Comment: Fairness in 2013


Fairness was the big theme of 2012, framing the political agenda from the budget onwards. Cuts to the top rate of tax, the introduction of a pasty tax, calls to cut housing benefit for young people, youth unemployment, statutory press regulation, the manipulation of the Libor rate, payouts to departing BBC director generals and the challenges of living on low pay all featured.

Fairness-2013It has been, and remains, a central theme of the political discourse since the financial crash in 2008.

It will continue to frame the political narrative in 2013, beginning with the Welfare Benefits Uprating Bill, which begins its journey through parliament early next year. This will impose a real terms cut on most benefits from April 2013 when a number of other welfare reforms – such as an overall cap on how much benefit individual families can claim – also come into effect.

Also in April, the universal credit begins its pilot phase before its full roll out in October. The sheer scale and scope of the reforms, plus unemployment remaining high – particularly amongst young people – suggests it will face some inevitable difficulties and criticism.

Other matters that fit within the fairness narrative are still to be settled; press regulation, the ring-fencing of banks and the living wage. The Office for Budget Responsibility (OBR) has consistently overestimated economic growth and is likely to revise down it forecasts, possibly forcing the government to identify further spending cuts. The government will also be under pressure to specify spending plans for the next budget period, which could include further cuts to the welfare budget.

The major political parties have attempted to define the fairness narrative in-line with their own philosophies and ambitions…

For the Conservatives, it’s a struggle between those on benefits (the ‘shirkers’) and ordinary working families (the ‘strivers’). The uprating cap was presented as being on the side of working families, reigning in those who sit at home ‘with the blinds drawn’ refusing to work. A new ad campaign launched this week featured images contrasting ordinary working families with the caricature of the lazy, out of work, benefit claimant.

The strategy is simple; it enables the Conservatives to win support for further government spending cuts (as part of their deficit reduction strategy), cut welfare spending (a longstanding priority) and appear on the side of working households who continue to experience an unprecedented cut in living standards.

However, the narrative fails to account for the reality of ‘benefits’ in the modern UK economy. The benefit cap includes ‘in-work’ benefits such as Working Tax Credits and will therefore hit the ‘ordinary working families’ to which the Tories seeks to appeal. The Resolution Foundation has already argued 60% of the impact of the cap will be felt by working households, a point seized upon by Labour.

Research by the Joseph Rowntree Foundation has also begun to unpick the narrative of families who have never worked. Their research suggested there are large numbers of families who simply rotate between low paid and insecure work and the benefits system, rather than never working.

How far this will go in challenging preconceptions of benefit claimants, low pay and labour insecurity is unclear; however, it does suggest using the uprating cap to further stigmatise benefit claimants could backfire as working households realise the cut to ‘benefits’ includes them too – their living standards will be squeezed further next year.

In opposing the benefit cut, Labour has also sought to position itself on the side of ‘ordinary working families’. This is a slightly trickier position to take in that it opens them to accusations – facile though they may be – that they support those not willing to work. But it is a fundamentally stronger position if we accept the Resolution Foundation’s predictions on the likely impact of the uprating cap and the reality of falling living standards for many working households.

This position also fits with Labour’s ongoing attempt to shape the fairness narrative; championing the living wage, challenging ‘tax cuts for millionaires’, protecting the consumer, committing to implement in full the recommendations of the Leveson report. Labour has a clear and consistent narrative that seems closer to the reality of ‘ordinary working families’ than the tabloid stereotypes of benefit claimants.

Both parties differ in their conception of fairness.

The Conservatives have framed austerity in the context of inter-generational fairness, ensuring our children are not burdened with our debts; Labour is more concerned with equality of opportunity and the link between effort and reward. Ed Miliband has suggested before that the ‘old economic assumptions’ – that hard work leads to a better standard of living and that there is a link between effort and reward – have been broken. Both resonate with the public, but as austerity draws on their appetite for long-term thinking and accepting existing inequalities, they may diminish.

Shaping the fairness narrative is likely to remain most difficult for the coalition parties who must implement unpopular spending cuts. But the government is likely to lose the argument if it continues to argue those on low pay and receiving in-work benefits are ‘shirkers’. The coalition must also be wary of introducing other measures that make life difficult for working households, such as the erosion of employment protection suggested in the Beecroft report.

Labour has the luxury of being able to avoid making detailed spending commitments, while opposing those cuts it disagrees with philosophically, if not practically. Nick Clegg has already begun to position the Lib Dems, highlighting increases in tax allowances and challenging the protection of pensioners’ universal benefits. This sets the scene for a high profile debate over the nature and extent of fairness in the economy.

If Labour successfully challenges tabloid stereotypes, offers some solid policy ideas and finds a persuasive way of presenting predistribution to the public, they are likely to continue leading the agenda; the challenge for the government is to find a better means of reconciling public spending cuts with the public desire for fairness.

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  • LordBlagger

    In opposing the benefit cut, Labour has also sought to position itself on the side of ‘ordinary working families’. This is a slightly trickier position to take in that it opens them to accusations – facile though they may be – that they support those not willing to work.

    =================

    So for a 26K a year worker, if their NI had gone into the FTSE at retirement, they would have had a fund of 560,000 pounds, generating a 19K a year, indexed to RPI, joint life pension.

    You over a 5K a year, linked to CPI (worth 20% less), not fully joint life. Only 20p in the pound of what they would have received.

    Factor in the increase in retirement age and its even more stark.

    Where is the fairness in depriving someone on 26K a year (700 40 years ago), of 430,000 pounds?

    That’s not social justice, its theft.

  • Alexwilliamz

    But surely there must be a cut taken from that 570k for those people investing that money on the individual’s behalf, then some kind of insurance in case of injury or redundancy. I’m seeing that pot diminishing quite rapidly.

  • Newsbot9

    It’s complete nonsense, Alex. He’s a bad parody of the 1%er position.

    Firstly, he’s ignoring the fact that pensions are largely paid out of current funds, they’re not an investment, but a guarantee of minimum retirement income regardless of the state of the market.
    Second, he’s trying to say that 100% of NI is for pensions. It’s not. Very far from it…it’s also for the JSA, ESA, bereavement benefits….and of course a portion also goes to the NHS.
    Third, he is as you say ignoring the very high fees we have for investment.
    Fourthly, he’s ignoring the need to shift funds, for pensions, out of shares and into safer, lower-return investments as people age.
    Fifth..he’s ignoring the fact that you can’t simply “invest in the FTSE 100″, actual pension fund returns have been far lower than he’s implying.

    I could go on for a while, but he’s really got no clue.

  • LordBlagger

    Yes. I’ve omitted stamp duty.

    Now, do you think those charges will come to 430,000 pounds?

  • LordBlagger

    I’m not ignoring it. I’m pointing out the real cost of the impact of paying other people with your money, rather than having an investment. The effect on a 26k a year earner has been a loss of 430,000 pounds.

    Jsa is peanuts and only lasts 6months. Bereavement benefit are small and only apply to a handful. Nhs from NI is only 1% and only recently. It hardly has an impact.

    The real cost is 430,000 gone. That puts that 26k earner into welfare. That means they are poor.

  • LordBlagger

    There is also a cut on the 130,000 for the state pension. That’s the cost for a state pension from a profit making insurer. Costs are on both sides.

    So what’s the one off cost of a state pension from the state?

  • Newsbot9

    So, you’re lying about it. Thanks for admitting it.

    You keep trying on your big lie, as you murder people. You ignore the fact people would be earning nearly double without your capitalism. keep arguing that the welfare needed to compensate for your raiding makes people poor, when it’s your fault in the first place.

    Run coward, run, from that truth!

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