13 July 2015
NDGP Reaction to the Budget
1. This budget was "regressive" taking much more from the poor than the rich (Paul Johnson, Director Institute of Fiscal Studies). The massive cuts in tax credits will cost 3 million low-paid families and average of more than GBP1000 a year, according to the IFS. Crucially most of these families will not benefit from the higher minimum wage -- not actually a living wage and linked to the cost of living as pointed out here but still needs to be made clearer. Most families benefiting from tax credits earn more than the minimum wage, most minimum wage earners earn too little to benefit from tax credits, especially given the big increases in personal allowances in recent years. These two groups are for the most part different segments of the working population. Low family incomes -- tax credit beneficiaries -- are not for the most part low hourly wage employees -- minimum wage earners.
2. The Tories are countermanding and counteracting their own welfare reforms. As numerous experts have pointed out, allowances such as tax credits were an integral assumption in the design of universal credit, and the incentive for those on benefits to move into work, however minimally or low paid. As Paul Johnson pointed out: "This will reduce the incentive for the first earner in the family to enter work." This budget has really clobbered the working poor with children, in particular not the poorest 10 percentiles but the second and third poorest 10 percentiles.
3. But the actual cuts announced in this budget hit many more than that. The freezing of most working-age benefits and housing benefit for the next four years will cost about 13 million families an average of GBP260 a year to 2019-20. That is a massive loss to families and individuals already on the edge. "In practical terms it means families being forced to choose between paying the bills or missing meals." (Nick Bryer, head of UK policy and campaigns at Oxfam). Matthew Reed, chief executive of the Children's Society called the budget "a disaster" for low-income working families. Think-tanks of all political persuasions have warned that this budget will lead to a substantial increase in inequality and poverty. How could it do otherwise, with figures like that. We and others have done the maths.
4. Public sector pay rises are to be frozen at 1% for a staggering four more years, on top of the zero or 1% pay rises of the past four years. This looks like a deliberate and continuing effort to punish and exclude those doing the most essential yet already least rewarded jobs in our country, most notably health service staff, teachers, and local authority workers. This will lead to major recruitment and retention problems in these sectors, inevitably impacting services and morale for the worse.
5. The Tory war on young people -- and it is just that -- has been intensified. No one under 25 benefits from the minimum wage increases. 18-21 year olds are now ineligible for any housing benefit at all ("Nothing short of catastrophic...it will lead to a big increase in homelessness amongst the young," Campbell Robb, chief executive of Shelter). Grants of up to £3,387 for living costs for students from lower income families will now be scrapped, and converted into loans, even though even the current level of student debt is regarded as unsustainable and costing the British taxpayer more than is ever likely to be repaid. All this at a time when all the statistics demonstrate young people are more excluded from home ownership and steady, regular employment than ever.
6. Green Taxes: a gaping whole; not even referred to in this budget. There is so much to pick from in the Tory government roll back of the ‘green agenda’ stakes but the most obvious is the retroactive and retrogressive cancellation of exemption from the Climate Change Levy for renewables. What was an incentive to generate from renewables has now become a tax on them mid-stream. Even some very conventional fossil fuel/nuclear power booster generators are shocked.