Political Promise

How this Budget will Widen Regional Inequalities

In Uncategorized on June 24, 2010 at 12:41 pm

By Stewart Owadally

Are England's outer regions travelling in the same direction?

There are obviously many issues that will come from the Emergency Budget announcement. Many have been debated in the press and are becoming inevitably boring so I won’t go on about VAT rises simply for what they are.

Rather, let’s have a quick look at an issue that the Conservatives themselves raised in their manifesto. It was a page on their manifesto that has been referred to previously on this blog. Page 22 of the Invitation to Join the Government of Britain shows a map of the United Kingdom. It is divided into regions with each region’s share of the UK economy written on it and each region’s size being relative to it’s share of the economy. Wales had a 4% share of the UK economy and the North East had a 3% share. Whereas London had 21% and the South East had 14%

So what will the Conservative government do to balance out this inequality? How can you stimulate growth enough in the North East and Wales in order for it to out-pace growth in London and the South East?

Maybe a 2-year public sector pay freeze? No, maybe not.

Wales and the North East have disproportionately high levels of public sector employment. Wales, for example, has around 30% of people working in the public sector. A freeze on public sector pay means less money is coming into these local economies than is going into the economies of London and the South East given that the latter two regions have private sectors to stimulate some growth. So, given that in order to redress the balance we would need to have growth in Wales and North East to be at a higher rate than growth in London and the South East, this policy will just make the gap bigger.

At least these low-income families who are living on the now-frozen public sector pay rates will receive some support though, right? Wrong. The freezing of Child Tax Credits means that a low-income public sector working family will stagnate because of this Budget. More likely, and much worse, they will begin to suffer as prices go up from 2011 with the VAT rise.

Comments such as “it could have been worse” in the media totally ignore the mass of low-paid workers in this country. The Budget may not hit the middle and upper-middle class, represented by the mainstream media, very hard. But what it will do is create a new level of the long-term unemployed class that sadly already exists. This new stream of long-term unemployed will be made up of educated people who have worked for years but are now stuck because of the state of the jobs market; a situation created by the banking collapse. That is, the collapse of banks that will barely be touched by this Budget. Ok, so Osbourne introduced a levy on UK banks and UK operations of foreign banks. But that will only raise £2bn. And that’s before we consider that the cut in Corporation Tax will allow the banks to scoop up a bit of the money they lose from said levy. Former Chancellor Darling raised more than that with his bonus tax. Much more could and should have been done to bring in money from the banks.

This Budget “could have been worse” for wealthy families and families that live comfortably. It “could have been worse” for big businesses. It “could have been worse” for the army and it “could have been worse” for people who like a fag and a pint every now and then. But for the mass of people who have lived lives riddled with belt-tightening and uncertainty over the last year or so, this Budget could lead to extremely serious circumstances.

Stewart Owadally is a Labour Party activist. You can follow him on Twitter: @sowadally

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