The fall in inflation to 1.7% this week from 2.2% in August should be good news for borrowers, but it could result in a blow to benefit recipients. Although the rate is expected by the Resolution Foundation to rise shortly again to 2.2%, the September inflation rate is that which determines the annual uprating of welfare benefits next April.
For all the difficult decisions facing the Chancellor as she finalises her Autumn Budget, for her to increase the annual uprating of benefits above the rate of inflation should be demanded by our party. If the increase was 2.2% instead of 1.7% this would give a couple over 25 more than £30 a month extra.
The rate of Universal Credit is already inadequate, as our party’s policies in its Fairer Society motion recognised. Now this is starkly spelt out again in a new report from the Trussell Trust, the major food bank provider, called The Cost of Hunger and Hardship. It says that record numbers of people in Britain, 9.3 million or 14% of the population, including 3 million, 20.9%, of children are facing hunger and hardship, which they define as being more than 25% below the Social Metrics Commission’s poverty line (which the SMC define as the amount ‘people actually have to have to cover daily living costs’).
Universal Credit is failing to protect people, the report asserts (p.24), ‘Almost four in ten (39%) people in families claiming Universal Credit (5.4 million) face hunger and hardship’. ‘Over half of people living in hunger and hardship – 58% – live in a working family, while 35% live in families where no-one is working, and 5% are in retired families’ (p 25).
The report spells out how the situation of benefit claimants has worsened comparatively over the last decade. ‘The value of the standard allowance for Universal Credit has fallen over the last decade compared to the rising cost of living. In 8 out of the 10 instances of uprating social security payments between 2012 and 2022, the basic rate of unemployment payments lost value relative to inflation, meaning the real value of these payments was reduced’ (p 24).
The report also describes the worsening situation of benefit claimants because of benefit caps and deductions (long noted by our party) such as being expected to pay back loans, including those taken during the five weeks’ wait for the initial payment.
The report states, ‘Over one in three (36%) people living in families in receipt of Carer’s Allowance are facing hunger and hardship – 900,000 people. Carer’s Allowance is the lowest payment of its kind, and the inflexible and strict earnings limit in place if in receipt of it reduces carers’ ability to work extra hours to make ends meet’ (p 25).
It further notes that, “The rate of hunger and hardship for people living in families claiming Universal Credit is significantly higher than for people living in a family where someone receives the means-tested benefit for pensioners – Pension Credit (24% higher), and many times higher than the rate for people living in families in receipt of the State Pension (6% higher)’ (p 24). But equally with pensioners, many people of working age are obliged to depend on the state aid supplements.
Our party is committed to reducing poverty. We surely must call on the Chancellor to recognise the poverty inevitably relating to inadequate benefit payments today, and find funds to uplift those benefits for people of working-age as a matter of urgency.
* Michael Berwick-Gooding is a Liberal Democrat member in Basingstoke and has held various party positions at local, regional and English Party level. Katharine Pindar is a long-standing member of the Cumberland Lib Dems.
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We really need to have a proper definition of the minimum income required to buy essentials so that can then be used as the basis for our benefits system. Even the Trussell Trust uses measure of poverty, destitution and ‘hunger and hardship’ that are all based on relative measures – such as relative to the median income.
Can anyone provide realistic reasons why the criteria for the elimination of hunger, including that of children whose development is harmed log term by it, are not connected directly to the cost of food?
This is just the tip of the iceberg.
Born again Blairite Minister Alison McGovern was quoted recently saying that cuts in the welfare budget are planned. She is also echoed the Tory mantra about getting sick people back into work.
This Labour government is a new beast and it is already bearing its teeth. Our party must become the champions of the poorest in our society, as the next round of attacks are lined up!
Friends, it is going to be hard for us to get our policy of gradual reduction of poverty, passed at our York Conference last year, accepted by our new government in principle at least. A headline in today’s Times tells us that ‘Labour refuses to row back on “devastating” Tory welfare cuts.’ So far from upping the inadequate Universal Credit rates, they intend to declare 424,000 people with mobility or mental health problems as no longer unfit for work, cut their benefits and expect them to make preparations to look for a job. The government’s own work and pensions secretary Liz Kendall has apparently spent weeks try to find ways to cancel or soften the cuts, without success, and is now relying on longer-term reforms.
The British people haven’t elected a Labour government to carry out Tory policies. It will be up to our Parliamentarians now to lead opposition to these measures, and suggest that the only way to get more people back to work to save any of the Welfare costs is first to provide for their health needs, and then to offer them guaranteed job placements. But meantime, find the funds to begin to mend the broken safety net.
At a time when even the alt-right have accepted UBI, as a way to maintain the life of people who cannot compete in a highly automated neo-liberal society, New New Labour are preparing benefit claimants to accept injections as a price for continuing on benefits.
