Socialist Worker

Osborne's budget means cuts for the poor and handouts for the rich

by Charlie Kimber
Issue No. 2495

United strikes can push back the Tories attacks

United strikes can push back the Tories' attacks (Pic: Guy Smallman)

Chancellor George Osborne’s budget means huge cuts in the incomes of the poorest—and a boost for the rich.

The measures introduced will hit disabled people particularly hard, with cuts in Personal Independence Payments robbing an average of £70 a week from 370,000 people.

The Resolution Foundation think tank estimates that the effect of all the measures announced since the 2015 election (including this budget) will mean “the poorest fifth of households losing an average of £550 in 2020, while the richest fifth of households will gain an average of £250.”

Its analysis (below) by decile (cutting up the population into 10 percent bands) shows the second poorest 10 percent losing nearly £700.

Poorest lose out

Poorest lose out (Pic: Resolution Foundation)

The Resolution Foundation added, that 80 percent of the cash gains from the budget measure of increasing the personal tax allowance and raising the threshold for higher rate tax will go to those in the top 50 per cent of households, with nearly half going to the top 20 per cent.

The Institute for Fiscal Studies, a more right wing think tank, comes to very similar conclusions—except even more so. It shows that tax and benefit changes from the last election to April 2019 (including the projected Universal Credit) will benefit only the rich, and the poor will be savaged.

The second poorest 10 percent will lose over £1,400 a year—more than 8 percent of their income.

Changes will hit the poorest the hardest

Changes will hit the poorest the hardest (Pic: Institute for Fiscal Studies)

And its further analysis shows that working-age families with children in the second poorest decile do worst. They are set to lose 12 percent of their net income. Note this assumes full take-up of all benefits, which we know doesn't happen.

Families with children will be hurt most

Families with children will be hurt most (Pic: Institute for Fiscal Studies)

Meanwhile the sure-fire winners are the corporations and their directors. They are enjoying massive handouts. By lowering corporation tax, Osborne has made sure they get to keep more of their profits.

Families with children will be hurt most

Families with children will be hurt most (Pic: Institute for Fiscal Studies)

These damning facts would have embarrassed Osborne—which is why the Treasury has stopped doing the “distributional analysis” that it used to do for its statements.

And behind all the budget waffle was the realty of stagnation. The recovery is weak and only for a few. Osborne was forced to downgrade his growth forecasts.

Jo Mitchell, Senior Lecturer in Economics, UWE Bristol, said “Osborne told us that the greatest achievement of his time in office would be to eliminate the public deficit. In 2010, he claimed this would happen by 2015. In today’s budget, he abandonedany pretence it could be achieved by 2020.

“The deficit forecasts for the current parliament have been revised up in every future year until 2020 – yet in 2020 the budget deficit is predicted to suddenly evaporate. The projections are utterly implausible.”

Commentators noticed that the “independent” Office for Budget Responsibility (OBR) gave Osborne a £27 billion windfall to play with over five years in November’s Autumn Statement and has now removed £56 billion in the Budget forecasts.

The Financial Times reported after the budget, “Responding to criticism that his OBR had found money for the chancellor down the back of the sofa three months ago only to lose it again, Mr Chote said that these sorts of forecast changes were normal. ‘What the sofa gives, the sofa can easily take away,’ Mr Chote said caustically.”

That loss largely arises from changes in assumptions about future productivity growth feeding in to lower economic growth over the rest of the parliament. Unless there is resistance and struggle, this will lead to lower wages and living standards.

Prem Sikka, Professor of Accounting, at the University of Essex, told the Centre for Labour and Social Studies, “Official statistics show that in 1976 workers’ share of GDP in the form of wages and salaries came to 65.1 percent. Now it is 49.3 percent, the lowest ever recorded. There is nothing in the budget to boost the purchasing power of normal people.”

The grim and grinding record over decades of moving money from workers to the elite goes on.

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