by Michael Roberts
About two years ago, the current UK finance minister George
Osborne commented that ‘hard-working people’ left for work every morning
while ‘behind the blinds’ of the house opposite people on benefits were
sleeping in. The ‘hard-working’ person was paying for the feckless “to stay at home and not work”.
At the time, I wrote a post that attempted to analyse just how many
of these feckless layabouts there were that we ‘hard-working’ people
were paying for (http://thenextrecession.wordpress.com/2012/10/08/who-are-behind-the-blinds-george/).
Apart from the official unemployed, nearly all of those not working
were disabled, lone parents without childcare, retired or students.
Indeed, after excluding students, there were only about 250,000 adults
out of a potential workforce of 41m who were ‘refusing’ to work for ‘no
good reason’, or just 0.6% of the workforce.
Well, the latest work survey has been released (http://www.ons.gov.uk/ons/rel/lmac/working-and-workless-households/2014/stb-working-and-workless-households-2014.html).
In June this year, there were 3.3 million UK households with at least
one member aged 16 to 64 where no-one was currently working. This
represented 15.9% of households and was a fall of 1.4 percentage points,
or 271,000 households on a year earlier. This ratio is down to its
lowest rate since 1996. In 2014, there were only 226,000 households
(excluding students) in which no adult has ever worked, or less than 1%
of all households.
That is the extent of the feckless hiding behind their blinds each morning.
The number of workless households has fallen as employment has
increased since the Great Recession. But we now know that most of these
new jobs are either part-time, temporary (zero hours contracts) or
created by people themselves through self-employment. And these jobs pay
much less that full-time employment. Indeed, in 2014, for the first
time, of the 13 million Britons officially living in poverty, there are
more working households than non-working ones – according to the Joseph
While the government boasts that it is getting people back to work at
record levels, it fails to mention that this work is badly paid,
precarious and often created by people themselves trying to scramble
together a ‘business’.
As a result, tax revenues are just not rising anywhere near enough to
enable to this ‘austerity’ government to meet its targets for reducing
the annual government deficit and the overall debt burden.
In March, the government predicted that the budget deficit would
shrink by about £12bn in the current fiscal year. Instead, it’s
widening. Government spending exceeded revenue by £10bn in September.
This leaves the shortfall in the first six months of the current fiscal
year at £55bn, 5% more than in the same period of 2013.
The reason is much weaker tax revenue than expected because the extra
employment is in low-paying jobs, part-time work replacing some
full-time jobs and above all in self-employment.
accounts for one-third of the 1.75 million jobs created since early 2010
as people hit by the recession turned to working for themselves in jobs
from taxi driving to carpentry. And the proportion of self-employed
workers reporting incomes below the tax-free threshold has jumped to 35%
from 21% before the financial crisis.
The benefits bill is staying stubbornly high because, while people
may be coming off unemployment benefits if they go into low wage work,
they are likely to continue claiming some form of welfare (tax credits,
child benefit, housing benefit, etc).
As nominal wages are barely growing, fewer people are moving into
higher-rate tax bands. In March, the independent OBR forecast average
incomes would grow 2.4% this year. Instead they rose just 0.7% in the
latest quarter. Together, taxes on income and social security
contributions account for almost half of government revenue. Osborne had
been predicting about 7% more income tax this year. Between April and
August, it fell 0.8%!
The coalition government is way short of its target to ‘balance the
books’ by the end of 2018, a target that has been slipping back anyway.
Meanwhile, the gross government debt ratio inexorably rises towards 100%
of GDP, a level not seen since the war debt levels of 1945.
What this means that the government’s drive to reduce welfare
spending on the ‘feckless’ is not even achieving the government’s own
professed aim of reducing the public sector deficit – although it is
reducing real wages and the cost of labour for business to make more
profit. The House of Commons briefing on social security expenditure
forecasts a rise in benefit costs in real terms through the whole period
of the next parliament 2015-20.
And it’s only going to get worse, whoever wins the UK general
election next May, as all three main parties are pledged to ‘balance the
books’ of the government as a priority. And yet the Conservatives have
announced more tax cuts for the rich if they win the election next
year. But they cannot square the circle of cutting taxes and maintaining
public services, even if they reduce welfare spending to zero!
Austerity is not working, except to lower real wages and keep the poor
even poorer. But then that is part of the reason for austerity.
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