Tag: Paul Johnson

Conservatives in disarray as Osborne signals raid on Duncan Smith’s Universal Credit funds

Chancellor George Osborne

George Osborne and Iain Duncan Smith have clashed over the chancellor’s plans to soften the impact of tax credit cuts by raiding the budget for Universal Credit.

The Centre for Social Justice (CSJ), which was founded by Iain Duncan Smith, insists that the Chancellor could use this month’s Autumn Statement to ease the impact of the controversial changes without risking his drive for a budget surplus.

In a critical report, the thinktank warned against taking money from Duncan Smith’s flagship Universal Credit scheme to sweeten the tax credit pill. Duncan Smith said that he’s concerned that the raid will serve to “undermine people’s incentive to work.”

The CSJ said in their report that the UC reforms meant by 2020 only 9% of those currently getting tax credits would still be receiving them.

Instead, it was suggested that the Government could “help people to work more hours” or introduce a transitional fund for those hardest hit.

But Osborne is nonetheless preparing to fund plans to soften the impact of tax credit cuts by making people claiming Universal Credit forgo as much as 75p of every extra pound they earn. At present Universal Credit recipients lose 65p for every extra pound they earn. Osborne is thought to be examining plans to increase the figure, known as the “taper”, to 75p.

The most expensive course of action would be to only impose the tax credit cuts on new claimants – but the authors note that it would have the “least social and political cost”.

The chief executive of the Centre for Social Justice, Baroness Stroud, who is a former special adviser to the Work and Pensions Secretary said:

“There are no easy choices, but these are the options the Chancellor has. What he should not do is raid Universal Credit to pay for any transitional changes or he will be recreating the same problem there.

“The projected savings through changes to tax credits is £4.4 billion, the Government plans to turn a surplus of £10 billion in 2019-20 and of 11.6 billion in 2020-21.

“Why have a surplus if we can’t protect those on the lowest pay, doing the right thing by taking work?

“The Chancellor can protect these workers and have a surplus by 2020.

“This Government is set to achieve its historic aim to make sure work always pays more than welfare, we shouldn’t put that at risk.”

Paul Johnson, the Director of the respected Institute for Fiscal Studies, questioned whether the move would raise enough to limit the impact of tax credits. He said: “If you are also increasing the taper rate then you are losing quite a lot of the key design of Universal Credit.”

Both the Treasury and the Deparment for Work and Pensions have declined to comment, but Conservative Tim Montgomerie, a columnist for The Times and founder of the Conservative Home website, said he believed George Osborne “could be forced to resign” over his tax credit omnishambles, and he warned that the chancellor faces a “massive rebellion” from his own party because the policy  is “terrible politics”.

“You cannot fight an election saying you are standing up for hard-working families then you cut benefits for hard-working families,” he said.

Perhaps it is time for the Conservatives to recognise that policies are not an ideological tool designed to ensure the government gets its own way in exercising traditional Tory prejudices towards the working and non-working poor.

However, in fairness there has been a series of right-wing backbenchers that have aired their disquiet at the cuts, although that unease may have be motivated by a pragmatic rather than an any ethical objection. The proposed tax credit cuts do make a mockery of the Tory claims to ensuring that “work always pays,”and presents the public with an incoherent narrative that has now lost any credibilty.

Montgomerie said:

“I don’t think George Osborne will tweak,” he said. “If he does just try to get away with this, he will not just be defeated in the Lords, he will be defeated in the Commons.”

539627_450600381676162_486601053_n (2)Courtesy of Robert Livingstone

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This post was written for Welfare Weekly, which is a socially responsible and ethical news provider, specialising in social welfare related news and opinion.

David Cameron promised a further £7.2 BILLION tax cuts to the rich at the expense of the poor

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I wrote an article last year – Follow the Money: Tory Ideology is all about handouts to the wealthy that are funded by the poor – which outlines Coalition policies that have widened inequalities and increased poverty by handing out public money to the wealthy that has been taken from the poorest. I pointed out that this Government have raided our tax-funded welfare provision and used it to provide handouts to the very wealthy – £107,000 EACH PER YEAR in the form of a tax break for millionaires, amongst other things.

