| Crown Currency Exchange victims 'will get back just 10p in the pound' Customers of Crown Currency Exchange, the collapsed broker, can expect to receive no more than 10p in the pound, early indications show. telegraph.co.uk |
Osborne's left swerve is expedient. He has to muster the poor to cut the rich | Simon Jenkins Those losing jobs in the underbelly of the public sector will wave bleeding stumps to no avail – now they are the unloved onesThe coalition is fast becoming the most leftwing British government since the war. It has clobbered the middle classes on child benefit. On Tuesday it accepted advice to impose a swingeing loan repayment regime on rich graduates. Today it said it would wipe billions in tax relief from private pension plans. This is from a government that is the first to implement a top-rate tax rise, to 50%, since the Labour government of 1974. Nothing is sacred. Rightwing this is not.The response from middle England has been furious. In the case of child benefit, the losers (earning more than £44,000) grabbed desperately at the poor to plead the case for keeping a universal benefit. Reporters and commentators, half of them probable beneficiaries, scoured the country looking for cases of "poverty on £40,000". Every argument was deployed: penalising families, costly means-testing, unfairness to single mothers, general indignity. When the government wobbled by hinting at new family tax allowances, the net saving was claimed as negligible.In the case of student fees, the survey evidence presented in the Browne report explicitly refutes the claim that higher fees deter poorer students. Paragraph 2.2 quotes government research to the effect that "there is no evidence from the national trends that changes to tuition fees or student support have been coincident with reductions in the young anticipation rate". Instead, over the past five years, "there has been a significant and sustained increase in the participation rate [in higher education] of young people living in the most disadvantaged areas."Further evidence from the Institute for Fiscal Studies suggested that the chief financial deterrent to going to university lay not in the fee but in whether it is "upfront", and even then the deterrent was more than counterbalanced by a loan, despite the incurring of debt. Browne's proposal was for no upfront fee, not even for part-time students, as now – while his loan repayment is highly progressive, in effect a capped graduate tax beginning above £21,000, capped and restricted to 30 years.Yet the opposite was universally asserted in Wednesday's press. Why the alarmists were wrong about the effect of fees on access in 2006 is unclear. It may be that families below a notional £40,000 threshold place a high value on university education, which richer ones treat as a state entitlement. Perhaps poor families see more clearly the monetary value and upward mobility in a degree. In Scotland, where there are no fees, working-class participation rates appear actually to have declined compared with England's.Either way the Browne report, as generally accepted by the government, means that university education will become more expensive for the rich and less expensive for the poor, and experience suggests that this will not impede access to higher education. It may seem counterintuitive, but that is no reason to assert the opposite on the basis of selective anecdote. In education, political correctness seems always to trump evidence.The coalition has allowed itself the occasional rightwing lurch, such as Michael Gove's madcap "free" schools. But for the most part it has been markedly liberal, as on civil rights, Asbos, ID cards, pupil premiums, prisoner release, torture investigation and amnesties for immigrants. Its image problem is that, like every regime cursed by the antics of its predecessor, its reputation is to be dominated by cuts. Cameron and his Osborne axe will rank with Lloyd George and his Geddes axe (1920s), Ramsay MacDonald and his May report (1931), James Callaghan and the IMF (1976), and Margaret Thatcher's "cuts" of 1980-81.The 1920s and 1931 cuts packages focused on slashing unemployment pay and pensions by 10% to 20% across the board, as well as public sector salaries. They were drastic but did the budgetary trick. By 1976 and 1980, the sanctity of welfare benefits and the strength of public sector unions – both entrenched leftwing pressures – made such direct reductions unacceptable. Thatcher's cuts were in reality "reductions in the planned rate of increase", made messier by her own initial generosity in awarding inflation-busting pay rises. David Cameron and George Osborne are likewise hidebound by Whitehall's culture and forced to look beyond pay and benefits.In a radical American diatribe, Take the Rich off Welfare, Mark Zepezauer and Arthur Naiman illustrate the extent to which modern public spending benefits the rich more than the poor, in the US by roughly three to one. The money goes in a multitude of grants, tax reliefs, defence and research contracts, energy subsidies, student finance and farm support. Government, with more money than ways of reducing poverty, turns to its friends for help and spends on them.The same has come to apply in Britain. Departments plead that their sprawling agencies, consultancies, conferences and computers are all aimed at redistributing resources from the rich to the poor, who will suffer severely if any money is cut or jobs lost. Mostly this is hogwash. Studying, inspecting and managing poverty is not relieving it. Nor will any redundant quangocrats next week be donating their six-figure payoffs to Big Issue sellers.The same middle-class protectionism is reflected in the "poison pills" left the coalition by Gordon Brown. Cameron has already expressed his fury at the financial chaos at the defence ministry, and in particular at the contracts signed in Labour's death throes to make the Scottish aircraft carriers impossible to cancel. The same applies to billions of pounds' worth of Whitehall computers. In addition are such unaudited rackets as the doctors' contracts, with built-in bonuses, and the full Whitehall terms and conditions granted to the staff at even the most arm's-length bodies. Academic tenure has gone from British universities, but it has been replaced by bureaucratic virtual tenure in Whitehall.Cameron and Osborne clearly feel that Britain's public sector culture cannot accept flat-rate cuts across the board, as happened between the wars and, recently in Canada and Ireland. Equally unacceptable is cutting unionised public sector pay, however many jobs it might save. The coalition has agreed to the union tradition that unemployment is better than lower wages.The result is that the cabinet must find its short-term cuts in the soft underbelly of the public sector, among bureaucrats in the civil service, quangos and regions, whose numbers have blossomed on "wealthfare" over the last 10 years. They are joining the security lobby in waving shrouds and bleeding stumps. (This week the RAF won a triple Serota, a measure of hysterical lobbying, by claiming that cuts would mean it "could not stop a 9/11 on London".)Few have noticed that local government has gone about cutting its budgets with a grim but largely silent efficiency. Employment is already down by 50,000. Whitehall and its clients have, in contrast, embarked on what will be a month of cat-fighting as managers and professional advisers fight for their money and their lives. The middle income, middle of the road public sector will be jammed with noisy losers. The government will need all the poor it can muster to defend the cause of cutting the rich.Those who shout loudest may be those who hurt the most. They are unlikely to be those most in need of sympathy.Liberal-Conservative coalitionDavid CameronGeorge OsborneEconomic policyTax and spendingState benefitsPublic sector cutsPublic services policyPublic financeSimon Jenkinsguardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds guardian.co.uk |
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