Tag: Resolution Foundation

The budget will not alleviate inequality, poverty and hardship that government policies have created

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Watch Jeremy Corbyn’s excellent response to the budget, while facing the braying, sneering, smirking government. 

Hammond is economical with copies of the Budget 

The Labour party have accused the chancellor Philip Hammond of breaking the ministerial code after opposition parties were not given a copy of the budget in advance. The code states that when a minister makes a statement to MPs in the Commons “a copy of the text of an oral statement should usually be shown to the opposition shortly before it is made”. The rules are that 15 copies and associated documents should be sent to the chief whip’s office at least 45 minutes before a statement. The government have frequently flouted these rules, prefering to follow the rampant authoritarianism protocol of avoiding scrutiny, transparency and above all, democratic accountability

However, a Treasury source claims that there was ‘no official rule’ that other parties should get an early look at budget measures. “We did not do anything differently from what we have been doing for the past 20 years,” the source said. I half expected him to add that the Ministerial Code isn’t really a code, but more a kind of ‘loose guideline’. 

The opposition is said to be considering a formal complaint. 

Austerity has not ended

Jeremy Corbyn accused the government of a U-turn on Theresa May’s party conference pledge that austerity was over. Hammond told MPs that austerity was “coming to an end”. The Labour leader replied: “The prime minister pledged austerity is over. This is a broken promises budget. What we’ve heard today are half measures and quick fixes while austerity grinds on.”

The Labour party also criticised income tax cuts, which it said would favour the better off and said there were no guarantees that government departments would not face further cuts. The Resolution Foundation have also concluded the same. 

Government rattles the Office for Budget Responsibility

The Office for Budget Responsibility (OBR), whose role, unsuprisingly, is to scrutinise the budget are also disgruntled because the government only handed over the final Budget policy measures on 25 October, a day late. This means the OBR hasn’t been able to check that the government’s sums actually add up.

The precise changes to universal credit came too late for the OBR to assess them properly, too. The budget red book says that the roll-out of universal credit is now scheduled to end in December 2023. It says:

In response to feedback on universal credit, the implementation schedule has been updated: it will begin in July 2019, as planned, but will end in December 2023.

But until recently, as this House of Commons library briefing (pdf) reveals, the roll-out was due to end in March 2023.

Officially the government says that, if the UK had to leave the EU with no deal, it could manage. But the OBR doesn’t share this view:

A disorderly one [Brexit] could have severe short-term implications for the economy, the exchange rate, asset prices and the public finances. The scale would be very hard to predict, given the lack of precedent.

The Press Association (PA) reports that the Labour leader said eight years of austerity has “damaged our economy” and delayed the recovery, adding the government has not abandoned the policy despite the chancellor’s latest spending pledges. The PA says:

Leading the response to the budget, Corbyn also said the proposals announced will “not undo the damage done” by the squeeze on spending.

He told the Commons: “The prime minister pledged austerity was over – this is a broken promise budget.

“What we’ve heard today are half measures and quick fixes while austerity grinds on.

“And far from people’s hard work and sacrifices having paid off, as the chancellor claims, this government has frittered it away in ideological tax cuts to the richest in our society.”

Corbyn added: “The government claims austerity has worked so now they can end it.

“That is absolutely the opposite of the truth – austerity needs to end because it has failed.”

Corbyn later said the “precious” NHS is a “thermometer of the wellbeing of our society”, adding: “But the illness is austerity – cuts to social care, failure to invest in housing and slashing of real social security.

“It has one inevitable consequence – people’s health has got worse and demands on the National Health Service have increased.”

Corbyn also condemned the “horrific and vile antisemitic and racist attack” in Pittsburgh, noting: “We stand together with those under threat from the far-right, wherever it may be, anywhere on this planet.”

The Labour leader criticised pay levels for public sector workers, adding: “Every public sector worker deserves a decent pay rise, but 60% of teachers are not getting it – neither are the police nor the Government’s own civil service workers.”

The economy is also being damaged by a “shambolic Brexit”, Corbyn added.”

Elements of the budget have revealed a Conservative party in ideological retreat. One of Jeremy Corbyn’s greatest achievements as leader of the opposition is the undermining of the neoliberal hegemony and his presentation of an alternative narrative and economic strategy. Personally I am glad that neocon neoliberal Francis Fukuyama didn’t get the last word after all. 

Over the last couple of years, the government have imported policy ideas and adopted rhetoric from the Labour party to use as strategic window dressing. Hammond announced an end to the government signing off on much-loathed private finance initiative contracts – something Corbyn had already promised. As a former Treasury advisor noted:

Originally introduced by John Major, and continued under New Labour, PFIs are essentially a way for the state to finance and then look after new infrastructure. The traditional way for the government to build a new piece of infrastructure, such as a hospital, a school, or a new road bypass, was to raise the money in taxes, or borrow it from the bond markets, and then pay builders to deliver the project. After that, the public sector would own the asset. 

The theoretical justification for Private Finance Initiatives (PFI) is that the private sector is more efficient at delivering and managing infrastructure projects than civil servants. PFI also supposedly transfers the financial risk of a construction project over-running from the public to the private sector. However earlier this year, the National Audit Office (NAO), released a new report which highlighted a lack of evidence that PFIs offer value for money for taxpayers.

The report followed the collapse of the construction and services firm Carillion which has shone a bright spotlight on the flawed process of  state contracting and outsourcing.

According to the Treasury data there are 716  PFI projects (of which 686 are operational) with a capital value of just under £60bn. Of this total the Department of Health was responsible for £13bn, the Ministry of Defence £9.5bn and the Department of Education £8.6bn.

Hammond pledged a tax crackdown with a UK “digital services tax”, aimed only at multimillion companies rather than startup businesses. On universal credit, the government attempted to neutralise the toxic issues with an extra £1bn to ‘ease issues with its rollout.’

But Hammond’s generous tax cuts to the very wealthiest households indicate that this is still very much a government for the few, not the many. 

Alison Garnham, chief executive of the Child Poverty Action Group, commented:

The work allowance increase is unequivocally good news for families receiving universal credit but a bigger salvage operation is still needed for the benefit. And bringing forward higher tax allowances – which will cost much more than the universal credit change – will mainly benefit the richest half of the population. We look forward to hearing more detail on how the secretary of state will use the extra £1bn to ease the migration of people on existing benefits to universal credit.

This is crunch time for universal credit. We hope the chancellor’s positive announcements on work allowances will be followed by a pause in the roll-out to allow for a fundamental review of its design and, crucially, for a commitment to restoring all the money that’s been taken out of universal credit.

Final comment:

 

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Wealthiest tenth of households are ‘overwhelmingly’ the biggest beneficiaries of Hammond’s budget tax cuts

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Image result for Philip hammond rewards for the wealthy

The Resolution Foundation is a non-partisan think tank that works to improve the living standards of those in Britain on low to middle incomes.

