It is the "crusade against poverty" which Blair and his ministers have chosen to highlight as their main concern in the run-up to this year's conference season. At the end of August, Social Security minister, Alistair Darling wrote in The Guardian: "By the end of this parliament, one and a quarter million people will be lifted out of poverty, 700,000 of them children (...) We have introduced Britain's first ever minimum wage. The biggest rise in Child Benefit - £250 a year. More help for the poorest pensioners - this year's Winter Fuel Payment has increased fivefold to £100. And from October the Working Family Tax Credit will provide extra help to 1.4m families, targeting those who earn below £235 per week..." Then, on 8 September, Brown's presentation in Parliament of the "Working Family Tax Credit" (WFTC), aimed at the so-called "working poor", got universal media approval. Instead of complaining as usual about the resulting burden on public finance, the Financial Times spoke of "worthy credit", claiming that with such reforms, Brown was really "tackling" poverty.
Much of the hype surrounding this so-called "crusade" is obviously for electoral purposes, reflecting the Labour government's efforts to regain ground among the party's traditional base of support. This was spelt out by Brown in a column published by the Guardian on September 7th: "The WFTC marks not just the creation of an agenda to make work pay and tackle poverty, it also represents the drawing of one of the central dividing lines for the next general election." But beneath the gloss, what the planned measures will really deliver for the poor amounts to peanuts at best. In any case, contrary to Darling's and Brown's claims, they will not "lift the poor out of poverty" nor "tackle poverty".
Blair and his ministers cannot really conceal the fact that their so- called "crusade against poverty" is just a continuation of the Tories' old policies - with the same "moral" slant which blames the poor for being poor and uses the benefit system to blackmail them into taking any mean and casual job. And they may find that fooling Labour's working class supporters is easier said than done.
For how can working people and the jobless fail to compare the billions of pounds of additional income which Brown's tax breaks are awarding to the wealthy, with the few quid he intends to throw at some poor families? And moreover, that he does this on condition that they renounce self-respect and accept levels of exploitation in work which should no longer be tolerated in today's world? And how can they fail to see that, far from addressing the cause of poverty - that is, the capitalists' insatiable appetite for profits - Blair's so-called "incentives" for the poor, are in reality incentives to these same capitalists to reduce their labour costs and increase their profits even more?
Credit where it's due
Ironically, the cornerstone of the government's "crusade against poverty" - the Working Families Tax Credit (WFTC) - is remarkably similar to the Tory-instigated Family Credit, dating back to 1988, which it replaces. Nevertheless, when Brown introduced WFTC to parliament it had become a major and innovative "new" reform. It was "for the first time, using the tax and benefit system together to tackle the causes of poverty."
To give Brown his due, this is indeed a new method of payment of benefit - but that is the only substantial difference between WFTC and Family Credit. The Inland Revenue will administer WFTC and the benefit will appear in workers' pay. Neither is this idea Brown's invention. Though the present version is the result of proposals made by a Labour-appointed commission headed by Martin Taylor, the ex-chief executive of Barclays Bank, it is an idea which was toyed with by both Labour and Tory governments right from the inception of the welfare state. Similar systems which exist already in the US and Canada have also been used as blueprints by Taylor's commission.
From the government point of view, the first reason for switching to such a system is that it allows further integration of the Social Security and Inland Revenue departments, which is expected to result in the same kind of "advantage" as all mergers - cutting costs through cutting jobs.
The second reason is that WFTC is designed to implement Blair's other "crusade" - against the "something for nothing welfare state", a phrase both he and Alistair Darling have used in the past. As such it is taking the Tories' agenda on welfare reform further than the Tories ever dared to do.
