Despite the tax credits u-turn, the Chancellor did little to help working people

By Frances O’Grady, TUC General Secretary.

The headlines on today’s Autumn Statement will be about the Chancellor’s spectacular u-turn on tax credit cuts. Millions of working people will be relieved that he has listened to trade union and civil society campaigning against these extreme cuts to vital in-work support. But there was a sting in the tail: reductions in Universal Credit (the new benefit that will replace tax credits from 2020) are still pencilled in for the years ahead. Wider welfare cuts are also a concern. Imposing sanctions on in-work benefit claimants who aren’t able to increase their hours, or pay, is a further nasty cut to the social security safety net we all rely on. It will leave many working people wondering if the Chancellor is really on their side.  

At the TUC we were particularly listening out for help for industry – not least steel, which is in crisis and putting thousands of jobs in communities across the country at risk. But we were disappointed. There was talk of an active industrial policy, and rhetorical commitment to investing to boost growth. But the positives, like protecting support for catapult centres and science budgets and a long-term (if limited) commitment for our energy intensive industries, were accompanied by significant failures. Most notably there is disastrous inaction on the steel industry crisis and the ongoing devastation of cutting all funding for carbon capture and storage technology. Crucially, while the Chancellor talked the talk on infrastructure, the overall position is still of ongoing reductions in government investment. It will be lower as a proportion of GDP over this parliament than the last.  

The news on support for our vital public services is especially grim. We have undoubtedly seen a slowing in the pace of public service cuts, but only from the extreme position the government set out before the election. It’s heartening to see that on this the TUC has been proved right – the OBR say that even this small reduction in the rate of cuts is forecast to boost growth. But the OBR also tell us that under current plans government spending will still fall by 5.2 per cent of GDP over the decade from 2009. Barring the periods of demobilisation in the wake of the First and Second World Wars, this is the biggest ten-year reduction in the past century and the biggest ten-year fall seen in any G7 country in the past half century. By the end of the parliament, the scale of these spending reductions will mean services like schools, hospitals and childcare will struggle to deliver even basic levels of service, let alone the excellent support that people at work deserve.

Local government services are facing some of the most significant cuts. While the Chancellor might like to describe dramatic reductions in central government grants as ‘empowering’, local people who see their leisure centres, libraries, children’s centres and care services close are likely to reach a different conclusion. Phasing out government grants and requiring local authorities to rely on locally raised revenues will simply mean that the inequalities between poorer and richer areas continue to grow. Promoting tax competition between local councils is not the answer to the spending squeeze that some of the most deprived areas in the country now face. It risks leaving some authorities unable to meet their most basic statutory obligations.  

The Chancellor says he wants to be the friend of working people. People at work want a genuinely shared recovery, with proper support for more good jobs in growing businesses across the economy and across the country, and world-beating public services that their families can rely on. But the Chancellor’s laissez-faire approach to industry and his public service and infrastructure cuts are still taking us in the wrong direction. And on tax credits, he’s made a temporary climb-down, but there is still long-term pain in store

Frances O'Grady is the General Secretary of the TUC.