Published on April 1st, 2014 |
by Eleanor Newis
Image © www.magma.ca
Osborne’s 2014 Election Broadcast
Yesterday my dad bought me coffee (from a chain that actually pays its taxes) and drew me a diagram on a scrap of paper that I’m thinking of sending to George Osborne. It looks a bit like a bow tie, and it illustrates the changes that have been going on in the job market. Without buying you an overpriced coffee and drawing you a picture, I’ll explain it as best I can: essentially, the greatest numbers of jobs lost due to the recession are middle income ones, whilst there are more available jobs in the high and low paid sectors. That’s why when you draw the job market it ends up looking like a bow tie – or if you’re less optimistic and flip the diagram round, an egg timer.
So, when dear old George said in his 2014 budget statement that “under this government income inequality is at its lowest level for 28 years”, he was showing more optimism than is really allowable. It’s pretty normal, in times of economic stagnation, for inequality to reduce as middle-class earnings fall and the usual protections stop the poor from falling too far. But, if Osborne doesn’t watch his step, the knot of the bow tie will disappear: we will end up with an economy where there is a high-income job market, and a low-income one, and nothing in between.
Now, another factor in Osborne’s low inequality story is the decision of the rich (those at the top of the egg timer, if like me you’re fond of analogies) to delay their earnings until 2012-13 to benefit from the cut in the 50p tax rate. This would result in the figures the Chancellor and his glorious leader are waving around looking rather promising – but this promise is entirely superficial. What the Tories are holding up as a sign that “we’re all in this together” and their austerity is working, is actually nothing of the sort: do a bit of number crunching, and it looks quite different. Most of the coalition’s welfare cuts only took effect last year. Once things really get going in the public sector, inequality is forecast to increase dramatically in 2015-16. A policy in the 2014 budget to cap benefit increases at 1% hasn’t really made any headlines, but should have done. This cap amounts – when inflation is taken into account – to a cut that will see the poorest face a drastic fall in their incomes. This is one reason why the IFS expect economic inequality to almost reach its pre-recession level by 2015-16.
This is the real crux: inequality will not just rise, but we will be almost as unequal as a society as just before the credit crunch. Whilst I hate to burst Osborne’s bubble, it is factually incorrect for him to attribute the fall in inequality to his policies. In contrast, the rise will be due to his policies. In an economic narrative of boom and bust, inequality naturally rises; what this government should be doing is trying to build a sustainable recovery that will protect the economy in the future from relying on this narrative. This story has been told so many times, and the end is always the same: boom is inevitable followed by bust. Capitalism must self-destruct in order to continue; which is all fine if you’re reading it in a political theory textbook, but not so good if you’re attempting to actually survive in the real world.
But, of course, the 2014 budget wasn’t written with the intention of breaking the cyclical narrative of capitalism, or modeled on my dad’s sketchy bow tie picture. It was written to get the Tories elected in 2015. When you look at who benefits out of Osborne’s policies, this is blindingly obvious. A while ago I wrote an article about the slanting of economic policy towards older people and higher earners, and how in comparison young people are being – to be blunt at the expense of eloquence – screwed. The 2014 budget just reiterates this. When two thirds of Isa wealth is already owned by those over 55, do we really need more tax free Isas? Well, yes actually, because those people vote – and they tend to vote Tory. I know I must come across as a moaning post-teen when I go on about this, but it’s honestly not just me. The Intergenerational Foundation, which promotes generational fairness in government policy, has a whole website of statistics supporting this; following the budget statement, it’s now in every major newspaper. I could go on and on about the economic unfairness towards my generation, but I won’t subject you to that depressing article again.
What I will say is that the bias of the 2014 budget towards pensioners (who I genuinely have nothing against, by the way) and the superficial spinning of falling inequality, are symptomatic of a wider point. This budget is not for the future: it is for now. Osborne and Cameron aren’t bothered about rebuilding a sustainable economy free from the boom and bust cycle. They just want to get re-elected. So, they pander to the wants – not needs – of a generation who reliably vote, and possibly vote Conservative already. They ignore the needs of a generation increasingly disenfranchised with politics, who if they go to the polling station at all won’t want to vote for the austerity package already making their lives harder. Nothing in this budget will last: Osborne’s political Chancellorship has reached new heights in using the annual budget statement as an election broadcast.
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