Squeezing the poor: the pips should start squeaking!

Submitted by martin on 22 April, 2008 - 5:14 Author: Gerry Bates
Pay cuts

For many years now, inequality has soared, but intimidation by employers and foot-dragging by sluggish trade-union leaders have pretty much kept a lid on wage battles.

Back in the 1970s, the then Labour chancellor Dennis Healey promised (untruly) that he would "squeeze the rich until the pips squeak". New Labour has been squeezing the poor - and so far the pips haven't squeaked much. But squeak time could be coming soon.

* Food prices have gone up 15.5% over the last year. The Tory Daily Mail worked out the figures for its own purposes (18 April), but they're accurate.

* Other basic costs are also increasing fast.

* Mortgage repayments are up 7.4% over the past year. Buy-to-let landlords are collecting rents up 15% over the last year (according to the finance company Paragon). The Government has been forcing high council rent rises for years, with the avowed aim of pushing up council rents to "market" levels: council rents went up 6.2% in 2006-7, and the increase won't be less for 2007-8.

* Gas bills are increasing at 12.5% a year, and electricity bills at 12.9%.

* Fuel costs are up by 16.5%.

The increases in food, fuel, and energy prices are due to basic structural changes in the world economy, and are not likely to slow soon. The US Federal Reserve, and to a lesser extent of the Bank of England, are shovelling out credit to financiers as fast as they can, on the principle that higher inflation is a smaller risk for them than a worse credit crunch and a slump in production, so official policies are feeding inflation too.

House prices are likely to fall, but mortgage lenders are cutting out cheap deals in order to redress their financial position, so mortgage costs will probably continue to rise.

The Government's official price indices, the CPI and the RPI, are kept low - the CPI currently shows 2.5% inflation, and the RPI 4% - partly by excluding some items, and partly by "weighting" the baskets of goods and prices whose prices they check.

Flat-screen TVs, for example, are becoming cheaper. For someone buying lots of expensive stuff, the CPI and RPI are probably realistic estimates.

But lower-paid workers, whose budgets are dominated by food, housing, and energy bills, are much worse off. The minimum wage is falling in value, compared to the RPI, for the first time this year; it will fall in value much more when compared to the real inflation rate for low-paid workers.

Add two other things:

* The Government has abolished the 10% income tax rate, putting five million people into the 20% bracket. Some will get some compensation from working tax credit.

But the Guardian reports: "Childless, single people earning between £5,435 and £19,355 a year and ineligible for working tax credits because they are under 25" will lose out. "Part-time workers who clock up fewer than 30 hours a week are also hit by the cut because they do not qualify for working tax credits either. Then there are the early retirees, who do not receive tax credits, but who are too young to benefit from the increase in the tax allowance for those aged 65 and over.

"Around 5.3 million households – roughly one in five - will be left worse off, mostly in the poorer half of the population... the Treasury [comes out] with a £3.7bn net gain".

* Last year, already, the Government pushed down real wages across the public sector by enforcing a pay-increase limit of two, or two-and-a-bit, per cent. This year it wants to nail down that two-and-a-bit per cent limit with pay formulas lasting three years. Four or more solid years of cuts in real wages!

This is new. Grim though New Labour's policies have been, and fast though the gap between the ultra-rich and the poor has increased, since 1997 most workers have had pay rises. The poorest, or at least those of the poorest able to navigate the seas of bureaucracy to claim working tax credit and pension credit, have stayed poor, but at a slightly higher level.

Now the Government's budget deficit is bigger than they wanted - so New Labour is making the poor pay.

At the same time, the Government is feeding the rich. It has dished out over £20 billion in credit to Northern Rock, and plans to dish out another £50 billion to other banks, by giving them saleable Treasury bonds in return for the mortgage-based securities which no private buyer will touch. It backed down to the City outcry against its plans to make rich people who live in Britain but claim "non-domiciled" status to pay something more like normal taxes.

Even the miserable crew of New Labour MPs is protesting about the abolition of the 10% tax rate.

How long will low-paid workers suffer in silence? Maybe not much longer. Maybe the strike on 24 April will rouse revolt by showing how it can be done.

That is what socialists and activists should work for. And we should work to get the unions to voice the revolt, rather than sitting on it; to mobilise, rather than dither.

The first step should be for the unions to use their research resources to calculate and publicise a cost-of-living index based on the reality of low-paid workers' budgets. The second step, to propose as a unifying demand, and campaign for, a "floor" in all pay settlements which guarantees a pay rise sufficient to match the real inflation rate for low-paid workers.

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