Many still don't realise how far this government is bent on dismantling the public realm. Labour has to show us a way out
If a chancellor claims, "I'll give it to you straight", "I'm going to level with people", the wise run for cover. But George Osborne was pretty honest about where he was heading and why. As this "neutral" laissez-faire budget heads on down his death spiral, he spelled out the reason why as clear as day, no need to call in the textual code-breakers.
Driven by an ideology that's as natural as breathing for David Cameron, Oliver Letwin, George Osborne and their circle, the crisis continues to gift them their unique opportunity: to cut spending permanently, to shrink the state, and to let low-wage/high-pay inequality grow as a functional necessity in their vision of capitalism. No doubt they are disappointed their remedy has failed so far, but more of the same medicine is bound to succeed in the end because the ideology is right. Pragmatism and learning by experience is not for them. Their mindset is closer to obstinate Soviet five-year planners than anything witnessed in a British postwar government.
With great glee Osborne boasted the size of his state would keep dwindling. Professor Peter Taylor-Gooby's figures from IMF charts reveal the remarkable fact that by 2016 the UK government will be smaller than the US as a proportion of GDP for the first time. President Obama's spending has been held down by the Republicans, but our Tea Party economists are running the country. We used to sit in the middle of the G7 by size of state, but our cuts will see us fall to the bottom over the next three years. Never mind public squalor, holes in roads, unkempt public places, more poverty and more Rich Ricci £17.6m bank bonuses, we can be proud in future of how little our state will do for us, socially or economically.
What are Osborne's instruments of growth? A cut in corporation tax to propel us in a mutually destructive global tax race to the bottom. But take a heady sniff from Osborne's best propellant – a feelgood house price bonanza for the 65% lucky enough to own their homes. Don't we already know what happens when we pump money into sub-prime loans to people the banks don't dare lend to? Banks want 20% deposits as they fear that when interest rates rise by even 1%, the great buy-to-let bubble will burst, sending all those properties flooding the market, so prices fall by 20%. But Osborne has the Treasury taking the punt, tempting young people into crushing debts. He even adds in new right-to-buy incentives to sell off desperately lacking London council homes: expect another rash of private landlords to buy them up to rent back to tenants at three times the price on housing benefit. The answer is to build private and public housing, not to inflate prices – but a state-aided building programme is against the ideology.
Osborne rightly identifies lack of childcare as a critical block on growth: too few British mothers work because our childcare is cripplingly expensive. But the BBC and others were wrong to claim there would now be "universal" help. The Resolution Foundation presents remorseless graphs: the system is fiendishly complex, but most goes to better-off families earning more than £40,000 after tax. A lucky few lower earners get an 85% subsidy, but half of all working families on credits get nothing at all from this while couples on up to £300,000 gain £2,400. As with housing, the economic answer is to use the money for good affordable nurseries for all, as in most of Europe. But state provision is against the ideology.
What of the £10,000 personal tax allowance? Don't be deceived by boasting that this is aimed at the lowest paid. The Resolution Foundation shows three quarters of the relief goes to the top half of households, while workers on low pay gain just 32p a week.
People may be momentarily pleased with a 1% benefit rise in April – until the shock of their first council tax bills. With three quarters of benefit cuts still to come, Osborne is on course to send at least 600,000 more children into poverty. With prices growing twice as fast as wages, the Resolution Foundation shows the median wage fell by £3,200 since 2009, to £21,700. They conclude that recovery will remain "elusive", "if typical working families continue to have no money to spend". As for those 13,000 super-rich about to get a windfall tax cut of £100,000 each, they are more likely to spend it on luxury imports.
All Osborne's policies are monumentally regressive. As the Treasury's own chart shows, the bottom half of the population are the overall losers from tax and benefit changes, while most in the top half do far better. But the government is not embarrassed. Why should they be? Their demonising of benefit claimants is purposeful.
Deep in the heart of the budget is the most telling policy of all. This does need some decoding, but it tells the same story about their intent. Osborne said he would cap total public spending – annually managed expenditure (AME). His June spending review will reveal the details, but benefits will be the largest part. A cap would mean, for example, setting a total sum for disability benefits regardless of how many disabled people there are. If numbers grew, the Department for Work and Pensions would spread the capped sum thinner.
This has already happened with the devolving of council tax benefit and the social fund to councils with a fixed sum, regardless of numbers. This breaks the link between benefits and need, with people drawing from funds according to how many others were in the pool. Forget automatic stabilisers (hazily defined anyway): if the number of unemployed claimants or homeless people rises, as projected, under an AME cap the sum they each get would shrink. This is unthinkably radical, but make no mistake, this government has already done things Margaret Thatcher thought unthinkable.
Do people get it? As yet, many still don't realise how far this coterie in power is ideologically bent on dismantling the public realm. As yet, enough voters still believe the coalition mantra that the need to cut the deficit justifies almost any savagery. Though Osborne attracts plenty of opprobrium and blame and a majority now think his Plan A is failing, still more blame rests with Labour and too little trust. Osborne used a sharp anti-Keynesian put-down: "People seem to think the way to borrow less is to borrow more."
