Labour and Tax Credits

The decision of the House of Lords to delay the government's proposals to reduce Working Tax Credits, was undemocratic. But, then all actions by the House of Lords are undemocratic, by definition, because it is an unelected institution. Its action now is just as undemocratic, therefore, as when, in the past, stuffed with Tory hereditary peers, whose power went back to feudal times, it was used to vote down any progressive measures agreed in the House of Commons. The Tories and the Tory media want to focus on these constitutional issues, so as to divert attention from the actual issues that affect millions of working people, arising from the proposal to remove those Tax Credits.

Little time need be wasted on the constitutional issue. If the Tories want to propose the only rational response to the undemocratic actions, and nature of the Lords, i.e. to immediately abolish it, then socialists, social democrats, and even consistent bourgeois democrats will be the first to congratulate them. Such abolition is more than two centuries overdue, and should be just part of other long overdue democratic measures, such as abolition of the Monarchy. The Tories should either do that, or stop whining.

The Tories proposals in respect of Tax Credits had to be opposed, not because Tax Credits are themselves something that should be supported, but because the Tories proposals required an immediate, and severe attack on workers living standards. From a Marxist perspective, Tax Credits are not defensible. Tax Credits, like all other in-work benefits, are a direct subsidy to low paying employers. They tend to hamper the process by which inefficient small capital is replaced by larger more efficient, more profitable larger capital, which is able to pay higher wages, and provide better conditions.

The Tories stated aim was to remove this subsidy to those low paying employers, and to replace it with a higher Minimum Wage. However, all of the studies that have been undertaken, have shown, contrary to all of the assertions that the Tories have made over recent days, that the increases in the Minimum Wage, in tax allowances, in the provision of free childcare and so on, would still have left the average family more than £1,000 a year worse off, more than 3 million people around £1,300 a year worse off, and some people around £1,600 a year worse off, even by 2020. Because all of these other measures do not take full effect until 2020, whereas the removal of Tax Credits happens straight away, from April next year, the immediate effect on all these families would be much worse.

Its not the removal of Tax Credits that Marxists oppose, but this immediate, and significant attack on workers' living standards. The Tories dress up their proposals with talk about the need to reduce debt, so as not to burden future generations, but all they are doing is reducing public debt, by inflating private debt even further! Private debt is already about twice the figure for the public debt, as a result of thirty years of falling wages, and the encouragement of private debt to finance housing, university tuition and so on. If the Tories really wanted to reduce this debt, they would have introduced a much higher Minimum Wage immediately, so that workers did not have to make up the difference each week between their income and expenditure by resort to credit cards, and pay day lenders, and so that they could begin to pay down some of the accumulated private debt that has arisen over thirty years.

And that should be the position that Labour adopts. Rather than allowing the Tories to put the debate on the ground of the retention of Tax Credits, and thereby be able to continually ask Labour how it would make up the £4 billion cost, Labour should instead make the spearhead of its attack a massive rise in the Minimum Wage. If the Minimum Wage were raised, not to £9.20 per hour, but immediately to £11 per hour, with the tax threshold raised to £20,000, then the issue of Tax Credits would melt away. If, the Minimum Wage were raised to £15 per hour, with a corresponding rise in the tax allowance, then this would mean that Housing Benefits, could also be abolished.

In the meantime, the savings made on providing Tax Credits, Housing Benefits and other such subsidies to low paying employers, and to landlords, could be used to ensure that unemployment benefit, and sickness benefit was raised to a decent level. The Tories say that work should pay so let them prove their commitment to that principle!

But, there is another issue at stake here. Wages, Marx demonstrates, are the phenomenal form of the value labour-power. That is they appear as though what capital is buying is labour, or that they are the price of labour. But, this appearance is not the reality. For one thing, Marx says the concept of a “price of labour” is irrational, as irrational as a yellow logarithm, because labour has no value. Rather labour is value, its essence and its measure, and so to ask what the price of labour is, is no more rational than to ask how long is length?

What workers sell as a commodity is not labour, but labour-power, the ability to perform labour, and thereby to create new value. The value of this labour-power, as with any other commodity is the labour-time required for its production, which, under capitalism, amounts to the same thing as the amount workers have to pay to buy all of the things required for their existence, and the production of new generations of workers to replace them.

As Marx describes, if workers work beyond the normal working day, then they need more food and so on to replenish their ability to work. Beyond a certain length of day, at any given level of intensity, no amount of additional food and so on, will suffice to cover the depletion of their bodily resources. Workers will wear out more quickly, die sooner and so on, and so the actual value of labour-power will rise, so that wages themselves have to rise, which causes the rate of surplus value, and the rate of profit to fall.

However, the same is not true in the other direction. If objectively, the normal working day is 8 hours, given a certain intensity of labour, but workers only work for 6 hours, or 4 hours, this will not reduce the value of labour-power. The worker does not stop living during the time they are not working, and so they will still need to eat as much, still need to pay for somewhere to live, still need to have clothes to wear, education for their children and so on, whether they work for the normal working day of 8 hours, or a reduced working day of 4 hours! The value of their labour-power will not have changed, and nor therefore, should their wages.

If a slave master owns a slave, the slave will need to consume as many of these commodities, whether they work for 8 hours or 4 hours. If the slave owner fails to provide the slave with these necessary means of subsistence, the slave will lose their ability to work, and eventually die, which will appear as a direct loss of wealth to the slave owner. Similarly, a capitalist who buys a machine has to pay the owner of the machine its value, its price of production, whether he intends to use it for 8 hours per day or 4 hours per day. If the capitalist says “I only want to pay you £500 for your machine, rather than the £1,000 which is its price, because I only intend to use it for half the time its designed to be used”, the machine maker would look at the capitalist as though they were nuts.

“I am selling you a commodity,” would say the machine maker. “If you choose to only use it for only half the time it is designed to be used, that is your problem. Either pay the price, or don't buy it.”

The same should be true for the sale of labour-power. Labour-power has a value based objectively upon its reproduction cost, and the normal working-day. If capital does not use the labour-power for the full extent to which it is designed to be used that is the problem of the capitalist. The minimum wages that the worker requires to cover the reproduction of their labour-power, is still the same.

Consequently, this should be taken into consideration when discussing and setting the level of the Minimum Wage. The Minimum Wage could be set at £50 an hour, but if a worker only, on average, was provided with 2 hours a week of work, by the employer, this would still be inadequate to reproduce their labour-power, to buy the food they need, to pay the rent and so on.

Either the Minimum Wage should be set at a minimum weekly or monthly amount, irrespective of the number of hours worked, or else it should be set as a minimum daily amount, with the right of the worker to register as unemployed for those days of the week when they are not employed.