As Iain Duncan Smith makes clear in his letter of resignation, Osborne’s budget is designed to favour Conservative voters. He has hit hardest those who most need help in these difficult times. This is a serious indictment of both the policy and the character of the chancellor.
In-work poverty is sharply on the increase in Britain. Osborne’s tax changes are highly regressive. We are clearly not ‘all in this together’. It is time to nail this grimly ironic maxim to the coffin once and for all.
Much of the regressive effect of the tax changes is because in-work benefits fall away as post-tax incomes increase. In effect, the least well off will gain little if anything from increases in the minimum wage, or from the increase in the income tax thresholds. What is given to them with one hand will be taken away with the other.
Those who earn a little more, those who do not claim top-up in-work benefits, will gain something from the increase in the income tax thresholds, but the changes in inheritance tax and in corporation tax mean that the better off you are the more you stand to gain.
The clever tax ploy of transforming personal income into corporate income for tax purposes means that the rate of 17% corporation tax will be applicable to many high income earners, rather than the 40% income tax rate.
While some in the middle class may feel like celebrating their apparent good fortune they should be aware that extra cash in their wallets does not tell the whole story. It is all too easy to forget the very real benefits of publicly provided goods and services. For example, the middle class has been hit very hard by high and rising university fees.
The housing crisis of unprecedented proportions hits young, working people. Many of these hard-hit youngsters come from middle income families. Depletion of public services is another economic and social cost that hits hard right across the nation.
When the Work and Pensions Secretary resigns saying the cuts to welfare are brutally unfair Britain should pay very close attention. Iain Duncan Smith has dedicated his life to cutting benefits to the working poor. He is just about as anti-welfare, anti-tax and anti- ‘big government’ as it is possible to get. When even he says that something is badly wrong with the chancellor’s welfare and tax changes the country should be very concerned.
The public should also be very concerned that the PMs parliamentary whip has such a strangle-hold on MPs that despite all the doubts and dismay, and the black hole in the budget brought about by the chancellor’s U-turn, the budget was passed through parliament last night, supported even by the above-mentioned ex-Work and Pensions Secretary.
IDS said in his resignation letter that the cuts were not strictly-speaking necessary as ‘austerity measures’ to control deficit spending, and when combined with tax cuts to the very wealthiest amongst us, he felt that the cuts were indefensible. This forced the government’s U-turn. IDS called into question the integrity and fairness of the chancellor, and implicitly, of Cameron’s entire government. Nonetheless he then went on to vote in favour of the chancellor’s budget. What does this say about our democracy?
The budget does not support young, hard-working people. It favours wealthy retired people and the highest income earners. Statistics show that women and children are the hardest hit of all groups. The sugary drinks tax, if anything, increases this regressive effect of the budget.
The resulting inequality will do nothing to promote investment, productivity and growth in the economy, all of which are down this year. Economists are speaking out against too much austerity which is damaging to economic recovery. The best that can be said is that the chancellor is, in fact, failing to meet his objectives, though, unfortunately, not for want of trying. He is unlikely to move into a budget surplus in 2019/20 largely because a poor growth record will reduce tax receipts to the treasury.
The chancellor believes in inequality as a political strategy. It has never been more apparent that we are not ‘all in this together’. Iain Duncan Smith resigned over the injustice of the budget but went on to vote for it with no credible assurance from the chancellor that the next round of cuts will be any less brutal for the most vulnerable people in society than the last. The U-turn on working tax credits, the U-turn on cuts to benefits for the disabled, have not U-turned the entire agenda of this government. However it is increasingly untenable for the government to claim that we are ‘all in it together’.