These Ceaseless Tory Attacks on the Poor

The chancellor’s autumn statement saw him take yet another opportunity to articulate his disdain for the poor, as he outlined the government’s intention to deepen its attacks on the unemployed and benefit claimants. It also confirmed the abiding economic illiteracy that underpins austerity.

When Gideon Osborne drew his comparison between those who get out of bed to go to work and those who remain in bed and don’t, he confirmed not only the deep ignorance of someone who is the product of inherited wealth and privilege, but also the cynical ploy of the government in fomenting division between the working poor and the unemployed as it sets about continuing its objective of transferring wealth from the poorest to the richest in society, having succeeded in turning an economic crisis that was caused by private greed into a crisis of public spending.

The below-inflation rise in and out of work benefits of 1 percent over the next three years was compounded by Osborne’s announcement of a cut in corporation tax to 21 percent, the chancellor boasting that this will reduce corporation tax in the UK to the lowest of any major western economy. Taken together these measures reveal a level of inequality that can only be described as brutal, one which moreover places the UK on a par with the United States when it comes to the lack of social and economic justice built into the foundations of the economy. The chancellor’s confidence in outlining these blatant attacks on the poor in the midst of the worst economic recession since the 1930s points to the extent to which the right has won the battle of ideas, given the favourable ideological environment necessary for the logic underpinning them to gain traction.

The idea that the unemployed have chosen to be and enjoy being unemployed is the product of a skewed moral compass. It amounts to a criminalisation of poverty and those whose lives have been impacted most by the recession.

The creation of the welfare state by the postwar Labour government was predicated on the need to erect a firewall between the vicissitudes of a capitalist economic system subject to periodic shocks and downturns and those impacted most – the poor and the working class. The unemployed were held to be victims of and not responsible for the economic factors that informed their plight, and as such it was deemed morally just for the state to provide a safety net in order to prevent their destitution.

But with the nostrums of Thatcherism sweeping away the philosophy that underpinned the postwar consensus three decades ago, nostrums that continue to fuel the dominant narrative politically, economically and culturally, the moral foundations of the welfare state and the social justice it represents have been subjected to an ideological assault – one that has reached its nadir under the present government.

Poverty is the worst form of violence. Those in poverty have one thing in common with the rich in that all they think about is money – about how much heating, food, and other bare essentials they can do without as they struggle to make ends meet. The idea that cutting benefits and attacking the poor could ever eradicate unemployment is beyond perverse. On the contrary, instead of eradicating unemployment it will eradicate the unemployed – and quite literally too as the suicide rate goes up.

Indeed, this is what is so easy to forget when we listen to the benign and easy establishment-speak of the political class in its depiction of the unemployed as work-shy scroungers. More austerity for those at the sharp end equates to more despair, more domestic violence, more crime, more homelessness, more mental illness, more alcoholism and drug abuse, and more hopelessness; the fate of the increasing millions who’ve been selected by this government of the rich, by the rich, and for the rich to be purified with pain.

It is a government that while claiming it wishes to help those who are willing to work hard, continues with an economic policy that has and will continue to create more unemployment. The inevitable consequence is that those of the unemployed who refuse to be crushed under the weight of the economic and social injustice they are being subjected to will enter the black economy, while others will drift into crime. The law of cause and effect cannot be denied.

So, yes, the new sport is kicking the unemployed, and it is noticeable and shameful that Labour refuses to stand up for this demographic as they’re being attacked so mercilessly, instead focusing its ire on the impact of the chancellor’s midterm budget on the in-work poor and those on middle incomes.

The shadow chancellor Ed Balls’s bumbling performance in parliament in response to the Osborne’s autumn statement was panned with good reason. At a time when the nation is crying out for a clear, positive, and bold alternative, Labour remains a prisoner of its own timidity and ideological weakness. It is why this government has been successful in deflecting its culpability over the state of the economy and why it will continue to do so.

