By Spencer Thompson, Economic Analyst, IPPR
At budget time, it’s often difficult to sort through all the announcements and work out what the real impact will be. In between shifting money between different areas of Government, giving away a little bit on beer duty here but paying for it with mysterious ‘underspends’ elsewhere, by the end most people don’t know whether they will be better or worse off.
But the sad fact is that, for Hackney, the real impact of this budget will be largely non-existent. It will do little to improve the prospects for the local economy, will not ease the financial pain of Hackney’s poor, and does nothing to address the long-term problems the area faces in terms of housing and youth unemployment. Given the crisis the UK finds itself in, is this really the best we can do?
Firstly, this budget will do little to jumpstart the economy. Everybody knows the UK is performing terribly, and this is starting to put pressure on people’s wages and standards of living. So what impact will the budget have? Well, the Office for Budget Responsibility, the independent body tasked with assessing the state of the nation’s finances, is pretty crystal clear: yesterday’s budget will have ‘no impact’ on the economy in the long-term. Anyone hoping for a spurt of growth from the Chancellor’s announcements will be disappointed.
Secondly, its impact on the poor. Much was made by the Chancellor of his decision to raise the personal allowance – the amount you can earn before you start paying tax – to £10,000. But the fact is, this does little to improve the lot of the poorest, many of whom are earning less than the personal allowance anyway. In fact, it is the richest 10 per cent of families who will gain the most from this change, with their annual incomes boosted to the tune of around £100 by 2016.
Hackney is one of the poorest areas in the country, and many of its residents are set for a tough few years as a result of coalition policies. The decision to cap welfare increases at one per cent, made in December, will see 200,000 more children living in poverty in the UK, and the poorest 10 per cent of households losing over £150 in 2016. The announcements made yesterday do little to reverse this.
The ‘help-to-buy’ scheme, which will lend people money to help them move onto the property ladder, appears to be a good idea but has some serious risks attached. In east London especially, where developers and investors are rapidly buying up property, further money pumped into the market risks raising house prices and rents even higher, pricing out many existing residents.
But one of the most worrying pieces of news yesterday was not even in the budget. The latest jobs statistics were released and showed that youth unemployment has risen sharply in the three months to January, and is now dangerously close to having a million young people out of work. Beyond any changes to taxes and benefits, it should be of huge concern to policymakers that we are continuing to fail those just starting out in the world of work. Without a serious effort to tackle this issue, Hackney – with its nationally high levels of youth unemployment – risks seeing a generation of its residents out of work and facing an uncertain future.
Yesterday’s budget was largely smoke and mirrors, with small changes here and there, but little real ambition to fix the UK’s long-standing issues. Sure, the price of a pint may have gone down by 1p, but the poorest families will find little comfort in the measures announced yesterday, especially as the full impact of the coalition’s cuts become clear.
