The Cost of Austerity
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.
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