The Chancellor’s Emergency Budget 2015 should have included measures to strengthen our economy, but not at the expense of people being made worse off. Instead, they have announced cuts to child tax credits that will affect those in-work on the lowest incomes, which will have a disproportionate effect on people in Oldham, a third of whom are paid less than the Living Wage. And whilst the announcement of a national living wage is to be welcomed, this won’t take effect for another 5 years and does not fully redress the reduction in families’ incomes as a result of the tax credit cuts.
In addition, the Government’s decision to cut the social security by a further £12 billion over the next three years will hit the most vulnerable hard. Recent analysis of trends in benefits spending has shown that far from being generous, as the Chancellor today claimed, in 2012 the UK spent 15.5% of GDP on total social security support which was 17th out of 32 EU states with the most being spent on our pensioners. The Chancellor is risking making inequalities intergenerational.
The Government is presiding over a low pay, zero hour contract labour market, where a surge in under- and self-employment, underpin current employment levels. There are over 20,000 working families with nearly 30,000 children in Oldham who are claiming tax credits families – that’s 2 in 3 families and 3 in 4 children. For them, tax credits means the difference between just about keeping their heads above water or not.
The deficit needs to be paid down, but there are better ways of doing it than hitting people that are working hard and the most vulnerable. While we shift from a fragile, low pay economy, we need to protect those on low incomes whilst supporting employers to introduce the living wage in all sectors as early as possible by, for example, linking this to tax rebates as Labour has proposed.
The UK is already one of the most unequal countries in the world. The International Monetary Fund has said that ‘widening income inequalities is the most defining challenge of our time’. Forty years ago, 5% of income in the UK went to the highest 1% of earners; today it is 15%. Today’s Budget has patently failed to think about the economy as a whole, across the country, and as a result will hit many Oldhamers on low income hardest.