In the UK, Wales has a degree of regional autonomy. This has
helped shed some light on two aspects of UK government policy: taking income
from the disabled and the working poor.
The Welsh government asked the highly respected Institute of
Fiscal Studies (IFS) to examine the cumulative impact of the coalition
government’s tax and benefit reforms up until April 2015. Ideally we would like
such an assessment for the UK, but the government has said this would be ‘difficult’ and
‘meaningless’. However there is no reason why findings for Wales should be very
different to the UK as a whole, and the Welsh government - run by Labour - had no
inhibitions asking the IFS to do this for Wales.
In terms of income distribution, the report’s findings
are summarised in this chart.
Summary of gains and losses across the income distribution,
2014–15 prices. From “The
distributional effects of the UK government’s tax and welfare reforms in Wales:
an update” by David Phillips, IFS.
The chart speaks for itself, except to say that UC and PIP
stand for the new Universal Credit and Personal Independence Payments schemes,
which will not have their full impact until beyond 2015.
The study also looks at how this breaks down among particular
groups. Pensioners fare relatively well, losing only 0.5% of income as a result
of all these changes. In contrast the working age disabled are hit relatively
badly, suffering on average a 6.5% loss. Yet this loss may pale into
insignificance compared to the fear that has been created by the government’s new
assessment procedures, contracted out to private firms whose methods are
confidential. (See also these case studies by Demos, and Alex Marsh and the Economist on the government’s welfare reform
in general.)
You might cynically think that this kind of thing is an
inevitable result of austerity, where help to the poor and disabled is
considered a luxury that society can no longer afford. Certainly the UK is not alone here. However the second policy has
nothing to do with austerity. As part of its drive to reduce ‘red tape’, the
government abolished the Agricultural Wages Board (AWB), the last surviving
wages council which set minimum terms and conditions for agricultural workers.
The government’s argument was that the Board hindered ‘flexibility’ in the
labour market, and that it duplicated the role of the national minimum wage.
The last argument is simplistic. Although the AWB set a basic
hourly rate very similar to the national minimum wage, it also set overtime
rates, which as anyone living near a farm will know are particularly relevant
to farm workers. The importance of this can be found from the government’s own impact
assessment of abolition, which suggests a transfer of as much as
£33.4 million from farm workers to farm owners as a result of abolishing the
AWB. (Farm workers are poorly paid on average: in 2011 the average wage was
£8.17 per hour, compared to a minimum wage of £6.08.)
As to the need to increase market flexibility by reducing
external intervention, this is particularly rich given the scale of public
subsidies received by this sector. This government has fought hard to maintain the subsidies from
Europe that go to large farms, so no free market there. Farm workers themselves
are particularly powerless compared to their employers, which is why the AWB
was the one wages council that the previous Conservative government did not
abolish in 1993.
What has this got to do with Wales? The Welsh government argued
that it had the power to keep an AWB for Wales. The UK government disagreed,
and took this all the way to the Supreme Court, but last Wednesday it lost. So
Welsh farm workers will retain some protection.
I would love to say that these two cases are isolated examples,
but they are not. Conservative ministers have recently proposed additional
restrictions on the right to strike, requiring over 50% of all eligible members
to vote in favour of strike action before a strike can be called. As Steven
Toft says, this is a strikingly stupid idea, and is
essentially just an attempt to further weaken an already weak trade union
movement. In terms of the future of the welfare state, the Chancellor’s plans for future austerity require yet further reductions. With pensions protected, this
means the disabled will be in the firing line once again.
