Life should not be conditional

 

According to a large-scale, biennial study by the Joseph Rowntree Foundation and Heriot-Watt University, destitution, defined as not being able to afford essentials such as heating or food, afflicts 2.4 million people in the UK, up 54% from two years before.

This figure includes 550,000 children, an increase of 52%, or an additional 185,000 children.

An indication, you might think, of the terrible toll taken by lockdown and the pandemic in Britain. Except that the study looked at the state of the nation at the end of 2019 – before Covid-19 struck.

By now it’s certainly a lot worse. The Trussell Trust, which operates around 60% of the more than 2,000 food banks in the UK, has reported an 89% increase, compared with 2019, in the number of emergency food parcels it has distributed. At the end of May 2020, the number of new claims for Universal Credit (2.9 million) was almost double the total number of Universal Credit (UC) claimants – 1.5 million – before the pandemic.

The one trend in the opposite direction comes from the £20 week top up to UC introduced in April last year. But the increase doesn’t apply to other benefits (the nearly 2 million disabled people on Employment and Support Allowance don’t get it) and is, as the government has explained, only “temporary” and due to come to an end in April 2021.

Destitution and food banks are becoming normalised in Britain, obscuring the absolutely central role of our ‘welfare’ state – more aptly punishment state – in creating this situation. Destitution in this country is not, in the main, about being homeless or having a drug or alcohol addiction. According to the JRF/Heriot-Watt study, only 19% of the people it classified as destitute had these additional problems. Over half, however, (nearly 1.3 million people) had a chronic health problem or disability. 14% had a job.

For example, new UC claimants – and new claims for unemployment benefit are by now Universal Credit claims – have to wait, as a matter of policy, at least five weeks for their first tranche of money to arrive. And because UC claimants invariably don’t have other means of support (that’s why they’re applying for it), they have to take out a loan from the Department for Work and Pensions (DWP). Which has to be paid back. Half of those experiencing destitution were claiming or had applied for UC. And debt deductions were identified as integral in pushing people into destitution.

According to research, more than one million people who claimed UC during the first coronavirus wave were having money regularly deducted from their benefits payments.

Universal Cruelty

But the problem with UC is far more fundamental. The brainchild of Iain Duncan Smith and legislated for in 2012 during the Tory-Lib Dem coalition, UC was intended to implant ‘the world of work’ into the benefits system. It is paid a month in arrears, with deductions for how much the ‘customer’ has worked during that period. A legion of DWP work coaches is on hand to ensure claimants take the necessary steps into employment – the department has even recruited work coaches during the pandemic.

With the mushrooming of zero-hours contracts, on-demand labour and temporary work in the economy, UC is the perfect benefits system to serve this new work order, enabling, according to one analyst, employers to turn workers “on and off like a tap” .

But the flow has to be enforced; it can’t be left to market forces. Claimants are compelled to sign a contract with the state (a “claimant commitment”), pledging to spend up to 35 hours a week looking for work. If they fail to meet these demands, they can be sanctioned, which involves the withdrawal of all financial support for a week, a month, six months or longer. Sanctions can also be imposed – or threatened – for not attending training or not updating a CV. This is known as ‘conditionality’. Its scope has hugely increased in the pandemic; 1.8 million people, a rise of two-thirds since before Covid-19, are subject to ‘searching for work’ conditionality.

Conditionality was suspended for three months during the first wave of coronavirus, then reintroduced at the start of July. Although pre-existing sanctions, sanctions that had been imposed prior to the first lockdown, were not lifted. More than 36,000 UC claimants in April last year were ‘under sanction’.

According to Work and Pensions secretary, Thérèse Coffey, sanctions are “an essential part of the contract to help people start to reconsider what vacancies there are”. Job Centres have been closed in the latest lockdown but whether sanctions have been suspended remains a mystery.

Conditionality does not just apply to Universal Credit. Other “legacy” benefits – so-called because they have not been replaced by UC as yet, although they will eventually – can only be successfully claimed under certain conditions. For example, Employment and Support Allowance (sickness benefit) is available only if claimants successfully surmount a Work Capability Assessment. A great number of genuinely ill people don’t. And many of those that do – those declared unfit for work but placed in the Work Related Activity Group – are still subject to the conditionality regime. Between 2010 and 2018, 110,000 sanctions were meted out to disabled Employment and Support Allowance claimants.