And what does our imperturbable chancellor promise if this disgrace of a government is re-elected? True to Tory form, more of the same: austerity for the poor and public services cuts, and tax breaks for the wealthiest.

But further cuts to lifeline benefits and public services is surely untenable. Absolute poverty has risen dramatically, this past four years, heralding the return of Victorian illnesses that are associated with malnutrition. People have died as a consequence of the welfare “reforms”. Supporting the wealthy has already cost the poorest so very much, yet this callous, indifferent, morally nihilistic  government are casually discussing taking even more from those with the very least.

This isn’t anything to do with economic necessity: it’s all about Tory ideology. Under the guise of austerity, the Tory-led Coalition have stripped our welfare and public services down to the bare bones. Any further cuts will destroy what remains of our post-war settlement.

Despite facing a global recession, the Labour Government invested in our public services, and borrowed substantially less in thirteen years than the Coalition have in just three years. UK citizens were sheltered very well from the worst of the global bank-induced crash.

Gordon Brown got it right in his championing of the G20 fiscal stimulus, agreed at the London summit of early April 2010, which was a continuation of his policies that had served to steer the UK economy out of the consequences of a global recession, and to protect citizens from the consequences of cuts to services and welfare.

Osborne’s policy of imposing austerity and budget cuts on an economy that was actually recovering was a catastrophic error. The austerity propelled the economy backwards and into depression; and, far from using public spending as a countervailing force against the cutbacks in private sector investment, the Coalition’s budget cuts served to aggravate the crisis. Many people are suffering terribly as a consequence, reduced to a struggle for survival.

And in these socio-economic circumstances, the Tories have pledged a further £7.2 BILLION tax cuts to the rich. The funding for the tax cuts will come from further catastrophic “savings” made at the expense of the poorest yet again – £25 billion more to be sliced from welfare, Local Authorities,  education, police and other vital services.

Three things are immediately clear. Firstly, without the ramping up of VAT in 2010, to 20%, Osborne would be in even more dire financial straits than he is.

Secondly, income tax has, despite allegedly rising employment, failed to increase.

Thirdly, corporation tax, targeted for cuts, year after year, has slumped. The tax system is increasingly veering toward very regressive – biased in favour of the wealthy – consumption taxes, which affects the poorest, most, and failing to deliver fairer taxes on income.

This is the result of government policy: increasing VAT but cutting corporation tax, and the engineered kind of “recovery” we have ended up with. The Office for Budgetary Responsibility (OBR) reminded us in October of the extent of the Coalition’s failure to reduce the deficit.

Public sector net borrowing in 2013-14 was originally expected to be £60 billion; the out-turn for borrowing was £108 billion (on a comparable basis). This amounts to a shortfall of nearly £50 billion, with borrowing approaching double the original predictions made when the government’s austerity policies were announced in 2010.

Much of this shortfall is accounted for by the current earnings crisis. UK workers are suffering the longest and most severe decline in real earnings since records began in Victorian times, according to an analysis published by the TUC. But Tories always lower wages, and hike up the cost of living. And whilst workers are struggling to make ends meet, private business owners/Tory donors are raking in millions of pounds. But this is exactly how Tories like to run society in a nutshell.

It’s their imposition of a feudalist schemata for social relationships. Cognitively, Tories are the equivalent of historical egocentric toddlers: they are stuck at this painful stage of arrested development.

“The deficit reduction programme takes precedence over any of the other measures in this agreement” – stated in the Coalition Agreement.

For a government whose raison d’etre is deficit reduction, the Coalition really isn’t very good at all. But austerity reflects the triumph of discriminatory Tory ideology over needs-led, evidenced-based policy making.

