sector arrogantly, and with galactic, hubristic stupidity, drove the economy off a cliff, yelling, ‘Does this mean I still get my bonus?’ Of course you’ll still get your bonus. Otherwise you’d leave the country and [chuckling] nobody wants that.” [Laughter from the audience – we’re all in on that joke.]

2. Employment

“More people are in work now; good. But why do employers talk like they deserve a sainthood when they have people working for them? Your company does a thing; you need workers to facilitate the doing of that thing. The workers work, and the thing is done – am I missing something here? Do you feel you need a medal?”

2a. Zero-hours contracts

“One-point-four million British workers are having to scrape a living together from cynical, ruthless, exploitative employers using zero-hours contracts. Value your employees – they are not battery workers; they are people… One in five UK workers earns less than the Living Wage.”

At this point the narrative switches to a spoof advert: “At GreatBigFacelessBastardCorp we care so little about what we do, we pay our workers the minimum wage allowed under the law! That way we can pass on their listlessness and overwhelming sense of defeated apathy to you, the customer! GreatBigFacelessBastardCorp – crushing dreams so you don’t have to!”

This relates to an argument that Vox Political has been having with Tory-supporting businesspeople for years, going back to the earliest days of the blog. Back in January 2012, I wrote False economies that leave the business books unbalanced in which I stated:

It seems to me that many employees are finding life extremely difficult now, because the amount they are paid does not cover all their outgoings and they are having to work out what they can do without. The cost of living has risen more sharply than their pay, so they are out of pocket.

This creates stress, which can create illness, which could take them out of work and turn them into a liability to the economy – as they would then be claiming benefits.

That’s bad – not only for the country but also for their company, because demoralised employees produce poor work and the company’s turnover will decrease; having to bring in and train up new workers to replace those who are leaving through ill health is time-consuming and unproductive.

Therefore, in taking the money for themselves, rather than sharing it with employees, bosses are clearly harming their own companies and the economy.

In fact, it seems to me that this is a microcosm of the larger, national economy. In order to keep more money, bosses (and the government) pay less (in the government’s case, to pay off the national deficit). This means less work gets done, and is of poorer quality (in both cases). So orders fall off and firms have to make more cutbacks (or, revenue decreases so the government makes more cutbacks in order to keep up its debt payments).

[This seems to have been borne out by subsequent events. More people are employed than ever before, according to the government, yet GDP has improved by only a fraction of one per cent in the last quarter. By rights, it should be about 20 percentage points higher than the pre-crisis peak by now, according to some analysts.]

The message to bosses – and the government – is clear: Cutting back investment in people to keep money for yourselves will cripple your earning ability. Cutting even more to make up for what you lose will put you into a death spiral. You are trying to dig your way out of your own graves.

But there is an alternative.

A reasonable pay increase to employees would ensure they can pay their bills, and would also keep them happy.

Happy workers produce better results.

Better results keep businesses afloat and earn extra work for them.

That in turn creates more revenue, making it possible for bosses not only to increase their own pay but employ more people as well.

Wouldn’t that be better for everybody?

Well, wouldn’t it?

3. Welfare lies

“Young workers are amongst the hardest-hit by the downturn, with pay falling by 14 per cent between 2008 and 2013. Well done, everybody! We pay far more from the welfare budget supporting incomes for people in work than we do for those out of a job.

“The government keep on crowing about the number of people they have in work … most of them are not so much in work as near some work, if only they were allowed to do any.

“If you’re on the minimum wage, kept on a zero-hours contract between 7am and 7pm so you can’t work for anyone else but rack up a grand total of – ooh! – just enough hours so your employer doesn’t have to pay your National Insurance [another VP theme], you get no training, no employee benefits, no hope of any promotion and you hear ‘IDS’ banging on about how he’s ‘the saviour of benefits street’, well, if you can still afford a shoe then please throw it at the radio or through the telly or at his actual face.” This is a reference to sabotage, in which workers threw their crude shoes – or ‘sabots’ into machinery to stop it working, in protest against their working conditions and developments that were endangering their jobs.

“Low pay means higher staff turnover, high absenteeism, poor morale and lower productivity.” That’s exactly as I stated in the VP article from 2012.

