17 Oct 2010

Spending cuts target child benefits, tax credits and social housing

The deal is done.

The most extensive programme of government cuts since the 1920s was signed off at Chequers today by the ‘quad’ – that is the PM, Chancellor, Deputy PM and the Chief Secretary.

Here are some of the headlines:

Massive cuts to welfare. The Chancellor talked last month about £4bn extra, in addition to the £11bn announced at the Budget. That £4bn is now ‘markedly’ larger, with one government insider suggesting ‘seven or eight billion’.

Expect a restriction on the age to child benefit to 16-years-old, though slightly mitigated in some way.

Expect the tax credit system to be fundamentally reduced in scope and generosity. These savings can not and will not be just about targeting middle class welfare. The poor will be hit.

In theory that should allow the average cut in non protected departments to come closer to 21-22 per cent than the 25 per cent announced at the June Budget.

Happy days? Well not at all.

Some sub-departments at the Communities Department, and Vince Cable’s Business department face basic decimation. Government insiders have confirmed that the rough magnitude of cuts to the £8.4bn social housing budget, and the £3.9bn university teaching grant will be 60-80 per cent.

This will, say housing associations, collapse house building in Britain, even further.

Social landlords put in 60 per cent (to the taxpayers 40 per cent) of the funding for almost half (50,000) of the 113,000 homes built in the UK last year. Insiders suggest that will fall to hundreds.

The reason why? Firstly a whole load of spending has been politically prioritised and ring-fenced, raising the burden on non-protected areas to almost absurd levels. Second, the Chancellor’s strategy has been to deploy his limited jam in targeted dollops, not spreading it equally meagrely everywhere.

To that end, and this is the third point, the Treasury has put together a remarkable mathematical spreadsheet to try to numerically rank all capital investment spending in Britain, on the basis of contribution to economic growth.

Social housing did not score highly on this spreadsheet. Rail scored highly, as did the Mersey Gateway suspension bridge between Runcorn and Widnes and the Diamond Synchrotron in Oxfordshire.

So there you have it. A remarkable programme. And one which will shape Britain for the next half-decade.

31 reader comments

  1. Brian Corbett says:

    “one which will shape Britain for the next half-decade.”

    Utter nonsense.

    The next 25-50 years starts now. The end of ‘The Big State’ has begun.

    Govt spending as a percentage of GDP will gradually fall to 30% or so, and this is just the foundation stone for a complete new construction of the relationship between people and State, in which the balance is decisively switched from ‘Them’ looking after you, to ‘Personal responsibility’

    1. Charles Jurcich says:

      Clearly you are someone who knows nothng about macroeconomics. The Tories successfully conflated the recovery, with shrinking the state, even though the two are (for the time-being) mutally exclusive. Mass unemployment here we come.

      The cuts will reduce aggregate demand in our economy (which is already very low) and by the end of the 2nd Qtr of 2011 unemployment will rise precipitously at this point everyone will lose their sense of humour.

      The mercury is rising, I suggest that anyone who has supported these cuts, leaves the country while they still can.

    2. Peter Stewert says:

      Umm… taxes are not going down (up in fact) in the short term nor the long term so we will continue to look after “them”, but it will be a different “them” than has been the case (i.e., welcome to the new poor, the banking sector, due to the recent crisis and looming pensions black hole), and I’m not even sure what “Personal responsibility” will mean in such a future except it might motivate everyone to make sure we never have to be personally responsible for such feckless greed.

  2. lisa ansell says:

    Remarkable? Yeah. Remarkable alright. When they calculated the potential for economic growth- did they factor in the wealth destruction potential? I suppose Banks scored highly.

  3. jase says:

    Would i be correct in assuming house prices will not drop because of these cuts. If there’s less houses then the demand remains high ?

    It looks like those who really need help in society are the ones to get shafted AGAIN.

  4. Ray Turner says:

    Roll on Wednesday. Once it is announced, we’ll be better placed to get on and deal with it. Well after we’ve all had our usual moan about it perhaps. All this uncertainty over the last few months really hasn’t been helping matters. We need to be able to get on with things and start planning our futures again. If we’ve got certainty, even if its certain that things are going to be cut, i.e. that we’re going to get less pension and no winter-fuel allowance, we’ve got a chance to plan ahead…

    Incidentally, I was impresssed with the Governments committment to the consultation exercise. It would be interesting to see how much that exercise actually influenced the decision making. That’s the real story behind the story, and a good measure of how effective this new-fangled coalition Government really is…

  5. Old Holborn says:

    Jase, since when was it your RIGHT for the State to provide home ownership for all?

    Study hard, get a good job and save some money. Then you too can buy a house you can afford.

    Now get your hands out of my pockets.

    1. Stuart says:

      I agree. The UK seems to strive for a far higher level of house ownership than many other countries (e.g. France). People are forever complaining about not being able to get a “foot on the ladder” yet they have a home to go to at night. They just have some strange desire that they (or rather their bank) should own the home.

      In fact when you are younger owning a home is a lot of grief. Without savings there is no buffer for that unforeseeable repair that is urgent, with a more mobile workforce you change jobs and have to go through the costs and delays of selling, finding and buying houses, etc. Renting makes sense in a lot of situations except that everybody seems to follow Thatcher’s dream for ownership.

