From the TUC

The Cost of Austerity

11 Mar 2013, By

Infographic showing how much middle income families will stand to lose by 2015 due to current government policies

With just over a week until the Budget, the pressure is rising on the Chancellor to announce a plan that lifts the country out of its current economic malaise.

The Prime Minister attempted to put a brave face on the government’s track record last week, brazenly claiming that austerity was somehow good for families. But the reality is very different as new TUC research published later this week will show.

Since 2007, average wages in the UK have fallen faster than any other country in the developed world. While the government does not have a direct say in people’s pay – other than the six million public sector workers whose pay it is cutting by more than ten per cent in real terms – there is no doubt that the double dip recession it has presided over has limited scope for better pay rises – our research counts of cost of the slower than expected rate of pay growth we’ve seen since 2010.

But the government does have a big say on people’s disposable incomes, both in the taxes it sets and the level of support provided by the welfare state. And on most of these measures, the government is making the majority of households even poorer.

Take changes to welfare support. Cuts to benefits and tax credits have reduced the income of middle income households by nearly £700. The government new welfare programme – Universal Credit – actually leaves them a further £97 worse off.

Ministers are always to keen to stress that they’ve taken millions of low-paid workers out of tax altogether by raising the personal allowance. But households on low to middle incomes have actually lost more money as a result of the VAT rise than they’ve gained from direct tax cuts.

In total, a middle income household will be nearly £1,200 worse off as a result of government policies. Nine in ten households will be worse off by 2015 as a result of government policies.

The UK faces two interlinked crises – economic stagnation and falling living standards. Our fear is that unless the government does more to lift people’s living standards, the millions of businesses that rely on consumer spending will struggle to expand. And it’s much harder to negotiate better wages when the economy is teetering on a triple dip recession.

So at the TUC rally in Westminster this Wednesday evening, we will make the case for a new economic strategy that prioritises jobs and growth. But equally we need action to ease the squeeze in living standards that millions of households face. That’s why we’re calling on the Chancellor to reverse damaging welfare cuts that take effect this April and a focus on tax cuts that are better at helping families, such as a reduction in VAT. We want a Budget that delivers a better future for families.

Infographic: See a larger version here.

2 Responses to The Cost of Austerity

  1. Martine Hannah
    Mar 11th 2013, 4:09 pm

    These ideas will not work.You need to think outside the Box.The largest expenditure is food then energy,when it comes to the Familie.The train etc Features Markets on the stock market need to be brought under control and tightly restricted.Fix levels of pricing need to put into place to stop dangerous over speculation,which cause unwanted price hikes in food.Next the CAP policy must end to stop food wastage.Supermarkets must stop selecting perfect fruit and vegtables.This will end hikes in prices in fresh product.Next energy companies must Bw forced to pass on all reductions in wholesell prices to the consumer.Stop hiking tax on fuel and phase it out,bring insentives for businesses that use alternatives to desiel. such as LPG.Encorage households to generate some of the energy they use and surplus they can sell to their energy provider and reduce their bill.Vat cuts and tinkering with the benifit system.By talking control of energy and food markets,two of the most damaging areas to family finances can be brought under control.

  2. Focus on a ‘triple dip’ misses the point | ToUChstone blog: A public policy blog from the TUC
    Mar 12th 2013, 12:02 pm

    […] wage falls, coupled with changes to the tax credit and social security system, have given us the longest squeeze in living standards in modern British economic […]