4. In conclusion

“I don’t know when money started making money faster than people but… It’s not helping,” said Marcus, truthfully. “So instead of running about with your shirt over your head doing ‘airplane arms’, shouting ‘Nought-point-eight-per-cent’… do something to get the people who actually work to be rewarded, recognised and remunerated for what they do.

“It’s not rocket science and, frankly, if it is, I sincerely hope they’re not on minimum wage.”

When I heard that piece, I very nearly stood up to applaud. If you want to hear it yourself (and I’ve left out enough of it to make it worthwhile, I promise you), it’s available for download here, and starts around eight and a half minutes in.

Actually, it would be better if Marcus hasn’t been reading this blog, because then he would have drawn the same conclusions, from the same evidence, thereby reinforcing my own reasoning.

Now, let’s have your opinions, please. I’ll be very interested to hear from supporters of the current “pay-’em-the-bare-minimum” policy as they almost invariably say things like “We can’t pay them any more” – it’s never “They have good reasons that mean they can’t pay us more”.

Interesting, that.

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Why is Labour always offering too little, too late?

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Announcement or admission: Labour’s announcement, as it appeared on Facebook.

A future Labour government would cap rent increases, the party has announced – around a year and a half late.

The Coalition government has chosen to keep Housing Benefit down by making it the first payment to be reduced as part of the benefit cap, and Labour’s announcement should rightly be seen as a response to this.

But the benefit cap was announced in the mists of history, back in 2012 or thereabouts, so why has Labour only just got around to telling us its counter-proposal? The rest of us were screaming it from the rooftops at the time.

Coming so late, it seems less that this policy has been announced, and more that it has been admitted.

Perhaps this is the influence of new election advisor David Axelrod, and maybe it signals the start of regular announcements in the run-up to the general election next year. If so, this would go some way towards saving Ed Miliband’s blushes.

Certainly today we were presented with a 10-step ‘cost of living’ contract, stuffed with promises Labour has made to help beleaguered consumers keep prices down – and these are (mostly) good steps.

First is the popular scheme to freeze gas and electricity bills while the energy market is reformed.

Then there’s Labour’s plan to have 200,000 new homes built every year by 2020, relieving the housing shortage and lowering the cost of a new home.

Next comes the rent cap, plus a pledge to help families that rent plan for the future with new, long-term, predictable tenancies.

There’s the pledge to cut income tax with a 10p starting tax rate. This may be seen as an admission that Labour’s decision to end the original 10p tax rate (even though I seem to recall it was intended to be temporary) was a mistake. But isn’t it better to admit our mistakes, put them right, and move on? The plan to restore the 50p top rate has been lambasted by posh Tories and business executives, who say it won’t achieve anything (they would, wouldn’t they?) but is a good symbolic gesture.

Fifth is a pledge to ban zero-hour contracts altogether. This may seem problematic, as the evidence shows that there are working people who benefit from these contracts’ flexibility. The trouble is that unscrupulous firms were using these contracts to exploit workers who deserved better from them. Labour’s attitude – that these firms will have to manage without them if they won’t use them properly – is a bit ‘nannyish’ but makes a strong point.

Then comes Labour’s pledge to “Make work pay”. Some may criticise the use of words that have been tainted by Conservative spin. The Tories want you to believe that they’ll “make work pay” by cutting out-of-work and in-work benefits, but we all know that this won’t make anybody better-off; quite the opposite. Labour’s idea is to boost the minimum wage and encourage firms that are able, to increase their pay rates to the Living Wage, cutting the benefit bill that way.

Seventh is a little-known plan to cut business rates and make banks lend to small businesses (at least, that’s the only interpretation of “reforming the banks” that makes any sense in this context).

There’s a pledge to give working parents 25 hours’ free childcare (presumably this is per week) for kids aged three and four, and one to tackle abuses of immigrant workers by banning recruitment agencies that only hire people from abroad and pushing Europe for stronger controls. This would present problems for the Conservative-run NHS, as the BBC News has just announced that it is recruiting heavily from Portugal!

Finally we have the weakest promise – the job guarantee for the young unemployed, coupled with more apprenticeships. This has been met with opposition from the very people who were expected to welcome it, as it seems nobody outside the Labour front bench believes it has the remotest chance of success.

