Britain - Council tax, pensions, casualisation - Blair's domestic battle front

Mar/Apr 2004

The whitewash granted to Blair by the Hutton enquiry was far too obvious not to turn into a public relations debacle. The subsequent appointment of the Butler enquiry, with the explicit brief to avoid making any judgment on the legitimacy of the Iraq war, is an obvious delaying tactic which is not likely to cut much ice with the public. Above all, it has not prevented more evidence of Blair's lies over this war from coming to light - from the collapse of the court case against GCHQ whistleblower Katharine Gun, to the belated revelation of MI6's bugging of UN general secretary Kofi Annan by former cabinet minister Clare Short. And, no doubt, there will be other similar embarrassing disclosures for Blair.

In the meantime, his ministers have tried frantically to regain the initiative by shifting the political agenda away from Iraq and towards domestic issues. The Greater London and European elections are fast approaching and the government cannot afford an electoral disaster without seriously compromising Labour's chances in the next general election.

But in its attempt to bury the issue of the Iraq war, the Labour government has only managed to bring back to the surface a host of thorny issues which, although more or less hidden over the past months, are nevertheless threatening to come to a head at some point ,and quite possibly in the near future.

The council tax spiral

One of these issues is the vexed question of the council tax. When 83-year-old Devonshire pensioner Elizabeth Winkfield hit the headlines in mid-February, after stating in court that she would rather go to jail than pay the full 18% increase on her council tax bill, her bold stand must have struck a chord with many other pensioners across the country - in fact, not just with pensioners but also with many low-income families of working age who are faced with the same kind of ballooning bills. Of course, for the time being, this is not yet a re-run of the anti-poll tax riots of 1989-90. But when hundreds of usually law-abiding pensioners take to the streets, it does generate a distinctive whiff of rebellion.

In fact, although the case of Elizabeth Winkfield came to prominence thanks to her appearance in "Breakfast with Frost" on television and the coverage she got from the tabloids, her protest is the latest development in a campaign initiated in Devon, back in December 2002, by the Pensioners' Convention. There are other areas in the country where pensioners have been making a similar stand, whether as part of the same campaign, of another one, or just as individuals.

The root of the problem lies in the cost cutting measures imposed by this government on local councils. Since 1997, the responsibility for funding many services has been transferred from central to local government, as part of the reduction of central government budgets (the NHS budget, in particular). These transfers were implemented by ring-fencing an increasing proportion of the grants provided by the Treasury to local councils, thereby leaving less and less flexibility for councils to meet changes in local needs. New or expanded services which were demanded from local councils were often only partly funded by government grants and the gap had to be bridged from local resources, at the expense of other budgets. Moreover, the cost of services was increased by the imposition of expensive subcontracting exercises - the so-called "Best Value" initiative - and bureaucratic target systems, which tightened even more the straightjacket imposed on local councils.

One result of this policy was that there was precious little improvement in local services - and in fact outright cuts in many instances. More often than not, the ring-fenced grants only allowed things to just about keep going, when they did not lead to crisis situations. This was the reason for last year's sudden "discovery" of a huge shortfall of teachers. Due to lack of funding, there was often no way to even begin to address the backlog of disrepair in schools and social housing. Targets in this field were never met and emergency funding had to be found at the expense of other services to cope with the most urgent problems.

In the case of housing, the government went even further, by using repair grants which had been set aside for council stocks to blackmail tenants into endorsing the sale of council houses to so-called "social landlords" - in other words, their privatisation. In the London borough of Camden, for instance, the government responded to the tenants' overwhelming vote against the transfer of their homes out of local authority control, in February, by withholding the £283m grant which was meant to finance major repair work.

But the other consequence of the government's policy with regard to local government funding, since there were limits to the service cuts that local councils could implement, was that they had no choice other than to raise more resources through taxation. As a result, the council tax has increased by an average 70% since 1997 - five times as much as price inflation and seven times as much as the basic state pension. No wonder pensioners are finding it increasingly hard to cope!

