The Great Minimum Wage Swindle

 

“O frabjous day! Callooh! Callay!” 

The Guardian reports that the ‘National Living Wage’ will increase by a pound an hour: ‘Nearly 3 million low-paid workers will receive a pay increase of almost 10% next spring after the chancellor announced an increase in the national living wage to £11.44 an hour. Jeremy Hunt said the earnings of full-time workers would rise by £1,800 a year as a result of a move that the Low Pay Commission (LPC) said met the 2019 Conservative pledge to end poverty pay in the UK. The increase from £10.42 to £11.44 comes against a backdrop of a cost of living crisis in which inflation peaked at 11.1% – the highest in 40 years. Eligibility for the national living wage (NLW) will also be extended by reducing the age threshold from 23 to 21.’

https://www.theguardian.com/uk-news/2023/nov/21/uks-national-living-wage-to-rise-by-nearly-10-to-1144-an-hour

From the October 1995 issue of the Socialist Standard

The Labour Party's support for the concept of a minimum 
wage is not based on its concern for low-paid workers, in fact, Labour's real aim is to cut the expenditure, in the form of 
benefits, of the capitalist state it hopes to inherit.

The Labour Party went into the 1992 general election committed to introducing a legally enforced national minimum wage which, they said, would eventually amount to two-thirds of the level below which half all wage and salary earners fall (or the “median wage”, as the statisticians call it):

“Labour will introduce a national legal minimum hourly wage, starting at a level of 50 per cent of the mid-point of men's earnings (the median) . . . Four million people will benefit form this minimum wage. Over time, Labour will increase the minimum wage as a proportion of earnings to a point where no-one is paid less than two-thirds of the median male hourly rate ” (Looking to the Future, 1990, p. 37).

In today’s money this would give an hourly rate of about £5.50, or a minimum wage for a 39-hour week of £214.50, or over £ 11,000 a year. Of course there was never any chance that this was going to happen. You can’t legislate into being wage increases of this order, amounting in some cases to over 50 percent. Capitalism just does not work that way. Its economic mechanism responds not to government decrees but the realities of profit-making in competitive markets. The government could indeed pass a law aimed at ordering employers to pay a minimum wage at this level but, as this would cut into profits, the result in an economy based on the economic law of “no profit, no production” would be an economic downturn and a growth in unemployment.

Shrinking figures

The Labour leaders—who are nothing these days if not economic “realists”— were well aware of this. Which was why they proposed to reach the goal of two-thirds of the median only gradually, starting by introducing a law to fix the minimum wage at half it. This is the £4.15 or so to which Bill Morris and the T & G and other unions are still committed. But even this is pie-in-the-sky which will never come about, and wouldn’t have come about even if Neil Kinnock had entered Number Ten in May 1992. The economic mechanism of capitalism just won't wear it.

Since Kinnock went, Labour, first under Smith and then under Blair, has backtracked even further. It is still committed to the concept of a national minimum wage but not to any specific amount. This, they now say, is to be fixed by a commission made up of employers, unions and others and, we predict, would amount to about the same as the old Wages Councils, abolished by the Tories in 1993, used to come up with: about £3 or so an hour (in today’s money).

In other words, the most Labour would do would be to restore the pre-1993 situation, extending it to all industries and services so as to be able to call it a “national” minimum. This latter will only be window-dressing since most industries pay their workers above this hourly rate, otherwise they would have been covered by a Wages Council.

But why does Labour—now under arch-realist Blair—want to keep to the idea of a minimum wage, especially as it is going to earn them a lot of stick from the Tories? Since they now take the support of active trade unionists for granted, it can’t be a sop for their benefit. The reason lies elsewhere: it is part of their plan to reduce spending on welfare benefits as their contribution to trying to solve the fiscal crisis of the capitalist state.

A bit of theory

The basis of capitalism is the wages system, under which the work of production is done by people selling their particular ability to work to an employer in return for a wage or salary. Wages for particular types of skill are fixed by market forces at the amount of money workers require to buy the things needed to maintain their particular skill, plus an element to cover the cost of raising a family to replenish the labour force when they retire.

In the long run workers must get paid this amount, otherwise they won’t be able to maintain their skill, and their employer will begin to suffer in terms of absenteeism, increasing labour turnover, shoddy work and lower productivity.

