Issue 251 of SOCIALIST REVIEW Published April 2001 Copyright © Socialist Review

Four years hard Labour

Have things got better under Labour? As an election looms Clare Fermont examines the real winners and losers during its first term in office

Labour pains...
No 1

  • Record numbers of children are going to private schools. This year has seen an increase of up to 5 percent in the number of five year olds starting private schools. The total number has been increasing since 1995, and now stands at around 610,000. The fastest rise has been in the under fives--rising by 12 percent between 1995 and 1999 to nearly 71,000.
  • Forgive them their sins for they have helped the poor. This is basically the message of New Labour supporters as well as Polly Toynbee and David Walker in their new book which looks at Labour's record in office. Sure, they say, the government's policies on asylum seekers, on policing, on privatisations, on bombing Iraq, on civil liberties, are disappointing. And, yes, the government has failed to stop the rot in education, health, public transport and other vital services. And, ok, ministers are sinking in sleaze. But, they cry, Labour has rescued over a million children from poverty and Blair has personally promised to end child poverty in 20 years.

    Put to one side the obvious flaw in Blair's promise -- that he finds it acceptable that another generation of children will be raised in poverty in the fourth richest country in the world. Forget for the moment that his government has found enough money to cut income tax and hive off billions for a rainy day while people continue to go hungry. Let's look instead at the alleged achievements.

    In Toynbee's blast against the Socialist Alliance in the Guardian last month, she wrote, 'They [the Socialist Alliance] are quite wrong to suggest Labour's heart is not with the poor, when all the first money has poured towards them.' What a conveniently short memory some have!

    Almost the first social policy act of the Blair government was to cut lone parent benefits--affecting 2 million of the poorest children. This was the first real-terms cut in social assistance since 1948, and partly as a result child poverty increased in 1997-98. In the same period Labour effectively cut benefits for the disabled, one of the poorest sections of society, and gave pensioners the mighty increase of 75p a week. After two years of Labour in office the Child Poverty Action Group (CPAG) described the government's record as 'dire'.

    The few pounds extra that is now going to the poor in child benefit and pension increases is barely beginning to claw back what the poor have lost over the past 20 years. If someone steals 1 a week from you for 20 weeks, and then steals only 50p, you may feel a bit better off, but you're still being robbed. The CPAG put it another way: in January 1998 families living on income support were 39 a week short of what was recognised as a 'low cost but acceptable' budget. In 2000 the situation had improved--the shortfall was 'only' 20. It is also obvious that a few pounds extra makes no impression on the major problems facing the poor, such as leaking roofs, damp walls and lack of transport.

    We are being told that 1.2 million children have been lifted out of poverty by Brown's budgets. This is little more than a statistical trick. The magic line which defines official poverty is income of below half of average earnings. Poverty experts Holly Sutherland and David Piachaud show that small changes in benefits and tax credits can dramatically alter the poverty statistics while making virtually no impact on real lives. They also show that not all the poor have benefited from Brown's changes to tax and benefits -- up to 300,000 of the poorest children are actually worse off.

    Cheated and misled

    The statistical trickery extends to Labour's flagship for helping poor families--the Working Families Tax Credit (WFTC). Much of what the state gives to families through the WFTC with one hand it takes back with the other. The National Association of Citizens Advice Bureaux (CAB) reports that parents feel 'cheated and misled' when they find out that the extra income from the tax credit disqualifies them from free school meals, and help with rent and council tax. As a result some families are even worse off with the WFTC and would be better off not working. The CAB also revealed that some workers are being sacked by firms fed up with the hassle of administering the tax credit. No wonder then that nearly 400,000 families (out of 1.5 million) eligible for the WFTC are not claiming it. A million eligible people have also failed to register for the new children's tax credit, Brown's latest pride and joy.

    None of the changes to tax and benefits introduced by Gordon Brown get close to tackling poverty in families. The extra costs of children supposedly covered by current benefits are seen as food, accommodation and clothing. However, the major extra cost of raising children is either the loss of earnings if one parent stays at home, or the cost of child care (averaging 120 a week for a nursery place).

    For all Gordon Brown's boasts about the tiny sums of money the government is directing at the poor, the appalling fact remains that, after four years of New Labour, child poverty is almost 50 percent higher than it was in 1979, the last time Labour was in office. This is despite falling levels of unemployment since 1997 and a massive growth in the wealth of the country in the past 20 years. With around 3 million poor children, Britain has the highest child poverty rates in the EU and one of the highest in the industrial world, only exceeded by Russia and the US. Britain also has more relative poverty than Turkey, Poland and Hungary.