This reminds me of the “Work Programme” of the Orange Book people, that gave employees of SERCO the right to declare people “fit for work”, without the appeal that natural justice would provide. If you wanted 1997 back, be careful!
@ Peter Chambers “Labour are preparing benefit claimants to accept injections as a price for continuing on benefits”.
Are you suggesting that anti-obesity injections are to be compulsory and conditional as a continuity to receive benefits, Mr. Chambers ?
Mary Fulton,
As we stated the Trussell Trust defines their ‘hunger and hardship’ level in relation to the Social Metrics Commission’s poverty line which the SMC say is based on the specific needs of each family type (https://socialmetricscommission.org.uk/wp-content/uploads/2023/12/SMC-2023-Report-Web-Hi-Res.pdf). It seems that £177 a week is the poverty level for a single person, £305 for a couple, and £494 for couple with two children. (These figures in the 2023 report may refer to 2021/22 and so would need to be increased.)
Peter Chambers,
You haven’t given any references for any parties on the right calling for a UBI. The only party in England that supports a UBI I think is the Green Party. In the last general election this was played down compared to their earlier general election campaigns when Natalie Bennett was party leader.
@ Katharine,
“The British people haven’t elected a Labour government to carry out Tory policies….”
I’m afraid they have.
Many of us did our best to warn everyone. In any case it was obvious what was going to happen.
Lib Dems had no inclination in anything other than getting rid of the Tories before the election. Sure, we’ve done that but, and as you say, we still have Tory policies.
@ Michael BG @ Peter Chambers
There may not yet be any support from an established right wing party, Peter didn’t say there was, but there is support from some on the right.
The basic motivation is to place a cap on social benefits. Everyone will be given a sum of money to help them pay for their own and their children’s education, health cover, unemployment insurance etc. They’ll be expected to manage and if they can’t ……. that will just be too bad.
https://bigthink.com/the-present/negative-income-tax/
You did indeed warn us before the General Election, Peter, that the Labour party leadership showed too much of a leaning towards Tory policies. Liberal Democrats will have to fight this in Parliament, with backing from us activists.
Your reference to right-wing thinking is interesting, including the quote which explains that reliance on charity has drawbacks for those adherents. To me the idea of a UBI as advocated by right-wing thinkers is to be able to write off the needs of the people least able to cope with modern life and forget about them by ensuring that they won’t starve. Liberal thinkers want much more than that, and we also deplore the idea of any group of people, such as those in trade unions, deserving more state aid than others. Liberal Democrats are for all the people.
@ Katharine.
“.You did indeed warn us……. the Labour party leadership showed too much of a leaning towards Tory policies”
It wasn’t mainly about this though. If Keir Starmer, Rachel Reeves and co had won over the Labour Party to its current position by a process of fair argument, many of us wouldn’t have liked it, but we would have accepted it.
I don’t believe this would have been possible though. Keir obviously agreed and so embarked on a process of ly*ing and deception which was at least as bad as, and probably worse in its long term effects, than anything Boris Johnson was accused of.
However, whilst what might be termed the “liberal establishment” did rightly hold Johnson to account they gave Starmer a free pass.
So that’s why we are where we are, as they say!
Below is an article presenting, with validations, that strong union membership brings general positive benefits to a society.
https://www.epi.org/publication/unions-and-well-being/
Steve, you are right, that unions are of general benefit to the people of our country. We support the rights of working people to seek representation in their industries. My reference to state aid was misplaced – I only meant to suggest that no group of people is more deserving of state backup than another, in terms of their value as individuals. But I think our party leaders do need to ask for more help for people needing help who have no group to speak up for them. That must apply to individuals who can’t work because of mobility problems, mental health issues or are waiting for operations. I have written to the party spokesperson on work and pensions, Steve Darling (the Torbay MP with the wonderful labrador guide dog, Jenny!), to ask him to help co-ordinate our party’s opposition to the apparent plan of
cutting benefits and obliging the people currently called unfit for work to look for a job. (See my comment above, 18th October, at 8.06 pm.) This government’s apparent indifference to the unrepresented people who need help, as shown also by their refusal to tackle child poverty by abandoning the two-child benefit cap, needs vocal opposition from our party, which I hope readers here will also assert.
Tonight, I have emailed our Treasury spokesperson Daisy Cooper asking her to write to the Chancellor of the Exchequer calling for benefits to be increased by at least 2.2% and not 1.7% in April. Hopefully, it is not too late to influence the annual increase to working-age benefits.
@ Michael BG, @ Katharine,
Good luck with that! (Your email)
It might be worthwhile for you to take a look at a typical new Labour MPs FB page to see where the public are at regarding the poorest. My local MP is probably typical of many first time MPs. She’s a decent person but still gets more than her fair share of abuse. See link below.
