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.

Getty
Show Hide image

The decline of the north's sporting powerhouse

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Now, things are different.

On a drive between Sheffield and Barnsley, I spotted a striking painting of the Kes poster. Billy Casper’s two-fingered salute covered the wall of a once-popular pub that is now boarded up.

It is almost 50 years since the late Barry Hines wrote A Kestrel for a Knave, the novel that inspired Ken Loach’s 1969 film, and it seems that the defiant, us-against-the-world, stick-it-to-the-man Yorkshireness he commemorated still resonates here. Almost two-thirds of the people of south Yorkshire voted to leave the EU, flicking two fingers up at what they saw as a London-based establishment, detached from life beyond the capital.

But whatever happened to Billy the unlikely lad, and the myriad other northern characters who were once the stars of stage and screen? Like the pitheads that dominated Casper’s tightly knit neighbourhood, they have disappeared from the landscape. The rot set in during the 1980s, when industries were destroyed and communities collapsed, a point eloquently made in Melvyn Bragg’s excellent radio series The Matter of the North.

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Yet today, we rarely get to hear the voices of Barnsley, Sheffield, Doncaster and Rotherham. And the Yorkshire sporting powerhouse is no more – at least, not as we once knew it.

This should be a matter of national concern. The White Rose county is, after all, the home of the world’s oldest registered football club – Sheffield FC, formed in 1857 – and the first English team to win three successive League titles, Huddersfield Town, in the mid-1920s. Hull City are now Yorkshire’s lone representative in the Premier League.

Howard Wilkinson, the manager of Leeds United when they were crowned champions in 1992, the season before the Premier League was founded, lamented the passing of a less money-obsessed era. “My dad worked at Orgreave,” he said, “the scene of Mrs Thatcher’s greatest hour, bless her. You paid for putting an axe through what is a very strong culture of community and joint responsibility.”

The best-known scene in Loach’s film shows a football match in which Mr Sugden, the PE teacher, played by Brian Glover, comically assumes the role of Bobby Charlton. It was played out on the muddy school fields of Barnsley’s run-down Athersley estate. On a visit to his alma mater a few years ago, David Bradley, who played the scrawny 15-year-old Billy, showed me the goalposts that he had swung from as a reluctant goalkeeper. “You can still see the dint in the crossbar,” he said. When I spoke to him recently, Bradley enthused about his lifelong support for Barnsley FC. “But I’ve not been to the ground over the last season and a half,” he said. “I can’t afford it.”

Bradley is not alone. Many long-standing fans have been priced out. Barnsley is only a Championship side, but for their home encounter with Newcastle last October, their fans had to pay £30 for a ticket.

The English game is rooted in the northern, working-class communities that have borne the brunt of austerity over the past six years. The top leagues – like the EU – are perceived to be out of touch and skewed in favour of the moneyed elites.

Bradley, an ardent Remainer, despaired after the Brexit vote. “They did not know what they were doing. But I can understand why. There’s still a lot of neglect, a lot of deprivation in parts of Barnsley. They feel left behind because they have been left behind.”

It is true that there has been a feel-good factor in Yorkshire following the Rio Olympics; if the county were a country, it would have finished 17th in the international medals table. Yet while millions have been invested in “podium-level athletes”, in the team games that are most relevant to the lives of most Yorkshire folk – football, cricket and rugby league – there is a clear division between sport’s elites and its grass roots. While lucrative TV deals have enriched ruling bodies and top clubs, there has been a large decrease in the number of adults playing any sport in the four years since London staged the Games.

According to figures from Sport England, there are now 67,000 fewer people in Yorkshire involved in sport than there were in 2012. In Doncaster, to take a typical post-industrial White Rose town, there has been a 13 per cent drop in participation – compared with a 0.4 per cent decline nationally.

Attendances at rugby league, the region’s “national sport”, are falling. But cricket, in theory, is thriving, with Yorkshire winning the County Championship in 2014 and 2015. Yet Joe Root, the batsman and poster boy for this renaissance, plays far more games for his country than for his county and was rested from Yorkshire’s 2016 title decider against Middlesex.

“Root’s almost not a Yorkshire player nowadays,” said Stuart Rayner, whose book The War of the White Roses chronicles the club’s fortunes between 1968 and 1986. As a fan back then, I frequently watched Geoffrey Boycott and other local stars at Headingley. My favourite was the England bowler Chris Old, a gritty, defiant, unsung anti-hero in the Billy Casper mould.

When Old made his debut, 13 of the 17-strong Yorkshire squad were registered as working-class professionals. Half a century later, three of the five Yorkshiremen selec­ted for the last Ashes series – Root, Jonny Bairstow and Gary Ballance – were privately educated. “The game of cricket now is played in public schools,” Old told me. “Top players are getting huge amounts of money, but the grass-roots game doesn’t seem to have benefited in any way.”

“In ten years’ time you won’t get a Joe Root,” Rayner said. “If you haven’t seen these top Yorkshire cricketers playing in your backyard and you haven’t got Sky, it will be difficult to get the whole cricket bug. So where is the next generation of Roots going to come from?” Or the next generation of Jessica Ennis-Hills? Three years ago, the Sheffield stadium where she trained and first discovered athletics was closed after cuts to local services.

This article first appeared in the 19 January 2017 issue of the New Statesman, The Trump era