So, in a sense, market forces—aided by pressure from unions—already tend to ensure that wages don’t fall below a minimum level: that below which the workers wouldn’t have enough money to maintain their skill adequately. However, there have always been some kinds of work—those requiring little training or experience and performed for a mass of small employers—where, because supply permanently exceeds demand, and because trade union organisation is difficult, market forces bring about a wage that is below this level.

What this means is that, in the terminology of Marxian economics, these workers get paid less than the value of their labour-power. They don’t get paid a “fair” wage even by capitalism’s standard of fairness, i.e. the full value of what they are selling.

This creates problems both for their immediate employers and for the employing class as a whole which has to foot the bill for the increasing ill-health and destitution that result from paying workers over a long period less than the value of their labour-power.

The problem for their immediate employers is that, even if they wanted to be a “good” employer and pay their workers the value of their labour-power as a means of getting their money’s worth in terms of work done and profits made, they can’t because of competition from other employers. None of them dares make the first move for fear of losing business, indeed of going out of business.

The solution that has been adopted in Britain has been two-fold. First, to introduce minimum wages in the trades concerned and, second, to introduce Family Allowances.

It was the Liberal government in 1909 that took the initiative and set up trade boards, later called Wages Councils, in the “sweated trades”, such as the retail trade, hotels and catering, and the rag trade, where workers tended to be persistently paid a wage below subsistence level. Under this system the employers, the unions and government officials met to fix a minimum hourly rate for the particular trade. It was an offence for an employer to pay below this rate. There was no national minimum wage, only different minimum wages for the different trades.

Subsidising employers

Family Allowances (now called Child Benefit) were introduced by the wartime coalition government in 1945. But, as the pamphlets Beveridge Reorganises Poverty and Family Allowances: A Socialist Analysis which we in the Socialist Party brought out at the time explained, this was not at all what it appeared to be: a money payment by the capitalist state which would leave all those with two or more dependent children better off by that amount.

Under capitalism and its wages system any regular payment received by workers in employment is going to have an effect on wage levels. This is because, as explained, wages tend to be fixed at a level which provides workers with enough money to buy what they need to maintain their particular skill in working order and also to bring up a family to take their place in the labour force when they are too old to work. If the state makes a contribution towards these costs, this means the workers’ immediate employer doesn’t have to.

The effect of any generalised state payment to workers in employment will be to depress, not necessarily the standard of living, but the wages paid by employers. This was why, in fact, Family Allowances were for a long time opposed by the trade unions. As we pointed out at the time:

"The real issue is not that certain unscrupulous employers may seek to save out of wages amounts paid in Family Allowances, but that once it is established that the children (or some of the children) of the workers have been ‘provided for' by other means, the tendency will be for wage levels to sink to new standards which will not include the cost of maintaining such children ” (Family Allowances, pp. 11-12).

In 1971 the then Tory government of Edward Heath breached a hitherto sacrosanct principle of the welfare state that no means-tested benefits should be paid to any worker in employment. They introduced a new benefit called Family Income Supplement (now called Family Credit), in effect a means-tested Family Allowance, payable to workers in employment whose income was below the poverty line, i.e. more or less what they would have got had they been on what is now called Income Support.

The logic behind this was to provide an incentive for people to take a job, however miserably paid. The result has been unsatisfactory from the point-of-view of the capitalist class as a whole. The cost of all state benefits payable to workers in employment (housing benefit, council tax benefit as well as Family Credit) has spiralled to over £2 billion a year.

Some employers—those in the modern sweated trades—have benefited. Knowing that the state will bring workers with children up to the poverty line they have been enabled to pay these workers below-the-poverty-lines wages. As Labour's deputy leader John Prescott has put it:

“Family Credit is now part of wage negotiations, with employers offering £1 an hour and saying: ‘I know you can‘t live on that, but if you nip down to Social Security, they’ll make up the difference (Observer, 28 August 1994).

Family Credit and other in-work benefits have, in other words, acted as a subsidy to these employers. This has caused resentment amongst other sections of the employing class who have to pay this subsidy out of taxes that, in the end, fall on their profits. This is where the Labour Party has come in with a proposal to help.

