George (ne Gideon) Osborne Baronet is the British Chancellor of the Exchequer – finance minister to everyone else. Every year, we have a budget in March but recently it has become the habit of Chancellors to make an Autumn Statement which is an update – and sometimes the opportunity to test an idea.
So what did George say today? Well to start with, much the same as last year – it will take another 5 years to sort out the accounts and, far from balancing the books by 2015 as promised in 2010, it will take until 2017/18 to get things straight. By 2015, he will probably be promising good cheer by 2020. And of course it is now all the fault of somewhere else – the Eurozone in particular.
Now I don’t want to be unfair. When Osborne first announced that he wanted to balance the books by 2015, reducing public expenditure by 25%, many were incredulous. This was far more than the cuts of the 1980s which led to over 3 million unemployed and riots in the streets. I estimated it would lead to at least 750,000 extra unemployed, mainly from the public sector. In fact headline unemployment has not increased by that much so far. Why?
There has been an upsurge in small businesses creating some new jobs and this is to be welcomed. Our fascination with online trading and business has kept some people afloat – yet of course closed other businesses. We will see whether we have gained or lost. And whether Messrs Amazon, Google etc will pay the VAT and corporation tax they should out of this online haven – there’s quite a few billion adrift.
But the big cuts haven’t hit yet.
Unemployment had been steady at about 5.5% from 2001 until early 2008, after which it rose to about 8% by autumn 2009, peaked at 8.4% early this year and has been sliding a bit down since then. It is now about 7.8% (2.5 million out of about 30 million people of working age in the UK). The actual number claiming welfare benefits is a lot lower than the unemployment rate at about 1.6 million – many can’t claim as there is a working partner.
What this hides is three things:
- There are about 3 million people considered to be underemployed – they want to work more. This has increased by about 1 million since the start of the recession, half in the last two years. Of course as far as the Chancellor is concerned, they are not claiming welfare benefits so they are not important. I would include temporary, part-time and other categories here. Counting part-time work as 50% suggests that the true increase has already been in excess of a quarter of a million full-time equivalent. So far.
- There are about 2.6 million claiming Incapacity Benefit or Employment and Support Allowance. Reforms including tougher medical tests and time-limiting of non-means tested benefits are rolling out which means that this number will be reduced but what will happen to the people? Some will manage to enter the labour market, it is true, but it is estimated that about 600,000 will fall out of any benefit completely and the claimant count will increase by some 300,000.
- There is a large underclass of economically inactive people – students, carers and the like – who do not figure in either category.
In sum, this lot adds up to something like 7 million non-productive people. Not so rosy, is it? 4.2 million on some sort of benefit, each costing the exchequer £20k ($32k) or more in benefits and lost tax.
Now don’t get me wrong – I believe people should work. I also believe that most unemployed people desperately want a job. But they need to be helped into work and the system as it stands is very inefficient. Earlier this year our son Ewan posted a heart-felt plea on this blog after nearly 4 years without a job. Fortune has smiled on him and he is one of the (few) successes, having found a job with the Cooperative Bank – one of the most respectable employers. The picture painted by Osborne of the person going to work while his (or her) neighbour turns over in bed is not fair and not true. In his Tatton constituency (one of the richest areas in the UK, even if it is in the north), the neighbour will probably manage a round of golf in the afternoon after a late breakfast.
But there are people who, through no fault of their own, have medical or mental problems, including those who have served their country in the military yet get a very raw deal. Are these people, some presently on IB or ESA to be discarded?
It will reduce help the Exchequer but at what cost? We have already got beggers back on the street, and families will find living even harder with utility bills soaring. Who suffers? Children, the elderly and those who are disabled or frail. Children are our future. Family is the future. You can depend on volunteers for short term help as the Olympics showed very effectively. My old ex-Army history teacher used to say, one volunteer is worth ten pressed men – but volunteers can walk away. And do. In the end you have to fund the resources required for society properly because there is such a thing as society and we are all part of it.
So is Osborne’s statement a success? It has been viewed as slashing the welfare bill by limiting increases to 1% which will squeeze families hard. He also slashed the amount the uber-rich can stash in their pensions boo-hoo – I am sure they will find a way round that. But there was little to do with the growth that we need in the statement. Yes he found some money for schools, a little for science and increased investment allowances for small businesses (that doesn’t cost anything). Osborne undoubtedly inherited a big problem. The previous government’s spending had been careless in places but it was the banks which tipped us over the edge. Neither of these causes were down to the man, woman or child in the street yet they are the ones picking up the tab. Thanks a bunch, George.