There are a number of questions you ask about any Budget including: who are the winners and losers, and what’s the chancellor trying to hide?
There is little doubt that Conservative MPs and the supportive media created an impression that George Osborne’s July Budget was a tour de force. He parked his tanks all over Labour’s leaderless lawns.
Having vociferously opposed the introduction of the national minimum wage, Osborne announced that everyone, at a minimum, will receive a living wage of £9 per hour by 2020. There was hardly a squeak of protest from those employer organisations which opposed the minimum wage at its introduction. They liked Osborne’s cheat: £9 is not the living wage but an enhanced minimum wage.
The world was busily lapping up Osborne’s claims that the UK and every citizen would be better off until the Insitute for Fiscal Studies spoke the following day. It said: “Changes in working age benefits, tax credits and housing allowances will leave 13 million families with an average £260 per annum cut after the planned increases in the minimum wage. The credit cuts also come ahead of the wage increases.”
So, the big losers are low-income working families. They will be squeezed badly. I meet them all the time in my constituency; many are just holding on now. The question for them is not whether but how much they will lose. Will they be able to hold on?
The number of children in poverty in working households is increasing daily. No wonder Osborne wants to scrap the legislative targets and the monitoring statistics. Having significantly increased the number of children from poorer households going to university, will we now see that trend put into reverse?
Then, below the big headlines were measures seriously affecting local services.
First, another £9bn of council spending cuts will be announced later in November. Thus, the next three years will see the same level of cuts as the past five years.
The second issue arises from the much-heralded living wage announcement. With a 1% overall cap on local government pay, how is the living wage to be financed?
We are in the ludicrous situation where the government claims that it is protecting NHS spending but has cut £1.1bn from social care spending this year alone. The number of people receiving social care is going down.
Age Concern’s research reveals that a million elderly people are not receiving the home social care they need. Is it any wonder that delayed discharges from hospital are at a record high?
Yet, many thousands of these social care staff, employed by councils, charities and contractors, are paid at the minimum wage only. In fact, many contractors have already been found to be paying less than the minimum wage as they have forced staff to pay for travelling time and travel costs.
It is estimated that just to bring the existing social care staff up to the current living wage would cost around £750m this year. Implementing the so-called living wage of £9 per hour in 2020 is estimated to cost at least £1bn.
That can only be paid by making further big cuts in social care, massive increases in charges, or even bigger cuts in other services provided by councils, which are already coming under huge pressure.
The third issue was the announcement on social rents. The government had made and repeated a long-term commitment that social rents would increase by CPI plus 1% per annum. That promise is crucially important to social housing providers as it underpins their investment strategies and their borrowing.
In the Budget, simply as a way of trying to cut government spending, the chancellor announced, with absolutely no consultation, that he was going to break the government promise by making social rents change by -1% per annum in order to cut government spending by over £1bn per annum in housing benefit by 2020.
Social housing providers will lose both housing benefit and from lower rents paid directly by tenants. The National Housing Federation estimates a consequent rent loss of £3.9bn over the next five years, meaning at least 27,000 fewer social homes for rent being built.
My own city of Sheffield will see housing revenue account income reduced by £59m over five years, equivalent to its annual maintenance budget. The broken promise will almost certainly unsettle the lenders, which always has a consequence: bigger fees, more conditions and higher interest rates on loans.
I rather suspect that many Conservative MPs who cheered themselves hoarse as George Osborne sat down will be a little less sanguine in due course.
Clive Betts (Lab), chair, communities and local government select committee