The foundation’s initial comments on Hammond’s budget: 

The big print giveth and the small print taketh away.

Torsten Bell, director of the Resolution Foundation, says about the budget:

“In today’s budget, the chancellor has significantly eased – but not ended – austerity for public services. However, tough times are far from over.

The chancellor has set out plans to spend almost all of a very significant fiscal windfall on extra spending for the NHS, bringing to a close the era of falling overall public service spending. But unprotected departments are still on course for spending cuts into the 2020s – averaging 3% between 2019 and 2023.

The chancellor has also delivered a welcome boost to [‘hard working’] families on universal credit worth £630 a year.” 

Tomorrow the Resolution Foundation and the Institute for Fiscal Studies will both be publishing detailed assessments of the budget. I will be scrutinising these and commenting on them.

Jeremy Corbyn’s verdict:

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Government refuse to publish Brexit impact assessment. We need to ask why

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“Despite calls from over 150 MP’s and threats of legal action, the Department for Exiting The European Union are still refusing to publish Brexit impact assessments.” David Lammy.

Whitehall’s internal risk assessments of the impact of leaving the EU on various sectors of the UK economy have remained the private property of the government. The government’s reluctance to publish them has been one of the most controversial, and widely discussed, features of its approach to Brexit. Ministers say that publication would undermine their hand in the Brexit talks and could influence the debate on Brexit if they were revealed. Circulation of the assessment is said to be highly restricted inside government because of its political sensitivity.

However the government’s authoritarian refusal to publish these documents is undemocratic, and it means the public will be intentionally kept in the  dark about Whitehall’s internal analysis over the economic impact of Brexit. Not a government that’s fond of public scrutiny, transparency and democratic accountability, then.

If you think my use of the term “authoritarian” is a bit strong, it’s worth remembering that in 2012, the government was ordered more than once by the Information Commisioner and by a Tribunal to release the risk register document relating to the impact of the controversial Health and Social Care Bill. Ministers vetoed the disclosure, and said that revealing such information would “interfere with policymaking”, and as such, was “not in the public interest.”  However, the Information Tribunal had ruled that the public interest in publishing the risk register was “very high, if not exceptional”.

Nonetheless, it has never been published for the public to see. Over the last 7 years, I have given many other examples of policies and narrative that indicate the Conservative’s strong authoritarian tendency.

The highly controversial Welfare “Reform” Act ( key measures of which were the introduction of Universal Credit, the “bedroom tax”, changes and steep cuts to disability benefits, the introduction of  a harsh and punitive sanctioning regime and the benefit cap) was defeated several times in parliament. The government implemented it nonetheless, by enforcing the “financial privilege” of the Commons in order to ignore the serious concerns raised and the refuse to entertain the mitigating amendments from the House of Lords.

Parliamentary debate regarding Brexit legislation is at a crucial stage, but opposition parties are given very little information before they are expected to make key decisions and vote on them. This is not an isolated or incidental set of circumstances. It’s emerged as a key Conservative strategy over the last few years, to ensure that parliamentary and public scrutiny and debate of controversial legislation is minimal. It’s a government that likes to get its own way, regardless of what the majority of the population may think. 

Tim Roache, GMB General Secretary, has said: “Brexit isn’t a game – people’s livelihoods and futures are at stake.

The Prime Minister seems to be intentionally keeping people in the dark in her quest to leave the single market and customs union.

The Government must publish their secret impact assessments as soon as possible so people know what’s in store and what the government is putting at risk.

Public services, unions and government need to plan for the future, we can’t do that when the government is hiding so much information from everyone.”

Image result for Brexit memes
There has always been a substantial gap between the Conservatives’ ideological position and economic prudence. Despite assurances earlier this year from the government, the Daily Mail  and the Express that our economy is “thriving”, they have somehow managed to misplace £490bn of our cash. That’s half a trillion pounds. It’s equivalent to 25 per cent of GDP.

This quote from the Daily Mail hasn’t held up very well in the fullness of time:

“In a damning assessment of the scaremongering by the Remain camp, the Office for National Statistics declared that there had been no post-referendum economic shock.”

I think it’s a bit of an economic shock to discover that the UK’s wealth has suddenly diminished from a surplus of £469bn to a net deficit of £22bn, and that investment in the UK by overseas companies and individuals fell from a £120bn surplus in the first half of 2016 to a £25bn deficit, over the same period, in 2017. 

Meanwhile, the government’s decision to leave the EU has itself “raised uncertainty and dented business investment” in the UK, a new report from the Organisation for Economic Cooperation and Development (OECD) has warned. 

The report says that real wages are being stripped back amid soaring inflation, despite low unemployment. Of course this has been a longstanding problem under successive Conservative governments as they have pared back labor market regulation and undermined the very notion of workers rights and collective bargaining. The balance of power was deliberately tipped against unprotected employees, in favour of exploitative and bad employers.

David Cameron introduced enormous fees of £1,200 for anyone seeking redress from an employment tribunal for unfair dismissal or discrimination. The crippling cost had its intended effect – in one year there was a 67% drop in the number who could afford to use tribunals. Only the highly paid or those backed by a union can now seek help. Women have been the hardest hit as sex discrimination cases fell by over 80% in the first year of fees.

Then there came the Trade Union Act which was deliberately designed to set too high a bar for strikes – a conditional ballot requiring a 50% turnout, and 40% of the electorate to vote yes.

General Secretary of the Trades Union Congress, Frances O’Grady, says: 

“Pay packets are taking a hammering. This is the sixth month in a row that prices have risen faster than wages.

Britain desperately needs a pay rise. Working people are earning less today (in real-terms) than a decade ago.

The Chancellor must help struggling families when he gives his Budget next month. This means ditching the artificial pay restrictions on nurses, midwives and other public sector workers. And investing in jobs that people can live on.” 

Despite their eyewateringly disingenuous rhetoric, the Tories have never been “the party of the workers”. Real wages are still shrinking , the cost of living is spiralling upwards, inflation was 2.6% in July (the mid-point of the quarter), and jumped to 3% in September.

Today, in response to the ONS employment report that was published, the Resolution Foundation analyst, Stephen Clarke, says:

“Today’s figures confirm the big picture trend that the UK labour market is great at creating jobs, but terrible at raising people’s pay.

“The scale of the pay squeeze over the last decade is so vast that people today are earning no more than they did back in February 2006, despite the economy being 4.4 per cent bigger per person since then.”

Britons would need a £15 per week pay rise to get back to the levels before the financial crisis.

Brexit, the economy and more shenanigans

The 140-page annual report from the OECD outlines the state of Britain’s economy 16 months after last year’s EU Leave vote.

