Owen Jones: It's essential to fight the divisive rhetoric of 'shirkers' and 'strivers'

It is right to be disturbed by the psychology of a politician who uses millions of working poor and unemployed people as a political football. That is exactly what George Osborne is doing with his 1 per cent cap on spending increases on benefits and tax credits over three years – which, in real terms, is a cut. That six out of 10 of those who will suffer are in work is irrelevant to the policy's architects: here is an attempt to divide people with rhetoric of "strivers" versus "shirkers". The hope is that, by opposing such a cap, Labour can be painted as the unapologetic champion of the widescreen-TV-watching, multiple-child-producing, closed-curtained-home-dwelling "shirkers".

That a gang of multimillionaire class warriors is intentionally attempting to turn poor people against each other for political advantage is as shameful as the often grubby world of politics gets. When even the mildest suggestion is floated that Britain's booming wealthy elite should cough up a bit more, the Tories slap it down as "the politics of envy", and yet they shamelessly attempt to direct the resentment of struggling low-paid workers towards the supposedly luxurious conditions of their unemployed neighbours. Has there even been such a concerted, deliberate attempt by a postwar government to turn large chunks of the electorate against each other? Thatcher would blush.

It surely represents the most aggressive attempt to drive down the living standards of the poor since the second-ever Labour government was destroyed in 1931 after an attempt to slash wages and payments to the unemployed. Disastrously, it will further suck desperately needed demand out the economy. Austerity has proved self-defeating (as the critics, smeared as "deficit-deniers", warned) and it is the working poor and unemployed who pay the price.

Just look at what this ideologically crazed cabal has done to our economy. We are in the most protracted economic crisis in modern times; the economy is still 3.1 per cent below the pre-Lehman Brothers crash peak, and analysts warn that an unprecedented triple-dip recession is approaching. A "lost decade" is upon us. As the catastrophe unleashed by this Government worsens, so the campaign to redirect anger to our neighbours must intensify.

To be clear, the situation facing the working poor and unemployed people was already bleak. The Resolution Foundation predicts that, in 2016, wages will be no higher than they were at the turn of the century. The poorest 10 per cent face a slide in living standards of 15 per cent by the end of this decade. Unlike the economy, food banks are booming like never before. Osborne claims his measures are to make work pay but, given that the majority of people in poverty are in working households, this is a nonsense.

There is now talk of the Labour leadership taking a stand against Osborne's cuts. It comes after backbencher John McDonnell sent a desperate plea to his fellow MPs that, "instead of falling for this grubby trap, let's take them on". Labour's response to the onslaught against the welfare state has been weak. While the Tories can claim a clear message, Labour's top team has risked looking hopelessly muddled and cowardly.

If the Labour leadership does show courage, it must defend the interests of the battered working poor without fuelling the sense that unemployed people are "shirkers". According to the Joseph Rowntree Foundation, there are now 6.5 million unemployed or under-employed people, all looking for work that does not exist. Neither are unemployed people a static group: at least one in six of us has claimed Jobseeker's Allowance in the past two years, and millions are trapped in a cycle of low-paid work and joblessness. And as a recent report from the foundation showed, the widespread belief in "three generations who have never worked" is a total myth. "Despite strenuous efforts," reads the report, "the researchers were unable to locate any such families."

To be fair to the Labour leadership, the political space for challenging welfare cuts is limited indeed. While a YouGov poll in September revealed that more than half opposed further welfare cuts, there is a Government and media-fuelled pandemic of hate against "scroungers". There urgently needs to be a campaign led by trade unions and charities to challenge myths and give a voice to those affected – challenging the all-pervasive extreme caricatures of layabouts.

Such a campaign needs to push alternatives, too. It is often alleged that the original plans of the Beveridge Report have been subverted, but it was published at a time of near-full employment. In the 35 years after its publication, unemployment rarely topped a million. Long-term unemployment alone was higher last year than all forms of unemployment in the early 1960s – the damning legacy of the trashing of British industry from the 1980s onwards. Most do not realise that by far the biggest chunk of welfare spending is on elderly people. And if Beveridge's original aims have been corrupted, it is because the welfare state has become a subsidy for landlords charging extortionate rents and employers paying poverty wages.

Today, Labour unveils plans that move towards German-style rent controls. If combined with a council house building programme – creating jobs and stimulating the economy – the £21bn wasted on housing benefit (which should be renamed "landlord subsidy") would be reduced. Similarly, the number of working families receiving working tax credits has risen by half since 2003 – because of a surge in low-paid jobs. A living wage would bring down spending on tax credits, and increasingly in-work benefits like housing benefit and council tax benefit. Improving workers' rights stuck in the Victorian era would allow working people to demand better wages from their employers, too, at a time when big corporations sit on a £750bn cash mountain.

Osborne has set a trap made out of the livelihoods of the poorest people in British society. Labour must call his bluff, but a campaign challenging the Government's demonisation campaign must create the space to do so. Let this ruse backfire – and expose the inhumanity of a Conservative Party determined to make the poorest pay for the economic calamity for which it is responsible for.