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| The Guardian view on the budget: low tax, low welfare, high pay – but also higher poverty | The Guardian view on the budget: low tax, low welfare, high pay – but also higher poverty |
| (about 14 hours later) | |
| During financial year 2015/16 thus far, budgets are a quarterly rather than an annual event. Wednesday’s set-piece in the Commons was not in any respect an economic necessity. The same chancellor had, after all, delivered another budget less than four months before, and Britain’s financial circumstances have barely altered since. For all the salutations paid to Britain’s recovery, a relatively modest rebound after a great recession plods on: the GDP growth forecasts George Osborne read out were a string of 2.4%s all the way to the end of the decade. None of this has changed materially since the spring; what has is a shock election result. | During financial year 2015/16 thus far, budgets are a quarterly rather than an annual event. Wednesday’s set-piece in the Commons was not in any respect an economic necessity. The same chancellor had, after all, delivered another budget less than four months before, and Britain’s financial circumstances have barely altered since. For all the salutations paid to Britain’s recovery, a relatively modest rebound after a great recession plods on: the GDP growth forecasts George Osborne read out were a string of 2.4%s all the way to the end of the decade. None of this has changed materially since the spring; what has is a shock election result. |
| Mr Osborne did the traditional chancellor thing, by making a post-election move to jack up taxes, concentrating on obscure levies that no one had thought to ask him to rule out raising before Britain voted. Less conventionally, there was a little post-election softening on borrowing and spending. The experts had warned that his wildly austere pre-election promises would not be delivered without a collapse in services, from colleges to care homes. Until polling day these fantasy plans made for an arresting contrast with the caricature of a spendthrift Labour party; with the election out of the way, Mr Osborne allowed the day the books will be balanced to slip by another year, creating room for somewhat smaller cuts. One immediate consequence – and a first shot in the Osborne campaign to lead the Tory party – came when the chancellor tickled the tummies of his backbenchers, and committed to keep defence spending at or above 2% of GDP, a commitment he has doggedly resisted making until now. | Mr Osborne did the traditional chancellor thing, by making a post-election move to jack up taxes, concentrating on obscure levies that no one had thought to ask him to rule out raising before Britain voted. Less conventionally, there was a little post-election softening on borrowing and spending. The experts had warned that his wildly austere pre-election promises would not be delivered without a collapse in services, from colleges to care homes. Until polling day these fantasy plans made for an arresting contrast with the caricature of a spendthrift Labour party; with the election out of the way, Mr Osborne allowed the day the books will be balanced to slip by another year, creating room for somewhat smaller cuts. One immediate consequence – and a first shot in the Osborne campaign to lead the Tory party – came when the chancellor tickled the tummies of his backbenchers, and committed to keep defence spending at or above 2% of GDP, a commitment he has doggedly resisted making until now. |
| Related: Taking the measure of the ‘national living wage’ | Letters | Related: Taking the measure of the ‘national living wage’ | Letters |
| So Mr Osborne has got a little harder on taxes, a little softer on services, but there is a third field in which he has been true to his pre-election word. Notoriously, he had refused to share with the electors exactly which social security benefits he planned to cut while he was asking them to return him to the Treasury, but he did vow to earmark reductions of £12bn, and when he finally got specific on Wednesday that is exactly what he did. These are savage cuts, which will greatly impoverish many low-paid workers and disabled people, and most particularly poor children. But the nation and much of the media was distracted by the inevitable budget surprise. To persuade the house and the country to avert their eyes from this raid on the vulnerable he needed some serious shock and awe. And he shrewdly calculated that for a Tory chancellor to commit to what he described as “a national living wage” would be every bit as ear-catching as hearing the late Mary Whitehouse coming out with a run of sexual expletives. | So Mr Osborne has got a little harder on taxes, a little softer on services, but there is a third field in which he has been true to his pre-election word. Notoriously, he had refused to share with the electors exactly which social security benefits he planned to cut while he was asking them to return him to the Treasury, but he did vow to earmark reductions of £12bn, and when he finally got specific on Wednesday that is exactly what he did. These are savage cuts, which will greatly impoverish many low-paid workers and disabled people, and most particularly poor children. But the nation and much of the media was distracted by the inevitable budget surprise. To persuade the house and the country to avert their eyes from this raid on the vulnerable he needed some serious shock and awe. And he shrewdly calculated that for a Tory chancellor to commit to what he described as “a national living wage” would be every bit as ear-catching as hearing the late Mary Whitehouse coming out with a run of sexual expletives. |