It also says the deadlock in talks has put Britain on course for a “disorderly Brexit”, suggesting: “In case Brexit gets reversed by political decision (change of majority, new referendum, etc), the positive impact on growth would be significant.” 

The deputy leader of the Liberal Democrats said it was clear from the OECD report that a second vote was needed to prevent the harm caused by Brexit.

Jo Swinson said: “Brexit has already caused the UK to slip from top to bottom of the international growth league for major economies.

“This will only get worse if the government succeeds in dragging us out of the single market and customs union, or we end up crashing out of Europe without a deal.”

At least 20 members of May’s cabinet backed remaining in the EU in the run-up to last year’s referendum. 

The Treasury and Conservative ministers have rejected the OECD’s suggestion of second Brexit referendum, despite the warning from the thinktank that Britain must stay close to the EU or face long-term decline, and that reversing the decision to leave would significantly benefit the economy. 

I wonder if Philip Hammond’s Autumn budget on 22 November will continue to push the “balancing the budget” theme – a Conservative euphemism for more austerity, and the poorest citizens having to live within the governments’ dwindling and increasingly miserly “means,” now that he’s somehow misplaced a massive amount from the public purse. It’s going to be very difficult to woo the electorate with such a backdrop of even more looming poverty for the demographic that Conservatives usually direct their traditional prejudices at. For many of us, the “no gain without [your] pain” mantra doesn’t endear the Conservatives or switch on our confidence in their “long-term economic plan”.

There is a veritable chasm between policy and democracy, rhetoric and empirical evidence, not forgetting the galaxy-sized space between facts and techniques of persuasion. Maybe the Conservatives are still trying to convince themselves, in the their typical blustering, unreachable, non-dialogic “because we say so” way that always indicates denial and authoritarianism, that they can persuade a cut-weary public that austerity will suddenly work if we persist for yet another decade.

The “paying down the debt” deadline set by the chancellor has become an elusive goalpost, forever retreating into the future, and now we are expected to believe that by 2025, our economy will be fine and we’ll have a comfortable surplus instead of an ever greedy black hole of trillions.

Back in 2010, we were reassured by George Osborne that the government’s aim was for the deficit to be eliminated by 2015, and in his first budget he said that aim would be achieved, based on the government forecasts of the time. That didn’t happen. By November in 2011, the first surplus was forecast for 2016/17. By December 2013, it had been pushed back again to 2017/18. Now it’s been pushed back to 2025.

That’s providing that the public continue to believe the Conservatives have a shred of economic credibility for the forseeable, of course. Personally, I think that people are starting to grasp that the continuing radical cuts to public spending the economy will continue to shrink rather than expand the economy, because it’s not rocket science, and besides, we have now witnessed 7 years worth of empirical evidence that austerity does not work the way the Conservatives say it will. There’s only so many times that the Conservatives can get away with saying “but the economic damage was greater than we feared”.

The Tories have succeeded in being economical with the truth. But the fullness of time itself – the last 7 long years – has been a very good test of verisimilitude. The Conservatives failed. The public have noticed.

Only months ago, before the election, the government were boasting about the economic “recovery”. Yet when it comes to actual policies, we see more miserly austerity cuts, juxtaposed with generous tax cuts for very wealthy people, and the justification narratives always sound as if those carrying the brunt of austerity cuts – our poorest citizens: disabled people, young people, those on the lowest wages, public sector workers and so on – are somehow culpable personally for the state of the economy, inequality and poverty.

Some disabled people have been forced by the state to “tighten their belts” on behalf of the nation to the point that it has actually killed them. I can’t help but wonder how long the public are willing to sacrifice politically marginalised groups in the name of “the national interest” and “the deficit” just for the sake of fulfilling economic dogma, traditional Conservative prejudice and nasty, antisocial ideology.

The revised figures from the Office for National Statistics figures have weakened the governments’ position in Brexit talks. On Monday, the prime minister is meeting with European Union leaders, Jean-Claude Juncker and the EU’s chief negotiator Michel Barnier, a matter of only days after the exit negotiations were deadlocked.

The OECD said Britain must secure “the closest possible economic relationship” with the EU after Brexit to prevent the economy suffering a long-term decline.

Angel Gurría, the OECD’s secretary general, said Brexit would be as harmful as the second world war blitz and the British would need to act on the propaganda maxim to “keep calm and carry on.” That doesn’t exactly bode well. 

The revision of UK national accounts, the ONS “Blue Book”, shows that the country no longer has a net reserve of foreign assets, and therefore no safety margin while talks with the European Union reach a critical point, as time runs out to reach an agreement.

Is no prime minister better than a bad prime minister?

The half a trillion pounds that has gone missing is equivalent to 25 per cent of GDP.  

The Institute for Fiscal Studies says that if we leave without a deal, trade with the EU would fall by as much as 29%, costing the UK economy between £48.6 billion and £58 billion – the equivalent to between £741 and £884 per person.

The Treasury, rather worryingly,  is equally pessimistic saying it could cost 800,000 jobs, cut GDP by 6% and see the pound fall by 15%.

The Conservatives have succeeded in raising employment figures, but all that means in reality is that more people earning smaller wages.

And the pay squeeze is set to continue.

Maike Currie, investment director for Personal Investing at Fidelity International, says the rise of the ‘gig’ economy, and the government’s public sector pay cap, are partly to blame for the wage squeeze:

“Another month, another fall in real household incomes. Today’s wage growth figures show our total earnings including bonuses grew at just 2.2% in the three months to August . With yesterday’s CPI figures showing inflation spiking to an eye watering 3%, the gap between our pay packets and the cost of goods and services continues to remain vast – our wages are not keeping up with the rising cost of living.

“The absence of wage growth remains the missing piece of the puzzle in the UK’s slow road to recovery – high employment should be the worker’s best friend because that’s what pushes up wages. With UK unemployment at a 45-year low, one would think that workers’ bargaining power at the wage negotiation table would improve, yet earnings growth remains elusive and the UK’s workforce is getting poorer. There are many potential reasons for this ranging from poor productivity to the squeeze on public sector pay and the rise of self-employment in the so-called ‘gig economy’.

Treasury documents showed Britain could lose up to £66bn a year if it pursues the hard Brexit option – leaving the single market and EU customs union.

Yet May’s Conservative conference speech signalled that the UK will prioritise immigration over single market access in Brexit talks, which also sent confidence in pound sterling plummeting.

While the longer-term economic impacts of Brexit are yet to unfold, and surprise everyone except the government, today’s report from the Resolution Foundation think-tank strongly suggests that the lowest paid could once again be hardest hit. It’s like everything this government touches upon immediately loses its value.