As a result, today, according to the government's own figures, the average council tax paid by a family whose house is in band D (the average for older houses) is just over £1,000/year. For a couple with a single earner working full time on the minimum wage (and therefore not entitled to any benefit or rebate), this average represents the equivalent of six weeks' income!

In the face of the rising discontent caused by cuts in local services and increased council tax (13% last year alone), last November Prescott rushed through a "rescue package" for local councils worth a total £2.1bn (a mere 1.5% of the total grants currently awarded to local government), amidst a blaze of publicity, while threatening to cap the budgets of "overspending" councils - the old weapons used by the Tories under Thatcher in order to force local councils to cut social expenditure!

Obviously Prescott's performance did not impress Elizabeth Winkfield and the other council tax resisters - and quite rightly so!

Another tax which favours the rich

What compounds the burden of the council tax is the way its amount is calculated. When it was introduced by John Major's Tory government, in 1993, it was a relief for many people compared with Thatcher's hated poll tax. Nevertheless it was, and remains, a deeply unjust tax for a whole number of reasons.

Firstly, it is based on the 1991 market value of the taxpayer's home. But the amount paid is proportionally larger for cheaper homes than for the more expensive ones: according to the Centre for Council Tax Reform, the total council tax paid on average for a house in the lowest A band over the usual lifetime of a mortgage (25 years) is at least 51% of its value, whereas it is 19% of the house's value if it is in the highest H band.

Secondly, whereas even the smallest hut attracts a minimum level of council tax (the same as if its value was £40,000), there is a maximum limit to the level of council tax paid for the richest houses. So, the super-wealthy, who own a mansion worth tens of millions of pounds surrounded by several acres of forest, will pay the same council tax as if it was a much less luxurious family home with just a small back garden, valued at £320,000.

Thirdly, the amount of council tax payable on a second home is reduced by 50%, which is a big concession to the better-off, given the small number of second homes in this country. Likewise, the same reduction applies to empty houses, including when their owners keep them empty for purely speculative reasons and because they do not want to bother with tenants. This is all the more of a scandal given the acute shortage of affordable homes available to let in many areas of the country.

Fourthly and even more importantly, there is no relation whatsoever between tax payers' incomes and the amount of council tax they have to pay. Yet the value of a household's home does not necessarily reflect its income, especially when, as it is often the case these days, this income goes down abruptly due to breadwinners having to shift from a decently-paid permanent job to a low-paid one, being forced into early retirement, or taking normal retirement. It is estimated that, in 2003, more than half of all new mortgages were in fact remortgages taken out by households trying to make up for a loss of income. As a result, these families find themselves stuck with a house which they usually cannot really afford to keep, but cannot afford to sell because of their mortgages, and who are not hard up enough to qualify for benefits and so have to foot the huge council tax bill attached to their home.

The overall result of these characteristics of the council tax is that nationally, the 10% poorest pay over 4 times more out of their incomes in council tax (and this includes those who qualify for a full or partial rebate because they are poor enough to be on benefits) than the richest 10%.

The injustices of the council tax system are nothing new. They have been denounced for a long time by all kinds of organisations. In fact, when the council tax was introduced by Major, the Labour frontbench did not fail to expose these injustices. But more than six years after coming to power, Blair's government has still done nothing about it - no doubt for fear of upsetting the richest landlords who benefit so much from it. There has been some talk of reform lately, including replacing the council tax with a local income tax, but the blueprint will not come out before the end of 2005 and it is unlikely to be implemented before 2007 - that is, assuming Labour survives in office until then.

If, in the meantime, by an ironical twist of events, the scandal of the council tax ends up providing ammunition to the Tories' anti-taxation campaign, Blair and the Labour leaders will have only themselves to blame. Unless, of course, a much more positive development takes place instead, such as an anti-council tax rebellion, for instance.

Yet another pensions con

Another of the government's much advertised "reforms" is the new Pension Bill published on 12 February. But once again, it has not cut much ice with the workers and pensioners concerned, judging by the protest against it which took place the following day in Central London. And for good reason too.

Indeed, this new Bill was supposed to close a legal loophole which has resulted in workers losing part or all of their occupational pensions if their employers go into receivership - something which happened over the past two years to workers in several companies in the steel industry, like ASW.

