Why April will be the cruellest month in the age of austerity

The "bedroom tax", the new Poll Tax and the 1% cap on benefit increases will squeeze the poor as never before.

April is the month when the full force of George Osborne's austerity programme will finally be felt. In the seventy years since the Beveridge report was published, no government has ever so consciously reduced support for the poorest. Below, I summarise the measures that mean the unemployed and the low paid will have their incomes squeezed as never before.

1 April: The "bedroom tax"

Perhaps the cruellest and most ill-thought through of all of the reforms. From next month, those social housing tenants deemed to have one spare room will have their housing benefit cut by 14 per cent, while those deemed to have two or more will have it cut by 25 per cent. The removal of what the government calls "the spare room subsidy" (and what most others call the "bedroom tax") will cost tenants an average of £14 a week more in rent or an extra £728 a year. Ministers have defended the measure on the basis that it will encourage families to downsize to more "appropriately sized" accommodation but in doing so they have ignored the lack of one bedroom houses available. In England, for instance, there are 180,000 social tenants "under-occupying" two-bedroom houses but fewer than 70,000 one-bedroom social houses to move to. Housing experts have warned that the £490m the government hopes to recoup could be reduced or even wiped out as families are forced into the private sector, where rents are higher, leading to even greater pressure on the housing benefit budget.

But by far the most troubling aspect of the "bedroom tax" is the impact it will have on the disabled. For many of these families, this additional space is not a luxury but a necessity. For instance, a disabled person who suffers from disrupted sleep may be unable to share a room with their partner, likewise a disabled child with their brothers and sisters. The same applies to those recovering from an illness or an operation. After months of pressure from campaigners, the government announced that families with severely disabled children would be exempt (as well as 5,000 foster carers and some armed forces families) but the majority of the 670,000 tenants due to be affected will still lose out, including hundreds of thousands of disabled families.

In a written statement, Iain Duncan Smith emphasised that Discretionary Housing Payments would remain available for "other priority groups" including those "whose homes have had significant disability adaptations and those with longterm medical conditions that create difficulties in sharing a bedroom." But research published by the National Housing Federation shows how inadequate this support is. Were the £30m discretionary fund to be distributed equally among every claimant of Disability Living Allowance affected (229,803 in total), they would each receive just £2.51 per week, compared to the average weekly loss in housing benefit of £14.

Having conceded that those families with severely disabled children should be exempt, on what grounds does the government maintain that those with one more or disabled adults should not? In a recent letter to George Osborne calling for all disabled families to be spared from the cut, the heads of seven charities, including Carers UK, Mencap and Macmillan Cancer support, cited one typical case.

Jean and Carl live in a two bedroom house. Carl has suffered from serious health complications for years and is now unable to work as a result of a series of operations and treatment. Jean juggles caring for her husband with a job at a local supermarket. They are unable to share a room because Carl’s condition causes very disrupted sleep and if they share Jean cannot sleep. Her shifts at work mean she frequently has to be up at 4am and she would simply be unable to do this if she could not get a good night’s sleep. They fear they will not be able to make up the shortfall in their Housing Benefit and if forced to downsize Jean is worried about her ability to do her job if she is unable to sleep properly (names changed to preserve anonymity).

1 April: "Poll Tax II": council tax support cut by 10 per cent

The most hazardous of the welfare changes could be that which has received the least attention (although Staggers readers will be better briefed than most): the government’s reform of the council-tax system. Polls routinely show that the levy is Britain’s most unpopular tax but the coalition is about to ensure that millions of people pay it for the first time. At present, those households deemed too poor to meet the monthly charge receive Council Tax Benefit to cover all or part of their bill. With 5.9 million recipients, it is claimed by more families than any other means-tested benefit or tax credit. Now, in its quest to roll back the welfare state, the coalition has cut the fund for council tax support by 10 per cent. At the same time, it has localised the system, transferring responsibility for the new regime from central government to local councils.

From this April, councils must either maintain current levels of support and impose greater cuts elsewhere, remove other exemptions (such as those for second homes and empty properties), or ask those who receive a full or partial rebate at present to make a minimum payment. Most have opted for the latter course. A report earlier this week by the Joseph Rowntree Foundation found that 1.9 million families who do not currently pay council tax will be billed an average of £140 a year. In addition, 150,000 low income families will pay on average £300 more a year.

When the poll tax was introduced in 1989, the poor were at least assured that their benefits would rise with prices. But under George Osborne’s plan to uprate working-age benefits by 1 per cent for each of the next three years (see below), rather than in line with inflation, their incomes will be squeezed to an unprecedented degree. Figures from the Institute for Fiscal Studies show that the average working family will lose £165 per year, while the average non-working family will lose £215. Confronted by these losses, which household will willingly pay hundreds of pounds in additional tax? Yet, for the sake of saving just £480m a year, the coalition intends to force councils to chase the poorest through the courts to recoup a charge they cannot afford to pay.

