In-work benefits and the minimum wage: a story of callous Tory disregard for poverty, and the arrant hypocrisy of Jeremy Corbyn

by George Kendall

During the coalition of 2010-2015, when the government was facing a record peacetime deficit, many Conservative cuts to welfare were blocked by the Liberal Democrats. In the 2015 election, the Tories took many Liberal Democrat seats, which gave them a majority. They then passed legislation to implement most of these cuts.

Jeremy Corbyn was elected Labour leader on the back of trenchant opposition to welfare cuts, however, when his team wrote their 2017 manifesto, they chose to continue those that had not yet been implemented. According to the Resolution Foundation, they only allocated £2bn/yr to reduce these welfare cuts, which would leave £7bn/yr in place. There was confusion among Corbyn spokespeople, but, by the end of the campaign, Corbyn’s policy of continuing most of the planned draconian cuts to welfare was confirmed as still in place.

I’ve previously written about this here and here, and the responses I have received from Corbyn supporters have been varied, and contradictory.

  • Some acknowledged that Corbyn’s manifesto didn’t allocate the money to stop these future cuts, but said Corbyn would never implement them. Of course, they never explained which of Corbyn’s campaign promises he would break, in order to fund the gaping hole in his budget
  • Others claimed it was fake news. They dismissed analysis of the Corbyn manifesto by the Resolution Foundation as reported in the Guardianby the IFSin the Independentand the New Statesman, even statements by Barry GardinerJeremy Corbyn and Emily Thornberry. Their denial of reality is an echo of the supporters of Donald Trump
  • But the most common response was that these cuts would be offset by other Corbyn policies, especially a rise in the minimum wage

In May, Emily Thornberry, when referring to the benefits freeze, said, “I don’t think we can reverse it entirely. We shouldn’t be promising things we can’t afford.” This, in spite of the huge additional sums Corbyn planned to spend elsewhere. She then said, “we will increase the living wage which will mean that those on in-work benefits will not suffer in the same way as they were.”

Astonishingly, this is pretty much the same argument that the Tories used, when they proposed the cuts back in 2015.

Of course, this was utterly disingenuous. The cuts to tax credits would mean “nearly 3 million working households with children on tax credits would be an average of £2,500 a year worse off, with larger families losing more“. The planned increase in the minimum wage was simply not enough to prevent these huge cuts devastating the living standards of millions of people.

But what if the minimum wage were increased so high, that it did compensate for the welfare cuts? This raises a dilemma that the 1997 Labour government thought long and hard about: the fear when they introduced the minimum wage that it could increase unemployment.

Many now cite the success of the 1997 government in avoiding increased unemployment as an argument for why it doesn’t matter how high the minimum wage is raised, but they ignore the reason for this. Labour created a new body, the Low Pay Commission. Its remit was to “recommend levels for the minimum wage rates that will help as many low-paid workers as possible without any significant adverse impact on employment or the economy“. Its work is regarded as a considerable policy success.

As the IFS point out, claims that a higher minimum wage can never have harmful effects don’t make sense: “It should be clear from an extreme example: if wage contracts of less than £100 per hour were outlawed, it would be unprofitable to employ vast swathes of the population and fewer would be employed. What is not clear is at precisely what point substantial job losses would materialise from further increases in the minimum wage“.

An even more extreme example would be if the minimum wage were 100% of average earnings. In effect, making illegal any kind of pay differentiation. Communism has tried this in the past, and the experience was not a happy one.

Of course, Corbyn’s proposals are not as extreme as these, but they would have a dramatic effect on the employment of young people. Under Corbyn’s policy, as the IFS point out, “77% of those aged 18-20” would have their wages set by Corbyn’s new minimum wage. This is because he proposes removing the lower rate of minimum wage for younger people. This could have severe effects on the employment of young people. However, the impact may not just be on young people. The British Retail Consortium already feared that the lower increases proposed by Osborne in 2015, could cost 900,000 UK retail jobs by 2025. The impact of Corbyn’s proposals would be greater.

Surely, far better, as the Labour government did in 1997, to have an independent body that recommends the level of increases in the minimum wage where there is no, or minimal, effect on unemployment. Then, as they did from 1999, to address the issue of low pay with in-work benefits.

