Rung sweet rung

Dalston development 5 c

One of the most striking features of last week’s televised leaders’ debate was the extent to which it displayed a common vocabulary among the party leaders, regardless of political persuasion. In this new policyspeak,  citizens have been transformed into ‘hardworking families’ (when they are not ‘customers’ or ‘taxpayers’) and homes are invariably ‘the first rung of the housing ladder’.

These rungs are only too evident in Dalston.  Despite valiant attempts by local groups, such as Open Dalston, to save some of the area’s cultural and architectural heritage, the ‘town centre’, as the planners call it, has become a giant building site. Cashing in on Dalston’s hip reputation, the hoardings show images of the young and cool and feature slogans like ‘see it, be it, love it’ placed strategically where they can catch the eye of people leaving the nearby Arcola Theatre and Cafe Oto and late night clubbers staggering their giggling way towards the Overground Station.

Dalston development 3Dalston development 4

Yet it is hard to imagine a larger cultural gap than that between the edgy, self-ironising hipster aesthetic that made Dalston cool in the first place and the bland mass-produced blocks produced in their thousands by Barratt and Taylor Wimpey who are currently the two main developers in the area. They also happen to be two of the largest construction companies in the country. Even the staunchly Tory Telegraph regards Taylor Wimpey as a predatory company that is bringing undue pressure on public bodies to allow it to develop where it likes (see this article for an indignant expose of construction companies’ attempts to pressurise politicians to let them develop the Green Belt) while Lawrence Barratt (founder of Barratt Homes) is a well-known donor to the Conservative Party).

The evidence is that the overwhelming majority of buyers of these flats are not the young ‘creatives’ referenced in the images on the hoardings. Many are investors from countries like Russia, China and Pakistan (and more recently from crisis-hit economies in Southern Europe) wanting to park some of their money in the London property market. Such has been the increase in value in recent years that many do not even bother to rent them out – the flats are earning so much money (and, no doubt, helping their owners avoid so much tax and/or financial scrutiny back home) that there is no need for the hassle. In other cases they are bought by buy-to-let landlords. Their tenants are often people who work in the City of London, which is just a few bus stops down the road. Few, if any, are people from the local authority’s list of people with a real and desperate need for shelter. It could also be (but I have no firm evidence of this) that we are beginning to see a phenomenon that is already statistically visible in New York, whereby single people or couples who cannot afford the rent take a 2- or 3-bedroom flat that is too big for their requirements on the basis that they can boost their income by renting out the spare bedroom (or even in extremis the whole flat) through Airbnb – a process that drives up the market rents in an area, while depriving the local housing market of affordable rental properties for families

What is clear is that these flats are not intended for long-term occupation by people who want to put down roots in the area. A couple of years ago I actually went and viewed a show flat in the Barratts Dalston Square development on behalf of a friend of mind who is disabled and was looking for somewhere she could buy that had a disabled parking space and full wheelchair access.

dalston development 2 The disdainful young woman who showed me around was completely unprepared for such a request. All the glossy documentation she showed me featured graphs  demonstrating the return on capital over various different time periods according to a range of different economic scenarios, carefully differentiated to show both capital appreciation and potential rental income. When I asked her which flats were actually wheelchair accessible she told me that only two floors (four flats) in one 13-storey block (out of several blocks for which they were selling apartments ‘off plan’) came into that category. I noticed that the show flat had a lip over the threshold of the front door that was difficult to get a wheelchair over and asked her if the ‘accessible’ flats were available without this. She didn’t know. I also asked whether it would be possible to get kitchen units with the lower height worktop that wheelchair users need and she said ‘You’d have to talk to the architects about that’. It would definitely ‘cost extra’. How much? Again, she didn’t know (and clearly didn’t give a damn). When I said that I thought the point of buying off plan was to be able to customise such things she said that it wasn’t part of the normal package, had to be dealt with by a different department and – when pushed hard – admitted that ‘it wouldn’t be less than £20,000 extra’. The disabled parking space would also add £20,000 to the cost of the flat. She couldn’t get rid of me fast enough. The last thing they wanted, it was clear, was to have owner-residents actually living there who might make real demands on them as freeholders.

Dalston residents have fought long and hard to try to get the planning applications for these developments amended, but with rather little success. After strong lobbying, the number of ‘affordable homes’ in one development (a vast tower block that will go up beside Dalston Kingsland Station and cast its shadow down Ridley Road Market when the sun shines from the west and all the way across the borough boundary into Islington when it is in the east) was increased to 14 (11%) out of the total of 125 flats. When questioned about this policy of allowing these huge private developments, Hackney Councillors on the Planning Committee explain that there is a requirement for a certain number of homes to be built in the borough imposed by government policy and that they have designated this area (which has also been designated as a retail area and a centre for the night-time economy – uses which might seem to clash with each other) as one of the places this quota will be met.

