Why cutting £20/wk from benefits isnt okay because it's "just ending a temporary increase"... a thread on the important history lesson in today's new @ONS incomes and inequality stats
I've had quite a few journalists ask in recent weeks why simply reversing the £20/week rise the Chancellor impressively swiftly put in place last April is such a big deal - surely it just takes us back to "normal" benefit levels that people were happy with pre-pandemic...
Why is this a deeply flawed approach? Because history goes back more than a year (who knew) - or to put it another way, there was nothing "normal" about what was happening to poorer families incomes immediately pre-pandemic. Today's stats make that crystal clear...
Outside recessions, incomes are meant to grow... but the typical income of the poorest fifth has been consistently falling since 2016. New ONS data shows it falling by 3.8% PER YEAR between 2016/17 & 2019/20 (this is probably an overestimate but either way huge falls took place)
What's caused these huge year on year falls? Cuts to benefits - the four year benefit freeze alone took 6% off the value of most working age benefits during these years. The result: the poorest households entered the pandemic with no real income growth since 2004-05
If we take pensioners out for a second, the picture for working-age families is much worse: over the past 15 years we've seen income falls of 8% and 10% for poorer working-age households with and without children respectively
This is why benefit levels going pre-crisis were totally unsustainable. It's why the Chancellor increased them as it became clear many more of us would be relying on benefits. And it's why scrapping the £20/wk takes us back not to an okay "normality" but to widespread destitution
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Something we didn't have time to do justice to overnight... defence spending. I think most people will be quite surprised by what is going on
You'll remember a few weeks back the Prime Minister announced a multi-year settlement for defence - containing the "largest military investment in 30 years" gov.uk/government/new…
The papers that focus on these things were very happy - this signalled the "end of an era of retreat". You'd have thought a hiring spree for soldiers, pilots and cyber warfare experts was coming. But... telegraph.co.uk/politics/2020/…
Right, have figured out what's happened to normal public service spending for next year - it's been cut by £10bn vs what was set out back in March. So £14.8bn increase next year is 40% less than previously planned
Why is this important? Because it points to the structural challenge the government has in rhetorically sticking to it's pre-crisis strategy of ending austerity/loads of money around, while substantively trying to tone it down given we have a smaller economy
Chancellor is basically hoping he can spend like hell on Covid, but hold the line on IT ALL being temporary. This is a bold assumption (think health, social care, - not to mention it requires him to cut £1000 from 6million families in April which isnt going to happen)
Here we go- Chancellor is on his feet, so we're off Spending Review wise. Expect:
- grim economic news
- more spending (lots of it)
- warnings of tax rises/spending restraint to come (but almost none of it set out - unless it largely affects people in other countries)
Chancellors wants to save "lives and livelihoods" - we know because he told us twice in about ten seconds
First announcement: extra spending needed to tackle covid next year = £55bn. This isnt a one year hit
Government has now announced headline details of their new employment support scheme - £2.9bn over 3 years to "help one million unemployed people in their job search"
£2.9 billion is a lot for this type of scheme (means more over the coming 3 years than was spent in 5 on a similar scheme, the Work Programme, after the financial crisis
This scheme will offer support to those out of work for more than a year - which is an important group to focus on given long term out of work do particularly badly when unemployment is high (ie because firms can hire those only recently exiting other jobs)
To distract us from the excitement of who you will/wont see over Christmas the government is putting on a Spending Review tomorrow. What should you expect?
New economic forecasts will show this year's disaster wasnt quite as disastrous as @OBR_UK thought in July BUT economy will be over 10 per cent smaller this year than pre-crisis = biggest fall in over 300 years.
Main impact of brilliant vaccine news is reduced uncertainty about when a full recovery can get underway - it won't magic away lasting economic damage. Expect a permanent 2 to 3% GDP hit by mid 2020s = £1,000 for every adult (this is much lower than previous crisis)
Times reporting that new National Living Wage rate for next year will be announced tomorrow. Headline is an 18p increase (ignore the headline about the rise being “scrapped” - that’s not right) thetimes.co.uk/edition/news/r…
This is a smaller increase than we’ve been used to (big rises seen since 2016) BUT would still leave National Living Wage on course to hit its target of eliminating low pay in middle of 2020s because target is set relative to (lower than thought pre-pandemic) typical pay levels
Crucial background here is that low paid workers have faced the biggest health risks AND biggest economic hits from this crisis