Tory Porkies on Budget

The November 29th Budget has been hailed in the news headlines as a ‘giveaway’ budget. Is it? Is austerity at an end at last?

 At Tory Party Conference Theresa May proclaimed, “Austerity is over. “ Hammond was more cautious in his Budget speech saying, “Austerity is coming to an end, but discipline will remain.” That ‘discipline’ sounds painful after all the hardships people have had to put up with since the Tories took over in 2010.

 In fact neither of these statements are true. John McDonnell, Labour’s shadow Chancellor of the Exchequer put them straight. "It is now clear austerity is not over, the cuts to social security will continue and Philip Hammond gave no assurances that departments won't face further cuts." Indeed there is a £1.5bn benefits freeze in the pipeline for working age claimants, which could make households £200 a year (£4 a week) worse off. And unprotected government departments could receive further savage cuts all the way to 2023 according to the Resolution Foundation (RF) thinktank.

 Torsten Bell, Director of RF was clear. (The budget) “spelled an easing rather than an end to austerity - particularly for low and middle income families." RF claims Hammond would have to put in an extra £31bn to really bring austerity to an end after all the Tories’ slash and burn of public services and welfare benefits since 2010.

 There is a bit more money for the NHS, but it’s at death’s door thanks to the Tories. The extra injected into Universal Credit (UC) is less than the amount robbed from the project by previous Tory Chancellor George Osborne. UC remains a car crash. Hammond has shelled out £400m on ‘little extras’ for schools, but teaching staff won’t get a penny.

The Institute for Fiscal Studies (IFS) also agrees. “This is no bonanza," said Paul Johnson, the director of the IFS. "If I were a prison governor, a local authority chief executive or a head teacher, I would struggle to find much to celebrate. I would be preparing for more difficult years ahead."

 What about the cuts in income tax? The threshold beyond which people start paying income tax has been raised from £11,850 to £12,500. This has been trumpeted as a bonanza for the low paid. Hammond declared, “If you look at all the measures in the Budget...it is those on the lowest incomes that proportionately benefit the most.” This is also the opposite of the truth.

 In fact the very poorest – those on part time and zero hours contracts – have incomes below the tax threshold, so no change there. Raising the threshold gives extra benefits right to the top of the pay scale. Since the top rate threshold has also been raised to £50,000, the well-to-do gain disproportionately more.

 The Resolution Foundation has done the maths. Of the tax breaks 84% will go to the top half of earners and 45% to the top 10%, who will gain an average £410 p.a. The poorest families (including those below the threshold) will be £30 per year better off – not much more than 50p per week. Big deal!

 That’s before we factor in the loss of means-tested benefits for the poor as nominal incomes rise, and possible future increases in the national living wage. Not everyone gets paid the national living wage of course, and future rises may only keep up with the cost of living in any case. Victoria Todd of the Low Incomes Tax Reform Group (LITRG) declares, “Those earning above £11,850” (the present threshold) “may benefit, but it depends on whether they receive tax credits or other means-tested benefits such as Universal Credit.” The LITRG calculates that for households on just above £11,800 the net benefit will be more like £48.10 since they will lose £81.90 in UC.

 Jeremy Corbyn is right.”This government is harsh on the weak and feeble on the strong...This budget won’t undo the damage done by eight years of austerity and doesn’t begin to measure up to the scale of the job that needs to be done to rebuild Britain.”