A draft Cabinet committee paper, which is based on a controversial study published by George Osborne in April during the referendum campaign, says:

“The net impact on public sector receipts – assuming no contributions to the EU and current receipts from the EU are replicated in full –would be a loss of between £38 billion and £66 billion per year after 15 years, driven by the smaller size of the economy.”

This evening the All Party Parliamentary Group on a Better Brexit for Young People released a report on the concerns and priorities for Britain’s youth during the Brexit negotiations. The report, compiled in association with LSE, gathered data from forty focus groups of 18 to 24-year-olds from varying economic, geographical and social backgrounds over an eleven-month period from November 2016 to September 2017.

The report, which is divided into three sections, explores youth views on the current state of Brexit, their concerns about Brexit and their priorities for Brexit negotiations.

In the introduction, it says: 

“[Respondents] spoke of their concern about the economic pressures they face with regard to housing, jobs, and education, and the political, social and economic direction of travel that Brexit represents”.

This opinion, says The LSE say that this is an opinion that was shared by over 90 per cent of those surveyed, demonstrating an overwhelmingly negative view of Brexit and its consequences. It’s clear that the referendum stirred feelings among many young people  of sadness, anger and frustration at the outcome of the referendum, and some of that was directed at people who voted to leave – the majority being older generations.  The government chose not to give the right to vote to 16- and 17-year-olds in the referendum. It is fair to ask whether allowing them to vote could have changed the result of the referendum or not.

Neoliberalism: more business as usual

You’d be forgiven for thinking that the near meltdown of the global financial system would prompt a comprehensive rethink of the principles underlying neoliberalism. Instead, the crisis was exploited to de-fund social welfare provision on a grand scale, to dismantle the social gains from our post-war settlement ) legal aid, the NHS and other public service provision, social housing and civil rights, and to hand out our public funds to a small and very wealthy cabal. Austerity socialised losses for the poorest, and privatised hand outs in the form of tax cuts. Labor market deregulation and increasing trade union regulation also benefitted the wealthiest, resulting in the growth of exploitative wages, job insecurity and poor employment practices for ordinary people, and big profits for the wealthiest. 

Immediately following the referendum result, the Centre for Policy Studies (CPS), a free market thinktank, revealed what many of us suspected – Brexit has presented the Conservatives with a cornucopia of opportunities to extend the principles of an already overarching, totalisin ideology to its absolute limits. The CPS said:

“The weakness of the Labour party and the resolution of the EU question have created a unique political opportunity to drive through a wide-ranging … revolution on a scale similar to that of the 1980s … This must include removing unnecessary regulatory burdens on businesses, such as those related to climate directives and investment fund[s].”

Shortly after, George Osborne proposed to cut corporation tax from 20% to below 15%, to staunch the haemorrhage of investment. During the coming months and years, the unfolding Brexit fueled economic crisis will provide countless pretexts for similar “emergency measures” that solely benefit big business profits and of course “roll back the state”. 

This is inevitable if the current government remain in office. There will be no Brexit risk assessment available to the public. There will be no vote in parliament, no second referendum, no fresh elections: just the most massive, scheming and authoritarian legislative programme in history within the current parliament, in which the Tories command an absolute majority based on 37% of the votes cast in the last general election.

So much for “taking back democratic control”. 

Tom Coberg, writing for the Canary, says:

“[…] it was not long after the 2016 EU referendum that one commentator observed how the Conservatives appeared to be adopting tactics akin to “disaster capitalism“. And that with Brexit:

[…] the prize is the opportunity to rework an almost infinite range of detailed arrangements both inside and outside the UK, to redraw at breakneck speed the legal framework that will govern all aspects of our lives.

May has begun to prepare the public for this. And according to Joe Owen of the Institute for Government, the civil service drew up plans for a ‘no deal’ “months ago”. Though, given the close links between the Tories and Legatum, such a scenario may have been the plan all along.

Or to put it another way: extreme Tory Brexit looks as if it could mean exploitation of the many, for the benefit of the few.”

 We are taking our country back. 

We’re heading for the feudal era, singing Hayek’s deadly anthem all the way. 

When the “free market” came to Chile

 

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“Gig economy” companies exploit workers and are free-riding on the welfare state

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Image result for gig economy uk

Deliveroo couriers plan legal action against the food delivery firm to claim better employment rights including the minimum wage, sick pay and holiday.

The 20 delivery riders say they are employees and not, as the company argues, self-employed contractors. In the latest challenge to employment conditions in the gig economy, they are seeking compensation for not receiving holiday pay and for being paid wages below the legal minimum for employees.

The Deliveroo worker’s move follows successful employment tribunal cases brought by cycle couriers at CitySprint, Excel and drivers for taxi app Uber. All three cases found the riders were workers, meaning they are entitled to basic employment rights including holiday pay and the minimum wage, rather than self-employed contractors with no employment rights. 

Uber claimed that its 40,000 drivers in the UK are self-employed, and therefore not entitled to pensions, holiday pay, or other basic employment rights. An employment tribunal in London disagreed, calling Uber’s argument that it was simply a technology company “ridiculous”, and they were relying on “fictions and twisted arguments.”

HMRC is investigating delivery giant Hermes for paying workers less than the minimum wage. Staff receive no holiday or sick pay, and risk losing work if they can’t make their rounds due to illness or lack of childcare.

Some 78 couriers working for Hermes, a company that describes itself as “the UK’s largest nationwide network of self employed couriers”, have subsequently made complaints to Frank Field, the chairman of the House of Commons work and pensions select committee.

It is estimated that falsely classifying workers as self-employed is costing the UK up to £314m per year in lost tax and national insurance contributions. 

A recent study has found that the average self-employed contractor is now paid less than in 1995. 

The Resolution Foundation – a think tank that aims to improve pay for families – partly has blamed the changing nature of the self-employed workforce. Their report says: “With the introduction and growth of the [so-called] New Living Wage, by 2020 more than 1 in 7 are expected to be paid at or only just above the legal minimum. This increases the need for employers and government to provide personal progression opportunities to get people beyond the wage floor.”

Currently, the government expects individuals to make in-work progression without support, or face financial penalties (sanctions) to their top up Universal Credit. This draconian approach forces unreasonable responsibility onto individuals and their familes, because the problem of low pay is one of exploitative employers and government policy rather than of individual behaviour.

Employers are responsible for setting pay levels and terms. The problem is more broadly one of the key features of neoliberalism, which has led to increasing employment precarity, characterised by insecure, exploitative forms of work. Meanwhile, the organisation of labour and collective bargaining by trade unions are being portrayed as “market distortions” by a government (and a party) that has legislated mercilessly to undermine the basic rights and fair levels of pay for employees.

The Labour party have pledged to reverse the Conservative’s anti-union laws if they are elected June.