But this policy seems to have absolutely nothing to do with meeting the actual social needs of Hackney residents. These flats have no gardens and no childrens’ play areas. They typically contain a mix of one, two and three bedroom flats (with the 3-bed ones only conceded very reluctantly after pressure from local objectors). They are not designed even for small nuclear families, let alone extended families. To the extent that they meet people’s housing needs at all (as opposed to the needs of global property investors) these are the needs of those emblematic ‘hard-working people’ who want to get their feet ‘on the first rung of the property ladder’. These people, if we are to believe the propaganda, are childless singles and couples who work in central London (and like a bit of partying). We can presume that they are expected, very soon, to move up to the second rung, which, if the likes of Barratt and Taylor Wimpey have their way, might be a 3-bedroom ‘town house’ in a suburb (in another Barratt or Taylor Wimpey development). In the next stage, they can move up to the third rung, one of those new-build 5-bedroom houses one spots from trains in the home counties or the edges of provincial towns, with an anonymous Disneyesque architecture that strips them of any association with the local soil (although no doubt the interiors feature those all-important en suite bathrooms attached to the master bedrooms and open-plan kitchen-diners that feature in the daytime TV property programmes): houses that really could be anywhere. Probably by this time these third-rung people will have children who, if they have artistic pretensions, will run screaming as soon as they are old enough to the nearest inner city location with enough poor people left living in it to offer some illusion of cultural authenticity, and the whole wheel will start turning again. In due course their parents will downsize and move onto further rungs, before making their final investment in a managed retirement community (releasing the capital for their offspring to start on rung one, having tired of bohemian squalor). But wherever they move, the benefits will accrue to the property developers and the new rentier class.

In the meanwhile, something priceless has been destroyed: the idea of a home as a home: somewhere to live, and for your children to live, as part of a stable community, knitted together through the generations. Whether it is owned or rented, what should matter is where it is, who the neighbours are, who is involved in the local school, the local political parties and the other organisations that make up the fabric of social life. Of course we should not idealise the past. Most London boroughs, for example, have a long history of appalling slum landlords, overcrowding, homelessness and vagrancy, coexisting with privilege and polarisation between the servant-employing classes and their servants. Nevertheless, much of the history of the twentieth century was a history of struggles to ameliorate this: to create decent public housing, education, health services and provision for the sick and destitute and to place these things in the hands of elected and accountable public bodies. To the extent that this succeeded, it created bodies of citizens, rooted in particular geographical areas (often through secure long-term jobs, as well as secure tenancies), who were able to exercise some leverage in their local communities,  in the knowledge that they belonged there and the faith that commitments they made to their neighbours and local institutions would be reciprocated. Thus are communities built.

This is not the place to rehearse those arguments, endlessly repeated since the 1980s, of how the rhetoric of ‘freedom’ and ‘choice’ brought about the destruction of the communitarian and solidaristic values that had been created through such processes. But, with a crucial election looming, it is worth remembering that what we are seeing now, a culmination of this, is a dual process: not only does it place huge and growing proportions of our housing stock, as well as other commons, into the hands of enormous corporations; it also atomises and fractures communities, scattering people willy nilly to wherever the idiosyncracies of the market leave spaces for them.

In this process, Hackney, to stick with this local example, ceases to be a cluster of communities and becomes an unstable and temporary staging post in a myriad atomised trajectories made up of competing individuals fighting for a foothold, one rung at a time. Once designated as an area for the first rung and not for families, it starts to implode socially. People who have been brought up here have to move out. And incomers make little more commitment to the area than they would to the surrounding location of a motel they have booked into for a night or two. Who are the losers? Well interestingly enough, they are quite a diverse set of bedfellows: the several communities that have made their homes here in successive waves of immigration; the British people who settled here because they liked this multi-ethnic environment and wanted to use its interesting shops and restaurants and bring up their children here; the later waves of students and artists and assorted hipsters and their gentrifying hangers-on; but also the institutions of local democracy. Hackney is a safe Labour parliamentary seat and Labour also has a majority on the local council. But in allowing the property developers to ride roughshod across the borough, the party is running the risk of kicking away the basis of its own support: the rungs of its own ladder; its electorate.

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More on the Citizens Income – a quick update

Since I wrote about it here in December there have been quite a few developments in the debates on an unconditional citizens income in the UK. These were partly triggered by an unfortunate television interview with Green Party leader Natalie Bennett on Sunday Politics, in which, when aggressively questioned by Andrew Neil,  she failed to provide a convincing argument that it was affordable. Subsequently, Green MP Sarah Lucas, who was also grilled about this on the Radio 4 Today Programme, stepped onto the back foot, saying that although the Green Party was still committed to this demand it would not be in their election manifesto.

A lot of the damage was done by an article in the Guardian by Patrick Wintour, misleadingly stating that ‘The Citizen’s Income Trust (CIT), which has given advice to the Green party and been repeatedly cited by the Greens, has modelled its scheme and discovered it would mean 35.15% of households would be losers, with many of the biggest losers among the poorest households.’

