Osborne's "Summer Budget" on July 7thstarted off with the usual nationalistic self-congratulatory nonsense about Britain's alleged achievements on the world scene: "we're growing faster than any other major advanced economy... faster than America, faster than Germany and twice as fast as France", etc.
This time, at least, he refrained from making himself sound too ridiculous, as he had in his March budget, when he trumpeted that: "Our goal is for Britain to become the most prosperous major economy in the world... Within just fifteen years we have the potential to overtake Germany and have the largest economy in Europe." Maybe some wise adviser pointed out to him that such a statement wouldn't go down too well, given the austere welfare cuts he was announcing.
Indeed, this budget had been widely promoted in advance as the second leg of the Tories' austerity policies - and it certainly was. However, the media had speculated that, this time, the Tories would slow the pace of their cuts. In fact, in his budget speech, Osborne himself tried to give credit to this speculation by declaring that, thanks to the success of his policies over the past five years, "no year will see cuts as deep as those required in 2011-12 and 2012-13", over the coming term.
Except, of course, that when "smaller" cuts are made in already deeply reduced expenditure, their impact is just as deep, if not deeper! Those who have already been at the receiving end of the £21bn welfare cuts of the previous Con-Dem government are certainly bound to feel hit even harder by Osborne's new £12bn round of cuts!
And then there are the hidden cuts that no-one talks about - least of all, Osborne himself. For instance, the famous "ring fence" around the NHS budget, which the Tories are so adamant about, turns out, on closer inspection, to be full of gaping holes. While Osborne stated in his speech that, by 2020, the NHS budget will have increased by £8bn/yr (although he doesn't say whether it is in real terms), his insistence that this is in accordance with the recommendations made by NHS head Robert Stevens, should set all signals to red. Because doesn't this report recommend cuts of £22bn/yr as well? But that's not even mentioned in Osborne's speech. The NHS is still too sensitive an issue among his own party's most loyal constituents!
To all intents and purposes, this "emergency budget" can be summarised as follows: "welfare for the poorest: down; welfare for the well-off and big business: up"!
Another great benefit squeeze
The unemployed remain, of course, the government's main target and punitive measures remain its primary method to deal with them.
For the jobless youth yet another scheme is to be introduced whereby the 18-21s, amongst whom the jobless rate remains stubbornly high, will be subjected to what Osborne calls an "earn or learn Youth Obligation". Learn what and earn how much, remains an open question, though. Presumably this means that once out of school, they will be meant to take one of the 3m apprenticeships that Osborne has pledged to create - assuming they can find one.
As if stocking shelves or sweeping floors, which is what it's mostly about, could be described as "learning". And on £2.73/hr, this is not "earning" either!
But never mind that. Not only will the jobless youth have to put up with this, but to prevent them from "going straight on to a life on benefits", they will also lose their entitlement to housing benefit. Too bad for them if they have no relative to provide them with a roof! Or if this prevents those whose home town is in one of Britain's many industrial graveyards, from moving elsewhere in search of a job or apprenticeship. It's ironical that a government which claims that "helping the jobless into work" is its main priority should come up with such a measure. Obviously its frenzy to cut and cut again, takes precedence!
The disabled and long-term sick remain primary targets as well. In a rather stupid way, Osborne complained in his budget speech about the fact that the number of incapacity benefit claimants had been going down much more slowly than the number of JSA claimants. Well, yes, able-bodied jobless can be more easily blackmailed into taking the odd non-job, under threat of losing all their benefits, and thereby disappearing from the register, from time to time, which is mostly how the reduction in JSA claimants is achieved. However, no amount of blackmail can remove a disability or sickness. But never fear, Dr Osborne has got a medicine for everything. From now on, the benefit received by the disabled and long-term sick who are assessed as able to do some work, will be reduced by 30% for new claimants, to the same level as JSA. Never mind that being incapacitated implies more needs and, therefore, more costs. But apparently, Osborne seems to think this will help the disabled and long-term sick to forget about their condition??
