Tag Archives: fabian-society

Why Zoe Williams’ tale of Tesco subsidies only tells half the story

Zoe Williams makes a good point in the Guardian when she questions why the taxpayer effectively subsidises companies like Tesco by paying out tax credits which would be unnecessary if they paid decent wages, whilst executives reward themselves massive bonuses from the profits they make as a consequence. There is clearly something wrong here.

But she only tells half of the story.

Yes, allowing highly “profitable” companies pay low wages is a scandal, but so is artificially increasing those wages by imposing income taxes on low incomes. This is effectively a dead weight cost on labour; neither the employer or employee benefits from it. It artificially raises the minimum wage which, in turn, strengthens the hand of those who would have you believe that the national minimum wage is an unacceptable burden on employers. And it undermines Zoe’s argument; that subsidy she alleges is at least in part coming out of the very low wages she is so critical of.

For this reason, it is absolutely crucial that personal allowance is raised to ensure that, eventually, no one on a living wage should be paying income tax. The coalition government has already made a start on this, and should be encouraged to move as swiftly as possible.

It would be nice to think that such a policy measure would be entirely uncontroversial; sadly it is not. In 2010, Left Foot Forward teamed up with the Fabian Society to produce a series of articles designed to prove that such a policy was one of the least fair and most regressive policies ever devised. On the narrow point about higher income earners gaining more from the policy than lower income earners, they had a point – although their manufactured outrage rings hollow in light of the new Labour orthodoxy about sticking up for the “squeezed middle”. In any case, this could e easily solved merely by lowering the higher tax rate bracket by the same amount as the personal allowance increase, which is indeed what George Osborne has done.

But it represents a wider failure of imagination on the part of Labour thinkers; that is to restrict their definition of fairness to purely one of income distribution. I strongly agree this is an important factor, but it would be a profound mistake to make this the only fairness test in public policy. Any tax policy which has the effect of making it more affordable for employers to pay people a decent wage should be championed; the public purse should indeed be used as a safety net, but it is simply madness to create a system such as the one built by Gordon Brown in which money unduly paid out on low incomes is recycled to top up the pay of people on low incomes. This is Alice in Wonderland economics – and that is even before you consider the billions in unclaimed benefits that this shockingly complex system effectively deprives people of each year. Surely even the most staunch statist cannot rationally argue against the inland revenue butting out at this point?

In short, we have a right to expect corporations like Tesco to pay decent wages to their employees – but Tesco have a right to expect the state not to have policies in place which actively discourage them from doing so. Both the government and corporate sector need to take action here, while Labour needs to decide which side they are really on.

Reporting back from the Fabians: What not to spend

The Fabian Society kindly gave me a media registration for their new year conference and I spent last Saturday at Imperial College mingling with the Labour Party faithful. I sadly missed Gordon Brown’s morning address but sat in on two discussions: “What not to spend” – a discussion on what public spending cuts the government should make; and “Tribes or causes: Can we campaign across party boundaries?” Both featured Lib Dem speakers, and I attended the former to keep an eye on Vince Cable and the latter to support Evan Harris (or should that be the other way around?).

What not to spend was, of the two sessions, the most frustrating. This was partially because there was no Labour Minister there to give us their perspective, partially because the Nigel Stanley and Janet Daley failed spectacularly to stay on topic and partially because Vince himself was being incredibly cautious. My hope that Vince might give us a tantalising glimpse of what he thought needed cutting, beyond that which the party has announced and reannounced over the past few months ended up dashed (despite his tantalising flash of leg in Parliament the preceeding week). And because the Cult of Vince seems to have extended as far as both the audience and the other speakers (I don’t think anyone breathed a word of criticism of him during the entire 90 minutes), he wasn’t even pressed on the kite flying list of spending cuts he flagged up in his Reform pamphlet last September. A man suggests means-testing child benefit and doesn’t elicit even a single squeak from a Fabian audience; what is going on? Indeed, the one area there did seem to be some tentative agreement on was the rolling back of middle class welfare.

Instead of talking about the current economic situation, Stanley and Daley preferred to continue a traditional left-right ding-dong which you might have heard in any political meeting at any point over the last twenty years. Both, I have to say, were much more nuanced and less dogmatic than they might have been, but neither seemed interested in really addressing what savings government needed to make. To be fair on Stanley, as a TUC staffer, it wasn’t really his job on the panel to do that, but I did expect to hear something substantial from Daley. She made a dig at the start about “not defending David Cameron’s economic policy because I don’t know what it is” yet pretty much the alpha and omega of her own economic policy seemed to consist of one word: “vouchers”.

“Vouchers” – whether they are vouchers for education, healthcare or whatever – have been a real rallying cry for the right in recent years. The aforementioned Reform think tank was for a while obsessed with them. Speaking personally, I’ve always felt it is a bit of a cop out of an argument. We’re constantly invited to believe that the key to the success of the Swedish education system lies in the voucher system, not in the amount of cash each of those vouchers represents, and to believe that, somehow, a voucher based on UK spending levels would have the same effect. I don’t buy it. I can see how they could be made to work in, say, an inner city area where the population density is sufficiently high enough to create a genuine market, but how it would work in a rural area is something I still haven’t found a satisfactory answer to.