Unmentioned is Labour’s plan to change the assessment system for sickness and disability benefit ESA, which earned instant toxicity because it sports only cosmetic differences from the current Conservative scheme that has been fatal for thousands. The plan was announced at around the same time as a Labour inquiry into these benefits called for preventative investment that the party leadership is unwilling to countenance, and a group of mostly-disabled people called Spartacus provided a far more enlightening overview of the problems with the benefit, and the steps needed to remedy them, that clashed with what Labour is saying.

More concerning still is the fact that all of these measures are responses to Coalition policies that have harmed people during the course of this Parliament – or situations that the Tories and Tory Democrats have allowed to continue because they support the overall plan.

Where is the inspiration to transform Britain and return prosperity to everybody, rather than limiting it to people who own smart suits and big houses? When can we expect a hint that this is coming?

Unless you are one of the aforementioned people with smart suits and big houses, the Conservatives sidled into government with a plan to diddle you out of as many of your Parliament-supported rights, privileges and benefits as they could possibly fit into a five-year term in office, all the while telling you it was for your own good.

As you can tell from today’s previous Vox Political article, that has gone astonishingly well for them.

Of course, the Tories didn’t announce this plan, because they knew it would turn the electorate away in their millions – the classic example of this in practice is the way Andrew Lansley was forbidden from mentioning his privatisation plan for the National Health Service, as this would be toxic to the Tory election campaign.

But times have changed. People are suffering. They need Labour to offer something more than a promise to rub ointment on their wounds.

They want to see Labour turn the tables on the Tories. And they want to know how that’s to be achieved.

Saying Labour will “transform Britain” won’t work as we’ve all heard about such miraculous transformations before, and they have always benefited the suit-and-house people.

So come on, Ed.

When can we have it?

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Cameron – corrupt corporate whore, according to Meacher

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A corporate whore servicing one of his clients: Apparently they’re normally called ‘Johns’, but in the high-paid corporate whoring world they’re known as ‘Ruperts’. Both of them. Silly Ruperts.

It seems opponents of the Coalition have realised its degraded claim to be a government is worthless and have decided to pour contempt on it at every opportunity.

I mention this after seeing Michael Meacher’s excellent column on David Cameron. The fake Prime Minister’s instincts, according to Mr Meacher are “that there is no such thing as the rule of law, and that the only things that ultimately matter are power, fear and money”.

These words should come as hammer-blows to Cameron’s credibility. It is to his credit that Michael Meacher has written them – but also to the shame of the Labour front bench that none of them had the guts to come out with it first.

Mr Meacher supports his claims by laying out a wealth of evidence that, while the comedy PM crows on and on about Labour’s (non-existent) pandering to the unions, “there is almost nothing… that Cameron won’t do, no commercial interest he will disdain, no policy he will refuse to alter if it will ingratiate himself with the sources of money and power… He has prostrated himself before a wide range of commercial interests by changing government policy to suit them in order to recruit their money and power for himself and his party in the lead-up to 2015”.

He supports his assertions as follows:

1. Cameron was determined to hand BSkyB to Rupert Murdoch, in exchange for support for the next general election (he failed in this attempt).

2. He ditched plans to remove branding from cigarette packaging. It has emerged that his advisor Lynton Crosby’s company lobbies on behalf of tobacco giant Philip Morris International.

3. Soon after Crosby was hired by Cameron, the government dropped plans for a minimum alcohol price. Crosby’s Australian company has represented an alcohol industry group campaigning heavily against similar plans in that country.

4. Crosby’s company also represents an oil and gas lobby group that campaigns aggressively for fracking, so now the UK government is encouraging fracking with tax breaks for the companies involved.

5. Crosby’s UK company represented rebel forces in Syria for six months, which may explain Cameron’s decision to send weapons to the rebels (but again failed in the attempt, thanks to a rare outbreak of sanity in the House of Commons).

The government will no doubt try to counter these arguments but there is no credible way of doing so. We are able to judge our politicians by what they do – not what they say – and the evidence is available for all to see.