Labour to the Rescue

In their July 1995 campaign pack Low Pay. A Tory Failure, the Labour Party repeats again and again that their minimum wage is designed to reduce state benefits paid to workers in employment:

“A minimum wage will not only act as a floor for pay. It will also ensure that in-work benefits do not act as a subsidy for low-paying and poor employers. ”

"Taxpayers would benefit because a floor under wages would reduce the need for tax handouts to low paying employers. Today employers have an incentive to lower wages at the taxpayers' expense."

"Every taxpayer is now paying £100 a year for in-work benefits for people in low-paid work. People who have no protection against exploitative pay rates are forced into dependency on the benefits system whether they like it or not. And employers have no incentives to raise wages because they know the benefits system will subsidise the poor wages that they pay by what is, in effect, a tax handout to employers. ”

What Labour is proposing (and are rumoured to want to do over maternity pay) is what the Tories did over Sickness Benefit: to cut back on state payments by shifting a part of the cost on to employers in the form of statutory sick pay. Labour’s aim is to shift some of the burden of maintaining workers on low pay at the subsistence level on to the employers who have been benefiting from the present system.

But what about the workers? The low-paid workers existing on the poverty line. It’s not going to make much difference to them since the argument is about who is going to pay their subsistence income and in what proportions not about its level.

As far as the low paid are concerned what will happen is that what the right hand gives away in the form of a slightly higher minimum wage for some the left hand will take away in the form of reduced Family Credit. People on Family Credit get their benefit reduced by 70p for each £1 by which their income increases. So if their hourly wage was increased from, say, £2.50 to £3 they would only be 15p an hour better off not 50p. And if the increase lifted their income above the qualifying level for Family Credit they would find themselves worse off through losing the accompanying entitlement to housing benefit and free prescriptions and dental treatment.

Labour’s national minimum wage is not a genuine reform in the sense of a measure to bring about some improvement in working class conditions. It’s an economy measure designed to save the capitalist state money. They don’t fool us. Let’s hope that they don’t succeed in deceiving too many of the low paid either.

Adam Buick

https://socialiststandardmyspace.blogspot.com/2023/10/the-great-minimum-wage-swindle-1995.html

Rising Energy Costs: Frost inside windows?

 

If everything is relative then perhaps many parts of the world might wish that worrying about how to be able to pay increasing energy bills, or coping with a rising cost of living, were the least of everyday worries as opposed to wondering about how to daily survive the deadly effects of war and conflicts.

But, in the UK, the former, for many - the elderly, those with disabilities, and those whose are living on the edge of, or in, poverty,- capitalism’s raison d’etre of exploitation and profits, profits, profits, are of real and anxiety causing concern.

SOYMB recently posted the latest Joseph Rowntree Foundation report on destitution with the UK. Now comes news that the choice between eating or heating is going to become even harder.

https://socialismoryourmoneyback.blogspot.com/2023/11/turn-off-capitalism-not-fridges.html

Numerous readers, of a certain age and above, will recall that within living memory households were dependent upon open coal fires and hot water bottles for their heating needs. The news report below notes that there has been a reduction already in the use by households of gas and electricity.

There will, no doubt, be numerous charities offering advice to the ‘vulnerable’ as to how to keep warm, avoid hyperthermia, and save on energy costs.

There will not be mainstream explanations of the reason for the potentially life threatening cause of the difficult choices which a hard cold winter creates, which is capitalism,. Neither will there be explanations as to how to abolish this iniquitous social system and replace it with one of benefit to everyone - socialism.

The Guardian reports, ‘Household energy bills could climb to an average of almost £1,900 a year in the coldest months of the year under the UK government’s energy price cap, according to a leading forecaster.

The energy price cap is expected to climb from the £1,834-a-year level for a typical home set to take effect from Sunday to £1,898 when the cap is next updated for the months from January to March, say analysts at Cornwall Insight, adding to the burden of the cost of living crisis.

The energy price cap sets the maximum price that suppliers can charge based on the average gas and electricity bill, meaning a cold winter could push bills higher if households need to keep the heating on for longer. The cap remains more than 50% higher than pre-pandemic levels.