The unemployed have been offered up as a sacrificial lamb to a neoliberal consensus that pits all against all and holds poverty as a symptom of moral decay on the part of those afflicted by it rather than a result of structural inequality and the policies of a government for whom society is divided between the undeserving poor at one end of the social spectrum and the deserving rich at the other.

Nye Bevan was right. The Tories really are lower than vermin.

Tories Continue Cultural Vandalism

The decision to cut funding to Booktrust defies the logic provided by Frank Field’s report on poverty recently published by the Tory government itself, which recognised that intervening to enhance cultural capital in early years is one of the most cost effective ways of helping people escape poverty in later life. From the BBC:

Leading writers have condemned a government decision to withdraw funding from a charity that provides free books to children to encourage reading.

Booktrust will lose its £13m support for schemes in England from April.

Author Philip Pullman called it an “unforgiveable disgrace”, and ex-poet laureate Sir Andrew Motion said it was an “act of gross cultural vandalism”.

The Department for Education said ministers had to take “tough decisions in difficult economic times”.

‘National institution’

Children’s writer Mr Pullman told the Observer: “Bookstart is one of the most imaginative and generous schemes ever conceived.

“To put a gift of books into the hands of new-born children and their parents is to help open the door into the great treasury of reading, which is the inheritance of every one of us, and the only road to improvement and development and intellectual delight in every field of life.”

Sir Andrew said Booktrust had become a “national institution and the envy of the world”.

“The savings made by its abolition will be negligible, the damage done will be immense,” he said.

Bookstart provides packs to parents when their babies are first born and then further books at later stages in their development.

The project started in 1992 and has received money from the government since 2004.

It is funded separately by the devolved administrations in Scotland, Wales and Northern Ireland.

‘Joy of reading’

Co-founder Wendy Cooling was awarded the MBE in 2008 for services to children’s literacy.

Bookstart chief executive Viv Bird said she was “immensely surprised and disappointed” to hear that funding would be withdrawn.

Labour leader Ed Miliband said: “The abolition of Bookstart will deprive children of an early opportunity to discover the joy of reading.”

Ms Bird said the charity would be seeking other sources of support.

A Department for Education spokesman said: “We believe homes should be places that inspire a love of books and reading.

“However, in these difficult economic times ministers have to take tough decisions on spending and the particular fund managed by Booktrust will end at the end of this financial year.”

The Return of the Undeserving Poor

by James Bloodworth

The Victorian notion of the “undeserving” poor has been resurrected from its nineteenth-century grave.

Under the pretext of cutting the deficit, and no doubt to the delight of large swaths of the Conservative Party, there appears at last to be popular support for “doing something about” those who, according to David Cameron, “live off the hard work of others”.

Decades of tabloid rhetoric about “scroungers” – employing the method of finding the most absurd benefit claimant and treating them as the norm – has succeeded in creating the impression that for large swaths of the population benefits are as much a lifestyle choice as, say, breezing through the “public” schools system and straight into a top city job for an individual at the more fortunate end of the social spectrum.

Notwithstanding the barely-concealed satisfaction in some quarters at the prospect of unleashing hardships on the most vulnerable members of society, the idea that estates where several generations have been out of work can be transformed simply by giving those that live there less money, shows an astounding contempt for communities that have not yet recovered from the destruction of British industry almost 30 years ago.

The notion that we are each a product of circumstance long ago became unfashionable. Twenty-first century ideas of fairness dwell on the buzzwords of “choice” and “opportunity”, while shying away from the more uncomfortable questions as to the economic context in which choice and opportunity are exercised – which would pose the even more uncomfortable proposition of confronting the powerful, rather than the easily vilified. Click to continue reading

Liberty and Equality

One area where the new Con-Dem government has received some plaudits is its commitment to scrapping ID cards, and a range of other civil liberties issues.

So it is worth considering how the Labour Party ended up being regarded as an authoritarian party of the big state.

