Budget 2015 – A Summary

Budget2015[1]The first Conservative only Budget in 19 years was delivered by Chancellor George Osborne on the 8th of July, and it was in large part precisely what we expected – cuts to welfare, a squeeze on young people, boosted defence spending in the wake of this year’s surge in violent extremism here and overseas.

However, there were also some surprises, including a policy ripped essentially from the Labour manifesto which the Tories have previously opposed. I will start my rundown of the 2015 Budget with just that policy:

A Living Wage

The policy which Labour, the Green Party and virtually every other organisation in the country bar the Conservative Party and UKIP have espoused for years has made a shocking appearance in the Tory Budget. George Osborne appears to have finally accepted the obvious and realised that the UK is in desperate need of a pay rise.

To that end, he has announced that the national minimum wage will increase to £7.20 p/hour next year, and rise to at least £9 by 2020. This is halfway between Labour’s pre-election pledge and that of the Green Party, and is in my mind a good level at which to set the rate. It’s nice to start an article about the Tories on a positive point for a change. Don’t get too exited, though – it won’t last.

Cuts to Tax Credits

We were all expecting this one. Although specifics were not forthcoming, Osborne has made it very clear that there will be significant restrictions to the number of people able to claim tax credits – about a 44% reduction.

Tax credits are an important source of income for those who are in work but are low-paid. Osborne argues that the tax credit system essentially subsidises unscrupulous employers – which is true, and is something I’ve been saying for years. The idea is that an increased minimum wage removes the need for tax credits; again, a traditionally left-wing argument which Osborne has appropriated. However, it remains to be seen whether the scale of the tax credit cuts is compensated for by the wage increases. If the Tories play this right, it could work very well; if not, it could be disastrous.

Targeting the Young

Okay, this is the point where I stop being nice. The Budget contains a number of absurd policies which can be nothing other than a deliberate attack on young people. The Conservatives are planning on bringing in an ‘Apprenticeship Levy’ – something which can only be a tax on firms for hiring apprentices. Osborne insists that the money companies already get will still leave them in profit overall, but considering the already ludicrous low level of apprenticeship funding available, I doubt it. This will seriously damage young people’s chances of being able to get a good apprenticeship.

And apparently they aren’t supposed to go to University either, because the government have announced that Tuition Fees are to go up in line with inflation, while Maintenance Grants are to be scrapped. True, it appears the plan is to extend Maintenance Loans to cover the money which was previously a grant, but it will still provide a significant disincentive to students from poorer backgrounds to get a degree, and leave the poorest with the most debt – surely a broken system.

It would seem that the government have decided that young people should not try to better themselves, and should instead throw themselves into immediate low-paid work, because housing benefits are to be withdrawn for under-21s and an ‘earn or learn obligation’ is to be introduced – essentially meaning young people will receive no social security of any kind unless they are in work or education (which, remember, has just been made more difficult). Oh, and the living wage mentioned above? That doesn’t apply to under-25s. The way young people are treated by the Tories is sickening, and one cannot help but think it might possibly be because we are the age group least likely to vote for them. Nothing to lose? We shall see…

Other Welfare Cuts

Apart from tax credits, where else in the welfare budget will the Tory axe fall? Well, Osborne has promised £12 billion of welfare savings, and they aren’t going to come from nowhere. The widely unpopular Benefit Cap is to be lowered from £26,000 to £23,000 per household (well below the living wage for a two-adult family) and Employment Support Allowance is to be lowered to the same rate as Jobseeker’s Allowance for people in ‘Work-Related Activity’. All working-age benefits are to be frozen for 4 years, meaning any increase to inflation from its current low will cut deeply into people’s pockets. This also means the Tories’ favouring of pensioners (the group most likely to vote for them) continues.

In fairness, one very welcome piece of news is that all disability benefits are no longer to be taxed or means tested. This may go some way to reversing the serious damage the last five years have done to the lives of people with disabilities. The 1% a year reduction to social housing rents should  help combat the freeze in housing benefit, as well (that is, provided the extended right/help to buy schemes don’t see our entire housing stock exhausted). However, it is hard to see how the announced cuts and freezes will add up to Osborne’s £12 billion. Brace yourselves for further bad news to come.

Helping the Rich

Tory is as Tory does, and it will come as no surprise that the Budget contains a couple of sweeteners for the Conservative frontbench’s rich mates. Further reductions in Corporation Tax, from 20% to 19% in 2017 and 18% by 2020, will funnel more of society’s money into the hands of rich businessmen – and there is still no sign of the much-needed implementation of a progressive, banded system of corporation tax to help small businesses and restrict the power of massive internationals.

The phasing out of the banking levy, to be replaced by a profits surcharge of 8%, sends a mixed message on the attitude of the Tory Party to the banks who crashed the economy – it is possible that this will increase the banks’ tax bill, but also possible that it will fall. The raising of the inheritance tax threshold to £1 million is much less cagey, however – it sends a loud, clear signal that the Tory Party is continuing their programme of cutting the tax bill of the rich. At least the threatened cut in the top rate of income tax has not materialised – yet.

Other Measures:

  • Increased defence spending every year of the Parliament
  • Wealthier social housing tenants to pay market rates
  • Increased powers over local services for Manchester; negotiations with Liverpool and Sheffield underway
  • A small increase of £200,000 a year in the investment allowance
  • Insurance premium tax at 9.5%

Conclusions

All in all, the 2015 Budget has been a Conservative budget in the Cameronian neoliberal tradition, albeit tempered slightly by a nod to the blue-collar conservatism of earlier years. The increase in the minimum wage is far and away the best part of the statement – the rest is a mix of the absurd, the dangerous and the greedy. With the economy finally growing again, it was perhaps to be hoped that the government would realise both the potential and the need for significant inward investment to maintain the recovery and help tackle rising inequality.

Sadly, if unsurprisingly, they have not done so.

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