The £1,834-a-year cap covering October to December is based on new Ofgem calculations that assume households now use 7% less electricity and 4% less gas, having cut back consumption in the cost of living crisis. When it was announced last month the regulator gave a headline figure of £1,923 a year, using the old methodology to help comparisons with previous quarters. However, in future only the new system will be used.

https://www.theguardian.com/money/2023/sep/29/energy-bills-price-cap

Turn off Capitalism not fridges.

 

The Joseph Rowntree Foundation have published a new report, Destitution in the UK 2023.

https://www.jrf.org.uk/report/destitution-uk-2023 (full report)

Socialism Or Your Money Back has many posts about JRF poverty reports.

Here’s one from 2009.

‘The Guardian has an article on new Joseph Rowntree Foundation report on UK poverty and the media and its findings that there isn't much popular concern over UK poverty and places much of the blame on the media, saying there is little appetite to address themes of poverty. In newspapers, the subject is "worthy, not newsworthy", and journalists found it was often "difficult to give poverty a focus, since it is ongoing and amorphous rather than a specific 'event'". In other words , to paraphrase the Bible , the poor are always with us
Why don't we have celebrities singing "Let them know it's Christmas time" to raise money for the 3 million or so children in this country living below the poverty line? Why is there no Bono or Bob Geldof marshalling the campaign to end child poverty? Why can't campaign groups rouse sufficient outrage to get the public marching on the streets.

"The voices of people with experience of poverty...are severely under-represented in media coverage," says the report. On television, there is a danger of poverty turning into a "spectator sport" that entrenches an "us and them" mentality, the report also warns.

"There is very little sympathetic portrayal of poor people. And people are looking for reassuring images, that things are OK, things are fair and that people at the bottom are there because it’s their fault and therefore we’ve all earned on merit our position." (Political commentator)

As a result of this information shortage, many doubt whether there is"real" poverty in the UK and are unconvinced by the concept of relative poverty – the measure by which the government measures deprivation here. The public is either "harshly judgmental" towards people living in poverty or views poverty and inequality as inevitable. The trend of judging individuals as creators of their own poverty seems to be increasing. Journalists quite often used stereotypical pictures and words to refer to people living in poverty. Public awareness of the extent and reality of UK poverty is limited. People often see it as the individual’s responsibility to get out of poverty because they are not aware of the obstacles to achieving this. However,those suffering from poverty and being in receipt of benefits are stigmatised, so people are reluctant to speak out.

While the nature of poverty is very different from 50 years ago in the UK and from absolute poverty in developing countries, not having what most people take for granted is what many find difficult. Perhaps the starkest examples are the cases of parents going without or falling into debt so their children can have what others have, or their children being bullied at school for not having the latest trend. This may not be the poverty of material destitution. But if the measure of a human being consists in the accumulation of material possessions to which he or she may claim then , by that token, we are demeaned. And, ultimately, it is in this devaluation of our human worth — not simply in the fact of material inequality but in the meaning this society attaches to it.

The JRF calls for a debate that goes beyond building awareness of poverty. This needs the presentation of narratives exploring the causes of poverty and inequality. Over the decades the answer to the cause of poverty has been staring all those NGOs and charities and researchers in the face . It is capitalism .

Are all reforms doomed to failure and do not really make a difference to workers’ lives? Of course not - there are many examples of ‘successful’ reforms in such fields as education, housing, child employment, conditions of work and social security. But while there has been some ‘successful’ reforms, none of them have ever done more than keep workers and their families in efficient working order and, while reforms have sometimes taken the edge off a problem, they have very rarely managed to remove that problem completely. There have been some marginal improvements, but the social problems that the reformers such as JRF have set out to deal with have generally not been solved - hence the need for an uncompromising socialist party to pursue revolutionary change.

Nobody would deny today that poverty exists in the UK as many JRF reports provide ample evidence of . But does it make sense to argue that because we don't have socialism yet , we should, in the meantime, fight for reforms to at least reduce the worst effects of poverty. This argument has been voiced by so many for so long that `in the meantime' has become forever. The time is long past and too many people have suffered, are suffering, and will continue suffering until we attack the cause itself.

