Is this Coalition Government stupid or heartless or both?
Last week George Osborne delivered a Budget that handed millionaires a tax cut of £42,500 each, offered a big helping hand to higher rate taxpayers with kids and (buried deep in The Red Book) slipped in a big rise in inheritance tax exemptions for non-doms.
By contrast, next week the axe falls on £2,165,000 of support for the poorest. Low income working families bear the brunt. The changes, which all result from the 2010 Budget and the Comprehensive Spending Review, snatch tax credits from working parents unless they work at least 24 hours a week. So a family where one parent works for 20 hours on the minimum wage stands to lose £74.34 a week. Many also lost housing benefit in January and have no idea how they will cope. Charities are on standby for spiralling debt, rent arrears, evictions and pitiful hardship.
The other big change a week tomorrow hits people like my friend, who worked and paid National Insurance for 20 years before breast cancer surgery a year ago, and who suddenly finds her contributory benefit, Employment and Support Allowance, stopped altogether because her partner works. Exhausted from chemotherapy and ineligible for Jobseeker's Allowance, she rants in emails that she thought the state would care for her if she fell ill. With her savings gone, she faces the humiliation of having to ask her partner for money to buy him a birthday present, and worries their relationship won't survive.
Burned into my consciousness is a smirking Mr Osborne claiming: "This Budget rewards work." Does it heck. The claim was pinned to a big rise in income tax thresholds from next April. But they are a pig in a poke for poor working families. The poorest do not pay income tax anyway so do not benefit. There's also bad news for nearly one million low income families just above the current threshold who ought to gain £220 a year. As Citizens Advice points out, the 900,000 on housing benefit face a clawback of 65p in every £1 and for the 700,000 also on council tax benefit there's a further clawback of 20p. So, for every £1 the Treasury gives them, it will whip away 85p. Meanwhile middle-class working couples will be an average £8 a week better off.
The hullabaloo over the granny tax obscured the larger injustice visited on poor working families. For all the spin about "fairness", the Treasury's own figures show the poorest half of the population lose a larger proportion of their income than 80% of the richest half.
The story does not end there because, while the state retirement pension rises by £5, child benefit is frozen for three years. The poorest are also clobbered hardest by regressive indirect taxes like the 20% VAT rate and fuel duty. Meanwhile the minimum wage lags behind inflation and benefits rise more slowly after the switch to CPI indexation.
Stand by for the Government moving the goalposts on the definition of child poverty, since on current projections there will be 400,000 more British children growing up in poverty by 2015 than the figure inherited from Labour. And there's worse to come, following the casual intimation of a further £10 billion cut in the welfare budget in 2016. Regional pay for public sector workers could be used to freeze pay rates everywhere outside the south-east for years to come, pushing millions more part-timers below the poverty line.
This isn't just unfair economics. It's stupid economics that will suck billions out of the economy, further depressing consumer demand. The best way to kickstart growth would be to introduce a living wage that would put money into the pockets of the poorest, the group you can rely on to spend it. You don't need to take my word for it. Boris Johnson says the same thing.
My question is this: who will speak up for the bottom 15%? The Tories are simply reverting to type. The LibDems are their hapless human shields. So where is the SNP, with its pretensions to being a "progressive beacon"? Where is Labour, supposedly the party of social justice? Never mind the squeezed middle. Who will speak for the squashed bottom?
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