Ed Balls and workfare – still following Osborne’s agenda?

Ed Balls has announced that Labour plans to introduce a compulsory work scheme for those  over 25 who have been out of work for more than two years – in addition to its existing plans for the under-25s.  The proposal is being spun in two ways – both as giving “opportunities” but also as a demonstration that Labour is not “soft on benefits”.  Balls is quoted as saying:

“A one nation approach to welfare reform means government has a responsibility to help people into work and support for those who cannot, but those who can work must be required to take up jobs or lose benefits as a result – no ifs or buts.

“Britain needs welfare reform that is tough, fair and that works, not divisive, nasty and misleading smears from an out of touch and failing government.

“Day after day, we see Tory and Lib Dem ministers claim they are targeting the workshy and benefit ‘scroungers’. But it’s no wonder even cabinet ministers have told the newspapers they are uncomfortable with these smears. Because the truth is very different.”

And he goes on to argue:

“Of course we need spending cuts and tax rises to get the deficit down but, with the flatlining economy sending borrowing up by 10% so far this financial year, it’s clearer than ever that you cannot get the deficit down without a plan for jobs and growth which works.”

There’s some nice triangulation there.  Balls is trying to play both sides of the street on welfare and benefits, and manages to get in a bit of One Nation rhetoric as well.  But the point is that his underlying assumptions are both wrong and, in my view, counter-productive.

The problem with Ed Balls really lies in that second quote, where he continues to use the rhetoric of austerity.  Austerity is failing, and there is an increasing body of evidence to show why that is the case – I’ve referred to the IMF’s evidence about the multiplier before.  The evidence is increasingly showing that we need precisely the opposite of spending cuts, and that any tax increases should fall overwhelmingly on the wealthier, for reasons of both equity and to ensure that they do not damage demand (Balls’ argument that his scheme should be paid for by reducing the pension tax advantages of those on the highest incomes is very welcome, but misses the point – more spending and an end to austerity would increase tax revenues across the economy as a whole).

And Balls remains mired in the idea that you can create subsidised jobs without reducing pay for others, and that it is is somehow acceptable to subsidise big businesses willing to participate in such schemes without damaging smaller, more local businesses.  Workfare is not just a form of exploitation of those involved in the schemes; insofar as it is dominated by big businesses like chain retailers, it is sucking money away from local businesses and local economies, which is where sustainable recovery will be generated.  And the effect of these measures, by subsidising pay budgets of big businesses and providing them with what is in effect a flow of free or cut-price labour, is to bid down wages – in sectors in which low pay, often below the living wage, is already endemic. There are far more efficient and equitable ways of creating jobs; Balls seems intent on taking the low-pay, low-productivity route, at a time when austerity is ensuring that the productivity of the UK workforce is actually falling far and fast.

But most of all, he continues to allow the neoliberals in Government to set the terms of the debate.  He remains caught in the rhetoric of an economic theory that is visibly, palpably failing.  And it seems to me that not only does this illustrate a desperate lack of ambition; it fatally constrains Labour’s ability to offer a real alternative at the next election, and leaves the political initiative in the hands of the more explicitly neoliberal Coalition parties.  It not only means that Cameron and Osborne are setting the terms of debate, with all that implies for Labour’s electoral prospects; it begs the questions – what is Labour for? What real difference would electing a Labour government in 2015 make?   To be fair to Labour, there have been some encouraging signs lately – the clear opposition to the 1% cap on benefits (in reality a 4% cut) being one.  There are indications that the rhetoric is changing.  But Labour continues to give the impression of a party that is running scared of the Daily Mail, and that lacks the confidence to capture the growing intellectual and evidential swing against austerity economics.

If Labour is serious about looking like a credible alternative government there comes a time when triangulation has to stop – and when the deployment of vague and ultimately pretty meaningless slogans like “One Nation” and “predistribution” – the latter a classic piece of market defeatism which starts from the distinctly neoliberal assumption that the state can’t make a difference –  don’t cut it any more.  There is an evidenced alternative to the politics of austerity that is gaining ground by the day. When will that alternative break into the Westminster mainstream?