      In my day you needed a decent deposit (not easy to save but if you wanted a house you had to save for one) and a far more limited mortgage. You ended up buying very small house in need of lots of work. These days the realistic option is a flat – but nobody wants those. First time buyers are a lot lot fussier these days and will not compromise like we had to for our first houses.

    2. celticchickadee says:

      Old Holborn you seem incredibly ignorant of the reality of being able to buy a home for many many hard working people in this country – for whom actually having something left to save would be a luxury. Where I live the average wage is around 14K. yep 14. House prices here have at leaat quadrupled in the last 8 years – but of course earnings haven’t. How the hell are you supposed to work towards buying a home on that please? Particularly with the continued reluctance of the greedy, culpable banks to lend at anything less than 85-90%. Soon, those who earn even that will be breathing a sigh of relief that they have a job at all as we prepare to see unemployment rocket.

      You sound like exactly the kind of complacent Tory eejit who swallows this sad sorry excsuse for a government wholesale. Get real.

    3. cyrilandshirley says:

      Old Holborn, me duck, a bulletin from the world of ordinary people:

      Study hard? Where exactly? Universities will be folding around the country. Those that remain will be well beyond the pocket of most people.

      Get a good job? Where exactly? The economy is in a mess. We need skilled people but now the Universities won’t be able to afford to skill them. I will of course be lining up for one of those lovely jobs that M&S are going to create for me. Selling overpriced pants to … um anyone who can still afford them.

      Save some money? No, I think Baron George wants us to spend our way out of recession, doesn’t he? Savings generate zilch in interest. As I, and most other people, have no money left at the end of the month after energy, food etc, it’s kind of academic anyway. See what I did there? Academic. Geddit?

      And I hate to point out something so obvious, but no one has said the State should provide home ownership for all. But it does have the responsibility to ensure we can all find our way to some kind of reasonable shelter. Otherwise, we end up living in dumpsters, like in the good old USofA. Yay for freedom!

    4. Peter Stewert says:

      It was never a right, but since the 1980s when Mrs Thatcher decided that government should make it as easy as possible for first time buyers, with plenty of social housing being available to buy, and policies to keep interest rate in line with wages. by all accounts the scheme brought in lots of revenue for the government. Wonder why it isn’t a good thing now…

    5. Mike says:

      Nice blinkers mate, have a look out into the real world. As the son of a postman, I went to University, studied hard and got a good job but actually care about something other than myself. When crime goes up and we end up in an even bigger hole than we are now I suppose people like you will still end up blaming someone else. Selfishness is not only immoral it’s also short sighted……..ah but that’s why you like Cameron I guess.

  6. les says:

    Another balanced piece of reporting I see!

  7. vicky says:

    house prices will plummet in regeneration areas where building/reconstruction of neighbourhoods will hault. Some developers will topple as their order book depletes, the knock on effect on housing will not be good. More homeless, overcrowding, less jobs- thsi coalition is incoherent and very dangerous.

    1. Ray Turner says:

      Not as dangerous as the last irresponsible Government, which accumulated the debt…

  8. Stuart says:

    If you want children, get Daddy to pay for them. If you want a house (presumably a big one), get Daddy to pay. Life is a lot easier when you are a millionaire and there is a lot less pressure to think of the not so well off when you were a millionaire the instant you popped out of your Mum. So did anybody really expect the Conservatives to take care of the less well off ?

  9. Tom says:

    Old holborn, people like you make me worry about our country, you don’t care about anybody but yourself do you? The state doesnt provide home ownership for all though does it! social housing is vital in ensuring people who cant afford it have a home, it also gives vulnerable families security so they have the basic commodity every human deserves, a roof over their head. totally agree with vicky, very worrying.

  10. Jim says:

    Remarkably sick!

    I can’t get a job, I won’t be able to pay housing benefit. They will offer me some nonsensical six month scheme at a local butcher shop and pay the butcher to employ me, and if I refuse, I will be made homeless.

    Thank you for not abandoning me and leaving me trapped in poverty, thank you ever so much for taking away my nasty benefit addiction. Now I can die in the sewers a free man with dignity.

    1. Fred Habuckle says:

      Jim, I agree 100%. The cuts should not impact the vulnerable in society, but given the conservative ideology they will. I would rather my tax and NI go to support you, after all in this climate you never know when you will lose your job. A nation should pride itself on the benefits it provides, not ashamed of it.

  11. CONDEM'd says:

    The Tories are obviously enjoying this along with the historicaly power starved LibDems, they are enabling this slaughter of public finance!

    The right wing fools that moan about scroungers will now have thousands of ex public employees claiming benefits and not paying taxes, NI etc., as those jobs are made redundant. People will tighten their belts, spending will dry up and the whole economny will go into free fall! If we want to save serious money, then lets get out of Afghanistan and don’t renew Trident!

    The second Housing bubble/pyramid scheme in my 50 year lifetime has caused all this nonsense again – those who believed their houses were worth so much have been fooled and many more were foolish in believing the market would not collapse – this has been a setup! The biggest social bail out has been on the behalf of EVERYONE WITH A MORTGAGE at these doggy banks whose main investment was mortgages and not industry!

