Iain Duncan Smith has delivered round after round of cuts to the welfare state without flinching. But George Osborne’s latest plans are so cruel, even IDS was appalled, threatening to quit if they were implemented. The Chancellor has called his bluff, and plans to make the cuts regardless.
Osborne has been trying to push IDS into cutting the amount payable to recipients of Universal Credit – the all-inclusive benefit, combining Jobseeker’s Allowance, Income Support, Housing Benefit, Child Benefit, Working Tax Credits, and Child Tax Credits into one payment.
The Secretary of State for the Department of Work and Pensions knows that Universal Credit is already delivering a major cut to the incomes of those who need to claim it. There is no fat to trim. Our colleague Emily Apple detailed the existing cuts last week:
- The scheme encourages working families to cut the working hours of their second earner, as they will lose 65p of every £1 they earn in corresponding cuts to their benefits.
- The self-employed will be penalised, losing existing top ups and support mechanisms which cover seasonal work and fluctuating incomes.
- It is difficult and costly to apply for the credit, meaning many vulnerable groups may lose access to welfare altogether.
- The payments are made monthly, and in arrears. Not only will this leave existing claimants with a painful five week gap without welfare, but it exacerbates known issues of budget management with vulnerable claimants (addicts and victims of domestic abuse). Providing a lump sum once a month, rather than an easier to manage weekly payment is expected to cause chaos among certain groups.
- The heavily criticized sanctions regime is set to expand, cutting claimants out of the welfare system altogether.
Yet for George Osborne, this wasn’t tough enough. He wants even greater cuts. So, Iain Duncan Smith threatened to quit. Issuing the threat through a ‘friend’ to The Times, who said:
“The Treasury have come after UC [universal credit] at every fiscal event and Iain has made clear every time that this is a red-line issue for him. “That is the case now as it has been in the past.”
What was the Chancellor’s response?
He came out today and announced the cuts anyway; a staggering 30% from each government department (some of which have already had their budgets halved) by 2020. Announcing his cuts, Osborne said:
“If our country doesn’t bring the deficit down, the deficit could bring our country down,”
“That’s why, for the economic security of every family in Britain, the worst thing we could do now as a country is lose our nerve.”
Labour’s Shadow Chancellor John McDonnell was quick to respond to news on Twitter.
Osborne's announcement of departments cuts is tactical ploy to isolate & pressurise IDS on cuts to Universal Credit.Is IDS going to resign?
— John McDonnell (@johnmcdonnellMP) November 9, 2015
Osborne talks about security but people want the security of knowing their tax credits are not being cut.Why can't he tell us now?
— John McDonnell (@johnmcdonnellMP) November 9, 2015
He has a point. The Chancellor has some nerve invoking the economic security of working families as reason for his cuts. Ideological austerity is not the solution to their poverty, it is the cause of it. Under Osborne’s watch:
- Homelessness has shot up by 50%.
- 100,000 children will be homeless this Christmas, a rise of 15,000 in a single year.
- There has been a near 5000% rise in food banks, with more than 1 million people now dependent on food banks to eat.
- More than a million UK households have fallen into fuel poverty – too poor to heat their homes.
At the same time as we have seen 20% rent hikes in social housing, and 15% in the private housing sector, alongside falling wages and slashed welfare payments.
Yet, the Chancellor has continued to reduce tax revenues from the wealthiest corporations and individuals in the country.
- By cutting Corporation Tax from 28% to 18%, Mr Osborne costs the Treasury £8bn a year by 2016-17
- By granting tax relief to Capital Gains for the benefit of buy-to-let landlords, Mr Osborne costs the Treasury £5.2bn a year
- By signing up to the Swiss Bank Tax Evasion deal which granted amnesty to known tax avoiders, Mr Osborne cost the Treasury of taxes liable on £78bn of assets in over 30,000 accounts.
The Chancellor is trying to pay for these cuts in taxes for the richest, by cutting welfare and services for the middle class, the working poor, and those reliant on the welfare state. Osborne has taken this ruse so far that even Iain Duncan Smith, the axeman of austerity, has flinched. But still, he cuts.
It is clear that David Cameron and George Osborne plan to accelerate the demolition of the welfare state in advance of the next general election. It might be that the opposition need to accelerate plans to bring about their downfall with similar vigour.