    A fascinating new book by David Gordon and Peter Townsend, called Breadline Europe, explains why. Between 1979 and 1994-95 the richest 10 percent enjoyed increases of up to 68 percent in real income; the poorest suffered a fall of 8 percent after housing costs. The number of officially poor grew threefold between 1979 and 1997-98, leaving 14 million people in poverty. In the same period the number of pensioners living in poverty doubled. According to one extensive study, 17 percent of the population in the late 1990s were living in absolute poverty, a condition normally associated only with the developing world.

    So has Labour done anything to reduce the yawning gap between the rich and poor? Toynbee claims in her book that 'poorer households have benefited disproportionately' from Labour's tax and benefits changes. This is absolute rubbish. Brown's budgets have handed billions of pounds to the rich. Big businesses and shareholders have raked it in as New Labour has gone on slashing corporation tax. In the 1984 budget it was reduced from 52 percent to 35 percent. Brown then reduced it to 30 percent, and now, for some businesses, it is as low as 10 percent.

    National Insurance contributions have increased for many workers but fallen for employers. Between 1980 and 1998 workers paid an extra 6.5 billion in NI while employers paid 5.6 billion less. Rich individuals also escape their fair share of NI contributions: no payments are required on income over 575 a week--handing 5 billion to the wealthy. The basic rate of income tax was cut by 1 percent by Brown and the top rate remains at 40 percent (it was 60 percent even under Thatcher). Labour's tax policies have certainly been 'disproportionate'--to the advantage of the rich.

    The cupboard is often bare for poor families
    The cupboard is often bare for poor families

    Labour pains...
    No 2

  • Women's income from employment, pensions, benefits and investments is just under half that of men's, according to Equal Opportunities Commission research. Average pay for a woman in a full time job is around 82 percent of that paid to a man.
  • Labour's real agenda

    So what exactly is Labour's policy towards the poor? It certainly is not to create a fairer society by taxing the rich to help the poor. Indeed, the poorest families are hardly helped at all. As Gordon Brown constantly boasts, he is targeting 'working families' which means that he is inclined to ignore the poorest families of all -- those that have no one in work. Labour's real message comes down from the Victorian era and the Poor Law. The poor are divided into 'deserving' (those who work) and 'undeserving' (those not in work). The former are helped with pittances in tax concessions, the latter largely left to rot.

    The message was rammed home in the recent budget. The 5 million adults and 2 million children in households where no one works gain nothing from the much heralded tax credits. In fact, because their benefits are linked to prices, not earnings, they will continue to see their relative poverty increase (average earnings have consistently risen faster than prices). The few crumbs that are offered to them are tied to ever greater pressure to work. The latest kick aimed at lone parents is to force all single parents, including those with children aged under five, to attend 'back to work' interviews.

    Such policies effectively blame the victims of poverty for their own deprivation. They wilfully ignore the fact that in many areas of the country there simply aren't the jobs. A recent study showed that 1.75 million new jobs are needed to equalise the rate of employment in the north and south. In the south too there are vast pockets of high unemployment--22.3 percent in the Hackney North constituency in London, for example. In addition, many positions advertised in job centres (one in five in Greater Manchester, for instance) are so part time -- less than 16 hours a week -- that they fail to qualify people for the 'welfare to work' benefits.

    New Labour newspeak has a new definition for the deserving and undeserving poor--the 'socially included' and the 'socially excluded'. The socially excluded, in case you missed the point, are those outside mainstream society (those not in paid employment). If you concentrate on this division, you conveniently ignore the real divisons in society which are not between employed and unemployed workers, but between the rich and powerful on the one side and the rest of us on the other. The class war is over, in Blairspeak. In any case, to define the socially excluded as those without paid work is ridiculous. Many who work suffer 'social exclusion' because they are paid a pittance or have to work long and unsociable hours to make ends meet.

    The obsession with social exclusion, which inevitably leads to a culture of blame, runs right through the philosophy of New Labour. For example, the Social Exclusion Unit focuses on those 'sleeping rough' rather than on homelessness and the destruction of social housing. Employment and education ministers whine on about the lack of skills among the unemployed rather than the lack of decent jobs. Home office ministers moan about squeegee merchants, teenage mothers, and the young 'thugs' and truants who sleep rough, enjoy crime and rip off the welfare state. What are the ministers' remedies? Harsher punishments, more enforced training, tougher prisons. When Blunkett launched Sure Start, he announced the doubling of fines for parents of truants and repeated the New Labour mantra that it is 'poverty of expectation and aspiration, not poverty of income, that makes the difference between success and failure'. As poverty expert Peter Townsend writes, 'The emphasis is so much on the opportunities for people to escape from poverty rather than on the abolition of poverty itself, that poverty is virtually defined as the lack of opportunity to climb out of it.'