Despite the success of this Labour policy, even that low rate of minimum wage impacted on a few people. See this extremely moving short video, of a father of disabled Ben, who was having great difficulty finding work for his son, Ben.

It may seem compassionate to raise the minimum wage significantly, but, if we get it wrong, there will be many more like Ben, and they won’t just be disabled people. And, in addition to the loss of their jobs, the Tories and Corbyn would cut their benefits.

George Kendall is Chair of the Social Democrat Group – http://www.ldsdgroup.co.uk – a Liberal Democrat organisation to build links with social democrats outside the party. He writes in a personal capacity


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24 Responses to “In-work benefits and the minimum wage: a story of callous Tory disregard for poverty, and the arrant hypocrisy of Jeremy Corbyn”

  1. john P Reid says:

    I’m all for getting people from other parties to join labour but putting a link to someones who’s in the libdems on their webpage is hardly a way of ding it

  2. steve says:

    A fantastic contribution!

    How heartening it is to see the inclusion of a piece by a Liberal Democrat.

    In truth, the LibDems are now the bearers of the Blairite flame. The anti-Corbyn malcontents who write for this site should act in accordance with their consciences – leave the LP and join the LibDems.

    Ok, so there’s no gravy train standing at the LibDem platform. And there’s very little chance of electoral success in the short term – there are no vacant safe-seats awaiting baby-faced Blairite parachutists.

    But it you do decide to jump at least you’ll be able to say that you finally fixed yourselves firmly to your principles, you rallied to the flag, you abandoned your poltroon posturing and rode your useless principles unto oblivion.

  3. Tafia says:

    It was Labour who introduced both the Minimum Wade and Working Tax Credits. It was obvious to all but a moron that to do this would actually increase the amount of people in low pay as employers just reduced pay rises until the NMW overtook them and then used tax credits to subsidise their low wages. Any politician that didn’t think that would happen shouldn’t even be in politics.

  4. Tafia says:

    It was Labour who introduced both the Minimum Wage and Working Tax Credits. It was obvious to all but a moron that to do this would actually increase the amount of people in low pay as employers just reduced pay rises until the NMW overtook them and then used tax credits to subsidise their low wages. Any politician that didn’t think that would happen shouldn’t even be in politics.

  5. John P Reid says:

    Steve quite, ironically post the coalition many liberal , LibDems have joined labour want labour to be another wing of middle class liberals Pro the EU from Islington, and ignore Jeremy’s a EU skeptic , think lots of libdems still try to mention they are against the Iraq war as Blair’s name is still mud to their core vote

  6. LB says:

    Now factor in migration.

    What happens is that the young Brits who need the experience of work to get ahead, don’t get it.

    Employers can import min wage earners with skills, rather than give the experience and the training to British young.

  7. Michael BG says:

    This article raises an interesting question, could increasing the Minimum Wage or the National Living Wage offset the benefit freeze. Everyone can agree – not for those not in work. However for those in work, it is possible if they work 37 hours a week and they earn £10 an hour instead of £9 an hour that they will be better off by £37 a week. If a family has two children they will lose £10.48 (family element) a week and at least 5% of the rest according to the IFS which is £7.28 making £17.76 for these two children, two adult families. I wonder where the IFS gets its £2,500 a year (£48.08 per week) from. If we consider a three child family using the 5% inflation prediction then the loss is much greater £71.22 per week and earning Labour’s £10 an hour would not offset their losses.

    George, you draw the wrong conclusion from the information set out by IFS the National Living Wage as proposed by the Conservatives is not a bad idea, even raising it to £10 an hour after 2020 is not a bad idea either.. You also set out the wrong information. The meaningful information is that under the Conservative proposals wages will have been increased for “at least 2.8 million workers by (only) 4% on average” while “the Labour plans” increases wages “for 7.1 million workers by almost 15% on average”. The correct problem to identify is Labour’s proposal to increase wages for those aged 18-24 to the National Living Wage rather than keep the separate levels for those 18-20 and 21-24.