Face to face work capability assessments were stopped in March. But at the start of November last year – when the government was beginning the second lockdown – sanctions were re-introduced for sick or disabled people who failed to attend a fit for work test over the phone.

Open for infection

There is a macabre symmetry between the government general attitude to Covid-19 and its ‘welfare’ policy. After dallying with herd immunity, the government locked down too late and not comprehensively. It then attempted to re-open the economy, encouraging people to ‘Eat Out to Help Out’ while the virus was still present. After coronavirus came back with a vengeance in the winter, the government, supported by the ‘opposition’, refused to close schools despite clear evidence they were the main source of transmission, and pledged to ‘save Christmas’. The result has been 100,000 dead because of Covid, the worst death toll in Europe.

And, likewise, it was slavering at the bit to reintroduce conditionality and compel claimants to “reconsider what vacancies there are”. Last summer ministers even removed a line of guidance for UC claimants that had previously assured them they would not get a sanction if Covid-19 meant they could not comply with their claimant commitment.

However, as shown by the 2.4 million people who were destitute before the pandemic, Covid-19 has merely shone a light on the huge problems of the government’s conditionality approach; it hasn’t caused them. It should not be forgotten that the Conservatives’ whole analysis of poverty that underpins their welfare policy asserted that the prime cause was poor people’s patterns of behaviour – poor education, addiction, “worklessness”, family breakdown etc. It is mystifying, then, that the rolling out of their flagship policies – Universal Credit and the intensification of sanctions – has resulted in a huge increase in abject poverty and destitution. It’s almost as if the Tories’ explanation of the origin of poverty was utterly wrongheaded.

Unconditionality

There is one solution to this ocean of misery – Universal Basic Income (UBI). As its name suggests, this is a benefit paid to all individuals – the principle is much the same as for child benefit – so there is no means testing. For rich people, the amount can be clawed back by taxation. The UBI Lab Network is calling for a Post-Covid Recovery UBI of £1,000 a month for every adult and £500 a month for each child.

But the ‘U’ in UBI can, and should, also signify that it is unconditional. The massive bureaucracy that has been built up to means-test for benefits and ensure that recipients are spending every hour of every day looking for work or proving to the satisfaction of government officials that they are sick to the point of complete immobility would be dismantled. Conditionality – so beloved of the Conservatives and New Labour – would end. “An enormous amount of the machinery of government, and that half-government corporate NGO penumbra that surrounds it in most wealthy countries is just there to make poor people feel bad about themselves,” wrote the late David Graeber in 2018. “It’s an extraordinary expensive [my italics] moral game played to prop up a largely useless global work machine.”

This is one answer to a common objection to basic income – that, however desirable, it is prohibitively expensive. In fact, as has been demonstrated by the UK’s National Audit Office, the lynchpins of conditionality – benefit sanctions and Work Capability Assessments – cost more than doing nothing. Abolishing conditionality, notwithstanding the boost it would give to local economies, would actually save money.

As indicated by academic Guy Standing, basic income could also be funded by a “bonfire of the subsidies”. Enormous sums are paid to huge landowners who clearly don’t need the money; a gravy train that should be possible to bring to a halt now Britain has left the EU. Britain’s £10.5 billion annual subsidy to fossil fuel companies – the largest in the EU – should also be in the firing line. In 2016, other selective tax reliefs – such as exempting homes from capital gains tax and VAT relief on housebuilding – were estimated to come to £117 billion a year, a sum larger than the budget of the National Health Service.

Then there are new taxes to consider. Possibilities include a carbon tax, a wealth tax and a Financial Transactions Tax.

It is probably necessary to also assuage a great, unconscious fear – that basic income would lead to a dramatic dearth of delivery drivers, cleaners, waiters, shelf stackers and other low paid, repetitive jobs that a nonetheless considered essential to modern society. With an unconditional income, people would shun such jobs. Actually, because basic income – in contrast to current means-tested benefits – is not withdrawn as people move into paid employment, the incentive to work in order to top-up a person’s income is, if anything, strengthened and does not need the threat of being plunged into destitution to operate.