To cut a long story short, this Bill sets up a "pension protection fund" which will guarantee the payment of at least 90% of the pensions owed on behalf of the failed employers if need be. On the face of it, it all sounds well and good. But is it?

The small print tells a different story. Firstly, it does not provide any help for those workers who have already lost everything in the recent bankruptcies - which was why many ASW workers took part in the following day's protest.

Secondly, the Bill said that this "protection fund" will be funded by contributions from employers. But there is no provision to prevent employers from passing on the cost of these contributions to their workforce through increasing employees' contributions. Nor, according to pension specialists, is this fund large enough to cope with bankruptcies in big companies, or a large number of smaller bankruptcies. In other words, should the economic situation deteriorate, it will provide no protection at all. Nor, of course, will it provide workers' pensions in general with any protection against the ups and downs of the stock market, the profiteering and extortionate administrative fees taken out of pension contributions by finance companies, and the pension cuts introduced by the many companies which have closed their final salary schemes over the past years!

And yet, what about looking for the funds needed to pay decent pensions to workers where they can be found - i.e. in the assets of the bankrupt companies or in the wealth accumulated by their owners and shareholders thanks to the past profits produced by the workers' labour? The whole process of receivership remains shrouded in secrecy, hidden behind the hypocritical mantle of "commercial confidentiality", so as to allow the capitalists to sort out their finances between themselves without being in anyway accountable to the workers they have chosen to dump on the scrapheap. This secretiveness has a reason of course - it only shows that the bosses have many things to hide from the working class. Rather than this half-baked law, the only real protection for workers would be tear off this hypocritical veil of secrecy, bring the employers and their fund managers to account and see for themselves where the money has gone and how it can be recovered!

Beyond the question of bankrupt companies, the small print of this Bill introduces two unrelated measures through the backdoor, which are both part and parcel of the government's long-term plans against workers pensions.

Firstly, the Bill reduces the legal obligation that occupational funds have to protect pensions against inflation: so far pensions had to be protected against inflation up to a maximum of 5%. From now on this maximum will be reduced to 2.5%, which is slightly less than today's inflation according to official figures. In other words, Blair is introducing a pension cut for all pensions through the backdoor, in line with the general cuts in state and occupational pension levels which have been introduced surreptitiously over the past two years or so!

Secondly, this Bill includes a rather bizarre provision which allows those who defer taking their basic state pension for five years to receive a lump sum payment of up to £30,000 at the end of these five years (or a bit more than the total pension payments they would normally receive). This amounts to providing an incentive for male workers, for instance, to give up their right to a state pension at 65, retire at 70 and get a lump sum as a reward. Once again, the method used by Blair is similar to Thatcher's proven techniques, when she introduced tax and cash incentives to entice workers into opting out of the State Earning Related Pension Scheme and switch to personal pension funds. This time Blair is trying to entice workers into volunteering to retire at 70!

And this is no coincidence. The government is currently in the process of producing a new law against age discrimination. As part of this legislation, it is considering setting a "default" retirement age at 70. In the name of fighting against age discrimination! Just as Thatcher increased the retirement age for women in the name of fighting against sex discrimination! The same hypocrisy put at the service of the same objective - to reduce state expenditure on pensioners!

And already companies have preceded the government down this road or intend to take it. A recent survey by the Chartered Institute of Personnel shows that 15% of employers have already changed retirement age in the past two years, usually by cutting the pension that workers are entitled to when they retire at 60. And the survey adds that another 17% of employers plan do the same in the coming two years.

Blair and his capitalist sponsors obviously hope to be able to turn an incentive-based retirement age at 70 into a compulsory one, at least for the overwhelming majority of workers who are not well-off enough to do without their maximum pension. But whether they will get away with depriving workers of another 5 or 10 years of their lives remains to be seen.

From Morecambe to Blair's "flexible labour market"

Blair's domestic policy was further exposed by an event that he and his ministers did not expect - the deaths of the 20 Chinese cockle pickers, who drowned on 6 February, when they were caught unawares on the treacherous Morecambe Bay mudflats.