    Poverty can be ended

    What neither Toynbee nor anyone associated with New Labour is willing to acknowledge is that market forces create growing inequality and impoverishment, and that the more those market forces are set free, the greater the inequalities will be. Breadline Europe shows that the rate of increase of inequality has been faster in the past 20 years than at any time in recorded history because of neo-liberal policies--deregulation of the labour market, reduction in progressive taxation, the extension of means tested benefits, and the privatisation of industries and services. As long as Blair and his government continue to champion such policies, as they have promised to do, no amount of tinkering with benefits will stop the relentless rise in inequality that is unnecessarily blighting so many lives.

    It doesn't take much imagination to see how poverty (in terms of people going without the necessities of life) could be ended in Britain. Unicef estimates that it would cost 10 billion to eradicate child poverty in Britain immediately. A 15 percent levy on the super-profits made by oil companies last year would raise 17 billion. A simple and substantial rise in universal child benefit to cover all the extra costs of raising a family would be cheap and easy to administer, would leave parents a free choice on how to raise their children, and would immediately end family poverty.

    A 20 percent rise in the top rate of income tax would raise billions more and could be handed over to pensioners and the unemployed. A rise in the minimum wage to at least 7 an hour (the EU decency threshold) would end the appalling reality that millions of people in this country earn their poverty. The simple truth is that if New Labour's heart was with the poor, there would be no poor. But its heart is elsewhere, and that's why there are more millionaires than ever before.

    Factory closures are still a fact of life in Britain today
    Factory closures are still a fact of life in Britain today
    Book references

    Did Things Get Better? Polly Toynbee and David Walker, Penguin 6.99

    'Reducing Child Poverty in Britain: An Assessment of Government Policy 1997-2001' Holly Sutherland and David Piachaud Economic Journal

    Breadline Europe David Gordon and Peter Townsend, Policy 17.99

    Labour pains...
    No 3

  • A report by Professor Brian Robson of Manchester University says that in Manchester, cheek by jowl with the new penthouses that sell for 1 million, and upmarket restaurants and stores, lies 'the land of the forgotten...the endless rows of impoverished terrace housing and half-empty council housing, where unemployment is horrendous, where houses sell--if at >all--for under 10,000, where crime...traps people in their homes.'

  • Dirty dealing

      'The six warmest years of the 20th century occurred in the last decade. Twenty five percent of the world's land area is affected by soil erosion or other land degradation. Snow and ice cover is estimated to have decreased by 10 percent since the 1960s, according to satellite photography... This process is accelerating.'
      Tony Blair 6 March 2001

    The summer of 2000 witnessed storms in Taiwan, Brazil and Canada; floods in Bangladesh (which made 15 million homeless), Japan, Vietnam and India; fires in the US, Italy and the Balkans; and droughts in Burundi, Croatia, Kenya and Iran. In Britain the Environment Agency has warned that Britain could become a 'flood hotspot', with 5 million people living in flood-prone areas. But while Blair may have acknowledged the scale of the problem in his two recent speeches (his first on the environment in the last four years), the record of his government is one which is strong on rhetoric and weak on action.

    In 1997 a conference was held in Kyoto, Japan, to discuss how to reduce emissions of greenhouse gases, which are the main cause of climate change. To great fanfare, the world leaders attended and came to an agreement to make a small reduction in the release of the gases. At just 5.2 percent against the 1990 levels by the year 2012, the cut was laughable. The Royal Commission on Environmental Pollution acknowledged that a reduction of 60 percent by 2050 would be required if we are to avoid the worst consequences of global warming.

    Since that time the world's biggest polluter, the US, has resisted the agreement by every possible means, with both Democrats and Republicans arguing against its ratification. Last month President Bush rubbished Kyoto, saying, 'We use a lot of coal and we need a lot of coal to fuel our plants, to make sure Americans have got the ability to heat and cool their homes.'

    The rejection of such a small step to end global warming should have brought a severe rebuke from Blair. Instead the British government has been the key defender of the US against other European governments, as witnessed at the Hague conference last year.

    As New Labour failed internationally, so it did at home. During the 1997 general election Blair boasted that his government would oversee a 'reduction in the amount of road traffic'. The use of cars and lorries over public transport is responsible for pollution, accidents and a terrible waste of resources. Yet four years into its term of office New Labour now talks only of 'reductions in traffic growth'.

    The 180 billion transport policy included a huge new road building programme. Instead of government action to improve public transport, Blair cites new technology to make cars 'greener' in the future. In the last 30 years there have been many improvements in the petrol engine that mean it pollutes much less. However, the huge increase in the number of cars on the road means that greenhouse emissions in this sector have continued to grow, and travelling by car is slower than ever. An increase in spending on public transport would give people a real choice in how they get around, decrease car usage and immediately improve the quality of our atmosphere.

