The two sides to welfare

There are two kinds of welfare: one for those who are unemployed or disabled and another for private interests. Today, Iain Duncan Smith announced his plans for a shake up of the welfare system. Some of what he has said about those on benefits appears to be based entirely on popular myth and denial.

“After years of piecemeal reform the current welfare system is complex and unfair. For many people taking a job leaves them no better off than a life on benefits, and this has trapped significant parts of our society in inter generational worklessness and entrenched poverty.

Let’s have a look at “intergenerational worklessness” and what this means. Prima facie it appears that people simply refuse to take work because they can live on benefits. On the other hand, many people are reluctant to take work – including part-time work – because they would be worse off; this is something that IDS acknowledges. Anyone who has been forced to live on benefits will tell you that it isn’t easy and benefits don’t cover the rising costs of living. Few people choose to live a life of penury. But what about living wages? Many employers, particularly in the current climate are telling their workers that they must take a pay cut. Furthermore, many employers are keen to pay their workers as little as they possibly can in order to keep down costs (but will pay themselves performance bonuses). No one can survive on the minimum wage.

As for the “intergenerational” part of that phrase, what IDS seems to be saying is that worklessness is cultural; it is deeply entrenched ‘way of life’.  But was this situation created by the State or by claimants? What IDS and his supporters continue to ignore is that the manufacturing industries in which these claimants might have worked were all closed by the Thatcher government along with the mines. We have been told by this government that the numbers of private sector jobs will increase. But how will these jobs be created when the country’s manufacturing base has been destroyed? Not everyone can work in financial services!

IDS also claims that “dramatic amounts” of money [was] being wasted in overpayments. I need to see evidence of this. When I have been unfortunate enough to have to claim dole, I have never once been overpaid any form of benefit nor has anyone else that I know. Yet IDS seems to be saying that this is a frequent occurrence.

What the Tories really want to do is to scrap benefits altogether and force people to go cap-in-hand to charities (who will also face funding cuts). For them, benefits claimants represent a massive drain on the economy. By attacking people on benefits, they have found a people without a voice; without power. Meanwhile Lord Ashcroft, Zac Goldsmith et al can salt away their cash in offshore bank accounts and pay no taxes. Train Operating Companies (TOC’s) can still receive huge government subsidies and continue to offer a third rate service at a premium price. As I mentioned in an earlier blog, the biggest recipients of state handouts are private companies; the TOC’s are among them.

This Times article from last year tells us that,

Last year, the eight largest franchises received a total of more than £800 million from the taxpayer. By 2012, they are due not only to receive no subsidy but pay a combined premium to the Government of more than £300million.

While the TOC’s pay the government back some money, they still make profits for their shareholders.  This Guardian article tells how last year the TOC’s were to receive £400m. For companies that are not making enough money, there is a state benefit called Revenue Support that they can claim.

National Express East Anglia, Virgin Trains and Northern Rail also qualified for revenue support last year. National Express East Coast, which agreed to pay the government a record £1.4bn but will relinquish the contract this year after admitting it could not afford it, did not qualify for support until the end of 2011.

The supported franchises could be joined by the remaining major routes over the next two-and-a-half years. Stagecoach’s South West Trains(SWT), which owes the government £1.2bn, will qualify for revenue support from next year if it wins a legal battle with the DfT. By the end of 2011 the list could include: East Midland Trains, also owned by Stagecoach; Arriva’s CrossCountry; Northern Rail; and Southeastern and London Midland, which are both owned by Go-Ahead.

Wouldn’t it be easier and cheaper in the long term to nationalize the railways instead? The old private railway companies like the iconic GWR and LNER never received a penny in public money…but they also failed to make profits!