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Tuesday, July 5, 2011

Credit where it's due

Listing the sins of this Westminster coalition is like housework; a depressing, never-ending chore enlivened only when one is required to stop and identify the new species taking root behind the fridge. But while the government set about cleaning up what they aver is a mess - some cynics say replacing it with a worse one - a glaring contradiction to their stated ideology stands out. It seems to defy a prime article of monetarist faith, the one which says public spending can only be a burden on wealth creation that merely encourages feckless dependency and deserves at least as much scrutiny as any nefarious prank involving sub-prime mortgages and collateralised debt.  

While the thousand cuts they are so gleefully inflicting are being readily identified and deconstructed by all and sundry, one astronomically expensive example of the dead hand of state interfering in people's lives, a Keynesian monster that, if doctrine were adhered to, would  be considered the work of a monolithic, statist, command economy, has received little or no attention. This despite, on the face of it, being meat and drink to neo-liberal market evangelists everywhere, namely, the bizarrely complicated and hugely expensive - about £18 billion - working tax credits system. This is doubly strange, what with its architect being one Gordon Brown, at whose door it is now customary to lay the blame for every catastrophe from the fall of man onwards.

Current political orthodoxy – if such indeed exists in a world where governance is increasingly regarded as little more than an adjunct of big commerce – has it that if Gordon Brown thought of something, it must by definition be a bad idea. Surely the Working Tax Credits system is the beast incarnate, the very embodiment of the redistributive, anti-free trade tyranny that business abhors and gives markets fits of the vapours? 

Let's see Mr Brown's brainwave for what it was, a fiscal tool. It was by some measure the most far-reaching act of unashamed and progressive real-time wealth redistribution this country has known and it was enacted overnight without real issue - a few inevitable computer glitches notwithstanding (see. DVLA. q.v. the NHS) Parents in low and median wage jobs were suddenly given the equivalent of up to a 30% pay hike, in cash. Thus they were able to afford to service an economy utterly dependent on perpetual superfluous consumption, the one proviso, reasonably enough, being that they had to work a certain number of hours.

The impossible Mr Brown, weighed down by the egalitarian baggage of late and post-industrial Fife, had deduced that an individual's relative worth to the country, based on a minimum wage, could reasonably be measured and valued and that some due reward could usefully and deservedly be afforded to fill the chasm left by the low end of the private sector in which so many reward so few. (Some have questioned how he could seemingly print money on the basis of speculative worth. See, the City of London. See also, eight digit football transfers. Note, too, that the money is still out there, getting spent in used notes.)

Earning up to £25K a year - which most are - they were incentivised to work more rather than less, the great dole-trap inverted. It made a difference and continues to do so with every passing week. The economy now depends on this fast flowing hard currency more than it does the entire might of the financial sector. Ask the High Street.

So, why have the usual suspects gone completely silent regarding this seemingly blatant assault on those who earn above the very generous threshold of WTCs? What's in it for them? Why would patrician ideologues who would happily see the Poor Laws re-enacted and have kids leave school at 14 (a Tory wheeze mooted and abandoned very quickly in the early days of this coalition: somebody may have twigged as to the potential pitfalls in having millions of unemployed, addled adolescents add to the millions of utterly lost teenagers already on the dole) tolerate this paleo-marxist abomination?

Because to remove it would reveal the bottom end of the wage scale in this supposedly prosperous country to be as dismally low as it really is and highlight the hideous wealth disparity that now infests these islands on a scale that would've made the Tudors blush (q.v. an Ireland apparently unshackled from British perfidy), that's why. For most working families, WTCs are now all that gives them a taste of a life above mere struggling and rudimentary maintenance and inflation is eating even this. For many, the hidden under-employed for whom no reliable measure exists, it puts bread on the table and pays the rent. 

For those unfamiliar with WTCs, they can amount to the food bill of a family with a low income and two parents working part-time on the minimum wage. If this spending power was taken out of the economy, now that society is accustomed to it, the retail and manufacturing sector would have seizures and the economy would grind to such a juddering halt, recession and stagnation would be considered a distant, surreal aspiration. A City-backed Tory government knows this damned well; they have friends in the private sector - whose miserly wage policies are at least partially mitigated by WTCs - who will doubtless admonish them should attentions wander too far into the nether regions of the insane right wing. They also know that if this particular benefit is even touched, the demonstrations would go Greek, quite possibly Libyan.

They know the old saw about the distance between civil society and barbarism being measured in square meals. Taking £50 quid a week from a company executive is one thing. He's just miffed, the other £950 a week somewhat cushioning the blow, for now. Taking it from the folk selling them the lattes and croissants - or "fixing" the brakes on the Lexus; a thought, boys and girls - is asking for trouble. And taking the sums involved out of circulation - which would self-evidently happen: the money wasn't going on Porches or vanishing in the Cayman Islands - would have caused the economic catastrophe the banking crisis was merely a shadow of. 

Alarmist? Simplistic? Look at the bodies at Tesco on a Saturday morning and ponder what it might be like if half of them didn't have any money. Easier to park and get served, granted, but the store might not be there by the end of the week as Tesco's profit margin would evaporate. These guys don't hang about when the cash flow dries up. It is not only working families who depend on that weekly boost.

And guess what? It seems to work. It does so not by removing people's money, but by keeping the damned stuff working for us instead of the other way around. The wealthy are wealthy because of circulating cash, not in spite of it. If not, why aren't they belly-aching about this the way they do about disability benefits or pensions for people who were daft enough to forego careers in the private sector for the increasingly dubious privelige of teaching our children?

Because the disabled will only ever spend on absolute basics and have no economic clout and teachers' pensions do, indeed, look good compared to most private schemes.* Debate is clearly still necessary regarding certain aspects of nuance** and this is under way, but with argument for wealth redistribution thus acknowledged by all sides, it's about time we started to haggle over the sums this essential fiscal impetus commands. £18 billion sounds a lot, but with a public expenditure of around a £1 trillion it's tempting to imagine what might happen to general productivity - not to mention general public mood, which has been better -  if they doubled the amount handed out in WTCs. There is plenty more to be shared out. Who knows? In time people may learn a bit about the nature of wealth and the state won't need to intercede.

*This may possibly be because public pension schemes are subject to more dispassionate scrutiny and, while they lacked the glitz and va-va-voom of their short-termist cousins in the private sector, they are less prone to being drained dry by greedy boardrooms (see. Robert Maxwell, Equitable Life, etc.) but that's the markets for you, old bean. 

**Ask a teacher about the modern classroom or, if you will, ask yourself who you might like fighting your corner when you're up against it. Already emasculated public sector unions supporting minimum wage cleaners or George Osbourne? Good Lord. That's exactly what I thought.

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