Sunday, October 10, 2010

Now I know why Cameron wears that condom

I’ve never quite understood the cartoonist Steve Bell’s caricature of David Cameron wearing a condom over his head, except for the rather obvious suggestion that he is, well, a male member.  However, following the row over how many children benefit claimants should be allowed to have, I finally do get it.  Vote Tory and stop one. 

   It all started with the culture minister, Jeremy Hunt’s remark  that people on benefits should accept the financial consequences of having too many children.”It’s not going to be the role of the state to finance those choices”, he told BBC’s Newsnight.   The government has capped benefits at £26,000 irrespective of family size or need.  This presumably means that the hundred thousand families on  benefits with four kids will suffer a serious financial squeeze.   “Only the rich to be allowed to have children” cried the Daily Mirror and a number of Labour MPs. The Child Poverty Action Group rounded on Hunt for “forcing children into destitution on the arbitrary basis of how many brothers and sisters they have”. It was precisely what the Coalition didn’t need in the week in which the row over withdrawing child benefits had blown the Tory conference out of the water.  

   However, though my first instinct was to join the clamour of condemnation of “heartless Hunt”, I found that I had difficulty going the distance with his critics.  It’s not as if the Tory minister had called for benefit claimants to be castrated, or for a massacre of the fourth born.  In fact, the more I thought about it, the more I discovered that I basically agree with him:  it is irresponsible to have large numbers of children when you can’t pay for them. The cap is not a fiscal prophylactic but a reasonable compromise between family welfare and the protection of the taxpayer.   After all, £26,000 is the equivalent of  a gross income of around £35,000, which puts the 100,000  benefit families that receive it in the top 20% of income earners earners.  Are employers who pay the median GROSS salary of £25,500 guilty of eugenics because they don’t pay enough for their employees to support a large family?   If so, what about those who pay minimum wage?   You don’t have to be Richard Littlejohn of the Daily Mail - who calls unemployed single mothers “benefit whores” - to see that there may be a problem here. 

    Similarly, I couldn’t really argue with the decision to cap child benefits at the standard rate of taxation, though clearly the anomaly of two earner households needs to be addressed.  And call me Iain Duncan Smith, but I it hard to disagree with the government’s decision to cap housing benefit at £400 a week. It never occurred to me that people could claim that much in the first place.    Of course, like the family benefit cap,  it mainly hits people living in expensive places like London and Edinburgh.   But is it the job of the state to pay the excessive rents charged by inner city landlords?   It’s a very tough call, of course, because no one wants to see families thrown on the streets.  On the other hand, what about all the millions of workers who can’t afford to live at London addresses - are they really expected to pay in their taxes for others to do so?  

   The same issue arose with public sector pensions, which are now being squeezed by the Tories.  Most people in the private sector have not only had their wages cut over the last two years, they have also seen their pensions shredded by the financial crash.  Only a small minority still enjoy final salary schemes, yet they have been paying,  through their taxes, to finance the 85% of  public sector workers to have early retirement and index linked pensions based on final salary.  No - there simply had to be a rebalancing, and the proposals put forward by the Hutton Review,  basing payments on lifetime earnings rather than final salary, are certainly worth considering.  My only real criticism is that the proposals seem to let the high-earning bureaucrats away with more than they deserve.  But it is ludicrous to threaten to take to the streets over this kind of readjustment. There will be plenty of time for barricades when the real cuts come.  

    But will the real cuts ever come?  I must say as I saw DAvid Cameron deflate like a punctured balloon - or rather condom - at the Tory Conference last week, I began to wonder whether this administration really has the bottle to carry through its austerity programme.  It’s easy for shouty Chancellors, like George Osborne, to call for 25 - 40% cuts in public spending; it’s quite another thing to cope with the media reaction.  The Prime Minister was left apologising for his own policy on child benefits last week after being assailed by Right and Left for ending the universal principle.  The Tories have been battered  by the antipoverty groups for the benefits cap and the housing benefit cut.  Yet these policies combined will only yield;d  couple of billion - a tiny fraction of the £100 billion structural deficit that the Tories are trying to pay down over the next four years. 

   We live in an age of entitlement, when everyone thinks they’re worth it.   And its not just benefits.  The navy appears to have won the case for building two aircraft carriers at a cost of £5.2 billion, which will have no planes to fly from.  Brilliant.  The great cull of quangos, we learn, is not going to deliver many savings either. The cost of shutting down many of these quasi non-governmental agencies is going to be higher than the savings, thanks to severance pay pensions and other broken contracts.  I suspect the government has seriously underestimated the extent to which public sector bureaucrats have seen them coming. 

    And as I say, none of the real cuts have started yet.  The Financial Times reported last week that the government has already started to back down,  or rather “reprofile” some of the spending cuts. The expected economic slowdown will test the government’s nerve to the limit. I just don’t see them lasting the course - which means only one thing: more inflation. It is the only way weak governments in a jam can cut their debts.  Buy your gold while stocks last. 

No comments: