Universal Credit: Crunch Time for Labour

By Peter Kennedy 

Universal Credit (UC) – which rolls together 6 existing benefits into one - has been universally condemned in almost all quarters except the Tories, their paymasters and think tanks. UC is rightly condemned for making people worse off on every dimension one cares to think of, along the spectrum of loss of income, lack of basic food on the table, lack of heat in the home, a roof over one’s head, indebtedness (National Housing Federation, July, 2018), to deteriorating physical and mental health.  

Problem with UC

Chronic delays in receiving payments and bureaucratic backlogs have served to extend the already punitive waiting period between applying and receiving benefits; compounded by the more general cut in benefit due to the benefit cap and a decade of frozen benefit values. Claimants are driven to despair by the chaotic stop-start drip feed to the flow of income, arising from the precarious nature of very low paid employment contracts, income from which vary widely over the course of any given week/month/year.  On top of all this UC has been plagued by design flaws, resulting in delayed implementation (initially 2017, currently 2023 and counting), and escalating costs, from an initial £2 billion, to anywhere between £8-15 billion - depending on which report you pick up.  

Tory Response

Unsurprisingly, the Tories brush aside this sort of damning evidence as left wing propaganda, while admitting to little more than teething problems, easily remedied by slowing down the rate of implementation and throwing a bit more cash at UC in the hope off shutting down protests. One might think it is more surprising that the Tories remain ardently committed to rolling out UC across the UK, when it will cost them more than what it is replacing. However it is not about saving money, least of all is it about creating a more transparent benefit system for Job Centre staff and its clientele to negotiate.   

No, the rationale for UC runs deeper, along two pathways:

a) making the working class pay for the economic and financial ruin caused by the capitalist class in the lead up to and beyond the 2007 global crisis, and

b) meeting the accumulation requirements of the capitalist class thereafter, who, more than ever before were bent on a capital investment strike, favouring the more intense exploitation of labour (Chadha, 2017; World Bank, 2018).  

Making the working class pay:

As we know UC came about as part of the broader package of Welfare Reforms initiated in 2012, as the platform for advancing the Tory/Lib Dem Government-led austerity programme. The latter included public sector pay freeze and cuts, retraction of public sector spending and escalation of an even more draconian approach to benefit claimants, which included attacking access to a range of benefits and disability payments and ramping up an already savage culture of benefit sanctions. UC is designed to turn claiming benefits into an Orwellian nightmare for claimants, effectively forcing people off the benefit radar, or into any available insecure work. UC chips away at the more enduring stock of potential labour power known as ‘labour market inactive’ (roughly 22% of adults not in work) (NOMIS, 2018). Chipping away at the latter has become increasingly necessary for the state and business as the unemployment rate falls still further, endangering the present capital investment lite/labour intensive accumulation strategy, to which we now turn.

 Capital investment strike/intensive exploitation of labour:

Running parallel with attacking the working class is a specific form of investment strike, manifesting as an orchestrated slow down in capital investment and relative over-reliance on more labour intensive forms of investment, or what the Office for National Statistics (2018) euphemistically describe as an ‘increase in employment elasticity…indicative of…economic growth shifting to more employment-intensive activities’. We see the evidence of this ‘elasticity’ in rising employment/under-employment in poorly paid full and part time insecure no-skill-low-skill service sector jobs. We see it in the current rate of unemployment, 4%, which is at its’ lowest since the end of the post war boom in the mid 1970s (ONS, 2018); and we see it in the Tory 2012 Welfare Reform and its’ flagship, Universal Credit.  

UC and the Reserve Army of Labour

The above is best understood as part and parcel of class struggle to re-activate a reserve army of labour for capital. The basic Marxist argument is that the labour of working people is a commodity in capitalism and as such businesses treat it as a demand and supply problem (the person takes secondary importance). When the economy is expanding, business demands more reserves of labour, and when it contracts, the relative over-supply of labour that emerges leads businesses to sack or lay off working people, who become part of the reserve army of unemployed. The reserve also serves the function of competing down the value of wages and salaries and allows business to settle employment contracts in their favour.  

The latter requires the assistance of the capitalist state of course, and how it assists will be different according to the historical situation. Which bring us back to the present historic context of partial capital investment strike and the after effects of the global financial crisis. Within this context UC has become the central mechanism of the current Tory governments attempt to re-activate a reserve army of labour for a capitalist class unwilling and so far unable to advance a capital intensive accumulation strategy. Instead of drawing on the new platforms of science and technological innovations and integrating these across the economy, the Tory government and their paymasters prefer to maximize the more intense and extensive exploitation of labour.  

Where Does the Labour Party Stand?

Although we can expect little else from the Tories, the big surprise in all of this is the present Labour Party’s standpoint towards UC, which for a long time has been to do little more than call for a pause in its’ roll out, so that elements of the programme can be ‘fixed’, such as eliminating delays in receiving UC benefits and reversing benefit cuts (Labour Party, 2018). However effectively this means a commitment to improving the very mechanism for activating a reserve army of labour, which is anathema to the principles of socialism, surely. Yes, there has been some consideration of a universal basic income, which the leadership thinks may be a policy whose time has come (Basic Income Earth Network, 2017), but little else of substance. Meanwhile, Labour appears to be split over what to do with UC, and it is only very recently that some within the shadow cabinet have favoured scrapping it, but with no clear commitment about what ought to replace it.  

One would expect a left wing Labour Party, repelled by the prospect of treating people as a reserve army of labour, would want nothing more than to crush UC and replace it with a poverty-eradicating system. In this respect, while far from a panacea to put an end to capitalism and usher in a socialist society, a universal or citizens income can end poverty by drastically reducing the wealth of the rich which, if I’m not mistaken, is the bread and butter of any movement towards socialism. The power of money and the threat of impoverishment is the sine-qua-non of capitalist rule when all is said and done, so let’s begin the march to socialism by bring the source of power and impoverishment to an abrupt end. 

From UC to Universal Income:

There are a number of variations on universal income and usually they are posed in terms of potential problems such as taking away the work incentive, over-taxing people, hindering international investments. These are capitalist complaints, not ours. The real substantive socialist point of universal income is to break the link between working people and their status as commodities within capitalism, giving priority to their social, financial and personal wellbeing. In other words, it fits completely with the slogans central to the current labour movement: ‘for the many not the few’ and ‘people before profit’. The actual value of the income has been debated and this is not the place to rehearse these debates in detail, but if it is to seriously weaken the commodity status of labour it should be a value that lifts people clear of poverty, according to current definitions, and should be received by all individuals of working age. The money should come from redistribution of the income and wealth of the rich; in other words the money big business currently have control over should be returned to citizens.  

Of course this will more than upset big business, but if it didn’t we are probably short-changing the working class and missing the opportunity to raise socialist aspirations. The right to an income regardless of employment status, repositions employment as a choice and tips the balance of power away from those who are more than willing to drive down terms and conditions of employment and towards working people. The rebalance of power is in this sense a double investment, to put an end to poverty and invest in the quantity and quality of the time and space required for meaningful democratic participation in society, at a local and national level, concerning the limits of capitalism and possible futures.  

One would at least hope that a left wing labour Government would want to put an end to UC as part of a root and branch transition towards some form of universal income that is more appropriate to its vision of a new economy premised on new technological breakthroughs, which promise to diminish necessary work and expand the creative capacity of all of the people. To do so one would hope the Labour Party would put its’ political weight behind a welfare revolution and not the putative ‘welfare reset’ currently being proposed for UC! 

References

Basic Income Earth Network, (2017) ‘UK: Labour Party sets up working group to investigate UBI’, [Accessed 21/10/2018], February,

https://basicincome.org/news/2017/02/uk-labour-party-ubi-working-group/.  

Capital investment in the UK as a percentage of GDP remains at historically low levels, see The Global Economy, 2018, ‘United Kingdom: Capital investment, percent of GDP’, (sourced from The World Bank), [Accessed 19/10/2018], https://www.theglobaleconomy.com/United-Kingdom/Capital_investment/.  

Chadha, J.S. 2017, ‘The UK’s Productivity Puzzle: Labour, Investment And Finance’, NIESR General Election 2017 - Briefing No. 7, [Accessed 19/10/2018], https://www.niesr.ac.uk/sites/default/files/publications/NIESR%20GE%20Briefing%20No.%207%20-%20%27The%20UK%27s%20Productivity%20Puzzle-%20Labour%2C%20Investment%20and%20Finance%27.pdf 

Labour Party, (2018) ‘Our Campaign to Fix Universal Credit’, [Accessed 19/10/2018], https://labour.org.uk/issues/universalcredit/.  

National Housing Association, (2018) “Flawed” Universal Credit is causing debt and hardship for families in social housing’, July, [Accessed 19/10/2018], https://www.housing.org.uk/press/press-releases/flawed-universal-credit-causing-debt-hardship-families-in-social-housing/ 

NOMIS (2018) ‘Economically Inactive – Time Series’, [Accessed 22/10/2018] https://www.nomisweb.co.uk/reports/lmp/gor/2092957698/subreports/gor_einact_time_series/report.aspx?.

 ONS, 20118, ‘Labour market economic commentary: April’, [Accessed 19/10/2018], https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/labourmarketeconomiccommentary/april2018.  

ONS, 2018, ‘UK labour market: September 2018’, [accessed 19/10/2018]. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/september2018.