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Labour's Embrace of Welfare Reform Is a Victory for the Right

10/06/2013 17:50 BST | Updated 07/08/2013 10:12 BST

The Labour Party leadership's embrace of welfare reform - set out in Ed Miliband's recent keynote speech on welfare to a select audience in Newham, East London - marks a victory for the right and describes another benchmark in the political degeneration of the party that created the welfare state.

From the moment the current global economic crisis hit these shores with the collapse of Northern Rock in September 2007, the singular objective of the right has been to turn what was and is a crisis of private greed into a crisis of public spending. It was a campaign given political credence with the election of the Tory-led coalition government in 2010, unleashing a political and economic assault on the poorest and most vulnerable section of society under the rubric of austerity.

In economic terms austerity is doomed to failure. The empirical and historical evidence leaves no doubt that in periods of economic downturn a government must spend more not less in order to re-inject the demand sucked out by the refusal of the private sector to invest as profits tumble

A story that appeared in the Express in April revealed that the government's own Office for National Statistics had calculated that UK corporations, other than banks, were sitting on a combined surplus £318 in the final quarter of last year - up from £304 billion in the previous quarter.

This is an investment strike by any other name, which the government has responded to with tax cuts for the wealthy and other inducements to invest in the shape of subsidies, grants, tax breaks, and so on. Picking up the tab for all this has been the poor and those reliant on the welfare state and public services in the form of swingeing cuts to public spending.

If we factor in the £375 billion pounds the government has thus far fed to the banks in the form of Quantitative Easing since 2009, what we have seen over the past five years of the economic crisis is the transfer of wealth from the poor to the rich on a grand scale.

The fact that the government has been able to get away with this without meeting significant or effective resistance is a consequence of two processes that are interlinked. The first is the traction and persuasiveness of the simplistic analogy that the Tories and their bag carriers in the right wing press have drawn between a national economy and a household budget.

Yet as the US economist and Nobel laureate Paul Krugman reminds us - unlike a household budget, when it comes to a national economy one person's spending is another person's income. Under the aegis of austerity, if no-one is spending then no one has any income, resulting in the contraction of demand leading to the stagnation we are currently witnessing.

The second of these two interlinked processes is a government initiated campaign of demonisation against the unemployed and those claiming benefits, resulting in the creeping criminalisation of poverty. Shifting the responsibility for poverty onto its victims - away from the vicissitudes of a free market economic system that could not function without creating poverty - has been one of the most vicious and callous policies of any British government in modern history. Sadly, as stated, it has met with inordinate success, reflected most recently in Ed Miliband's speech on welfare reform, which amounted to the Labour Party leadership's abandonment of the principle of social solidarity that underpins the welfare state.

The specific contents of Ed Miliband's speech set out a pledge to in building homes in order to bring down a housing benefit bill that currently sits at £95 billion annually. Set against the paltry £4.5 billion the government devoted to building affordable housing last year, it is inarguable that the current expenditure in housing benefit is unsustainable. However its size indicates an out of control private rental market on the back of a three decades long housing crisis.

While any pledge to address this housing crisis is welcome, the lack of any policy on rent control to deal with exorbitant rents charged by private landlords - the real beneficiaries of housing benefit - is instructive. Also instructive, not to mention disappointing, is the lack of a firm pledge by Labour to repeal the present government's iniquitous Bedroom Tax if and when elected, with its disproportionate impact on the disabled.

Listening to Ed Miliband's capitulation to the right on welfare reform, the words of US billionaire investor Warren Buffet immediately sprang to mind:

"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."