So, ladies and gentlemen, let’s change the pitch of news reporting this summer. Instead of the usual ‘silly season’, let’s make it open season on Cameron and his cronies. Let’s get all the evidence against them together and make it clear to the general public, via all possible avenues, what a craven cadre of corrupt corporate prostitutes they all are.

It shouldn’t be too hard.

From the DWP to the economy – the Coalition’s growing credibility chasm

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All the wrong choices for all the wrong reasons: The evidence fails to support George Osborne’s economic austerity policies – the only likely explanation seems to be an intention to rob this nation of everything possible before 2015.

The more we learn of the Tory-led Coalition’s policies, the wider the gap grows between what it is doing and what it should be doing.

Look at the sham psychometric tests, exposed by fellow blogger Steve Walker in a series of articles on his Skwawkbox site. It is now firmly established that the DWP – aided by the Cabinet office ‘nudge unit’ – set out to pressgang put-upon benefit claimants into taking part in a crude piece of neuro-linguistic programming – no matter what answers you provided, the test always pushed out a ridiculously upbeat appraisal of your character and then tried to get you to act according to this verdict in your jobsearching activities. The theory is that this will make a jobseeker more confident and finding a job easier. The problem is that it’s quite utterly ludicrous.

If you haven’t already, you can read the Skwawkbox exposure of this particular caper on that site – there are plenty of links to it from this one. The reason it is mentioned here is that it provides a useful set of questions with which to analyse any government activity: First, is the theory behind this activity sound? Second, if that theory is being used to support a particular course of action, is that action justifiable?

So let’s turn once again to George Osborne’s reasons for pursuing economic austerity, as described in the letter Vox Political received from the UK Treasury last month.

Firstly, the letter warns against the perils of losing market confidence. By this, we can see that it means we should fear any downward revision of our credit rating by the credit agencies, as “a one percentage point increase in government bond yields would add around £8.1 billion to annual debt interest payments by 2017-18”.

What’s being said is that a drop in our credit rating would mean the people and organisations that have invested in UK government debt (by buying our bonds) might move their funds to others, meaning the government could be faced with an interest rate rise, leading to increased difficulty in borrowing.

But we know that this isn’t true. The UK’s credit rating was downgraded only a few months ago. Did interest rates rise? Was our ability to borrow hindered at all? No. There’s a reason for that.

As Professor Malcolm Sawyer notes in Fiscal Austerity: The ‘cure’ which makes the patient worse (Centre for Labour and Social Studies, May 2012), “It is well-known that a government can always service debt provided that it is denominated in its own currency. At the limit the UK government can ‘print the money’ in order to service the debt: this would not take form of literally ‘printing money’ but rather the Central Bank being a willing purchaser of government debt in exchange for money.” This is what is happening at the moment. Our debt is in UK pounds, and we can always service it. Our creditors know that, so they remain happy to continue financing it.

This means that the Treasury’s next point, that “any loss of investor confidence in the UK’s fiscal position would not only affect the UK, but also the global economy” is also meaningless. There won’t be a loss of investor confidence, so there won’t be an effect on the global economy.

We move on – to the Chancellor’s claim that fiscal austerity is required to prevent the slowing of economic growth that happens when the national debt hits 90 per cent of gross domestic product (or thereabouts).

You’ll recall that my letter to the Chancellor was prompted by the revelation that the academic paper on which he relied most often, by Reinhart and Rogoff, had been proved to be mistaken. The Treasury’s response pulled out a series of references to other academic works suggesting a fiscal cliff similar to the Reinhart-Rogoff model, off which we would drop if the national debt passed an arbitrary level around 85-90 per cent of GDP. These were published by the International Monetary Fund, which we know isn’t quite as keen on austerity as it used to be; the Organisation for Economic Co-operation and Development, which this blog marked out as “schizoid” only a few days ago; and others.

Obviously I haven’t had time to look up eight academic works to support any opposing theory I may wish to create – and I think I would be foolish to try. I don’t have any grounding in economics beyond what I’ve been able to pick up by following the national and international debates.

But, then, according to Dean Baker of the Center (yes, it’s American) for Economic and Policy Research: “As a general rule economists are not very good at economics.”

He writes: “Most economists are unable to conceptualize anything that someone with more standing in the profession did not already write about. This is the only reason that the Reinhart-Rogoff 90 per cent debt-to-GDP threshold was ever taken seriously to begin with.”