  8. We are very lucky that we have the Liberals to fight against Tory austerity… oh, hang on a moment, didn’t they…

  9. @Steve
    I’m confused by your comment, though maybe I’ve misread you.

    You say you like my piece. But you imply that anyone joining the Lib Dems from Labour, would have useless principles.

    Which makes me wonder if you really did like my piece. Are you actually a supporter of Jeremy Corbyn, and want to see his position strengthened? If so, presumably you disagree with me calling him an arrant hypocrite. As I’ve tried to construct a convincing argument for why he is, I’d be interested to know how you might disagree.

    A couple of points I strongly disagree with. The suggestion that the Lib Dems are Blairite is silly, and a bit offensive. The Lib Dems were the main party opposing the Iraq war. Blairism is now in the past. Blair is irrelevant. And, besides, many of the people Corbyn is sidelining were Brownites, part of the soft left, or part of other strands within Labour.

    Nor is my article an appeal for social democrats in the Labour party to join the Liberal Democrats. I’d welcome them warmly, of course. But I entirely understand why some don’t.

    The purpose of the Social Democrat Group is not to ask people to leave their party, but to use policy discussion to build better mutual understanding, and perhaps as we do so, to generate new ideas for the future of the country.

  10. Hi @Danny Speight,

    Out of interest, what are your views on Corbyn’s 2017 manifesto commitments on welfare?
    When the Lib Dems proposed to reverse all £9bn/yr of the 2015 cuts, he proposed only reversing £2bn. Which 2017 welfare policy did you prefer?

  11. Toby Ebert says:

    Note to editor of Labour Uncut:

    Do you only commission articles from people who hate and despise our elected leader? Or might we in the future have some balance? Just asking……

    It would certainly make the site more interesting. At the moment you almost know what you’re going to get before you open the website: different versions of ‘Jeremy Corbyn is rubbish’.

  12. Vern says:

    Toby – perhaps some of us are concerned that Corbyn and his 70’s clap trap have the potential to dstroy the party as we know it. This country needs a credible labour party in both office and opposition. Not the current one with its disingenuous leader barking out a series of unaffordable, poorly thought through and meaningless soundbites that are purposely directed at todays young.
    Corbyns politics are not kinder or fairer.
    Question the morality of a man who despite being in his 60’s thought it a good idea to “shamelessly lie to the electorate” by sitting on the floor of a train to whip up hysteria about nationalising rail.
    Corbyn is pure nastiness and hates opinions from anyone except himself and those few individuals that have put up with him.
    There are not many who have earned £2 million from the public purse and contributed so little. He has had a cushier life than most. He is the few not the many. The warning signals are everywhere.

  13. Anne says:

    Sorry George do not know enough on the effects, either positive or negative, to make a valid contribution but what is of paramount importance is that Labour must be clear that it can manage the public finances in order to be a credible government.
    One of the cornerstones of the Labour manifesto was nationalisation – there is now much more favourable traction to this – state ownership can mean effective management. After all the private sector has not been that efficient with mega high salaries for executives, rewards for share holders, and opting out of pension schemes.

  14. Michael BG says:

    I made a tiny mistake in my last post. No one would be £37 a week better off on Labour’s proposed £10 an hour, I forgot National Insurance and Income Tax the figure is only £26.05.

    However those who have two children or less on Tax Credits will only receive this £26.05 after having to live with the Conservative cuts before this. So Labour’s policy is, if you are one of the poorest in our society we will do nothing to reverse the benefit freeze and the abolition of the family element and so cause you pain now and for every year until April 2020. But if you have more than two children you will just have to live with being much poorer under both the Conservatives and Labour and there is little light coming in April 2020 as the extra you might get from being on £10 per hour does not cover the benefit for your third child you have lost and if you have more than three children times will just be hard.

    Labour are not reversing the £3.665 billion of cuts just to Universal Credit these include substantial reductions in how much a person can earn before they start to have their benefit reduced. People without children lost £25.62 a week (if one or both are disabled £57.69 a week [not paying rent]), lone parents £77.76 or 16.38 a week, couple with children £32.08 or £6.92. These are on top of the cuts to Tax Credits which also apply to Universal Credit. No one has any idea which of these cuts the Labour Party would reverse in government with the £2 billion allocated for the job.

