Has the right learned to love higher wages? Don’t fall for it

http://www.theguardian.com/commentisfree/2015/jul/07/right-love-higher-wages-tax-credits

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This is what blue revolution looks like. Wednedsay’s budget liberates George Osborne and David Cameron to be themselves. Now they can complete Thatcher’s mission, doing what she never dared. Early disguises are shed, so there is nothing stealthy about their intent. The axe swings in full public view against everything their modern party detests, from benefits to the BBC, from windmills to Whitehall, the arts to local councils, with special attention to the obnoxious young.

Why not? Who will oppose them? Humiliated Labour is on its knees. Osborne taunts Labour: go on, oppose welfare cuts and nail yourselves back in the Miliband coffin marked “On the side of scroungers”. Nothing checks their triumph, with allelujahs from their press, who expect rewards in BBC cuts.

The “low tax, low welfare, higher wage” society Cameron promises is a fabrication and a front for the savagery they will inflict on the low-paid – many of the same “hard-working class” families Cameron woos towards his party. Tax credits are ridiculed as a Gordon Brown bribe, a wasteful burden employers should bear. Cut tax credits and, hey presto, employers will fill the gap. Useful outriders like Boris Johnson, Steve Hilton and Rohan Silva, formerly of No 10, have called in recent days for a living wage. Fair enough, employers should pay a fair wage, not the taxpayer. It sounds like sense – until you see the facts.

If Osborne were serious about pay, he would start by paying a living wage to care workers

Tax credits, a subsidy for the low-paid, keep low-paid households above penury. If someone’s pay rises, tax credits are automatically reduced, so there’s no need to cut them if the genuine intention is to keep the same living standards for the working poor but make employers take the strain.

Here’s how wildly dishonest this is: low-paid workers would need a 26% pay rise to compensate for loss of tax credits. The Resolution Foundation shows how the living wage is set assuming that tax credits and housing benefits are in place. If tax credits were withdrawn the London living wage would need to rise from £9.15 to £11.65. No one imagines that’s about to become the new minimum – currently £6.70. The cuts will just impoverish the already hard-working low paid – and the chancellor will lie about it. If he was serious about pay, at a stroke he would start by paying a living wage to the one million state-financed care workers, many falling below even the minimum rate.

Related: Inheritance tax giveaway to feature in first Tory budget alongside welfare cuts

Nor will raising the tax threshold help the 6 million lowest paid, who already pay no income tax. Virtually all the money will go to others, most to top half households. But Osborne and Cameron presume no one understands the numbers. Those who lose enormous slabs of income will suffer quietly, as before, not organised to rebel. Is there any point at which reports of extreme hardship reach Tory voters? On the bedroom tax Osborne did overreach public tolerance for cruelty – and since it failed in every respect, he may rescind some of it. But no lesson has been learned.

The Telegraph has been pre-fed joyous news that the “green crap” will indeed be cut: targets for green taxes will go, shrinking subsidies for wind turbines and solar panels. The Times whoops at promised cuts to the BBC – hoping for an end to the News channel, gifting Sky a monopoly. But when the BBC warned that cutting a third of its income meant closing BBC2, BBC4 and local radio, the government appeared to take fright: their own heartland wouldn’t tolerate that. But we shall see how effectively Murdoch hits back.

Child poverty has been abolished, or at least its measurement, though children again bear the brunt of cuts. The 12% of families with more than two children may lose credits (Cameron has three, Iain Duncan Smith has four). The most vulnerable young, 18- to 21-year-olds without supportive families, will lose housing benefit. The YMCA is horrified at the fate of those they care for, evicted from home, who will join many more homeless and the sofa surfers. Yet because middle-class and functioning families keep their children into their late twenties, Cameron can pretend lost young people fecklessly abuse the state and should “go home”.

As the welfare state is stripped to a skeleton, the end of social housing is accelerated when housing associations are forced to sell off homes at a £104,000 right-to-buy subsidy. To pay for that, councils must sell high-value homes – so two social homes vanish for each one sold. Yet home ownership is falling, while the post-2010 buy-to-let boom, propped up by the madness of tax-deductible mortgages, sees 15% of loans go to 2 million private landlords.

The increase in inheritance tax exemption to £1m is a gift for just the 6% wealthiest estates. Corporation tax will fall to the lowest among the G20 nations, causing cutthroat tax avoidance competition, far more important than the budget’s other anti-avoidance gestures. Stealing Miliband policies, Osborne may squeeze some non-doms and cut pension tax reliefs of the richest. He may boast he has leeway to cut other departments a little less, but he still has to plug suppurating NHS finances. Local government should beware his devolution trojan horse, as devolving the axe is his prime purpose.

Related: Business groups reject PM's plan to replace tax credits with higher pay

This budget is set to be the most regressive, hardship-inducing, inequality-generating, public squalor-causing, global-warming budget of modern times – worse even than his growth-strangling 2010 budget. The same recipe will do the same again. His “march of the makers” went backwards, manufacturing down to 10% of the economy, financiers becoming risk-happy again.

It’s hard not to despair. Those of us brought up in the postwar years were taught history as the story of the onward march of social progress towards greater equality and better life chances. How unbearable to live with the backward march that began in the early 1980s, was halted during the Labour years, and now reverses faster than ever.

Yet this post-victory exultation is a traditional time of peril when hubris beckons governments to go too far. As the budget is cheered to the roof by their own benches, Osborne and Cameron may think they can rely on an infinite well of public callousness, indifference or stupidity. If so, they may badly underestimate the voters. Cameron mistakes his less than landslide result if he thinks voters share his party’s blue revolutionary zeal. Many of these budget horrors will combust: slow burners perhaps, but incendiary nonetheless.