The main thrust of the cuts, however, is aimed at in-work benefits. "In 1980", complained Osborne, "working age welfare accounted for 8% of all public spending. Today it is 13%. The original Tax Credit system cost £1.1 billion in its first year. This year, that cost has reached £30 billion. We spend more on family benefits in Britain than Germany, France or Sweden". And, to back up his case, he called for the support of Labour grandees: "It is, in the words of the RHM for Birkenhead the new Chair of the Work and Pension Select Committee [i.e. Labour's Frank Field], simply 'not sustainable'. As Alistair Darling has said, the sheer scale of Tax Credits is 'subsidising lower wages in a way that was never intended'."
Could this have anything to do with the financial crisis? Not at all said, Osborne: "Since the crash, average earnings have risen by 11%, but most benefits have risen by 21%." Except that this is just a hypocritical sleight of hand. Whatever the increase in "average earnings" may mean, it does not reflect the fall in income experienced by the low-paid, due to having to shift from one casual non-job to another, ever since the outbreak of the crisis. Whereas this fall in income caused by the crisis is directly responsible for the 21% increase in the total amount paid by the government for most benefits - what's so surprising about?
Ironically, by calling in the help of Labour's former Chancellor, Alistair Darling, Osborne actually highlighted his own hypocrisy. Because, for once, Darling is absolutely right. If the bill for in-work benefits has risen so much, it is indeed because, these are effectively used to subsidise bosses who, by taking advantage of the crisis, have got into the habit of paying very low wages - especially by using part-time and zero-hour contracts. Pointing a finger at the claimants, as Osborne does, amounts to blaming the victims for the bosses' crimes!
But never mind. Dr Osborne has again got his own medicine to deal with the problem: these benefits are to be frozen for 4 years. But given the kind of benefits in question, this is a vicious aberration. For instance, the Local Housing Allowance, which is the equivalent of Housing Benefit for private tenants, is supposed to be calculated on the basis of the average rent of the 30% cheapest homes of the same type in a given area. Given how fast private rents are increasing, failing to uprate this benefit accordingly, means that a rising number of tenants will be unable to pay their rent - thereby facing expulsion and homelessness. Then it will be up to local councils to sort out the problem, since they have a statutory duty to deal with homelessness - thereby offloading central government expenditure onto already cash-strapped local councils!
In fact, Osborne used a similar trick again, when he announced a grandiose 1% cut in social rents in each one of the coming 4 years. Of course, the aim was not to do social tenants a favour, but just to cut the Housing Benefit bill. By the same token, Osborne is also cutting the rental income of local councils and Housing Associations, hypocritically adding that "I'm confident that Housing Associations and other landlords in the social sector will be able to play their part and deliver the efficiency savings needed." Yes, by reducing the maintenance bill for social housing or other local services, for instance?
Probably the biggest cuts, however, are rather more technical: the level of earnings above which household Tax Credits and Universal Credit start being reduced will be more than halved. What's more, the child element of Tax Credits, Universal credit and Housing Benefit will no longer be available for children born after April 2017, unless it is the first or second child in the household - although Child Benefit, which is not means-tested, is not affected. In other words, the poor are not supposed to have more than two children!
As to the impact of these cuts, this is what Osborne had to say about it: "When we came into office in 2010 this country had reached the point where a benefit that was intended to support lower income households, was instead available to 9 out of 10 families in this country. Now, our properly focussed reformed Tax Credit system will provide support to 5 out of 10 families". Which probably says it all! People's needs do not come into the picture.
Towards a Non-Living Wage
At the very end of his speech, however, Osborne found it necessary to try to make up for all these attacks against the working class. After all, hadn't Cameron announced an "emergency budget to make work pay" in his Runcorn speech, earlier in June?
But the way he did it was by ostentatiously hijacking the slogan of last October's TUC week of action - "Britain needs a pay rise" to which he added "and Britain is getting a pay rise" - and taking Labour's mantle on the issue of wages. Out of the blue came the announcement of a new "National Living Wage" (NLW) to be introduced next April, with an initial £7.20/hr rate which would be meant to reach £9/hr by 2020, according to Osborne.
