On the 7th of May, Cameron’s Conservative Party won an unexpected parliamentary majority, after his election campaign focussed on improving British lives, reshaping the UK’s relationship with Brussels, delivering economic growth and restoring financial stability by slimming the state. Yet, if one looks back at Osborne’s missed target for the achievement of fiscal stabilisation by 2015, it is quite clear that balancing the books is easier said than done and announcing something does not necessarily mean that it will be completed.
Undeniably, the Treasury was rather empty back in 2010, when public sector debt stood at a worrying 62 per cent of GDP. Under Conservative-led government Whitehall spendings fell by £4.7 billion and unprotected services, such as local services, social housing, adult care and defence, shrunk by around a third. Additionally, through raising VAT rates, lowering income tax for high earners and thanks to favourable corporate tax revenues, the Coalition managed to bring the deficit down to 6.9 per cent of GDP. However, records show that the poor bore the weight of the changes to direct taxes, tax credits and benefits. Tightening welfare eligibility requirements inflated poverty rates, whilst contributing little to reducing the government’s borrowing.
Last week, the PM delivered a speech in which he announced the government’s assault on welfare benefits. In what seems to came as a response to Saturday’s anti-austerity protest, Cameron made it clear that welfare cuts will be fixed to £12 billion a year. After reassuring the elderly, who coincidentally make up the largest chunk of the electorate, and making pensions as well as child benefits off limits, the PM reiterated his determination to move from a ‘low-wage, high-tax, high-welfare society to a higher-wage, lower-tax, lower-welfare society’. Despite the Tories’ parliamentary majority providing Cameron with a democratic mandate to go ahead with the shrinkage of the welfare state, it is questionable whether his electors had realised the magnitude of such cuts when they entered the ballot box on the 7th of May.
Evidently, making cuts becomes harder as the overall bill shrinks; in real terms, out of the £230 billion destined to the welfare budget, cuts will only come from the £120 billion that have been set aside for working-age benefits, jobseeker’s allowance and other kinds of personal social services. This suggests that tax credits as well as in-work benefits will be on the frontline of cuts. Some commentators also speculated that a further squeeze will hit the housing benefits bill, since the PM declared that government should stop handing out huge sums to landlords.
However, the government’s strategy strikes me as misguided. I feel strongly that social inequality will spread as a result of the proposed cuts, thereby turning Cameron’s dream of a fairer society into a mere utopia. Whilst few would disagree that something needs to be done to balance the books, it would be more forward-looking to tackle the overarching causes that make the welfare bill so unsustainable, such as low pay and housing shortages, to name but a few. Since both wages and rents are determined by supply and demand in the market, something at a structural level has to be done to overcome the issues that leave the working poor in need of government aid.
Firstly, it is crucial to reform the whole system of employment by rethinking the usefulness of zero-hour contracts and instead encouraging full-time work and making it more rewarding for companies to pay the living wage. Secondly, Britain’s regionally unbalanced economy ought to be rebalanced. Since the majority of people want to live in London and the South East, where the most high paying jobs are, such areas have been hit by skyrocketing rents and unaffordable house prices. Therefore the government should design long-term policies to put an end to the UK’s London-centred economy, but in the short-term it is vital to expand social housing to a higher rate. Lastly, I believe that Westminster is fundamentally wrong in avoiding to look for savings in the pension budget, especially due to the unstoppable trend of an ageing population.
Although it is far too early to evaluate the impact of the government’s choices, one does not need to be a crystal-ball gazer to hypothesise that the cuts will hamper the achievement of a fairer society – since those with the broadest shoulders will not have to bear the greatest burden. In fact, some Tory backbenchers are concerned that cutting in-work benefits will invalidate the Conservatives’ claims to be the party for blue collar workers. Even though the PM has pledged to build 200,000 new houses, 500 new schools and perhaps a new Promised Land, only time will tell if Cameron’s verbosity will turn into real policymaking.