Living wage does not make Osborne a closet socialist

Looking back on George Osborne's budget, the living wage was a master stroke, and it does not make Osborne a closet socialist. Meanwhile, defence looks to have done well, while we still pour vast amounts down the toilet of "foreign aid"

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A free lunch from Osborne?
Robin_mitchinson
Robin Mitchinson
On 18 July 2015 05:59

Two key issues attracted very differing media reactions to Chancellor Georrge Osborne’s ‘socialist’ budget. The first is the ‘living wage’, which has been seen as a left-wing innovation that steals a key plank in Labour policy.

It is nothing of the sort.

For a start, there is nothing new about it. It has been in effect in Australia for 120 years. Wages Councils were begun by Winston Churchill before the first World War.

In introducing the legislation, Winston said, ‘It is a serious national evil that any class of His Majesty’s subjects should receive less than a living wage in return for their utmost exertions’. Almost all countries have some form of control over minimum wages.

And this was not a piece of Labour policy. It was put together by Steve Hilton when he was Senior Advisor to David Cameron. Osborne proposes an eventual starting level of  ‘more than’ £9 per hour. The Living Wage Foundation estimates that the living wage for London is £9.15 per hour.

There has been a marked lack of support or enthusiasm amongst the Right-leaning chatterati. They maintain that setting a ‘living’ wage means higher costs for employers and a massive loss of jobs.

But this is not confirmed by experience or any reliable evidence. On the contrary, a decent wage is reflected in increased productivity, much lower staff turnover (a costly business for the employer), and increased commitment and loyalty from the workforce.

The Working Tax Credit will go, and not before time. It is misconceived morally, socially and economically. It is grossly misnamed. It is not a ‘tax credit’. It is a welfare payment; it keeps the low-paid in the benefits trap and diminishes their dignity and independence.

In effect, it is a subsidy to employers that encourages them to pay below the proper rate to the tune of more than £3,000 a year for each family, of which there are around 2.3 million.

Its abolition will save the taxpayers about £1.4 billion. It could be usefully redeployed to reduce National Insurance for smaller firms facing statutory wage increases.

The second notable issue was defence, and it elicited almost no comment. The expected cuts did not materialise. Instead, Osborne appeared to ‘ring fence’ it at 2 percent of GDP. This means a year-on-year budget increase if the economy continues to prosper.

Cynics may wonder about the catch. Will other security-related spending be loaded onto the defence budget, such as aid to war-zones, or anti-terrorism measures?

For the present, it looks as if defence has the dubious privilege of sharing a special status with foreign aid, that bottomless pit into which the government shovels vast amounts of tax-money where it disappears without trace.

The Tory commitment to ever-increasing amounts of ‘aid’ is incomprehensible.

At this time, the UK is unable to track Russian submarines in British waters as there has been no early warning capacity since the scrapping of Nimrod without replacement. The cost of this would be £250 million, the same as the amount given to India in aid.

Meanwhile, the Department for International Development (Dfid) has the task of spending £30 million every day. The consequence is that they simply spend, spend, spend  without any monitoring of the effects.

The entire farce is input-oriented; get rid of the money and don’t bother with the outcomes because DFID simply does not have the institutional capacity. In reporting on the situation, the Government’s own watchdog says that its inspectors encounter examples where “ambitious spending targets” seemed to take priority over considerations such as whether the poor were being helped.

“When we asked one contractor what Dfid meant by “impact” the response was: 'it doesn’t come up very often’.

Meanwhile, the taxman is given an average of £400 a year per household to spend on a charity of his choice.

It’s a mad world, my masters!

Robin Mitchinson is a Contributing Editor to The Commentator. A former barrister, living in the Isle of Man, he is an international public management specialist with almost two decades of experience in institutional development, decentralisation and democratisation processes. He has advised governments and major international institutions across the world

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