These are rather complex issues, and the degree of complexity can be seen by the fact that many of those who think that the Labour government was too illiberal themselves support two of the most intrusive restrictions on individual liberty – the ban on hunting with dogs, and the ban on smoking in public places.

There are two main strands to the Labour Party’s social policy deriving from the Blair years, one of which was the concept of the good citizen; essentially a person who refrained from bad behaviour. There was a view that in a society with weakening bonds of social solidarity and decline of shared moral and ethical frameworks, then the state would need to provide the incentives. The result of which was the Respect agenda, and the communitarian sanctions against social non-conformity.

The other strand was recognition that for problems like obesity, there was widespread popular support for the idea that individuals should bear responsibility for their own actions, but also that the state should take responsibility for weighting the incentives and disincentives affecting individuals in the interests of the public good.

Over the last decades, there has been increasing privatisation of personal space in Britain. Personal washing machines have replaced launderettes; children are more likely to play in back gardens (or indoors on the Ninetendos) than in parks or on the streets; supermarket bought wine and lager has replaced a trip to the pub; many people even have their shopping delivered. Private cars have for most people replaced public transport for most journeys.

This does not mean that public space and interaction has ceased to exist, but it has become more residualised, giving greater weight within the public space for the marginal and the disadvantaged. This in term incentivises people to withdraw more from the public space, and become ever more compartmentalised. This is a well documented social phenomenon, exacerbated in some areas by poor urban landscaping.

The result has been that individuals have reduced feeling of collective, shared community, and peer pressure towards beneficial behaviour is weakened.

At the same time there has been a retreat from ideological collective moral purpose, both in the decline of collective religious observance, but also through a decline in active participation in trade unions, and a hollowing out of social democracy, as the Labour Party shifted away from promoting an inspiring moral and ethical vision of a better and more just society, and instead sought to win elections through triangulation, spin and wheezes. As Eric Hobsbawm observed all those years ago, the former collective shared culture of working class life has become irretrievably fractured into a mosaic of subcultures and networks of relationships which are abstracted from class and workplace.

Rising individualism and consumerism, as Professor Layard has pointed out, leads to unhappiness, as commodities will always disappoint, and commoditised relationships will always feel exploitative.

The Blairite project, so often misunderstood, was therefore to seek state intervention in order to promote individual citizen satisfaction with public services (linked with their ideologically driven belief that services could be improved via “choice, contestability and commissioning”); and to nudge citizens towards better behaviour to each other via sanctions against non-conforming behaviours, and state action against anti-social neighbours.

It was not posited on authoritarianism for its own sake, but on a rational statist response to genuine trends in society and shifts in social-attitudes. The ID cards and the national database were not proposed as part of a Big Brother surveillance society (despite naïve justifications that it would somehow help to prevent terrorism), it was founded on a desire to collect sufficient data upon individuals in order to assist the government in “behavioural economics”, steering individuals in the direction of making personal decisions that would be more beneficial to themselves and society. It was therefore at heart paternalist not authoritarian.

If we understand where these aspects of the Blairite project were coming from, then we can consider the alternatives.

The social problems that ASBOs, parenting orders, support orders and the like were introduced to counter are real ones. The underlying causes of those problems are also real, including a slowing down of social mobility and widening of inequality.

The approach of the Con-Dem government is to remove the measures which Labour was using to fight the symptoms but they will do nothing to cure the disease. Individualism, consumerism, the removal of essential support services for the disadvantaged and the poorest will accelerate under this Tory government. People will be more on their own, more frightened and with less options for help and support. “Civil liberties” mean very little if they also embrace the abandonment of the poorest and most vulnerable in our society.

A socialist approach has to be different. Not all New Labour’s innovations were wrong, because they were at least recognising that there are social problems, and agreeing that it was the state’s responsibility to address them.

At the heart of our approach must be recapturing the ideals of social solidarity, and the return to an agenda of Labour governments being transformative in the interests of fighting inequality.