The political logrolling of the profit incentive presents us with the most unedifying and hard face of neoliberalism, in which human need is profoundly devalued; the employee is merely availed of as an object of value extraction. The Conservatives certainly don’t value the idea of “a fair day’s wage for a fair day’s work”, despite all their rhetoric about “making work pay”. Over the past six years, we learned that this slogan was only a semantic decoy: a cover for the dismantling of our welfare state by a creeping, unremitting stealth.

The report went on to say that many more people had taken up lower-paid jobs in the so-called “gig economy“, essentially self-employed workers taking on a variety of different roles, while the proportion of self-employed business owners with their own staff had fallen. The number of hours worked by the self-employed had also declined.

The foundation said this had limited wage growth before the financial crash, but that pay had been “squeezed” in real terms more recently, falling £100 a week by 2013-14.

Last year, TUC general secretary Frances O’Grady said: “Britain’s new generation of self-employed workers are not all the budding entrepreneurs ministers like to talk about.

“While some choose self-employment, many are forced into it because there is no alternative work. Self-employment today too often means low pay and fewer rights at work.”

The Resolution Foundation’s most recent briefing looks at the final quarter of labour market data for 2016. It says: “Most importantly, inflation has risen rapidly in recent months, weighing heavily on real pay growth – though published pay statistics will take some time to fully reflect this. Well over a third of the workforce are experiencing shrinking pay packets according to the latest figures, in sectors ranging from accommodation to finance and the public sector. Many more will join them in the coming months as inflation continues to rise, with pay across the economy as a whole set to have fallen in the first three months of 2017.

Indeed, our ‘Spotlight’ article notes that real pay in the public sector has likely now begun a fall that could well last for several years. Conversely, private sector pay growth will continue to outpace the headline average earnings figures.”

A Department for Business spokesperson said the government was “committed to building an economy that works for everyone”.

Last year, Damian Green said, in a speech at the Resolution Foundation, that the private sector and voluntary sector “should be more involved in the provision of welfare services”. Green’s endorsement of the “exciting” gig economy and the “huge potential” that it offered came just the month after an employment tribunal found that drivers for the Uber car service should in fact get the minimum wage and paid holiday. 

Green also said: “The Government is a necessary, but not sufficient provider of welfare.” 

Shadow Digital Economy minister Louise Haigh tabled an amendment to the Government’s Digital Economy Bill, New Clause 24, following the tribunal ruling against Uber. 

She said there was still a danger that despite the ruling, Silicon Valley multinationals and other employers could use “loopholes” to break the rules and get around workers’ protections. 

Haigh said: “This is a landmark ruling for workers in the digital economy, and a great victory for the GMB and its members.

“The digital economy was supposed to promise choice and flexibility, but the reality for too many in the sector is that they are overworked, underpaid and exploited by bosses they never meet and who do not even fulfil their basic duties as an employer.

The Work and Pensions Committee report

In a new report the Work and Pensions Committee also concluded that the government must close the loopholes that are currently allowing “bogus” self-employment practices, which are potentially creating an extra burden on the welfare state while simultaneously reducing the tax contributions that sustain it. Increasingly, some companies are using self-employed workforces as cheap labour, excusing themselves from both responsibilities towards their workers and from substantial National Insurance liabilities, pension auto-enrolment responsibilities and the Apprenticeship Levy. 

In an inquiry that has had to be curtailed because of the election, the Committee heard from “gig economy” companies like Uber, Amazon, Hermes and Deliveroo, and from drivers who work with them. The evidence taken painted starkly contrasting pictures of the effect and impact of “self-employment” by these companies.

Companies utlilising self-employed workforces frequently promote the idea that flexible employment is contingent on self-employed status, but the Committee says this is a fiction.

The report

The Committee says:

  • The apparent freedom companies enjoy to deny workers the rights that come with “employee” or “worker” status fails to protect workers from exploitation and poor working conditions. It also leads to substantial tax losses to the public purse, and potentially places increased strain on the welfare state.
  • Designating workers as self-employed because their contract offers none of the benefits of employment puts the cart before horse. It is clear, though, that this logic has taken hold, enabling companies to propagate a myth of self-employment. This myth frequently fails to stand up in court, but individuals face huge risks in challenging their employment status that way.
  • Where there are tax advantages to both workers and businesses in opting for a self-employed contractor arrangement, there is little to stand in the way.
  • An assumption of the employment status of “worker” by default, rather than “self-employed” by default, would protect both those workers and the public purse. It would put the onus on companies to provide basic safety net standards of rights and benefits to their workers, and make the requisite contributions to the social safety net. Companies wishing to deviate from this model would need to present the case for doing so, shifting the burden of proof of employment status onto the better resourced company. 
  • Self-employed people and employees receive almost equal access to all of the services funded by National Insurance, especially with the introduction of the new state Pension, yet the self-employed contribute far less. The incoming government should set out a roadmap for equalising employee and self-employed National Insurance Contributions.
  • The Department for Work and Pensions (DWP) needs to ensure that its programmes and resources reflect the positive contribution that self-employment can make to society and the economy. This may require an expansion of specialist support in JobCentre Plus.
  • The DWP is seeking to support entrepreneurship without subsidising unprofitable self-employment. The existing Minimum Income Floor (MIF) in Universal Credit (UC) does not get this balance right and risks stifling viable new businesses. The incoming Government should urgently review the MIF with a view to improving its sensitivity to the realities of self-employment. Until this is complete, the MIF should not apply to self-employed UC claimants.

Chair’s comments

Frank Field MP, Chair of the Committee, said;

“Companies in the gig economy are free-riding on the welfare state, avoiding all their responsibilities to profit from this bogus “self-employed” designation while ordinary tax-payers pick up the tab. This inquiry has convinced me of the need to offer “worker” status to the drivers who work with those companies as the default option. This status would be a much fairer reflection of the work they undertake which seems to fall between what most of us would think of as “self-employed” or “employed”. 

It would also protect them from some of the appalling practices that have been reported to the Committee in this inquiry. Uber’s recent announcement that it will soon charge its drivers for sickness cover is just another way of pushing costs onto the workforce, to reinforce the impression that those workers are self-employed.

Self-employment can be genuinely flexible and rewarding for many, but “workers” and “employees” can and do work flexibly. Flexibility is not the preserve of poorly paid, unstable contractors, nor does the brand of “flexibility” on offer from these gig economy companies seem reciprocal. It is clearly profit and profit only that is the motive for designating workers as self-employed. The companies get all the benefits, while workers take on all the risks and the state will be expected to pick up the tab, with little contribution from the companies involved.

It is up to Government to close the loopholes that are currently being exploited by these companies, as part of a necessary and wide ranging reform to the regulation of corporate behaviour.”