The OBR said the forecast from 2010 was over-optimistic because it did not take into consideration the effect of lower wages as well as a higher levels of tax-free personal allowance on the upper brackets of income tax. National Insurance contributions were also £7.4 billion below forecast.

Which brings us back to the issue of further tax cuts for the wealthy, with no mention of raising wages for the poorer work-force, and of course there is the promise of more cuts to come for those relying on lifeline benefits. I don’t think that the Coalition cares that their policies don’t balance the books, as it were, or mend the economy. Nor do they care what the consequences are for the wider public.

TUC General Secretary Frances O’Grady said:

The government’s failure to get wages growing again has not only left families far worse off than in 2010, it’s put the public finances in a mess too. The economy has become very good at creating low-paid jobs, but not the better paid work that brings in income tax. The Chancellor’s sums just don’t add up – he can’t make the tax cuts for the better off that he is promising and meet his deficit reduction target without making cuts to public services.

His cuts would be so deep that no government could deliver them without doing damage to both the economy and the fabric of our society. We can’t cut our way out of this problem any more than we can dig ourselves out of a hole. More austerity would only keep us stuck in a downward spiral. The Chancellor should use next week’s Autumn Statement to invest in growth and to put a wages recovery at the top of the agenda.

Shadow Chancellor Ed Balls said:

Nobody will be fooled by pie in the sky promises of tax cuts when David Cameron cannot tell us where the money is coming from. Even the Tories admit this is an unfunded commitment of over £7 billion, so how will they pay for it? Will they raise VAT on families and pensioners again?

Cameron has also announced the basic rate before we start paying tax would rise from £10,500 to £12,500. While a worker on £12,500 would save £500 a year, someone earning £50,000 would keep £1,900 extra.

Those earning up to £123,000 would be £484 richer. Someone on £12,500 would save £500 a year, while someone on up to £50,000 would keep £1,900 extra. And the £500 tax cut for basic rate earners will be almost wiped out by George Osborne’s raid on in-work benefits.

Paul Johnson of the Institute for Fiscal Studies think tank says it was:

very difficult to see how the £7billion tax giveaway could be paid for.

We’re looking at promises of £7billion of tax giveaways in the context of an overall plan to get the deficit down but even without tax giveaways that requires pretty extraordinary levels of spending cuts such that most government departments will see their spending cut by a third by 2020.

How are you going to afford this? Even more dramatic spending cuts?

At the Tory Conference, Cameron promised to expand the National Citizen Service youth project for every teenager in the country, have the lowest rate of corporation tax of any major economy.

There was also a pledge to abolish youth unemployment by the end of the decade. But the Tory faithful gave the loudest applause for his pledge to scrap the Human Rights Act.

This is a truly terrifying pledge, because human rights were originally formulated as an international response to the atrocities of the 2nd World war, and to ensure that citizens are protected from abuses of their government.

A Labour Party analysis found the proposed tax break would hand David Cameron and other Cabinet ministers an extra £132 a year. But a family with two children with one earner on £25,000 a year would lose £495 by 2017-17 due to the benefits freeze announced by Mr Osborne.

The Tory plan is based solely on spending cuts, mainly directed at the working age poor. And the Conservative plan to raise the higher rate threshold to £50,000 means that  working-age poor people are to fund a tax cut that is four times greater for higher rate tax payers than for basic rate taxpayers.

Ed Balls said in response:

David Cameron’s speech showed no recognition that working people are £1,600 a year worse off under the Tories nor that the NHS is going backwards on their watch. The only concrete pledge we’ve had from the Tories this week is a promise to cut tax credits by hundreds of pounds for millions of hard working people while keeping a £3 billion tax cut for the richest one per cent.

TUC general Secretary Frances O’Grady added:

No amount of dressing up can hide the fact that the policies in this speech pass by those who need the most help to reward richer voters.