I have explained before that combating inequality is actually very hard.

So firstly, We need to understand the basis that we oppose inequality. Tony Blair was explicit that for him it was about equality of opportunity, as he said in a speech in 2006 “It is about our sovereign value, fairness. It is about potential never explored, talent torn-off unused, the inability to live a life free from the charity of others. The object is timeless: we want to expand opportunities so that nobody whatever their background or circumstances should be left behind”

This is interesting because the fairness he describes is the removal of external impediments to success, but it does not criticise the idea that there should be inequality between those who “succeed” and those who “fail”.

The individualism inherent in this approach is a reflection of Tony Blair’s acceptance of the core Thatcherite ideal that there is no collective social project that we all share; society is merely the accumulation of individuals, and government is there to mediate between them. Equality of opportunity is a good thing in so far as it removes social discrimination, but if you are only opening the door to different and perhaps more intractable inequalities based upon those merits rewarded in an acquisitive and greedy society, then you have not really addressed inequality at all.

Indeed it is the erosion of communities of solidarity, and lessening of the vision of social democracy as a transformative progressive project in favour of a fairer society that has required New Labour to look to punitive sanctions as the way of addressing anti-social behaviour, rather than community building.

The removal of unfair impediments is not enough to achieve equality, because we are not all blessed with the same advantages in life, and will not all be lucky, and there will be differences in outcome. The aim of a socially just society is to give equality of regard and respect to everyone whatever their social status, and to decouple political and economic power from social status. More egalitarian societies are happier ones, and expanding the social safety net reduces stress and fear of failure.

It is precisely because overcoming inequality is not easy, that it needs to have purposive moral and ethical foundations. A strong basis for a commitment to equality within the Labour tradition is to be found with R H Tawney, as I have discussed before.

Tawney regarded Capitalism as fundamentally immoral, because it is based upon individual gain and self-interest, rather than service to the community. Acquisitiveness becomes a primary goal in its own right, and the strong and powerful use others as mere objects for self advancement, and the weak and poor are encouraged to emulate the selfishness of the strong.

In contrast, Tawney regarded the communities of solidarity of the labour and trade union movement as especially virtuous, and the traditional labour movement priorities for overcoming poverty and unemployment to be moral. As such for Tawney, the industrial and economic struggle of workers against employers took on a moral dimension, because it was a struggle for power within the economy between profit driven selfishness, and collective social solidarity.

With regard to modern politics, the astute observation of RH Tawney is that liberty is related to equality. If freedom is defined as absence of restraint, then liberty promotes inequality, because the more powerful in our society have less constraints upon them, and the majority of the population will always be unfree.

For Tawney, true liberty is the freedom to act positively for the benefit of the community, and being empowered to resist the tyrannical demands of the rich and powerful.

If we look at the last few years of rampant consumerism, celebrity culture, bling and self-advancement, we see that New Labour has worshiped at the alter of the acquisitive society. The ethics of Tawney was that society should value collaborative and productive labour for the benefit of the community, not for selfish personal acquisition.

But it is a mistake to see the record of the Labour government over the last 13 years as all bad in this regard: indeed their policies were informed by an intelligent understanding of the structural causes of inequality in our society, and sincere desire to help the most disadvantaged. But their framework has been a timid one, and in the final analysis failed to acknowledge that equality has to rest upon shared sense of community, and that community is alien to the spirit of free market capitalism.

Low Earners Still at Risk Despite Fall in Unemployment

Despite today’s improved unemployment figures, it’s still not plain sailing for the 9.4 million low earners in work. Continued falls in employment levels, growth in long-term unemployment, expectations of a sluggish economic recovery in the private sector and a squeeze on public sector activity and employment mean that sustained improvements in the labour market remain some months away.

