The Staggers

The New Statesman’s rolling politics blog

Osborne’s “progressive” façade

Talk of a “fair and progressive” Budget disguises how cuts will hit the poorest hardest.

By George Eaton Published 22 June 2010 11:26

The coalition is determined to present today's Budget as "fair and progressive", with tax rises for the richest and tax cuts for the poorest. But does the rhetoric match the reality?

On tax, George Osborne will point to the plan (first mooted by the Lib Dems) to raise the personal tax allowance by £1,000 to £7,475, a move that will take 850,000 of the lowest-paid out of income tax altogether.

But this measure isn't as progressive as it initially appears. For a start, those individuals too poor to pay tax in the first place will gain nothing from the move. In 2009-2010, only 62 per cent of the adult population earned enough to pay income tax. Should the measure be combined with a rise in regressive VAT, the overall effect may be far from progressive.

But it's only once we take account of the likely spending cuts that any claim this Budget will be "progressive" falls apart. The coalition's decision to rely on spending cuts, rather than tax rises, to plug the deficit will have disastrous consequences for the poor.

With spending in non-ring-fenced departments poised to fall by up to 25 per cent, it is the poorest who will be hardest hit. As I noted yesterday, an analysis by the Financial Times showed that cuts would hit large parts of the north twice as hard as the south.

Today's FT contains a succinct explanation:

Spending cuts of such a scale could not be presented as "progressive" because public spending is concentrated in poorer areas and poorer families, suggesting that the Budget will have a sting in the tail.

Will Osborne, a better politician than he is an economist, have the chutzpah to claim that his cuts are "progressive"? If he does, Labour will be presented with an open goal.

Special subscription offer: Get 12 issues for £12 plus a free copy of Andy Beckett's "When the Lights Went Out".

Special Offer: Get 12 issues of New Statesman magazine for just £12

Tags: Spending Cuts Budget 2010

More from George Eaton

7 comments

Tue, 2010-06-22 12:06 — orderfromcha0s

Tory governments are all the bloody same. Remember the last one? Preserve the wealth of the elite at the expense of EVERYONE ELSE. Because they've never had it hard, they have NO IDEA what it's like to struggle. Scum.

We (me included) didn't know how good we had it for the past 13 years. Yeah it got bad, but nothing on this. Gordon: you were right, we're fucked now. Sorry mate.

Tue, 2010-06-22 12:10 — jeremiah

Obviously this Budget will whack the poor.

The areas in the UK that are most reliant on Government programs are also the ones that tend not to vote Tory.

Parts of London, Northern England, Scotland & Wales will all take a hammering on Tuesday.

Labour made a balls up of the public finances and made Britain more unequal than in the time of that Thatchwoman.

Once Cameron & co. are finished Britain will be like the USA. We will have a pauper state and an even more unequal society.

Tue, 2010-06-22 12:17 — Lou (not verified)

The days of Thatcher will seem like halcyon days compared to these current incumbents.
Regarding Osborne's claims that these cuts are progressive, he got his adjectives mixed up, what he should have said is that these will be regressive cuts.

Tue, 2010-06-22 13:26 — Bill Kruse (not verified)

None of this addresses the heart of the problem, we only have one money supply and that's in the hands of a small group of private individuals, the owners of the private banks we're encouraged to borrow kmoney from. When they stop lending, as they have now, there's no money about and many experience hardship. Other countries have public, state-owned banks who will lend at good rates enabling businesses to grow and prosper, enabling them to avoid recession or at least the worst effects of it. Why can't we have a banking model like this? This isn't even being discussed, let alone addressed.

Tue, 2010-06-22 12:59 — sonia ali (not verified)

Whether they end up affecting the poor more directly (which I agree they will) in the end, everyone will suffer.
Cutting the Future Jobs fund is a silly move, dismantling the RDAs would be an even sillier move, particularly in the North, down in London we could probably live without the LDA. Funny though how Boris is already taking the credit for ERDF..as if somehow it has something to do with him, no doubt he will take credit for the LDA's implementation of the ERDF rounds in the past, but at the same time insist it has been inefficient and must be dismantled.

Tue, 2010-06-22 21:26 — Drew (not verified)

The same mantra the wealthy elite have been chanting since Milton Friedman reared his ugly head from the womb touting ridiculous Randian rhetoric. The real issue here is the slow and utter failure of capitalist ideals in any circumstance over the last 30 years and the complete ignorance of it by the media and those in power.

Change is coming, and this is the tip of the iceberg, but the real questions remain to be answered... How long will the majority of the population remain complacent and/or ignorant? How long will the capitalist system fight its slow suffocation? Will change come before we reach the one-way street to oblivion, fascism, or both?