There is one way, and one way only, to abolish poverty, and that is to establish a socialist society in which the tools of production will be commonly owned and administered by the population as a whole in their own interests. In such a world, not only poverty but all the social evils created by the profit system will be abolished.’

https://socialismoryourmoneyback.blogspot.com/2009/09/reporting-poverty.htm

Fourteen years on, ‘The Guardian has an article on new Joseph Rowntree Foundation report on UK poverty...’The more things change the more they stay the same?

Main Stream Media all seemed to find it headline worthy that people are having to try and save the costs of electricity by turning off their fridges and freezers. Unsurprisingly, they are capitalist supporters after all, the solution to the ills of capitalism were not propounded.

From the 2023 Guardian report ‘a government spokesman said, ‘A Department for Work and Pensions spokesperson said: “The cost of living payments have provided a significant financial boost to millions of households – just one part of the record £94bn support package we have provided to help with the rising cost of bills. This includes a 10.1% rise to benefits earlier this year, and we’re investing £3.5bn to help thousands into jobs – the best way to secure their financial security in the long term. Ultimately, the best way we can help families is to reduce inflation, and we’re sticking to our plan to halve it this year, taking the long-term decisions that will secure the country’s financial future.”

https://www.theguardian.com/business/2023/nov/14/millions-of-uk-households-forced-to-unplug-fridge-to-cope-with-rising-bills

The conclusion of the 2009 blog post is even more relevant than ever: There is one way, and one way only, to abolish poverty, and that is to establish a socialist society in which the tools of production will be commonly owned and administered by the population as a whole in their own interests. In such a world, not only poverty but all the social evils created by the profit system will be abolished.’

l

Poverty in the UK

 

A report from the Joseph Rowntree Foundation says that ‘Almost four million people, including more than a million children, in Britain experienced the most extreme form of poverty last year.

‘According to the charity, the number of Britons experiencing ‘destitution’ surged 61% between 2019 and 2022, with 3.8 million people going through these levels of poverty.

‘Destitution’ is defined as the inability to meet basic physical needs, like staying fed, warm, clean and dry either due to lack of essentials – such as clothing, heating, shelter and food – or because an income is so low that people cannot afford to buy these items.

Household income dropped below a minimum level after housing costs, ranging from £95 ($115) a week for a single adult to £205 ($249) a week for a couple with two children. Over half of destitute households had a weekly income of less than £85 after housing costs, the study concluded, adding that a quarter reported no income at all.

The number of ‘destitute’ children has nearly tripled since 2017, marking a dramatic increase by 186%.

Adults from across the country reported a frequent inability to have more than one meal a day, saying that they are often forced to go without to ensure their kids could eat. Around two-thirds of respondents (61%) said they had gone hungry in the past month, having relied on food banks or relatives for groceries.

Over half of destitute adults (51%) regularly went without hygiene and cleaning products, along with toiletries like shampoo and toothpaste, reporting heavy reliance on food banks for these items.

Most of the polled adults were not able to afford clothing and footwear, claiming they only purchased new clothes that were necessary, such as school uniforms and trainers for their children.’

Suburbanisation of Poverty

From the Urban Big Data Centre comes a report titled ‘Private renting and the suburbanisation of poverty. What would Karl Marx and Frederick Engels made of this date one wonders. The UBDC notes that five years ago ‘one in three children in poverty lived in private renting, three times the level of 20 years earlier.’ What might that figure be now?

UBDC asks the pertinent question, ‘We need to examine the impacts this has on the welfare of poorer households as they are pushed to locations which tend to have worse public transport, and worse access to jobs and vital services. But we also need to be asking whether this is the kind of city we wish to create – one marked by deepening spatial divisions between richer and poorer.’

The solution lies within everyone's grasp. It is the replacement of capitalism with a social system based on the production of quality goods and services for use, not profit. The abolition of capitalism results not only in the abolition of the exploitation of the majority working class but the abolition of landlords too.

‘One of the most marked changes in the UK’s housing system over the last 30 years has been the rise – or rather, the re-growth – of the private rented sector (PRS). Many more low-income households now find homes in this sector. In a new paper we show how this is leading to the steady exclusion of poorer households from more central locations in our towns and cities, a phenomenon known as the suburbanisation of poverty. For the ten largest cities, we estimate that one-in-nine low-income PRS households was displaced in just eight years as a result – 15,000 households in total. Changes were particularly stark in the largest conurbations but were by no means confined to those cities.

