Belfast Telegraph

This is going to hurt you more than it hurts him

George Osborne's slash and burn Budget risks a return to old-style class war politics. As usual the poorest will bear the brunt of the pain, writes Liam Clarke

The immediate effect of this Budget will be to recklessly increase inequality and grind the noses of the poorest in society.

It is a budget imposed mainly by public schoolboys with little experience of how the other half lives - and it is bound to increase social division.

The Lib/Con coalition are piling on the pressure early in the hope that the worst of the pain will be over by the next election.

It's a gamble and, whatever the outcome, regions like Northern Ireland and people on low incomes are providing the stake money without any guarantee of a share in any winning.

Even The Sun - now a Tory paper - commented, "The staggering scale of his state cutbacks has never been tried here or anywhere else in the world. It's like giving a patient an antidote that has not been tested. It could well cure us. But it could also kill us."

The big ticket item, in terms of tax revenue, is the increase in VAT to 20% which takes effect in the new year. That is where the bulk of the new revenue will come from.

It will cost every household an average of £517-a-year - about £10-a-week - but average figures mask the disproportionate impact of such a brutally regressive measure.

VAT costs the wealthiest 10% of the population just £1 out of every £25 they spend, but for the bottom 10% the figure is closer to £1 in every £7.

It is the poor, the disabled, struggling working families and single parents who will feel the lash most acutely.

It brings our VAT rate to within 1% of the Republic's and will kick the legs from under the cross-border shopping boom which cushioned border towns like Newry, Derry and Strabane.

In fact, higher VAT - and an initially strong pound - will encourage trade to go the other way, by increasing the differential in diesel prices.

Let's hope that Stormont can resist the temptation to drive more southerners away by increasing the price of drink in supermarkets.

It's hard to know how George Osborne described it as a "progressive Budget" with a straight face - or how he kept his composure as he commended benefit cuts as an incentive to work.

The reality is that he will cut more from housing benefit from those too poor to pay their rent than he will raise through increases in capital gains tax, a measure which was heralded as a way of making the better off pay.

It doesn't stop at housing benefit recipients. Northern Ireland's growing army of buy-to-let landlords will find it harder to get a return on their investment and benefits and, as the poor get poorer, local retailers will also suffer.

Child benefit will fall, disabled people will face more checks by doctors with targets to meet in reducing the number of claimants.

Those thrown off benefit will join single parents in a job market characterised by recruitment bans and wage freezes in the public sector. This bitter medicine is being forced down our throats in alarmingly high doses, but was there any alternative?

There was according to the Office of Budget Responsibility (OBR), the new independent body the Chancellor likes to quote. It found that the outgoing Labour Government's plans were tough enough to achieve budgetary sustainability.

Will Hutton, the economist called in by David Cameron to advise him on equality in the public sector, described the cuts as "brutish", adding that to go so far beyond Labour's planned austerities in the teeth of OBR forecasts was "unconscionable and will rightly be challenged".

Sucking too much, too fast out of a weakened economy endangers recovery, as Barack Obama told G20 leaders, warning them not to be seduced by austerity.

This is the sort of pain the IMF forced on Greece, whose debt exceeds its GDP by 150%, much of it in loans to external financiers. Britain is not in that position. Most of its loans are on a 14 or 15-year rollover and much of this year's new debt will be sold to British investors and companies without any trouble.

Cameron cites the tough measures imposed by Canada in the late 1990s as his inspiration, but Osborne's package is almost twice as severe.

And there are other differences - at that time, Canada's main trading partner was the US, which had an expanding economy. We are next to the ailing Eurozone.

Sweden also climbed out of a recession in the 1990s, but it spread the pain over 15 years and it didn't, in George Osborne's phrase, succumb "to the temptations of the political cycle" by trying to get it over by the next election.

It also improved the social safety net for the most vulnerable.

The Cabinet's background gives it little understanding of the impact on working families.

Twenty of them went to Eton, and other top public schools are well represented. In all, 54% of Tory MPs went to fee-paying schools compared to 7% of the population as a whole.

This is government by toffs to a degree that we have not witnessed in more than a generation.

They risk sparking a return to old-style class politics, with industrial unrest, a resurgent Labour Party and the Bank of England left to take up the slack by printing more money.

How will that look as a backdrop for the next election?


From Belfast Telegraph