Osborne has attempted to present this as a “neutral” budget or “people’s budget”, highlighting the rise in the income tax starting threshold to £9,205 in April 2013. Low paid workers will however be hammered in a myriad of other ways, and will emerge much worse off once inflation is taken into account according to the Citizen’s Advice Bureau. For the most vulnerable in society, Osborne has indicated he will “need to make savings in welfare” of an extra £10 billion by 2016. Pensioners emerge an average of £84 a year worse off, due to the withdrawal of tax allowances. Furthermore, the ending of universal child benefit will force 300,000 more workers into the 40p tax band from April 2013.
With the UK economy teetering on the brink of another technical recession, this represents a continuation of the neo-liberal austerity policies that are deepening the crisis and piling untold misery on the backs of working people and the unemployed. Further attacks on the spending power of workers will strangle any prospect of a meaningful recovery in the real economy.
The Office for National Statistics (ONS) has reported that pay freezes and inflation meant that real household disposable income in the UK fell by 1.2 per cent last year, the biggest annual fall in spending power since 1977. The situation is even starker for Northern Ireland. The latest statistics indicate that over the past year, weekly food shopping bills have increased on average by 5.8%, home heating oil is up 10%, electricity 18.5% and motor fuel 5.1%. The Belfast Telegraph has projected that over the next 12 months, the average worker will be £600 worse off as prices continue to rise.
Perhaps the most worrying development for workers in the North will be the threatened move towards regional rates of pay. Northern Ireland’s private sector is proportionately much smaller than other regions of the UK, with better paid areas such as ICT, pharmaceuticals and engineering particularly under-developed. By contrast, the less well-paid service and retail sectors dominate, which are heavily dependent on the spending power of public sector workers. It is estimated that regional rates would see Northern Ireland’s civil servants facing an annual pay loss of up to £1,000, removing £210m from the local economy. This would be on top of the £4.3 billion of cuts that the Assembly parties are implementing that are already having a devastating impact.
The trade union movement needs to challenge this “race to the bottom” in terms of living standards and put forward a fighting strategy to defeat austerity. The historic 30 November public sector strike was a step forward, but since then many union leaders have backtracked, and are prepared to accept the awful deal on offer on pensions in the hope of avoiding cuts elsewhere. As this budget demonstrates, this is a failed strategy that accepts the logic of cuts. To defeat austerity, left organisations need to be built within each union that are prepared to unite and, fight all attacks on their members interests.
A political alternative for working class people is also needed. In Britian, steps toward this have already been taken with the formation of the Trade Union and Socialist Coalition (TUSC). Rather than accepting cuts, the £123 billion that the super-rich avoid paying in tax every year should be used to invest in society. A massive job creation scheme is needed to provide socially useful employment and ensure decent public services. Ultimately, by taking into public ownership the key sectors of the economy under the democratic control and management of working people, a decent standard of living would be ensured for all.