What basic income would do is empower people to, in the words of one basic income advocate, “say no to a bad deal”. Employers would be compelled to improve pay and conditions in order to attract applicants or, if necessary, automate jobs. A tamed and fearful workforce could no longer be “turned on and off like a tap”.

“If you commit a crime, no court is allowed to make you go hungry as a punishment,” noted one charity chief executive in 2014. “But if you’re late for an appointment at the Job Centre they can remove all your income and leave you unable to feed you or your family for weeks”. Conditionality – threatening to cast people who simply have an urgent need of income to live into destitution or starvation – has not been ameliorated in the intervening years, in fact it has intensified.

It must end. It is barbaric

The Undrowned World

It is predicted that, because of the coronavirus pandemic, 2020 will be the first year since the Second World War that global GDP falls. Output in so-called ‘emerging markets’ is forecast to drop by 1.5%, the first decline since records began in 1951. Two billion people – a quarter of the world’s population – are living under lockdown of some kind. According to the former chief economist of the IMF, global trade and commodity prices are experiencing a 1930s-style collapse.

In ‘developed’ economies the picture is no different. There are 33 million unemployed people in the US, over a fifth of the workforce. The European Union is undergoing a more severe economic contraction that the US, “the deepest economic recession in its history” according to the European Commissioner for the economy. While Britain faces the worst economic recession for over three centuries.

And yet despite an economic downturn of unparalleled dimensions, the world is only just about on course to deliver the carbon emission reductions necessary to keep within 1.5 degrees of warming, the level identified by the IPPC as the ceiling above which massive crop failures, inundation of cities, huge refugee flows etc. become inevitable.

Carbon emissions, forecasts the International Energy Agency, are set to drop by just under 8% in 2020 (they were flat in 2019).This will be the largest ever fall in CO₂ emissions. By a fortuitous coincidence, according to the UK website, Carbon Brief:

Global emissions would need to fall by some 7.6% every year this decade – nearly 2,800MtCO2 in 2020 – in order to limit warming to less than 1.5C above pre-industrial temperatures

But this benevolent trajectory won’t last. Even if Boris Johnson’s reckless breaching of the lockdown is not imitated by other countries the lockdown will end, this year or next. Most people will eventually return to work even if many others won’t have jobs to go to and depression conditions – long-term low growth – ensue.

Lockdown cannot go on forever. It is true that economic recession need not – in fact often doesn’t – lead to higher mortality and suffering (recession followed by austerity does, however). Indeed, evidence suggests that people in Britain are welcoming the changes, such as cleaner air, that lockdown has produced. But the palpable benefits it produces – through the suspension of economic activity – indicates that this is not a normal economic crisis.

Invariably, in economic downturns, economic activity continues at a reduced level or the government steps into the breach, as it did in Great Depression America, and creates paid work. But in the coronavirus slump, whole economic sectors have been stopped in their tracks.  As Marxist economist, Michael Roberts, notes, this is not something that can continue in perpetuity, with governments – ideally – supplying the cash transfers to make sure no-one is destitute. In the absence of productive economic activity, governments cannot continue indefinitely inventing money based on debt – jobs will disappear and hyper-inflation will take hold.

In other words, the sustainable path the world has – quite by accident – found itself on, is not sustainable.

This is not an argument for scaling back the lockdown before it is safe to do so as is happening in the UK. Evidence from New York indicates that maybe a fifth of people have had the virus but herd immunity – the point at which the virus stops being transmitted – requires 60-70% of the population to have been exposed. Sending people back to work before that has occurred, or a vaccine developed, clearly risks many more people dying.

But it is an argument for acknowledging something. The fixation on economic growth that has, quite justifiably, been criticised as a form of insanity, masks something equally disturbing, and intractable – the dependence of the vast majority of people on that economic growth. Without it, under this economic system, jobs and livelihoods vanish.

This is quite apparent by looking at the UK, where over 16 million people have less than £100 in savings, but it is even more glaringly obvious by examining a country like India. In the country which was formerly the world’s fastest growing major economy, 90% of the workforce are thought to making a living in the ‘informal’ sector. Working as rickshaw pullers, baggage collectors and street vendors, amongst other occupations, these people are “daily wage earners” – if they don’t work, very soon they – and their families – don’t eat.