Indeed, it is worth recalling, that when the Tories came into government in 1979, they justified their cuts in welfare spending by the need to target benefit to get rid of the so-called "dependency culture" - just as Brown does today. The Tories also had the objective of reducing the role of the state as the main direct provider of welfare. While their 1979 Manifesto pledged to "do all we can to...restore the incentive to work, reduce the poverty trap and bring more effective help to those in greatest need" (which is not very different from Labour's language today), subsequent manifestos went on to stress targeting those in need by means-testing. With the introduction of Family Credit in 1988, their claim was that targeting the working poor would "provide... better incentives to earn and gain independence" - the same language used by Brown to justify WFTC. And at the same time, just as Labour is doing today, the Tories also tightened rules against benefit claimants: with the launch of their "Employment Training Scheme" (the Tories' version of Labour's "New Deal"), 16 and 17 year-olds were no longer able to claim benefit if "available for work". This, above all else led to poverty and homelessness amongst the youth.
But despite all the Tory "reforms" Social Security expenditure increased rather than decreased under their regime, mostly due to the rise of unemployment. Today, one of Blair's main jobs is to crack this nut and reduce such spending. Blair has (or at least thinks he has, because things can change) a major advantage over the Tories in this respect: the balance of forces in society, which has been heavily tilted against workers for years due to the threat of unemployment, combined with the blackmail exercised on the unemployed by both Tory and Labour governments, means that many workers may now agree to conditions in work which they would not have tolerated twenty years ago. The introduction of WFTC is an instrument to consolidate this situation and, by the same token, to reduce welfare expenditure accordingly .
Brown claims more credit than all the rest
Brown says WFTC will lift hundreds of thousands of unemployed households out of the poverty trap and provide them with a decent income, for the first time, as opposed to Family Credit, which left them in it. This is, apparently, because it is more "generous", and helps towards the cost of child care. According to figures provided by Brown, 1.5m working families would, on average, gain £24/week more than they did on Family Credit, but some would get £40 more; and a minimum income of £200 a week would be guaranteed to any family with a full-time worker.
So how will this work out in the real world? WFTC is primarily aimed at families with at least one parent already in work, and working single parents. But it is also meant to act as an incentive for the unemployed with children to start work for the first time or go back to work via the New Deal interview system. Comparing WFTC to FC, however, it becomes clear that most of Brown's assertions for its great superiority are indeed for the sake of politics rather than having any substantial basis.
Both these credit systems - or top-ups to wages - apply only to parents working 16 hours or more per week, with the same £11.05 extra bonus if a parent works more than 30 hours. In both systems wages up to a certain threshold are eligible for the full top-up amount. A proportion of the wages above this threshold is then deducted from the maximum top-up. Under WFTC the threshold is now nearly £10 higher, at £90/week and the maximum top-up is £2.50 more than with FC, at £52.30/week. The deduction rate is now lower - 55 pence disappears for every pound earned above £90, rather than 77 pence in every pound earned above the FC threshold. In addition there are extra credits for each child, with a value depending on age (only those for the youngest age-group have been increased by £4.70/week) and the help provided for child care costs is a bit more substantial under WFTC. So it sounds as if eligible families will get more.
But now comes the catch. In both cases, other payments like housing benefit and council tax benefit - the main springs of the "poverty trap" - come on top. But since these benefits are also reduced when earnings increase, they will be cut by the switch from Family Credit to WFTC. Significantly, none of the examples provided by the Treasury took this into account.
To illustrate this catch, take the case of a single parent with a 6- year old child, who takes home £70 a week for 20 hours work (around the minimum wage) and pays £50/week rent. She will be better off - before housing costs are deducted - by £7.20/week on WFTC. But after housing costs are deducted, she will be only £1.25/week better off due to the resulting reduction in housing benefit and council tax benefit! Another example, provided by the West Midlands Low Pay Unit points out that a family with two children on housing benefit and council tax benefit and earning £144/week will be better off by less than £5.
But that is assuming that low-paid working families actually get their WFTC. Brown says that he expects a higher take-up rate for WFTC than for Family Credit, because of the method of payment, which removes "the stigma associated with claiming benefits". However, the nature of casual employment these days is that it is irregular and never guaranteed. Working families may shift in and out of entitlement frequently. For workers who work several part-time jobs, there will be the problem of which employer pays the WFTC. Above all, given the complaints already made by employers over what they consider as excessive additional red-tape, one can be sure that many bosses will be reluctant payers at best and at worst will evade paying altogether, despite the planned penalties for those who do not comply.