From fewer than one-in-ten households in 1991, the PRS is now home to almost one-in-five. The Government encouraged this re-growth because the sector provides an important source of flexibility for those that need quick access to accommodation without long-term commitments. But few expected the sector to grow as fast as it did.

Even fewer anticipated the extent to which it would become home to increasing numbers of low-income households and, especially, poorer families with children. By 2017/18, one in three children in poverty lived in private renting, three times the level of 20 years earlier. Where previously most low-income families would expect to find secure housing in the social rented sector, now they are faced with raising children while living with the insecurities which go with private renting and all the disruptions to schooling and social life that that entails.

The other consequence of the growing reliance on private renting is how it affects where low-income households can afford to live. Here there are two factors at play: rent levels and subsidy levels from Housing Benefits. On rent levels, PRS housing in more central locations isn’t always more expensive: a lot of cheaper housing can be found close to city centres because it is older, smaller or in worse condition. But in our paper, we show how this housing is becoming less affordable over time with the steady gentrification of these areas. Using the detailed data on private renting from Zoopla plc (available through UBDC’s data collection), we can see that rents are rising everywhere but they are rising faster in more central locations, particularly in the larger cities ; London is the exception but rents for the central parts of that city were exceptionally high to start with. In the social rented sector by contrast, rents vary very little across the different locations within a city so central locations remain affordable.

On Housing Benefits, we have seen increasing restrictions on the subsidies available to pay rents at exactly the same time as we have pushed more low-income households into private renting. In the years leading up to the pandemic, increases in Housing benefits were restricted to levels well below rental inflation rates so that poorer households were restricted to smaller and smaller sections of the PRS market. In 2012/13, 20 per cent of listings on Zoopla were affordable for those on Housing Benefit. By 2019/20, this had fallen to just 9 per cent.

One of the most marked changes in the UK’s housing system over the last 30 years has been the rise – or rather, the re-growth – of the private rented sector (PRS). Many more low-income households now find homes in this sector. In a new paper we show how this is leading to the steady exclusion of poorer households from more central locations in our towns and cities, a phenomenon known as the suburbanisation of poverty. For the ten largest cities, we estimate that one-in-nine low-income PRS households was displaced in just eight years as a result – 15,000 households in total. Changes were particularly stark in the largest conurbations but were by no means confined to those cities.

From fewer than one-in-ten households in 1991, the PRS is now home to almost one-in-five. The Government encouraged this re-growth because the sector provides an important source of flexibility for those that need quick access to accommodation without long-term commitments. But few expected the sector to grow as fast as it did.

Even fewer anticipated the extent to which it would become home to increasing numbers of low-income households and, especially, poorer families with children. By 2017/18, one in three children in poverty lived in private renting, three times the level of 20 years earlier. Where previously most low-income families would expect to find secure housing in the social rented sector, now they are faced with raising children while living with the insecurities which go with private renting and all the disruptions to schooling and social life that that entails.

The other consequence of the growing reliance on private renting is how it affects where low-income households can afford to live. Here there are two factors at play: rent levels and subsidy levels from Housing Benefits. On rent levels, PRS housing in more central locations isn’t always more expensive: a lot of cheaper housing can be found close to city centres because it is older, smaller or in worse condition. But in our paper, we show how this housing is becoming less affordable over time with the steady gentrification of these areas. Using the detailed data on private renting from Zoopla plc (available through UBDC’s data collection), we can see that rents are rising everywhere but they are rising faster in more central locations, particularly in the larger cities; London is the exception but rents for the central parts of that city were exceptionally high to start with. In the social rented sector by contrast, rents vary very little across the different locations within a city so central locations remain affordable.

On Housing Benefits, we have seen increasing restrictions on the subsidies available to pay rents at exactly the same time as we have pushed more low-income households into private renting. In the years leading up to the pandemic, increases in Housing benefits were restricted to levels well below rental inflation rates so that poorer households were restricted to smaller and smaller sections of the PRS market. In 2012/13, 20 per cent of listings on Zoopla were affordable for those on Housing Benefit. By 2019/20, this had fallen to just 9 per cent.