She isn’t really socialist and she’d be perfectly at home in the Lib Dems. There are more than a few adverse comments on the WFA. This fuels most of the unfair abuse she receives. The two child cap vote received far less opposition. The usual argument was that if people wanted more than two children they should make sure they could afford them first. It was hard work trying to explain that people’s circumstances often change and raising children in poverty is going to be more expensive in the longer term.
So I doubt you’d get much public support at all for an improved system of social benefits. I’ve known this for a while. This has caused me to look for another angle. We need to get back more to what Beveridge actually had in mind. He was against means testing and wouldn’t have agreed with a UC system of welfare no matter how generous it might be.
As far as I can make out your GBI is pretty much that.
https://www.bbc.co.uk/news/articles/cly72z28myzo
Peter. thank you for that interesting email. I hope your Labour MP can also be persuaded of the need to uplift benefits, rather than reducing them for people with physical or mental health difficulties that oblige them to stay at home. (Work that can be done at home may be one option, but only for people whose physical or mental capacity doesn’t prevent them taking it up.)
I disagree with you about Beveridge. He did intend that nobody at all should have no means of subsistence – and sufficient care; he even wanted dentristry to be provided
as part of free health care.
The principle of free health care is much more widely supported than the poverty reduction schemes you favour. This has to be because many would argue that it isn’t free. We do work to pay our taxes and thereby support the system. It is part of a social contract between the nation’s workforce and the state.
However the sympathy for those who are perceived, rightly or wrongly, not to keep their side of the bargain is limited.
There are plenty of links on the website to the full Beveridge report. It is quite hard going and I can’t find one that is pdf searchable. They are scans of the typed original. However there are other comments on it as in the link below.
To quote: “The Welfare State. Beveridge hated the term because to him it implied a ‘Santa Claus’ state.”
“and the title “Beveridge Plan” which had become like advertising slogans, which taken together had led many people hopelessly to misunderstand what he had truly worked for”
“means testing gradually displaced insurance over time and the universal credit, which the government bills as the most radical reform of the welfare system since Beveridge, is in many ways the complete opposite of what he proposed.”
https://julesbirch.com/2012/11/27/10-things-you-may-not-know-about-the-beveridge-report/
It’s the Five Great Evils identified by William Beveridge which have been the subject of mine and Michael’s focus on social liberal issues, as individual members of Social Liberal Forum, for several years. We have offered motions and moved amendments at Conference ourselves, and have contributed to the Working Group on a Fairer Society which produced the policy passed at York last spring. It will be good if there were more action on social media as well, as Jack on the other thread has mentioned.
In case the younger generation doesn’t know what the Five Great Evils were, they were Want, Squalor, Disease, Ignorance and Idleness. Which we brought into the present social- injustice urgent concerns as Poverty, Decent Housing, Health and Social care, Education and training, and Employment opportunities.
In fact we are not only the party of William Beveridge, we are the party of Lloyd George. When he was Chancellor of the Exchequer in the great social-reforming Liberal government of 1906 to 1915, he drove through the National Insurance Act of 1911, the first national system of unemployment insurance in Great Britain. So Liberals have provided for the subsistence of people of working age who could not work since 1911. It would be a shame if today’s Liberal Democrats did not fight to ensure that people unable to work through disability of mind or body do NOT have their needful benefits cut next spring, but instead have a good increase of them.
@ Katharine,
You’re avoiding the uncomfortable reality that Beveridge was dead set against the principle that social benefits should be means tested. Yet the UC, on which the Lib Dem policy of GBI is based, is very much a means tested benefit.
We do all now know Beveridge wanted to abolish the five evils of Want, Squalor, Disease, Ignorance and Idleness. But, he didn’t want to do it in the same way that you do.
I would say, with all due respect to your POV, I’m closer in my thinking to Beveridge than you are.
Peter Martin,
In the article you provided a link to, Jules Birch states,
‘Pensions were paid in full from the start’. However, unemployment benefit was not;
‘Beveridge had no answer to the question of how to pay for housing costs’. And this was why the means test was not abolished.
Beveridge assumed there would be full employment. If we had full employment and there was little long-term unemployment, I don’t think people would object to there being higher rates of unemployment benefit.
The National Insurance aspect still exists. A person can receive Jobseeker’s Allowance for six months and Employment and Support Allowance for one year if they have paid enough National Insurance with no means test.
When I talk about Beveridge I am thinking about his aims to end poverty, homelessness, long term health issues, lack of education and training and unemployment. However, if we compare the system of pensions we have with the Guaranteed Basic Income I don’t see much difference. The full Basic State Pension is £169.50 a week, but on top of this there are means-tested benefits such as Pension Credit, Housing Benefit, and Council Tax Support. We are calling for there to be an increased level of Universal Credit set at the deep poverty level for each family household type and having Housing Benefit, and Council Tax Support on top.
