Another Tory budget for the rich

Pete Green looks at the budget

Jeremy Corbyn got it right in his response to Osborne’s budget last Wednesday:

“This budget has unfairness at its very core, paid for by those who can least afford it”

For once this message appears to be cutting through the media hype and reaching the majority of voters who also think the budget is unfair according to the latest poll. The resignation of Ian Duncan Smith, whatever its motivation, is a clear sign of nervousness and disarray in Tory ranks especially over the cuts to disability benefits.

According to the Daily Mirror 640,000 disabled people on Personal Independence Payments will have lost £4.4 billion in total by 2020. That’s an average of around £3500 a year for those affected. That cut will in effect be used to finance the rise in income tax thresholds from which the top 10% of incomes gain the most.

On top of that the budget announced cuts in corporation tax and capital gains tax. These cuts will supposedly be covered by a crackdown on corporate tax evasion. Experts such as Richard Murphy of the Tax Justice Network welcomed some of the proposals on that but remain deeply sceptical about just how much money will be raised – not least given the record of the HMRC, the tax collecting agency whose staff numbers have been slashed in recent years.

Scepticism should also be directed towards the rhetoric about the northern powerhouse which sadly Labour local government leaders in Manchester, Leeds and elsewhere have all signed up to support. Most of the new spending on transport infrastructure is going to London and the southeast, and much of it isn’t even scheduled until after 2020. Meanwhile the cut in business rates for smaller businesses will take away around £7 billion over five years from the finances of local authorities on top of further cuts in grants from central government. This can only lead to further devastation of essential services and jobs especially in areas most dependent upon them – mostly in the north.

Then there is a proposal for every school student to do maths up to the age of 18 whilst the government does nothing to address the acute shortage of teachers in some parts of the country, especially those teaching maths. Or the money to help the homeless which turns out to be merely money diverted from the existing budget for local communities without any detail about what will be cut instead – whilst the shortage of housing for those on low incomes becomes even more acute.

The independent Institute of Fiscal Studies (the IFS), as reported in the FT on Friday , did its sums as usual, and concluded that taken as a whole the budget was “very much a giveaway to the better off”. The poorest 50% will be on average worse off by £375 a year. The better off 50% will gain on average £235 a year from the rise in income tax thresholds but most of the gains go to the top 10%.

The IFS also exposed just how all these measures make it extremely unlikely that the government will meet its targets for reducing the overall budget deficit. Osborne attempted to put the blame for lower forecasts of economic growth on the state of the world economy but that’s only part of the story. The anaemic recovery in Britain has been driven by more consumer borrowing and provided more jobs on zerohours contracts and/or low pay. The combination of low wage increases for the majority with cuts in the top rate of income tax and continuing tax avoidance schemes by multinationals such as Apple and Google has predictably led to tax receipts far lower than earlier forecasts.

So we can expect further austerity – more cuts in public spending and continuing pay freezes for those working in education and health (unless they happen to be college principals or heads of NHS trusts of course). Meanwhile cuts in public sector investment are a recipe for slower growth in the longrun as John McDonnell has been right to emphasise.

The immediate prospects for the economy are poor regardless of what happens to the world economy. But if the turbulence in world financial markets and the downturn in the price of oil and other commodities feed back into outright recession in Europe, and the USA, Britain will certainly be hit as well. The outlook is dark according to one headline in the FT. Except of course for those of us who recognise that this will also be an opportunity for all those on the left to start winning the argument about how and why “Austerity kills. Kill Austerity”.