After the budget, more austerity

Issue section: 

George Osborne's budget last month was better received than his disastrous "omnishambles" budget of two years ago.

That was attacked from the left for cutting the top rate of tax, from the right for freezing pensioners tax allowances ("Osborne picks the pockets of pensioners" screamed the Daily Mail) and widely mocked for the "pasty tax" on hot takeaway food.

The chancellor's 2014 budget was more politically assured and designed to draw key constituencies back to the Tories and away from Ukip, rewarding well-off pensioners and small businesses, while further entrenching austerity and trying to put Labour on the back foot. The final aim, at least, was successful.

When the Coalition came to office in 2010 the Tories' plan had been to implement austerity, get the economy growing rapidly paving the way for tax cuts towards the end of the parliament to boost their re-election prospects.

But despite Osborne's upbeat talk about the economy picking up, the recovery remains the slowest of all the major economies and output is only expected to return its pre-recession level later this year. This limited Osborne's room for manoeuvre.

So he offered special high interest bonds for pensioners and increased higher tax-free savings schemes from 11,500 pounds to 15,000 pounds a year.

This will only benefit the well off - as the tax justice campaigner Richard Murphy pointed out, "Who, on average UK wages of 26,500 pounds, can save that?"

Osborne hit the headlines with his announcement that he will end the obligation to buy annuities for those with defined pension schemes on retirement.

Even the Financial Times thought this was a risky "leap in the dark".

Osborne doubled the level of tax relief on business investment to 500,000 pounds and exempted large energy-intensive businesses - typically big manufacturers - from the cost of supporting renewable energy development.

But above all, the war on welfare and public spending continues. He announced yet another squeeze on government budgets till 2018-19, though he was careful to avoid spelling out exactly where the axe would fall.

But overall his plans will take public spending to their lowest share of national income since 1948. And so far only a third of the cuts have been implemented.

Osborne's cap on welfare spending was designed to put Labour under pressure. Save the Children produced research suggesting that the welfare cap will mean an additional 3 billion pounds in cuts on top of those previously announced.

Since the state pension and Job Seekers' Allowance are excluded from the cap, these cuts will fall heavily on working age benefits. Save the Children estimate this will push another 345,000 children into poverty.

But rather than make any of these arguments - or point to the obscenity that the five richest people in Britain now have a wealth equal to that of the poorest fifth of the population - Labour leader Ed Miliband instructed his MPs to vote for the welfare cap. Just 13 Labour MPs rebelled.

Labour's acceptance of the argument for austerity and reducing welfare spending, far from helping it electorally, plays into the Tories' hands. Labour's lead in the polls narrowed to just 1-2 percent immediately following the budget. Whether this is just a blip or a something more significant is unclear as yet.

But the danger is that Miliband will respond to a narrowing of Labour's lead by abandoning his campaign over the "cost of living crisis".

Certainly this is what a section of his shadow cabinet and a number of former New Labour ministers are pushing for. But Miliband's arguments about the squeeze on workers' living standards has resonated and put the Tories on the defensive.

The huge outpouring of sympathy for both Tony Benn and Bob Crow after their deaths showed that arguments for a fightback and for a more equal society have a wide purchase.

The response to Crow's sudden death was particularly revealing given that only weeks earlier he was being demonised in the press for leading his members on London's Tube out on strike.

The ideas put forward and associated with Tony Benn - for public ownership, a redistribution of wealth, against war - are more popular than the embrace of the free market represented by Tony Blair in wider society, despite their marginalisation within "official" politics at the top.

The union leaders, even though many call for more radical policies to be adopted by Miliband, are in reality too often resigned to hoping for a Labour government to be elected.

But though getting rid of the Tories will be a boost for every worker, it won't end austerity.

The argument that we need to fight both now and under whoever wins the election next year needs to be raised across the unions.