@ Michael BG,
I do accept that it wouldn’t be possible to immediately switch away from the system of means tested benefits we have now. However, it should be defined as a goal which we should be working towards. This would require some discussion but Lib Dems aren’t doing that. This is the way we’d increase popular support for the contributory benefit system which Beveridge had in mind. The aged pension is just such a system which does command support on this basis. Many do object to it even being called a benefit on the grounds that they have paid NI contributions their whole working life and so are entitled to what they were promised to begin with.
If you do get a full state pension you don’t qualify for pension credits BTW. Not sure about housing benefit and council tax.
I don’t know if anyone has any answer on how to pay for housing. If there aren’t enough houses and flats there is always going to be a problem. If we have 100 dogs and 95 bones then 5 dogs will have to do without. Simply paying landlords what they ask will only drive up prices for everyone else.
The first step is always to understand the nature of the problem and then have a sensible discussion on a solution.
I have gone back to what Sir William Beveridge himself said, introducing his great Report – recorded on YouTube by the LSE. He said that “No-one is to fall below a certain standard.” “(This report) Preserves the maximum balance of freedom and responsibility that is consistent with the abolition of want.” He proposed “An all-in scheme of social insurance for all citizens and families, in return for a single weekly
contribution.” The amount paid is “To be adequate and to last.”
I had never supposed, Peter, that Sir William would have wanted people of working age not working to have living expenses paid to them. As Michael says, he expected full employment, and he never had to witness the employment problems of our citizens today. But what he also said in this recording, and which I had forgotten, was that there should be children’s allowances, and “that they should be paid regardless of whether the parents work or not”. That is a clear statement that children’s benefits must be paid, whatever their parents’ situation, so he would have approved of today’s family benefits, and certainly it appears would not have condoned the two-child benefit cap.
Beveridge was living in a time when the working class had only two states: working and not working. You could reasonably expect that anyone would prefer the latter and would not want if they achieved it. Today’s labour market is nothing like that. You couldn’t make the system work without a taper based on earnings for those who cannot find enough work to be better off than the unemployed through their earnings alone.
@ Katharine,
Yes I agree. Children, the elderly and those who are sick need to be exempt from any requirement to work to support an adequate lifestyle. Of course there is always a going to be a problem in deciding who is genuinely sick and who is working the system for their own advantage.
Again I should make the point that it isn’t really about money. In any society (think a supposedly primitive Amazonian tribe ) those who do make a contribution to the welfare of others are those who actually do something. Every society needs its workers.
This being the case, all workers who put in a full shift during the week should be fairly paid. I appreciate that the term “fair” is subjective, but it should at least mean the receipt of a living wage which means that accommodation costs need to be affordable . Just how we achieve this in a market economy is a perhaps a problem to be solved. Difficult, perhaps, but not insoluble.
What is necessary now, I suggest, is a full-scale Liberal Democrat attack on the proposals, heralded in the Tory press, that the welfare bill should be cut next April by focusing on the people who have been unable to have found paid work because of mobility problems, mental health issues or other illnesses or disabilities. We must ask Daisy Cooper and our new MPs to demand instead that welfare benefits be raised next April beyond September’s 1.7% inflation rate, and that efforts to increase the working population must concentrate on giving people of working age stuck at home proper attention to their health needs plus local assistance to find them guaranteed jobs, if they are capable of taking them. All of us members should back up the leadership in this, and hopefully in the Commons numbers of the more progressive Labour MPs will be found to strengthen our Parliamentarians’ demands.
Peter Martin,
The 1911 National Insurance Act provided some free health care for about one third of the population. However, the National Health Service was never based on contributions. You argued at 10.44am yesterday that people support it being for everyone because it is paid out of taxes. The same could be said for means tested benefits. (As I have already written people don’t like other people being unemployed for long periods of time.)
There are two main state pensions – the Basic Pension of £169.50 a week and the New State Pension of £221.20 a week. Pension Credit will top-up a pension to £218.15 for a single person and is available not matter which pension you receive if your total income is low enough to qualify. If a person receives the full New State Pension, then you are correct, they wouldn’t qualify for Pension Credits.
Peter Davies,
Indeed, having tapers on benefits is better than benefits being cut on a pound for pound basis as happened in the past.
Indeed Michael, tapers on benefits are better than benefits being cut on a pound for pound basis. No one but someone without common sense would work harder to earn more if it was being taxed at 100%.
However, the Poverty Trap that Rachel Reeves has just further reinforced means if your income is just £1 more and you lose all pension benefit, she will take away from you another £200 or £300 in Winter Fuel Payment as well. That is not simply unjust but downright nasty and only a socialist could try to justify taking £200 from someone not quite poor enough, so that he or she could take £200 from someone who does not need it.
