A budget to enshrine welfare reform and help the low paid

Chancellor of the Exchequer George Osborne delivers his Budget statement in July 2015. Photo: PA Wire
Chancellor of the Exchequer George Osborne delivers his Budget statement in July 2015. Photo: PA Wire

The budget unveiled by George Osborne yesterday was of major importance to Northern Ireland and the UK.

It also had a degree of global significance.

Ben Lowry News Letter Deputy Editor

Ben Lowry News Letter Deputy Editor

The latter because Britain is now emerging as a poster child for austerity, which has been much-despised but has not derailed growth in the UK – despite the (later retracted) IMF warning of 2013.

Mr Osborne yesterday stepped off the cuts pedal, but the target of eliminating the deficit remains a central aim for this administration.

The Conservative victory in May will have been carefully noted by other governments, including the Fine Gael-led coalition in Dublin.

It dealt a blow to the disturbing (and plausible) notion that western states are now so large and so powerful (particularly in terms of public sector patronage) that it is almost impossible for a political party to win victory on a manifesto of scaling back the size of government.

The Tories won a mere 36.7 per cent of the vote, so their victory is only a partial blow against such a notion. But there seems to be a shift in how most people perceive the ‘cuts’ debate.

For years, if not decades, critics who have rallied against cuts and austerity have seized the moral highground, and been allowed to hold it.

They have depicted (and believed) themselves to be valiant defenders of the poor against Dickensian slashers and burners.

But now that the consequences of incontinent spending (Greece being an egregious example) are more apparent, it is increasingly those who oppose restraint and insist that the money keep flowing who look like the selfish ones.

Who is going to pay for it? What is the morality of passing on a huge bill to the next generation so they are denied the same spending largesse?

As anyone with a rudimentary grasp of economics knows, UK debt is not being cut. It is rising and stands at £1.5 trillion.

Even a standalone Tory administration can only slow the pace at which that vast debt pile is growing until Mr Osborne succeeds in eliminating the deficit, if he ever does.

I have been struck by the way in which the mood has been changing in Northern Ireland (and perhaps Scotland), where barely a politician accepted the need for fiscal responsibility five years ago.

Then, every perk going – from free prescriptions to cutting the age of free public transport despite rapidly rising life expectancy – had cross-party support. All the while, further cash from London was furiously demanded.

Many people have come to see how insatiable parties such as the SNP and Sinn Fein are when it comes to spending other people’s money. Unionist parties in Northern Ireland were once almost as spendthrift, but are now belatedly alive to the damage that approach has done to the Union. This is due to the gradual awakening in middle England, which is footing the bill, as to what is happening on the Celtic fringe.

Which brings me to my other point: the immense consequences for Northern Ireland of yesterday’s budget.

The welfare debate is largely over in Great Britain, where reform has substantial public support. Prior to 2010 barely anyone outside of political think-tanks was aware that many families in the UK get more than £26,000 a year in benefits, equivalent to a £34,000 pre-tax income.

When people were made aware of such excesses, which went far beyond any provision envisaged by the founders of the welfare state, there was justifiable outrage.

The Tories fought the election on a promise of cutting the cap to £23,000 and are now pressing ahead with a £20,000 cap outside London.

This is hardly a radical move: a family in receipt of £20,000 payments has the equivalent of £25,000 a year before tax. Plenty of full-time journalists earn less than that.

But there is no such limit to benefits in Northern Ireland. There is still no cap at all.

The debate on welfare will gradually change, I suspect. Increasingly, people will understand that in Northern Ireland this is not in fact a debate about cuts, but about where public money is spent.

London is not (yet) cutting our subvention by much. It is passing to us the cost of keeping unreformed welfare but our overall funding remains the same.

If Northern Ireland spurns reform (it has been blocked by Sinn Fein and the SDLP) scores of millions of pounds that could be reallocated by curbing welfare excesses will be lost to hospitals, schools and roads.

But Mr Osborne yesterday was not just a cutter, and adopted policies from the centre-left and the traditional left. By increasing the minimum wage, there is an implicit acceptance that the Tories were wrong to oppose a minimum wage in the 1990s.

And by continuing to raise tax thresholds, and take the low paid out of tax altogether, Mr Osborne is enshrining a policy that was the brainchild of the Liberal Democrats.

The thinking is that people should not be shunted off benefits on to appalling pay. And they should not have to pay income tax at all until their wage rises to almost £1,000 a month.

• Ben Lowry is News Letter deputy editor