Low earners:

1. are concentrated in industries vulnerable to unemployment

5.0 million low earners work in the manufacturing, construction, banking and retail sectors, and 1.8 million work in public administration, health and education

2. face difficulties with job retention and progression

workers recorded as low-paid in 2000 were twice as likely as higher earners to be unemployed in 2005 and three times as likely to be economically inactive

3. have fewer safety nets to weather periods of unemployment

half of low earner benefit units have less than one month’s gross income in savings and assets

Low earners continue to be disproportionately affected by unemployment because of their high representation in those industries such as manufacturing, construction and retail where most job losses have occurred. While employment is likely to stagnate in these industries for some time, the forthcoming fiscal consolidation is likely to concentrate further job cuts in the public sector. As such, the 1.8 million low earners working in education, health and public administration, who have so far been largely protected from unemployment, could face a particularly difficult 2010-11.

Across all industries, low earners are more likely than higher earners to face unemployment because of their concentration in lower-skilled occupations: between April 2008 and February 2010, the number of JSA claimants reporting their usual occupation as elementary increased by 197,000; by contrast, the number of claimants from professional occupations increased by just 32,000.

Even during economically benign times, low earners are more likely than higher earners to face difficulties with job retention and progression. They are typically restricted by job insecurity, time constraints, transport issues, and immobility. They are also caught in a training gap: less likely than higher earners to receive training from their employer and less likely to have the private finance necessary to self-fund, but also less likely than those with the lowest levels of skills to qualify for government schemes. This range of disadvantages means that low earners who have lost their jobs during the recession are more likely than higher earners to have become long-term unemployed: in February 2010, 195,000 JSA claimants from elementary occupations had been on the count for more than six months, compared with just 17,000 from professional occupations.

Low earners are also more vulnerable to the consequences of labour market issues than higher earners. In part this is because of lower levels of savings and insurance and in part it is because of lower levels of redundancy payments among members of the group. Similarly, while reduced working hours, increases in part-time and non-standard work and wage restraint have all helped to keep unemployment at a lower level than had been expected at the start of the recession, low earners living at the edge of their means have found the consequences of underemployment difficult to handle. At the end of 2009, half a million low earner households said they were having difficulty keeping up with bills and credit commitments because of a fall in their income associated with reduced working hours.

The positive impact of swift action by the government is apparent with overall figures being lower than anticipated and lower than in previous recessions. However, given ongoing softness in the labour market, it is important that measures introduced in response to the recession designed to support those vulnerable to, or experiencing, job loss are sustained, and that medium-term work and skills policies are developed with the needs of low earners in mind. In particular, the Government should:

· Extend the Job Guarantee to all who have been unemployed for 12 months or longer in order to reduce long-term unemployment;

· Ensure that youth unemployment schemes reach non-graduates who are most vulnerable to the scarring effects of early-age unemployment;

· Continue to tackle cultural barriers in Jobcentre Plus to ensure that it is configured to help the changing profile of clients;

· Reform welfare-to-work programmes by bringing forward the enhanced skills assessment from 26 to 13 weeks, assessing employability by time out of work rather than by time on benefits and focusing provider targets;

· Make it easier to combine jobs and training, especially during a period in which people are working fewer hours – by widening eligibility of Working Tax Credit so that training as well as paid work counts for example; and

· Ensure that low earners working in the public sector do not bear the brunt of any future spending squeeze – by limiting public sector pay freezes to those workers earning more than the median salary for example.

Matthew Whittaker, Senior Economist of the Resolution Foundation, said:

“It is promising to see another fall in unemployment this month, however, we mustn’t be complacent as many low earners, especially those in the public sector, may still face unemployment over the next year. Once out of work low earners with low-level skills struggle to get back into work quickly which is why we recommend keeping them as close to the labour market as possible through extending the job guarantee scheme and bringing forward the enhanced skills assessment.”

How Inequality Contributed to the Crash

By Stuart Lansley, from Labour List, this is an abridged version of a more substantial article in the Spring edition of Soundings.

