The true cost of regressive budgets and cuts

Submitted by Bill Kerry on 2 September 2010

So now we all know what we feared was true. The Coalition’s budget was not progressive - in fact is was "clearly regressive".

The respected think-tank, the Institute for Fiscal Studies has confirmed its earlier preliminary finding that the net effect of the changes will be regressive and that the poorest will be hardest hit.

The government has responded by saying its plans for economic recovery and, in particular, the drive to move people from welfare to work have not been factored in by the IFS. But this response begs questions about the strength of the recovery and what sort of jobs people will be taking (if they can get them), how secure they are and how much they pay.

Sometimes it is a good idea to step back from statistical debates. We were contacted by Wendy from Cornwall who copied us her letter sent to the Treasury and leading members of the government:

The IFS has disclosed the regressive effects of the government's planned spending cuts; the Treasury disputes these findings, saying that they are 'selective'. (I have read the IFS report). Mr Hoban, The Financial Secretary to the Treasury, has apparently decided that cuts to Housing Benefit awards will be 'fair' because those affected will move to cheaper accommodation : fine for him to say; as a recipient of Local Housing Allowance, I should like to say that I find these remarks quite staggering.

Where does he suppose that people like myself will move to? After several years living in adverse circumstances: noise; neighbours from hell; infestations of bugs; blocked drains, I have finally found a decent flat, which is privately rented from decent owners.

Nevertheless, I have no real security and no assets, apart from a few hundred pounds in a savings account. I am retired and live on a modest income in Cornwall, which is one of the poorest regions in the UK. In fact I am so poor that I receive financial aid from a charity. Nonetheless, I feel that even I am comparatively fortunate in contrast to many impoverished people of working age, who will undoubtedly wonder what has hit them.

Recent figures published in the local press show that Cornwall will bear the brunt of the proposed cuts and that the poorest households will suffer the most. There is little work here, apart from minimum wage, part time jobs in retail and nursing homes. I have personal knowledge of well-qualified young people working full time who are unable to afford decent rented accommodation. This can only get worse. It is also a fact that many private landlords will not consider housing benefit recipients.

Housing Benefit is crucial in providing the means to keep a roof over one's head and to live in a reasonably decent home without falling into debt. The taper, at 65%, is steep, and contributes in no small way to the poverty trap, as I know from my own experience. Treasury ideology is all well and good but it puts the cold finger of fear on those of us who have to survive on small incomes.

These are the brute facts of what austerity means for poorer people in the UK. We call on the government, all political parties and policy-makers to have a serious re-think about the future direction of our economy and, particularly, the distribution of income within it. As PM David Cameron said in November last year in his Hugo Young Lecture:

We all know, in our hearts, that as long as there is deep poverty living systematically side by side with great riches, we all remain the poorer for it.

Closing the gap between rich and poor is the key to improving our society for all. What we need now is for actions to match words.