With Thatcher in the news, and the Tories hammering the poor, you'd be forgiven for thinking that us Brits had fallen down a wormhole and returned to the 1980s. In fact, the prospects for those on lower incomes could be even worse this time round. Last week's spending review announcement marked the end of the coalition's honeymoon period, but opened up a new chapter for the UK, now faced with 4 years of severe cuts. Baby-faced assassin George Osborne outlined £81bn of cuts and argued he would bring Britain "back from the brink" - some may argue he's kicking huge swathes of society over the edge. My fear is that he's taking a huge risk with people's livelihoods, and that the cold winds of recession will return with a vengeance. I hope I'm wrong.
All this may make me sound like a dye-in-the-wool socialist, but that's not the case. I understand that high debt means high interest payments, and that can hamper a government's ability to invest in the infrastructure, welfare and services that those on lower incomes rely on. Living within one's means is even something I subscribe to in my own life, I just don't see the need to carry out the "savings" so abruptly, or to punish the poor for the mistakes of the rich. We've entered a game of moral hazard, where bankers and investors who take dangerous risks get bailed out, while the poor who had nothing to do with this mess now suffer.
Let's look at the huge numbers, key to understanding modern economics. Spread over 4 years, the cuts will work out at around £20bn a year which, within the context of a total government spend of around £600bn a year, is about 3% sliced off annually. This doesn't sound so bad until you realise that the axe is falling on particular areas, like welfare, rather than spread out evenly. Health, education and welfare account for around half of government spending, but only the latter is facing cuts, with £18bn to be shaved off in the next 4 years. This seems particularly unfair when you consider that bankers are still paying themselves £7bn a year in bonuses, and that the banks recently mopped up £200bn of quantative easing just to improve their balance sheets, with no real benefits for customers and small businesses.
As well as the poor, families with children will be hard hit by the cuts, with higher-rate taxpayers losing their child benefit on top of the loss of Child Trust Funds earlier this year. According to the coalition, those with the broadest shoulders will bear most of the burden, but research from the IFS shows that the spending axe will fall hardest on the poor. Like most people, when faced with conflicting information from a political class obsessed with spin (take the term "efficiency savings" as an example) and an independent audit body, I'm more likely to believe the latter. I also read through the review myself and picked out just some of the areas that I do think spell trouble for my belief in a fair, cohesive and meritocratic society:
• Cutting the mobility component of disability living allowance (DLA) for those in care homes
• Scrapping the £30-a-week education maintenance allowance (EMA) for 16-19 year olds
• Focusing cuts on local councils and services, which the poor rely on most
• Cutting the police budget by 20%
• Slicing a third off the spending on arts
• Obliterating the higher education budget
On top of all this is the prospect of 500,000 jobs disappearing in the public sector. Not only will this hit the poor, women and ethnic minorities disproportionately hard, but it will also end up swelling the welfare budget the government is trying to cut. I just don't buy the idea that the private sector will step in and create that many new jobs; instead I think it will be the charities (that are also facing cuts) that will be obliged to step into the breach and act as a safety net. For many of us who are not low-paid, or dependent on social or housing benefit, the immediate effects of the cuts may not be visible in the next year or so, but beyond that (and to quote Bob Dylan) I do think "a hard rain's a-gonna fall" for all of us. Except the very rich, and the bankers that got us into this mess.
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