So despite Brown's claims, the vast majority of the low-paid will in fact remain in poverty. Brown says himself that he expects WFTC to "lift at least 1.25m people out of poverty, of whom 800,000 are children", and therefore only 425,000 adults. But this is a lot less than the 1.1 million adults in families which are receiving Family Credit today. In other words, Brown himself has to admit that 61% of adults living in families switching from Family Credit to WFTC will not actually be lifted out of poverty!
But there are other whole sections of people on very low incomes or no income at all - those who are childless, the disabled and the elderly. By implementing its present reforms, the government is continuing the Tories' strategy of isolating out various groups among the poorest. Each group is defined by different kinds of benefits and is subject to different forms of coercion to reduce their access to welfare funds. Because it is still seen as unacceptable to exacerbate the poverty of children (fortunately so), families with children are treated with a bit more caution. By contrast the childless or disabled unemployed have to run the gauntlet of Gateway and New Deal interviews and capability assessment, under constant threat of having their benefits withdrawn if they fail to toe the line. Even the severely disabled who cannot work at all are targeted as well: their benefits will now be means-tested, with an estimated 30% of them being excluded from all benefits, usually because they have a working partner or an occupational pension.
Brown's claim to be lifting people out of poverty is worse than a bad joke. The levels of benefit provided by Social Security have already been cut to the point that nobody can live decently on such amounts. But what is even more scandalous is that families who are actually in work, and even receiving a top-up via WFTC will still have to live on incomes which are well under the poverty line. This is indecent when is so much wealth around in the hands of a privileged. That Blair and his ministers should actually congratulate themselves for their sleight of hand over benefits and "welfare reform" is even more indecent.
A benefit for the bosses
It is not by accident that Brown is at the same time tightening up measures against the unemployed who fail to toe the line. Claimants of Job Seekers Allowance and those who come under the New Deal are threatened with cuts in the benefits which are at the sole discretion of those who interview them. This is consistent with Blair's approach, to blame the unemployed themselves for the absence of a viable job "market". As he told the Observer: "it is important to improve skills and employability, to reform the tax and benefit system that fails to reward work and allow people to climb the earnings ladder." So we are meant to believe that it is "employability" and the will to work that is lacking. But where are the five million jobs on offer for the five million adults who today live in workless households? Especially those jobs that provide steps upwards on the ladder? Where is the ladder, for that matter?
Instead of using its powers to stop profitable companies from cutting jobs, Blair's government has actually shown the way, by cutting thousands of jobs across the public sector and the introduction of WFTC will add even more job cuts at the DSS.
WFTC will not only provide a wider choice of casual workers for employers, thereby pushing wages down. But in addition, as a wage top-up paid by the state on the pay slip, WFTC amounts to a subsidy to slave bosses, since by making wages look higher than what they really are, it allows the employer to get away with paying lower wages. Indeed, far from "making work pay" and providing an "incentive" to work for the low-paid and unemployed with kids the only real incentive it provides is to bosses, to pay low wages.
Of course this is not altogether new. It was always the case, even when the welfare state was launched in 1945, that welfare benefits amounted to a subsidy to the capitalist class, designed to allow the bosses to pay lower wages. Only today, particularly with WFTC, this is more blatant, cynical and direct than ever.
But regardless of what Brown implies, poverty is not just a matter of income. It is also a function of the living conditions imposed by society on the poor because they are poor.
The state of housing and the cost of it, reflects above all the role of governments in helping to generate the present social crisis. The problem of homelessness which started to become visible in the late 1980s, has become permanent. The dereliction of housing estates is taken for granted. The very poor are now living in overcrowded, damp and cold conditions. In Bromley-by-Bow, in east London, it is not very uncommon to find a family of five sharing one bedroom. And this is the case in many inner city areas.
