I always enjoy doing the Radio 2 budget commentary, but there's an implicit challenge in it. As has been the case for some years now Mark Littlewood and I walk into the studio with Jeremy Vine just as the Chancellor is sitting down and have to give an off the cuff reaction having only the speech to go on and having had no chance at all to see any of the notes. And, this being Radio 2, what's needed is a headline reaction.
On Wednesday my reaction was that this would be a budget that would significantly increase inequality, with some trophy baubles for the wealthiest, like inheritance tax reform, but swingeing cuts that would impact the most on the poorest - and this despite changes in the national minimum wage that I had only just heard.
The assessment was correct. For those who have not seen it this is the IFS distributional impact:
I am aware that the Treasury says this ignores free childcare and the impact of the increase in wages. I have two responses: first one cannot live off free childcare. Second, no one knows who will get the wage increases. For the under 25s they might be a disaster. For immigrant labour they might be great news. For 26 year olds they're almost certain to spell unemployment and poverty just as they might have the responsibilities of childcare arriving. So I don't always buy the IFS line on tax, but on this sort of thing they get the data right, and confirmed my on the spot analysis.
All that in turn also suggests that Martin Wolf is right when writing of this budget this morning in the FT, where he says:
Yes, the chancellor pulled off a political coup de théâtre. He also used adoption of the national living wage as a way to justify cuts in support for the working poor. Yet this is bad policy. It subverts careful economic analysis. It is a classic example of intrusive regulation. It fails to protect the bulk of the losers from cuts in tax credits. It will surely lead to a loss of jobs. And it will not do anything significant to reverse the UK's failure to increases underlying productivity. Good politics do not necessarily lead to good policies. This is a case in point.
I am beginning to be quite strongly reminded of the March 2012 pasty tax. Osborne sat down that day thinking he's pulled off another coup. And it unravelled. There is, I admit, no pasty this time, but there is something much worse, and that's a core component at the heart of his supposed new political contract that just will not work.
You can't build national prosperity and foster poverty at the same time, but that's what Osborne's doing.
You can't tackle the issue of immigration and make the UK one of the most attractive destinations for migrant labour at the same time.
You can't build an economy on condemning the under 25s to low pay and living with their parents, knowing that at 25 they'll be priced out of a job by the up and coming 18 year olds.
You can't build productivity by forcing wages up and more into unemployment that you are unwilling to support.
You can't create a minimum wage and expect that it will be enforced when you don't supply the resources to do so.
You can't make such changes without consultation.
If you do you risk your strategy going wrong, very quickly.
This one will, I suspect. And it will be the poverty that it will expose millions of children too that will create that change. Mum's who can't feed their children eventually get very angry. I suspect they will when millions are to be punished in the way George Osborne plans for the simple fact of being amongst the poorest in the country.
Although, let's be candid, right now no one is offering much of an alternative.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
You very neatly sum up a lot of issues that the mainstream ignores – even the Guardian. How the new ‘living wage’ is portrayed as a balance to Tax Credit cuts is just PR – there is no guarantee that the jobs market WILL pay the living wage. Or is this some sort of perverse ruse to kick more expensive over 25’s out of work so that employers get cheaper under 25’s so that the Government can tell us ‘yoof’ unemployment is going down? And as you say, it gives a green light to business employ immigrants. They may end up displacing problems rather than solving them.
My only worry is that the Mum’s you speak of may end up blaming someone else as Osbourne’s PR machine goes into overdrive – immigrants for example or even the Scottish!!
And why not – as the late Frank Zappa said about modern life ‘Absurdity is the new reality’.
Osbourne must get home at night, put his feet up with a glass of the finest wine and laugh himself silly at how much fun he is having at our expense. Policy is obviously a playground to him.
Eventually the truth outs, Pilgrim
As far as I can tell, ‘Mums who can’t feed their children’ will have their children removed and taken into care.
If you take a look at families with three or more children, living in council accommodation – the cheapest housing of all – and apply the benefit cap, the numbers fall short. That is to say: ignoring all deferrable expenses like hygiene and clothing, their rent and heating will push them into a ‘calorie deficit’.
At which point, the local authority social services are legally obliged to intervene.
The figures are worse for families with a ‘wage earner’ on a zero-hours contract than for a family entirely dependent on benefits, once you factor in a week or two without a shift, month after month, without effective support from their benefits office.
Most local authorities will evict a family if they build up rent arrears, and declare them ‘intentionally homeless’. This is actually unlawful, as rent arrears due to an involuntary and unavoidable lack of money do not pass the legal test of ‘intention’ – but councils are doing it anyway.
Now for the bad part – or rather, the part that I regard as ‘worst’, and I may well discover some new depth – the financial incentives.
It is extremely expensive to place a child in residential care, and every local authority faces bankruptcy if they are forced to intervene and take large numbers of children into care.
However, that’s a statutory duty and they act lawfully in doing so.
The cost-effective option of providing food or financial assistance – and that assistance will be necessary as the cost of living continues to rise while lower-quartile incomes are still falling – to provide support so that the family continues to provide care ‘in-place’, will bankrupt the council, too.
And that’s unlawful, because that assistance is discretionary spending, and a long series of expensive legal actions will be required in order to demonstrate that the LA’s have no other option and are therefore acting legally; and the courts may rule against the councils.
Westminster or Whitehall may well issue a vintictive directive that ties their hands and forces councils to stop providing direct assistance; and central government will definitely wash their hands if it and blame the ‘profligate’ councils for their own misfortune.
So we are going to see council cuts to zero – rubbish on the streets and the dead unburied – and Britain’s first municipal bankruptcy in decades.