The combination of these two factors has meant the steady exclusion of low-income households from the inner-city locations. In Figure 2, we can see that the number of PRS households on Housing Benefit fell in most of the largest cities between 2011 and 2019 but the falls were greater – and sometimes much greater – in the inner-city areas. Here we define ‘inner city’ as the most central fifth of neighbourhoods.

Another way to capture the scale of the change is to ask how many more low-income households would have been in the inner-city areas in 2019 if the change in households on Housing Benefit there had been the same as in the outer areas of each city. In Bristol, for example, there were 6300 PRS households on Housing Benefit in the inner city in 2011 and this had fallen by 2400 by 2019, a reduction of 38%. In the rest of Bristol, however, the fall was just 15%. If that rate had applied in the inner city, the reduction would have been just 900 households. There are therefore 1500 fewer Housing Benefit household in the inner city than there might otherwise have been – equivalent to nearly one-in-four of those present in 2011. Across the ten largest cities, the total number of households affected was 15,000 or one-in-nine of those present in 2011.

Continuing cuts in Housing Benefit levels, combined with the rising costs of inner-city renting, are engineering a fundamental change in the social fabric of our cities. We need to examine the impacts this has on the welfare of poorer households as they are pushed to locations which tend to have worse public transport, and worse access to jobs and vital services. But we also need to be asking whether this is the kind of city we wish to create – one marked by deepening spatial divisions between richer and poorer.’

https://ubdc.ac.uk/news-media/2023/october/private-renting-and-the-suburbanisation-of-poverty/

Republic of Congo higher fuel costs due to IMF

 

‘In the Republic of Congo, diesel prices have risen by 25 percent in October, marking another increase following a hike in January. Similarly, since July, the pump price of gasoline has also surged by 25 percent.

Authorities in Brazzaville attribute the soaring fuel prices to recommendations made by the International Monetary Fund (IMF) in 2019 under the Extended Credit Facility (ECF), which provided financial assistance to the Republic of Congo, grappling with a severe economic crisis and unsustainable debt (more than 80% of the GDP). Among the IMF-recommended reforms was the removal of fuel subsidies.

However, the Congolese branch of What You Pay coalition (PCQVP) vehemently opposes these fuel price increases.

"We have the right as an oil-producing country to sell petroleum products at lower prices in our nation. Why are we asked to sell these products at the same price as on international markets? Are we not capable of refining petroleum products for our domestic consumption to eliminate the need for subsidies? If we can refine oil for our local use, then subsidies will vanish," said Brice Mackosso, deputy chairman of PCQVP coalition.

"We believe that the fight against corruption in the oil sector will bring sufficient revenue to the State's budget. We call for the prohibition of petroleum product exports. We urge the government to consider a report from the ITE of Congo and the International ITE Secretariat on fiscal modelling, showing that the Republic of Congo loses about $1 billion annually due to high costs, tax prices, and the threshold of high costs" added Brice.

The Congolese government has implemented a series of measures to mitigate the impact of potential inflation, which would be particularly detrimental to the population. However, the Congolese civil society believes that the of addressing this crisis remains the fight against corruption.’

https://www.africanews.com/2023/10/18/fuel-prices-surge-in-congo-amidst-protests-and-economic-struggles

'It was during this period of beating about the bush for economic direction that the IMF and the World Bank joined in the fray. They came along with a novel package that was going to miraculously propel African economies to the highest degree of development. This new policy was the Structural Adjustment Programme (SAP). This SAP idea condemned the previous method of development as unworkable and maintained instead that making structural changes, including the expansion and re-orientation of production, was the only way forward. African nations were to put the production of “non-traditional exports” and tourism into a higher gear. Thus in a country like Ghana where the traditional exports were mainly cocoa, timber and gold, under the SAP crops like pepper, pineapples, yams, maize, and oranges were to be turned into cash crops and exported. SAP also stipulated that private capital was to be the “engine of growth” and that “governments have no business doing business”. It did not however take long for the people to understand that they were once again fooled by official policy. Hardship and suffering increased a thousandfold. The masses had been moved from the frying pan into the fire.’

