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It isn’t a ‘lower tax, higher wage’ economy as Osborne boasts, it’s actually a higher tax, lower wage economy

Osborne's gladstone budgetboxOne has to give it to Osborne, he’s extremely good at branding whatever he doesn’t like with a clever, pejorative – but false – jingle. ‘The merry-go-round on welfare’, ‘strivers versus shirkers’, ‘Labour left behind this economic mess’ , and ‘austerity’s painful decisions are the only way to cut the deficit’ immediately spring to mind. But they’re all wrong, or at least require teasing out to show they’re more propaganda than reality. But with the unerring aid of a prostrate Tory press and the feeble docility of a pliant Opposition, he manages to command a narrative resonant with the public consciousness which even a cursory scrutiny would show to be a raging falsehood.

Thus in his budget yesterday Osborne, faced with widespread rejection of his £12bn welfare cuts, sought to turn the tables by fitting it positively into his new framework of a ‘higher wage, lower tax, lower welfare’ society to replace the ‘low wage, high tax, high welfare’ economy which the incessant Tory mantra of hostility over the last 5 years had turned into the enemy within. But the budget portrayed no such thing. It actually contained tax increases of some £47bn, roughly twice the size of all the tax cuts in aggregate.

Nor is this a budget that can celebrate net higher wages. The compulsory £9 living wage by 2020 is welcome insofar as it gets the Tories on side in recognising that wages are far too low at the bottom, but it is much more modest than Tory headlines have made out. It should be remembered that the living wage in London is already £9.35 an hour, but much more significantly still the gains involved in that are far outweighed by the 4-year freeze on in-work benefits and the severity of the cutbacks in working tax credits.

As to high welfare, the £46bn cumulative cuts in social security payments unveiled yesterday for the next 5 years are certainly going to have a massive impact in exploding poverty and inequality and in the demand for food banks in a partial Third World stratum of British society. Osborne couldn’t resist yet another poke at the ‘lifestyles’ of the jobless, but when unemployment is still not much less than 2 million it is obvious that the reason they remain without a job is not because they don’t want one or haven’t tried persistently to get one, but rather because Osborne’s own policies have so far shrunk the economy that demand has withered and private investors still do not believe there is a foundation for sustainable growth to justify their investing in large-scale high-wage jobs.

And we should continue to ask: high welfare for whom? £46bn taken off the poor while corporate welfare rides high with trousering £93bn subsidies every year. And the City’s tax welfare is kept protected by Osborne by his perpetual refusal to consider a Financial Transactions Tax, even at the very low level of 0.001%, which within 5 years could pay off the budget deficit in 5 years without any further cuts at all.

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