UNISONActive is an unofficial blog produced by UNISON activists for UNISON activists. Bringing news, briefings and events from a progressive left perspective.

Thursday, 21 March 2013

More From Osborne... More Pain, More Cuts, More Austerity

There is only so much one person can take of Gideon Osborne live. This year he gets to the part where he talks about the fairness of maintaining pay cuts for public service workers (or an up to 1% pay increase in his world) when the decision had to be made... switch off or put the telly out the window.

A quick flick of the remote and Led Zeppelin’s Whole Lotta Love from Radio 6 filled the kitchen instead... Leading to a day dream in which the Leader of the Opposition stares at him in silence instead of replying, then produces an electric guitar and cranks out Pump it Up at maximum volume...

Fortunately, the full transcript is always on the Guardian website. Looking at it produces a sense of bemusement. http://www.hm-treasury.gov.uk/budget2013_statement.htm

By way of explanation I must add that, however much you get angry with a child struggling with concepts it does not understand, you would not slap it. There again, however, you would never put a child in charge of the economy. That child is Gideon. Unfortunately he has been put in charge of the economy. But then again, would slapping be too good for him? After digesting his latest offering, it is to be hoped that it slaps the electoral chances of the Tories into oblivion.

Osborne’s general analysis is similar to that of most economic commentators. Growth has slowed to the point where it is non existent and borrowing is increasing. Demand in this country is stagnant. In other words, the UK economy is flat-lining.

Since the election of the current government, they have been consistent in two things - consistently prioritising their own ideology that this country is over taxed, over regulated and over spending, as evidenced in his budget quote that we are “Building a modern reformed state we can afford...” and consistently ignoring the evidence of the real economy.

This consistency is maintained in the current budget. Economists in the real world have been calling for a programme of fiscal stimulus to reinvigorate demand in the economy. Gideon has ignored them, again. The devil as always is in the detail. But is he really helping those “who aspire to own their own home; who aspire to get their first job; or start their own business” as he claims?

Osborne’s prescription for our economy starts with tinkering with the relationship between the Treasury and the Bank of England. The real meat is elsewhere.


“I confirm today that we will instead be seeking £11.5 billion of current savings.”

“We will also seek substantial savings from what is called progression pay.”

Was this supposed to be a budget economic growth? Like the child who sticks his Lego together the wrong way but always persists in his own method of brutalising the bricks, Gideon learns nothing and continues to treat the UK economy like his bricks. In other words, there is no attempt to rescue the economy from the cliff top that it is hurtling toward.

Instead the tried and tested right wing panacea of cutting public spending continues, with no thought of the consequences either for the macro economic effects or the inhuman consequences of further diminishing the necessary public services for a modern democracy. Further job losses in the public sector will follow. Further cuts in vital public services will continue.


“The Government will extend the restraint on public sector pay for a further year by limiting increases to an average of up to 1 per cent in 2015-16.”

“We will also seek substantial savings from what is called progression pay.”

So much for increasing demand in the economy. We all know that as public sector pay has been frozen and inflation continues to rise, there is only one result. Pay cuts. Below inflation rises make little change to that. So those who continue to be employed in the public sector see their standard of living continually reduces.

But it seems that is not enough. Many public sector pay systems have been negotiated on the basis of incremental progression. For some the lack of an annual pay rise has been mitigated by rising through the incremental bands- though not for those already at the top of their grade. This slight cushion is to be withdrawn, and is bad enough in itself, but what Gideon probably doesn’t realise is that at a stroke he unilaterally breaking dozens of public sector pay agreements.

PCS estimate that 40% of its members are entitled to state aid through Universal Credit; ditto Unison members employed in local government. Wasn’t being in work supposed to pay? One thing is certain. Few employed in the public sector will be splashing the cash on consumer goods and services, if, that is public sector unions are prepared to accept the cap and the changes to national agreements
Personal Taxation

“From 2014, there will be no income tax at all on the first £10,000 of your salary.”

Unfortunately this was not Gideon’s first budget, but a cumulation of a process that began with savage cuts in tax credits and other benefits as soon as the Con-Dems took office, a fact too often forgotten by BBC budget commentators . The cumulative effects are devastating.

“Despite the rise in personal allowances, the overall impact of tax and benefit changes is likely to be negative, according to a "distributional analysis" issued by the Treasury after the budget. It showed that the cumulative impact in cash terms for the bottom 10% of households from tax, tax credit and benefit measures in 2013-14 would result in a £200 reduction in incomes for the poorest group in society, although there will be a small increase for those on middle and upper-middle incomes.”