Uber

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The Resolution Foundation’s review of the Conservative’s “Living Wage”

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The Conservatives’ summer budget saw a new national minimum wage set. However, it has been  re-branded as a “national living wage” as the Conservatives claim that it should be what people need to live on. Employers will no longer be allowed to pay the £6.70-an-hour rate, but will have to pay the new “national living wage” of £7.20 an hour to people over the age of 25. Call me a cynic, but the psychosemantic re-branding of a minimum wage increase of less than a pound an hour is a diversion because the government intend to stop subsidising low wages through tax credits. 

Increasing the minimum wage is simply not adequate to reduce poverty. Forty per cent of individuals earning between the minimum wage and the actual amount that would be the Living Wage campaigners want, are in households in the top half of the income distribution. They aren’t poor. Tax credits on the other hand are much more highly targeted at those in need of support. Whilst the public understand what the minimum wage was about, renaming this new policy the “National Living Wage” will inevitably create confusion, as many will incorrectly assume that the government are targeting the same rate as that advocated by the Living Wage campaign – a figure based on estimates in line with the cost of living. They aren’t.

The Living Wage Foundation say:

  • The current UK Living Wage ought to be £8.25 an hour
  • The current London Living Wage ought to be £9.40 an hour

However, the Resolution Foundation have issued a press release that says the Prime Minister should allow the in-built flexibility of the “national living wage” to “take its course.”

Conor D’Arcy, Policy Analyst at the Resolution Foundation, said: “Some businesses are unhappy about a higher minimum wage, particularly amid the post-referendum uncertainty. But backsliding on the government commitment is unnecessary given the in-built flexibility of the policy to adjust to changing economic circumstances. It would also be costly for millions of low paid workers, so the Prime Minister should stick to her guns.”

Backsliding on the so-called “National Living Wage” (NLW) could leave some full-time workers up to £1,000 a year worse off by 2020 – with women, the young and older workers most likely to lose out – according to the new analysis published yesterday (Wednesday) by the Resolution Foundation.

Earlier this year, the introduction of the NLW delivered an average 7.5 per cent pay rise to around 4.5 million workers aged 25 and over. Low-paid workers are set for another four years of above average pay rises as it approaches its target ‘bite’ of being worth 60 per cent of typical hourly pay by 2020.

More recently, May has put tackling squeezed living standards at the centre of her new government. However, some business organisations have called on the government to water down its plans following the EU referendum. In a letter to the Business Secretary Greg Clark, 16 trade associations called on government to “exercise caution” in light of “the economic uncertainties the country faces”.

Such calls are understandable given the challenge of a higher wage floor for some businesses. However the Foundation says that the in-built flexibility of the NLW – which automatically adjusts to economic shifts by being pegged to typical hourly pay, rather than the £9 cash figure that many people associate the policy with – means that there is no need to water down the policy.

The Foundation’s analysis, based on the latest summary of independent economic forecasts published by the Treasury, shows that the NLW is currently on track to rise to around £8.70 in 2020. That’s lower than the £9 forecast in the March 2016 Budget, due to expectations of weaker wage growth. The Foundation notes that the projected figure for 2020 is likely to rise and fall in coming years as wage forecasts are updated and the actual impact of implementing Brexit becomes clear.

The Foundation says the Prime Minister should therefore stick to her guns and press on with implementing a policy that will deliver a pay rise for six million workers – and support her vision for an economy that works for everyone, not just the privileged few.‎

Torsten Bell, Director of the Resolution Foundation, said:

“Theresa May is right to stick to her guns on the National Living Wage. Britain has a serious low pay problem and now of all times is not the moment to put off dealing with it.”

The Foundation adds that sticking to the current policy is very different to pursuing a cash target of £9 or higher in the face of weaker overall wage growth. That approach, which some advocate‎, could jeopardise the success of the NLW.

Ahead of a crucial meeting of the Low Pay Commission in October to decide their recommendation for next April’s NLW rate, the analysis shows that should the government scale back its ambition over the next four years – for example by raising the NLW at a similar pace to the recent minimum wage increases applied after the 2008 financial crisis – its value would fall by around 55p per hour in 2020. This would lower the annual pay of a full-time worker on the NLW by around £1,000, relative to current plans. Should the current ‘bite’ of the NLW be maintained, rather than increased to 60 per cent by 2020, the annual pay would be reduced by £1,500.

Around one in five women and one in five workers aged 26-30 would lose out from any backsliding on the National Living Wage, as would over a quarter of workers aged 66 and over.

The Foundation says that the main focus for the government should now be on implementation. To do this, it is calling for the government’s upcoming industrial strategy and productivity plan to include a focus on the often unheralded low-paying sectors of the economy, and not just on areas like digital and high-value manufacturing. This will help employers handle the higher labour costs brought about by the NLW.

The analysis is part of the Foundation’s upcoming report Low Pay Britain 2016, which will be published later this month.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, said:

“The National Living Wage is a hugely popular policy that is set to deliver a pay rise to six million of Britain’s lowest paid workers and play a pivotal role in the Prime Minister’s vision for an economy that works for everyone, not just the privileged few.

“Understandably some businesses are unhappy about a higher minimum wage, particularly amid the post-referendum uncertainty. But backsliding on the government commitment is unnecessary given the in-built flexibility of the policy to adjust to changing economic circumstances. It would also be costly for millions of low paid workers, so the Prime Minister should stick to her guns.

“The government’s attention should instead turn to the huge task of implementation. This should ensuring that its upcoming industrial strategy includes the less glamorous but hugely important sectors like retail and hospitality, which are at the coalface of Britain’s huge low pay challenge.”

Review recommendations

  • While the National Living Wage is a welcome boost to low earners, the Living Wage with its genuine link to an acceptable cost of living, remains as vital as ever.
  • But as we have made clear, improvements are possible in both methods and seeking alignment will inevitably lead to change. We believe the recommendations we have outlined in this review represent a genuine improvement over the current methods. The aligned method should be more representative, more robust and, most importantly, driven to a greater extent by changes in the cost of living.
  • Inevitably, calculating a Living Wage requires judgement calls. Policy changes like the introduction of Universal Credit would always have required judgements on how the new system is phased into the rate. Having a body like the Living Wage Commission to make such decisions when required in future can only be an asset to the Living Wage campaign as it moves forward.
  • The natural question which follows these recommendations is what impact is likely on the rates themselves. However, the next steps are for the Living Wage Commission to consider our recommendations. The options they choose will determine the extent to which the rates vary from their current levels.
  • Broadly speaking however, the aligned method we have recommended is likely to have an upward effect on the London Living Wage. We consider this to be an unavoidable consequence of a Living Wage rooted in an up-to-date basket of goods with a more diverse mix of family types. There is a clear discrepancy in the target income between London and the rest of the UK, and as highlighted by recent analysis on the size of London salary weightings[1] the differential between rates should be larger than at present. The exact size of the increase will depend on the Living Wage Commission and Mayor’s response to our review. They also have a role in setting out a how to implement and transition to the new rates in London and the rest of the UK.
  • The Living Wage Commission is expected to respond to our review in September 2016. With a strong, aligned methodology and an enhanced governance structure, we see no reason why the Living Wage cannot continue to raise the wages of workers across the UK, delivering more families an acceptable standard of living.

