Ninety years ago today, on 24 August 1931, the UK Government fell, when most of the Cabinet rebelled against the Prime Minister and Chancellor over their plans to cuts benefits by 20 per cent.
A minority Labour government led by Ramsay MacDonald and Philip Snowden lost the support of the Labour Cabinet and were subsequently expelled from the party when they formed a national government with the Conservatives to force through punitive cuts on the poorest people in society.
In response to the global economic slump of the early 1930s, a Labour Prime Minister and Chancellor had proposed public expenditure cuts, i.e. cuts to benefits and services the poor rely on.
Nearly a century later, and the current Prime Minister and Chancellor are about to take away £1,000 a year from six million of the least well-off households in the country. History tells us that it will not be easy or popular.
The cuts, in the form of the end of the Universal Credit uplift – a £20 increase implemented during the Covid pandemic – equate to a 15 to 25 per cent cut in many families’ incomes. Six Conservative former Secretaries of State for Work and Pensions have come out against the proposed cut – including the architect of Universal Credit Iain Duncan Smith, who is not widely regarded as an advocate for a more generous social security system.
© Provided by The i Ramsay Macdonald and Phillip Snowdon on the terrace of 10 Downing Street before a cabinet meeting (Photo: Hulton-Deutsch Collection/CORBIS/Corbis via Getty Images)
In 2015 the Government of David Cameron and George Osborne proposed cuts to tax credits (the forerunner of Universal Credit). Again, the message was the same: the finances are in trouble and the poor should pay. Those cuts would have left three million working families worse off.
The Government U-turned, following huge opposition. Jeremy Corbyn, during his leadership election that year, had switched the Labour Party’s position on tax credit cuts from pathetic capitulation to outright resistance and made it the centrepiece of the party. Political commentator and i columnist Paul Waugh called the U-turn “a huge scalp for Jeremy Corbyn, his first big political victory since becoming leader in September.”
The problem governments face in taking away money from those with the least is that it is very hard to justify. In 2015, Corbyn contrasted Osborne’s austerity cuts to tax credits – needed to balance the books the Chancellor pleaded – with the fact that in the same Budget, Osborne was also giving tax cuts worth billions to profitable corporations.
A few weeks ago, Conservative MP Andrew Rosindell was sent into TV studios to defend the £20 per week cut in Universal Credit. He suggested “some people like getting the extra £20 but maybe they don’t need it”. Universal Credit claimants will see their benefits cut by 21 per cent to just £324 per month for a single adult. As an MP Rosindell is paid 20 times that per month pre-tax – with generous food allowances. Twenty pounds will be a week’s food shopping for many single unemployed people.
The UK’s social security system – even with the current £20 uplift in Universal Credit – is woefully inadequate. In Ireland, unemployed people get around £173 per week. If the £20 cut to Universal Credit goes through it will be approximately £80 a week in the UK. And Ireland is no outlier, in Germany the system is even more generous.
At the same time as this cut is going through, the Conservatives have handed out £25 billion in tax breaks to corporations over the next two years, £5 billion in stamp duty tax cuts, and are promising a new ‘royal yacht’ for £200 million. But apparently it’s £20 per week for the poorest households (£6 billion a year) which is the unaffordable item.
© Provided by The i Read More - Featured Image
Labour’s shadow work and pensions secretary Jonny Reynolds has stepped up his call for the £20 uplift to be made permanent. Reynolds is also taking a serious look at the way Universal Credit penalises those in low paid work, and calling for the ‘taper rate’ to be reduced so those in low paid work keep more of what they earn. Currently 63p from every £1 earned above the work allowance is lost. With tax and national insurance added in, it’s equivalent to a marginal tax rate of 75 per cent – far more than the 47 per cent paid by those earning over £150,000 a year.
Johnson and Sunak are unlikely to face a Cabinet rebellion on the scale that brought down MacDonald and Snowden 90 years ago, but like Cameron and Osborne they could be forced into a U-turn – especially if their own backbenchers and an emboldened Labour keeps up the pressure.
Andrew Fisher was executive director of policy for the Labour Party from 2016 to 2019. He is the author of ‘The Failed Experiment’ – a book about UK economic policy and the financial crash of 2007/08
Find us at the office
Overmann- Mucha street no. 55, 74667 Papeete, French Polynesia
Give us a ring
+76 987 423 417
Mon - Fri, 8:00-17:00