Welfare Secretary Iain Duncan Smith this week exhorted companies to “pay their full share” of workers’ remuneration, rather than leaving it to the government to support low income work through tax credit. These comments echo those of former Labour leader Ed Miliband who routinely railed against the scourge of low wages and the “predatory” nature of some British employers. Tellingly the Prime Minister also made a speech this week extending a similar line of argument and suggesting that welfare payments would be slashed as Britain moves from being a “low-wage, high-tax, high welfare society to a higher-wage, lower-tax, lower-welfare society.”
As yet there are few details of how this will be achieved in practice. When pressed in the Commons, Duncan Smith bullishly remarked: “when we are ready, I will come forward with an announcement.” He did, however, promise that the “most vulnerable” would be protected from spending cuts and that the disabled would be treated with the “utmost kindness.”
The language emanating from the new government is interesting because it fits into a wider pattern of the Tories attempting to steal a march on Labour while the opposition are leaderless and in a state of something akin to chaos. While critics are suspicious that the Conservatives plan to institute punitive measures that will penalise the poor, the promise of higher wages is a tough one to counter and is sure to play well in Tory-Labour swing seats. Describing his party’s positioning, MP for Harlow Rob Halfon commented that he wanted the public to see the Conservatives as “on the side of the workers” and even to understand “that we are the workers.”
The reality of transforming the economy will undoubtedly be challenging. Although there is a link between tax credits and low pay, it is a tenuous one and would be difficult to correct through legislation. Similarly, it is unlikely that a Conservative government would implement policies that could be described as creating “red tape” for business, and without legal incentives producing substantive changes in behaviour is likely to be a challenge. Finally, there is a deeper structural problem: low productivity, which simply doesn’t sustain the kind of jobs needed to increase wages across society as a whole.
Having promised to save £12 billion a year in savings on welfare spending, the Conservatives will have to impose significant cuts on non-pensioner benefits. Of the £220 billion social security bill, around half has been ring-fenced meaning that more than 10 percent needs to be saved from areas like housing and disability benefits and children’s tax credits. Reducing the former could save an estimated £5.1 billion, however, doing so would risk increasing child poverty and undermining Conservative claims that the most vulnerable would be protected.
Despite the Tories’ sunny optimism that welfare cuts will be supplemented by higher wages whether these claims will stand up to scrutiny remains to be seen. With little by way of opposition they have been able to triangulate and sought to claim Labour’s traditional territory as their own. Yet questions remain as to whether they will be able to hold it in the long-term. The competing impulses of cost-savings vs. effective services underline what seems to be the fundamental challenge of modern governance, achieving more while spending less.
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