George Osborne's new Poor Law and how Labour should respond

George Osborne’s introduction of a National Living Wage has overturned two centuries of Poor Law policy in Britain.

Frank Field
5 August 2015

Flickr/altogetherfool. Some rights reserved.

In 1796 Samuel Whitbread, the then Whig MP for Bedford, brought to parliament a wage regulation bill. The bill would have fixed wages at the bottom of the labour market to ensure they kept up with the costs of living. For short, he was seeking to introduce Britain’s first Living Wage.

The bill’s defeat without division in February of that year gave rise to a system under which the state, rather than employers, shouldered much of the responsibility for protecting and advancing the living standards of Britain’s lowest paid workers.

They could scarcely have known at the time, but reformers present at Speenhamland’s Pelican Inn shortly before the defeat of Whitbread’s bill, were developing a system that would remain largely intact, and, indeed, be built up into an almighty pillar in Britain’s welfare state, until George Osborne’s summer budget, 219 years on.

For the gathering at Speenhamland helped accelerate the expansion of ratepayer funded subsidies with which local authorities could supplement low wages. This system was soon to become the only welfare reform show in town, in respect to providing workers with a more acceptable minimum than their wages would afford them and their families.

The post-war renewal of the ‘Speenhamland system’ in 1971, through the introduction of Family Income Supplement, came about as a supposedly temporary measure while policies were devised to address the problem of family poverty. But it was here to stay.

Successive governments since then have been able to hide the true extent of low pay by expanding policies of subsidising employers paying poverty wages.

In 1971, 71,000 working families claimed Family Income Supplement. When it was changed by a Conservative government to Family Credit 261,000 claimed the supplement, at a cost of £821 million in today’s money, and this increased again to 1.2 million families before Labour introduced Working Families’ Tax Credit.

1.4 million low paid workers in Britain were claiming Working Families’ Tax Credit in 2003 at a cost of £13.3 billion. The new tax credits introduced in 2003 were being claimed by 4.9 million low paid workers across the United Kingdom at their peak in 2011, with the bill totalling £29.8 billion.

The current Chancellor’s National Living Wage policy, therefore, becomes the potential game changer. For it signals a handing back of at least some of the responsibility for workers’ living standards from the state to the nation’s employers.

But has the Chancellor shirked too much responsibility in one go?

Alongside the National Living Wage, he announced two key reforms to tax credits – lowering the earnings threshold and increasing the taper rate from 41% to 48% – that will severely disadvantage 3.2 million low paid workers and their families next year. These families will lose, on average, £1,350 and some will lose up to £2,884. Families earning £10,226 will be exactly £1,500 worse off.  

This represents a hard smack on the nose for those strivers who the Chancellor had promised, before, during, and since the election, to protect.

So how should Labour now respond to the Chancellor’s own measures, and how, from this response, can it craft an economic agenda which puts the party back on the side of Britain’s strivers? 

Labour must first ensure that the government doesn’t get away with trying to sneak through these vicious tax credit cuts without them being debated on the floor of the House.

The government will try, once the House returns from summer recess, to gain parliament’s approval for these measures by pushing a Statutory Instrument through the Committee Rooms.

Harriet Harman rightly has written to the Prime Minister asking him to ensure all MPs are given the chance to debate and vote on these measures.

I propose that, should he refuse Harriet’s suggestion, Labour MPs should initiate a campaign not of ‘civil disobedience’ but of positive engagement. MPs would register their wish to speak in the Committee and this could prevent the Committee approving these cruel cuts.

A vast majority of voters, I believe, would sympathise with this cause. How unjust would it be to allow 3.2 million strivers to be clobbered, without their elected representatives having had the chance to vote on the measures with which our constituents will be hit?

A second front on which Labour could ensure it goes with the grain of the public’s values, would be to build upon the Chancellor’s National Living Wage and thereby initiate a debate on bringing down the tax credit bill in a fairer way which doesn’t disadvantage existing claimants working in jobs that pay low wages.

In so doing, two initial questions could be posed to the government: first, how will it so drive productivity in low paying industries that a National Living Wage can be set at such a level that it is both substantial and sustainable; and, second, is there room in higher paying industries for further advances towards a full ‘Living Wage’, which currently stands at £7.85 an hour as opposed to the new National Living Wage rate of £7.20?

This gifts Labour a chance to set the economic agenda for the rest of this parliament. By making the argument that only by increasing the nation’s productivity can we secure higher standards of living for working-class, as well as middle-class, households, Labour would show it is ready to do business.

But alongside this we would be making clear that we will always encourage those employers most able to pay their workers enough to live on to do so immediately. And will the best equipped firms now phase in a living wage before the compulsory measure kicks in from April?

The summer budget opened up for the first time in two centuries the debate on the balance that needs to be struck between employers and the state, in respect of who is responsible for ensuring work always pays a decent family wage.

The Chancellor grasped the nettle with his National Living Wage, but he risks being stung by 3.2 million strivers whose incomes will shrink from next April.

If it is able to mount a serious attack on this second measure, and make the case for a relentless productivity drive to bolster the National Living Wage, Labour will have shown itself capable of facing up to one of the key economic issues facing this parliament. 


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