That prodded my curiosity to check some of the papers listed by the Treasury in support of its stance, and the three that I checked (The Real Effects of Debt, Public Debt and Growth, and How Costly Are Debt Crises?) all listed the Reinhart-Rogoff paper in their supporting references. So Mr Baker is right.

“Debt is an arbitrary number,” he continues. “The value of long-term debt fluctuates with the interest rate… The value of our debt will plummet if interest rates rise… This means that we could buy back long-term debt issued today at interest rates of less than 2.0 percent for discounts of 30-40 percent. This would sharply reduce our debt-to-GDP ratio at zero cost.

“Bonds carry a face value, meaning the amount that will be paid off when they reach maturity. This is what gets entered in our debt figure. However bonds also carry a market price, which fluctuates inversely with interest rates. The longer the term of the bond, the more its price will vary with interest rates.

“If interest rates rise, as just about everyone expects over the next three-to-five years, then the market price of the bonds we have issued in the current low interest rate environment will fall sharply. Since we count our debt at the face value of the bonds, not their market price, we could take advantage of the drop in bond prices to buy up… bonds at sharp discounts to their face value.

“The question is why would we do this, we would still pay the same interest? The answer is that the policy would make no sense for exactly this reason.

“However, if we accept the Reinhart-Rogoff 90 per cent curse, then reducing our debt in this way could make a great deal of sense. Suppose we can buy back debt with a face value of 60 per cent of GDP at two-thirds its face value, or 40 per cent of GDP. In our debt accounting we would have reduced our debt-to-GDP ratio by 20 percentage points. If this gets us below the 90 per cent threshold then suddenly we can have normal growth again.

“Yes, this is really stupid, but if you believed the Reinhart-Rogoff 90 per cent debt cliff, then you believe that we can sharply raise growth rates by buying back long-term bonds at a discount. It’s logic folks, it’s not a debatable point — think it through until you understand it.”

I found Mr Baker’s piece after asking Jonathan Portes of the National Institute for Economic and Social Research (NIESR) for his opinion on the Treasury letter. He described it as “Predictable and largely irrelevant”.

So despite my lack of economic education, we have a working theory that suggests the Treasury has built its economic castle on the sand; that its justification for austerity is unsound. What about the austerity measures themselves? Are they justifiable on any level at all?

Evidence suggests not.

Let’s go back to our other friend in this matter, Prof Malcolm Sawyer. “Fiscal austerity and cuts in public expenditure do not work – there is a limited, if any, effect on reducing the budget deficit, and any return to prosperity is severely undermined.” We can see that this is true, using the government’s own figures. It managed to cut the deficit from £150 billion to £120 billion in 2011-12, mostly by axing large projects that invested in the UK economy. How much did it cut from the deficit in 2012-13? Less than £1 billion. The benefit cuts that created much of the fuel for this blog have not helped to cut the deficit at all.

“The reduction of the budget deficit can only come from a revival of private demand which is harmed by an austerity programme,” Prof Sawyer continues. Again, we can see that this is true. Austerity measures such as benefit cuts and the axing of infrastructure investment projects means there is less money available to the people who are most likely to spend it – the working- and middle-classes, and those who are unemployed. People with less money have to spend just about everything they receive in order to cover their costs. That money passes into circulation and the economy grows, through the fiscal multiplier effect. An attempt to explain this effect appeared on this blog within the last few days. The point is that demand increases when the people who earn the least have more to spend.

Therefore we see that Prof Sawyer’s next statement, “Deficit reduction requires investment programmes and reduction of inequality to stimulate demand”, is already proved.

So the answer is to reduce the unemployment rate by creating more jobs and closing the jobs deficit, as highlighted in this blog only a few days ago; to raise incomes by significantly increasing the minimum wage and adopting the proposed ‘living wage’, as promoted in this blog frequently; and investment in infrastructure projects.

What has Osborne done, along with his economically-illiterate chums?

He has created high unemployment.

He has depressed wages.

He has cut infrastructure projects.

He has, therefore, sucked all the demand out of the economy. What effect has this had?

Economic growth has, in the single word of Shadow Chancellor Ed Balls, “flatlined”, borrowing has remained high and the national debt is continuing to rise.