That is thoroughly reprehensible.
As an aside, Taxing it is much better than tapering as it means you don’t need to develop a whole new bureaucracy with its systems and procedures when the Inland Revenue can do it with ease.
Michael you say that giving an increase of 2.2% instead of 1.7% would give a couple £30 a month extra. That cannot be correct: If a difference of 0.5% makes £30, that would mean the couple are receiving £6000 a month in benefits, which is not plausible.
But more generally, if you are uprating benefits (or anything else) to account for inflation, then using the same month every year is the correct thing to do since that correctly factors in all price increases over time. You can’t just go picking and choosing which month’s figures to use each year because that will mean you end up double-counting some months’ price increases and will make the inflation adjustment wrong and unfair. If you want to increase the real value of benefits, that’s a separate argument and needs to be an entirely separate decision, not part of the automatic inflation adjustment.
David Evans. Yes indeed, we need to keep protesting about the hardship incurred by not-well-off pensioners by the removal of the winter fuel allowance, as well as the hardship of cuts in the welfare benefit apparently planned for next spring. It seems as if our new Government is indifferent to a possible rise in poverty rates.
Simon R. It would indeed be fair enough to uprate benefits by the same month each spring (those that are to be updated at all). But the argument that is most imperative is that the basic rate of Universal Credit is just too low. A couple receives on UC just £142.52 a week. The Social Metrics Commission, whose estimates on the poverty line are based on the specific needs of each family type, reckoned a couple needed £305 a week in their ’21-’22 estimate. Our policy asked for the restoration of the £20 a week given in Covid time and then taken away as a minimum.
Simon R,
Thank you for pointing out my mistake. 0.5% of £617.60 is £3.09 (rounded up). 0.5% of a couples Universal Credit is £37.06 a year.
The problem with benefits is that the inflation rate in September is applied in April. We recognised this as a problem in our policy paper 150 ‘Towards A Fairer Society’. There was a large difference in April 2022 when inflation was 9%, but the increase was only 3.1%.
David Evans,
A taper is not really a problem until someone starts to pay income tax and national insurance, when they lose 28% from taxes and then a further 55% of the net income. A fairer system would be to reduce the taper so that when paying tax and NI the total reduction is still 55%. However, the lower the taper the greater the amount people can earn and still receive benefits.
Michael, I see your logic, but must disagree with your conclusion, on the basis of the answer I have come to on one simple question.
Is it acceptable that a person receiving benefits should only take home £45 for every £100 of extra income they earn (and probably have to work an extra 5 hours or more to get it), when someone on £140,000 per annum takes home £60 for each extra £100 of earnings (probably for less than an hours extra work)?
I can only say it is not acceptable, but accept other people may come to a different conclusion. However, I just can’t see how any Lib Dem can say it is acceptable under any circumstances.
When you throw in the wasted resources in running any taper system as well, I simply say any proposal that takes more from those who have less is always unacceptable.
I hope perhaps you will reconsider.
In the meantime – All the best.
David
@David. There are two reasons why the taper rate needs to be high:
A lower rate would mean more people being means tested. If you reduced it to 30%, most people would be eligible. That’s a lot more of your “Wasted Resources”.
Lowering the rate is enormously costly without helping the very poorest. Consider a situation where you have a fixed amount of money to spend on Universal Credit. You can either pay a low base rate and taper it slowly or a high base rate and taper it fast. The former gives the poorest less money but more of an incentive to work. 55% is within the range of reasonable compromises.
Of course it is weird that people on £140,000 p.a. pay a lower percentage than those £120,000. Raising the top rate to 50% and starting it lower would make sense. The real problem though is the ridiculously low headline rate of 20% around which the rest of the system has been cobbled together.
@David. A high taper for people on benefits might seem unfair but it is actually an inevitable consequence of making benefits more generous. To see this, ask yourself at what income benefits should stop being paid. Opinions will differ on the precise level, but you can put a limit on it because It would be obviously utterly unsustainable for more than half the population to be net receiving benefits (while fewer than half the population pay for those benefits): So you can set an upper bound at the median income. In a reasonably sustainable system, someone on median income will not be receiving benefits. That means if you set the benefit level at half median income (the so-called deep poverty level) then you stop paying benefits at no more than twice benefit level so the taper is at least 50%. If you want benefits to be 60% of median income then you stop paying benefits at no more than 1/0.6 = 1.67 times benefit level, so the taper must be at least 67%. You might not like it but it’s mathematically unavoidable.
The discussion underlines the problem with means tested benefits. I doubt many people understand the arithmetic in terms of tapers and marginal rates of taxation. They do, though, understand there’s no point going out to work if you’re going to be losing benefits. They also can misunderstand the arithmetic and so think there’s no point in looking for a job . There are also other expenses to consider which can act as a disincentive.