Labour has yet to find an equally crisp riposte that shows why he's wrong, or to draw a clear enough route map out of Osborne's slough of despond. Forget his "aspiration nation", we risk becoming an atomised land of angry and defeated strivers.
Driven by an ideology that's as natural as breathing for David Cameron, Oliver Letwin, George Osborne and their circle, the crisis continues to gift them their unique opportunity: to cut spending permanently, to shrink the state, and to let low-wage/high-pay inequality grow as a functional necessity in their vision of capitalism. No doubt they are disappointed their remedy has failed so far, but more of the same medicine is bound to succeed in the end because the ideology is right. Pragmatism and learning by experience is not for them. Their mindset is closer to obstinate Soviet five-year planners than anything witnessed in a British postwar government.
With great glee Osborne boasted the size of his state would keep dwindling. Professor Peter Taylor-Gooby's figures from IMF charts reveal the remarkable fact that by 2016 the UK government will be smaller than the US as a proportion of GDP for the first time. President Obama's spending has been held down by the Republicans, but our Tea Party economists are running the country. We used to sit in the middle of the G7 by size of state, but our cuts will see us fall to the bottom over the next three years. Never mind public squalor, holes in roads, unkempt public places, more poverty and more Rich Ricci £17.6m bank bonuses, we can be proud in future of how little our state will do for us, socially or economically.
What are Osborne's instruments of growth? A cut in corporation tax to propel us in a mutually destructive global tax race to the bottom. But take a heady sniff from Osborne's best propellant – a feelgood house price bonanza for the 65% lucky enough to own their homes. Don't we already know what happens when we pump money into sub-prime loans to people the banks don't dare lend to? Banks want 20% deposits as they fear that when interest rates rise by even 1%, the great buy-to-let bubble will burst, sending all those properties flooding the market, so prices fall by 20%. But Osborne has the Treasury taking the punt, tempting young people into crushing debts. He even adds in new right-to-buy incentives to sell off desperately lacking London council homes: expect another rash of private landlords to buy them up to rent back to tenants at three times the price on housing benefit. The answer is to build private and public housing, not to inflate prices – but a state-aided building programme is against the ideology.
Osborne rightly identifies lack of childcare as a critical block on growth: too few British mothers work because our childcare is cripplingly expensive. But the BBC and others were wrong to claim there would now be "universal" help. The Resolution Foundation presents remorseless graphs: the system is fiendishly complex, but most goes to better-off families earning more than £40,000 after tax. A lucky few lower earners get an 85% subsidy, but half of all working families on credits get nothing at all from this while couples on up to £300,000 gain £2,400. As with housing, the economic answer is to use the money for good affordable nurseries for all, as in most of Europe. But state provision is against the ideology.
What of the £10,000 personal tax allowance? Don't be deceived by boasting that this is aimed at the lowest paid. The Resolution Foundation shows three quarters of the relief goes to the top half of households, while workers on low pay gain just 32p a week.
People may be momentarily pleased with a 1% benefit rise in April – until the shock of their first council tax bills. With three quarters of benefit cuts still to come, Osborne is on course to send at least 600,000 more children into poverty. With prices growing twice as fast as wages, the Resolution Foundation shows the median wage fell by £3,200 since 2009, to £21,700. They conclude that recovery will remain "elusive", "if typical working families continue to have no money to spend". As for those 13,000 super-rich about to get a windfall tax cut of £100,000 each, they are more likely to spend it on luxury imports.
All Osborne's policies are monumentally regressive. As the Treasury's own chart shows, the bottom half of the population are the overall losers from tax and benefit changes, while most in the top half do far better. But the government is not embarrassed. Why should they be? Their demonising of benefit claimants is purposeful.
Deep in the heart of the budget is the most telling policy of all. This does need some decoding, but it tells the same story about their intent. Osborne said he would cap total public spending – annually managed expenditure (AME). His June spending review will reveal the details, but benefits will be the largest part. A cap would mean, for example, setting a total sum for disability benefits regardless of how many disabled people there are. If numbers grew, the Department for Work and Pensions would spread the capped sum thinner.
This has already happened with the devolving of council tax benefit and the social fund to councils with a fixed sum, regardless of numbers. This breaks the link between benefits and need, with people drawing from funds according to how many others were in the pool. Forget automatic stabilisers (hazily defined anyway): if the number of unemployed claimants or homeless people rises, as projected, under an AME cap the sum they each get would shrink. This is unthinkably radical, but make no mistake, this government has already done things Margaret Thatcher thought unthinkable.
Do people get it? As yet, many still don't realise how far this coterie in power is ideologically bent on dismantling the public realm. As yet, enough voters still believe the coalition mantra that the need to cut the deficit justifies almost any savagery. Though Osborne attracts plenty of opprobrium and blame and a majority now think his Plan A is failing, still more blame rests with Labour and too little trust. Osborne used a sharp anti-Keynesian put-down: "People seem to think the way to borrow less is to borrow more."
Labour has yet to find an equally crisp riposte that shows why he's wrong, or to draw a clear enough route map out of Osborne's slough of despond. Forget his "aspiration nation", we risk becoming an atomised land of angry and defeated strivers.
Guardian