Furthermore, while they might be a suitable topic for discussion in a debate about getting value for money from public services, I just can’t see how introducing them during an economic period where we are having to make cuts makes much sense at all. It won’t address any problems in the short term, and indeed the cost and bureaucracy that would be involved to establish the system would make it harder to introduce cuts.

The other area that troubled me was the aforementioned apparent consensus around the idea of scaling back the “middle class welfare state”. Some of this, I have very little trouble with. Creating a shorter taper for tax credits so that people earning £50,000 aren’t entitled to some tiny amount which is eclipsed by its own administration costs makes perfect sense. But that is the trouble with means-tested benefits. By contrast, there is a real danger in means-testing what few universal benefits we have left in the name of cutting costs. Partially, this is because you end up having to establish a whole new bureaucracy to administer the scheme, partially because it means that those most in need often end up failing to claim for it precisely because of that bureacracy, but also because it helps create a sense of solidarity between the comfortably off and the poor. As Sunder Katwala himself said at the Lib Dem conference last September “services for the poor will always be poor services“.

I hope that my concern about the comfort with this rhetoric proves to be unfounded and that things like child tax benefit won’t be regarded as low hanging fruit after the general election. But the way this idea seemed to be supported in the generality at the session did cause me some discomfort. It was the elephant in the room.

The dreaded spectre of the straw Fabian

Liberator has marked the launch of the Social Liberal Forum with two articles which they have kindly allowed us to republish – one by SLF Director Matthew Sowemimo and the other by Federal Policy Committee member and writer David Boyle.

David is a different kind of critic from someone like Charlotte Gore. Very much “one of us,” he wrote a chapter in Reinventing the State and I’ve worked with him on a number of projects over the years, including a motion on participatory democracy that was debated at Autum Conference last year. So the fact that he is a sceptic is a real disappointment. Having said that, I do think he could have picked a better argument.

His problem with the SLF stems not from anything on our website, or anything Matthew or Richard Grayson have written (I seem to have been written out of the equation, being a mere flunky), but from a presentation made by a staffer of the Institute for Fiscal Studies at the Reinventing the State breakout session at the party’s LSE conference on social mobility in January before the SLF had launched. I didn’t attend that session as I was at a parallel one at the time, but David’s concern stems from the IFS chap’s definition of equality. This then moves into an all out assault on Fabianism.

He is right to warn against defining equality too narrowly or adopting technocratic solutions, but I’m not clear how either are really concerns about the SLF as opposed to the debate within the left more broadly. It is a bit of a leap, from the personal views of a guest speaker at an event before the organisation is launched to Beatrice Webb to concluding that the SLF is in danger of endorsing state socialism. By not reflecting on anything the SLF has actually done or put out thus far it does feel as if a number of straw men are being laid at our door.

The biggest straw man is the one that vaguely resembles Quintus Fabius Maximus. Fabian-bashing is a time honoured liberal pastime and one which I indulge in myself from time to time. And why wouldn’t you, when people like Beatrice Webb offer us such a wealth of infamous quotes to cite? Even Labour apparatchik Philip Collins tried this line of attack in Prospect last year. But if you think that new Labour state socialism stems from the modern Fabian Society, you are dead wrong. Indeed, the modern Fabian Society’s favourite Lib Dem-bashing tactic at the moment is to denounce us for not supporting asset-based welfare (the specific criticism that we plan reallocate resources away from Labour’s tokenistic Child Trust Fund is rather fatuous but more generally, I think they have a point more generally). I am pretty certain that Sunder Katwala being the Fabian Society’s General Secretary is a fact that has both the Webbs spinning in their graves.

And finally, while I would agree that income-inequality – and even consumption-inequality – should never be the only measure, David risks understating its importance. He is right to say that we won’t ever solve the underlying problems of inequality with charts and targets. David wrote a fantastic book in 2001 called The Tyranny of Numbers which forecast the failure of the New Labour project before most people were getting their heads around it, but the conclusion I took from it wasn’t that we must never count things – merely that we understand the limitations of statistics. Indeed, David’s own think tank, the New Economics Foundation (of which I am also a supporter), is continually coming up with new ways to measure social progress. It is an odd charge to suggest the SLF is enamoured by “the fantasies of Fabianism” while not applying the same standard to NEF.

While I think SLF has already avoided two of David’s potential pitfalls – centralisation and education – I will readily admit that the other two – snobbery and passivity – are tougher nuts to crack. But they are for everyone. How do you ensure universal entitlement without creating an inflexible, impersonal system? How do you ensure a flexible, personalised service without giving the articulate middle-classes an advantage over less well off? Unlike state socialists or libertarians, the social liberal doesn’t have the luxury of picking a side in this debate. But please don’t assume that acknowledging the need for one doesn’t automatically assume a dismissal of the other.