This event triggered a tide of hypocritical buck passing on the part of the authorities and politicians. First "illegal immigration" was blamed. Several of the surviving cockle pickers were arrested by the police. Yes, faced with this tragedy, the authorities could only think of checking how many were "illegal"! In fact the cops were caught on the wrong foot, because most of the cockle pickers did have the right documents allowing them to work here. But even if it had not been the case, why should this explain away the appalling working conditions imposed on these workers?

Then "unscrupulous gangmasters" were blamed and everybody started calling for a clampdown against them and a system of licensing. Of course, there is no shortage of such gangmasters, appropriately named, since their practices verge on gangsterism. In fact, there used to be a system of licensing for gangmasters, which obliged them to abide by certain standards. But this system was scrapped by John Major's Tory government in 1994 and, like in so many other similar cases, Blair's government never bothered to restore the minimal protection that the previous legislation had offered workers, despite the fact that, according to the Transport Union's estimate, this would concern as many as 3,000 gangmasters and up to 100,000 workers.

Yes, this government bears a heavy responsibility for the deaths of the Morecambe 20. But not only because of its failure to reintroduce regulations covering gangmasters. The Morecambe gangmasters may have been pushing the exploitation of casual labour to criminal levels, but they are first and foremost part and parcel of a system organised for the exploitation of workers' labour.

Indeed, who benefits from the criminal activities of these gangmasters, if not respectable mainstream businesses in the food industry or big supermarkets, among others? Who has reduced immigrants, legal or not, to precarious status by treating them like criminals, thereby making them easy prey for "unscrupulous gangmasters", if not Blunkett and his anti-immigrant demagogy and legislation? More generally, who developed a legal framework allowing casualisation to become normal and to blossom, by cutting benefits for the jobless and forcing them to take the first casual job on offer, if not Blair and his government? Thanks to Blair's "flexible labour market", is it not perfectly safe for big companies to impose totally "illegal" conditions on casual workers, as long as they do it through a chain of subcontractors which is so long that the workers themselves do not know who their actual employers are?

In reality, this tragedy has nothing to do with immigration, legal or illegal and only marginally with unscrupulous "gangmasters"! What it has to do with is a whole system in which the bosses go out of their way to seek out the most desperate workers in order to screw a few more pounds out of them, whether they are Chinese, Portuguese, Eastern European or even Geordies working up North on construction gangs. It has to do with the policy of a government which, under the pretext of making it easier for employers to create jobs, facilitates the over-exploitation of a significant section of the working class.

And for what purpose? At the end of February, Blair celebrated another record low in the number of jobless claimants. But meanwhile there are still over 4 million "inactive people of working age who would like to work", to use the jargon of official statistics. At the same time, over the previous year, 105,000 jobs disappeared in manufacturing, most of them permanent full-time jobs. Even the kind of "assembly-line" type service jobs created in the 1990s in calls centres are now disappearing in droves. Where are these "new jobs" which are being created according to Blair? They are part-time and casual jobs, not quite as bad, certainly, as those of the Morecambe cockle-pickers. But the more casual jobs there are, the worse they are bound to be in terms of pay and conditions.

But not everyone suffers from Blair's anti-working class policies. Britain's five largest banks have just announced a combined record profit of £26bn for 2003 - an increase of 38% over the previous year. These are the real beneficiaries of this government's policy and the increased exploitation of the working class resulting from Blair's "flexible labour market". This £26bn represents the equivalent of 20% of the combined budgets of Education, Transport and the NHS - three areas of public services which are desperate for funds - or the equivalent of the annual wages of almost 1.7m workers on £300/w. While the capitalist class wastes profits and dividends in gambling on financial markets or on living in luxury, how many millions of decent jobs could be created merely by ploughing back the profits which are flowing out of the country's companies, into socially useful activities and production?

If there is a solution for the working class to the problems of unemployment and casualisation, it is not in the free-for-all that Blair offers to capitalist exploiters under the hypocritical pretext of creating jobs, it is through imposing its control over the way capital is being used, or rather wasted, in this society.