Although global imbalances, excessive bank leveraging and reckless financial risk-taking helped trigger the meltdown of 2008/09, the crisis has it roots in the rising income and wealth gap, and the way a new domestic and global super-rich elite created economic fragility.

The rise in inequality of the last 30 years has been driven by a steady fall in the share of wages in UK national output – from a high of 64.5% in 1975 to as little as 53.2% in 2007 – along with a rise in the share of profits which has fuelled the personal wealth boom at the top.

These trends have played a major role in financial instability. First, because of the negative effect of greater inequality on spending power. To maintain rising living standards, ordinary families, faced with declining relative wages, became increasingly indebted with the debt/income ratio rising from 45% in 1980 to 157.4% in 2007. Moreover, because lending was extended to groups with few if any tangible assets, the level of default risk in the economy rose along with the fragility of the banking system.

Secondly, this increase in risk was multiplied because the personal wealth boom boosted financial speculation at the top as the super-rich attempted to use their mounting wealth portfolios as the source for quick profits. In doing so, they aped financial institutions, leveraging their wealth – sometimes by huge amounts – by borrowing. Record returns together with cheap credit encouraged the wealthy to borrow not to finance consumption but to take large speculative bets. Money poured into hedge funds, private equity, takeovers, commodities, rare art, commercial and private property in a speculative frenzy that created the multiple bubbles that triggered the credit crunch and the subsequent recession.

A similar mechanism was at work in the build-up to the great depression of the 1930s with, in the United States, a great surge in the concentration of wealth and in the volume of speculative loans during the 1920s. During that decade, the poor and the middle stagnated while the rich prospered – as they have in the UK and the US in recent times – and soaring profits poured into real estate and stock markets, leading to the 1929 crash.

The role of inequality in fuelling financial instability has long been recognised. Keynes made it clear that because of the lower marginal propensity to consume of the rich, and their propensity for speculation, wealth inequality increases the risk of financial instability and economic collapse. In his book The Great Crash, JK Galbraith identified “the bad distribution of income” and its impact on the pattern of demand as the first of five factors causing the crash and the great depression.

The global distribution of wealth today is almost as uneven as it was in the 1920s, and its speculative element and impact has been accentuated by both greater leveraging and the rise of an avalanche of footloose capital owned by the world’s nomadic super-rich. The combined wealth of the world’s richest 1,000 people is almost twice as much as the world’s poorest 2.5 billion.

The third way high levels of inequality have fuelled instability is via shifts in the global and domestic power nexus. Over the last three decades, the rise of the global financial elite has shifted power from nations to a small coterie of individuals and corporations. Awe-struck political leaders stood on the sidelines as the new wealthy elite ensured what Citigroup global strategist Ajay Kapur has called “favourable treatment by market-friendly governments”. Over the last decade this elite has used its growing political muscle to guarantee weak financial regulation by the state and lower taxes on the wealthy. According to Simon Johnson, former chief economist at the IMF, a dominant financial oligarchy “played a central role in creating the crisis, making ever-larger gambles…until the inevitable collapse”.

The fault lines of Britain’s low wage, high debt, finance-dependent economy are now only too evident. The wage squeeze meant that real wages were not growing fast enough to underpin final and stable demand without excessive personal borrowing. By fuelling borrowing by households with a limited or zero asset base and encouraging rampant financial speculation, rising inequality brought unprecedented asset bubbles alongside an increasingly fragile banking system.

Today’s most urgent task beyond recovery is to rebalance the real economy. This means plans which halt and reverse the sliding wage share, reduce the gap between rich and poor, shrink the size of the financial sector and increase the flow of funds into productive and sustainable economic activity.

Such a strategy would make the economy less dependent on debt for maintaining demand, limit the level of financial speculation, moderate the cycle of asset prices and reduce the degree of economic volatility.

Stewart Lansley is the author of Rich Britain: The rise and rise of the new super-wealthyUnfair to Middling: The TUC Touchstone Report; and co-author of Londondgrad: From Russia with cash.

