A bullying Budget

Chancellor George Osborne today delivered a budget that showed the striking cuts and welfare changes that the Conservative Government are to make over the next five years to trim the debt and deficit.

But while the savings and the reports of continued economic growth might seem as though Britain is doing well once again, compared to our recent recession and the overbearing problems in Europe, this progress is coming at a great cost to many of the poorest and most vulnerable in the country.

Unbound by the shackles that were Lib Dems, Osborne unveiled the first step towards an eye-watering £37 billion in cuts over the course of this Parliament – making political and financial gain out of the people who should be helped most.

It was benefits that bore the brunt of the Chancellor’s wrath, with £12 billion being wiped out from the people’s pockets.  The tax credits system, introduced by Labour in 2003, was eviscerated today – with the threshold at which they can be claimed almost halved, limited to benefitting only those with two or fewer children and an overall freeze on levels.  Indeed, nearly all working-age benefits (for those 25 or older) have been frozen, leaving those struggling with the costs and strains of modern life to fall behind as inflation drives costs ever higher.  The benefit cap per household has also been slashed by almost a quarter to £20,000 per year outside of London.  The Conservatives are determined to get people into work, and breaking the strong reliance of many on benefits might be the way to do that, but these massive changes will hurt millions of families for the sake of perhaps a few thousand jobs.

All this makes the olive branch that could have been, the heralded introduction of an official “National Living Wage”, all the more flimsy.  From April what was the minimum wage will now be set at £7.20 per hour – which is a 70p rise.  This is the policy that the Conservatives are trying to make the most hay out of, not only for its unquestionably positive step towards improving pay for working people but also because their pledge of raising this Living Wage to £9 an hour by 2020 trumps Labour’s election promise which was set to £8.  And it would be a gestured to be roundly applauded, but the drop in tax credits means that the rise won’t mean much to the many, many people claiming the two.  It’s also worth noting that this “Living Wage” is still below that set by the independent Living Wage Commission, which takes account of the cost of life in Britain today when setting its figure – which is currently £7.85 per hour.

So while those on benefits have been targeted, and those in work have been given the bait and switch, surely young people would be given a boost?  Not quite.  Student maintenance grants, which have allowed many of the poorest students to afford university without the burden of loans, have been scrapped while housing benefit for 18-21 year olds has been removed with the idea that it will encourage them into employment.  Young people don’t even have the luxury of being kept in line with the new “Living Wage” which is for over 25s only.

Despite the shock that many feel this budget is, one thing that the Tories cannot be slighted for is deserting their manifesto – as most of the key pledges we heard today come straight from it.

Raising the income tax threshold to £12,500, taking those on the minimum wage out of income tax, was in the manifesto.  Raising the inheritance tax threshold to £1 million was in the manifesto.  Increasing the NHS budget by £2 billion this year and by a total of £8 billion by 2020 was all in the manifesto too.  These give the spoonful of sugar to help the medicine go down.

As one Twitter comment put it, “Tories gonna Tor” – the Conservatives are ideologically set to reduce the financial involvement of the state in their people’s lives, only taking the money raising steps they are (£47.2 billion in tax rises) with the goal of slashing the enormous debt that hangs over our collective heads.  There are indeed large swathes of the electorate that will likely be pleased with this budget, as there’s business incentives (with the phased reduction of corporation tax), bank punishments (a new levy on bank profits and more attempts at stopping tax avoidance) and no real tax hikes on the general populace.  It’s a budget that will delight the Tories and may even be backed by some of the more fiscally right-wing voters of the other parties.  It’s a budget that was allowed to happen because of just that – with listless Labour and the lost Lib Dems on the other side of the argument.

But the issue with this is the Tories still aren’t doing enough to justify the damage it’s causing to people.  Osborne is now forecasting a surplus in the budget by 2019/20, which is a year later than he announced in March’s budget and a full five years later than he promised in his first budget in 2010.  The job-raising target this Parliament is set at 1 million, which is only half of what was promised in the Conservative manifesto.  Even though our economy is set to grow at between 2 and 3% a year, it’s once again going to be a recovery and evolution that people won’t feel in their pockets.  That’s why a more gradual and more humane return to fiscal balance would be better, getting us out of debt more slowly but making sure people can live their lives in the mean time – and surely that last point is what small-state Conservatives would like for us all.

Only “just under half” of the £37 billion Government cuts programme was announced today, with the Government department belt-tightening on course for autumn.  With the NHS ring-fenced and defence spending mandated at 2% of GDP to keep in with NATO, its worrying thinking about where else the axe might fall.

This was a bullying budget, where the first Conservative majority in nearly twenty years finally got round to enacting their agenda of unravelling the support structure that was the Labour welfare state and started pushing the pendulum back towards business.  But that folks, is democracy, and the people spoke loudly in their favour on May the 7th.  I just wonder will they be quite so loud after five more years.

You can find a breakdown of the key Budget policies here and an independent OBR report on what it will mean for the economy here.

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