8 April: Benefit increases capped at 1 per cent for three years

From this April, until at least 2015-16, working-age benefits and tax credits will be uprated by just one per cent a year, rather than in line with inflation as usual. By breaking this link, the coalition will leave the poorest families even more vulnerable to fluctuations in food and energy prices. CPI inflation is forecast by the Office for Budget Responsibility to be 2.6 per cent in September 2013 and 2.2 per cent in September 2014, meaning that those families affected will suffer a cumulative loss of four per cent of income by the end of the period. For many, this will mean being forced to choose between heating their home and feeding their family.

As the Institute for Fiscal Studies has shown, 2.5 million households without someone in work will lose an average of £215 per year in 2015-16, while seven million households with someone in work will lose an average of £165 per year. If, as in recent years, inflation rises faster than expected, these losses will be even greater.

In seeking to justify the measure, the Conservatives have repeatedly highlighted the fact that benefits have risen faster than private sector wages in recent years. Since 2007, the former have increased by an average of 20 per cent (in line with inflation), while the latter have increased by 11.4 per cent.

But this is an argument for increasing wages (for instance, by ensuring greater payment of the living wage), not for cutting benefits. Indeed, many of those whose wages have failed to keep pace with inflation rely on in-work benefits such as tax credits to protect their living standards. The government's decision to cut these benefits in real-terms (contrary to ministers' "strivers/scroungers" dichotomy, 60 per cent of the real-terms cut falls on working families) will further squeeze their disposable income.

When Iain Duncan Smith says that benefits have risen faster than wages, he is really complaining that wages have risen more slowly than inflation (and are expected to continue to do so until at least 2014). But rather than prompting the government to slash benefits, this grim statistic should encourage it to pursue a genuine growth strategy that ensures more people have access to adequately paid employment.

While benefits have increased faster than wages in the last five years, this is a temporary quirk caused by the recession. Until now, their value relative to wages has plummeted. In 1979, unemployment benefit was worth 22 per cent of average weekly earnings. Today, it is worth just 15 per cent.

15 April: Benefit cap of £500 a week introduced

First announced by George Osborne at the 2010 Conservative conference, the £500 a week (£26,000 a year) cap on the total amount of benefits an out of work family can claim will be introduced next month. But in a sign of ministerial nervousness over the measure, it will initially apply only to four London boroughs - Bromley, Croydon, Enfield, Haringey - before being applied nationwide from September. The cap, which applies regardless of family size, will cost 50,000 households an average of £93 a week, with 29 per cent losing more than £100. The Children's Society has warned that 80,000 children will be made homeless as families are forced to move out of private sector rented homes that are no longer affordable.

The government has justified the cap on the grounds that it is unfair for an out of work family to receive more in benefits than the average family receives from going out to work. But this (admittedly shrewd) line ignores the support that many in-work families receive through the tax credit system. Were the cap to take this into account, it would be set at a significantly higher level of £31,500, preventing thousands of families being pushed into poverty.

Finally, it's worth noting as I have before, that welfare cuts aren't just bad for the poor, they're bad for growth too. To anyone with an elementary understanding of economics, this will come as no surprise. If the government reduces someone's benefits by £728 a year (the average annual cost of the "bedroom tax"), that's £728 less for that person to spend on goods and services. And since, as Paul Krugman sagely observes, "your spending is my income" (and "my spending is your income"), it's not just the claimant who loses out, it's shops and businesses too.

In addition, since the poor are forced to spend, rather than save, what little they receive, welfare cuts are around twice as economically harmful as tax increases (the OBR estimates that output is reduced by £60 for every £100 of welfare cuts, compared to £35 for increases in VAT and £30 for increases in income tax). It's for this reason that wise governments allow welfare spending to rise in times of stagnation. While borrowing temporarily increases as a result, higher benefits (known as the  "automatic stabilisers") are an essential means of maintaining consumer demand. But Osborne’s decision to cap benefit increases at 1 per cent (alongside other pro-cyclical measures) runs entirely against such logic. Welfare payments will now fall, rather than rise, in line with inflation, reducing real-terms incomes. As a result, Britain’s anaemic economy will be even more prone to recession.

Postscript: a welfare cut for the poor, a tax cut for the rich

There is, however, one group conspicuously exempt from next month's austerity: the rich. For the 1.5 per cent of earners who make over £150,000 a year, the top rate of income tax will be reduced from 50 per cent to 45 per cent on 6 April. The move will benefit the UK's 13,000 income millionaires by an average of £100,769 a year. Were the government to reverse this measure, it could expect to raise around £3bn a year, more than enough to fund inflation-linked rises in benefits.

Even in the first year of the 50p rate, when temporary forestalling meant many avoided it (for instance, by bringing forward income to 2009-10, the year before the new rate took effect - a trick they could only have played once), the tax raised an extra £1.1bn. This alone is enough to meet the annual cost of increasing benefits in line with inflation (the government expects to save £0.9bn in 2014-15 by capping increases at 1 per cent).

George Osborne leaves number 11 Downing Street in central London on March 19, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Who "speaks for England" - and for that matter, what is "England"?

