I wrote this ten years ago, pre-Brexit. Its inference is that outside the EU, Universal Credit would be replaced by the more effective, efficient and honest practice of subsidising targeted industries. Why is it not even being discussed?
The United Kingdom probably has the largest and most complex welfare system ever known. Much of its workings are the standard stuff of modern economics, revolving around the pretence that it is desirable for everyone to be in education, paid employment or retirement, a condition known as “full employment”. This in defiance of the plain fact that for more than half a century standard economic theory has held that a certain level of unemployment is both desirable and necessary as a hedge against inflation. The clear and present threat of loss of employment is the sole available brake on wage demands in those economies such as the UK still locked into the adversarial employment relations model.
The German mitbestimmung is of course an effective alternative. Germany’s experience has shown that wages can effectively be limited by mutual agreement based on open books. Workers under mitbestimmung have shown themselves well able to recognise wage thresholds beyond which the enterprise and therefore their jobs cease to be viable.
This holds little political appeal in the left-right-obsessed minds of British politicians and workers’ advocates, with each side holding the other to be unrestrainedly greedy. This is a pity and a waste, but it is business as usual, neither likely to change nor even particularly interesting, the quotidian folly of a society mired in 19th Century industrial relations philosophy.
So much for the circumstances and attitudes surrounding unemployment benefits. I am more interested in the other, larger slice of the welfare bill: payments to the poor in employment. In the mid 1980s New Zealand introduced a purer form of monetarism than that of either Britain or the United States; Thatcher was a fervent admirer of Minister of Finance Roger Douglas under the unfortunate Lange government, who swept away every single vestige of state support to the employed. Not that there were many to start with. The child benefit of around £7.50 per week per child had been around since Michael Savage’s far-reaching welfare reforms in the thirties. I part-funded the purchase of our first house by the common practice of child benefit capitalisation, which gave us 18 years’ worth of child benefit for both of our children – a substantial sum. (And yes, I felt rather smug when the child benefit was axed soon after.) The only other benefit for those in work was the ability for the employed to claim work expenses – study and training, work-related travel beyond the daily commute, clothing allowances, etc. This also went in the late 80s.
So arriving in the UK to see vast sums disbursed in welfare payments to the lower-waged was something of a shock. In my world it is now an absolute given – to go into work is to leave direct welfare behind. Free or subsidised health care is not viewed as welfare, but as a right, derived from the shared belief that access to healthcare being dependent on wealth is immoral, an anathema.
So why is it seen as necessary in the UK? On the face of it, you could call it the good old British sense of fair play, simple compassion for the strugglers. But scratch the surface and we see a deeply unpleasant underbelly: a hidden subvention for British industry and agriculture, direct support being severely constrained under the firm and ungenerous thumb of Brussels (as it stood while the UK was in the EU).
Suppose the housing benefit, the winter fuel payments, the child tax breaks and all the rest of it were swept away in one fell swoop. What would happen? Rent and mortgage payments would white ant the rest of the family budget. Then what – rent default on a huge scale, hundreds of thousands of simultaneous evictions? If that were the only consequence, well, rents and mortgages would simply have to drop. So what? The consequences of that are not hard to calculate – thousands of highly geared landlords going bankrupt, for a start.
But that would not happen, or at least not quickly, because experience shows that most people will freeze and starve before they give up their home to go – where?
If there were any slack in the system, the lowly paid might stand some chance of enduring the shock. But there isn’t any, at least not nearly enough. My partner’s son and his family simply could not survive on their meagre earnings alone, in spite of the fact that he is a hard-working and successful bed salesman. Most people would simply choose unemployment and the dole and it would be a valid choice. You can’t hold your job if you can’t afford to get there. You can’t put in a day’s work if you’re constantly hungry. You can’t show up to a retail or office job in shabby old clothes. Of course the first to go would be the Smiths, the Perkins, the Jameses. The Wronskis, the Odungas and Wachikes would hang on longer, the ones who will live six to a room and subsist on rice and beans, a dynamic already observable under the current system. Cue deepening hatreds, the oppressed turning on the oppressed. So often ‘taking our jobs’ really means doing our jobs for low wages we refuse to accept and should not have to accept.
Such scything cuts to workers’ welfare could not be made without declaring the whole plan, being an intention to divert those billions into supporting capacity and advancement in agriculture and industry, research and development, and where necessary direct price support. The British public has become so used to ubiquitous welfare it is likely that, even if the scheme were openly described as a reallocation of resources, the reaction from the street, the pulpit and the leader page would still be to flay the heartlessness of the politicians driving them. The British sense of entitlement to welfare has become endemic. From the other side of the fence, the beneficiaries of these hidden subsidies would howl about the unavoidable wage increases which would follow, ignoring or not trusting the intention to replace them in a more open and targeted manner.
It is a fact that failing that strategy forbidden by the EU many British products and services would become more expensive than those of their competitors. So we see what this really is all about – international competitiveness. A deeply dishonourable covert subvention that reduces workers to the role of part-time beggars on their knees before the armies of bureaucrats employed to administer their welfare. Their day-to-day existence haunted by the spectre of The Cuts. Perfectly honest hard-working employees who deserve decent wages and the respect due to those who thrive by their efforts are often driven to become cheats, sharing with their mates every new wrinkle to work the system, escape deductions, drive up entitlements through falsehood and secrecy. Absolute loss of belief in the political process and the law.
It is (was) a terrible price to pay for staying in Europe and exalting the Holy Grail of free trade.
This is (was) the hidden cost of Europe: the humiliation of the British worker.
So why, now the UK is no longer subject to Brussels, does it continue?
Play With Strangers 