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Jean Shaoul (S.E.P.) Statement following the Regional Meeting in Rotherham on 8 March 2008. Thank you very much for inviting me to speak at your meeting. When I told friends and colleagues that I would be speaking here, everyone gave me a horror story. Everything I have heard today about the Tax Credit fiasco provides me, as a member of the Socialist Equality Party, with yet another example of why a new party must be built to oppose the Labour Party and defend the interests of the working class. Labour is now ever more openly revealed as the party of big business. Just consider the background and direction of Labour’s welfare policy. Here I should say that in my day job I am an academic specialising in public finance and policy. When Blair took office in 1997, he categorically rejected redistributive taxes and universal cash benefits to reduce the ever growing social inequality, the hallmark of Britain today. Instead he called in an array of big businessmen to review welfare and social policy issues and suggest how it should be reformed. In the case of the Tax Credit system, it was Martin Taylor from Barclays Bank. Essentially their proposals were outlined in a Green Paper called: ‘The shape of things to come’; it had three strands:
From the point of this meeting, the second and third strands are crucial. We can see how Tax Credits fit this agenda. A unified benefits system would - it was claimed - reduce fraud and offer government a more efficient service to customers. But a unified benefits system would have to bring together the assessment of eligibility for benefits and their payment. It therefore depended upon highly integrated IT systems linking the various agencies, as well as mergers of the agencies. While this resulted in lucrative IT contracts for big business, the result has been a financial disaster. The contracts have been late and failed to deliver. National Insurance Recording System 2 (NIRS2) has lost the government at least £5bn, as well as causing incorrect payments. The third element was Tax Credits, announced some years ago. It would replace the existing system of Working Families Tax Credit (WFTC) and guarantee a basic weekly income of £180 when first introduced for families with at least one person working. But even this was below the de facto poverty line of £210 per week for a family of four. It fundamentally aligns benefits away from payments paid as a matter of right, based on rules of eligibility, to a means tested Tax Credit system. In effect it would be determined by employers. Welfare, henceforth, was to be linked to responsibility: the responsibility to work. In the future, anyone refusing a job, however lowly paid will have their benefits stopped. We see this is now being extended with attempts to force those with disabilities, long term sick and health problems into work. As such, it was and is aimed at creating a new pool of cheap labour by forcing people off benefits. That in turn would serve to drive down wages. By providing inducements to work, in the form of Tax Credits, it was a barely disguised subvention to big business. It enabled employers to pay poverty level wages. The government admitted as much when it said that making savings was not the primary purpose of the scheme. Indeed, it would cost more, not less! Tax Credits are a £20bn a year subsidy to employers and has become key to making Britain a low paid service centre, while the service companies are the Stock Markets darling. In other words, it is an essential mechanism for corporate welfare, for redistributing wealth not from the rich to the poor - but from the mass of the population to the financial elite. The benefits system has been taken away from the DSS and brought under the direct control of the Treasury. Tax Credits are not entitlements based upon collective social insurance but are discretionary payments by the state, and subject to the tax, not welfare, legal system. They can be withdrawn or changed as the state sees fit. The IT system was designed to be flexible, to make payments and then at the year end, when total annual income was known, make some automatic adjustments via a claw back mechanism if circumstances or income had changed. It was highly complex. The software did not work, they underestimated the amount of volatility in poor people’s income, and the amount of work after the year end that this would give rise to. It was designed as an automatic system. There is no information publicly available to show entitlements or how the credits are calculated. There is no provision to examine each family’s situation on a case-by-case basis. The transfer to HMRC, who had been used to dealing with Income Tax, (usually where people are more prosperous), was totally unsuited to dealing with a benefit system and the highly vulnerable people for whom £10 a week matters. Many people found themselves facing court orders for the repayment of thousands of pounds of tax credits. There is hardly a family in the country that has not been adversely affected by the maladministration of the Tax Credit system. As a result, hundreds of thousands of families do not claim the money to which they are entitled. So its conception and implementation were very different from the mantra of lifting families and children out of poverty. But there are also broader considerations. The combined system radically alters the relationship between the government and its citizens: the individual’s responsibility is to work, be independent, support family members (not just children), and save for retirement. The state’s role is to ensure that people do work and thus become ‘economically independent’, so that the state supports only those unable to work. Thus it dismantles the system of state social insurance, introduced by the post-war Labour government exactly 60 years ago as a mechanism for eradicating poverty. This policy agenda is also an attack on any sense of social solidarity; any notion that society has a responsibility for the well being of its citizens. The government is saying that everyone has a duty to look after themselves and their families, and that the individual’s future depends upon his or her own efforts - not those of their fellows. It is for these reasons that the Labour government must be opposed - by the building of a new, independent political party, based upon a socialist perspective. |
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decisions made by HMRC, The Parliamentary Ombudsman, The Adjudicator, or any
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