From the Socialist Standard October 2001

https://socialiststandardmyspace.blogspot.com/2023/10/financial-wizards-or-great-pretenders.html

Pity the Continent

‘If ever a continent cried out for justice, for help and, more, for Socialism, it is Africa, a land of 30 million square miles, 54 nations, a thousand languages and 642 million people; a land geographically as rich in diversity as it is in fauna and flora; a land organically as rich in oil and coal as it is in gold and diamonds, and yet, paradoxically, the poorest continent on Earth.

For over a hundred years a spectre has haunted Africa — the demon of world capitalism that sees Africa only as a source of profit, cheap commodities, a gullible market for western exports and an easily exploitable population ruled by corrupt leaders.

The age of overt colonialism may have gone, when the European powers raped and carved up Africa, each with vested interests backed up by huge armies, but now there are new colonists who can do ten times as much damage with the flick of a pen — the World Bank and the IMF.

In ten years, loans given by the IMF and the World Bank have tripled Africa’s debt burden to $180 billion — a figure that represents more than Africa’s aggregate net income. Debt repayments currently stand at $11 billion a year — a staggering four rimes more than what Africa spends on health and welfare.

Since the mid-1980s, African governments have repaid the IMF $2 billion than they have received in loans — a system that is so severe that every adult and child in Tanzania and Zambia owe their nations' external debtors twice their yearly earnings.

African governments secure loans unwittingly to the detriment of their respective nations because they believe this is the only way to domestic stability. Most are forced into accepting loans on terms and conditions regarding policies they would not have hitherto adopted: the privatisation of state-owned industries, the introduction of new constitutions and drastic reductions in public expenditure which hit health and education programmes the hardest.

In the past ten years about 30 African nations have come to regret the acceptance of IMF and World Bank advice. Living standards have dropped by two per cent annually, while unemployment has quadrupled to 100 million, with real wages falling by 30 percent. Africa is now worse off than it was 25 years ago. The June issue of New African declared that "the average African has 10 percent less food to eat than twenty years ago”.

The Guardian (20 July) reported how "in myriad cases, bank projects, supposedly targeted at the poorest of Africa’s poor, not only increased inequality and hunger, but exacerbated ethnic conflicts . . . Across Africa, projects funded by the bank have become synonymous with financial mismanagement, environmental degradation, the displacement of vulnerable populations and corruption”.

Eighteen African nations are amongst the world's poorest 20, 30 amongst the world’s poorest 40. Africa with eight times the land area of the USA and twice its population has only one percent of world trade, while American capitalists are top of the world trade league. In 1991, the total GNP for Africa south of the Sahara, excluding South Africa, was $204.7 billion — only slightly higher than that of tiny Belgium with a population of 10 million. Within six years 300 million Africans will be living below the subsistence level.

Myth of overpopulation

Africa has a population of 642 million. Considering Africa is three times the size of China, it has one sixth the Chinese population per square mile. Yet some experts point to African overpopulation as one of its problems. This is pure fallacy. While 50 percent of Africans are undernourished, it is widely known that the continent is capable of sustaining a population several times its present size were Western farming methods applied there.

While millions were dying in the Ethiopian famine eight years ago. the Ethiopian government were exporting thousands of tonnes of lentils to the West. In 1991, Zimbabwe was forced, by the World Bank, to sell one million tonnes of surplus grain to meet debt repayments. A year later a drought hit southern African cutting Zimbabwe’s grain output by 60 percent, with disastrous effects.

If anything, the problem facing Africa is western capitalism. Shortages of food and overpopulation do not even enter the equation. Guy Arnold, writing in New African in September believes "an enormous deception has been practised upon Africa since I960. It is that all the interference by the World Bank, the IMF and the Paris Club has been for Africa’s advantage".

"Africa", Arnold says, “ is not at all interested in such donor prescriptions, but is obliged to accept them because it is heavily in debt and debt is a primary instrument of control."

This is an intrinsic fact of capitalist society: the wealthy control the poor.

Africa is a land of plenty and only Socialism could truly release its productive potential to the benefit of its people. For a hundred years the West has carved up Africa, diseased its flesh and drained its life-blood. Reforms and loans will only ever be the sticking plaster over the gunshot wound.’

John Bissett

From the Socialist Standard October 1994

https://socialiststandardmyspace.blogspot.com/2019/10/pity-continent-1994.html