The summer Budget 2015

Today George Osborne delivered his summer budget. Behind the jargon, what are the changes and what do they mean?

The Living Wage

The main headline-grabber came right at the end of George Osborne’s budget speech: from April 2016, there will be a new “national living wage” set at £7.20 per hour, rising to £9 per hour by 2020.

The idea of a Living Wage has long been advocated by the Green Party, but they follow the guidelines set by the Living Wage Foundation: They calculate that the *current* living wage should be £9.15 per hour in London and £7.85 elsewhere. Osborne’s figures are substantially lower.

What he has effectively done, then, is rename the minimum wage as the living wage. The national minimum wage is currently £6.50 for those aged 21 and over. The new living wage will apply to over-25s, so in the tax year beginning April 2016, 21 to 24 year olds earning the minimum wage will earn the same, and those aged 25 and over earning the minimum wage will see a 70p per hour rise.

This is of course welcome, but given that Osborne has chosen to use the same terminology, it’s important to stress that it isn’t the same as the Living Wage the Greens and SNP advocated in the run-up to the General Election.

Young adults

It is undoubtedly this group that are worst off from today’s budget. As well as the new living wage not applying to those aged 25 and younger, it has been announced that university maintenance grants will be scrapped and replaced by further loans, and 18- to 21-year-olds will no longer be eligible for housing benefit, with an “earn or learn” test applied for other working-age benefits.

This leaves 18- to 25-year-olds shouldering more than their fair share of the burden. Young people are now in a position where they are increasingly dependent on having a family home, where it will be much later in life before they can earn enough to support themselves, and where every graduate will start their career with a huge loan to repay.

Tax cuts

The main gains for individuals from today’s budget came from the following increases in tax thresholds:

  • inheritance tax threshold raised to £1 million
  • personal tax-free allowance raised to £11,000
  • threshold for 40p income tax rate raised to £43,000

Benefit cuts

The main losses for individuals across all age brackets came from the following benefit cuts:

  • tax credits and universal credits for families with children restricted to apply to a maximum of two children from April 2017
  • working-age benefits frozen for four years (excluding maternity and disability pay, but including housing allowance)
  • social housing tenants whose households earn more than £40,000 per year in London and £30,000 per year elsewhere will have to pay the market rate of rent (this will be a HUGE increase)
  • annual household benefit cap reduced from £26,000 to £23,000 in London and £20,000 elsewhere
  • from April 2017, anyone claiming the disability benefit Employment and Support Allowance (ESA) and placed in the Work Related Activity Group (WRAG) will receive a reduced level of benefit, equal to that of those claiming Jobseeker’s Allowance (JSA)

Other measures announced

  • Corporation tax to be reduced to 19% in 2017 and 18% in 2018
  • Abolishment of non-dom tax status for those who have lived in the UK for 15 of the past 20 years
  • HMRC budget increased by £750 million to tackle tax avoidance and tax evasion
  • Bank levy rate to be reduced, but offset by 8% surcharge on bank profits
  • Small businesses get increase of National Insurance allowance from £1,500 to £3,000
  • Local powers to relax legislation on Sunday trading hours
  • Commitment to spend 2% GDP on defence every year

A reflection on ideology

Osborne has aimed to position the Conservatives as the true party of the working people, and says that the only way out of poverty is work.

From an ideological perspective, the main issue I have is that 100% employment has been presented as both possible and desirable.

100% employment is not possible and there are currently far more job-seekers than there are vacancies. This budget does absolutely nothing to help those who are constantly applying for jobs without being successful in getting one. In fact, with the freeze of in-work benefits, reduction of Employment and Support Allowance, and the triple whammy aimed at young adults, it has made life more difficult for long-term job-seekers.

Is it even desirable to say that our ultimate aim is to have a society where 100% of those who are able to work are in full-time employment? Do we work to live, or live to work? This budget is skewed firmly towards the latter.


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