We know that tackling child
poverty and pensioner poverty was a priority of New Labour, and that
they
succeeded in doing so to a remarkable degree
. The introduction of
the Minimum Wage and Tax Credits, which also boosted work incentives
in the old system, played a central part in this. But an equally
significant part was played by a slightly dull and technical action
taken by Gordon Brown: increasing the child and pensioner elements of
means-tested benefits well above inflation for a series of years in a
row. This was a rising tide that lifted the household incomes of
millions of families with low incomes, whether or not they were
working.

Since 2010, the
Conservatives continued one element of this approach: the Minimum
Wage has increased well above inflation, lifting the per-hour income
from employment of low-paid earners. The annual Income Tax personal
allowance, £6,475 in 2010, will have almost doubled to £12,500 in
2019 following the latest announced increase in this year’s Budget,
the
cause of the latest set of arguments within Labour
. This has
represented a huge configuration of the tax system – over
40% of adults now pay no income tax.

But of course, at the same
time, the benefits system has gone in the opposite direction, with a
multitude of different cuts affecting different people in different
ways, including the ongoing benefit freeze which is in effect a large
annual cut for everyone claiming benefits (now in its third year of
five), and the controversial and complex introduction of Universal
Credit. The impact of these changes has been disastrous for many low
income households.

After the Budget,
Conservative MP Chris Philp tweeted the following:

just computed someone
working 40 hours a week on Min Wage has annual wage up from £11,200
in 2010 to £17,100 next April. That’s +38%. But *post tax* income
up 44% due to personal allowance increases. Inflation over the period
c.25%. Those on lowest wages see big real increase
.”

This prompted me to do some
‘computing’ of my own. My calculations pretty much agreed with
Chris Philp’s: someone working 40 hours per week on the minimum
wage would have earned around £12,064 gross in 2010 and will earn
around £17,077 gross in 2019, an increase of around 42%. Because of
the growing personal allowance, their net earnings would have risen
from around £10,248 to around £15,058 over this period, an increase
of around 47%.

But if that worker had
children, the picture would be completely different. A single parent
with two children might have an overall household income of £19,544
in 2010, consisting of net earnings, Tax Credits and Child Benefit.
In 2019, the household income for an equivalent household will be
£20,998, consisting of net earnings, Universal Credit and Child
Benefit, including the increase in Universal Credit work allowances
announced in the budget. This is an increase of just over 7%.

With inflation over the
period roughly 25%, as Chris said, that actually represents a cut in
their household income in real terms of around £3,400 a year.

Because benefits are clawed
back as earnings increase, it’s always been the case that the
impact of tax cuts, and even rising wages, are blunted for the lowest
earning households. On top of this the many cuts introduced in recent
years, including the benefit freeze, has created a bleak picture for
many households on benefits. According
to the Joseph Rowntree Foundation
, the income provided by working
on the minimum wage (and topped up by benefits) now provides only 80%
of a minimum household budget for a single parent with two children,
compared to 97% in 2008. With a complex mix of different cuts and
‘welfare reform’, the overall picture varies a lot for different
types of households and different circumstances. Some families have
lost much more, for example, large families who are (or will be)
excluded from claiming an additional amount for their third or
subsequent children; people with disabilities receiving lower
entitlements under Universal Credit; and people affected by various
Housing Benefit restrictions and the benefit cap. As the safety net
has been eroded, incomes have dropped for working and workless
households, although of course those with lower earnings are more
exposed to the impact of benefit cuts.

Let’s say the single
parent from the example above became pregnant, had a third child and
left work. The benefits system as it was in 2010 would have provided
£153.65 Child Tax Credit, £33.70 per week Child Benefit and £65.45
Income Support per week. The current system would instead provide
£190.75 per week Universal Credit and £34.40 Child Benefit. This is
a dropin annual income of 11%, while living
costs have increased by around 25%. As a result this family would
have an annual income around £4,300 less than if things had stayed
as they were – well over a third of
their total income
. Although not the
only cause, the biggest factor in this case is the two-child limit.
Measures like the two- child limit have been particularly pernicious
as they arbitrarily remove the crucial link between a family’s
level of need and the financial support they are entitled to, purely
by accident of personal circumstances.

As the social safety net has
been eroded and no longer meets peoples’ needs, more and more
families have been pushed into poverty and material deprivation, and
many more families than before are destitute. Because the safety net
that tops up incomes to a minimum level is lower than it needs to be,
a move into employment or an increase in wages is no longer
sufficient to guarantee that a basic minimum standard of living can
be met. And of course, millions are not in a position to work at all,
for many of whom an ability to meet a basic decent standard of living
recedes further and further out of view.

This should all act as a
reminder that the social security system is absolutely vital.
Rebuilding and investing in it must be at the heart of the policy
platform of any party that can call itself progressive or socialist.
Increases to benefits lift millions, and cuts harm millions, whatever
policies there are towards jobs, earnings and tax. The safety net of
social security benefits remains the only single available mechanism
to lift the income and living standards of all those with the lowest
incomes.

What is Labour’s approach
going to be if it wins power? John McDonnell seems to have very much
focused
on rebalancing the economic system
, addressing workers’ rights
and pay and collective bargaining. If successful this would represent
the kind of long-term structural economic change that New Labour
neglected during its years in government. The labour market policies,
and the commitment to large-scale council house-building, are great
policies which could also help with reducing poverty and cutting the
social security bill. But if we want to really tackle living
standards, poverty and hardship, then there is unfortunately no
alternative but to make social security a central priority and commit
significant amounts of money to it.

So far, Labour has been
patchy and inconsistent on social security, as shown by the
recent backtracking and confusion over whether or not it is Labour
policy to end the benefit freeze and return to uprating with
inflation
. A huge amount of money is going to need to be invested
just to undo the worst effects of recent years (there will need to be
above-inflation
increases just to repair the damage to living standards). But unlike
in other areas of policy such as education, Labour’s
response has been weak
, with neither the financial commitments
needed nor the priority it merits. The financial investment will be
needed whether Universal Credit is scrapped or retained, a
question Labour is reviewing
– although this hasn’t stopped
there being inconsistent
announcements about its policy
.

A stronger social security system is the single most important thing that a Labour government could do in order to address these problems. Building a safety net at a higher level through increasing the rates of cash benefits is one of the most powerful levers that a government has to redistribute income and bring about structural change of the kind that is badly needed in the UK. The multitude of Conservative cuts has brought about a massive erosion in the wellbeing, incomes, and living standards of millions of people. Tackling this crisis, a historic mission needed now as much as ever, should be at the heart of Labour’s very purpose. Without a strong safety net benefits system, poverty and destitution will remain a permanent scar on the British social landscape.

Perhaps it is never going to
be politically possible to give the benefits system the money and
level of priority it needs, and the UK will forever be stuck with a
highly unequal society and entrenched institutionalised poverty and
deprivation. But surely we at least need to try. The current
politically volatile climate, with growing
public opposition to austerity
, and a radical Labour leadership
elected after refusing to abstain on the 2015 Welfare Reform and Work
Bill (which implemented many of the harshest cuts), should present
the opportunity we need.