Means tested benefits have never been popular: (https://ichef.bbci.co.uk/images/ic/976xn/p05ky7j5.jpg)
The obvious solution is to give people a job if they need one. There are no compromises to be made. Those who are currently working the system by earning cash-in-hand money, very possibly in the pursuit of some criminal activity, probably won’t be interested in signing up for a an actual job. The cost will probably be far less than we might think. Plus we’d be getting something for our support in terms of what people are being asked to do for the public good in the short term.
It prevents temporary unemployment becoming permanent unemployment and eventually unemployability.
We should be offering jobs at a living wage and not workfare.
If anyone is too sick to work we put them on paid sick leave. I don’t have a totally satisfactory answer as to how we decide who is too sick to work and who isn’t. However, this is always going to be a problem.
David Evans,
I disagree and accept that people are paid at different rates. A manager should be paid more than a person they manage. However, I do believe that the remuneration some directors and chief executives receive is sometimes too high. The Income Tax Personal Allowance needs to be increased. The top rates of 42% (over £50,270) and 47% (over £137,710) are too low. I think the taper should be reduced to 37.5% on income that has had income tax and national insurance deducted from it.
As pointed out by Peter Davies, Simon R and myself the lower the taper the greater the income someone can have and still receive benefits. Somone living in Bath claiming housing benefit with two children would still be entitled to benefits when having a net income over £34,797 a year. If the taper was 28%, they would still receive benefits with a net income over £68,352 a year.
Also, I would like the rates of Universal Credit increased for a couple by over £100 a week and for a single person by over £50 a week. These would also increase the amount people can earn and still receive benefits.
Peter Davies,
The Conservative reforms to the reclaiming of Child Benefit payments has reduced the marginal rate to 53% on incomes over £60,000. It would make sense continue that rate after £80,000 and increase the higher marginal rate to 58%.
>” A manager should be paid more than a person they manage.”
From many times I’ve recruited managers including CEOs and MDs, I don’t believe in such nonsense. A good manager is just another member of the team, bringing complementary skills ( think Belbin team roles). If their ego requires them to be paid more than the rest of the team then they don’t understand high performance teams.
“If their ego requires them to be paid more than the rest of the team then they don’t understand high performance teams.”
Seconded (based on experience)
Roland and Nonconformistradical,
Are you really saying that you worked for companies where everyone was paid at the same hourly rate? If so, please can y ou name these companies?
‘The median CEO/median employee pay ratio across the FTSE 350 was 57:1 in 2022, slightly up from 56:1 in 2021. The median gap between CEOs and their lowest-paid quarter of employees fell slightly in 2022 to 75:1 from 78:1 in 2021’ (https://highpaycentre.org/high-pay-centre-analysis-of-ftse-350-pay-ratios-2/).
There was an alternative proposal to the Beveridge scheme during and after WW2 Beveridge’s rival: Juliet Rhys-Williams and the campaign for basic income, 1942-55
Beveridge was not able to solve the problem of rent We have never solved Beveridge’s ‘problem of rent’. In fact, we have made it worse and worse
Juliet Rhys-Williams was largely roght in her analysis of the issues but she too did not address the problem of rent.
The issues and the potential solutions have been known to Liberals for over a century. In a market economy, capital accumulation extracts increasing levels of economic rents in the form of land rents, mortgage interest and monopoly pricing from wage earners.
The integration of the tax and benefit system and the progressive taxation of passive income from rents and investment income are a necessary component of measures aimed at reducing inequality.
@Michael – “Are you really saying that you worked for companies where everyone was paid at the same hourly rate?”
We were referring to your use of the word “Should”. There is no real reason why managers SHOULD be paid more than those they are working with.
The idea of a manager being worth more is in part due to the undue emphasis on traditional pyramid hierarchy, I ditched that back in the 1980’s and for my companies adopted a teams and web based structure. In support of a venture capital award, I recruited a MD to do the business management, whilst I got on with product development and marketing, naturally I earnt more than the manager as the manager had no real understanding of the (software) product, upon which the success of the company depended. subsequently, I recruited (and paid) managers on ability not on the what I was paying the rest of the team, of which the salesman probably took home the biggest slice of the profits…
@Michael
I refer you to Roland’s response:
“We were referring to your use of the word “Should”. There is no real reason why managers SHOULD be paid more than those they are working with. ”
A manager may have (need) in their team people with specific skills who DESERVE to be well paid.
A team manager is definitely not superior to such people. And if they are a good manager they won’t be giving out orders – they’ll be ensuring their skilled team has the resources needed to do their jobs properly.
