The Blog

George Osborne's Budget Heralded a Redistribution of Wealth - From the Poorest to the Richest

The first Conservative Budget in 19 years was delivered in the UK parliament on Wednesday. And there were some shocks.

Having resisted the merit of a minimum wage for much of it's history as a coherent party, George Osborne announced the introduction of a Living Wage - a newly raised level for the basic rate of pay. It was Tony Blair's Labour government that first introduced the minimum wage to Britain, in the face of trenchant Tory opposition.

Osborne's move came as a shock to many commentators, as did some of his other announcements - such as the abolition of non domicile tax status, and a new surcharge on bank profits. It all seemed fairly progressive, much of the changes actually being key pieces of Labour's election manifesto.

So much so that many accused the Conservatives of having stolen Labour's clothes.

Osborne even aped the specific language that had been used by Ed Miliband during his campaign - talking of a One Nation budget for working people. It would be fair to stay that the stand-in leader of the Opposition was taken aback - the element of surprise had it's desired effect, but only for a moment.

Harriet Harman went on the attack, a personal attack, berating George Osborne's showmanship and personal motives. Avoiding the substance of the budget, she preferred to focus (quite legitimately) on the Chancellor's proven track record of drowning actual economic detail in a torrent of soundbites, ready made for consumption and reproduction by the print and broadcast media.

With a razor sharp glare projected across the despatch box, Harman then honed in Osborne's career ambitions and fired - for her this budget was about politics not economics, about Osborne positioning himself as a man of the people, and using the spectacle to prime public opinion in his favour.

Essentially this was his first pitch to the British people for the 2020 General Election, when he could very well be the man standing for Prime Minister, once David Cameron has made the expected departure from frontline politics.

There is an established pattern with budget announcements. On the day itself, much reporting and media reaction is shaped by the headline grabbing centrepieces that have most rhetorical impact and thus make easy news.The right-wing and Murdoch owned press had a feeding frenzy - headlines rapturous in their enthusiasm.

It is normally the day after that serious analysis begins, once the experts and maths bods have managed to compute the detail and crunched all the numbers. In Britain the Institute of Fiscal Studies is the foremost respected and independent authority on fiscal matters, and it is to them whom we look for an unravelling and intelligible conveyance of what all the complex changes mean for people in real terms.

And once all the data had been audited, all the sums processed, it became clear that the very people Osborne was claiming to help were in fact those who would be hit the hardest. The IFS produced some startling conclusions - that due to tax changes outlined in the budget 13 million families would be worse off, and 3 million would be £1000 worse off. Even with a rise in the minimum wage, the tax reforms planned would overwhelm any such increases.

Much of these reforms centred around the system of tax credits. Tax credits are essentially a form of tax relief for working families - their introduction by Gordon Brown helped to incentivise work, and although described by Tories as a bribe, the effect was to reduce the tax burden on those who received them.

So cutting them and taking them away, is in effect a tax rise for those concerned. The money that would have been given back to people through tax credits, will now being retained and pocketed by the treasury.

But what was especially shocking about this budget was the varied impact it had different income groups. The IFS produced a graph which demonstrated the sharp inequity of these changes and their effects - they took money away from the poorest and middle income families, and gave money to the richest.

This was wealth redistribution upwards on a massive scale, transferring tax burdens to the lowest 50% of earners, and relieving it from the top 50%.

There were a number of other measures in the budget that made the stomach turn, mostly aimed at the age group between 16 and 25 - cuts to support that disabled students receive at University, the abolition of maintenance grants for the poorest students and withdrawal of financial safety nets for the young, stripping those aged between 18 and 21 of the right to claim any state assistance for housing or basic subsistence.

And if that wasn't enough, anyone under 25 will be excluded from the minimum wage rise.

So we will have the group in society with the least labour power receiving the least protection from the inevitable volatilities and periodic instabilities of labour markets.

There will be a lot of youngsters and lower to middle income voters who actually voted Conservative, in a state of shock and disbelief as the consequences of this budget sink in and start to bite, hitting incomes and standards of living.

A lot of these voters no doubt were taken in by the psychology and ethos of hitting the 'deserving' poor, vulnerable and disabled. After all that is what the last parliament was about. But they made the very costly mistake of thinking that the targeting of these groups could continue ad infinitum or at the same rate. The reality is there was only so much juice to be squeezed from those at the very bottom. George Osborne has moved onto the groups next up on the income scale combining predatory and parasitic in only the way he could. And hell will freeze over before he gets to those at the very top.

Before the May election I remember lots of meme posters being circulated online, pictures of David Cameron, George Osborne and Ian Duncan Smith, associated with quotations from the poem 'First they came...' by Martin Niemöller. I felt the comparison was inappropriate, because of the sheer scale of the Holocaust, and that to find an equivalence with Britain under the Conservatives these last 5 years, was not right.

I still feel the same way, but even though I cannot find an equivalence in scale, I can certainly find relevance and resonance - a lesson to bear in mind when governments start targeting and persecuting certain groups, whether through social, economic or military policy.

Be careful what you participate in, because that very same persecution may soon find you in it's sights.