Tuesday, 4 October 2011

Give the People Some Credit

So we are now to have 'credit easing'. The Chancellor of the Exchequer has persuaded the Governor of the Bank of England to participate in lending to small and medium-sized enterprises which would have been too risky for banks to undertake. It is another step on the road which started with the bail-outs of financial institutions in 2008. The government is increasingly (if reluctantly) involved in the supply of credit.

Nothing wrong with that in our present circumstances; bond markets are still more willing to lend to our government than European banks are to each other. But there is a stark and widening contrast between the terms on which the Treasury and BoE lend to business, and those on which other ministries provide income to citizens.

Essentially it comes down to the same thing; government loans to firms (which may or may not be able to pay back) for their production needs, and pays benefits or allowances to citizens (who may or may not be able eventually to 'repay' these in tax contributions). But businesses face no sanctions if they become insolvent, whereas ordinary people are subject to increasingly punitive measures if they fail to live up to their 'responsibilities'.

In opposition, Iain Duncan Smith sponsored a report on how the tax-benefit system for the poorest working-age citizens should be integrated, in order to improve incentives to take part-time work. The bases of this new scheme were to be 'universal credits' (note the term), and the report made no mention of enforcing the obligation to work, instead emphasing how New Labour's complex administration had created barriers to participation.

But in office as Secretary of State for Work and Pensions, now he stresses the penalties and disqualifications that people who claim benefits of all kinds will suffer if they do not adopt the posture of seeking employment (or training, or experience) of any kind, at any wage.

And - since the city riots - he and the Prime Minister have mooted plans to cut off the benefits and evict from social housing anyone involved in criminality of any kind. In other words, you will lose your livelihood and your home for actions which have nothing to do with claiming, if you have not already been penalised for not looking hard enough for non-existent jobs.

The irony is that the terminology - 'universal credits' - remains, despite this fundamental shift in the politics of the proposed reform. People who rely on the government for their incomes are losing their basic civil liberties at an alarming speed, at the very time when reliance on such payments is rising.

Can anyone imagine that business people would be subject to this stigma and coercion if they failed to repay the loans made to them as part of 'credit easing', or if they were discovered to have cooked the books or underpaid their taxes? Hardly.

The fact is that workfare, welfare-to-work and all the other paraphernalia of state enforement has had absolutely no effect on reducing long-term unemployment, here or anywhere else. Even in the boom years after 2000, the average duration of workless spells increased substantially, in the USA, in Europe, and in all the other OECD countries except Canada and Australia.

Isn't it about time that governments started giving some real credit to citizens as well as businesses?

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