The model referred to here is Euromod, a tax-benefit microsimulation model developed by Holly Sutherland at the University of Essex. Like all such models, the results it produces depend on what assumptions you feed in in the first place.  Whilst it is perfectly true that some early attempts to model the impact of the Green Party’s proposed Citizens Income did produce results that showed that some poor households could be net losers, more recent studies, like this one, based on more sophisticated assumptions, have been done that show conclusively that, in the words of Malcolm Torry:

It is perfectly feasible to implement a Citizen’s Income of £72 per week for every adult, with lower amounts for children and young people, and higher amounts for pensioners, by reducing to zero the personal tax allowance, abolishing higher rate tax relief on pension contributions, and taking households’ Citizen’s Incomes into account in the same way as other income is taken into account when their means-tested benefits were calculated. This scheme would be revenue neutral, it would impose no losses at the point of implementation on low-earning households, and it would impose few losses on all households. All means-tested payments would be substantially reduced, every household would experience much lower marginal deduction rates or current MDRs on much reduced earnings ranges and then reduced MDRs on the rest, and about half of all households currently on working tax credits would be floated off them.

There is, however, a larger and more important point to be made here. And this is the insistence in all the media discussion that any innovation has to be ‘revenue neutral’. This is the default assumption adopted by any journalist interviewing any politician about any demand. Each change has to be justified on its own merits, independent of any other change, on the assumption that all other things remain the same, in a kind of parody of the experimental method.

In reality, of course, any new government would introduce a whole range of changes, all of which would interact with each other. Inevitably, microsimulation models like Euromod, are better able to deal with ‘givens’ that are clearly set out in government policy (such as tax and benefit rates) than with changes arising in the market (such as changes in wage levels, prices or unemployment levels) and cannot hope to model the full complexity of these interactions. Any government that came to power wishing to introduce a citizens income would undoubtedly also want to make other changes, such as raising the minimum wage, changing the rates of income tax, creating some extra taxes, abolishing others and so on. These would radically alter the sums, as, of course, would changes in employment levels related to the dynamics of the world economy. But even leaving these points aside, it is clear that a government committed to redistribution would not find itself short of resources to redistribute (just look at the tax evasion by HSBC customers currently being uncovered).

Such considerations did not feature in the debates following the debacle of the Bennett Sunday Politics interview. In fact several commentators seemed to grab the wrong end of the stick in ways that, perhaps unconsciously, seem willfully counter-intuitive.

Here, for example, is  Zbigniew Tycienski (blogging as ‘Tychy’) gleefully reflecting on Bennett’s ‘car crash’ interview, in a post called ‘A flagship sunk’.  He quotes my earlier post on Citizens Income (the part where I say that, given the choice, some people might like to ‘live on very little and devote your life to art, music, prayer, blogging, archaeology, chasing an elusive scientific concept, conserving rare plants or charitable work’) and describes this as ‘anti-social’.  What an extraordinary conception of society this is!  In his view it is anti-social to contribute to the general cultural, spiritual and scientific good of humankind, but, presumably, not at all anti-social to devote your life to competition, the acquisition of material goods and the pollution of the planet with the resulting detritus. Thus has the neo-liberal logic been absorbed and internalised and become part of a grotesque new Orwellian common sense in which the common good has become the common bad.

The more I hear arguments like that, the more committed I feel to the need to challenge these inside-out ethics. The question is, how?

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Environmental challenges in the inner city

You need nerves of steel to be an environmentally responsible consumer in this part of London. Take the question of recycling carrier bags. At the local Tesco Express the checkout operators already have the plastic bag ready and open to pack for you before you have even had a chance to plonk your basket down beside the till. They are manifestly in a zone of their own, their hands engaged in an automated rhythm that enables them (while abstractedly greeting the customer) to  swipe the goods and pack them without disturbing whatever inner chain of thought or inwardly hummed music gets them through the nearly intolerable stress of the job. If they can stay in the zone, they don’t have to engage consciously with whatever kind of psychopathic personality the customer might have or be reminded of the haraam nature of the food they have to handle which, however hermetically sealed in plastic, must be gross to think about if you are a strict Muslim.

So when you rock up with your sturdy cloth bag from Daunt Books saying ‘I have my own, thank you’ you are disturbing the swing of the labour process and jolting them unpleasantly into the reality of their situation (the long impatient queue of people grumbling into their mobile phones; the eye-to-eye stand-off in the doorway between the security guards and the drunks they are supposed to prevent from being served alcohol; the prickle of just-avoided contact between people whose class and gender and ethnic diversities are such that they would rather not touch each other; the smell – Oh that olfactory entropy, made up of layer after innumerable layer of chemicals, intermingled with the manifold varieties of animal and vegetable decomposition they are supposed to conceal or enhance. Don’t get me started).

You are usually met with a glare that says ‘Do you really think I want to TOUCH your manky bag?’ and left to pack it yourself. This is a challenge because what little spare space there is on the surface of the workstation is on the other side. If you aren’t buying very much, you can squeeze the bag, not properly open, into the half of the wire basket that doesn’t have shopping in it. More usually you have to prop it precariously onto the small triangle between the basket and the credit card reader, taking the items one by one from the exasperated checkout operator and trying to fit them in whilst also holding your purse. The only alternative is to hang it over your arm while filling it. Not recommended. Unless you have exceptional dexterity, you end up with a display of fumbling which irritates the people in the queue behind you as well.