The unabridged version of this article is published in Soundings issue 44, Spring 2010.

Who Cares About the Poor?

by Jon Cruddas and Jonathan Rutherford

Who cares about the poor? David Cameron says the Conservatives do. Frank Field, the Labour MP for Birkenhead, is worried that the Tories are not simply raiding Labour territory, they are declaring war on its reason to exist. Through 100 years of disputes about what Labour is or should be about, Field says, “most have agreed that [it] exists to protect and advance the interests of the poor”. That consensus is now open to question.

The Welfare Reform Act 2009 received royal assent last November. There is no better time than now for the centre left to ask itself a few difficult questions about its relationship with the poor. In the final vote on the bill, the Commons rejected Lords amendments that sought some protection for the most vulnerable. Those who are sick, even very ill, will be expected actively to seek work, or face sanctions. Sanctions also apply to mothers of very small children and to those suffering serious mental illness. But the biggest shock to those who campaigned for a more humane approach to welfare reform was the silence of the labour movement. Was this through lack of interest, or tacit support for the measures?

Government ministers rigorously defended the bill, claiming that William Beveridge would have approved of it. This is wrong. Beveridge described his 1942 plan as “in some ways a revolution, but in more important ways it is a natural development from the past”. The revolutionary part broke with the ruling welfare ideology and created a “new type of human institution”. Beveridge called it “social insurance”, which implies both that it is compulsory and that “men stand together with their fellows” by pooling risks. The implementation of this universalist principle and its ethic of
solidarity was an exceptional event in British history. The Welfare Reform Act undermines both the principle and its effect.

Yet there is some truth in the government’s argument. The rhetoric of welfare reform is in keeping with some of the “natural developments” that influenced Beveridge, including the idea of an “undeserving poor” and the belief that it is the dysfunctional behaviour of the poor that is responsible for their poverty. The punitive treatment of Incapacity Benefit claimants and the belief in the curative powers of work have their roots in the late-Victorian idea of a “social residuum”. New Labour revived a disciplinary approach to welfare, concerned with controlling rather than supporting individuals.

Its intellectual lineage – represented by figures such as Thomas Malthus, Jeremy Bentham, the late-Victorian social investigators, and Sidney and Beatrice Webb – is steeped in a technocratic and rationalist notion of progress. Its driving ethos was not so much social justice as that the “degeneracy” of the poor got in the way of the efficient drive towards a perfect society. Sidney Webb railed against the falling birth rate and feared that the country would fall “to the Irish and the Jews”.

Moral panic
Beveridge was a member of the Eugenics Education Society, set up in reaction to the threat of “degeneracy”. Its “first object”, wrote its founder, Francis Galton, “is to check the birth rate of the unfit instead of allowing them to come into being . . . The second object is the improvement of the race by furthering the productivity of the fit by early marriages and the healthful rearing of their children.” In his 1907 pamphlet The Problem of the Unemployed, Beveridge argued that men whose “general defects” make them “unemployable” should be made “dependants of the state”. In return, they must pay with “complete and permanent loss of all citizen rights – including not only the franchise but civil freedom and fatherhood”.

Labour has historically lacked the political ideology to counter the legacy of utilitarian, disciplinary welfare. Its own political culture has been imbued with the Puritan work ethic. As Richard Tawney has argued, 17th-century Puritanism prepared the way for capitalist civilisation and brought with it a new punitive attitude towards the poor. Labour, like the wider social-democratic tradition, has been unable to build a counterculture that can offer an alternative ethics of living and working. As a result, it has colluded in distinguishing morally between the “deserving” and “undeserving” poor.

History has shown us that economic crises generate middle-class panics about a “dangerous” underclass and its racial and sexual transgressions. In the 1980s, the new right embarked on a project to theorise an underclass in Britain. It drew on the work of the American political scientist Charles Murray, whose research had revived eugenicist debates about race and intelligence. Murray was invited to Britain by the Sunday Times in 1989 and his ideas were taken up by Digby Anderson’s Social Affairs Unit. The American academic Lawrence Mead was also influential in reviving the belief that poverty was about behaviour and dependency, rather than economics and justice. The problem was not environment, but individual failing. The work of the new right laid the foundations for New Labour’s welfare reforms.