    Social housing has not caused this disaster – U.S sub prime morgages initiated it (why social housing is necessary) and the greed of bankers after the higher interest charged to these mortgages! It’s good to blame the poor for everything though!

  12. alan says:

    i believe they are doing very well a very hard job that should have been done by the last lot, who as usual did nothing but line their own pockets,the reforms are needed, to cut things like child benefit for over 16`s is necessary, no longer a child at this age, we all need to start taking responsibility for ourselves, not leting governments do it for us.

    1. Mike says:

      Cheers Alan, I needed a laugh. I think you’ll find it was bankers lining their pockets that got us into this mess and I can’t imagine too many of those had anything to do with the previous government. People who are able to pay should pay but don’t spout this Daily Mail claptrap about it being fair that the poor get poorer in order to ensure that the wealthy still remain wealthy. Now if you want a serious argument about economics, I’m up for that but spurious arguments like yours………..

  13. Charles Jurcich says:

    All the political parties have bought into this nonsense that taxes pay for things, or when they don’t the govt has to borrow it.

    The Gold Standard disappeared years ago, and now governments no longer have to borrow to ‘finance’ their deficits. When will all of these people abandon their ‘Gold Standard security blankets’ and start living in macroeconomic reality.

    The cuts are unnecessary and damaging – the first order of business should be for the Bank of England to stop this unnecessary issuance of government debt. (If they want to maintain a positive interest rate then they should pay interest on excess reserves instead.)

    Let’s get on with nation building.

  14. Anthony Martin says:

    We get fed brainwashing propaganda and scaremongering stories of ‘terror’ threats every single day yet, British people in their millions are resigned to a life of misery at the hands of a government run by the wealthy. Here we have Britain back in the Dickensian era short of faecal matter flowing down the streets. We are a country where the majority are powerless, cowardice and controlled by a dictatorship and a manipulated media. Britain today is a massive divided country with festering hate and people forced to commit JUSTIFIED crimes just to survive. We have a country where the rich would rather that the poor go commit suicide or be kept by relatives. A country where 90% of the wealth is dominated by 5% of the populations. A country where property costs and rents are dominated by the rich owning portfolios of hundreds of housing stock. A country where predatory capitalism has been allowed to ride rough shot over the majority and benefited only the minority. A country where the public are isolated from reality because most pubs are closed down. A country where the MPs/Lords Bankers and corporate scum do as they please with money and commit fraud on a colosal scale. A country…

  15. Rachel says:

    Two things worry me. There are a lot of people in this country, over 60/65, who have made a big contribution to the economy, but who no longer contribute to it. Where do services for them come in the Tories’ spreadsheet? Whilst I can understand the rationale behind the rankings, services to the elderly and vulnerable need to be protected and not de-prioritised in this way. Kids are vulnerable, but they have loads of people fighting for their lot – parents and parents to be. The elderly have fewer loud voices. Another thing is this country’s obsession with university education. What’s happened to further education? Under Labour it was squeezed, the Cinderella service between schools and universities. Under the Tories it seems the same will be the case. However, the skills that FE can provide students with are often very vocational (and also provide those who’ve lost interest in education a new opportunity for engagement). I’d rather we invested in having plumbers and technicians who can do a job well, rather than a nation of call centre operatives with degrees in media studies and English. (Oversimplified, yes, but you get my gist!)

    1. madge says:

      yes i do get your gist. many of the long term unemployed were the result of maggie in the 1990’s. they never got into a job or the work ethic. i think she was admitted to hospital with over excitement at what her prodigies were up to.

  16. Madge says:

    i am reading comments and listening to news with a knot in my guts this evening. stories that my mum and dad told me about the ‘bad old days’ when people couldn’t afford medical care, infant mortality was high, men and women were old and worn out at 45, no food, no coal are haunting me. i am 65 and still working only 2 days a week after an accident 2 years ago. i do not know whether i will be asked to carry on for another year and dreading it. i can manage 2 days a week but if my disabled living allowance is taken away i will not be able to get out of the house. the car will go. i will not be able to get to work, shop, get to the doctors, the hospital, hairdressers, see family etc etc. i am so worried i am not sleeping at night properly. i have never been a big earner and have only limited savings. i have done my best and now at this time of my life i am terrified of the future. thank you mr cameron and your tory cronies.

  17. Dee says:

    As a Woman with a trannsexual history , who is
    down already with all the abuse I have suffered ,
    I must say thankyou very much for making me feel
    much worse to the condems .
    Spent all day contemplating suicide , flashback
    city and;now the benefit cuts.
    I must be something real nasty , and a scrounger
    and a half, thank you again, after all the wealthy must be looked after first .

  18. peteb says:

    Tax all unused second houses. Public and private.

  19. Raymond says:

    Presumably in this Wednesday’s spending review the Government will announce the sale to the general public of its £70 billion worth of shares it holds in RBS and Lloyds banks. Surely this would generate sufficient funds to offset the £80 billion of spending cuts being talked about.

Comments are closed.