BERNADETTE HORTON breaks down how the poorest in society will pay for the Tories’ tax cuts if they win in 2015
The Britain Needs a Pay Rise march and demonstration is taking place in London today. Thousands of ordinary people, including myself and those from workplaces across the country will come out in force, campaigning for a wage increase.
We are working people unable to cope on wages that don’t cover our bills, let alone cater for some kind of social life. We will march alongside people in our communities — the carers and the disabled who feel voiceless and vulnerable. It promises to be a mass protest where we can express our anger at this coalition government.
But how did we get to this stage where work doesn’t pay enough to cover our basic living costs?
Look no further than the recent conference season. This is the last one before the general election which will take place on May 7 2015. The majority of the opinion polls put Labour ahead slightly, but all the ramped-up rhetoric was reserved for the Tory conference.
Osborne set the scene by announcing some of the detail of who will carry the burden of his new £12 billion round of benefit cuts.
It became rapidly obvious it will be again be the working class who will bear the brunt.
He announced a two-year “freeze,” which we all know is in fact a cut, to working age benefits. Osborne will cut working tax credits, universal credit, child benefit, jobseekers’ allowance (JSA), housing benefit and income support. It is a package that will hit 10 million households including five million low-paid people.
The reality in 2014 is that the majority of people in poverty are in work.
Horrifyingly these measures represent just a quarter of the cuts — £3.2 billion of the total £12 billion the Tories want to slash.
And what about our young people? There is a Tory promise that they will lose their entitlement to all housing benefit and their unemployment benefit will be “abolished” by simply halting their JSA after six months.
Britain’s young generation are the most attacked, most set-upon and most worried about their future post-war generation.
The Tories have written us off as a political gamble aimed at their own core vote, under the false premise that their action to cut the welfare bill and keep down public-sector wages will tackle the deficit and ensure future prosperity.
We know the reality is different.
The poorest third in society are hit the most and working families with children will lose nearly £500 a year in child benefit and tax credits.
Public-sector workers who have already had year after year of real pay cuts, as Osborne has held their wages down while inflation and the cost of living increased, are faced with the same for at least another two years.
In the whirl of Tory spin the facts are lost and we are conned. The economy had returned to growth that would in any event have reduced the deficit before this government was elected and their savage cuts had begun. We are left with the question — prosperity for whom?
By Wednesday of Tory conference, Cameron answered us by announcing his tax cuts will overwhelmingly benefit the wealthiest. There is a clear policy framework to funnel money upwards to the rich.
Cameron announced a two-pronged mechanism to dish out £7bn of tax cuts. Firstly his announcement to raise the income tax personal allowance to £12,500 seems to benefit the lowest paid, but as the TUC’s senior officer Richard Exell argues, that first impression is misleading: “This is a policy that delivers very little to the poor and much more to the well-off.”
Already 3.6 million employees earn below the personal allowance, so they will feel no benefit from this increased threshold.
Continued low pay means that each year the group that will not benefit from a further increase in the personal allowance will grow, but they are the same people who will be hardest hit by the benefit cuts.
The Institute for Fiscal Studies has stated that since less than two-thirds of the total adult population have high enough incomes to pay income tax at all, the argument that attempts to use income tax reductions to help the poorest in the country is likely to fail.
Osborne plays a game of smoke and mirrors when it comes to the upper tax rates. He spins the myth that more and more ordinary working people have to pay the top rate of income tax — and it is true that more people are paying tax at 40 per cent, but only on some of their income.
But Osborne has decided to “freeze” the threshold at which people move into this tax band rather than increasing every year in line with inflation.
What is cleverly hushed up is that only the top 15 per cent of employees pay tax at this rate. Less than 10 per cent earn more than £50,000 currently — the rate Cameron wants to be the new starting point for the 40 per cent tax rate. If the 40 per cent rate had increased with inflation over the past few years, it would have reached £50,000 in 2020.
But we live in a country where half of us earn £21,000 or less and only a fraction reach these tax rates. So you see — this is not Cameron’s story of helping “ordinary working people” at all. It is Dave’s big con!
Remember, many of the highest earners — the top 1 per cent — have now been “rescued” from paying the 50 per cent tax rate.
So while we struggle on as benefit cuts hit 10 million households, the Tories have delivered tax cuts to the top 300,000 biggest earners. It seems that far from us “all being in it together” they are “all in it for themselves.”
All of this misery for the majority of working-class people sits against a backdrop of plans for public spending cuts stretching miles into the future. Before the latest tax announcements, the Tories have planned a further eye-watering £45bn of cuts.
As expected the right-wing press fell over themselves to praise Cameron’s speech but the Financial Times was much more damning, accusing Cameron of trading votes for economic credibility. On October 2, the FT said he had indulged in an “electoral gimmick” and that the tax cuts leave the Tories with “an economic strategy of questionable coherence.”
Thinking back, how can a country so flat broke, reeling from austerity that on the Monday meant 10 million households had to face further benefit reductions, be so flush by the Wednesday that £7 billion can be gifted in tax cuts that disproportionately benefit the better off?
We know in economic terms this makes no sense whatsoever, but in political terms for the Tories the con goes on and gets masked as helping out those of us struggling by at the bottom.
What is clear though is that we have had a severe “double-dip recession” caused by austerity that affected the productive sectors of the economy, such as construction and manufacturing.
A number of service industries such as finances and real estate were boosted by a combination of ultra-low interest rates and specific measures adopted by government to boost consumption. Investment has plummeted. The result is anaemic growth and wage stagnation.
Under Thatcher the Tories argued that it didn’t matter that manufacturing collapsed as long as Britain excelled at other things like financial services. We know how that turned out — boom turned to bust, leaving us the legacy of a dangerously unbalanced economy.
An economy firmly rooted in the employers’ best interests and not the workers’, where flexibility means zero-hours contracts and agency employed staff, no skilled apprenticeships leading to permanent jobs for our young and little or no permanent direct employment, something we considered the norm in the not-too-distant past.
Presumably the Prime Minister and Chancellor are banking on their gamble paying off. The tax cuts announced give the Tories a weak defence against the charge of “not caring for the poor.”
We need to turn out in numbers for the march where we demand that Britain needs a pay rise now, not through some tax cut dodge but through our wage packets.
We demand a living wage and we spurn the new Tory norm for the working class of living on the breadline and barely getting by.
As for the tax cuts — don’t be fooled. You know that anything given by one hand will be taken by the other — and you and I will pay for it.
Read more Bernadette Horton at mumvausterity.blogspot.co.uk