Editorial: Only now will the scale of austerity start to be felt

The welfare bill will rise. The question is where the axe falls, and whether it falls fairly


Given the scale of the Coalition’s cuts programme, the British public has, on the whole, been remarkably quiescent.

There has been some resistance: the odd anti-austerity march, for example, and the odd strike. But polls suggest that, although voters’ faith is beginning to be ground down by evidence of economic torpor, the majority still consider that – with the Treasury struggling under unaffordable debts – retrenchments must be made.

So far, though, the discussion has been a largely theoretical one. In practice, government belt-tightening has focused on (largely invisible) cuts to capital investment. Only now – on Monday – do the welfare reforms put in place after the 2010 election come into effect. Only now, therefore, will the social impact of austerity begin to be felt.

The changes are far from nominal. One of the most high-profile is the abolition of central government-funded council tax benefit – leaving more than two million of the poorest households worse off by an average of £140 a year, according to poverty campaigners. The disability living allowance is also to be replaced – by a system which could see half a million disabled people lose out, say disabilities charities. Meanwhile, a cap will limit the amount that any one person can receive from the state (with potentially profound implications for social diversity in, for example, high-rent central London) and those in social housing will take a hit to their benefits if they have a spare bedroom.

This is no unquestioning defence of the status quo. Welfare now accounts for almost a third of public spending, and the bill will only rise as the population ages. Such commitments are unaffordable. The question, though, is where the axe falls, and whether it falls fairly.

That the abolition of the 50p tax rate also takes effect next week hardly helps. The principle may be the right one – evidence suggests that avoidance of high taxes undermines their benefit to the Treasury. But the Chancellor’s decision to bring down the top tax band just as his Government is instituting benefits reforms that might, for example, hit disabled people in as many as six different ways is truly atrocious politics. For all that the Opposition will take advantage of the opportunity to lambast a “tax cut for millionaires”, however, Labour has not yet spelled out a credible alternative.

There are signs that may be changing. In an interview with this newspaper today, Ed Miliband acknowledges that, when it comes to the economy, his party needs to do more than just criticise. Some progress has already been made, with hints of a reintroduction of the 10p tax rate (a bad idea) and the creation of a mansion tax (a good one). But more must be done to clarify which cuts are deemed acceptable, and where extra spending is to come from, if the Opposition is to play a meaningful role in the public debate.

Nor are such questions purely retrospective. This summer’s spending review needs to slice another £11.5bn out of Whitehall’s budget for 2015-16. Theoretically at least, welfare is safe; that, at least, was the Liberal Democrat caveat when signing off George Osborne’s decision to hold benefit rises at a sub-inflationary 1 per cent for three years. But with pressure from Cabinet heavy-hitters, including the Home and Defence Secretaries, rising, that might yet change.

Perhaps, in fact, it should. As things now stand, disabled people look set to bear a disproportionate burden. And the bedroom tax is hard to justify when, for example, it penalises those with secondary custody of their children. Yet the Prime Minister remains committed to universal benefits for the elderly, and some budgets, including foreign aid, remain protected.

Such arguments will be harder to make than ever as the welfare reforms take effect. Indeed, the debate about cuts is only just beginning. The Coalition will be defined by austerity; only on Monday will that legacy begin to take shape.

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