East of the M60’s response to the first Con-Dem Budget
My name’s Stuart Vallantine, I fell off my grandma’s bed and woke up in 1981. Am I mad, exiled in deepest Cheshire, or back in time? Whatever’s happened, it’s like I’ve landed on a different planet where monetarism is king. Now, maybe if I can work out the reason, I might leave home.
Seriously, after listening to today’s budget, I thought I was listening to the 1981 budget by Geoffrey Howe, or his 1979 one which saw VAT nearly double from 8% and 12.5% to 15%. The attack on public sector could easily have come from a Thatcher era budget. So much for the new politics we were promised; what we are receiving is Thatcherism 2.0, thanks to the sale of 7 million Lib Dem votes to David Cameron and Co.
So, what have they inflicted on us?
- 25% public sector budget cuts over the next four years (7.25% per annum; NHS and international aid excepted);
- 20% VAT from 03 January 2011 (up from current 17.5% rate);
- £11 billion worth of cuts by 2014 from the DWP budget: this includes a freeze on Child Benefit and medical assessments for Disability Living Allowance;
- A freeze on alcohol, tobacco and fuel duties;
- A change in the lower income tax threshold to the first £7,475;
- Below inflation public sector pay rises for low paid employees;
- 2 year pay freeze for public sector employees earning £21k per annum and above;
- 1 year council tax freeze;
- The restoration of the earnings link with state pensions;
- Bank balance sheet levy;
- The formation of a Green Investment Bank.
In a nutshell, very few carrots and one massive stick. Rather more iron bar than stick and especially so if you live in the North of England where the biggest employers are the public sector.
The public sector spending cuts will have a massive effect on frontline service delivery. Councils may consider privatising back-office services, reducing scope for secure skilled employment. Frontline services could be affected by reduced opening hours, subcontraction to external bodies (outsourcing companies and non-profit organisation) and property sales. Subsidised bus routes may suffer withdrawal.
This will be exacerbated by a 1 year freeze on council tax bills, and pay freezes (or minimal rises for low paid) public sector staff. Low pay may dissuade new starters – assuming public sector bodies are willing to recruit. Staff leaving the public sector may find their position left unfilled indefinitely through ‘natural wastage’.
The public sector pay freeze will have a hugely negative effect on the prosperity of the Tameside area. In Ashton, no amount of new trams would stop the Arcades Shopping Centre having problems with empty units. The fancy coffee shops will be emptier, fewer stalls will be trading on Ashton Market, and the already pressed public sector employees in the local Jobcentres will find themselves collapsing under the weight of high unemployment.
This takes us to VAT, which would also have a causal effect on the service industry. Say goodbye to all these coffee shops. Bid a fond farewell to the market traders struggling with VAT as well as a double whammy with higher stall rates (caused by council tax freezes). Au revoir casual dining establishments and cinemas.
Osborne’s decision to raise VAT to 20% by the 03 January 2011 would see job losses within the service sector. This will be caused by the double whammy of reduced spending power by the few people still in work and price rises. The loss of traditional industries and replacement by the service industries would affect the North of England most, where former coalfields and steel plants have been replaced by retail parks and call centres (which even prior to the budget did not fully replace the lost jobs in the heavy industries).
With the resultant increase in unemployment, spending power will be reduced even further by the downward shift in incomes. Woe betide anybody who dares to have a second child (freezes in Child Benefit), or happens to be on the autism spectrum (existing on Disability Living Allowance), or fits both categories.
Naturally, I expected the proposals to introduce assessments on future DLA claimants to cause controversy. It is also worth noting that assessment by a DWP Approved doctor for Incapacity Benefit has been in use for 15 years. Plans for DLA assessments were considered in the midst of creating James Purnell’s drafting of his Social Security Bill. I fear it may become a bureaucratic nightmare and that the assessment depends on the knowledge of local medical professions. What if your ASD diagnosis was made 15 years ago, whereby sufficient support enabled you to live an independent life? People on the high functioning end of the autism spectrum like myself may find themselves without sufficient support, if the assessor neglects to take into account more subtle problems?
Two welcome measures (the £1,000 increase on the basic rate income tax threshold, and the restoration of the earnings link to state pensions) will be cancelled out by the savage cuts. Though welcome, pensioners will be no better off than prior to the budget as that will be cancelled out by January’s VAT increase. Likewise the low paid part-time workers. Instead of properly taxing the rich, we have opted for a Robin Hood tax in the reverse, due to the amount of VAT paid as a proportion of their earnings.
“I warn you not to be young…”
Being poor and middle aged may be bad, but to be poor and aiming towards university education soon after secondary school will have the most to lose. Not to be content with the abolition of the Future Jobs Fund and Baby Bonds, another announcement went virtually undetected. As well as having trouble finding work to fund their studies (thanks to VAT), the Chancellor plans to privatise the Student Loans Company.
The cost of higher education is already high enough with tuition fees and student loans during a typical 3 to 4 year long BA Honours course. Privatising the Student Loans Company could well see an end to the low public sector borrowing rates. Instead, we could well see commercial interest rates introduced. Higher Education would not only become a preserve of the wealthy, but also to those with an excellent credit rating.
The much vaunted Broken Britain which Cameron harped on about could well be on its way. As well as the City, the other winners of the budget would be criminals as acquisitive crime may increase; the man in the pub selling fake DVDs in the pub could be seen as offering ‘fair competition’. The police officer may take longer to catch the thief; the Trading Standards officer may be laid off.
Our education system would be more polarised by means of free schools, credit card interest rates on student loans and a return to the pre-Harold Wilson era number of university students. There will be longer waits at local bus stops, charges for public services once available freely, and above all, the return of the Lost Dole Age.
Unlike 1979, we have sold off most of the family silver. Instead of forcing the City to pick up the tab for their misdoings, they passed the tab onto us, and Boy! are we going to pay for this big style when we shouldn’t have to. Instead of a prosperous knowledge-based economy resulting in higher tax revenues, we could see wage rates fall ever lower as unemployment rises resulting in reduced tax revenue. Therefore, this would lead us towards a dangerous spiral, where this year’s set of cuts could be a tip of the iceberg.
Spivvery has been legislated. We must do everything to stop this becoming reality. This means protecting our public services, paying public sector employees properly, and treating our young people as assets rather than liabilities.
There was no ‘public interest’ and equality in this year’s budget. Just ideologically inspired cuts which has turned the Con-Dem Coalition into a Thatcherism Tribute Act. The onus was, as was the case under Thatcher, a chance to shrink the public sector.
Unnecessary, unjust and divisive: welcome to Thatcherism 2.0.
Will the last person to leave the country please switch off the lights? I would much rather you do that than return home to your constituency and prepare for Torygeddon.
S.V., 22 June 2010.