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Spending review 2015: Our Panel’s Reaction

Yesterday George Osborne set out government spending plans up to 2020. These involve added pressure on local government, Whitehall and welfare, but also promises including a promise to overturn tax-credit cuts, albeit until the introduction of Universal Credit.

Our experts from parliament, policy and economics give their thoughts on yesterday's annoucements below. Class will be releasing a detailed briefing on the Spending Review soon, follow @classonline for the latest updates.

 

Jon Trickett MP, Shadow Secretary of State for Communities and Local Government

Whilst we await a detailed report on the local government settlement, the big picture for local government looks bleak after the Chancellor statement yesterday. The whole of local government has taken a massive hit in recent years, but the poorest areas have been hit the hardest and with additional pressures on local government in children’s services, public health and a range of other services the situation is only set to get worse.

The announcement on adult social care is particularly disturbing and the Chancellor’s weasel words cannot disguise the fact that the government have abandoned any attempt to fund the care of our parents and grandparents.

Big questions remain about the decision to allow local authorities to retain 100% of business rates. Think what would happen to a council such as Redcar where government negligence allowed a steel plant to close and ceased overnight to pay business rates alongside having to provide support for those who lost their jobs.

 

Ann Pettifor, Director of PRIME (Policy Research in Macroeconomics)

The Chancellor forecasts both a further fiscal squeeze in 2016, and optimistic public debt outcomes. There is no economic logic in this. Instead his policies might well fuel property price inflation and with it private personal and mortgage debt, while further weakening demand.

Yesterday’s Autumn Statement must be considered in a global context. Far from being over, the financial crisis moved from the core (US) into its second phase, Europe. China is now at the epicenter of the third phase of this apparently unending crisis, leading to disinflation and even deflation in rich countries.

Global weakening is compounded by a vicious loop between high and rising levels of private debt (exacerbated by deflationary pressures) and by deliberate policy to lower public investment, repress wages and weaken trends in national income.

Britain’s Chancellor proudly leads the charge for this ‘deliberate policy’ - slashing public spending and overseeing one of the largest squeezes on wages since 1850. In other words, the Autumn Statement will help prolong the global financial crisis.

 

Richard Exell, Senior Policy Officer for TUC

Well, if you’re going to do a U-turn, you might as well make a virtue of it:

I’ve had representations that these changes to tax credits should be phased in. I’ve listened to the concerns. I hear and understand them.

And because I’ve been able to announce today an improvement in the public finances, the simplest thing to do is not to phase these changes in, but to avoid them altogether.

George Osborne’s decision to withdraw the changes to tax credits, due to come in next year is a massive relief. Research by the TUC and other organisations show that, in every part of the country, the low-paid families who get Working Tax Credit were due to lose, on average, more than £100 a month starting next April.

This should hearten everyone who worked so hard to reverse this decision: policy research and hard-hitting campaigns really can make a difference. So let’s take a moment to pat ourselves on our collective backs.

But then read the Chancellor’s next sentence:

Tax credits are being phased out anyway as we introduce universal credit.

Yes, it’s true, none of the cuts to Universal Credit due to take place by 2020 were reversed in this announcement. These include:

  • Freezing most of the elements of UC in cash terms.
  • Cutting UC work allowances for those without housing costs to £5,000 for those with children or with a limited capability for work, and removing them entirely for those without children.
  • Cutting UC work allowances for those with housing costs to £2,400 for those with children, and abolishing them for those without children.
  • Restricting the child element of Child Tax Credit and Universal Credit to two children per family from 2017/18.

So yesterday’s announcement means less pain in the immediate future, but, as they transfer to Universal Credit, low-paid families will still have to cope with the cuts we first heard about in the July Budget.

 

Cat Hobbs, Founder of We Own It

In George Osborne’s speech yesterday, he barely mentioned the word ‘asset’. But in the accompanying spending review documents, the word ‘asset’ is mentioned many, many times. And it’s all about selling them off.

National assets are up for grabs. Osborne is going ahead with re-privatising the banks, selling off the Green Investment Bank and student loans. The government is looking at options for privatising Network Rail and allowing it in turn to sell off land and property. Osborne wants to ‘explore’ selling off the government’s stake in National Air Traffic Services, privatise the Land Registry and look at bringing the private sector into Ordnance Survey.

Government departments are all being told to look at their own land and property and flog off as much as possible. The Department of Health will sell off assets worth nearly £2 billion. The Ministry of Defence will raise £1 billion from asset sales. It's hard to believe that all these assets are 'surplus' and disposable - clearly there would be benefits in keeping them public.

Local government meanwhile is being hit hard with cuts and offered a cunning bribe. If they sell off local assets (which could mean parks, swimming pools, community centres, places that make life liveable) they are allowed to keep 100% of the proceeds. This is the opposite of devolution. Destructive cuts enforced from central government, followed by pressure to sell off local assets to soften the blow.

Osborne is putting at risk our future communities and the resources they will have available with a clever story. He's talking about the need to cut debt and increase housing but never mentioning the role the private sector could play in responding to these issues. He is utterly, ideologically committed to transferring assets from the public to the private sector and the impact will be devastating: loss of future revenue for government and a damaging effect on all of our public services. They are called ‘assets’ for a reason.

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