A day for resentment?

June 22, 2010 by
Filed under: Credit crunch, Politics 

If anyone’s interested and not watching the footie, I am at 9.15 this evening taking part of what may be an interesting conversation on Radio 3’s ‘Night Waves’ about ‘resentment’. I think we will start off talking about the nature of resentment and how it is different from, say, a sense of injustice. The conversation may then turn to today’s budget and ask where in British society we might see resentment emerge as we move into a four year period of higher taxes and service cuts.

Probably the last thing readers want is more budget analysis, but as it is such an important statement and, as I wrote about it yesterday, I thought I might share my top lines.

The budget can be looked at socially, economically and politically.

Socially, it is fair in one sense and unfair in another. Fair in that the tax and benefit pain is reasonably evenly distributed, although even the Treasury’s own figures show the poorest ten percent being the second hardest hit decile overall. Unfair in that some will argue we should give extra protection to the poorest in hard times, and because the public spending cuts to come are almost certain to impact the poorest hardest.

Economically, the whole package rests on the expectation that the private sector will grow steadily and strongly. If this is the case then the Coalition may well be in a position to reduce and even halt planned expenditure cuts in years 3 and 4 of the plan. If the private sector doesn’t grow, then not only might it be that the plan is judged to have been misguided (as Labour is arguing) but the consequences of cuts – especially on overall unemployment – will be much worse than today’s Treasury predictions

Politically, as I said yesterday, I suspect the Coalition will get reasonable support for its boldness for some time, maybe 18 months or so. But by the time we get to autumn/winter 2011 the Government will be badly in need of good news to maintain its cohesion and its support in the country. Of course, a lot depends on how Labour behaves. Its response today was, to my mind, too shrill and short-termist. Most voters do blame Labour for the state of the public finances, and if there isn’t a second economic downturn (most economists don’t think there will be), then Labour will have its dire predictions thrown back in its face.          

The final note is that I am non-plussed about how the Coalition is going to reduce education expenditure by 4-5% a year for each of the next four years while at the same time introducing a generous pupil premium and funding an expensive policy of supporting free schools (something which relies in the short term on allowing more surplus capacity in the system). Michael Gove is not stupid and he is a powerful figure in the Coalition. It will be fascinating to find out how he hopes to pull this off.

Share

No related posts.

Tags: ,

Comments

2 Comments on A day for resentment?

  1. carl allen on Tue, 22nd Jun 2010 8:58 pm

    2. FREE SCHOOL POLICY … a model of self-help and subsidy

    From the progressive community viewpoint, it seems the free school policy initiative will surely be a boon to highly taxed families who struggle to have their children developed and educated in schools that are suitable for their long term development.

    But it is not clear, on a point of financial creativity and freedom from regulation for free schools
    • Is the rule on extras removed i.e. in a class, all children must be part of extra -curricular activities even where the child (parent) cannot afford it … a subsidy is in effect
    • Will private schools be able to claim for each student … never mind any rules, we can get around that!

    Now communities should not live in isolation and bear in mind the relative geographical isolation of many gated communities. Positive action means that less fortunate children should have more than just entry into our free gated schools to develop and be educated in a far better environment than otherwise.

    [In a free gated school all the children can develop their full potential in a diverse environment ... gated communities tend to have a wide outlook on life, having travelled widely i.e. those who only England know, know not England at all. Good saying that!]

    Can there be a sort of Ryanair model of free education where you pay for extras but as an educational establishment offer, to the less fortunate, bursaries for extra -curricular activities and special effects within curricular activities?

    Such a Ryanair model would help in ensuring that some worthwhile students from poorer families do apply and have entry knowing that they will be able to fully partake in the life of the school while helping highly taxed but hard pressed families from our gated communities.

    Nonetheless all must understand that there is no place or case for the free school policy initiative to become a virtual subsidy for private schooling. And that Local Authorities should fight hard to prevent the free school policy initiative becoming a defining but divisive social feature of their areas.

  2. Livy on Wed, 23rd Jun 2010 8:19 pm

    3. Surprised people aren’t all over this.

    I’m kind of torn. To be fair, I’m glad he decided not to listen to think tanks who suggested covering more goods with the same rate of VAT. I’m growing more and more fond of Harriet’s speechwriter and the VAT increase made it too tempting not to slam the Lib Dems a bit. “22 ministerial jobs were bought at the expense of tens of thousands of other people losing theirs”….love it :)

    The thing is, all too often politics is the problem. Whether VAT is a progressive or regressive tax is an empirical question, and there’s a fair case to be made around 0% rated items making up a much higher proportion of the poor’s spending habits, especially given the increase in food prices over the last couple of years. The credibility of the budget will actually hinge on the government’s ability to deliver the departmental cuts and we won’t know exactly how that will play out until October; if it proves too painful Osborne will certainly return to welfare spending. That’s where the future battle lines could have been drawn, but all the Labour leadership candidates were quick to let it go and concede that too much has been spent on unemployment. In either case it will be hard to manage a 25% departmental reduction without substantial job losses and the OBR say more will be lost with each year of this parliament.

    The switch from RPI to CPI indexation for most benefits is the significant aspect of this whole thing; given that the latter inflation measure is between 1-2% points below RPI it will have a huge and lasting impact.

    Basically the gap will get wider and wider over time as CPI doesn’t include housing costs or interest payments on mortgages. If benefits stayed on RPI they would have gone up by 3-4% next year (or whatever September’s RPI figure is) and the price of a shopping basket of food for poor people goes up faster than CPI; somebody on JSA already has an income that doesn’t keep pace with the sort of things they spend money on. In cash terms benefits would have gone up by 31% since 2000 under RPI, but 20% under CPI.

    On the education front… a friend of mine is a head of department and reacted to this, half joking half serious, by saying that if he were to set up his own ‘free school’ in East London he’d make an absolute packet by renting out space to Dixy Fried Chicken. We both laughed, and then turned quite sombre and silent for a minute.

Tell me what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!