Today I discovered yet another hazard. When I got home I found in amongst my shopping a small cardboard container packed with luridly coloured little sachets which, on inspection, turned out to contain ‘2015 Premier League Socker Stickers’*. They must have been on display by the checkout to entrap exhausted parents into spending even more (‘Every little helps’). Priced at 80p each. I must have inadvertently shoved around £100 worth of them in with my shopping.

I returned them, of course. Expecting at least, perhaps, a smile or an ice-breaking moment. ‘Silly me’. Or ‘Fancy those security guards not spotting I was shoplifting’. But no. The young woman who had served me was not at her workstation but I recognised her from behind by her hijab, attracted her attention and handed them back. She took them politely but without a flicker of interest or amusement. Like the other checkout operators and the people in the queue she seemed to think I was quite mad. No words were spoken (other than by me) but what the expressions said, loud and clear, was ‘Why on earth did you bother to bring them back?’.

Why indeed?

* an illustration of capitalism’s seemingly infinite ability to generate new commodities. it would be interesting to know how that 80p is distributed among which economic actors along what must be a bizarre value chain (paper manufacturers? football clubs? printers? the factory- or home-based labour of packers? writers? designers? photographers? transport workers?) all for a coloured sticker whose raw materials must be almost worthless and which will bring, at best, only moments of pleasure to the child who, presumably, gets to stick it in a sticker book, swap it with a friend or discard it as a duplicate.

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The importance of the minimum wage

This is the sixth in a series of posts on what sort of welfare state we might want. The first can be found here, the second here, the third here, the fourth here and the fifth here.

Although it is still widely believed  that raising the minimum wage would damage the  economy, a great deal of good work has been carried out in recent years by a range of academic researchers, campaigners and the trade union movement to promote the idea of a living wage in the UK*.

It definitely seems to be an idea whose time has come. The Green Party and Plaid Cymru have signed up to the principle of a ‘living wage’ but (although a number of local authorities, Labour-controlled and otherwise, have done so) the Labour Party has done so only timidly. According to the Labour website their commitment is only ‘to increase the NMW from 54% to 58% of median earnings by 2020 following consultation with business.’

That last phrase – ‘following consultation with business’ – speaks volumes, uncomfortably reminding us of the fudging of the last Labour government which (as I discussed here) found itself caught between the pressures from its constituents to introduce a national minimum wage for the first time and the pressures from neoliberal consultants and business interests to replace existing benefits with tax credits. Gordon Brown, the then Chancellor, ended up with a compromise: introducing a minimum wage which was too low to provide a living wage for many sections of the population, with tax credits used as an income top-up. As the years have gone by, the value of that wage has fallen in terms of its buying power, while the bill for tax credits has grown inexorably. This has of course been in the interests of business, with employers benefiting immensely from being able to pay below-subsistence wages in the knowledge that they will be subsidised by the state.

It will be no surprise, therefore, if the proposed consultations provoke a stream of arguments that raising the minimum wage is not a good idea. The most usual argument put forward by business is that it will ‘destroy jobs’. Employers, will, they say, simply not be able to afford the higher wages and, depending on their size and strength will at best stop recruiting, or, worse, start firing people. Before the introduction of the minimum wage in 1998 the media were flooded with dire warnings along these lines. In the event, no such impacts were detected.

A very thorough recent survey of existing studies by Hristos Doucouliagos and T.D Stanley concluded that ‘with sixty-four studies containing approximately fifteen hundred estimates, we have reason to believe that if there is some adverse employment effect from minimum wage rises, it must be of a small and policy-irrelevant magnitude.’ In other words, research shows that introducing a minimum wage has absolutely no discernible effect on employment whatsoever.

So arguments like these from the employers can be largely discounted. But what about other objections to the idea of a statutory minimum wage coming from other quarters? Two of these arguments deserve special attention.

The first is that statutory minimum wages are incompatible with free collective bargaining. In the past, this argument was typically put forward by trade unions representing workers in well-organised sectors who were able to bargain successfully for above-average wages and, in the process of such bargaining, built strong, class-conscious organisations that could (and sometimes did) use their collective muscle to campaign for broader social benefits for the working class as a whole. It was such voices, above all, that prevented the national minimum wage being placed on the Labour Party’s wish-list until the 1990s, despite some weaker dissenting views from trade unions representing low-paid workers, women and freelance workers. Such views still prevail in a number of European countries where the trade unions remain relatively strong and the coverage of collective agreements broad. Denmark, Finland, Italy and Sweden, for example, only have minimum wage rates set through sectoral collective agreements while Austria has more or less the same system but sets a low minimum wage in sectors where no collective agreements exist. Given that it is always possible for trade unions to negotiate something that is higher than any statutory minimum, it is not always easy to tell to what extent such arguments are driven by instrumental factors – the belief that the only reason people join unions is to get pay increases and a fear that members will become apathetic if they see this role being carried out by non-union organisations.

