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The working poor: Westminster discredited The working poor: Westminster discredited
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Has British politics given up on the working poor? It is an extraordinary question to have to ask after a week in which official figures recorded wages lagging the cost of living for the fifth straight year, with pay even more stagnant at the bottom end. The proliferating use of zero-hours contracts since the recession is only the tip of an iceberg of insecurity. And even as unemployment declines in the recovery, the number of unwilling part-timers, lumped with inadequate hours, continues to set records. Toil for scant reward really ought to be the great issue of our day.Has British politics given up on the working poor? It is an extraordinary question to have to ask after a week in which official figures recorded wages lagging the cost of living for the fifth straight year, with pay even more stagnant at the bottom end. The proliferating use of zero-hours contracts since the recession is only the tip of an iceberg of insecurity. And even as unemployment declines in the recovery, the number of unwilling part-timers, lumped with inadequate hours, continues to set records. Toil for scant reward really ought to be the great issue of our day.
Yet the question about whether Westminster cares has to be put, not merely because George Osborne has launched a stealthy assault on low-earners this month but also because nobody batted an eyelid when he did. While Iain Duncan Smith felt the heat in the Commons after his late-in-the-day confession that his universal credit reform was being delayed, neither the media nor the opposition noticed how the autumn statement froze for three years the so-called "work allowances" in the new system. It fell to eagle-eyed observers at the Resolution Foundation and the Institute for Fiscal Studies to explain what this meant – the new credit, which has been sold as making work pay, will start being snatched away, at a rate of 65p for every pound earned, from people on increasingly meagre wages.Yet the question about whether Westminster cares has to be put, not merely because George Osborne has launched a stealthy assault on low-earners this month but also because nobody batted an eyelid when he did. While Iain Duncan Smith felt the heat in the Commons after his late-in-the-day confession that his universal credit reform was being delayed, neither the media nor the opposition noticed how the autumn statement froze for three years the so-called "work allowances" in the new system. It fell to eagle-eyed observers at the Resolution Foundation and the Institute for Fiscal Studies to explain what this meant – the new credit, which has been sold as making work pay, will start being snatched away, at a rate of 65p for every pound earned, from people on increasingly meagre wages.
Mr Osborne's frenzied wielding of the axe on "welfare" extends to benefits that do not yet exist. It shatters the bone-headed Liberal Democrat insistence that increasing income tax allowances is an effective way to reward the low-paid. That argument was already weak, both because national insurance has been decoupled from the rising allowance and still kicks in at lower wages, and because higher VAT gobbles up the extra change put into pay packets. But now, while middle-earners will continue to enjoy a higher allowance, increasing numbers at the bottom end will see the bulk of any future gain clawed back through reductions in universal credit, which will impose an effective tax rate not at the 20% basic rate but at 65% instead.Mr Osborne's frenzied wielding of the axe on "welfare" extends to benefits that do not yet exist. It shatters the bone-headed Liberal Democrat insistence that increasing income tax allowances is an effective way to reward the low-paid. That argument was already weak, both because national insurance has been decoupled from the rising allowance and still kicks in at lower wages, and because higher VAT gobbles up the extra change put into pay packets. But now, while middle-earners will continue to enjoy a higher allowance, increasing numbers at the bottom end will see the bulk of any future gain clawed back through reductions in universal credit, which will impose an effective tax rate not at the 20% basic rate but at 65% instead.
In a crass debate fuelled by resentment against the workless, the parties are falling over one another to propose caps on "welfare" spending, without any regard for how much of this money is now spent on relieving the working poor. In a crass debate fuelled by resentment against the workless, the parties are falling over one another to propose caps on "welfare" spending, without any regard for how much of this money is now spent on relieving the working poor. There are still interesting options for raising or reforming the minimum wage; perhaps Ed Miliband's announcements on housing on Monday will also offer something more positive to the low-paid. But for workers not pulling in a living wage, cash top-ups are surely an indispensable part of any sensible policy mix. Until the anti-welfare panic calms, however, it is one essential ingredient that is going to be increasingly hard to come by.
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