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Our autumn spending review response

BY BLOC 28/11/2015


Labours shadow chancellor, John McDonnell, was right: Osborne had promised us that the deficit would be gone by now & he’d have borrowing under control. The stark reality is that he has borrowed £708 billion in the past 5 years, if he carries on at the same rate he will have borrowed £1.8 trillion in the same period Labour borrowed £292 billion. This man cannot be trusted with our economy, he continues to fail on his promises and makes the most vulnerable in our society pay for his mistakes.


There is no doubt Osborne got lucky with this budget as the Office for Budget Responsibility (OBR) threw aside some of its previous caution & found a £27 billion improvement in revenues through better tax receipts and reclassifications to national insurance, and lower than expected inflation. Remember though, this £27 billion is spread over 5 years & the OBR have been quick to point out their predictions could prove inaccurate - this leaves the chancellor with little wriggle room & if the OBR are wrong this could be the final nail in the coffin for Osborne. As with his previous spending review we have issued our analysis, looking deeper beneath the usual one-liners.


Tax Credits & Universal Credit

Where better to start than this hotly debated topic? When George Osborne announced he was scrapping tax credits on 8 July it was given a mixture of responses; to those that it affected it brought worry, dread & fear, to most of those it didn’t it brought sympathy & the hunger to fight back. This U-turn was people power at it’s best but it also shows how important a strong opposition is, Jeremy Corbyn ensured his party fought against the cuts alongside those campaigning & it is no doubt a gallant but small victory. The reason it is small & is therefore too early to celebrate is because this isn’t a sudden development of compassion by Osborne but merely pain delayed rather than abandoned. Two tax credit cuts, the family element and the two-child cap are still going ahead. In addition, cuts to universal credit - the benefit set to replace tax credits for most claimants in the last years of the parliament - are still to go ahead, which will still leave about 3 million households around £1000 worse off on average by 2020. This will hit future claimants and the Resolution Foundation say a single parent with one child, working part-time on the national living wage, making a new universal credit claim, would lose £2800 by 2020. There is still work to do for campaigners & the opposition in the coming years.


For Osborne it is a political embarrassment, he will need to return to the commons to seek permission to breach his own self-imposed welfare cap. We also have to question the consistency of a man who just weeks ago was claiming that tax credit cuts were an essential part of fiscal responsibility.


The Little Red Book

Not part of the budget strictly but John McDonnells use of Mao’s ‘Little Red Book’ came under fire after the budget. He was criticised by many, including some of the most left wing Corbyn supporters we saw on Twitter, but unjustly so. The joke had a serious point to it: Osborne is selling off our assets to the vicious Chinese government. During the recent Chinese state visit £40 billion worth of business deals were completed, including the nuclear power plant in Hinckley. Cheap Chinese steel has already flooded the UK market seeing the loss of thousands of jobs in steel plants across Britain. 350,000 families sit on social housing waiting lists in London yet precious land is being sold off to Chinese investors to make way for luxury living.


Student Nurses

Bad news for these guys we’re afraid, and consequently healthcare in the UK. Student nurses are to have their grants cut & have them replaced with loans. Many student nurses are already working 37.5 hours a week on rotational contracts but are paid nothing. In April, UNISON called for student nurses to be paid as their unpaid work meant they were unable to take part time jobs, leaving them relying on grants to pay their living costs. Many student nurses take up courses later on in life meaning a high proportion take a risk to move into the profession, having a loan may make it too much of a risk to some. Coupled with the fact nurses are generally low paid anyway this will end up with a shortage of nurses in the future. The Royal College of Nursing have already warned those from poorer backgrounds are likely to be put off from applying.


Green Energy

The last budget was a disaster for green energy & things haven’t got much better this time round. There were some positives in the budget but they make no sense when stacked up against the negatives. For example there have been changes to the The Energy Companies Obligation (ECO) - an energy efficiency scheme that requires energy providers to roll out energy efficiency measures in UK households. It will end in 2017 & be replaced by an as-yet unnamed replacement, it will improve the efficiency of 200,000 homes - can’t be a bad thing can it? Well, green campaigners highlighted the replacement will cost £170 million less than ECO, meaning under the current system considerably more than 200,000 homes could be improved. £700 million has also been cut to the Renewable Heat Initiative - the coalition governments flagship programme.


While Osborne claims we have the greenest government ever he has created a ‘fracking fund’ in this budget. Up to 10% of revenues from shale gas projects will be directed into a new Shale Wealth Fund designed to benefit local communities located near fracking sites with extra money for development and local initiatives. This gives the strong suggestion that fracking is becoming more and more of a reality, a further step away from renewable energy.


One big question is how Osborne plans on this government becoming any greener when he has cut the funding of The Department of Energy and Climate Change by 22%? Green groups have warned the reduction of funding for renewable energy in this budget will make it harder to meet the EU's renewable energy target for 2020. Since Cameron cut solar panel subsidies just a few months ago 1000 jobs have already been lost. The industry has huge potential for Britains future but is sadly been picked apart piece by piece by this government.


Government departments spending cuts

Government departments will make day-to-day spending cuts of £12 billion by 2020. The Department for Transport is the biggest hit, with a real terms cut of 37%. Many other departments will see huge day-to-day cuts, which will ultimately end in 80,000 public sector job losses by the end of the decade.


Student Loans

Osborne outlined that the threshold at which student loan repayments would begin would be frozen at £21,000 for the next 5 years, as opposed to being raised in line with average earnings, as promised in 2010. If this wasn’t bad enough the freeze will be backdated to include students who started university as far back as 2012. There have been suggestions a legal challenge will be mounted as it is essentially mis-selling on a mass scale. University students have had the terms of their loan changed at a later date which should never be allowed. Personal finance expert, Martin Lewis, has attacked the move as a ‘breach of trust by the government that betrays a generation of students’.


The Institute for Fiscal Studies say the retrospective freezing would mean an average graduate will end up paying back about £3000 extra, while more disadvantaged students could be even worse off.


The Queen

Despite all the bad news in this autumn spending review there was a glimmer of good news tucked away on page 120. Good news if you’re the Queen anyway: she’ll be receiving a 7% pay rise! Despite the billions cut to public spending, and there’s much more than we’ve highlighted in this article, she will get £42.9 million next year compared to her £40.1 million this year.



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