Now that the Budget has had time to sink in, the grandiose claims by George Osborne that spendings cuts and fairness have been reconciled have turned to dust; the bleats about concessions by the pathetic Liberal Democrats have dissolved in a solvent of dishonesty; and the true reality of the most regressive budget in generations has become clear. The treacherous Liberals may honestly believe that we live in a pluralistic democracy in which political power can be shared equally (the assumption behind Vince Cable's remarkable comparison of bankers and trade unionists) but Tuesday has demonstrated otherwise. This is nothing short of class war by the rich against the poor.
The Institute for Fiscal Studies (IFS) yesterday went through the Budget, separating out those elements already announced by the previous government from the announcements made by George Osborne on Tuesday. Their conclusion is that:
"Osborne and Clegg have been keen to describe yesterday's measures as progressive in the sense that the rich will feel more pain than the poor. That is a debatable claim. The budget looks less progressive – indeed somewhat regressive – when you take out the effect of measures that were inherited from the previous government, when you look further into the future than 2012-13, and when you include some other measures that the Treasury has chosen not to model."
One of the major omissions from the government measurements on the impact of this Budget is the 25% cuts pencilled in for some departments. As a rule, the poorest in society are more reliant on certain key public services so they will be disproportionately impacted. Moreover, with a larger proportion of their income comprising of benefits such as housing benefit, Osborne's cuts will fall hardest on the poorest. Not content with this, the Chancellor today added:
"If, over the coming couple of months, we can find further savings in the welfare budget, then we can bring that 25% number down. In the end that is the trade-off, not just between departments, but also between the very large welfare bill and the departmental expenditure bill."
Tellingly, tables on the distributional impact of this Budget end in 2012-13; before £8bn of further welfare cuts are planned. Top class spin and an admission of the inequitable impact of planned spending cuts. Added to this, of course, is the rise in VAT- the most regressive tax of all- to 20%. Moreover, apparently a rise in National Insurance contributions by employers is a 'tax on jobs' but a rise for employees is different .
Perhaps the most fanciful, and not to say disgraceful, claim was that by Vince Cable who had the sheer nerve to suggest the Liberal Democrats had safeguarded some 'fairness measures.' This evening mentioned the rise in child tax credits in particular. He forgot to add that as Osborne gave with one hand, he took immeasurably more with the other. Along with a freeze in child benefit, housing benefit is to be capped, and housing charities have said that this could tip tens of thousands of people into homelessness. Landlords will be forced (not that many of them need much forcing) to increase rent to make up the difference, and many families already in the breadline will face eviction.
This will especially be the case in London as the low-income people will be forced out of the city. As Dianne Abbott has said, only 1 in 8 people claiming housing benefit are unemployed; it is low-income working people who will be destroyed by this policy. Campbell Robb, chief executive of the homelessness charity Shelter, said some people claiming housing benefit would lose up to 40% of their total rent: "People will be forced out of one form of accommodation, but there is nowhere for them to go to. We expect to see debt and evictions rise as a result of this."
Cable last night on Question Time argued that he changed his mind on the necessity of cuts because of the sovereign debt situation, the severity of which was most starkly demonstrated by Greece, and Osborne has argued that the figures were 'worse than we thought.' However,
Anatole Kaletsky writes in the Times that:
"tax receipts in 2009-10 proved better than expected, £476 billion, compared with estimates of £469 billion in the March Budget and £457 billion in 2009. With public spending also running below previous expectations and tax revenues continuing to surprise, the OBR should project an improvement in this year’s deficit of at least £10 billion."
The situation, in other words, is slowly improving- not getting worse as Osborne has alleged.
On the subject of sovereign debt, moreover, the UK debt is qualitatively different from Greece's. The average debt maturity of Greek government debt is 8 years, for Portugal it is 6 years and for Ireland it is a mere 5; the average for the UK is 14 years,
one of the longest in the industrialised world. In other words, most of the debt UK's debt will not mature for at least a decade. Indeed, the Greek crisis reached a new level of severity on 27 April 2010 when the Standards & Poor's rating agency downgraded Greece's short-term debt to 'junk' status; a few weeks later,
after the election,
demand increased for UK gilts which were seen as beacons of stability in comparison to the dangerous rapids of the Eurozone. Finally, according to the FT:
"foreign investors only hold 30 per cent of the £800bn in outstanding gilts, much lower than eurozone countries. More than 80 per cent of Irish debt is held externally. In Greece and Portugal it is 75 per cent and 72 per cent respectively. This means the UK market is not subject to the more capricious nature of overseas buyers that are more likely to take flight in the event of negative news flow or poor economic data."
The comparison should not be with Greece, whose debt crisis is infinitely more serious than our own, or indeed with Canada on whose model the Tories and Lib Dems allege to be working; Canada when carrying out its deficit reduction plan in the 1990s had a steadily growing economy and not one with growth rates within the margin of error. The most accurate comparison is not with these countries but with
Japan, who attempted to cut a budget deficit caused by a banking collapse too quickly and brought into being two 'lost decades' of waste and stagnation from which the country are only just recovering.
A key point in closing is that the IFS has said that the cuts planned by Osborne will tackle 110% of the structural deficit which is much more than is necessary to reduce the deficit to levels that would satisfy the gilt markets. One is led to the obvious conclusion that Osborne and the Tories wanted to cut the state anyway,
a priori, and are seizing on the flimsiest of evidence to support their designs. What is more, very few, if any, of these measures were included in the Tory manifesto; indeed, the Tories campaigned against '
Gordon's VAT bombshell' and the Liberal Democrats warned of a similar '
Tory VAT bombshell' of the sort they have colluded in dropping on the heads of the poor. What has been inflicted on the UK is a coup d'etat of cuts that no one explicitly voted for; and the voters of England should share most of the blame for being the only constituency part of the United Kingdom to give majority support to the Tories
As the right-wing of the Lib Dems has elided into the liberal wing of the Tories, Clegg has transmogrified into Cameron, their polished Oxbridge accents harmonising in concord, singing the same baleful tune of pain and austerity like silver-tongued charlatans. They deserve the fate of the
republicans of 1848 in France who 'did not succumb; they passed out of existence. Their history has come to an end forever, and, both inside and outside the Assembly, they figure in the following period only as memories...'