Notes 

  • The ‘bite’ of the National Living Wage – its value relative to typical hourly pay – is set to increase by 4.3 percentage points over the next four years. The ‘bite’ of the National Minimum Wage (NMW) increased 1.7 percentage points in the four years following the financial crisis. Should the NLW instead follow this path, rather than the one currently set out, its value in 2020 would fall to £8.17 an hour. That’s 55p an hour less than the latest economic forecasts imply, equivalent to £1,075 to a full-time worker on the NLW.
  • The Resolution Foundation forecasts that by 2020 around 12 per cent of workers will be earning the National Living Wage, including 19 per cent of women, 19 per cent of 26-30 year olds and 26 per cent of workers aged 66+. 

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Conservatives plan stealth raid on in-work benefits and the long-term phasing out of child benefit

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Picture courtesy of Tina Millis

The respected Institute for Fiscal Studies (IFS) has warned in a recent Green budget report that George Osborne’s plan to achieve a budget surplus will result in 500,000 families losing child benefit and tens of thousands having to pay a higher tax rate. More than half a million families will be stripped of child benefit over the next five years under a series of “stealth” tax raids by the Chancellor to help “balance the books.” Fuel duty will also need to be be significantly raised over the next five years or Osborne will face a £3billion black hole in his surplus plans.

Currently those earning £50,000 will lose some benefit and those earning £60,000 or more lose it all. Eventually, the report concluded, even those earning modest wages and paying the basic rate of tax will start to lose their child benefit entitlement.

The authors of the report concluded that Mr Osborne’s tax plans “lack any coherent principle” and called for more transparency, adding: “If the desire is for these tax rates to apply to a greater fraction of individuals than is currently the case, it would be better for politicians to state this clearly, rather than achieving the outcome through stealth using fiscal drag.”

Osborne’s promise to deliver a budget surplus from 2019-20 is “risky” and could have a long-term impact on the UK because the Government refuse to borrow money to fund large-scale infrastructure projects, despite low inflation.

Total public spending, excluding health, will be at its lowest level since 1948 as a proportion of national income.

The authors said: “If continued indefinitely, child benefit would be received by fewer and fewer families over time.

“But if this is the government’s intention, it would again be better to state this clearly rather than achieving it by stealth.”

Tim Loughton, a former Conservative education minister, branded the IFS findings a “double whammy” for families who are already paying the 40p higher rate of income tax.

He said: “This was inevitable. It inevitably means more and more families suffer a double whammy of having to pay higher rate tax because of the freezing of the threshold and losing out on all or most of their child benefit at the same time.

“This is hardly helpful for hardworking families trying to do the right thing for their children – if you don’t index up the rates and if you have very complicated formula that doesn’t accurately reflect household income … it’s a double unfairness.”

The Treasury has declined to comment on the IFS criticism of the Office of Responsible Budget (OBR) charter, which Osborne has committed to. But a spokesperson has said: “There may be bumpy times ahead – so here in the UK we must stick to the plan that’s cutting the deficit.”

That will invariably mean further austerity cuts. Up until recently austerity targeted those claiming out of work benefits, particularly those who are unemployed because they are sick and disabled. But increasingly, austerity is being aimed at those in low paid or part-time work, and the middle classes are set to lose further income, under the Conservative plans, too.

Despite being a party that claims to support “hard-working families,” the Conservatives have nonetheless made several attempts to undermine the income security of a signifant proportion of that group of citizens recently. Their proposed tax credit cuts, designed to creep through parliament in the form of secondary legislation, which tends to exempt it from meaningful debate and amendment in the Commons, was halted only because the House of Lords have been paying attention to the game.

The use of secondary legislation has risen at an unprecedented rate, reaching an extraordinary level since 2010, and it’s increased use is to ensure that the Government meet with little scrutiny and challenge in the House of Commons when they attempt to push through controversial and unpopular, ideologically-driven legislation. The Shadow secretary for Work and Pensions, Owen Smith, has pointed out that cuts to benefit in-work entitlements being introduced through Universal Credit mean controversial tax credit reductions have been simply been “rebranded” by the government rather than reversed.

In the Spending Review last November, George Osborne announced that tax credit reforms, which were set to almost halve the income level at which support is withdrawn from £6,420 to £3,850, would not be enacted, an analysis of the changes published by the Office for Budget Responsibility (OBR) highlighted that cuts to work allowances in Universal Credit, which set the level at which benefits will begin to be withdrawn under the new system, have not been reversed. Furthermore, people claiming Universal Credit needing in-work benefit because of low pay and  part-time hours will be expected to increase their wages and working hours, or controversially, face losing their benefit.

The Chancellor has cut in half the amount people can earn before their working tax credit starts to “taper” (reduce) – down from £6,420 to £3,850 from April 2016. Restrictions to eligibility for child tax credit means that families with more than two children are set to lose a significant amount of weekly income from April 2017. whilst the flat £545 “family element” paid before the amount for each child will also be removed completely. This will affect people in work, the think-tank Resolution Foundation said that working mothers would be worst hit – accounting for 70% of money saved by the Treasury, but overall the cuts will hit those out of work the hardest.

Many of us recognised the Tory “making work pay” mantra for what it was in 2012, when the first welfare “reforms” were pushed through parliament against widespread resistance, on the back of “financial privilege.” It was and always has been a diversion to allow the Conservatives to dismantle our welfare state, and reduce the value of labour, in much the same way as the 1834 Poor Law principle of less eligibility, which fulfilled the same purpose. The Poor Law Committee also wanted to “make work pay.” Since 2012, steadily rising in-work poverty has shown that having a job no longer provides a route out of poverty.

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The IFS report conclusions simply confirm what many of us have suspected since 2012: that the government have a secret long-term aim to completely dismantle the social gains of our post-war settlement: the welfare state, affordable social housing provision, the National Health Service and access to justice through legal aid.

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Picture courtesy of Robert Livingstone

Osborne’s tax credit cuts omnishambles

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The Chancellor, George Osborne, has recently announced that the Conservatives are a true “workers party”  – claiming that his opponents, the Labour Party, represent the unemployed. But the Conservatives are attempting to re-write history: the Labour Party grew from the Trade Union Movement, and have a strong tradition of supporting worker’s rights and fair wages, and of course the Unions have retained close institutional links with the Labour Party.