Joseph Bourke,
It seems that Jules Birch in the article you provided the link to is suggesting we need to have a large number of people living in council houses and that the private sector has to have rent controls. I also note that if benefits were linked to earnings there would be a reduced need for extra benefit to pay for the rent.
I don’t know what Liberal Democrat policy you think we have to solve the issue of rent.
Roland and Nonconformistradical,
You both accept the premise behind what I wrote, that some people should be paid more than others because of their skills, but you both don’t seem to think managers should be paid more for doing the managing.
Roland,
I note that the manager you did employ received less money than you from your company. As you were in charge of marketing did any of your sales people have salaries higher than yours?
Nonconformistradical,
Why would an organisation employ a manager who didn’t have managerial skills? It would be a strange organisation that didn’t reward a manager for the extra duties carried out by them and the extra skills used.
You have not named any company that you worked for, where a member of the team had a salary higher than the person who managed them. I would be interested to know the names of such companies and the reasons why they valued the manager less than the person managed.
@Micheal BG
“Why would an organisation employ a manager who didn’t have managerial skills? ”
A daft organisation.
But my point is that I don’t value managers above people with other skills. And good managers treat the rest of their team with respect. They listen to them as opposed to just giving orders.
A government which plans to reduce the welfare benefits of disabled people stuck at home instead of providing resources for good local services for them and for seriously ill people is not the government we hoped for. As Joseph Bourke wrote so tellingly above (25th October 2.29 pm), what is needed is ‘integration of the tax and benefit system, and progressive taxation of passive income from rents and investment income.’ Unless the Chancellor surprises us next week, it begins to look as if our party will have to take up the banner of reducing inequality as well as fighting poverty from Labour.
@michael
Short answer yes several. However, you could say if these people delivered the company would have been worth substantially more and hence I would ultimately benefit from any sale/IPO.
>” Why would an organisation employ a manager who didn’t have managerial skills?”
That is a good question, we only need to watch the Horizon inquiry to see a business that clearly employed executives who didn’t have the necessary skills.
Going back to your reference to executive pay, this has been removed from reality for decades, Tom Peter’s in the 1980s referred to it and noted that even then executives did very little and contributed very little for their golden rewards. This would be in keeping with the Peter principle and the 80:20 rule that executives like to apply to everyone else, without thinking it also applies to them, namely 80 percent of executives are adding negligible value and can actually be removing value fro their businesses…
Personally, unless someone is recommended, I only appoint a manager who has shown an interest in being a manager by getting suitable qualifications (of which an MBA isn’t one).
Hold on! Following my comment of this morning, I see that it may just be that the new government IS prepared to attend to Liberal Democrat (and charities) appeals to help households on the current inadequate rates of Universal Credit. I was amazed to see today’s Guardian has the front-page headline, ‘Budget to make a million poor households better off’, together with an inside headline, ‘Universal credit change will bring extra £420 a year to poorest families.’
Apparently the move is to cap the level of monthly deductions to individuals’ universal credit standard allowance at 15% instead of the current 25%, The Guardian report, by its social policy editor Patrick Butler, says that this would help 1.2 million households, including 700,000 families with children, who at present see between a sixth and a quarter of their monthly payments clawed back. The deductions are taken automatically for a range of debts, including (as our party has condemned) DWP benefit advances.
So this seems like a very slight step forward, which is being welcomed by Save the Children. Our party will of course agree but ask for much more.
That doesn’t actually bring £420 per year to the poorest families. It just increases the period over which debt will be recovered. That’s why they can do it for next to no cost. Good move though.
Nonconformistradical,
There was an assumption to my original statement, that the manager has not only managerial skills but also the same skills of the people they are managing. If that assumption is wrong, then it is possible that an organisation might value the specialist skills above those of the person who is managing them. (I note you still haven’t given any examples.) An example could be a team of surgeons, who are managed by someone who is not a surgeon.
I understand you have a low opinion of managers, but good managers don’t just give people orders. In fact, I have never had a manager who just gave orders. However, there does seem to be a lot of poor managers being employed.
Roland,
I agree with you that executives do not contribution in proportion to the high salaries that they are paid, and if they were replaced with less expensive people the business would not suffer. I also agree that the Peter Principle can be seen in action in many organisations.
Peter Davies,
This policy doesn’t cost the government any money, and it does as you say increase the period required to pay off the debts. However, those affected will have 10% more of their benefit if they had been paying 25% towards paying off their debts.
The policies to solve the problem of rents are exemplified by the experience of Vienna How Vienna Cracked the Case of Housing Affordability
“Because rent control disincentivized the private development of rental buildings, landlords were, for a time, removed from the market for urban land. Consequently prices finally went down, allowing the city to buy land at a much reduced price; often it was the only buyer in the market. The city quickly became the dominant developer of new housing.”