Of course the blame for this cannot be deposited at the door of Blair's government alone. In the Tory years, 1.6m council homes were sold for a total of £7bn. The idea was that Britain would become a "nation of owner-occupiers". The building of social housing ground to a halt. When the "grand sale" of council homes was over, the number of council tenants had dropped from 32% of all households in 1979 to only 19% in 1999. But many ousted council tenants did not end up as owner-occupiers. And many for whom council accommodation was no longer available were induced to buy on the market and then burdened with very high mortgage repayments having borrowed close to 100% of the price of their houses. When they could not meet their mortgage repayments, their homes were repossessed. Between 1990 and 1995, 350,000 "owner occupiers" lost their homes in this way. This amounted to an average of 230 repossessions every working day.
On top of this, the 1996 Housing Act withdrew the right of the homeless to a tenancy in the social rented sector. The homeless were pushed into the hands of the private sector - or indeed the Housing Association sector - both of which were outside of rent control, due to rent deregulation in 1989. And of course rents soared in both these sectors.
The idea was that instead of the councils providing social housing for the rapidly rising numbers of homeless unemployed and low- paid, accommodation would be provided by private landlords (and Housing Associations). Where tenants could not afford the rents, the state would foot the bill by paying the tenant's housing benefit directly to the landlord. So instead of housing benefit coming back to local councils via council rents, to fund the maintenance and repair of council housing - or even the building of new houses - it went into the pockets of private and non-profit-making landlords, thereby providing them with what amounted to a subsidy.
Eventually when rent rises got out of hand, the government stepped in and capped housing benefit. Since 1997, all private tenants have been limited to housing benefit equivalent to an average local rent. Housing benefit was also restricted for single people under 60 years living on their own. Their housing benefit was cut to the average rent payable for a room in a shared house! The introduction of these rules meant that many hard-up tenants had to move to cheaper accommodation or face a cut in their already inadequate income.
The number of houses or flats available at lower council rents is, if one takes the 1997 figure for homeless accepted onto local authority lists as an indicator, short by 125,000. Young workers and unemployed (as well as students) usually end up in "shared houses" anyway, which are privately owned, and where the owner squashes as many of them in as possible in conditions which are often both unhealthy and unsafe, but seldom cheaper than £50 per week (in the case of London, for instance).
The implications of all of this for the low-paid and unemployed is that they have to consider their incomes primarily with reference to their housing costs. This is the origin of the notorious "poverty trap", where to take paid work, or to increase one's earnings means no longer affording the rent (and council tax) due to withdrawal of housing benefit. It also means that where the poor can perhaps afford to live, just about, they are trapped in a different way. Their houses are left to rot without maintenance and their areas to become derelict because there are neither caretakers nor cleaners employed to look after the buildings or the streets.
Since Labour came to power, nothing has changed in this respect. There again, the same Tory policies have been continued, if not taken further. There has been no question of restarting social housing programmes nor of using some of the 750,000 empty homes that exist in Britain, to help the homelessness. The backlog of repairs to council homes, which is already estimated at £20bn, is increasing because the government does not want councils to borrow, as this would have an impact on public expenditure and the state debt. Instead they are putting pressure on councils to transfer the remaining council homes to Housing Associations or similar organisations. These would come under control of the Housing Corporation quango, outside of state expenditure and regulation. But already, the results of this policy are becoming visible: while most of these organisations are "non-profit making", the transfer of 140,000 homes this year has resulted in a 25% rent increase.
Public services and poverty
There are many other contributing factors to rising poverty today which can be attributed directly to government policy and which the present Labour government is certainly not intending to change.
The privatisation of electricity, gas, and water was meant to result in decreased costs to the consumer. This turned out to be a fairy tale, particularly in the case of water where charges increased by up to 40%. On the other hand, charges for the utilities also now vary according to payment method, among other things. Discounts usually only apply to those who pay by direct debit or who pay their bills before a certain date. Obviously this means that the poor are not eligible for lower charges - that is, those most in need of discounts.
