Public sector pay, health, education. The demand for a share of the so-called magic money tree grows by the day. After seven years of restraint, it’s hardly surprising the case is being made for the purse strings to be loosened. It’s worth remembering no new money has so far been forthcoming, aside for Northern Ireland. But if you’re struggling on a low income, the prospect of some respite couldn’t be more welcome.
Part of the problem which led us here is where you choose to place your chips in the first place. The Government – and its opposition – need to put the interests of hard-pressed families first and make sure that those who have borne the greatest strain are the first to get some relief. The Joseph Rowntree Foundation’s Minimum Income Standard (MIS), an annual barometer on living standards, today shows why.
Inflation has returned to bite into family budgets. It means the choice to freeze benefits and tax credits, made in George Osborne’s 2015 Summer Budget, is beginning to hurt. Our analysis shows in the first year alone (the freeze is in place until 2020), the policy has reduced the income of a lone parent with two kids working full time on the National Living Wage by £355 a year, and £415 for a couple family with two children and both parents working full time.
Despite the National Living Wage rising and tax cuts, just about managing is just getting harder. The beauty of MIS is that it’s decided by the people for the people: covering the essentials but enough for modest outgoings to take part in society, such as a small birthday gift for someone in the family or swimming lessons for your children. When it’s harder to make ends meet, affording this leaves parents with some impossible choices: which bill to pay (or avoid) first, skipping meals so the kids can eat and having to cut back on the after-school clubs because the cash just won’t stretch.
This arguably isn’t anything new. Yet the clamour for extra public spending has overlooked entirely the 10 million families on low incomes in and out of work hurt by the welfare freeze. The kind of families who have struggled over the last seven years, having seen their wages stagnate, tax credits pared back and cost of living soar.
This makes Labour’s decision not to commit to lift the freeze in its manifesto even more conspicuous by its absence alongside spending commitments. Despite promising to put £2bn back into the system to reverse a number of welfare cuts, it is keeping in place a policy that systematically holds down the living standards of people in poverty. This was met with incredulity by Alan Johnson, who said in a recent speech:
“This year inflation is set to hit 3 per cent but the freeze on working-age benefits will continue and would probably not have been unfrozen to any great degree if Jeremy Corbyn had become Prime Minister. In essence therefore…both main political parties in the election supported a real-term pay cut for the working-age poor. With wages stagnant, the ‘just about managing’ are soon to be the ‘just about sinking’.”
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So if a little fiscal headroom is to be made available, it must be spent wisely. Many areas of public spending have been under strain. But the debate now should be looking at where any extra cash will have the biggest benefit, for the largest number of people, who need it most. The freeze saves around £3.6bn a year. No small change, but more prudent that other spending commitments being lobbied for at the moment. Government is about choices and priorities. The Conservatives have offered tax cuts to the personal allowance – the lion’s share of which goes to the top half of households – costing £11bn per year between 2010/11 and 2017/18. By contrast, cuts to Universal Credit Work Allowances reduces support for working families with the lowest incomes by £3.2bn, in the process sabotaging the Government’s main poverty-fighting tool.
Labour brought the public sector pay cap to the fore with a vote in the Commons. But lifting the freeze on welfare ought to be their first priority when it comes to pressing the Government on living standards and extra spending. The IFS forecasts these cuts combined are the driving force behind a million more children living in poverty by the end of the Parliament.
Feedback on the doorsteps, the need to agree a deal with the DUP and the awful events at Grenfell Tower have broken the orthodoxy that there is no money to spend. No party at the election made a convincing case they understood the plight of the millions of people struggling to make ends meet. Overlooking the welfare freeze shows a lack of recognition and empathy. When life is getting harder, it should not be left to the realms of magic to offer a little help to people who need it most.
Campbell Robb is chief executive of the independent Joseph Rowntree Foundation
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