In any case, such objections are declining in importance. This is partly, perhaps, a reflection of the dwindling of union influence in an economy dominated by anti-union multinational corporations who can use the existence of a global reserve army of labour to bring downward pressure to bear on wages and conditions, and the industrial restructuring that has shrunk manufacturing employment in the West. But it is also a reflection of the growing importance of non-wage issues in the collective bargaining agenda. Across all industries, unions find themselves having to take up issues like job security, health and safety, equality, pensions, protection against casualisation and outsourcing and these are often the reasons people join. In the public sector unions are under growing pressure from their members to campaign against privatisation and austerity. In the creative industries, there are burning concerns about the use of unpaid internships, the ownership of intellectual property and – brought into sharp relief today by the horrific events at Charlie Hebdo – the safety of journalists. With all these other things to worry about, having at least a minimum level of pay guaranteed becomes, one suspects, something of a relief. For trade unions, a minimum wage is a floor below which wages cannot fall. Incorporating it into collective agreements provides a way to ensure that it can stay in place and cannot be removed by government dictat (something which cannot be said about the level of tax credit). Though of course this does not mean that there is not a continuing need to make sure it rises in real terms in line with increases in the cost of living.

Another argument against the minimum wage sometimes heard, including from some people broadly on the left, is that it is incompatible with a basic minimum income, or ‘citizen’s income’. I must say I fail to understand the logic of this argument. Let us suppose that the citizens income (CI) is set a fairly low level, as it undoubtedly would have to be. Then most people will want to work at least part time and many, I would surmise, will want to do so full time for much of their working lives. Their motives for doing so will in most cases include a financial one – they want a higher income so they can improve their standard of living, buy luxuries, take holidays or whatever. They will pay income tax on everything they earn and this income tax, along with the proceeds of other taxes, will be redistributed to pay for public services and, of course, for the CI itself (however it should be emphasised here that the CI will not represent a new cost for the state; it will simply be substituting for benefits, tax credits, tax allowances that people currently claim by different means). The wage and the CI thus bolster each other.

Because there is rather little evidence of how CI actually works in practice there is no way of testing hypotheses that, if the market is left to its own devices, the tendency would be for wages either to rise or to fall. A kind of common sense logic suggests that at the very bottom of the wage spectrum, employers offering unpleasant jobs would have to raise the wages on offer because workers could no longer be forced into them out of desperation. Similarly, we can presume that trade unions representing low paid workers would find their bargaining power with employers strengthened by the fact that CI would offer the equivalent of strike pay in industrial disputes. However it is possible that where jobs are more attractive, people might be prepared to do them for lower rewards. But this is conjecture. In the meanwhile, it seems only prudent not to leave things to the market. I can see no fundamental incompatibility between CI and a statutory minimum wage (though the definition of ‘living’ in ‘living wage’ might have to be adjusted). However I do see a number of other strong arguments for retaining the principle of a statutory minimum wage. These include:

  • bolstering the principle of equal pay for work of equal value;
  • countering gender and other forms of segregation on the labour market;
  • ensuring that vulnerable groups (such as people with learning impairments) can be integrated into work without being exploited;
  • ensuring that migrants who may not yet have been granted the full citizenship that would entitle them to CI are not exploited or used to undercut other workers.

Another big challenge for the minimum wage is how it can be adapted to address the situation of people working online, on crowdsourcing platforms which are unanchored from any national regulatory control. This is something I am currently doing research on but is beyond the scope of this blog post. Watch this space.

*The Living Wage Foundation is a useful source of information on this.

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Left and right libertarianisms: where will we swing next?

My recent post on an unconditional citizen’s income has sparked quite a bit of correspondence, reminding me of an article I wrote 20 years ago for Red Pepper, published as ‘Contesting Liberty’,  in which I discussed the way in which the idea of a citizen’s income (along with various other concepts such as ‘liberty’ and ‘flexibility’) had been adopted at various times by libertarians both of the left and of the right.

The article started off as a review of Saturn’s Children: How the State Devours Liberty, Prosperity and Virtue, (Sinclair-Stevenson, London, 1995) by Alan Duncan and Dominic Hobson, two enfants terribles of the Tory Party then in vogue, which proposed an extreme right-wing version of citizen’s income.

Re-reading it now I see that it took me quite a long time to get to the discussion of how to distinguish this version from those advocated by feminists, greens and socialists. The first part of the article is mainly a reflection on cyclical changes in political thinking, exploring the Spanish philosopher Ortega y Gasset’s idea that new patterns of hegemonic thinking become dominant as new generations come into power, at intervals 15-yearly intervals. Previous tipping points, it was argued, had been in 1903, 1918, 1933, 1948, 1963 and 1978 so the next such sea-changes should have taken place in 1993 and 2008.

What is striking in retrospect is how, although I was looking for evidence of such a change around 1993, I failed absolutely to spot any of the many significant changes which now seem so glaringly obvious: the launching of the Internet and the formation of the single European market in 1992, the bringing into being of the World Trade Organisation in 1994 … in short a whole range of things that consolidated the hegemonic power of neoliberalism, created the conditions for a new global division of labour, and established a new phase of capitalism that some have labelled ‘Digital’. (I have written about this in my new book: Labor in the Global Digital Economy: the Cybertariat Comes of Age). However I do not think my myopia at the time invalidates this approach, which perhaps has a new relevance right now. I doubt if there is anyone who will dispute the significance of 2008 as a historical watershed. As 2015 dawns we are, so to speak, in mid cycle so perhaps it is time to start thinking about what contradictions are playing themselves out in this present phase, and how the next generation will try to resolve them.