As a result of privatisation, disconnections of all utilities for non- payment of bills increased exponentially. They doubled for electricity and gas, and increased even more for water despite the fact that water disconnection required a court order. In addition, with the introduction of pre-payment meters for water by many companies, the "disconnection" is now masked - because if a household cannot afford to pay, it is the meter which does the disconnection without bothering with a court order.
The price for pre-payment meter gas and electricity as well as water is actually higher, to boot, and in many cases, the household has had to pay for the installation of the meter as well. It is not surprising that once-a-week baths and shared bathwater have made a come-back, and so have deaths from hypothermia amongst the elderly. In the case of households without meters, the utility companies may apply to have arrears deducted directly from social security benefits. This leaves a poor family with even less leeway to juggle their inadequate income. It inevitably results in hardship.
The exclusion of the poor is not limited to their reduced access to the necessities of life like gas, electricity and water. 10% of the adult population is even excluded from having bank accounts - mostly, of course, because they never have any savings and therefore make no profits for the financiers. Figures from Scotland published recently in the Financial Times estimate that 39% of all households have no savings and 12% have neither bank nor Building Society account. This has not been helped by the sale of Girobank - the old post office accounts had always been the means for the poor to manage their sparse finances. The government has recently completed a report on such "financial exclusion" and intends to encourage banks to provide simple accounts for the total 3m people without banking facilities. They have their own reason to do this, because they plan to automate all social security payments by 2005.
Ironically, the lack of bank or building society accounts has led to the growth of a flourishing "cheques-for-cash" industry. Customers are charged a one-off introduction fee of £4 plus 5% to 9% of the cheque cashed, despite the fact that these cheques are usually from solvent employers or from the state and therefore unlikely to bounce.
As for health, the association of ill-health, high childhood and adult mortality with poverty does not have to be proven, despite the fact that such an obvious link is regularly put into question by government policy units if not academics from university research departments. Nor is it the case that the poor have equal access to the health service. Compared to middle class areas, the number of GP surgeries is proportionally fewer in run-down areas, where the poor are concentrated. And given the fact that their needs are greater, GPs are unable to offer the same level of service, even if they wished to, which is all too often not the case. Tuberculosis has made a comeback because of overcrowding. Respiratory infections are common because of damp housing conditions. It was estimated by the "free school milk campaign" that 2 million children suffered from poor nutrition in 1997. On the whole, those living under the poverty line - one child in three - get only one or two meals a day.
But all the aspects discussed, and many more should make it abundantly clear that poverty in Britain, is the result of a multitude of social "exclusions" which cross-react with each other, and which are generated by the whole complex of social policies going back decades as well as the "simple" lack of money. A whole section of the poor is constituted by poor pensioners and the aged whose utter misery is more a question of being isolated and "forgotten". All this to say that poverty may be defined by a low income, but the deprivation and despair which come with it are the result of the social organisation which is imposed on the population. It is the class system that relegates the majority for the sake of the profits of a minority which is the real "poverty trap".
Poverty and profit
In the last few decades, while manufacturing industries have radically "downsized" or shut down completely - the worst cases being steel, shipbuilding and mines - the total profits accumulated by the capitalist class have nevertheless soared. Where did these profits come from?
It has almost become a cliché to say that Britain's poor have become poorer, and the rich have become richer. In 1989, the wealthiest 200 in Britain had a total of £38bn between them. Today the top 200 have double this amount - £75.9bn. The gap between rich and poor in Britain has become one of the widest in Europe. Britain's poorest 20% get 7% of the national income whereas the 20% richest get 41%. In 1979, one tenth of children were estimated to be living in poverty. Today it is more than one third. And of course the cause of child poverty is adult poverty. Today, the unemployment which shocked people in 1979, at 1.5m has grown to a real figure of nearly 5m. Unemployment has become a permanent and integral feature of the system.
