Socialist Worker

Tory budget means axe will fall on the poorest

A cap to the welfare budget means more cuts to make up the targets, reports Simon Basketter

Issue No. 2396

Anti-budget protest in Bolton

Anti-budget protest in Bolton (Pic: Karen Reissmann)

Tory chancellor George Osborne announced a cap on welfare spending in his budget last week.

Osborne gave an idea where the axe might fall, but not how much would be chopped off each time it does.

Carers, the disabled, those hit by the bedroom tax, pregnant women, child benefit recipients and a long list of others will suffer. 

Eileen Short is a spokesperson for the Anti Bedroom Tax and Benefits Justice Federation.

She told Socialist Worker, “This is a budget that gives handouts to the Tories’ mates and people who have money.

“Whatever the talk of recovery, the Tories’ war on the poor continues.”

The welfare cap includes housing benefit—and rents are soaring as rich landlords continue to screw every penny they can out of private tenants. 

This effectively means the cap will translate into hunger and food banks and malnutrition.


The vast majority of working age benefits and tax credits are now subject to the cap. 

Pensioners have failed to escape the cap, despite Osborne’s claims. 

A number of pensioner benefits, such as Pension Credit and Winter Fuel Allowances, are included.

The government will have to gain parliamentary approval to breach the cap if it looks set to do so. 

But forecasting errors meant that expenditure between 2012 and 2013 rose by 4 percent more than planned.  If this was repeated, which is highly likely, then it is not clear whether the government would simply cut some benefits to catch up.

All kinds of things can drive up different benefits. 

For instance, recent increases in housing benefit have been driven by the falling real wages of increasing numbers of working claimants. 

At the same time rents are expected to go up by a quarter in the next five years, according to some estimates.

The biggest myth is that welfare spending is out of control. 

In reality Britain spends less than the average wealthy nation on benefits. Before the recession welfare spending was falling as a proportion of national output. 

The proposal for a welfare cap is arbitrary. But it means there will now be a long term bidding war over which party can cut benefits the most. 

The Tories almost certainly will promise to the lower the cap after the next election. Disgracefully Labour has signed up to the cut. 

As Eileen put it, “You can only assume the Labour leadership, in an attempt to step up their supposed reputation in middle England, is prepared to join the war on the poor.

“If they stand with the Tories in pushing people at food banks and into poverty and malnutrition, many people will see it as proof that Labour is against us. 

“They need to pick a side.”

Pension rules benefit the better off

What do Osborne’s changes to the pension system mean?

Assume that someone who pays the 40 percent tax rate puts £10,000 into a pension.

This will only cost them £6,000 because tax reliefs of 40 percent are available.

If they cash in the policy they can immediately pocket a quarter of the value of the policy tax-free. So on a policy that cost them £6,000 after tax relief they now get £2,500 back, tax-free.

Next, they can take the rest of the policy as a lump sum. 

If they pay tax at 40 percent, this will be paid on the lump sum. This gives them another £4,500. Added to the £2,500 they already pocketed that gives them £7,000 back for putting in £6,000. 

If they cash in the policy after retirement, a lower tax rate gets them £8,500 for the £6,000.

This doesn’t apply to someone on the standard rate of tax—even if they had money to set aside for a pension.

Osborne believes there will be an increase in revenues as people cash in their pensions.

Lib Dem pensions minister Steve Webb gloated that it’s pensioners’ right to buy a Lamborghini if they want. 

And while private pensioners are encouraged to spend, a shortfall in pubic sector pensions is to be made up from existing budgets—meaning more cuts.

Protests demand better pay

Health workers in Bristol, Bolton and Oxford staged protests on the day of the budget over pay.

Tory health secretary Jeremy Hunt said that it would be “unaffordable” to pay a promised pay rise for nurses.

Hunt will only give 1 percent for those at the top of their pay band, which, does not count towards their pension. There is no pay rise for the rest, Tories say because they will get an increment. As one nurse in Bolton told Socialist Worker, “No pay rise is adding insult to injury. 

“Health workers are already at least 10 percent worse off with this government.

“It’s not a choice of pay or jobs or cuts. We say enough is enough. The money is there for decent services, and decently paid, happy staff.”

This Saturday there is due to be the 1,000 Mothers March for Justice in Tottenham, 11am at Bruce Castle Park, Lordship Lane N17 8NU. And on 5 April there will be demonstrations around the country marking one year on from the start of the bedroom tax.

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