So in case it is still of interest to some people, and since it doesn’t seem to be available online, I have reformatted the only version of the article I could find (probably not the precise version that was published in 1995 by Red Pepper, but near enough. I added one footnote but otherwise left its contents intact). At six pages, it is rather long to post as a blog entry so I have uploaded it as a pdf file here.

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The income tax taboo

This is the fifth in a series of posts on what sort of welfare state we might want. The first can be found here, the second here, the third here  and the fourth here.

There seems to be an unshakeable conviction shared by all the major political parties that the surest way to lose an election is to suggest in your manifesto that you might want to raise income taxes. Perhaps they are right. Perhaps most British people really believe that paying more income tax is the worst thing that could happen to them financially. But if they do believe this, we should ask why they do so, because it flies in the face of just about all the evidence.

The belief seems to be rooted in the idea that there is some terrible unfairness in taking a slice from the incomes of hardworking individuals and spending it on general social goods and services. But this kind of logic is rarely applied to other taxes.

Take, for example, Value Added Tax (VAT). This was introduced into the UK in 1973, as a condition of joining the European Common Market. What it replaced was purchase tax, which was levied on selected goods, at the point of production, from companies, although of course the costs were passed on to consumers. With a few exemptions, VAT is applied to all sales and purchases of goods along the value chain, with companies able to claim back the VAT they have spent on purchases and set this amount against what they have charged to customers. The tax is therefore funneled inexorably towards the final consumer, who, needless to say, cannot set anything against it and must pay the full whack.

As the excellent work of Richard Murphy has shown, unlike income tax, VAT is strongly regressive. In 2010, before the VAT rate went up from 17.5% to 20%,  he compared direct taxes (income tax) with indirect ones (VAT) and concluded that:

Direct taxes then rise steadily as a proportion of income as incomes rise and both VAT and all indirect taxes combined do the exact opposite, falling as a proportion of income as income rises. So marked is the trend that the overall progressive effect of income tax is not enough to counter the fact that the poorest households suffer such a high rate of overall indirect tax that they end up with the highest average tax rates in the economy as a whole. The message from this data is unambiguous: the poorest 20% of households in the UK have both the highest overall tax burden of any quintile and the highest VAT burden. That VAT burden at 12.1% of their income is more than double that paid by the top quintile, where the VAT burden is 5.9% of income. (Taken from Is VAT Regressive and if so why does the IFS deny it?, Tax Research UK, July 12, 2010)

Five years later, with VAT at 20%, this inequality between the poorest fifth of the population and the richest fifth has undoubtedly worsened. Yet we find very little in the public discourse decrying this unfairness. It is overwhelmingly the redistribution of income tax that is denounced, implicitly or explicitly, generally in the form of a rhetorical question on the lines of ‘Why should the hardworking taxpayer subsidise ____ ?’. There are many ways the blank can be filled in: single parents, students, child benefit, winter fuel allowance, bus passes, cosmetic surgery on the NHS, education for prisoners … you name it. But I cannot recall ever hearing a sentence starting ‘Why should the consumer subsidise ____ ?’.

Such discourse both obfuscates and distorts reality. Let us take the example of benefits paid to parents of young children. The rhetoric implies that having children is a selfish pleasure that should only be indulged in by those who can afford it, and that those who are usually described as having ‘chosen to remain childless’ are unfairly penalised if a portion of their taxes is diverted in the direction of feckless parents. This ignores the larger reality that what parents are actually doing is bringing up (with very little support from the state) the next generation of workers (and taxpayers) whose labour will support them in their old age. Parents are thus providing what should be regarded as a public service in which it makes pragmatic instrumental sense for everyone to invest.

In other cases, the taboo against defending the principle of income tax extends even to cases where it is manifestly the best and fairest solution to the problem it is purported to create. Student loans provide a clear example of this. They were introduced to replace student grants using the argument that it was unfair for the hardworking taxpayer to subsidise the higher education of people who were eventually going to end up earning more money because of their higher qualifications. Let us leave aside the fact that this is not necessarily the case. The value of an undergraduate degree on the labour market has in fact deteriorated in proportion to the extent to which university attendance has spread across the population (increasing from 3.4% in 1950, 8.4% in 1970, 19.3% in 1990 to 33% in 2000*) and many graduates end up doing low-paid menial jobs, often with little relation to their qualifications. More importantly, for the purposes of this argument, the loan system manifestly does not work on its own terms. It was announced in November 2014 that three quarters of students won’t be able to pay off their debt (see this report in the Independent). To those who can’t pay must be added those who won’t. Loan repayments can, for instance, be avoided by the simple expedient of moving abroad. Students (and their parents) are in effect being asked to pay in advance for something that might or might not happen (in the process enriching the financial services industry). The logic that those who earn more should pay more has been stood on its head.