In other words, this part-time Chancellor’s strategy – a plan on which we have all been asked to judge the entire Coalition government, let’s not forget – has failed. Hopelessly.

I return you to Prof Sawyer, one last time [bolding mine]: “The austerity programme is economically irrational, socially irresponsible, and lacks credibility that it can reduce the budget deficit and secure any return to prosperity. The time has come to rebuild through investment and through a major assault on inequality.”

How would abolishing the minimum wage help to make work pay?

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The so-called ‘public debate’ over whether Michael Philpott (or if you prefer, Iain Duncan Smith) typifies the sort of people who live on social security in modern Britain has effectively masked something more sinister that was put in motion this week.

The government wants the Low Pay Commission to consider the impact on “employment and the economy” of the minimum wage.

The implication is clear: The Conservatives want to get rid of the statutory lowest level of wages, in order to further depress remuneration for the poorest workers in the UK. Whether or not that is the fact, it’s what people will infer.

The timing is a classic tragedy of modern Conservatism. Having just made a bold (and entirely false) claim that its benefit cuts are “making work pay”, the Tory-led Coalition appears dead-set on making sure that it won’t.

I had an argument, on this very subject, over on the Conservatives’ (I think) Facebook page. It was a while ago, but I thought I had saved the debate for posterity. I spent much of yesterday looking for it and came up with nothing, so what follows is a paraphrase of what I said there, and the best I can remember. For that I apologise. I can only advise others reading this that you should never throw anything away, as you might need it later! (That goes for things you’ve said, mind, not sweet wrappers or other rubbish – you shouldn’t all become hoarders just because of me).

The discussion was based on the premise that, rather than pay the bare minimum, employers should in fact pay a ‘living’ wage, in line with what Labour has been proposing.

I’m very much in favour of a living wage. If a person receives enough, in return for their work, to pay their way in the world without having to take state benefits, several things happen:

They feel valued in their position, and try harder. The quality of their work improves, along with that of the other workers in the company who also receive the living wage, and as a result, the employer is likely to benefit from improved orders. The company flourishes and is able to take on more employees.

As a result of this, the firm and its employees are able to pay more taxes and National Insurance contributions – not as a result of an increase imposed by an oppressive government, but because more people are employed there. The government therefore has more cash to fund public services; it has less need to borrow money and will not have to pay as much in social security benefits – in-work benefits will be unnecessary because working people will be receiving enough to put them above the threshold for them, and fewer people will be claiming out-of-work benefits.

The government can then pay off its debts and deficit more quickly and then cut tax rates. This means everyone will have more money in their pockets – including employers, who can then plough the extra cash back into the firm with infrastructure improvements and more employment.

You see how this works?

Contrast this with what happens when you employ somebody on the minimum wage, or abolish it.

People on the absolute minimum do not feel valued. They consider their employers to be taking more than their fair share of the profits generated by the company where they all work together. They feel undervalued – and demeaned by the fact that they have to claim state benefits in order to survive. Their health may be put at risk, because they may find themselves having to work ridiculously long hours, just to make ends meet. Their work starts to suffer, and they may end up unemployed, either for health reasons or because the company is suffering (as a result of workers turning in substandard work).

The company makes cutbacks. Its bosses don’t want to take a pay cut so they cut corners elsewhere. The workforce diminishes and the quality of the product suffers. In time, the firm’s contribution to the national economy dwindles – if it doesn’t go to the wall altogether. Its tax and National Insurance contribution plummets.

The government finds itself paying in-work benefits for increasing numbers of people, and unemployment figures skyrocket. Employers and workers do not provide enough money in taxes and National Insurance to pay the bill for public services, so these are cut back and borrowing increases. The nation goes into a debt spiral.

That is the current situation.

Which of the above would you rather have?