    Returning to our couple with two children one of whom works who would gain £26.05 in 2020 the true loss is £24.68 a week if they pay rent but £49.84 if they don’t pay rent.

  15. @Toby Ebert
    I agree with part of your post. I’d love there to be a properly thought through response to the arguments I’ve made that Corbyn has not kept his promises on welfare. I’ve been disappointed with the arguments I’ve heard in Facebook, Twitter and in comments on websites, as I said in this article. Maybe there’s an argument out there that I just haven’t heard.

    In my article, I’ve accused Corbyn of campaigning against Tory welfare cuts, then fighting an election on a manifesto to increase them. I wouldn’t use the word rubbish. If I’m right, I’m afraid Corbyn is worse than that. Surely, Labour members looking for an honest idealistic political leader deserve to be assured that I’m mistaken. With hundreds of thousands of Labour members, isn’t there someone who can come up with a convincing response?

    I’m not part of Labour Uncut, I’m very grateful that they’ve published a few of my articles, but it’s not really my place to suggest who they commission. But if Labour Uncut commissioned an article specifically to respond to these arguments, I’d welcome the debate.

    Can you suggest someone they could approach?

  16. @Anne
    Thanks for your honesty about your incomplete knowledge. I wonder though if you’re being too modest. While the detail is fiercely complex, and probably requires very specialised knowledge, the basic facts are relatively simple.

    I agree with you that Labour shouldn’t promise what it can’t afford. The question is, why did they choose to spend such vast sums on extending targeted services to the middle class, while making such severe cuts to the welfare of the poorest in our society? If they hadn’t made those promises, and targeted the extra money at protecting benefits, then they could easily have afforded it. See https://www.ifs.org.uk/uploads/Table%20for%20income%20tax%20obs%2017%20May.JPG

    Regarding nationalisation, you’re right that there’s more public support for this than in the past. But if the public were told nationalisation would come at the cost of other things, such as a sufficiently large house building programme to make a real difference to high rents and inattainable house-prices, would they be so sympathetic?

    The privatised utilities are no panacea, and I don’t have particularly strong views on whether some utilities should nationally or privately owned. However, I’m afraid I don’t share your optimism of how things could improve post-nationalisation. Aside from the fact that it would divert vitally need money and resources from more urgent priorities.

  17. Ray Visino says:

    So are you advocating the removal of all cuts and reverting to former spending? The reaction to Corbyn’s modest manifesto was that it was marxist and extreme so he didn’t want to go any further.

  18. @Michael BG
    Thanks for your comments. It’s good that someone is engaging with some of the detail of what I’m saying. It’d be great if someone from the Labour party could do the same.

    I sympathise with your tiny mistake. I have made many, and it’s why I’m probably wiser when I quote experts like the IFS or the Resolution Foundation, rather than when I do my own calculations.

    There was a stylistic error in my article above. When I said, “this was utterly disingenuous”, I was referring to the Osborne claim that the Living Wage would compensate for the benefit cuts, rather than Corbyn’s rise. Perhaps it would have been clearer if I had added this link: https://www.theguardian.com/society/2015/sep/26/national-living-wage-osborne-cuts- But that article is inadequate criticism of Osborne. It’s not just those on the minimum wage who are low earners. If, say, the minimum wage were raised by £2, then those who were previously £1.50 above the minimum wage would only get an extra 50p an hour. It’s even worse for the part-time. A single parent working 20 hours a week is only going to get half the benefit of the rise in the minimum wage, but they’ll suffer the full force of the benefit cuts.

    Of course, the calculations for Corbyn’s higher minimum wage are different. For a few, his proposed rise in the minimum wage would cover the loss of benefits (if they kept their job, of course).

    And that leads us on to the key question: if you raise the minimum wage too high, will it increase unemployment?

