Yesterday’s Budget exposed the very worst side of the calculating mind of George Osborne – it was a Budget designed to fool the public to which he is elected to serve. Full of unfunded gimmicks and miniscule tax cuts for the many, larger ones for the more wealthy and unveiled a horrifically cynical set of spending plans for the next five years.
The spending plans
First of all those spending plans. They’ve already been described by the Office for Budget Responsibility as a “rollercoaster”. Basically, in order to stop my party from being able to describe his spending plans as cutting spending back to 1930s levels by the end of the next Parliament he will now no longer aim for a budget surplus of £23billion in the final year of the Parliament but a surplus, instead, of £7billion.
So does this mean a easing of austerity? You’d think so wouldn’t you? But no. Instead Obsorne is proposing this “rollercoaster” plan to cut back public spending in the first two years of the new Parliament by double the amount he has cut public spending in any previous year. These are extraordinary cuts. Spending cuts continue but a reduced pace in year 3 of the Parliament before shooting back up by £16billion in the 4th year – the year before the next General Election.
Why cut public spending so deeply simply to restore it by £16billion in the final year? There are 3 possible explanations – perhaps it’s a mixture of 1 and 2 or 1 and 3:
1. It allows him to show public spending as a percentage of GDP is only falling to 1964 levels instead of 1930s Depression-era levels.
2. It allows him to boost public expenditure with massive popular investments in the NHS and Defence but only in Year 4 when dramatic further austerity to local government and other services will have pushed other services into disarray (the King’s Fund – a respected health think tank – recently showed how cuts to local authority budgets had resulted in huge cutbacks to social care budgets leaving more older people reliant on hospital A&Es thus causing the A&E crisis)
3. He actually doesn’t intend to make these dramatic cuts but was hoping Labour would sign up to this level of austerity therefore giving our supporters (quite rightly) reason to ask what we stand for.
If its point 2 then he’s genuinely going to make some of the most dramatic cuts to public spending ever seen in this country. Even if he froze benefits for the working and out of work, the sick and disabled for five years that would only ‘save’ £6.9billion by attacking the real incomes of the poorest and most vulnerable in society. To meet his target of £12billion of welfare savings he would have to find a further £5.1billion – that can only mean real terms cuts to benefits for people in work but on the minimum wage struggling to pay soaring rents and their rising bills.
Labour has a better plan to cut welfare:
- We’ll raise the National Minimum Wage which reduces welfare spending on tax credits and increases Government income tax and National Insurance revenues.
- We’ll encourage businesses, especially the biggest firms to go further and pay a Living Wage, by offering them part of those tax revenues and benefit savings as an incentive but only for one year so as to create a long-term higher pay situation for millions of workers and further benefit savings and tax revenue increases
- We’ll introduce guaranteed jobs for young people who’ve been unemployed over a year as the Welsh Government has done recently to great success rates, with over 80% going on to sustained employment
- We’ll get young people back into college by reversing the situation where they lose benefits if they enrol on a course and instead remove the incentive to not further their education by removing their eligibility for Jobseekers Allowance and re-introducing a form of Educational Maintenance Allowance but for over 18s; and
- We’ll reduce the number of people claiming Housing Benefit by introducing new three-year tenancy agreements that cap rents from rising by more than inflation during those three years and by increasing the number of affordable homes being built.
If its option 3 it will show he has learned some of the lessons of this Parliament where he cut too far and too fast (as we repeatedly warned) and saw the economy stagnate, tax revenues way below those he had forecast and thus his deficit reduction plan had to bring it in-line with the plan he inherited from Labour but by then we’d wasted two years of low or no growth.
The tax cuts
His tax cuts – raising the personal allowance to £10,800 from April 2015 and £11,000 the year after – will obviously do nothing for the lowest earners who earn less than this amount but will benefit people earning over that amount including those who earn enough for some of their earnings to fall into the 40p tax bracket. Osborne decided that people earning more than £42,700 were a priority for additional tax cuts by raising the threshold the 40p rate kicks in to £43,300.
Over the course of the Parliament Osborne’s tax plans will hand average earners around £500 but by contrast will hand people earning over £50,000 a year a whopping £1,300 tax cut. The most regressive tax move since his own decision to cut tax for people earning over £150,000 by 5% back in 2012.
The other giveaways and gimmicks
The Budget was also full of gimmicks and giveaways which Ed Balls has said he will not reverse simply because they don’t amount to very much and don’t affect Labour’s spending plans. That includes a freeze on fuel duty for another year, a cut in beer duty by 1p, money for church roof renovations and a cut in the Severn Bridge toll.
We’ll also keep his Help to Buy ISAs which give first-time buyers £50 for every £200 a saver puts in. Osborne obviously thought we wouldn’t back this but with Ed Balls agreeing to keep it in place if Labour win just means Labour’s offer to first time buyers is now even better. For first time buyers:
- We’ll be building more homes
- We’ll be allowing local authorities to designate these homes for 1st time buyers from the local area before they can be sold on the open market
- We won’t match Tory plans to offer cut price homes that will exempt developers from high quality building standards, energy efficiency measures and their contributions to social housing schemes and local infrastructure because this wheeze will store up huge problems for the future
- We will match their Help to Buy programme and Help to Buy ISAs
- Our more secure three-year tenancies with caps on rent increases will help renters save deposits
So all in all this Budget has shown us Osborne’s plan for Britain is not a long-term economic plan as he likes to claim. It says everything about the man that he believe long-term means nothing more than a 5-year electoral cycle. It’s a plan for huge public service cuts and attacks on the poor to pay for more giveaways to wealthier and older voters. It is a core vote election strategy nothing more, nothing less.
Labour has a better plan and better vision for Britain. A One Nation vision that will help us all by not cutting services that are actually investments to help our future like early years education or the services that save our NHS money and help it run better like social care for older people. It’s a plan that doesn’t saddle the next generation with a debt burden from unpaid tuition fee loans and it helps those who struggle to get by at university with a £400 increase in annual student maintenance grants. A plan that cuts welfare by helping people into work, into affordable homes and increasing their pay and a vision that sees small businesses prospering from a cut in business rates and from the productivity gains of higher quality Apprenticeships.