In the current circumstances, the need for direct cash transfers so people can survive – in India and the UK – is obvious. Indeed, basic income is not something exclusively for the developed world. Finland may have recently concluded that basic income improves mental and financial well-being, but the same was already true for India. A basic income pilot in the state of Madhya Pradesh between 2010 and 2013 reduced debt bondage and increased the confidence of the recipients.

But the world economy now confronts a quandary. In order to head off the most catastrophic effects of climate change, curtailment of economic activity – in addition to re-sourcing and clean technology – is necessary. The inadvertent coronavirus slump shows how radical it needs to be. But an indefinite lockdown – not even considering the restrictions on personal liberty – will have equally catastrophic economic effects, even if (a very big ‘if’ admittedly) people are supported through it by government spending.

Put simply, it is not possible to build a sustainable and equal society on top of an inactive capitalist economy. Something has to give. And building a just society on top of capitalism, albeit active capitalism, has been the default position of many supporters of basic income and modern monetary theorists.

Ultimately this is an argument for imagining what a ‘rational’ economy would look like. What would the contours of a post-capitalist economy be? How would it ensure that the dependence people have on economic growth taking place, and capitalism functioning well, is relieved so that the economy becomes genuinely sustainable? In dismantling the machine of capitalism, how would the social calamities of hyper-inflation and destitution be averted and how would public services be funded?

The bazookas won't be enough

There is an erstwhile, familiar, right-wing canard that ‘you can’t solve a problem by throwing money at it’. Well, that particular piece of wisdom is now going to have to be reversed because you can’t solve the Coronavirus depression that is now coming down the pipe by throwing money at it. No matter how huge.

And the sums are huge. Over $600 billion in Germany, £330 billion (in loans!) in Britain, €300 in France, $700 billion in Quantitative Easing in the US.

But according to James Meadway, former chief economist of the New Economics Foundation and ex-Labour party adviser it won’t be enough:

Thing is: there is no, as in none, as in it doesn’t exist, amount of money at a macro level that can solve this economic crisis. We need to reorientate how stuff is produced: pouring money into markets that are getting to the point of being unable to function will not work.

— James Meadway (@meadwaj) March 18, 2020

The problem is not simply that pubs and restaurants fold as their customer base vanishes as people stop going out. There will be an unavoidable knock on effect on their suppliers and their suppliers and so on. Unemployment will starting rising. Household debt – estimated at £119 billion – is huge and if people’s income collapses in the context of a paucity of savings, there will inevitably be mass default on debts. This will damage, perhaps fatally, credit card companies and banks. But that is not all. Corporate debt, after years of low interest rates, is enormous in Britain and globally. If business bankruptcies happen, defaults on that debt are inevitable.

In the words of labour economist, Guy Standing:

These indicators may not mean much to most non-economist readers. But they indicate incredible economic fragility, especially as private and corporate indebtedness are characteristic of every national economy.

According to one estimate, UK GDP will drop by 15% in the second quarter of this year – compared to, for example, 4.1% in 2009, at the height of the last recession. A French economist, Pierre-Olivier Gourinchas, has suggested that coronavirus containment measures reduce economic activity by 50% and 25% for the month after that. “We are about to witness a downturn that could dwarf the Great Recession,” he says.

It’s possible that the virus will recede in the spring, allowing containment measures – social distancing and not going out – to be lifted and the economy to resume, if not unscathed, at least in recognisable shape.  Possible but unlikely. ‘Suppression’ as it is called, is posited to go on for 18 months, punctuated by month-long pauses, the earliest in July. This is necessary to allow a vaccine to be safely produced.

I don’t believe it is possible to ‘mothball’ an economy for a year and a half, possibly longer, no matter how many bazookas in your armoury are fired. There will have to be, in Meadway’s words, a reorientation of “how stuff is produced”.

One immediately necessary reorientation is the introduction of unconditional basic income for all those who need it – the newly unemployed, poor, self-employed or anyone showing symptoms – for example. This would enable them not to go to work if they were ill, maintain some level of demand in the economy and limit defaults.

But the task of the Left is not merely to insist on its introduction – other people, including the DUP, are calling for it and Johnson is ‘considering’ it – but to ensure it is not temporary. That we never go back to the DWP dystopia of mass sanctioning and the imposition of destitution as a matter of government policy.