  19. swat says:

    I think the LibDems got their fingers burnt and stabbed in the back by Cameron’s Coalition Govt. Maybe they’ve learnt their lesson: Never trust Tories, they say one thing and do another.
    JPReid makes an important point, but Labour need to start looking for Coalition partners right now, if they are to form the next Govt.
    We need the LibDems,Greens and others, to make a Rainbow Coalition, or a Compass Coalition if you like. So it’s time to be civil to them.
    No doubt JC has been two-faced on some issues, but then which politician hasn’t. So I’ll give him the benefit of the doubt. At least he’s fighting on a socialist platform.

  20. John P Reid says:

    And after my comment, George Kendall, mentions the libdems opposed Blair’s .Iraq war

  21. John P Reid says:

    Swat, there was something on labour list about excluding Northern Ireland, if Plaid SNP And greens were added to labours vote it would be more than the Tory/Ukip vote, but if the libdems went into coalition with Labour 6 of their remaining 7% would prefer the Tories

    What politician hasn’t been two faced on issues, the ones you don’t like, Denis Skinner Anne Marie waters, Jacob reees Mogg etc but in the days when Kinnock pretended he was now pro the EEC in 1984 , it was a different beast to the EU

  22. Hi @Ray Visino

    I’m not suggesting reversing all cuts from 2010.

    If we did, then we’d be back where we were in 2010, with an enormous deficit. I don’t think that would be realistic. But, in 2015, the deficit was a lot lower, so we can avoid making the new cuts that were set by the Tories in 2015, and haven’t yet taken effect. (And we can reverse a few less costly cuts from the 2010 parliament).

    The cuts I suggest we shouldn’t make include:
    – continuing the Tory benefit freeze – at a time of higher inflation
    – the rollout of universal credit, at a less generous rate than benefits at present
    – the application of a two child benefit limit to new claimants (this doesn’t apply to current families with more than two children, but to new claimants)

    The benefits freeze – if implemented by a Corbyn government – would be unambiguously a new cut. Because, each year with inflation of a Corbyn government, it would reduce the welfare bill, by lowering the living standards of those on benefits by the inflation rate.

    Universal credit was made less generous than existing benefits by Osborne in 2015. If Corbyn sticks with his manifesto, and keeps with the existing Tory plan, then as Universal Benefit is rolled out, a Corbyn government would be reducing the welfare bill, by impoverishing those on benefits.

    As the two child limit only applies to new claimants, its initial cost is small. But if Corbyn kept it in place, year by year he’d be reducing the welfare bill.

    If there were a new Corbyn government, and he did as he said in the last election, it’s a matter of semantics what you would call his failure to stop these new cuts. If you want it to sound better, you could call it choosing not to reverse cuts. But, as far as the claimants would be concerned, these would be new cuts, brought in by a Corbyn government.

    Fixing this was perfectly affordable, if Corbyn has chosen not to spend the money elsewhere.

    See https://www.ifs.org.uk/uploads/Table%20for%20income%20tax%20obs%2017%20May.JPG

  23. Tafia says:

    John P Reid on mainland GB the votes were

    Tory/UKIP – 14,263,901
    Rainbow – 16,917,431

    However a rainbow is not on the cards. The parties needed are too far apart from each other over key issues.

    The SNP are adamant that they will not enter in to coalition (or even C & S) unless they are granted a second indyref and without Westminster interference – something Labour will not countenance.

    Plaid, as a red line demand want a welsh Parliament with the same powers as Scotland’s and linked to Scotland ie as they are given more power Wales gets the same. Again somethong Labour will not countenance because for example it means ending cross-border things such as Police and Courts control from London.

    The Lib Dems want a second EU referendum – something Labour have consistentlyy ruled out even as late as last Thursday by Owen Smith on Question Time.

    etc etc etc

    And remember, the mainland GB vote of parties committed to leaving the EU as a first tier manifesto pledge (Tory, Labour, UKIP) totalled 27,142, 311

    Amongst the potential rainbow there is to great a divergence over key red line issues – and there is no reason why any of them should shift position just to allow Corbyn into number 10.

  24. Landless Peasant says:

    The evil Tory scum have deliberately wrecked our Social Security system. and while you lot argue among yourselves and stab Corbyn in the back. the queues at the foodbank grow longer. Unite and fight the real enemy.

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