Despite this deliberately theatrical presentation, Osborne's NLW is hardly anything to write home about. It is significantly lower than the "Living Wage" championed by the TUC (£9.15 in London and £7.85 outside). Even if the NLW was introduced today, rather than next April, it would still be far too low to make ends meet in most jobs - except by working extremely long hours. Besides, who knows what £9/hr will be worth by 2020?
Then comes the small print. This NLW will only be applicable to the over-25s. What will happen to younger workers is anybody's guess. Will they remain stuck with the present, lower, age-related rates of the existing minimum wage? Probably. But this minimum wage could even be scrapped altogether. With the bosses seeking every possible way to boost their profits, nothing can be considered to be off the table.
And what about the vexed issue of enforcement? Considering the notoriously patchy way in which the minimum wage has been enforced since its introduction, in 1999, this is far from secondary. In this respect, the latest report from the Low-Pay Commission, the "independent" body in charge of advising the government on wages, is well worth reading.
It says, for instance, that, in 2013/2014, the last year for which figures are available, HMRC (which is in charge of enforcing the minimum wage) investigated 26,000 cases of workers who had been paid below the minimum wage. A total £4.6m in owed back pay was recovered from heir employers - a figure which HRMC hailed as an absolute record! Nevertheless, only 6 employers were prosecuted for having broken the law during that year - the same number as in the previous year. The token "Name & Shame" scheme launched by the government following a request of this Commission was not much more successful: the Commission's report complains bitterly over the fact that in each one of its first 2 years of existence, this scheme only managed to shame 2 employers! Quite obviously, the report's authors were blaming the government for standing in the way of the minimum wage's enforcement, even though they didn't spell it out.
To complete the picture drawn by this report, its figures must be compared with the 203,000 over-21s who were officially estimated to be paid below the minimum wage during the same period 2013/14. Even assuming that official statistics do not vastly underestimate the problem - which they probably do - this means that the bosses got away without even an investigation, let alone a conviction, in 9 cases out of 10! And this is without even taking into account the officially estimated 20% proportion of apprentices who are paid below their own version of the minimum wage, despite its derisory level!
But Osborne's hypocritical posturing as a champion of "work which pays" probably reached a climax when, in the same breath, he announced that wage increases in the public sector would be limited to 1% - i.e. wages would be cut in real terms - for the next 4 years, on top of the previous five years of wage freeze. So, does it mean that his NLW won't apply to the public sector or its many subcontractors?
Wooing the rich
Each of Osborne's past budgets has included a compendium of handouts for the rich. This one was no exception. It was only made more blatant due to the its brutal attacks on just about every aspect of welfare. For instance, Osborne's menu included the possibility for well-off households to pass £1m worth of assets on to their children, including a "mansion", without having to pay a penny in inheritance tax - even opening a loophole which will provide the same advantage for assets worth double this amount.
But, no doubt because of the main austerity thrust of his budget, Osborne also made a point of showing that he intended to close a number of tax loopholes which have allowed the rich to get even richer for a very long time. But one can only wonder whether this will result in actual deeds, or whether it will remain hot air for public consumption.
For instance, Osborne once again stole Labour's mantle, by announcing measures to "abolish" the non-dom tax status, which allows some rich British residents to pay no tax in Britain if they can prove that they have certain ties with a foreign country. Except that he said himself that he won't really do that. Only those British residents who have lived in Britain for 15 or more of the previous 20 years will lose their non-dom status. But apart from the fact that staying away from Britain for 5 years out of every 20 is not that difficult to organise for people who have enough millions to buy themselves private jets, what about those British tycoons who, like the former prominent Tory party donor Irvine Laidlaw or retail billionaire Philip Green, are based in the Monaco tax haven for tax purposes? There does not seem to be any plan against those!