If the ‘problem’ is that graduates end up earning more than other workers, then the solution to that problem seems glaringly obvious. If and when they start doing so, let them pay it back in the form of income tax. Such a solution (tried and tested as it was in most developed countries in the latter part of the 20th century and still working in some) is undoubtedly simpler to run and more efficient in achieving the stated objectives of the policy that gave us those disastrous loans. It also has another benefit in that it recognises that the value of a university education does not only lie in the financial rewards it leads to. As I already discussed in this blog here, producing a well-educated population has general social benefits that accrue to everyone – not just those who receive that education –  in the form of art, culture, charitable work, the quality of public debate and political life, imaginative and better-informed parenting and what is currently known as ‘social innovation’.

As with child benefits and student grants, so it is with many other forms of social redistribution. Not only do they provide efficient solutions to managing economic and social reproduction, they also enrich the commons and provide the foundations of a civilised culture. So let’s grasp the nettle and start promoting income tax as a good thing.

to be continued

*figures taken from here

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Don’t attack the baby boomers

This is the fourth in a series of posts on what sort of welfare state we might want. The first can be found here, the second here and the third here.

When I wrote about tax credits a couple of weeks ago I was too lazy to search out the latest figures on the breakdown of welfare spending and used some older figures I dug out in 2012. A few days later I discovered that the Daily Mirror had done the job for me here.

It compares the spending on the top seven categories of welfare spending of which the five largest categories are:

  • £22.9 billion on Housing Benefit;
  • £25 billion on Working Age Tax Credits;
  • £80.5 billion on State Pensions;
  • £13.3 billion on Disability Living Allowance; and
  • £9.3 billion on Employment Support Allowance (ESA).

The news story to which this information is attached concerns the government’s plans to cut back the level of ESA (formerly Incapacity Benefit) paid to disabled people from £101.15 a week to £75.40 a week, just above the level of the Job Seeker’s Allowance (JSA) paid to the unemployed. (It should be noted in passing that the total amount of JSA paid out is too low for it even to feature in this breakdown.)

The main message of the article is that it is disgraceful to pick on disabled people this way. Despite the fact that the Mirror is traditionally a paper that supports Labour, however, it does not conclude from this that cuts should not be made. No, the burden of the article is that the savings should be taken not from disabled people but from pensioners. To quote:

‘Cutting Employment Support Allowance would save the government £2.4bn but at the cost of some of the UK’s most vulnerable people. But it leaves the biggest items on the welfare bill untouched. That’s pensions.’

Leaving aside the fact that many disabled people are pensioners, and vice versa, what is most striking to me about this conclusion is that the author makes absolutely no mention of  the second-largest component of welfare spending: Working Age Tax Credits. Nor is it ever suggested that it might be possible to raid this pot rather than the pensions one.

At the risk of repeating what I have written earlier, I feel it is necessary to reiterate that there is a fundamental difference between benefits like ESA and pensions, which accrue to individuals, and tax credits, the benefits of which accrue, not to workers but to cheapskate employers who pay wages that are too low to survive on.

The Mirror appears here to have internalised, completely and unquestioningly, the neo-liberal logic that plays one section of the population off against another whilst leaving unexamined the ways that this is in the interests of companies.

The elderly form a large and growing portion of the UK population. According to official UK statistics (OPCS estimates) in mid-2013 there were 14.7 million people aged 60 and over and 11 million aged 65 and over (out of a total population of 64 million) and there are now more pensioners than there are children under 16. It is predicted that the proportion of people over 60 will rise from the present 23% of the population to nearly 29% in 2034 and 31% in 2058.

Small wonder, then, that the pension bill is a prime target for those wishing to cut public expenditure. And right now the ground seems to be being prepared – with a vengeance – for future cuts. Several inter-related themes are recurrent in the popular discourse but they add up to a general message that the current generation of people retiring from the workplace are in some way privileged, and that these privileges are gained at the expense of other groups in the population: the disabled (as evidenced in this Mirror article) or, evenly more commonly, the young, including their own children.

One common theme is that the baby boomers’ pensions are being paid by those ‘hard working taxpayers’ who feature so prominently in the rhetoric of the Labour Party as well as government propagandists. Actually this misrepresents the reality to quite a considerable extent. During the 1950s, 1960s and 1970s, when most of the current crop of pensioners entered the labour market, the UK pensions system was still as it had been established under the 1946 National Insurance Act: National Insurance contributions were paid by those in work, and their employers, into a common pot from which unemployment benefit, sickness benefit, retirement benefit (pensions) and other benefits were paid. Pension coverage was not universal (married women and some self-employed workers were excluded from it) but the principle was that everyone contributed to a system from which everyone then benefited. The baby boomer generation thus spent the first two, three or even four decades of their working lives contributing to the basic state pensions of the older generation that preceded them. Some were, of course, also enrolled in employer-provided pension schemes which provided additional income in retirement, but by no means all (in the case of women working part-time and people working for small companies, only a very small proportion). Over the ensuing decades a series of changes placed pension schemes more and more into the hands of private providers and shifted the logic from one whereby people currently working paid for the pensions of their elders who were concurrently drawing pensions to one where people working paid for their own pensions in the future, a principle whose most recent formulation was in the Pensions Act of 2008 with its ‘defined contribution’ principle that says whatever the ‘jobholder’ puts in, he or she should then take out. This is quite contrary to the principle ‘to each according to  need, from each according to ability’ that underpins most socialists’ idea of what a welfare state should be about. It also strays away from the idea that contributions into a common scheme should be obligatory, a principle, which even Winston Churchill recognised as necessary (in relation to unemployment insurance) because if it were not compulsory for everyone to pay into the system then only the bad risks would take out such insurance, leading to the failure of the whole scheme.

