New Labour's claim to be serious about tackling poverty exploded when shameful figures were released revealing the true extent of hardship in Britain. The government had been expected to miss its target of reducing child poverty; in fact the number of children living in poverty in Britain ROSE by 200,000 last year. The first increase in nearly a decade destroys the government’s prediction it would halve child poverty by 2010. In 2005-6, 3.8 million children were in relative poverty – defined as homes on less than 60 percent of average income including housing costs. With housing costs not taken into account, the number of children living below the relative poverty line was 2.8 million. The figures represent an increase from 3.6 million and 2.7 million respectively in the previous year.
Martin Narey, the chief executive of children’s charity Barnardo’s, said, “This is a moral disgrace. In 1999, we were all excited by the government’s determination to eradicate child poverty and, on the way, to halve it by 2010. It is now clear that what it meant was that it intended, not to halve child poverty by 2010, but to reduce it a bit. We are a country where we can countenance individual bankers getting annual bonuses of £22 million while we give a family of two parents and two children, living on benefits, £10,000 to live on for a whole year.” The same set of figures – Households Below Average Income – also showed a rise of half a million in the number of people of working age living in relative poverty after housing costs in 2005-6. The figures are worse than 1998, let alone compared to last year. The end of Gordon Brown's regime of war abroad and poverty at home cannot come quickly enough. “It shows that if you shout loud enough and long enough, the chancellor will hear.” This was a response to Gordon Brown’s budget – not from the trade unionists who fund the Labour Party – but from Miles Templeman, director general of the Institute of Directors.
Brown’s budget lays down his credentials as Tony Blair’s natural heir. His only difference is an extra bit of Thatcherism thrown in for good measure. “Britain must champion open markets, flexibility and free trade – an open and inclusive globalisation, not protectionism,” said Brown in his budget speech - but did he indicate that the working class would suffer for this goal? Continuing New Labour’s commitment to war, Brown announced £400 million extra for British armed forces engaged in the occupations of Iraq and Afghanistan. He also promised an extra £86 million for the spooks in the intelligence and security services. The New Labour chancellor confirmed another huge boost for the bosses. He will cut corporation tax – the tax that they pay on profits – from 30 percent to 28 percent. He boasted that the new corporation tax rate would be “the lowest of all the major economies”, including the US, Germany, France and Japan. Stephen Green, chairman of HSBC, Britain’s largest bank, said, “The news on corporation tax is a very welcome boost for business and one which serves to further enhance London’s competitiveness.”
To get a sense of the scale of those who are being rewarded it is worth noting that the largest 100 companies on the stock market made a staggering £140 billion in profit in 2006 – and that is after they paid tax. That represents a 28 percent rise in profits compared to last year. Meanwhile public sector workers are told their pay will be cut by 2.5 percent in real terms. In the weeks leading up to the budget, Ed Balls, Brown’s key ally at the treasury, organised a series of meetings with business leaders and bankers. They got their way – big business is the real winner from Brown’s budget. Not satisfied with handing over cash to the rich, Brown is also engaging in asset stripping - he sold off some £18 billion of public assets to the private sector – doubling the extent of privatisation in the public sector. Disgracefully, Brown has decided to sell off the “student loan book”. All the debts students run up from their loans at college will now be handed over to the private sector to collect. This was an idea promoted by the Tories in 2004.
Nor should anyone be fooled by promises of “more cash for schools and hospitals”. This money will be linked to PFI deals and further privatisation – ensuring that the cash goes in lining corporate profits rather than boosting public services. Despite intensive lobbying from the unions, Brown declined to announce any measures to hold back the private equity firms that gobble up and asset strip other companies. Shriti Vadera is an adviser to Gordon Brown and a former investment banker. The day before the budget she met senior executives from private equity firms Apax, BC Partners, Blackstone, Permira and 3i to discuss how they planned to deal with unions, and how to portray their industry in a better light. The treasury was apparently concerned that vocal attacks from unions on private equity companies as asset strippers who sacked thousands of workers were placing it under political pressure to act against the industry.
The Financial Times quotes one of those attending these talks saying, “Shriti Vadera has been trying to remove a political problem from Gordon Brown’s plate [because he] does not want to be seen to be caving in to the unions.” In February the treasury put it more bluntly. “Gordon is not going to have his leadership ambitions up-ended by a bunch of rabid trade unionists,” said a senior treasury official. Among those attending the meeting were Martin Halusa and Adrian Beecroft, Apax chief executive and deputy chairman respectively; David Blitzer, a top European executive of US group Blackstone; Damon Buffini, managing partner of Permira; and Philip Yea, the chief executive of 3i who also sits on the Gordon Brown’s so-called “high level group”.
Private equity allows the rich to use the capital gains tax system to cut their taxation rate on profits to just 10 percent. The other action from Brown is a very limited review by treasury secretary Ed Balls of certain types of borrowing. In 2002 Brown was under pressure to deal with the super wealthy using tax havens to avoid paying tax. Brown announced a similar review led by business leaders and tax experts – and nothing has been heard of it since. Behind the headlines about a 2 percent cut in income tax, the reality is that this a budget for the well off; Brown has scrapped the 10p lower rate of income tax, which means many poor people will be worse off. But the income tax cut means those on higher incomes will get far more in their wage packets.
One in five taxpayers will be losers. According to figures from the Institute for Fiscal Studies, they are concentrated among single people on low incomes – those earning between £12,000 and £18,000. Brown wants the poor to rely on tax credits. But only 40 percent of those entitled to tax credits claim them. And among the low-income single workers who are losing the most from the budget, the take-up of working tax credits is just 25 percent. Low-income workers have their benefits withdrawn with each extra pound they earn. And tax credits are also an attack on young people – you have to be over 25 to apply for working tax credit. In the last ten years, Brown’s budgets have moved a very small amount of money from sections of better paid workers to the very poorest. Even then, they only benefit if they can navigate their way through the maze of forms that must be filled in if they are to claim what they’re entitled to. This time he didn’t even bother pretending to redistribute income to the poor. Instead he attacked them.