Wot Recovery?

The Institute for Fiscal Studies (IFS) said just £35bn of cuts had already happened, with £55bn yet to come. The detail of reductions had not yet been spelled out, IFS director Paul Johnson said. If reductions in departmental spending were to continue at the same pace after the May 2015 election as they had over the past four years, welfare cuts or tax rises worth about £21bn a year would be needed by 2019-20, at a time when the Conservatives were committed to income tax cuts worth £7bn, according to the IFS.

Johnson said the plans set out in the Autumn Statement implied "a slight increase in the speed of proposed spending cuts after 2015-16", extending the expected period of reductions in state spending for a further year beyond 2017-18, Mr Johnson said. To achieve the Office for Budget Responsibility's forecast of a budget surplus of £23bn by 2019-20 would require "spending cuts on a colossal scale ... taking total government spending to its lowest level as a proportion of national income since before the last war," he said. "There is no spending dividend on the horizon; far from it," Johnson warned. "There are huge cuts to come. On these plans, whatever way you look at it, we are considerably less than halfway through the cuts."

George Osborne used the autumn statement to reiterate the promise he made to the Conservative party conference to freeze working-age benefits, which will cut £3bn a year from the welfare budget. The plan will see all main working-age benefits, including child benefit, frozen at their post-election levels rather than being uprated in line with inflation. Slicing billions of pounds off the bill for tax credits, paid as a top-up to 5 million families on low incomes, is likely to form the core of a future Conservative government’s attempt to rein back welfare spending. Tax credits have grown to become one of the biggest programmes within the welfare budget. In 2013-14, they cost £29.7bn, or more than six times the £4.6 bill for jobseeker’s allowance, and nearly double the cost of housing benefit (£17.6bn). The estimated bill is expected to rise by another £400m in the current tax year.

A freeze on working-age benefits would knock as much as £350 a year off the income of a low-income family with one child. For a lone parent with two children, the reduction in income is nearly £500, as the same officials briefed that the family would lose £75 a year in child benefit and £420 in tax credits.

Housing benefit is likely to be frozen as well as tax credits, reducing incomes for some of the working poor by even more.

“There are people on the right – such as Tory peer Howard Flight – who would just abolish the lot as they reckon wages would adjust automatically. And there are people on the left who see tax credits as a disguised subsidy to employers,” said Ryan Bourne, head of public policy at the Institute of Economic Affairs.

Indeed both claims are correct except wages will not adjust automatically but through the actions of workers within the class struggle to claim pay-rises and, of course, immediate success for industrial action is not guaranteed when the State intervenes on behalf of employers.

The TUC general secretary, Frances O’Grady, said the IFS analysis revealed that  “The chancellor now wants us all to pay the price for his failure by cutting public services down to a stump with the loss of a million jobs.”