Likewise, Osborne said he would end the extraordinary tax break enjoyed by the richest buy-to-let landlords, whereby every pound of interest repayment on their mortgages only costs them 55p. But he won't do anything about this before 2017, when he will phase in the change over 4 years. And even by the end of these four years, the landlords' interest repayments still won't cost them one pound for a pound, but only 80p. One can only be struck by the deep sympathy and understanding shown by Osborne towards the "plight" of the rich, compared to his brutal treatment of the poorest and most vulnerable!
More generally, Osborne's pledge that he will recoup money from the rich by fighting all forms of tax evasion and discouraging tax avoidance can only sound hollow. After all, it was he who appointed Ian Barlow to chair the board of HMRC, despite the fact that, for 8 years, the same Barlow ran the UK tax department of giant accountancy firm KPMG, whose speciality is, among other things, to advise businesses about the best way to pay as little tax as possible! And under their common watch, the over 7,000 British accounts hidden with dozens of billions in HSBC's Swiss subsidiary have remained behind a veil of secrecy, with just one prosecution initiated to date and a few hundred millions in penalties recovered.
The capitalists' drip-feed
But the biggest handout of all, once again, goes to companies - in the form of an additional 2% cut in corporation tax, which will go down to 19% in 2017 and 18% in 2020. In and of itself, this is nothing new, of course, since Osborne already cut this tax from 28% down to 20% over the course of the previous Parliament.
But what was new - and rather hilarious - was the argument used by Osborne to justify this new handout to the bosses. The Low Pay Commission, he said, "estimates that the cost to business [of his new NLW] will amount to just 1% of corporate profits. To offset that, I have cut corporation tax to 18%" - i.e. by 2% Either Osborne believes that his audience is dumb or he is dumb himself!
Indeed, the profits on which companies pay corporation tax are calculated not before they have paid the wages, bonuses, NI contributions, etc., of their employees, but after. So, on the basis of the same operating profit, the fact of paying higher wages automatically reduces the corporation tax they have to pay. Assuming that the estimate produced by the Low Pay Commission is correct, a quick back-of-envelope calculation shows that paying the NLW and corporation tax at the present 20% rate, would actually only cost them an additional 0.8% of their operational profit - in any case, not the 2% that Osborne is handing out to them with his corporation tax cut.
On the basis of this year's corporation tax receipt (£42bn) Osborne's 2% cut amounts to handing out more than £4bn/yr to the bosses - which is almost equivalent to the cuts in Tax Credits faced by 5 million claimants!
But if this cut is added to the 8% cut in corporation tax already made by Osborne since 2010, by 2020, companies will have received a total tax break of around £80bn over the previous decade - an amount which is significantly larger than the so-called "savings" made at the expense of the working class during the same period!
In fact, as European tax expert Philip Baker QC, quoted by the Guardian, noted: no-one can say that, in the last 20 years, "governments have driven corporation tax policy. It's the large companies that have driven the direction of corporate tax policy."
But what the capitalist class squeezes out of the state and, more generally, out of society is much, much greater than that. The results of research carried out by Kevin Farnsworth, an academic from York University, published in the Guardian in early July, show that, during the year 2012/13 alone, the government spent £93bn on subsidising the profits of the capitalist class.
For instance, Farnsworth lists: £14.5bn in promoting investment and direct subsidies to defence and transport firms; £44bn in corporation tax relief (to allow private companies to write off investment or to subsidise their new investment; exempting construction companies from new housing and land duty, etc.); £15bn in fuel tax relief (for airlines and train companies in particular); £3.8bn direct subsidies to energy companies (eg., for the decommissioning of ageing nuclear power stations); and £15bn for procurement to private contractors such Serco, G4S, etc...
What may be even more significant is that this total £93bn is comparable to the £87bn in dividends paid during that same year by all British companies listed on the London stock market. Such is the extent of the parasitism of the capitalist class that, in the final analysis, a considerable part of its profits actually comes directly from the state, including from the taxes paid by the working class, while the rest comes from its labour. It has never been clearer. This system has well passed its sell-by date!