Workfare ruling leaves too many questions unanswered

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Alan Turing, allowance, benefit, benefits, Cait Reilly, Chris Grayling, company, contemporary thinking, Department of Work and Pensions, DWP, European Convention on Human Rights, forced, fraud, government, graduate, High Court, homosexuality, Iain Duncan Smith, Interest, interview, job, Jobseekers, Labour, Lawyers, living, minimum, minister, ministers, Mr Justice Foskitt, pay, PIL, Poundland, private, profit, public, responsibility, scrounger, service, slavery, state, taxpayer, taxpayers, wage, women's liberation, women's suffrage, Workfare, workshy

Cait Reilly, the graduate who was forced to leave her voluntary work in a museum to stack shelves at Poundland on the government’s Workfare scheme, has lost her case against the government.
Mr Justice Foskitt, at the High Court in London, said, “characterising such a scheme as involving or being analogous to ‘slavery’ or ‘forced labour’ seems to me to be a long way from contemporary thinking”.
What an interesting choice of words!
Back at the turn of the century, contemporary thinking stated that a woman’s place was in the home, and that she must never contradict her husband, take a job, or be allowed the right to vote. A few decades ago, contemporary thinking about homosexuality forced Alan Turing, the Bletchworth Park genius who cracked the Enigma code, thereby hugely boosting the Allies’ chances of winning World War II, to commit suicide.
Contemporary thinking has been responsible for terrible injustices and this is one of them.
I wonder if he really meant “contemporary thinking”, anyway. Did he, in fact, mean it’s a long way from what the government of the day thinks?
The judge ruled that Workfare does not contravene article 4 of the European Convention on Human Rights, which prohibits forced labour and slavery.
A friend of mine looked up “slave” in the dictionary and found among its definitions the following: “A person who is forced to work for another against his will” and “A person who works in harsh conditions for low pay”.
I think we can agree that Cait Reilly was made to work at Poundland against her will (we’ll get to the failings of the DWP’s correspondence in a moment) and, while I can’t comment on the conditions, it is certain that her benefit payment was below minimum wage and therefore, by definition, was low pay.
So by dictionary definitions, she was a slave. Perhaps the judge was commenting on the fact that the legal definition needs to be rewritten?
It wasn’t all good news for the government, though. Although this scheme will remain unpaid, it seems it must be totally voluntary, and communications between the DWP and claimants must reflect this. In other words, the DWP must clean up its correspondence to make it clear that claimants can say no.
Those who have already had their benefits removed for refusing Workfare might now be entitled to compensation. Law firm Public Interest Lawyers, who acted for Ms Reilly, said more than 22,000 people had been stripped of their benefits for refusing Workfare by January 2012. By now (August) this figure may have doubled.
The DWP has announced that it will appeal against the decision. A spokesman has been quoted by the Guardian, saying: “We do not believe there is anything wrong with the original letters and we will appeal this aspect of the judgment, but in the meantime we have revised our standard letters.”
This begs the obvious question: If there was nothing wrong with the original letters, why change them?
The saddest fact about the case is that none of the above touches the real problems with Workfare.
It is not the taxpayers’ responsibility to pay the wages of people employed by a private company. If Poundland wants people to stack its shelves, it should hire them at a living wage, rather than ask the government to provide workers and pay them only in state benefits.
Poundland’s annual profit in 2010 was £21,500,000. Split among its 390-odd stores, that’s more than £54,000 – or enough to pay three extra employees, per store, on minimum wage, with cash to spare. Make it a decent, living wage, and that’s still two extra employees (with a lot more cash to spare).
It could be argued that Poundland has been providing a public service for the government by taking on Workfare jobseekers when it didn’t need any more employees. If this is the case, we must ask why Cait Reilly was promised a job interview at the end of it. The fact that the promised interview never happened, I think, also provides our answer: Poundland has been taking advantage of the scheme to get cheap labour.
If that is true, then the company has gained financial benefit from having Ms Reilly – and others on Workfare – stacking its shelves. Poundland has made money from it, so Poundland should pay all those working for the company a decent wage – including those on Workfare who have helped create that profit.
If this does not happen, then no employer in his or her right mind would think of paying the full amount for an employee when they can get them on Workfare instead, and have the taxpayer foot the bill. Workfare is therefore a way of ensuring that the current lack of full-time jobs continues into the future.
At a time when the government is complaining that the benefits bill is too high – and trying to blame that on so-called workshy scroungers fraudulently claiming they are disabled (fraud rate on those is less than 0.4 per cent) – it is insane for ministers to send those on benefits to work for profitable firms at no cost to the employer.