It’s the topic that’s always hitting the news. The “Nasty Party”, as Theresa May once labelled them, really have no heart and want to push poorer people into poverty by taking away their welfare, their tax credits because the UK Government claims it cannot afford them. Whilst doing this though, the richer members of society are not asked to pay a single penny more! What’s more – they cannot afford to maintain current tax credits but they can afford to spend an estimated £12 billion on 138 stealth fighter jets to combat Daesh! This cannot be just or fair… or can it?
Too often people of my generation are fed this narrative that the Westminster elite and currently the Tory Government do not care about its citizens (the ones that are not so well off, I should add). The chancellor, George Osborne, has been a pantomime villain figure for many across the country because of his unpopular implementation of reductions in public spending. But why? George Osborne does not exist for the end purpose of reducing payments to the public, he was not born for the sole intention of reducing public spending, so the question remains why is he doing so?
One can deduct a few conclusions from the very nature of the UK Government and depending which conclusion one focuses on, summarises the differing political narrative that is forever frequent.
Firstly, there is the traditional Conservative notion of ‘rolling back the state’, essentially reducing Government involvement in daily life and leaving individual units (households, businesses etc) to be more independent of the state and be able to make their own decisions, to let Adam Smith’s ‘invisible hand’ shape the economy and benefit society.
Secondly, perhaps the Conservatives favour the rich so much that they will take money from those most in need in order to pay for public services rather than tax the rich more. The Tories clearly have no heart or understanding of the reality of what it is to be poor and wants to punish them because they see people on low wages and benefits as ‘lazy’.
Thirdly, the well-respected newspapers and financial magazines such as the Economist (my absolute favourite, although I cannot afford the print copy!) acknowledge that the UK has a national debt. Debt is money owed that must be paid back. So surely the UK should pay this money back to the multiple debtors? Well the UK is certainly not alone in having a national debt, in fact only Macao (a special region of China so not completely independent) is free of debt, but the UK’s current national debt is measured as of 2015 as 88.6% of GDP, a continued increase from 2010, despite the Conservatives’ pledge for a ‘long term economic plan’. Anyway this third point assists with the message that the Conservatives persistently played through the 2015 election, to reduce the deficit and try and turn it into a surplus.
The first conclusion would be favoured by those who have earned their way in life, perhaps are coming to the end of their careers or even business leaders. Free market economies are brilliant for business, because corporation tax and VAT damage business through higher prices and lower demand assuming not very inelastic demand (but are often imposed to internalise external costs such as pollution) and so this conclusion is appealing, however it lacks much substance to it. Osborne may be reducing welfare handouts, but he has also introduced the £7.20 minimum wage for those over 25. As for the rich who pay top rate of tax on their £150,000+ earnings, during the years of a Tory-led coalition, they saw a decrease of 5% to 45%. Middle earners still pay 40% tax also, and Osborne may be increasing the lowest salary at which one starts paying tax, but the top rates do not seem headed for a downward shift, in contrast to the will of capitalist free-market economics. Also, VAT actually has risen under Osborne, unusual for an incoming Conservative Government who tend ideologically to avoid UK Government intervention. Hence, this notion of embracing traditional Tory roots seems wholly unconvincing.
Onto the second point – this is the common perspective that I hear. On [Marxist] Twitter, at school, in some national newspapers and on other social media websites to a lesser extent, the Tories are demonised as this monstrous party led by greed and dislike of those not in the bourgeois, those not born into privilege, those who aren’t so upper-class. Often the only credibility supporting this argument is tenuous at most, and rather complex. “Slashing” (note the emotive language used by the left) public spending whilst not increasing taxes on “those with the broadest shoulders”. The connection between these two points as representative of the Conservative party’s reinforcement of class divisions and making the rich richer and the poor poorer is a complete failure and shows a thorough lack of understanding of the tax system, as many professional left-wing journalists fail to do so in their worrying inability to grasp basic economics. Owen Jones completely baffles me sometimes but even worse is his writing and speech which attempts to convince others he is the most caring, the most wise, the most educated, the most knowledgeable and anybody who disagrees with him is narrow-minded, of course. I indeed wish no hypocrisy and I do not claim to be a political editor, nor an expert, simply a student expressing ‘socio-economic political thought’. It does not take a professional to work out that if there are two monetary values, take £1000 and £2000 for simplicity’s sake. Say both were obliged to pay 10% of these earnings, the first would pay £100 but the second would pay £200 (please note that this is pure maths and not representative of general incomes, for at these annual incomes they would pay no income tax at all). Easily it can be seen that at the same tax rate, those earning more DO pay more in tax and will continue to do so under the Conservatives. Nonetheless, the idea of a flat tax is not adopted by many political or economic figures nowadays and is a debate for another time as it is not directly relevant to the conclusion regarding public savings and the national debt.
