Maeve Sherlock on the dire impact of George Osborne’s tax and benefit policies on Britain’s families
In October, George Osborne told BBC Radio 4’s Today Programme, “It is unfair that people listening to this programme going out to work see the neighbour next door with the blinds down because they are on benefits.”
The remark has been quoted often but it was clearly not a slip of the tongue, and Mr Osborne was at it again when he introduced his Autumn Statement last month. Explaining the government’s approach to the social security system, he said: “Those with the most should contribute the most, and they will, but fairness is also about being fair to the person who leaves home every morning to go out to work and sees that their neighbour is still asleep, living a life on benefits. As well as a tax system where the richest pay their fair share, we have to have a welfare system that is fair to the working people who pay for it.”
That’s pretty clear, isn’t it? So we now have a basis on which to judge the Coalition government.
So far, their approach to tax and benefits fails on both counts. Far from taxing the rich more, the government has pledged to reduce the top rate of tax from 50p in the pound to 45p, giving a tax break to lots of wealthy people, peaking at a gain of over £100,000 a year for 8,000 of Britain’s highest earners. At the same time, Ministers have announced they would uprate working age benefits and tax credits by just 1% – a cut in real terms.
Most of the savings from doing this come from tax credits, maternity allowance, maternity pay, sick pay, and housing benefit, all of which are claimed by working people.
Would you have worked that out from Osborne’s description?
No, me neither.
In fact, this is a grim cut in support for working families at a time when they can least afford it. Seven million households will lose an average of £165 a year, and some much more. The Children’s Society worked out that a 2nd lieutenant will lose £552 a year, with 40,000 soldiers in this position. A lone parent nurse will lose £442 a year, as will a primary school teacher. Yet we often hear the government say that they are helping working families, for example by increasing the personal tax allowance.
The trouble is, once again, you need to read the small print to discover the real impact. The respected Institute for Fiscal Studies (IFS) says that poorer households will benefit relatively little from this increase because they don’t earn enough to pay tax. And the winners? The IFS says “Households in the middle and upper-middle range of the income distribution benefit the most as a percentage of income from the increase in the personal allowance...”.
Any proper plan to reduce the benefits bill has to include steps to create economic growth, and help the long-term unemployed. If Labour were in government now, we would introduce a compulsory jobs guarantee for adults unemployed for more than two years, funded by limiting tax relief on pension contributions for people earning over £150,000 to 20%.
That is the kind of positive action this government should be taking. But I won’t hold my breath, George.
Baroness Maeve Sherlock is a member of Labour’s Shadow DWP team in the House of Lords
Published 17th January 2013