Osborne has argued, somewhat absurdly, that reducing tax credit payments to people in low paid jobs would give them “economic security” by reducing the Government’s spending deficit. Labour argues that the richest should pay to cut the deficit, and has identified cuts to tax avoidance and corporate subsidies that could replace cuts to the lowest paid. Osborne’s priorities reflect a traditional Conservative ideology.

As Richard Murphy, from Tax Research UK, points out:

“… the government is forcing the burden of risk bearing onto those least able to bear it in society – that is those with the lowest income. So just as we now know inequality, especially concerning wealth, is rising rapidly, insecurity is also increasing exponentially as risk is being passed from those with the capacity to bear it to those who have not.”

Osborne’s “long-term economic plan” isn’t without controversy. According to many economists, during recessions, the government can stimulate the economy by intentionally running a deficit. The budget deficit is the annual amount the government has to borrow to meet the shortfall between current receipts (tax) and government spending.

Of course, last year, serious doubts were raised regarding Osborne’s deficit targets after the treasury met a significant tax revenue shortfall. Osborne’s obsession with deficit cutting and the Conservative small-state ideology has clearly overlooked the problems created by poor pay and high living costs, which has impacted detrimentally at both a micro and macro level, creating an economic spiral of cuts and stagnation. And it has widened inequality significantly.

In order to keep his promises on further future tax cuts for higher earners, Osborne will invariably make even more cuts to public services, public sector pay and the social security safety net that are so deep they will severely damage both the economy and potentially, the fabric of our society.

The Institute for Fiscal Studies (IFS) have recently criticised George Osborne’s proposed tax credit cuts, because it is “at odds” with wider Conservative stated aims to “support hardworking families”.

Research conducted by the IFS calculated that only around quarter of money take from families through tax credit cuts would be returned by the new National “Living Wage”.

Tax credits are payments made by the Government to people on lower incomes, most of whom are in work.

It was announced today that the Work and Pensions Committee is holding an urgent evidence gathering session on the proposed reforms to the tax credit system on Monday 26 October. The Committee will question representatives of respected independent think tanks that have analysed the impact of the Conservative plans, including the IFS and the Resolution Foundation, who revealed that the planned welfare cuts will lead to an increase of 200,000 working households living in poverty by 2020, and that almost two-thirds of the cut would be borne by the poorest 30 per cent of households, whilst almost none of the cuts will fall upon the richest 40 per cent of households.

A Labour motion calling on the government to rethink the controversial tax credit cuts has been defeated in the Commons. But despite Labour losing the vote today, the debate saw a number of Tory MPs attack the proposed changes, too.

In her maiden speech today, Tory MP Heidi Allen said that her party risks betraying its values, as she voiced her opposition to tax credit cuts.

She suggested ministers were losing sight of the difficulties of working people in their “single-minded determination to achieve a [budget] surplus”. She also said that the tax credit changes do not pass the “family test”, warning that the pace of the reforms is “too hard and too fast”.

The opposition day motion called for a reversal of the policy but MPs voted against it by 317 to 295 – a government majority of just 22. Next week, the vote in the House of Lords was set to be far closer, with the very real possibility that on Monday, Peers would  vote to block the changes. Because the tax credit cut proposals were not in the Tory manifesto, it means they are not bound by the usual Salisbury convention that prevents the peers from blocking election promises.

Also, the tax credit cuts were not included in the Finance Bill, which normally enacts a Budget, and the opposition have used the opportunity to seize on the fact that a Statutory Instrument can be halted by a single House of Lords vote.

Mr Cameron effectively ruled out cutting the benefit before the election, telling a voters Question time that he “rejected” proposals to cut tax credits and did not want to do so.

The cuts are part of £12bn cuts to the social security budget that the Government is to make – the details of which the Conservatives refused to announce before the election.

However, in an unprecedented move, the Conservatives have threatened a constitutional “showdown”, and have refused to engage in dialogue with peers that want kill off the proposed Tory cuts. The government warned the House of Lords it would trigger a full-scale constitutional crisis by pressing ahead with their plans.

Despite the fact that the chancellor faces a growing rebellion against the cuts among Tory MPs, the government told the group of crossbench peers that they also “risked” a renewed push to weaken the powers of the upper house if they refused to back down.

The threats from the government that came because it was facing probable defeat on what is an extremely unpopular reform, even amongst their own party ranks, are truly remarkable, showing a contempt for democratic process and a lack of willingness to engage in transparent dialogue. They came after Lady Meacher, a crossbencher who is the former chair of the East London NHS Trust, threatened to table a “fatal motion” to kill off the cuts to tax credits.

The Tories do not have a majority in the Lords and faced defeat after Labour and the Liberal Democrats said they would support Lady Meacher.

It is understood that Meacher withdrew her fatal motion on Tuesday night and announced she would table a motion calling on the government to deliver a report responding to the warning by the Institute for Fiscal Studies that 3 million families would lose over £1,000 a year.

Meacher told the Guardian today:

My plan at the moment is to put down a motion which will prevent this regulation being approved on Monday, which will require the government to produce a report responding to the IFS analysis and consider mitigating action before bringing it back. This gives time to the House of Commons to go on doing what they are doing. There are Tory MPs horrified by this.

So we are giving the government time to think again, but the word fatal would not be appropriate. This is causing a great deal of consternation at government level and we are trying to find a way through which will ensure that the government revisits these regulations

This move will also allow time for the Work and Pensions Committee to gather further evidence to present to the government, too. The Committee have stated that they will ask representatives questions on the following topics;

  • The impact of the April 2016 tax credit cuts (in isolation and in the context of other welfare measures in the Summer Budget), and the National Living Wage
  • The winners and losers and their characteristics
  • The extent to which the National Living Wage will compensate individuals receiving lower tax credit payments
  • The distributional impact of these measures, individually and combined
  • The scale of the financial gains/losses to households and what influences this
  • The quality of the analysis produced by the Government to support their proposals
  • Other options for achieving savings from the tax credit system that will mitigate the impact on the least well off
  • The implications for work incentives and the Government’s wider objectives in welfare reform

Select Committees work in both Houses of parliament. They check and report on areas ranging from the work of government departments to economic affairs. The results of these inquiries are made public and the Government must respond to their findings.

A select committee is a cross-party group of MPs or Lords given a specific remit to investigate and report back to the House that set it up. Select committees are one of the key ways in which Parliament makes sure the Government is adequately scrutinised, held to account, and has to explain or justify what it is doing or how it is spending taxpayers’ money.

Committee findings are reported to the Commons, printed, and published on the Parliament website. The government then usually has 60 days to respond to the committee’s recommendations.

The Osborne omnishambles is far from done and dusted yet.

555114_453356604733873_1986499794_nPictures courtesy of Robert Livingstone