How cuts will hit the poorest hardest

New research shows how the poorest areas of the country will suffer the greatest loss of income.

In recent weeks Nick Clegg has attempted to reassure voters about the coming cuts by promising to deliver what he describes as "progressive austerity" and to prevent the emergence of a new north-south divide.

But new research by the Financial Times shows just how unrealistic and disingenuous this promise is. The analysis looked at how different regions of the country would be affected if social security benefits were reduced by 10 per cent and if public-sector areas, excluding health, were cut by 20 per cent.

It found that the poorest areas would be disproportionately hit on both measures. For instance, benefit cuts would make household income in west Wales and the Welsh valleys fall by 3.6 per cent, compared to a drop of less than 0.5 per cent in inner London. Areas such as Northern Ireland, the north of England and the south-west would suffer the greatest fall in income, while regions such as the Home Counties and London would suffer the least.

Given that public spending follows need, it is the poorest areas of the country which are most reliant on the state. It therefore follows that across-the-board spending cuts will hit them hardest. The Tory minister who, in a rare moment of honesty from this government, recently admitted that "those in greatest need ultimately bear the burden of paying off the debt" was spot on.

The danger to the poor is magnified by the coalition's decision to rely on spending cuts, rather than tax rises, to plug the deficit. The government's deficit reduction plan envisages a 4:1 ratio of spending cuts to tax rises, rather than the 2:1 split favoured by Labour. By comparison, during the last big fiscal tightening undertaken by a Conservative government, Ken Clarke split the pain 50:50 between tax rises and spending cuts.

Targeted tax increases on middle- and high-income earners offer a progressive alternative to spending cuts of a size not seen in the postwar era. But those hoping that Clegg will make this argument around the cabinet table will be disappointed. In an interview with the Spectator before the election, he pledged to reduce the deficit through cuts alone, a position that put him to the right of David Cameron.

So it's not that Clegg has been "turned" by the Tories -- he was never a progressive to begin with.

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George Eaton is political editor of the New Statesman.

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Richmond is a wake-up call for Labour's Brexit strategy

No one made Labour stand in Richmond Park. 

Oh, Labour Party. There was a way through.

No one made you stand in Richmond Park. You could have "struck a blow against the government", you could have shared the Lib Dem success. Instead, you lost both your dignity and your deposit. And to cap it all (Christian Wolmar, take a bow) you self-nominated for a Nobel Prize for Mansplaining.

It’s like the party strategist is locked in the bowels of HQ, endlessly looping in reverse Olivia Newton John’s "Making a Good Thing Better".

And no one can think that today marks the end of the party’s problems on Brexit.

But the thing is: there’s no need to Labour on. You can fix it.

Set the government some tests. Table some amendments: “The government shall negotiate having regard to…”

  • What would be good for our economy (boost investment, trade and jobs).
  • What would enhance fairness (help individuals and communities who have missed out over the last decades).
  • What would deliver sovereignty (magnify our democratic control over our destiny).
  • What would improve finances (what Brexit makes us better off, individually and collectively). 

And say that, if the government does not meet those tests, the Labour party will not support the Article 50 deal. You’ll take some pain today – but no matter, the general election is not for years. And if the tests are well crafted they will be easy to defend.

Then wait for the negotiations to conclude. If in 2019, Boris Johnson returns bearing cake for all, if the tests are achieved, Labour will, and rightly, support the government’s Brexit deal. There will be no second referendum. And MPs in Leave voting constituencies will bear no Brexit penalty at the polls.

But if he returns with thin gruel? If the economy has tanked, if inflation is rising and living standards have slumped, and the deficit has ballooned – what then? The only winners will be door manufacturers. Across the country they will be hard at work replacing those kicked down at constituency offices by voters demanding a fix. Labour will be joined in rejecting the deal from all across the floor: Labour will have shown the way.

Because the party reads the electorate today as wanting Brexit, it concludes it must deliver it. But, even for those who think a politician’s job is to channel the electorate, this thinking discloses an error in logic. The task is not to read the political dynamic of today. It is to position itself for the dynamic when it matters - at the next general election

And by setting some economic tests for a good Brexit, Labour can buy an option on that for free.

An earlier version of this argument appeared on Jolyon Maugham's blog Waiting For Tax.

Jolyon Maugham is a barrister who advised Ed Miliband on tax policy. He blogs at Waiting for Tax, and writes for the NS on tax and legal issues.