Austerity and Its Impact on Welfare

The government policy of only providing welfare payments to the first two children in any family is rooted in austerity logic and reactionary views on the poor. Let me explain why, but it will also require a bit of history.

Austerity as a policy started officially in 2010 with the election of the Conservative and Liberal Democrat coalition government. It meant massive cutbacks to public sector spending, including wage restraints for millions of workers and significant reductions in public provisions. This was in response to the global financial crisis of 2007-8 when bad, unpayable debt had swamped international banking as a result of excessive credit being given out to people who ended up buying houses they couldn’t really afford. This was itself the result of low wages and excessively high house prices in several countries.

“Mainstream politicians used false analogies comparing the national economy to a family’s credit card debt: if you want to pay off the debt, you’ve got to make cuts elsewhere in your budget.”

The argument was that there is only so much money in any government’s pot to spend, so because they had to bail out the banking system to the tune of billions, there had to be cost savings (cuts) elsewhere. This led to a reactionary tidal wave of claiming that essential public services were simply unnecessary and good financial prudence meant cutbacks. The view was that because there was a crisis in international banking, nurses’ and teachers’ wages needed to be cut and local libraries needed to be closed. Capitalism privatises the profits and socialises the losses, and Conservative, Liberal, and Labour politicians are there to facilitate that process.

Austerity is often argued to be politically neutral, a pragmatic response to a real-world problem. But austerity is always political; it is used by capitalist politicians to drive down public services, cutting taxes for businesses and the wealthy, and creating ‘opportunities’ for businesses to come in and provide services (and therefore profit) in areas previously the responsibility of public sector workers. Around this time, David Cameron was also arguing for an expansion of the grey economy, getting retired people to do more ‘voluntary’ work to keep local services like libraries running.

The Reactionary Nature of Welfare Policies

The two-child benefit cap is part of this logic. It was introduced by the Conservatives in 2017 as part of their ideological war against the poor. It is based on the belief that some people have ‘too many children’ and cannot afford them, and that is on them. Cutting welfare provision for families with three or more children harkens back to the old Victorian logic of the undeserving poor and the Malthusian argument that the poor breed too much and this is socially unsustainable. Rich people can have as many children as they like, of course, because they don’t rely on ‘handouts’.

“Punishing some people with poverty is a way of controlling them.”

No one says this explicitly, of course, but it is in the DNA of the policy; the policy only exists because of these assumptions. The idea of the undeserving poor is particularly odious. Poverty exists because capitalism cannot provide the jobs or wages that people need to live. There is structural unemployment and underemployment in the UK, even alongside some labour shortages. In-work poverty is a particularly damning indictment of capitalism – workers whose wages don’t cover their basic needs, meaning that their bosses are making even more profit out of them. Most people on Universal Credit are also in work, meaning that the state is effectively subsidising low wages, especially in supermarkets which rely on part-time women workers. In 2015, it was reported that the government paid out £11bn in welfare payments to workers in the top four supermarkets because their pay was so low. That translates into even more profit for the supermarkets.

A Different Vision of Society

This is where socialists have a different vision of society. We reject the scarcity argument that is embedded in capitalism, that you have to make cuts in one place to pay for other things. We only have scarcity because the capitalist economy requires scarcity to make money. You can only profitably sell things that are not abundant, you can only force people to work if they don’t have enough to live, and you can only control people through economic and social manipulation of who gets what and who deserves what.

The left often raises arguments for welfare, not warfare, to spend more money on what people need and not machines of death. This is fine as a general slogan, but it is also based on scarcity thinking and argues for a reallocation, not challenging the logic of how the economy is structured.

“Socialists also oppose the cap because it is part of the reactionary way that welfare is structured.”

The fact that welfare is now routinely referred to as ‘benefits’ is part of the ideological offensive by the right to portray necessary welfare payments as something that is somehow a bonus, something extra, a benefit that you could get. It softens people up to accept the argument that ‘benefits should be cut’. After all, benefits sound like something nice and above the usual, not something essential.

Irrespective of language, however, socialists oppose the concept of means testing for these kinds of payments. This can sound strange, as surely it is common sense to support means testing. Why should the rich get things for free when the poor need them more?

This is where common sense is just a reflection of the dominant ideology of capitalism. Means testing is a humiliating process where people have to prove they are poor and have no money. Universal Credit is means-tested in the UK – you have to be unemployed or earning below a certain threshold to qualify. The Child Benefit payment is linked to the Universal Credit. So your finances get checked over, your personal life gets spied into, and if you are sufficiently abject, then you can get some money from the government.

Rather than starting from what poor people should get (leaving aside why there are poor people in the first place!), let’s start from what we as a society think is important. If we want to support people to have children, to make sure those children are provided for and can enjoy a good quality of life, then as a society every child should qualify. This is about universal services, providing what we as a society think is a good thing.

The Child Benefit cap is particularly awful in this regard, as there are exceptions for women who have babies due to being raped – but of course, you have to show evidence of the assault. Prove you are poor and also that you were raped. What a world to live in.

In this sense, rich people should also get these payments for their children. But of course, they should also pay more through taxation for their wealth, assets, and property. But it is better that rich people get universal payments to look after children than for a single mother living in poverty to go begging to the state for something that should be provided automatically for all. It also punishes those people who are earning some money and therefore don’t quite qualify but then end up paying more, which can be financially very difficult.

This logic that only poor people should get access to state spending is a capitalist and neoliberal argument because it assumes that government welfare, or council housing, or medical care should only go to the poorest, and that free market capitalism should take care of the rest. This is what the capitalists want the state to be, a last-ditch safety net for the poor and not a way of providing a universal and expansive provision for everyone.

If something is worth having, then everyone should have access to it. That goes from cheap housing to medical care to welfare payments for children.

Solidarity and Protest

The cowardly Labour party leadership have argued to put ‘country before party’ and stick to their strict fiscal rules, which means they cannot support abolishing the benefit cap, even though it is one of the direct causes of the astronomical child poverty. As of 2023, one in three children live in poverty in the UK. Shocking. Again, socialists don’t accept that arbitrary fiscal rules are more important than human happiness and providing for what we need. The danger is that 14 years of austerity and 40 years of neoliberalism have produced an economy where the dominant logic is that there can never be serious increases in taxes on the very wealthy or big businesses. We have created this society where something called ‘The Economy’ is more important than actual people.

“But what is the economy if it isn’t people? If it isn’t us living our lives and making and distributing things or providing services and getting what we need?”

Whose interests are being protected by refusing to find £3bn to fund this change? Who benefits from a lack of child benefit?

A good response to this would be mass protests, bringing out millions of people, not just about this or that benefit reform, but to fight for a better society for all, including better wages, more time off work, stronger pensions, and free public transport. All of these things are achievable under capitalism. It is time we stopped accepting the scraps from whatever the capitalist class decides we are allowed to have within their ‘fiscal rules’ and start to demand what we need as a society.

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