Few on the left of the party will have been surprised that Gordon Brown is proving himself to be as right–wing as Blair in his domestic policy agenda. Party members, Labour voters and indeed the electorate in general expect and wish devoutly for a respite from the Thatcher – Blair ideology of the last decades and Brown's honeymoon bounce will soon fall to earth unless he changes direction and radically so.
Socialist Campaign Group News has pointed the way forward for Labour and we must continue to set out an alternative and practicable programme which will have mass appeal and lead to Labour victory at the next election and beyond.
At the core of New Labour's misdirected policy agenda has been the whole field of pensions, benefits and taxation. Millions of pensioners, low income families and the most disadvantaged in our society find the benefits system impossibly complicated. Many of them simply give up and do not receive the benefits to which they are entitled. Others get into serious difficulties, especially when they move in and out of employment and their benefits status changes. The jungle of means testing and form filling would be daunting even to the most able and competent members of society. Many of those who may be elderly and frail, or chronically sick, or who have literacy or language problems simply cannot cope with the complexities of benefits.
It is therefore time for radical reform, a dramatic simplification of the whole benefits system and a progressive return to the principle of universality.
First, the basic state pension is a simple matter to address. This should be substantially increased with means testing abolished and with the earnings link restored immediately. However, for the millions of others who will remain dependant on benefits to some degree more radical changes are necessary.
It is a nonsense that there are three major sources of benefits. Local authority housing benefit, various credits paid out by the Revenue and Customs and the rest by the Department of Work and Pensions (DWP). Put very simply, all benefits should be centralised into one government department, logically the DWP. The Revenue and Customs should return to doing what it was designed to do, namely collecting taxes and duties. With billions being lost every year from VAT fraud, tobacco smuggling and tax evasion in general, there is plenty for the Revenue to do, and as every additional tax officer collects several times their own salary there would be plenty of work for Revenue staff for the foreseeable future. With such a reform however, the government must also stop harassing and pressurising benefit claimants. Reduced means–testing will help in that respect.
Housing benefit essentially arose from the 1972 Tory Housing Finance Act which forced up council housing rents. The left should urge a freeze on council rents and a progressive tapered reduction of housing benefit. This must go hand in hand with a halt to council house sales and a massive new council house building programme, together with the municipalisation of much private renting, especially former council homes now being rented out.
Benefits to families with children should be rationalised into a very substantially increased non–means–tested Child Benefit. For those parents who choose to work with young children this would provide for child care costs, and for those who stay at home it would provide a significant additional family income and counter the child poverty which so shames Britain in comparison with continental Europe and Scandinavia in particular. Other components of the benefits system should also be fundamentally reviewed with a progressive reduction of means–testing across the board.
Those who support the right wing means–testing agenda argue constantly that universal benefits give money to the rich who do not need it. The answer to this is simply to raise taxes on the rich so they help to pay for the better benefits. It is astonishing that the right wing argues that the pensioners' Winter Fuel Allowance is targeted to help the poor when in reality the rich receive the same benefit untaxed. All non–means tested benefits should be built into the tax system with the sums clawed back from the rich into the public purse contributing to better benefits for the less well off. The Winter Fuel Allowance could easily be paid as a double pension payment in the winter months.
A radical reform of the benefits system would bring enormous advantages. It would ensure that many receive benefits automatically because they would be universal, not means tested. As things are, the Treasury saves billions every year through unclaimed benefits, yet wastes billions administering an impossibly complex system. Local government could devote resources to providing services, not administering benefits and Revenue and Customs could focus on collecting taxes.
In a short article it is clearly not possible to develop a detailed plan for reforming such a complex area of policy, but the essence is clear. Bring all benefits together in one government organisation, reduce and where possible eliminate means testing, increase the basic state pension and substantially increase child benefit. Such a system would be very much simpler to administer, ensure all those entitled to benefits receive them, and address the unacceptable poverty levels.
When New Labour's writ has finally run out and Labour once again embraces its true democratic socialist philosophy, such a radical and progressive reform of the tax and benefit system will be essential. It will require significant and long overdue increases in taxes on the rich.
Kelvin Hopkins MP
