Page 4, 28th May 1993

28th May 1993
Page 4
Page 4, 28th May 1993 — Who are the new budget cuts hurting?

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Who are the new budget cuts hurting?

John Battle MP

THE starkest contradiction of the 1980s was represented by the dramatic increase in millionares and homeless people. The 1980's was the decade of income tax cuts, ostentatious celebration of wealth, the glorification of free markets and finance. The decade of partying for the rich has moved into the deficit "hangover" of the 1990's. The rich got richer but now there's no room for further tax cuts for them so attention has dramatically shifted onto the poor.

The economic focus is on the future of welfare spending, as the Chief secretary to the Treasury Michael Portillo refers to the rising social security spending as "the cuckoo in the nest" unwelcome and to be jettisoned. He warned "social security spending is rising by about 3 per cent in real terms at a time when, until recently, our economy hasn't been growing at all. It is a third of all public spending £80 billion a year £10 a day for every person who is in work."

The political target is the government's £50 billion public sector borrowing requirement deficit for this year a PSBR far far greater than treasury estimates suggested last year and the year before. Since the government cannot raise income taxes to fairer and more reasonable levels to cover this deficit, the options are limited to indirect taxation (via VAT) and massive reductions in public spending.

If the rich can't have any more tax cuts and have to tighten their belts (so the argument goes) the poor (ie all on social security) must also pay an equal contribution. The budget deficit is 8% of output mortally dose to 1976 levels when Britain was faced (as a result of the oil price shock) to borrow from the International Monetary Fund. Already the IMF is knocking at the Treasury door.

Social Security payments, by far the largest segment of the budget deficit is therefore the prime target, and a media campaign is already moving in on the "undeserving poor" and "scroungers". The editorials are already running "Of course we want a safety net.. but targeting is needed... Those who can look after themselves must now do so.. We cannot expect free handouts at every turn and still have the freedom to spend the money we earn." There are suggestions that "the long term well being of the nation, and in particular the tax payers "is threatened.

Protecting "tax payers" is now the priority. Nor is it simply a question of suggesting horrendous cuts so that modest cuts will be accepted at the time with relief. There is now a coordinated assault on the budget of social security. Ten million pensioners are told that they are protected but as an additional 100,000 pensioners come of age each year, equalisation of the pension age at 65 years will become a practical means of saving £3.5 billion.

Twenty per cent of the social security budget goes to the long term sick and disabled. A further £1.4 billion goes on sick pay, and though the Department of Employment is currently getting monthly unemployment figures down by encouraging people to sign on as sick (sick pay is £42.70p per week, unemployment benefit £44.65) the scrounger stories of GPs "signing hardluck cases on to boost their income" are already typeset.

Headlines showing that 5.4 million people claim income support are aimed not at the scandal of the increase in poverty over the last decade, but at reducing the social cost to the tax payers of the poor.

The fact that 10.3 million people in our society live on or below the breadline should be a spur to tackle poverty caused primarily by unemployment and low pay.

The Government's real dilemma is that encouraging the casualisation of unemployment (part-time work, paying no taxes) reduces the revenues from taxation that would cover the public expenditure. Before we adopt the language of "underclass" and, as in America, condemn "low-lifers" (homeless and poor) to be bussed from city boundary to the next city boundary. how we tackle the causes of poverty should be the starting point. For help, try Church Action of Poverty, Oldham Street, Manchester Ml UT (061 236 9321).

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