“Even though the city was able to keep land prices down, land and housing still cost money. In the late 1920s, about 30 per cent of Vienna’s annual budget was spent buying land and financing housing construction.”
“Where did that money come from? Mostly from taxes on private property and land. They were levied on private apartment buildings and progressively increased with the assessed value of each unit. Very high taxes were also levied on vacant land, giving owners extra incentive to sell.”
“These policies stripped land speculation out of the marketplace and did so very rapidly. Doubtless, any attempt to replicate the Vienna strategy where faith in the “free market” remains strong would provoke emotional debate. But the gravity of the housing crisis that Vienna faced, and the efficacy of their solution, is beyond dispute. ”
“As both the Vienna model and Henry George would suggest, the problem is forever and always the cost of land. Burdensome land costs, and the rentiers who gain massive wealth by passive land speculation, are the real enemies — not developers, not our homeowners, not our public officials..perhaps we should heed Henry George’s advice: tax land and use the proceeds to build the housing we need.”
Fascinating example of successful provision of housing from nearly a hundred years ago, thank you, Joseph, and from a city probably not generally known for that provision, Vienna. But your conclusion, that land costs and the hoarding of land by ‘rentiers’ are to blame for the insufficient supply in our own country today is well understood by our party. Could we get our new government to consider land and economic rent reforms, as part of a drive to reduce inequality as well as providing means towards the massive increase of housing which they intend? Perhaps we need to discuss, review and develop our own policies rapidly to be able hopefully to influence theirs.
We don’t need to go to Vienna for inspiration, Katharine and Joe. There’s a good old Glaswegian Scottish example. 2024 marks its centenary.
John Wheatley’s ‘Housing (Financial Provisions) Act 1924 was one of the few successes of the first Labour Government. It was supported by some of the more radical Liberals in the hung parliament.
The act built on the Lloyd George Coalition Housing, Town Planning, &c. Act 1919 by increasing government subsidies paid to local authorities to build municipal housing for rent for low paid workers from £6 to £9, and extended the period which the subsidy was paid from 20 to 40 years. It was introduced by the first Labour government and known as the Wheatley Housing Act after John Wheatley, the minister (and Glaswegian MP) who introduced it.
The Prime Minister Ramsay MacDonald dubbed the act ‘our most important legislative item’. It went some way towards rectifying the housing shortage, caused by the disruption of the building trade during the First War and the inability of working-class tenants to rent decent, affordable housing. Wheatley provided public housing to council tenants, as against LLG’s government commitment to privatisation. It subsidised the construction of 521,700 rented homes at controlled rents by 1933, until it was abolished by the National Government.
According to Wheatley’s biography by Ian Wood, the Wheatley houses had “slightly larger dimensions than Neville Chamberlain’s,” and were also the first to be “equipped compulsorily with a bathroom instead of a bath” in the scullery
Lovely new example from a century ago, thank you David! I wonder now how so many houses were built by the Labour government after World War 2. Perhaps their housing minister will look back at the Wheatley Housing Act now and be encouraged to be enterprising!
David Raw,
I can’t see this Labour government providing the money to finance a large building programme of social homes.
Joseph Bourke,
I note that the situation in Vienna was helped by high inflation.
With falling land prices and landlords selling the houses they were renting out the price of houses should fall. Falling house prices would not be popular. It is often said that a buoyant housing market stimulates economic growth.
It would be interesting to see if such a policy as outlined in the article you provided the link to would be passed at a Liberal Democrat Conference. Can you draft a motion and get enough members to support it?
Just to go back to the question of helping the poorest: if the Government’s spending review accompanying the forthcoming Budget does indeed propose to cut the benefits of people with disabilities, physical or mental, or unmet health needs, who are stuck at home and unable to get a job, I trust our party will immediately denounce this and demand a rethink.
I was shocked to read a reported remark of one Labour MP at the weekend, that “There is a strong feeling in No.10 and among many MPs that a tough approach to benefits is not unpopular.” If this Labour Government with its large majority and certainty of at least five years in power should indeed decide vital policies affecting some of the poorest citizens on the basis of popularity rather than principles, it will be time for us to stand firmly as Opposition.
@ Michael B.G. “I can’t see this Labour government providing the money to finance a large building programme of social homes”.
You may be correct, Michael, but can you see this modern day Liberal Democrat Party persuading ‘this Labour Government’ to do it, or even forming a government themselves in order to do so ?
David Raw,
I would not expect the Liberal Democrat Party to persuade this Labour Government to do it. But I would hope that our policies would provide the money to meet what we said we would do in our Manifesto – to build 380,000 new homes ‘a year across the UK, including 150,000 social homes a year’. We also said we would reform the Land Compensation Act 1961, which should make land cheaper for local authorities to buy to build houses on.