| The substance is a real, if unspectacular, rise in the minimum wage for workers aged over 25. Such is the concentration of young workers on poverty pay, that this age limit dilutes the effect quite a bit, but – considered in isolation – this move would be worthwhile. That is so, even though this isn’t a living wage in the real sense of a pay rate carefully calculated in line with what workers need to live on. Mr Osborne’s proposal is instead for a rebranded minimum wage, starting at £7.20 an hour next year, less than the real living wage of £9.65 in London and £7.85 elsewhere. Crucially, these numbers are calculated on the assumption that families can access the very tax credits that were being butchered while all attention was on Mr Osborne’s “living wage”. Before the budget, the Resolution Foundation had warned that deep cuts in tax credits would push the London living wage up to well above £11. | The substance is a real, if unspectacular, rise in the minimum wage for workers aged over 25. Such is the concentration of young workers on poverty pay, that this age limit dilutes the effect quite a bit, but – considered in isolation – this move would be worthwhile. That is so, even though this isn’t a living wage in the real sense of a pay rate carefully calculated in line with what workers need to live on. Mr Osborne’s proposal is instead for a rebranded minimum wage, starting at £7.20 an hour next year, less than the real living wage of £9.65 in London and £7.85 elsewhere. Crucially, these numbers are calculated on the assumption that families can access the very tax credits that were being butchered while all attention was on Mr Osborne’s “living wage”. Before the budget, the Resolution Foundation had warned that deep cuts in tax credits would push the London living wage up to well above £11. |
| Minimum wage workers married to spouses on decent pay will have reason to thank Mr Osborne for a rise. But for poorly paid grafters in more penurious families, cuts to benefits and tax credits will overwhelm the gain: the net losses will frequently reach the high hundreds of pounds a year, and occasionally the low thousands. For all the talk of rewarding hard work, the government is going to start snatching tax credits back at lower levels of earnings than presently, and will also snatch them away faster too, deepening the poverty trap. Workers who fall sufficiently sick to satisfy an increasingly harsh bureaucracy that it simply isn’t feasible to class them as jobseekers are facing a benefit cut of around 30%, the sort of retrenchment more often associated with Greece. And where China once operated a one-child policy, Mr Osborne is now imposing a two-child rule on the poor. Tax credits will no longer be paid for third and fourth children, dismissing them as a luxury indulgence on the part of the parents, as opposed to young human beings with their own material needs and their own rights. | Minimum wage workers married to spouses on decent pay will have reason to thank Mr Osborne for a rise. But for poorly paid grafters in more penurious families, cuts to benefits and tax credits will overwhelm the gain: the net losses will frequently reach the high hundreds of pounds a year, and occasionally the low thousands. For all the talk of rewarding hard work, the government is going to start snatching tax credits back at lower levels of earnings than presently, and will also snatch them away faster too, deepening the poverty trap. Workers who fall sufficiently sick to satisfy an increasingly harsh bureaucracy that it simply isn’t feasible to class them as jobseekers are facing a benefit cut of around 30%, the sort of retrenchment more often associated with Greece. And where China once operated a one-child policy, Mr Osborne is now imposing a two-child rule on the poor. Tax credits will no longer be paid for third and fourth children, dismissing them as a luxury indulgence on the part of the parents, as opposed to young human beings with their own material needs and their own rights. |
| Put this together with a hideously complex new rule to ensure that those who come from £1m homes can inherit them tax-free, and instead of an agenda for social mobility, you have an agenda to bring to mind the words of a Victorian hymn: “The rich man in his castle/The poor man at his gate/God made them high and lowly, and ordered their estate.” Though welcome, a higher minimum wage will not create sufficient opportunity to compensate for the collateral damage done in the chancellor’s war on the welfare state. It provides unusually cunning political cover, but this will eventually be blown away by the experience of the cuts. Because, in the end, the truth has power. |