Electoral collapse
The government calculated that it could triangulate the Conservatives and subject the underclass to punitive measures without alienating Labour’s core supporters. Its refrain of “hard-working families” attempted to codify this division. But the so-called underclass is not a class apart as the new right and the social investigators of the 19th century tried to prove. It is an imagined body of people – chavs, hoodies, junkies – projected on to single mothers, the sick and parts of the working class impoverished by the impact of recession and unemployment.

Welfare reform has generated insecurity beyond those it has targeted. It has helped to create support for the BNP among low earners who fear the same abyss of unemployment and culture loss. The government’s treatment of the poor has become an electoral liability. Statistical evidence about the numbers taken out of poverty will not undo the distrust and the feeling that Labour is “not on our side”. How will Labour rebuild its base?
The centre left needs answers. The Tories discuss recapitalising the poor, while the government can only talk about harsher penalties. Across Europe, centre-left parties associated with the neoliberal transformation of the nation state are paying a heavy political price.

In Germany in 2002, the Social Democratic Party (SPD) launched the reform of the benefits system with its “Hartz IV” laws. The introduction of greater conditionality speeded up the downward trend in the party’s electoral support. Membership collapsed and its working-class base deserted it. Oscar Lafontaine exited to form the Left Party, culminating in the SPD’s catastrophic defeat in last September’s federal elections. New Labour has followed a similar path. It must face the possibility of similar losses to its support come the election.

Jon Cruddas is the MP for Dagenham
Jonathan Rutherford is professor of cultural studies at Middlesex University

ORIGINALLY PUBLISHED BY NEW STATESMAN

Time to Crack Down on Fat Cat Pay

Never Again! Why Britain needs a High Pay CommissionPublished a year on from the collapse of Lehman Brothers COMPASS have produced a report arguing that very little has been learned. The system of excessive compensation that helped cause the crisis has not gone away and rescuing the financial system without real reform has not protected us from a future crisis. This publication outlines the arguments for a High Pay Commission to instigate a public investigation into the effects of excessive pay on our economy and society.

The report argues that the culture of excessive pay for executives encouraged the creation of instability in the financial sector. Nobel Prize winning economist Joseph Stiglitz argues:

The system of compensation…was designed to encourage risk-taking – but it encouraged excessive risk-taking. In effect, it paid them to gamble. When things turned out well, they walked away with huge bonuses. When things turned out badly – as now – they do not share in the losses. Even if they lose their jobs, they walk away with large sums.

Over the last ten years the ratio of CEO to employee pay has risen from 47 times to 128.13. On 31 December 1998 the FTSE 100 index stood at 5,896; ten years later it had fallen to 4,562. On this analysis, the typical FTSE 100 leader has been awesomely rewarded for failure. For the average FTSE 100 CEO this equates to a total salary hike of 295%. Over the same period, average UK earnings went up by only 50%, retail
prices by 32%. The myth that the performance of those on high pay is linked to the performance of the economy as a whole has been shattered. In fact the real merit of their performance is probably worse than this suggests as CEO’s are incentivised to prioritise share value over the real underlying profitability of their companies.

The report argues that excessive pay has distorted the economy, growing the finance sector at the expense of other sectors like manufacturing; and while median incomes have stagnated, the pay of the top 10% has soared away, both distorting real demand in the underlying economy, while also creating a false perception of the affluence of society by business leaders.

Other countries are starting to examine ways to cap executive pay, and the report urges Gordon Brown’s government to investigate how to do so. Indeed, a High pay Commission scheduled to report shortly after the next election could be a poisoned chalice left for an incoming Tory government.

Download the full report here