The Hollywood producer Sam Gold­wyn once demanded, “Let’s have some new clichés.” The Daily Mail, however, is always happiest with the old ones.

The Hollywood producer Sam Gold­wyn once demanded, “Let’s have some new clichés.” The Daily Mail, however, is always happiest with the old ones. It trotted out Leo Amery’s House of Commons call from September 1939, “Speak for England”, for the headline on a deranged leader that filled a picture-free front page on David Cameron’s “deal” to keep Britain in the EU.

Demands that somebody or other speak for England have followed thick and fast ever since Amery addressed his call to Labour’s Arthur Greenwood when Neville Chamberlain was still dithering over war with Hitler. Tory MPs shouted, “Speak for England!” when Michael Foot, the then Labour leader, rose in the Commons in 1982 after Argentina’s invasion of the Falklands. The Mail columnist Andrew Alexander called on Clare Short to “speak for England” over the Iraq War in 2003. “Can [Ed] Miliband speak for England?” Anthony Barnett asked in this very magazine in 2013. (Judging by the 2015 election result, one would say not.) “I speak for England,” claimed John Redwood last year. “Labour must speak for England,” countered Frank Field soon afterwards.

The Mail’s invocation of Amery was misconceived for two reasons. First, Amery wanted us to wage war in Europe in support of Hitler’s victims in Poland and elsewhere and in alliance with France, not to isolate ourselves from the continent. Second, “speak for England” in recent years has been used in support of “English votes for English laws”, following proposals for further devolution to Scotland. As the Mail was among the most adamant in demanding that Scots keep their noses out of English affairs, it’s a bit rich of it now to state “of course, by ‘England’. . . we mean the whole of the United Kingdom”.

 

EU immemorial

The Mail is also wrong in arguing that “we are at a crossroads in our island history”. The suggestion that the choice is between “submitting to a statist, unelected bureaucracy in Brussels” and reclaiming our ancient island liberties is pure nonsense. In the long run, withdrawing from the EU will make little difference. Levels of immigration will be determined, as they always have been, mainly by employers’ demands for labour and the difficulties of policing the borders of a country that has become a leading international transport hub. The terms on which we continue to trade with EU members will be determined largely by unelected bureaucrats in Brussels after discussions with unelected bureaucrats in London.

The British are bored by the EU and the interminable Westminster arguments. If voters support Brexit, it will probably be because they then expect to hear no more on the subject. They will be sadly mistaken. The withdrawal negotiations will take years, with the Farages and Duncan Smiths still foaming at the mouth, Cameron still claiming phoney victories and Angela Merkel, François Hollande and the dreaded Jean-Claude Juncker playing a bigger part in our lives than ever.

 

An empty cabinet

Meanwhile, one wonders what has become of Jeremy Corbyn or, indeed, the rest of the shadow cabinet. The Mail’s “speak for England” leader excoriated him for not mentioning “the Number One subject of the hour” at PM’s Questions but instead asking about a shortage of therapeutic radiographers in the NHS. In fact, the NHS’s problems – almost wholly caused by Tory “reforms” and spending cuts – would concern more people than does our future in the EU. But radiographers are hardly headline news, and Corbyn and his team seem unable to get anything into the nation’s “any other business”, never mind to the top of its agenda.

Public services deteriorate by the day, George Osborne’s fiscal plans look increasingly awry, and attempts to wring tax receipts out of big corporations appear hopelessly inadequate. Yet since Christmas I have hardly seen a shadow minister featured in the papers or spotted one on TV, except to say something about Trident, another subject that most voters don’t care about.

 

Incurable prose

According to the Guardian’s admirable but (let’s be honest) rather tedious series celeb­rating the NHS, a US health-care firm has advised investors that “privatisation of the UK marketplace . . . should create organic and de novo opportunities”. I have no idea what this means, though it sounds ominous. But I am quite certain I don’t want my local hospital or GP practice run by people who write prose like that.

 

Fashionable Foxes

My home-town football team, Leicester City, are normally so unfashionable that they’re not even fashionable in Leicester, where the smart set mostly watch the rugby union team Leicester Tigers. Even when they installed themselves near the top of the Premier League before Christmas, newspapers scarcely noticed them.

Now, with the Foxes five points clear at the top and 7-4 favourites for their first title, that mistake is corrected and the sports pages are running out of superlatives, a comparison with Barcelona being the most improbable. Even I, not a football enthusiast, have watched a few matches. If more football were played as Leicester play it – moving at speed towards their opponents’ goal rather than aimlessly weaving pretty patterns in midfield – I would watch the game more.

Nevertheless, I recall 1963, when Leicester headed the old First Division with five games to play. They picked up only one more point and finished fourth, nine points adrift of the league winners, Everton.

 

Gum unstuck

No, I don’t chew toothpaste to stop me smoking, as the last week’s column strangely suggested. I chew Nicorette gum, a reference written at some stage but somehow lost (probably by me) before it reached print.

Editor: The chief sub apologises for this mistake, which was hers

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle