Monday, 28 June 2010

The State of Play

As I write David Cameron is busy blowing his own trumpet in the Commons post G8 so it seems a good time to reflect on reaction to the budget, nearly one week on, as well as commenting on some of the further proposals that we have heard from the coalition to cut the deficit.
Without doubt this budget has generated huge levels of interest from all parties, groups and commentators as well as for the first time in a long while, the ordinary man on the street.
In summary, it was a harsh budget that did not help anyone. No-one comes out of it better off, for which the coalition makes no apology; their oft repeated line is that we all have to contribute to clearing up the mess of the budget deficit. And most people would concede that this is fair enough, unless you consider just who will be hit the hardest as a result of Osborne's measures. No surprises, it's the poor that seem destined to suffer as a result of George Osborne's determination to pay off our deficit a full 15 years before even the IMF believes we need to. Research by the Fabian Society projects that spending cuts are likely to affect the poorest 10% six times as badly as the richest 10%. This is because it is precisely this group that relies both on welfare and front line services from local government, such as social care and services which are likely to be vastly reduced by Eric Pickles.

Various polls at the weekend seemed to indicate that overall the electorate are happy with the budget; the increase in VAT seemingly the only announcement that the majority take issue with. It appears that middle income Britain is if anything a little relieved; child benefit is staying albeit with a 3 year freeze; tax credits remain for those with salaries of under £40k and the cuts that we so far know about seem to be focused on benefits for those at the bottom of the pile; caps on housing benefit, review of disability allowance and as well as these measures the Tories are making frightening noises about relocating the long term unemployed, rehousing council tenants who's houses are deemed too big, forcing single mums back out to work when their children reach 5 as well as cutting disability benefits....oh and just make things even more Thatcherite we even have a culture minister suggesting that the Hillsborough tragedy was due to 'hooliganism'.

Meanwhile as our most needy digest how these changes may impact them at a time where unemployment is still climbing and their options are fewer than at anytime in the past 13 years; what are the cuts at the top of the tree? Ah, well....there is a banking levy which is only likely to bring in £2bn per year (around 0.07% of the balance sheet of the average city institution) which has been offset by a gradual cut in corporation tax. And we did see an increase in Capital Gains Tax, but even this was a good deal lower than expected by many commentators and investors.

Despite all of this, perhaps it is fair to say that so far, so far good for our merry coalition. Well, for the Tories that are no doubt controlling this government this may be the case but the Liberal Democrats are really starting to suffer. Labour are making it their clear modus operandi to attack them at any opportunity. All leading Labour figures used their articles and television appearances over the weekend to put the boot in, personally attacking the big Lib Dem names and digging out useful quotes especially relating to VAT rises. There are known to be an increasing number of Liberal Democrat MP's feeling very disengaged and nervous about what is happening in Westminster in their name. Alas, it appears that things can only get worse for the junior party in the coalition and indeed those needing any state support in the UK. A key part of Osborne's budget was the announcement that most government departments will have their budgets cut by some 25%, we will not know until the October spending review what this means in terms of inevitable job losses, cuts to services and further benefit reductions but it is likely that this is the point where the electorate will begin to sit up and take notice of what is surely an ideologically led attempt to shrink the state. October is likely to be the time that  real cracks will appear in the coalition, followed by severe tremors after the May local elections which will surely see a huge reduction in Lib Dem seats in councils across Britain, in particular in the North West where there is likely to be a strong sense of betrayal from the electorate.
However, even this won't make life easy for Labour. With the leadership battle in full swing and virtually all of the candidates admitting that mistakes were made in both the recent election campaign and the proceeding government there is a fundamental issue which doesn't appear to have been addressed. All five candidates have slammed the budget as regressive, unfair and attacking those most vulnerable and have been keen to point this out given any opportunity. But, as we have already seen, the electorate does not seem to share their view (at this stage at least) and surely any reinvention of the Labour Party needs to acknowledge this. The demographic that ensured Tony Blair's coronation is precisely the group which is currently satisfied with how the coalition is performing, whether we like it or not and Labour need to win back these people. How does it do it? If Osborne's plans don't plunge Britain into a double dip recession then whichever Ed or Miliband or Burnham or Abbott wins in September is going to need to be able to do more than just appeal to the UK's sense of fairness and  justice to get back into power.
Perhaps we can readdress this question in October when we will know more about how our future looks and who will be Labour leader but either way the candidates need to ensure that they are listening and can appeal to those who cannot see, or perhaps do not care that this budget is likely to cripple the poorest in Britain and could be the first step on an incredibly depressing,rocky road to  two tier society.

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