Former chancellor Gordon Brown introduced a system of working tax credits
A new book When Nothing Works: From Cost of Living to Foundational Liveability argues for solutions to fix the issues grinding working class people down. It comes at a time with rampant inflation, growing personal debt and low wages making ordinary people feel like nothing in Britain works for them.
One of the authors Sukhdev Johal told Socialist Worker, “In 1976 workers’ share of GDP—the value of all the goods and services produced—was just under 58 percent and by 2019 it’s just under 49 percent. What if workers had maintained their share? This difference translates to just over £7,000 a year. If we said the difference went to the non-retired households, every household would have had £9,700 more income each year.”
These figures indicate a huge shift of money from the pockets of workers to the bosses. “The current cost of living crisis is the outcome of attacks on labour rights over decades,” Johal explains. “Trade unions should have been a defensive wall against greedy managers and shareholders.”
Johal and his co-authors see the causes of the current cost of living crisis differently from the mainstream journalists and politicians. “Thatcherism—through the combination of attacks on labour rights and the proliferation of low paid jobs—made households more dependent on the state,” Johal said.
Low wages aren’t enough to live on, so working households have no choice but to claim state benefits. The current benefits system acts as a huge subsidy to employers—a form of corporate welfare. Even under New Labour, Gordon Brown’s tax credit system meant subsidising the bosses and propping up low paid work.
“In 1979, 30 percent of working households received more in total benefits than they paid in taxes,” Johal added. “By 2020 the total had risen to 48 percent. This wasn’t because of a post-Covid lockdown rise, as the trend had been steadily rising upwards.” Johal points out that a third of households claiming Universal Credit are actually in work. “They claim because their jobs don’t pay enough to support their families.
“Another third has no requirement to work. They are—even under draconian Universal Credit rules—too sick or physically unable to work. Wouldn’t it be better to pay more wages to the former and make recovering from illness more humane while removing the harsh Universal Credit requirements? Britain has a tax and benefits system that does not work.”
Johal used the example of a dual, low income, Universal Credit claiming, working household, with two children.
“If one receives a 100 percent pay increase, after all the taper cuts and reliefs it translates into just a 17 percent household income increase. A 40 percent pay increase would translate into just under a 7 percent income increase for the household.”
The authors say that politicians’ commitment to faster economic growth “is not a strategy for the future but more a dream of escape from Britain’s past of slow growth and stagnant wages”. They add, “Our argument is that political class objectives are unattainable using any mainstream policy while they are also misconceived insofar as faster growth aggravates nature and climate emergency.”
The book’s strategy is to radically replace the trend of broken neoliberal economics with one that focuses on rebuilding income among working class people. The approach focuses on what they call three pillars of liveability—essential services, social infrastructure and personal disposable income. To win this vision requires a redistribution of wealth and a fight against capitalist priorities. It will take a fight to win even quite limited reforms.
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