Alison Garnham, Chief Executive of Child Poverty Action Group, said:

What was missing in the PM’s speech was any recognition that independent projections show that child poverty rates are set to soar. We know that raising the personal tax allowance is an ineffective way of supporting low paid families.Independent analysis shows that just 15% of the £12 billion required to raise the PTA to £12,500 would go to working families in the lowest-income half of the population.

Many simply don’t earn enough to benefit from this policy, and those that do just see their benefits and tax credits withdrawn as their incomes rise.

The Institute for Fiscal Studies showed in their Green Budget publication this year that just 15% of the gains from increasing the personal allowance would benefit the poorest half of Britons, concluding:

There are better ways to help the low paid via the tax and benefit system.

Ex-Treasury official James Meadway,  now a senior economist at the New Economics Foundation, said Cameron’s changes were:

irresponsible, expensive gimmicks that scarcely affect the poorest workers.

They imply swingeing public sector cuts and mean handing over more cash to the already rich.

Ed Miliband will respond tomorrow (Monday), declaring that the Tories’ failure to tackle the cost-of-living crisis has helped cost the Exchequer £116.5 billion – leading to higher borrowing and broken promises on the deficit. The price tag, equivalent to almost £4,000 for every taxpayer, is based on new research from the House of Commons Library being published by the Labour Party.

This shows that low pay and stagnant salaries, combined with soaring housing costs and the failure to tackle root causes of increased welfare bills, means that over the course of this Parliament:

  • Income tax receipts have fallen short of forecasts by more than £66 billion.
  • National Insurance Contributions are £25.5 billion lower than expected.
  • Spending on social security is £25 billion higher than planned [despite brutal cuts to lifeline benefits]

Mr Miliband is expected to say the test for George Osborne in this week’s Autumn Statement will be to set out a plan to build a recovery for working people – one which recognises the link between the living standards and Britain’s ability get the deficit down.

He is expected to say:

For a very long time, our country has worked well for a few people, but not for everyday people. “We live in a country where opportunities are too skewed to those at the top, where too many people work hard for little reward, where too many young people can’t find a job or apprenticeship worthy of their talents, and where families can’t afford to buy a home of their own.

For all the Government’s boasts about a belated economic recovery, there are millions of families still caught in the most prolonged cost-of-living crisis for a century.  For them this is a joy-less and pay-less recovery.

My priority as Prime Minister will be tackling that cost-of-living crisis so that hard work is properly rewarded again, so that our children can dream of a better future, so that our public services including the NHS are safe.

Building a recovery that works for everyday people is the real test of the Autumn Statement.

But that isn’t a different priority to tackling the deficit. Building a recovery that works for most people is an essential part of balancing the books.

The Government’s failure to build a recovery that works for every-day people and tackle the cost-of-living crisis isn’t just bad for every person affected, it also hampers our ability to pay down the deficit.

Britain’s public finances have been weakened by a Tory-led Government overseeing stagnant wages which keep tax revenues low.

Britain’s public finances have been weakened by Tory policies which focus on low paid, low skilled, insecure jobs – often part-time or temporary – because they do not raise as much revenue as the high skill, high wage opportunities we need to be creating.

And our public finances have been weakened by higher social security bills to subsidise low paid jobs and the chronic shortage of homes.   

The result has been David Cameron and George Osborne missing every single target they set themselves on clearing the deficit and balancing the books by the end of this parliament.

Their broken promises, their abject failure, are not an accident. They are the direct result of an outdated ideology which says all a Government has to do is look after a privileged few at the top and everyone else will follow.

That is why this Government has done a great job of squeezing the middle, but a bad job of squeezing the deficit.

The test this week for David Cameron and George Osborne is whether they recognise that Britain will only succeed and prosper for the long term by tackling the cost-of-living crisis and building a recovery which works for the many, not just for a few.

Or whether they will just offer more of the same old ideas that have failed them, failed everyday working people, and failed Britain over the past four years.

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Thanks to Robert Livingstone for the brilliant memes