    Instead of getting tough on polluters, New Labour is encouraging them. The government is commissioning a huge increase in the number of waste incinerators in the UK, up from 15 when Labour was elected to a planned 87. This is despite well documented health fears.

    Meanwhile Michael Meacher, the environment minister, seems to have been distracted by other concerns. Last month he wrote in Tribune, 'I have just returned from a G8 ministers meeting, which discussed a number of the big global environment issues, to launch an initiative to tackle a very local and all too British problem--litter... I think it's time we got tough on this problem.'
    Yuri Prasad

    Labour pains...
    No 4

  • In the past two years government departments have underspent their capital investment allocations to the tune of 10 billion. The departments include health, education and welfare to work.

  • Their profits our loss

    With the rail system still in a state of chaos, and with rail bosses saying they will not be able to meet the Easter deadline for things to return to normal, what prospect is there that things will improve under Labour's second term?

    The main cause of the deterioration of the railways has been the lack of investment over many years. The Strategic Rail Authority plans to increase passenger traffic by 50 percent and freight traffic by 80 percent over the next ten years, so spending will have to increase dramatically if the network is to be able to cope. New Labour has pledged 30 billion to the rail industry over the next ten years. However, the majority of this is for the normal upkeep of the railway, although there is some for new investment and improved rolling stock. But a third of it--some 10 billion--is for Railtrack. With the company currently valued at 5 billion on the stock market, New Labour could at a stroke renationalise the railways and still have 5 billion left over to spend on improvements. Today there is talk of Railtrack being in crisis--it is demanding some 1.5 billion from the government to improve safety, money that was coming to it in 2006. There is also the possibility that it may lose its credit rating in the City, which will hit future investment plans.

    The more fundamental problem, however, is that Labour continues with a system which is based upon different companies competing for a share of the profits. The shortcomings of this were revealed in a recent report in the Financial Times entitled 'Why an accident like Hatfield was waiting to happen'. It showed that even now, some seven years after it was set up, Railtrack does not have a detailed register of its assets and their condition. As a result the company is unable to adequately respond to emergencies such as the recent scare over tracks cracking (the cause of the Hatfield derailment). It also delays the introduction of new technology. Today there are more than 500 new trains sitting in sidings waiting for safety approval--nobody is sure if it is safe to run them through Railtrack's tunnels. As the Financial Times reports, 'In extreme circumstances the new trains' owners have had to stick polystyrene on to brand new carriages worth up to 1 million each in case they scraped the inside of a bridge or tunnel.'

    On top of this there are now more than 2,000 registered railway infrastructure companies each competing for contracts. The drive for profits has meant a cutback in the workforce--the number of permanent staff has halved from 31,000 to just over 15,000. Combined with this is the greater use of temporary and short term contract workers. This has led to poorer safety standards, as the Cullen report into safety on the rail concluded: 'Maintenance standards are thought to have dramatically reduced. The emphasis is now on reactive or breakdown maintenance rather than preventative maintenance.'

    Labour's business friends

    Putting people before profit
    Putting people before profit

    Yet despite the overwhelming evidence of how privatisation has been such a disaster, New Labour is still determined to proceed with the sell-off of the London Underground. Gordon Brown and Tony Blair are set to break up the network and hand it, along with 6 billion of subsidy, to a consortium of private companies. These include Balfour Beatty, the company which was responsible for one of the greatest civil engineering disasters of recent times when the Heathrow extension tunnel collapsed, and also the company implicated in the recent Hatfield train derailment.

    A report by the Industrial Society at the end of last year revealed that these private companies could earn a handsome 15.3 percent return under the PPP scheme proposed by the government. What's more, performance targets for PPP bidders are actually 5 percent below current service levels. Were PPP to be given the go ahead under its present form the consortia could hardly fail to make lucrative bonuses, and would have little incentive to improve the tube's increasingly poor levels of punctuality, frequency and reliability.

    The current dispute between New Labour on the one hand and Ken Livingstone and his transport supremo Bob Kiley is not about the principle of the sell off, but about the management structure that is to be put in place if it goes ahead. Fortunately resistance by the tube unions may ensure that neither Blair and Brown nor Livingstone and Kiley will have it all their own way, and there is still the possibility that the sell off can be halted.

    New Labour has shown that it wants to continue with a policy of private companies running our transport system. The main reasons for this are political. Were Labour to back down and concede the principle that public ownership and control are preferable to private, it would drive a coach and horses through the heart of New Labour's ideology--that the market knows best. It would bring into question not only the sell-off of the air traffic control system, but the whole plethora of PFI and PPP projects in health, education and other areas of the public sector.
    Peter Morgan


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