U-TURN if you want to, the Chancellor is for turning. There are many lessons from last week’s epic policy reversal by George Osborne on tax credits, but the most important is that civic action and intelligent opposition can force important concessions, even from this most right-wing of Conservative governments. If the arguments are right, ministers have to listen.
This was a humiliating U-turn on a measure announced in the Budget only five months ago as central to Osborne’s “long-term economic plan”. Not axing tax credits has punched a £4.4bn hole in the Chancellor’s welfare programme and made him breach his own statutory cap on welfare this year.
The Institute for Fiscal Studies (IFS) and the Resolution Foundation probably deserve the greatest credit here. It was the IFS that initially called foul on the statistics used by the Chancellor and the Treasury to justify the April tax credit cuts. The widely publicised figure of three-million poor working families losing up to an average of £1,000 was one of theirs. The Resolution Foundation also helped demolish the Chancellor’s intellectual case by exposing the falsehood that a future rise in the national minimum wage would be compensation.
Now, the Resolution Foundation (RF) is not normally thought of as a left-wing organisation, indeed its chair is the former Tory cabinet minister, David Willetts. But its independent research was influential in persuading the House of Lords to reject the Government’s tax credit plans in the Welfare Bill. It was the Government defeat in the Upper House last month that made the U-turn inevitable.
The Child Poverty Action Group also deserves honourable mention, though its impact was less forensic than that of the IFS and the RF. But the fact that these organisations and the unelected Lords played such an important role in opposing the end of tax credits is a shocking reflection on the failure of Her Majesty’s official Opposition in Parliament: Labour. Intelligent opposition there was singularly lacking.
In fact, Labour initially provided no opposition at all to the Tory Welfare Bill, with its cuts to working tax credits and welfare cap. Labour’s interim leader Harriet Harman said last July that Labour would not oppose it. This now looks like a catastrophic failure of nerve.
Labour was smarting from its general election defeat, and the leadership believed that it had to show that it understood why it had lost the support of “ordinary voters” who thought it had become the benefits party. But what Labour did was validate the Chancellor’s entire approach to welfare reform.
We now know from Tory insiders that, before the general election, ministers never really expected to get away with their draconian changes to tax credits. They were surprised it went as far as it did, thanks to the collapse of the Liberal Democrats and the disarray of Labour.
The explosion in support for Jeremy Corbyn in the Labour leadership race dates from that fateful vote in July in Westminster where 48 Labour MPs – including Corbyn – joined with the 56 Scottish National Party MPs in opposing the Welfare Bill. That was a landmark moment.
Unfortunately, the new Labour leadership last week did its best to steal defeat from the jaws of victory. The Shadow Chancellor, John McDonnell, thought it would be clever to brandish Chairman Mao’s Little Red Book to admonish the Tory Government for selling state assets to the Chinese. But it simply gave a hostile press an opportunity to make fun of Labour and let an embarrassed Chancellor off the hook.
“Moderate” Labour MPs didn’t help by leaping in to join the criticism of their own Treasury spokesman. Really, Labour’s internal civil war is now a major threat to the economic welfare of millions of families. It seems incapable of mobilising a coherent case against the Tories, whether on welfare or bombing Syria. Jeremy Corbyn may not be the best leader, but he is the only leader they have at the moment, and Labour MPs need to support him.
Credit where it is due, the Scottish Labour leader, Kezia Dugdale, opposed welfare reform with consistency. But she made the mistake of believing that the tax credit cuts were a done deal. She tried to turn the issue against the SNP by demanding that they compensate the victims by increasing taxes in Scotland (or rather, not cutting them). This was morally sound but politically premature and has left Labour in Scotland looking both defeatist and opportunist.
Dugdale was too eager by half to embarrass Nicola Sturgeon by claiming that the SNP were more interested in cutting airport taxes for middle-class people than in protecting low-income families from the tax credit cuts. It was a sign perhaps of her inexperience, but it has left Labour without a coherent narrative for the 2016 Holyrood elections.
Labour had hoped to make it the tax credit election, but instead Nicola Sturgeon now gets credit for having opposed the Chancellor all down the line. Sturgeon wasted no time in warning that changes to housing benefit would have to be watched in case they had a similar deleterious impact on the welfare of the working poor.
Indeed, it isn’t just housing benefit. Over the next two years, the UK Government is determined to press ahead with the introduction of Universal Credit, which will replace income-related Jobseekers Allowance, Working Tax Credits, Child Tax Credits and Housing Benefit.
Unfortunately, Labour has supported the principle of Universal Credit – again fearing it might otherwise be seen as the skiver’s friend – but it has failed to scrutinise the detail effectively. And again it has been left to think tanks like the Resolution Foundation to provide a critique.
Indeed, it is clear that the tax credit loss has merely been delayed by last week’s U-turn on the transitional arrangements. According to the RF analyst, David Finch, millions of British families could be left £1,000 worse off by 2019. A single parent working part-time on the minimum wage could stand to lose up to £2,600; a three-child family, up to £3,000. These are devastating numbers.
It really is a sorry state when a Conservative-led think tank is offering the most challenging opposition to a Conservative government. Of course, welfare reform is complicated. The Government is using “confusion marketing” techniques to finesse the abolition of tax credits as it rolls out Universal Credit. It’s not at all clear how it will play in Scotland because housing benefit is supposed to become a responsibility of the Scottish Parliament.
But that is no excuse for intellectual and moral defeatism. The Universal Credit move can be challenged by forensic argument and the Chancellor can and probably will be forced to revise it. That’s why this week’s U-turn is so significant – it is a beachhead against the entire welfare reform agenda. But the opposition forces need now to press the advantage.
The final lesson for all opposition politicians is that they must cease petty party political rivalries and offer coherent and intelligent opposition. Labour in particular must stop looking over its shoulders at what the tabloids are saying, and it must end its internal civil war. In Scotland, Kezia Dugdale and Nicola Sturgeon need to develop a common front against welfare reform and not give in. Poor families in Scotland demand nothing less.
from Sunday Herald 29/11/15