This is a friendly reminder that there are different tax brackets in the UK. Those who earn more than £150,000 a year pay 5% more of their income to tax than the standard 40% rate for those between £31,768 and £149,999.99. So when people say the rich (loosely used term but I will use it in this flexible manner) need to pay more tax, they already do! They pay more tax than people on lower incomes! And rising the top rate too high to increase governmental revenue incentivises them to leave (as seen with the example France who abandoned their 75% rate in 2014 (there are lots of articles on that if you have any spare time).
How does this link to the point? The Conservatives do not think poor people are lazy at all. Instead, they believe that the Government should not be subsidising low-paid jobs and believe the businesses have a duty to pay fair wages to their employees, hence the introduction of the minimum wage. Arguments suggesting the Tories do not care about those on the lowest wages or unemployed now become somewhat redundant (see what I did there?). Also, there lingers the fundamental Conservative value of working for what one receives in life, and many of the party’s voters on lower wages are concerned that whilst they are working hard, others on benefits or tax credits, have a more comfortable life with more disposable income. Conservatives believe in the benefits of work and that those who work harder deserve to reap greater rewards, so the reduction in welfare give-outs is completely natural. Dependency on tax credits is more criticised and acknowledged in printed newspapers nowadays because those who are able and willing to work and are receiving tax credits but do not pay income tax are more of a state liability and in the current economic climate, the Government is in search of reducing the great difference between what it spends on and what it receives in tax. I wonder if the public remembers that Question Time last year when Yanis Varoufakis appeared and informed the British audience that they have not really experienced cuts at all. In fact, the measures put in place by Osborne accepted by Mr Cameron have hardly been austerity, especially in relation the the real cuts Greece has actually faced. Perhaps the left should be more wary before scaremongering Internet users about the ‘radical extent of Tory cuts’.
*and breathe!*
Finally, the third conclusion is interesting because there is high validity in it and often the depth of the matter is overlooked because of the ‘severe nature of the inhumane Tory cuts’ as I so often read on online articles. In 2015 alone £47.6 billion was spent on…. hmmmm let’s guess… DEBT INTEREST! Yes, not even towards the debt, just interest that was required to pay for having unpaid debt. To put things in perspective, because this figure might be minuscule in comparison the other budgets of course, it is greater than the £45 billion budget for national defence, £43.8 billion for education, more than the combined budget for transport and protection and finally even greater than the funding allocated to Scotland via the Barnett formula, according the Scottish Conservatives’ leader Ruth Davidson on Daily Politics (9/2/16). It does not rival that of the £153.3 billion pensions fund or the £134.7 billion health spending either, but it still is a significant proportion of governmental spending, considering it has no social benefits and has no positives for any private individuals. Other sources have presented similar figures, slightly different but generally following the same trend and it can be noted then that the opportunity cost is of course extremely high. Debt interest payments could so easily be spent on investment in UK business and encouraging businesses to create apprenticeships for young unemployed people potentially struggling to make their way in the early stages of life and their working career.
The national debt is the accumulative amount of money owed by the UK that must be paid back, but the deficit is the difference between what the UK Government spends and what it receives in taxes each fiscal year, so if spending is greater than income one year, that Government will run a deficit and the difference will be added to the adjusted-for-inflation debt. This is why the Conservatives are so keen on reducing public spending, because they want to get the country into a surplus, so every year the surplus can chip away at the national debt and over time reducing the amount of debt interest requiring payment (allowing this funding to be spent elsewhere). They also have in mind the aim of avoiding raising taxes, because unlike more socialist ‘progressive’ governments, Cameron’s Conservatives still want people to keep a majority of the money that they earn, thus finding savings in public spending is the only way to reach their target. And as for the Daesh air strikes, it is a controversial subject and there are no simple ‘this is correct’ or ‘that is false’ statements because of the subjective nature of ethics in modern days but it is a matter of national defence and though Osborne reportedly wants to make savings to the defence department, NATO will pressure against that and as the UK’s closest continental partner’s capital, Paris suffered a huge terrorist attack, it seems somewhat necessary to combat this inhumane barbaric terrorist organisation through the carefully planned missile attacks that will NOT be random and kill civilians, but will be carefully targeted with sufficient evidence of Daesh congregations. Of course, there remains the ethics of whether bombing and the potential for innocent civilians to be killed is fair or not, the emotional impacts can pull the heartstrings when watching footage of the devastation caused by Putin’s airstrikes. One simply has to balance this lesser evil against the growing force of Daesh (also known as ISIL).
What does this article aim to suggest? That the Conservatives are right to want to reduce public spending in their aim to reduce the deficit, and should do so. I am aware that I now speak in a normative tone, attempting to subliminally persuade in a manner potentially as farcical as Owen Jones, the Daily Mail and the Guardian, but I hope this article has demonstrated the necessity for such savings and how simple criticisms of the Tory Government’s actions accompanied with passive negative remarks about capitalism do not begin to even cover the broad thought required for evaluating domestic policy and the economy.
Many thanks for reading my first article,
Cameron.