The poor have become poorer not because society has become poorer, but because more wealth has been squeezed out of the working class and appropriated by the rich. Leaving the huge increase in speculative capital aside for the moment, and therefore the increase in financial profits, and despite decades of unde-investment in productive facilities, profits have been at record levels for the past few years, even in the context of this widening poverty gap. Gross operating profits of companies were £43bn - in the first quarter of 1999 alone. Business commentators may well be moaning today that this result is 9% down on last year (£47.5bn) but they forget to mention that it is still 43% higher than in the first quarter of 1996! The main reason for booming profits, of course, is the huge savings made on the back of the working class. What was gained by the bosses was paid by workers in the form of lost wages, from the half-a-million full-time jobs which have disappeared over the past nine years, for instance.
But if fewer workers are producing more wealth, either there has been a real technological revolution or workers are working harder for lower wages. Given the general lack of investment in productive facilities, for the past decade, it is obvious where these profits came from - the sweat of the working class, through a phenomenal increase in their rate of exploitation by the bosses. Small wonder then that working hours in Britain have increased over the past 15 years, with 4m working over 48 hours a week in 1998, compared with just 2.7m in 1984.
Blair claims that society can no longer afford to cater for those in need, for the disabled, the pensioners, etc... And yet wealth has never been as conspicuous as it is today. Every one percent increase in the FTSE share index means not a few hundred pounds for the top shareholders, but a few million. Yet those lucky enough to have an account with a building society that was demutualised saw the few hundred pounds they got as "bounty". In fact it is considered perfectly justified for companies to spend tens of millions of pounds on advertising campaigns and consultancy fees, for mergers which only serve as a pretext to cut costs for the benefit of shareholders and at the expense of workers' jobs.
There has been an enormous proliferation of intermediaries who take their cut in every exchange - and supermarkets are a good example of this, by overpricing essential goods. Not to mention the so-called entrepreneurs who are actually admired for their ability to spot an opportunity to make money by placing themselves in the middle of a transaction which would otherwise be direct and cheap - all these constitute utter waste. And the money which passes from hand to hand in these deals has to come from somewhere, and it comes from nowhere else than the productive work of the working class. But for it to accumulate in the pockets of shareholders and wheeler-dealers, it has to leave the pockets of workers empty.
Yes, the real cause of poverty is the monopoly that the rich have on all wealth and their waste of it. Poverty is the cancer of capitalism because it is primarily a question of social organisation. Enormously rich companies can only exist because they feed on large chunks of the resources of entire states and impose increasing exploitation on tens or hundreds of thousands of workers in the name of competition. This is what causes the dereliction of public infrastructure and the impoverishment of whole sections of the working class, sanctioned by willing politicians.
Welfare, whether in the form of "targeted", means- tested benefits or in the more universal form introduced in 1945, is no real protection against poverty for working people. Of course the demand of the poor and all those in receipt of benefits for a substantial increase of welfare payments (far more than Brown's miserly WFTC) must be supported. But charity, as Blair himself reiterates, is not what society needs - only he proposes to replace one form of charity with another even more objectionable form. Welfare alone, even if it was based on a redistribution of income via a "tax the rich" policy, can prevent neither unemployment nor the destruction caused by capitalist competition. It certainly cannot transform the economy into a rational system which produces for the needs of the many rather than the enrichment of the few.
The very minimum which would be necessary just to get people out of the poverty trap would be to redirect - under the control of the population - all the resources of the state as well as a substantial proportion of the profits made by the big companies towards useful and productive investment. Only this could provide the jobs needed by the unemployed - that is, the one essential part of the equation missing entirely from every formula presented by government ministers so far to "tackle poverty". But these jobs would not be in call centres or supermarkets, they would be socially useful jobs. It is the urgent work of rebuilding and developing all the public amenities and services which have become so run down or have even been dismantled in the last decades - useful and real employment - which is necessary. However, achieving these objectives will require to confront the capitalist class and its greed for profit - instead of serving it as this Labour government does. The only way such measures will be implemented is through the future struggles of the working class in the streets, in the offices and in the factories. But to free society of the plague of poverty once and for all, these struggles will have to go further, in order to bring down its fundamental cause - the capitalist system itself.
17 September 1999