Labour, the Living Wage, and Child Benefit

The Leader of the Opposition wants to institute what he calls a living wage. This is well-intentioned but demonstrates a colossal ignorance of economics.

Ed Miliband

Not only does Ed Miliband demonstrate his ignorance, but there are better and more effective ways to bring about what he wants. The living wage is not exactly a new concept; Newcastle City Council has recently announced it is to pay all its staff a living wage. Doubtless all councils in the country could and perhaps will follow in its footsteps, and so might the government. Does anyone see the fallacy here?

The Government and local government can always find more money; theoretically the Government can just print money or mint coin or create it electronically, or it could were it not for the Treaty of Maastricht.

At the end of the day our rulers can resort to heavier national or local taxation, or more borrowing, which may help a few lowly paid employees, but it will also reduce investment in the private sector, and of course push up prices.

What about the private sector though, especially what about small businesses? Can your local burger bar really afford to pay the living wage for someone who clears the tables or for the person who does the washing up? Check this out before you answer yes.

Jobs of this nature are tedious, soul destroying and numerous other unpleasant adjectives, and clearly the people who do them deserve some relief or meaningful reward. One way to do this would be to institute not a living wage but a basic income. Although Ed Miliband would not even be able to conceive this, it is a concept that is worth considering. Alternatively, the government could reduce taxation. Consider the following, according to the BBC last month, when you fill up your tank for £60, for instance, a staggering £35 goes to the Government: £25 in fuel duty and £10 on VAT. The latter of which goes where? Basically it goes to the fat cats of Europe, that body that rules us by diktat. Don’t forget though that it isn’t only you paying tax on your petrol, it’s everyone who wants to get from A to B, including people delivering parcels and things, and most specifically food. Reduce or totally abolish taxation on fuel, and prices will plummet. Ah, but we can’t do that, they say. Don’t you believe it. If this is a case of roundabouts and swings, we would all gain a lot more on the swings than we would lose on the roundabouts.

The other big financial issue at the moment is child benefit. The argument is now being made out that this should be cut for better off families with the implication that there will be more to distribute or redistribute to poorer families. Obviously this argument has a great appeal to poorer families, and it is designed to, but no one should have any doubt that what will really happen is the Government will take with one hand but not give with the other.

The big thing about child benefit is that it is paid directly to mothers, not to both parents, not to fathers, but to mothers. If the Government can’t understand why that is important, the women of this country will, even middle class ones.

[The above op-ed was first published November 6. 2012; the original wasn’t archived.]

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