Friday, 27 April 2012

Too Deep, Too Fast

As the budget unravels, and the government has started a u-turn on a number of its earlier decisions, what comes through loud and clear is that families on low and middle incomes will continue to be hard hit.

It has now been confirmed that we have a double-dip recession – technically, where two successive periods of three months show a contraction in the economy. This is the real confirmation that the government’s economic strategy required cuts which were too deep and too fast.

It’s obvious really. If thousands more people become unemployed, and millions of families suffer big cuts in income, they don’t spend as much, leading to even more businesses going bust or facing difficulties and more people becoming unemployed. It’s a vicious downward spiral.

The Chancellor said his policies would lead to more exports and small business growth. The belief that we could dramatically increase our exports – in a time of global recession – to fill the gap was always vainglorious. And, this week it has been revealed that bank lending to small companies has fallen in each and every month since he took control.

The result is that the government is now predicted to borrow £150bn more than George Osborne forecast. This is all borrowing to fill the gap in the lost tax revenues caused by his own economic policy.

Low and middle income families are now beginning to feel the impact from the cuts in tax, child and housing benefits starting this month. Already struggling, they didn’t need to hear three more government announcements this week which will hit them harder in the future:
  • more than 350,000 children are likely to lose free school meals next year with the introduction of universal benefit;
  • a plan for regional pay, which would mean that nurses, midwives, hospital porters, cleaners and paramedics will earn less if they work in the north of England. [Can you explain why highly paid managers and doctors are exempt?] It intends to extend this policy to all public sector workers;
  • an additional £16bn of cuts is now to be made.