David Cameron certainly thinks so. In his New Years speech, the Prime Minister stated that the nation was “on the right track” in terms of handling “all big issues that matter to Britain”and had some facts to back it up. The national deficit has been reduced by 25% since his Government came to power and the last available statistics(Q3,2012) showed that 100,000 people found work. However with more heavy cuts on the horizon and living standards falling, concerns over the direction of Britain remain.
Since coming to power three years ago, the Coalition Government have consistently emphasised their commitment to reducing the national deficit; which is generally calculated as the difference between the amount the Government spends and what it receives through taxes.
Through a series of cuts to public spending,welfare spending and lower corporate taxes to increase business investments, the Government intend to close the deficit by 2016/17 at which point the national debt, currently £1 trillion, will start to be repaid. However there is considerable evidence that the Government’s chosen methods are unfairly targeting poor and low-income families.
According to current forecasts, public spending is set to be reduced by £65 billion by the 2016/17 financial year. Further and Higher education sector will be hit hardest while social housing and nursery/pre-school services will also fall victim to significant cuts.
Research conducted by the trade union commission(TUC) found that these cuts will result the poorest 10th of households losing the equivalent of £3,995 or 31.7% of their average income in lost public services. By comparison those in the top 10th of the population stand to lose just 2.5% of their income as they are less likely to to use public transport, schooling and healthcare services.
In addition major changes to the benefit system will come into force this year with the Government’s benefits cap being among the most controversial. As of April, Benefits will be capped to a maximum of £26,000 a year a measure which the Government claim will ensure that “workless households” no longer receive more in benefits than the average earnings of working households.
However analysis from the children’s society claims that 220,000 children will be affected by the cap in comparison to 90,000 adults and that roughly a third of these children could be made homeless.The TUC, which represent 6.2 million working people, warn that the public sector cuts, in tandem with welfare cuts will have be especially harmful to low income families and their children;
“The chancellor’s fresh assault on the welfare budget is set to cause considerable financial harm for millions of families” It says. “But unless George Osborne (The Chancellor of Exchequer) changes course, these cuts will be dwarfed by the massive reductions in public services”.
With the widespread introduction of the work program and the stigmatisation of the welfare system, employment has been hailed as the way out of poverty but according to research conducted by the Joseph Rowntree Foundation, in work poverty is on the rise. The Social policy charity’s report entitled “Monitoring poverty and social exclusion”, found that in-work poverty has risen by a fifth over a decade to 6.1 million whilst the number of families with no working members has remained steady at 5.1 million.
Further, it was revealed that more workers were relying on benefits to top up low wages, with over 4 million jobs paying less than £7 an hour and the number of working families receiving tax credits increasing 50% since 2003 to 2.3 million.
Authors of the study also strongly criticised ministers for insinuating that “poverty is about worklessness and welfare dependency” when 60% of children living in poverty are in working households.
Nonetheless, the Government have consistently argued that their approach to cuts are absolutely necessary in order to reduce the debt, a stance which the Prime Minister backed up in his new years speech.
The analogy of the economy being similar to a household is regularly used to convey this message; when a household is in debt, spending must be cut back in order to pay it back.
However this is not entirely true as householders do not have to worry about what their spending decisions mean for other people or the wider economy whereas for a nation, it’s is the most important responsibility. Hence, many independent analysts and financial experts believe that it is important to focus on growing the economy now and introducing austerity measures at a later point when people are better off.
Currently living costs are rising faster than wages, food is becoming increasingly expensive and despite unemployment falling,underemployment is growing . According to official figures, more than 3 million part time workers want to work extra hours or even full time but cannot find the opportunities to do so which is a 50% increase on 2008 figures. Further the Government’s work program was only able to find long term employment for 3.5% of participants in it’s first year.
According to a 2010 study of the historical effects of austerity measures following recessions conducted by Arjun Jayadev and Mike Konczal of the The Roosevelt Institute, major cuts in such situations rarely have the desired effect;
“When countries cut in a slump, it often results in lower growth and/or higher debt-to-GDP ratios. In very few circumstances are countries able to successfully cut during a slump, and this happens only when either interest rates and/or the exchange rates fall sharply”.
In an article written for the New York times following the announcement of the initial wave of cuts in 2010,Nobel prize winning American economist Paul Krugman warned that the UK Government’s major cuts would have an adverse effect on it’s citizens and the economy;
“Why is the British government doing this? The real reason has a lot to do with ideology: the Tories are using the deficit as an excuse to downsize the welfare state. But the official rationale is that there is no alternative.”
The long term effects of the Government’s current course of action are open for debate but what is certain is that under such plans, the next few years will be increasingly challenging for British citizens, especially for those already struggling.