Update on the forthcoming coalition budget, from John Birchall
It was former UK Prime Minister Harold Wilson who once said that ‘ a week can be a long time in politics’. For the new coalition government of Britain the coming seven days may well shape their political destiny.
With a plethora of figures being shown on television and the front pages of newspaper we are being prepared for the most sever budget in 30 years – for those not old enough to understand the history behind this statement the severity of the cuts will similar to those that followed the first oil crisis of the mid 1970’s. Then it was a Labour government and they wanted to tax the rich, today in the post Blair years such a policy would not go down well with News International or the readers of the journals who have been managing expectations for the new boys in Downing Street.
We are promised cuts in spending across the wide spectrum of what government provides for the ordinary citizen.
The last two words of the previous sentence require some analysis. At present the Social Wage, the average spent by government on each household is over £4000 per year. On average, individuals in the bottom two-fifths of income distribution receive around twice the value of benefits in kind as those in the top fifth - over £2,000 per person as against £1,000. Social housing is the most strongly 'pro-poor', but health care, social care and most education services are also pro-poor. Around half the pro-poor bias is determined by factors related to people's position in the income distribution. So, cutting ‘front line’ services may hurt the most vulnerable people.
The Prime Minister has carefully chosen to target ‘benefit scroungers’ which tends to unite the majority against a minority who do abuse the system. Most estimates put these ‘scroungers’ at less that 250,000 which sounds a lot but our working population is over 30 million and the total population is approaching 60 million.
It is worth asking those we teach how much child benefit and other child- based benefits affect their lives. At what salary rate does a parent no longer need a cash injection, which is not income related? When do tax credits and child credits cease to be a much needed part of the household income – it is worth remembering how successive Chancellors, Governors of The Bank of England and politicians at large encouraged young people to take out large mortgages only for them to now discover that re-payments seldom go down and the process lasts a considerable part of one’s adult life.
Will the new ‘free schools’ and that does not mean that pupils will attend free of charge take money away from schools in poorer areas? What of free school meals; free transport to schools, book allowances, in-service training and the list goes on.
No teacher in the land expects the emergency budget to leave both them and their schools unscathed but just where will the ‘cuts’ fall and will they be ‘fair’ – see 1st Edition of E-News for an analysis of ‘fair’ in the A short history of economics’ series.
The new government, which seems to have argued hard and long over the size and direction of the public deficit attack will be judged by how well they spread the pain of this fiscal re-alignment and just who pays. Pensions of public sector workers may be a prime target and that means teachers, police and fire fighters – not just senior civil servants, army officers and judges.
It will be interesting to reflect on the coming week in just seven days time – see you then.