The baby boomers have, in other words, being paying into the system throughout their working lives, both in the form of National Insurance Contributions and in the form of Income Tax, though it is only in the latter part of their working lives (and in the case of many women and self-employed people, hardly at all) that many have been paying into their own private pension pots. Contrast this with the companies who benefit from the tax credits (which the Mirror thinks should not be touched) many of which are registered in tax havens and pay little into the public purse.

A second common theme is that the baby boomer generation have benefited disproportionately from the rise in house prices and are occupying high value properties that would otherwise be available for young people to live in. They are often portrayed as selfish squatters.

Again, let us leave aside the rather obvious point that in many cases young people, in the form of their own children and grandchildren, are already living with them in these properties, albeit perhaps sometimes with all parties wishing that they had a bit more privacy and control of their living space. There are some other myths here that need debunking. A few facts about the history of housing in the UK* may help here. During the 20th century, owner occupation grew from 10% of homes to 68%, with most of that increase taking place in the last four decades of the century (it actually fell between 1938 and 1951). A high proportion of the rented accommodation (a majority from the 1970s onward) was in housing owned by local authorities or (from the 1980s) housing associations. In the 21st century some of these trends have reversed a little, with a resurgence in the role of private landlords, so that by the 2011 census the breakdown was: 7.2 million homes owned outright, 7.8 million owned with a mortgage, 4.2 million privately rented and 4.1 million socially rented (of which 2.2. million were from local authorities and 1.9 million from other social landlords). Nearly 70% of homes, therefore, require the payment of either rent or mortgage to secure ongoing occupation. If the residents cannot pay these, they will be booted out.

The majority of the baby boomer generation were brought up in rented accommodation and started their working lives paying rent.  Some, but not all, switched to paying mortgages when they could afford to do so (often driven as much by fear that rents were becoming unaffordable as by the desire for the proverbial ‘home of one’s own’). Those who chose to acquire mortgages had to sacrifice a considerable chunk of their incomes to pay them off. (Let us not forget that for every pound of the purchase price of the property you pay off with your mortgage you pay at least as much again to the bank, building society or mortgage company that lent you the money to buy it with). Except in a minority of cases where properties were inherited, the properties these baby boomers now own were thus anything but a windfall (except to the moneylenders). Like their pensions, they were paid for from the wages of a working lifetime.

It is certainly true that many of these properties, including the former public housing that tenants were encouraged to buy from the 1980s onward, have increased enormously in value. But let us look at what, precisely, was going on when the Thatcher government decided to sell off the cream of Britain’s public housing stock. First of all, let us remember that most this housing had already been amortised. In other words, the initial cost of  building it had already been recovered. If the logic of the spirit in which welfare states were ostensibly set up had been followed, the rents of these publicly-owned homes should have been very low. If there was no need to make a profit from them, all that the local authorities who owned them should have needed by way of income was enough money to cover the costs of maintenance and repairs, and a contribution towards the cost of building additional new housing. So when these homes were sold off to their tenants, they were in effect being asked to buy something that was already publicly owned and paid for. And since they had to get a mortgage in order to do so, half of what they paid was in effect a gift (in the form of interest payments) to the financial services industries which were such strong supporters of the Thatcher Government, as well as beneficiaries from its policies.

But, I hear you think, the people who bought these properties nevertheless benefited hugely from doing so, didn’t they? Well, perhaps some did. But it is interesting how many people who were not former tenants did so even more. A surprisingly high proportion of former council flats have ended up in the ownership of private ‘buy to let’ landlords, including a number of Tory MPs (most notoriously Richard Benyon who purportedly collects £625,000 per year in tenants’ housing benefits). But even when, after years of paying off their mortgages, people have managed to remain in possession of these, or other properties, do they really get to leave them to their children as those enticing promises led them to believe? The answer is only yes if they are fortunate enough to die suddenly. Because of the pernicious distinction that has been drawn in the neo-liberal welfare state between ‘treatment’ (which, although increasingly narrowly defined, is still provided free by the National Health Service) and ‘care’ (which most emphatically is not), the chances are very high that the house will have to be sold off, either before or after death, to pay for the rocketing charges for social care (provided by private companies which, by a further irony, are very likely to be employing workers on such low wages that they require tax credits to survive and which may, or may not, be paying corporation tax).

So much for the baby boomers who scrimped and saved to pay mortgages. What of those who remained in their social housing and paid rent instead? Well they are already being being punished – by the ‘bedroom tax’. If they have any spare space whatsoever apart from their bedroom (whether used to house medical equipment, a study or any other purpose) then they have to pay an unaffordable extra sum of rent for it. So, although they may have faithfully paid rent for many years and put money and effort into maintaining and caring for the property, they are no more secure in their housing than anyone else.

Once again, what is happening is that different sections of the population are played off against each other, while corporate interests are rendered invisible.

to be continued

* Taken from here and here and here.

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