I recently caught up with The Flaw, a vivid documentary on the financial crash shown on Channel 4 and widely in the US, at a Cambridge Fabians showing with the director David Sington. The Flaw demonstrates with clarity the significance of gross inequality in the genesis of the crash – the massing, on the one hand, of huge capital sums in the hands of the corporate and financial elite; on the other, the accumulation of low and shrinking real earnings at the opposite end of the income scale.
Ed Miliband was roundly mocked when he argued that there should be more ‘predistribution’ instead of seeking to redistribute wealth and income through the tax and benefit system. Yet now that this idea has found a popular and more easily understood focus in the campaign for a ‘living wage’, linking the Miliband brothers and Boris Johnson, it doesn’t look like the geekish idea that our media suggested. While I wouldn’t abandon more redistributive tax policies, the idea certainly makes sense. Establishing a living wage could at one and the same time give working people spending money to reboot and sustain the economy, and relieve the need for the state to supplement earnings through tax credits (which are now being drastically scaled back anyway).
Whether or not a living wage can actually be made universal enough to work as a voluntary initiative is not the point at this stage. The campaign does throw into relief the absurdity of an economic system that does not generate sufficient earnings within the population at large to sustain itself and leaves hundreds of thousands in penury and an austerity drive that may well soon make substantial numbers of people homeless. It could also begin to give political shape to demands for curbs on higher incomes and growing ideas for a proportionate balance between higher and lower incomes.
It is also an idea that David Cameron has found that he cannot resist. A voluntary scheme could trail-blaze the way towards a national policy upgrading the minimum wage.
But a living wage cannot of itself carry the burden of a fairer system. Two things here, at least. A determined surge in building social housing and rent controls of private renting are essential so that housing benefits can be retained at defensible levels. And – to reiterate an argument I made recently on OurKingdom – child benefit must be continued as a universal benefit for all families, however many kids they have. Let’s learn again a lesson from postwar history. The Beveridge scheme assumed that the male wage would be sufficient to sustain the contemporary model of family life for the majority of the population. By the 1970s it was clear that this model no longer existed. Child benefit became the lynchpin for the future of the family in its various manifestations.
Perhaps here I can clarify my description of child benefit as “egalitarian”, which some contributors to the debate on my article quite reasonably queried and I hesitated over. I meant simply that on a horizontal rather than vertical scale – that is, between those at the same income level with and without dependent children – child benefit brings a measure of equality. As for the idea of restricting child benefit to just two children, I am shocked to find support for the historic prejudice against large families, albeit in new terms, which I knew as a boy growing up in Clydebank, a town in Greater Glasgow, and thought I had left behind.
However, the strongest argument against the proposal to limit benefits for some families to only two children is that it wouldn’t work even on its own terms. Fiscal measures of this kind, supposedly to give a “message”, simply do not work. France for ages, for example, tried to encourage French families to have more children through generous benefits. It simply didn’t work. Ian Duncan Smith will make a fool of himself if he pursues this idea beyond its ‘dog whistle’ appeal to prejudice. But let’s not be under any illusion. The proposal is a punitive example of prejudice in action rather than an honest contribution to public policy.