…And the families involved will still be in ‘calorie deficit’, and they will still have their children taken away.
The press campaigns required to raise the necessary public support for this, through vilification and blame of the families will be ugly; even by present-day standards.
Finally, there is one ray of sunshine in all this: local authority care homes up and down the country are a service provided by the private sector, for profit. Cash-strapped councils will be forced to contract out their residential care, as no money will be made available to build the homes and train the staff.
Bankrupt councils will be forced to sell the care homes; likewise they or their administrators will be forced to pay for private-sector residential care.
So someone stands to gain a lot of money from ‘Mums who can’t feed their children’ and, from that perspective, the fiscal and social policies which have led us here make perfect sense.
Never say that George Osborne and Ian Duncan Smith aren’t generous: I would say that they are being very generous indeed, to the people who matter in this enlightened age.
Thanks Nile
I found that really useful
Every time you are shocked by an unnecessary cost, consider that there’s a corresponding payment.
Easy for an accountant, difficult for journalists, and impossible (in public) for a politician.
Someone gains from all of this, even or especially fromthe worst of it: every privatisation of a service is a rent exacted on the citizen by a commercial entity, and every misfortune is an opportunity for profit.
It is a vital function of government to manage that equitably – and there are perverse incentives in a publicly-owned service too – but we seem to be failing disgracefully.
Or succeeding, from someone’s perspective.
I imagine similar reasoning is behind the closure of the Independent Living Fund (ILF), supposedly for reasons of economy, which enabled the severely disabled to live independently. Many of those people will now find themselves herded into care homes run by Tory backers at vast comparative expense to the taxpayer. There’s the philosophy behind it. We’re no more than livestock, animals, to them.
As I’ve been saying since the austerity politics of the Coalition were started 5 years ago, but which applies even more so now, ‘Forward to the 1930’s!’ really should be the motto. Not only in that these policies will reproduce the poverty seen in Britain in the 1930’s, but that a lot of the ideas behind it are reminiscent of ideas that prevailed in 1930’s Germany.
The cuts to the ILF, and the fetishisation of work whilst demonising any form of social security is not far from the Social Darwinian notions of ‘useless lives’ that was a central plank of Nazi ideology. If you weren’t fit to work through mental or physical disability then you were eliminated. We have the ludicrous slogan ‘hard working families’ with it’s implication that anybody who isn’t ‘hard working and raising a family’ is an inferior human being.
“We have the ludicrous slogan ‘hard working families’ with it’s implication that anybody who isn’t ‘hard working and raising a family’ is an inferior human being.”
“hard working” like “aspirational” is shorthand for greedy. It means those that are happy to be little cogs in the wheel, working more hours to get more to spend more & consume more.
If someone says, “I’m cutting my hours because I aspire to do something more. I’d like to play the Flugelhorn, learn German, take up fencing” that would be seen as repellently anti-social verging on Sociopathic.
Agreed
The Labour Party’s continuing move to the Right means that that the alternative is unlikely to come from that source but the Greens, Plaid Cymru and the SNP all offer an anti-austerity alternative.
I suspect it’s only a matter of time before substantial numbers of Labour MPs cross the floor to this new anti-neoliberal coalition.
@Bill. Labour Party members are already on the move – to a “People’s Coalition”. I moved from the [Managerial] Party to Green activism. Not so sure about Labour MPs being brave – too much to lose. A small group of Labour MPs might form an anti-neoliberal – Corbynites. I can see Labour politicians retiring in larger numbers, dying from the shame. I even notice shame appearing on Angela Merkel’s face in recent photographs, gone are the days of triumphalism.
All this on the back of unaffordable rents/housing which means everything founders except for the top two deciles as indicated above.
The Budget further divides our nation, the SETTLEMENT is in favour of one group. Tory policy is one of managed slow decline. I saw the IFS graph earlier today in The Telegraph under “Pension tax raid will cost the under-50s up to £15,000” which explains their editor’s concern.
My first thoughts were: How will the poorest absorb £1300 less money (2nd decile)? Gross wages for the 2nd decile (2012-13 ONS data £13100 p.a.). A £1300 reduction equals 5 weeks with no money.
Inflation of essential goods is more than twice the CPI, since 2002 – 2012, CPI up 29%, wage rises 36%, essential goods up 62%. [1]
Housing costs up – well you know, official average house price in 2002 was £95k and doubled to £188k by 2014, after inflation its still a significant rise. [2]
Transport – Rail costs 2002-2012 (all operators) up £54%, after inflation its still a significant rise. [3]
[1] http://ftalphaville.ft.com/2013/02/20/1393672/the-real-rate-of-british-inflation/
[2] http://www.housepricecrash.co.uk/indices-nationwide-national-inflation.php
[3] http://www.parliament.uk/briefing-papers/SN06384.pdf
Thanks Tony
Powerful
My first reaction was that Gideon had gone completely mad. My second was that this was Hubris on a calamitous scale.
Don’t believe me, go on that hunting ground of the extreme left, AccountingWeb, & you’ll see so many comments that the reason the benefits bill isn’t coming down, when unemployment keeps falling, is that the unemployed are just being cajoled into taking false self-employment or false employment so that they can be removed from the register while, in reality, claiming benefits as before.
Once you cut ‘working’ benefits to the bone, they might as well go back on JSA.
Secondly, how are they supposed to live? Gideon, intelligent but with virtually no experience of real life, leans on IDS, somebody that would be considered abnormally thick outside Westminster, who assures him that they’ll just have to “lively themselves up” & get better paid work.
I predict a riot…