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Expert Comment: Summer Budget 2015

George Osborne Friday 10 July 2015

The first all-Conservative Budget in 19 years was revealed by Chancellor George Osborne this week. Two of Liverpool Hope University's academics discuss the implications of Osborne’s plan for the economy.

If there were ever any doubts about George Osborne’s credentials as a political operator (and I confess to being one who has questioned this wisdom in the past), they should be dispelled following his recent Summer Budget. There is no question that the Budget is regressive in its effect, hitting the budgets of low income households more than others - as the Institute for Fiscal Studies (IFS) has pointed out - and that it has cemented the Conservative agenda to reduce the responsibility of the state for welfare, instead shifting it to individuals. Although the Budget will reduce welfare payments to working-age families by £12 billion, tax thresholds will be raised, relieving the tax burden on many lower and medium-income people and families, and taking many out of taxation altogether. Businesses will have to play their role in this too, by paying a so-called ‘national living wage’ (in fact a rebranded and increased minimum wage). In addition, banks would have to pay a ‘super tax’ on profits, and ‘non-doms’ would no longer have the same rights to maintain and pass on their status. 

While some of these measures are clearly in line with Osborne’s declared vision for a ‘high wage, low tax, lower welfare’ economy, and contain a distinctly Thatcherite tinge (abolishing maintenance grants for poorer students for instance and limiting benefits to only two children), some could easily be measures delivered in an alternative universe by a Labour Chancellor (and in fact, according to the same IFS report, the Budget has raised far more in taxes than it gives away).  The result of all this, is that Osborne has made it difficult to respond and laid a trap for the opposition. The trap for Labour is that by attacking the Conservatives for reducing working age benefits, when they have also introduced a ‘living wage’ and increased tax thresholds, it will be very difficult for Labour to be seen as anything other than the ‘party of welfare’. This is a position which, given the almost endless talk of ‘aspiration’ in the leadership contest, an incoming Labour leader will not relish. The first task of the new leadership will be to formulate a coherent strategy in response and attempt to outmanoeuvre Osborne. I cannot say I envy them.

Danny Rye, Post-Doctoral Teaching Fellow in the Department of History and Politics 

A motivational nudge?

The medieval Bayeux Tapestry contains one panel showing the Norman sponsor of the work striking his own sides’ troops. The caption reads: “Here Bishop Odo, club in hand, encourages the boys.” A rather similar image comes to mind following this week’s summer Budget. George Osborne may look more like a Roman Emperor than a medieval monk, but his desire to send the strong message that “workfare” is more significant than “welfare”, in today’s UK, is clearly evident.

It has been widely reported that the IFS has crunched the numbers to show a particular story of ‘nudge, nudge encouragement’. While the new Living Wage will increase earnings to the lowest paid workers by circa £4billion, the loss of welfare benefits and income support to this group and those within the bottom quartile, will be nearly £20billion by the end of the decade. This includes the much vaunted savings of £12billion to the welfare spend, which was a key plank of the Conservative’s General Election campaign.

So, to that extent, it is true that Britain got what it voted for and the Chancellor has been true to his word. But, there is a deeper message than the mere statistics in this first Conservative Budget for two decades. Motivation has shifted to a very small carrot and a much larger club. 

It is, in the language of Douglas McGregor’s famous Theory X-Y, clear that Osborne is a Theory X man. He believes that most people need the threat of punishment (‘authoritarian managerialism’) to be induced to work hard or seek to find employment. People need to be hungry for jobs and the best way to motivate that hunger is to help people to become hungry.

Currently, what we are seeing is a fundamental shift in British political economy. We may feel the post-war Butskellite consensus vanished under Margaret Thatcher in the 1980s, but we now have a new consensus (given that the Emperor has stolen Labour’s clothes) that says Britain is no longer a welfare state, even if we retain the tarnished badge of the NHS. Osborne has wielded a club, but the club he belongs to is just a little less all together open access than before this week’s Budget statement.

Tony Bradley, Associate Director of the Centre for Social and Ethical Enterprise Development 

 

Image by M. Holland [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0), CC BY-SA 2.5 (http://creativecommons.org/licenses/by-sa/2.5) or CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons 

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