Early implications of the Budget 2015

Posted by Euan Bennet on 09/07/2015

Having read the actual budget document yesterday, I was surprised [not really] to see the front pages of the UK mainstream media proclaiming a “pay rise for all” without the appropriate caveats. Caveats such as “all, except for the young, the low-paid, and the sick”. The way the press have run with the “£9 living wage” announcement represents a very loose interpretation of reality – what was actually announced is next year the minimum wage will be £7.20 an hour, rising to £9 an hour by 2020. As long as you are 25 or over. For comparison, the Living Wage in Scotland is £7.85 an hour right now. Living wage employers in Scotland include the Scottish Government.

Of course, the mainstream media will never report that the only place any of these wages are enough to live on is some parallel universe where food and energy prices haven’t changed for the last seven years. The actual living wage is more like £10 an hour (at least). Until yesterday, this was reflected in tax credits paid to low earners. After yesterday, those tax credits are being cut, and cut hard:

I’m sure this family won’t miss that £1,357.22 a year. After all, it’s not like they need food AND electricity, is it? Image source.

As Wings over Scotland have pointed out today, even when the Daily Mail fudged and sugar-coated the numbers, they couldn’t hide the abominable transfer of wealth directly from the poorest in society to the richest.

Daily Mail says: Fantastic! Everyone is an average of £1,204 per year worse off!!! (Sincere apologies for the source)

The United Kingdom in 2020: economic apartheid

The figure below shows the distribution of income per household per week, in 2011/12. The figures are not adjusted for housing costs, but are adjusted to include social security.

See full ONS report 

Imagine you are towards the lower income end of this range – to the left of the median income line i.e. where most of the population is. We’ve already seen that the changes mean you would gain slightly in wages, but lose out by more than you gain when the changes to welfare are included. What does the Budget statement say about your situation? Let’s find out by cherry-picking some out of context quotes!

“The government believes that those in receipt of tax credits should face the same financial choices about having children as those supporting themselves solely through work.”

Sounds promising, so they’re appreciating that family social security is about making sure the children get the best possible start in life first and foremost then, right?

Wrong:

“The Budget will therefore limit support provided to families through tax credits to 2 children, so that any subsequent children born after April 2017 will not be eligible for further support. An equivalent change will be made in Housing Benefit to ensure consistency between both benefits. This will also apply in Universal Credit to families who make a new claim from April 2017.”

“The Department for Work and Pensions and HMRC will develop protections for women who have a third child as the result of rape, or other exceptional circumstances.“

But it’s ok, they’re not completely heartless. Already have two children, and happen to become pregnant after getting raped? Simply prove it some bureaucrat and everything will be fine!

Ok, so they didn’t really mean that everyone should have the same choices for their children, in terms of welfare. Maybe they meant everyone should have the same choices if one parent would like to give up work to raise their children?

“Extending parent conditionality – From April 2017 parents claiming Universal Credit, including lone parents, will be expected to prepare for work from when their youngest child turns 2, and to look for work when their youngest child turns 3”

Oh. Well at least they’ll continue to support disabled children whose parents need to provide full time care, right?

“The disabled child premia in tax credits and UC will also continue to be paid to all children with a disability.”

That’s good. Except, as we’ve already seen, a family with one adult working at the minimum wage will be £1,357.22 a year worse off because their tax credits are being cut…

If you’re well off, you’ll be fine

“Combined with the increases the government has made to the personal allowance and the introduction of the Personal Savings Allowance, from April 2016 individuals will be able to receive up to £17,000 of income per annum tax-free, and separately invest up to £15,240 per annum through an ISA tax-free.”

“The government will achieve this by taking the family home out of inheritance tax for all but the wealthiest with a new transferable nil-rate band, introduced from April 2017.”

“First time buyers will be able to deposit £200 per month into their Help to Buy: ISA at participating banks and building societies. First time buyers will be able to open their Help to Buy: ISA accounts with an additional one off deposit of £1000 so that they can start saving now.”

I wonder how much of their £20,448.79 a year a family with 2 children will be putting in an ISA to make the most of the limit being increased. Or maybe they should be putting their money in a help to buy account so they have something to pass on to their children. All nice considerations to add in to the annual “heat or eat” decision!

But what about the welfare parasites?

Corporate welfare – £93 billion per year .

Image source.

Get this collected and the national debt will be gone in no time. Let’s see what the budget has to say about it:

“The government has asked HMRC to start a dialogue with business on how to improve the effectiveness of existing IR35 [tax avoidance] legislation. “

“The government will consult on the technical details of introducing tougher measures for those who persistently enter into tax avoidance schemes”

“The corporation tax rate will be cut to 19% in 2017 and 18% in 2020.”

The change in language when discussing tax collection is very apparent when compared to how welfare is discussed in the document. Now it’s all about “dialogue” and “consulting” instead of making sure the super-rich pay their fair share. Though at least the Government are doing their bit to reduce corporation tax avoidance, by reducing the amount of tax to be paid.

Conclusion

It’ll take some time for a more detailed analysis to emerge, but it would be reasonable to expect that inequality in the UK has just taken a step change increase. The Budget was a direct transfer of wealth from the poorest in society to the wealthiest. Aspects of inequality are now going to become more firmly ingrained, and far from work being the route out of poverty, the changes to the welfare system are likely to mean more people become trapped in working poverty. Then there are the under-25s – a generation who are in danger of being left behind.

And the truly sickening thing? This Budget was announced to cheers and celebrations by our colonial masters.

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