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Tuesday, June 22, 2010 

The politics of resentment and the budget.

Of all the figures which emerged today, the most instructive flashed across the screen while George Osborne was still delivering his first budget. By the BBC's calculation, the Liberal Democrats had ensured that the ratio between spending cuts and tax rises, instead of being 80% to 20%, as the Tories had originally planned, had instead been altered to a 77%-23% share. There, laid bare, was the sum of Liberal Democrat influence on their coalition partner: a massive 3%.

To say that the vast majority of the Liberal Democrats sitting alongside their new brothers in arms desperately didn't want to be there, and looked more morose than a crying violin player, would be something of an understatement. Apparently just the one Liberal Democrat MP waved his order paper as Osborne sat down, and only Danny Alexander and Nick Clegg seemed to be agreeing with the Tory brethren as he spoke. Vince Cable looked especially grim, even if later he was forcing himself to defend a budget which presumably went against much of which he had previously preached. As for Osborne himself, his nose seemed even more bulbous than before, and the tip with the line which so resembles the cheeks of a bottom appeared even more pronounced. Whether this had anything to with his repeated insistence that this budget was "unavoidable", that it was "progressive" and he was protecting the "vulnerable" is impossible to know. David Cameron however will have been pleased that Osborne on television at least completely blocked any glimpse of himself, giving the impression he wasn't there. These "Macavity"-like tendencies might yet turn out to be highly useful.

The best that can be said for this most vicious of attacks on the poorest and most vulnerable is that the very worst has been postponed until next year, or at least this autumn, when the general spending review will indicate where the full cuts are going to come, and with only the promise that health and international aid will be protected, these cuts are going to be beyond savage: slashes of 25% in expenditure will almost certainly mean the loss of hundreds of thousands of jobs. Even so, for those currently on benefits, this signals the beginning of the politics of resentment for those currently on the princely sum of £65 a week. Osborne at the weekend, appearing on the Andrew Marr programme, made clear what his intentions were:

I want to support the person who leaves their house at six or seven in the morning, goes out and does perhaps a low paid job in order to provide for their family and is incredibly frustrated when they see on the other side of the street the blinds pulled down and someone sitting there and living on a life of out of work benefits.

It doesn't of course matter that this hypothetical person on the other side of the street might be one of those currently either being turned down or not even getting a response to every single application they make, and that they might very closely be nearing the end of their entitlement to Jobseeker's Allowance, while the person doing the low paid job may be one of the lucky ones, this is exactly the sort of resentment that this government from the off wants to breed for those on benefits. This, it must be pointed out, is before the review of the welfare system is also due to be completed this autumn, and where the omens are to say the least not good. £65 a week is what someone on the minimum wage would receive for 11 hours work, or for some people, not even a day's pay. One of Osborne's biggest savings is through linking the yearly rise in benefits to the consumer prices index rather than the retail prices index, which as you can see from the graph on this post, is almost always lower. Quick calculations suggest that if this had been the case since 2001, benefits in cash terms would have risen by 20% rather than 31%, or to child benefit being £2 less a week than it is currently or £5 less a week for those on carers' allowance. These, as can be appreciated, are huge differences for those receiving such relatively paltry amounts.

If the pain from that move wasn't enough, then Osborne seemed determined to spread it evenly amongst all those receiving any kind of benefits. Admittedly, that those earning more than £40,000 a year had ever received tax credits in the first place was perverse, and a pure example of Labour's belief that you needed to ensure the middle classes were on side to justify anything other than the most basic of safety nets. Few earning below that figure will shed any tears for those better off than themselves being denied any money back from the exchequer. Far more alarming is the freezing of child benefit for three years, supposedly done because means testing would have made it far too complicated and taxing it would have made the non-working wives of millionaires better off than working mothers. Alongside this was the potentially even more damaging capping of housing benefit, or local housing allowance, at 30% of local rents rather than the current median. For those living in the south east, and especially London, this will at a stroke mean that many will instantly be having to look for a smaller property, regardless of the size of their family. The cut is meant to target the few cases that have featured in the tabloids, often involving large families of asylum seekers living in what have been described as "mansions" but what are in reality large houses, which are more cases of landlords cleaning up at the expense of the taxpayer rather than scroungers living in the lap of luxury. It's no exaggeration to suggest that some families will be evicted and made homeless as a result.

As for the introduction of a medical assessment for those on disability living allowance, this ought to be a perfect example of where the government could cut out duplication. Almost all of those in receipt of it will also be on either income support, incapacity benefit or employment and support allowance, all of which now require exactly the sort of medical assessments for eligibility to be introduced here. Those assessments should clearly show whether someone needs the kind of care which the DLA covers. Is it possible that George Osborne is confused over what DLA is actually for? Removing it is not going to increase the "incentive" to work, except perhaps for the carer who might no longer be able to look after the person claiming the benefit. Is this the sort of thing Osborne is really proposing in order to cut the deficit harder and faster than even they originally suggested?

All this is exacerbated by the rise in VAT to 20%, which although never imposed on food or children's clothes will inevitably have a knock on effect on exactly those things when the additional costs, especially on fuel, are factored in. The supermarkets and larger retailers might well be able to carry the burden themselves, helped along as they will be by the corresponding cuts in corporation tax, or at least those that don't already avoid it as much as they can will be, but even with the cut in the small companies tax to 20% many small businesses will have to raise prices exponentially. Add in the freezing of council tax, which will lead to cuts in local services which will also hit the poorest hardest, and you have a vision of austerity the likes of which those of us born in the 80s and after will have never experienced.

Some of this, undoubtedly, would have had to take place if either the Liberal Democrats or Labour had won the election single-handedly. Even if the Liberal Democrat influence on the Tories is just 3% when it comes to the ratio of cuts to tax rises, that's 3% which would have otherwise been cuts. The Tories with a workable majority probably wouldn't have touched capital gains tax, for example, or raised the income tax threshold by £1,000. For those two small mercies we should still be grateful, flippant as I am in the first paragraph.

The point remains however that despite Osborne's repeated use of "unavoidable", much of this budget was exactly the opposite. Even if we accept the premise that Labour, had it won the election, would have had to cut slightly faster and harder than it planned for in the March budget, say by another £20bn on top of the £73bn they had already accounted for, that would have still left another £20bn which Osborne has decided needs to be tightened to play with, or either the entirety of the extra spending cuts, or the entirety of the extra tax rises and welfare cuts announced today combined. Even if they had gone exactly with Osborne's additional cuts and spending, it could have raised the basic rate of income tax rather than VAT, a progressive tax rise rather than a regressive one. It could have introduced the so-called "robin hood" tax instead of the feeble banking levy which will raise £2bn, which is really sticking it to those who caused this crisis in the first place, as even Osborne admitted they did. Most of all though, as everyone else is making clear, this is a huge gamble. Osborne's plans are all based around the presumption that the private sector is ready to lead the recovery, when every suggestion is that the opposite is still currently the case. By their own admission, today's budget will lead to lower economic growth in the short-term and higher unemployment. It could well result in a double-dip recession. They, apparently, are prices worth paying for eliminating the structural deficit by the end of this parliament and for keeping the markets from the door. Both of those individuals Osborne identified in his illustration on Andrew Marr, both hit hard, might beg to differ.

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