Tag Archives: spending cuts

Will the rich-poor divide ever reduce?

Neither the coalition agreement nor the Queen’s Speech said anything about it.   They were  about deficit reduction, not poverty reduction.   But the latter must be one of the key tests by which we measure its performance.   Thatcher tripled child poverty and by 1997  it had reached 3.4 million (i.e. there were nearly 3 1/2 million children living in households where the income before housing costs was less than 60% of the national median).   Labour brought that down to 2.7 million by 2005, though still not half-way to meeting its target of halving child poverty by 2010.   The policy then collapsed.   Child poverty actually rose over the next two years back up to 2.9 million before falling again to 2.8 million in 2008-9.   That still left 22% of children in poverty households.

What effect can we expect from the coalition’s announced policies?   The Tory aim is to tackle poverty via strengthening marriage (tax reliefs), improving education (pupil premium for poorer children), incentives to work (cutting benefit, though JSA at £51 a week is already at rock-bottom), and sorting out the economy (with a trickle-down to the poor).   The LibDem policy is to introduce £10,000 personal tax allowances which would certainly increase the incomes of many of the poorest families, but only the first very modest tranche is being brought in this year.   The real problem however is that the size of the spending cuts to be announced in the spending review in October, let alone in the Budget in 4 weeks time, is likely to swamp any minor reduction in the poverty numbers that these indiect policies might have.

What makes this all the more galling is that Britain has become a hugely richer country over the last decade – for the elite.   New Labour has been a golden age for the super-rich.   The wealth of the 1,000 richest multi-millionaires has nearly quadrupled since 1997, and rose last year alone by £77bn to no less than £335bn.   Just 100 persons in the UK now have wealth valued at £183bn, that is 54% of all the wealth in the country.

These rich-poor inequalities are now staggering.   Yet all the talk, in a financial crisis brought about directly by many of these richest 1,000 individuals, is that between 100,000 and 300,000 public sector workers will now lose their jobs, most low-paid, to cut the deficit for which they bear no responsibility whatsoever.   Why is there no talk instead of imposing a 10% super-tax on this hyper-elite to raise some £35bn which is after all less than half of the amount by which their wealth increased last year?

4 tests for the new Tory Government

A checklist of 4 key items will determine the nature of this new Government and its likely fate.    They are:

1   Who will carry the burden of the big spending cuts which the Tories have repeatedly declared their intention to impose in this next year and which the LibDems have now succumbed to?   If it is low-paid public sector workers – nurses, teachers, porters, dinner ladies, low-level administrative staff, local government workers – rather than the top echelons especially the bankers with their bonus millions, there will be serious social unrest – maybe not on the Greek scale, but certainly enough to prevent a Tory election victory any time in the next year.
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What is this election all about?

One month to go, and the main issues so far seem to be safeguarding the economic recovery, immigration, and whether exempting half or more of employees from the 1% rise in insurance contributions at a cost of some £7bn is a good idea or not.   Yet that is not what the real arguments should be about.

Neither party is addressing the central issue of whether deep cuts (‘deeper than under Margaret Thatcher’) are needed at all to bring down the deficit if the rich (the top 10% and particularly the top 3%) are made to pay their way through increased taxes, reduced allowances and tax breaks, and the stopping of artificial tax avoidance, and if economic growth picks up anywhere near as fast as the Government is predicting.

Neither party is offering policies to tackle directly the economic disaster of 2.5 million jobless through a public sector-led job creation programme rather than a range of minor tax incentives to business which will leave unemployment far higher for far longer.

Neither party will face up to the banks, whose bail-out and the recession it generated has increased Britain’s national debt to over £73obn so far and who have used the money overwhelmingly to stuff their own balances, by forcing them instead to lend to businesses and homeowners starved of credit and thus to cut unemployment and strengthen the recovery.

Neither party is mentioning the biggest social indictment in Britain today, – the collapse of house-building to its lowest level since 1922 and the failure over the last decade to build more than 300 Council houses a year (half a house per constituency) when there are 1.8 million households on Council waiting lists.

Neither party is offering any prospect of serious banking reform which will prevent a recurrence of the worst financial crisis for 80 years, namely the splitting off of casino investment banks from retail banks, the prohibition or tight regulation of toxic derivatives, and the downsizing of gargantuan banks that are ‘too big to fail’.

Neither party is offering any policies to eliminate unacceptable inequality which is now greater than at any time in the last century and which now leaves top executives with incomes 100 times higher than the average worker, and will not even introduce a High Pay Commission to regulate the grotesque excesses at the top of the income scale.

If all the big issues are being sidestepped, what’s the point of an election?

It’s worse than Emmenthal cheese

Picking your way through the holes, crevasses and craters of the Budget where far more was invisible than apparent is difficult, but here goes.   The deficit is now £167bn, and Darling intends to achieve the proposed halving (i.e. a cut of £83bn) within 4 years by tax increases yielding £19bn, public expenditure cuts worth £38bn, and economic growth providing the rest, which must mean around £26bn.
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