And things will get worse.

“The squeeze on average incomes will continue for many years to come, according to a separate analysis of the Office for Budget Responsibility (OBR) figures by the Resolution Foundation prepared for the Guardian.”The squeeze will look worse over the next few years than previously feared: wages will fall further relative to prices and recover more slowly," said James Plunkett, director of policy at Resolution.

Median pay for employees, which stood at £24,800 in 2009, will fall to £21,600 by 2015 after taking into account inflation, a drop of 13%. "Prior to today's new OBR data, the projection for 2017 stood at £21,800. Today's gloomier projections therefore see the 'wage gap' (the difference from the pre-recession peak) increasing from £3,000 in 2017 to £3,200," said Plunkett.”

Gideon really helps the aspirational, does he not?

Corporation and Company Taxes

“So in April 2015 we will reduce the main rate of corporation tax by another 1 per cent.”

“I am abolishing altogether stamp duty on shares traded on growth markets such as AIM.”

“We will abolish the schedule 19 tax which is only payable by UK domiciled funds”.

“The Employment Allowance will work by taking the first two thousand pounds off the employer National Insurance bill of every company”

Paul Krugman’s view? (That’s Paul Krugman - Nobel Laureate Economist)

“So here’s what you should answer to anyone defending big giveaways to corporations: Lack of corporate cash is not the problem ...... Big business already has the money it needs to expand; what it lacks is a reason to expand with consumers still on the ropes and the government slashing spending.”

No one could put that better.

Other taxes

“Today, I am cancelling this September’s fuel duty increase altogether.”

“I’m going to go one step further and I am going to cut beer duty by 1p.”

Gideon claims that cancelling fuel duty increases will save motorists money. Well, if the duty had increased, they would have had to pay it. But prices will not in fact decrease. And other increases have been at the whim of the petrol suppliers. So the “savings” are theoretical and actually mean that motorists won’t pay more. Meanwhile given that the reported price of a pint has risen to £3, then every 300 pints the beer drinkers can raise a free glass to Gideon. Cheers !!!!

Child care vouchers

Relief on child care costs was much publicised in the run up to this budget, and probably produced the kind of headlines that the Tories were looking for. At usual the devil is in the detail. These have been summarised in the Guardian as;-

“New proposals on child care reverse recent reforms giving the basic rate taxpayer the same child care support as a family with two earners .....80% of families that will benefit are in the top half of the working family age household distribution. Extra support will not be available for all families in receipt of universal credit. the vast majority of families set to receive universal credit will miss out “ http://www.guardian.co.uk/commentisfree/2013/mar/20/budget-2013-childcare-excludes-families-need-help?


“We’re bringing forward the introduction of the new Single Tier Pension to 2016.”

“Public sector employers will have to absorb the burden, as is always the case with tax changes”

Another pension plan designed to cuts pensions, and to hammer public sector workers and employers in particular.

To quote UNISON
“The move was a "cash grab that could have serious implications for pension schemes in the public and private sectors".

It said that although the government seemed to expect employers rather than workers to meet the costs, it had not given any guidance on how they might do so and warned that public sector schemes would need to make more cuts if they were not given more funds to meet the costs.

"Yet again the government has failed to think through the implications of its policies properly," Unison's head of pensions Glyn Jenkins said. "There is a real danger the move could fuel deeper cuts to public services and jobs, as well as be the final nail in the coffin for the few decent pension schemes surviving in the private sector. We are calling on the government to help employers and employees deal with the consequences."


“Today I can announce Help to Buy.”

Gideon intends to provide help for those taking out mortgages in the new build private housing sector. Good for those who get it. For Shelter “‘this budget ignores business leaders, economists and even government ministers who've been calling for radical action to kick-start our economy by building more homes.

'Instead, the Government has chosen to extend existing schemes for first time buyers which have so far failed to deliver on any scale.”

It certainly fails yet again to begin to built a single public sector property at a time when homeless has reached record levels .Over 1.7 million households are currently needing a public sector property. Meanwhile 63 per cent of renters are struggling with housing costs http://england.shelter.org.uk/home
Additional Capital Investment

The additional funds for capital investment will be found from cuts to government departmental budgets, George Osborne said, and will be available from 2015-16.

Our economy needs a new New Deal, a commitment to prosperity for all, an effort to cut the inequality that scars our society. Gideon offers the working people of this country nothing, not even jam tomorrow.

So how can we sum up this effort? A budget of the rich, for the rich by the rich does nicely for me.