Taking the pressure off

It was in George Osborne’s 2009 Party Conference speech that we first heard his sound bite “we’re all in this together”.  The Government want us to believe that the pain of economic recovery is shared fairly, but for most families in this country it is clear that “we are all in this together” rings hollow.  
 
On the income side of family budgets wage increases are not keeping up with inflation. Governments are adding to that by their own attacks on pay and conditions, agriculture by abolishing the Agricultural Wages Board, with school support staff by abolishing their negotiating body, and for public sector workers by imposing an effective extra tax on them through increased pension contributions.
 
Cuts to the benefits bill is hitting the poorest hardest, and for some families, unemployment is rising once more with too many now going through the trauma of a sudden collapse in incomes. But the biggest hit on family spending overall has been the decision to prematurely raise VAT to 20%. It is now clear that this has not only helped to choke off the growth that was building in the economy, but it also hit family budgets.
 
Last week’s inflation figures made grim reading.  Little wonder that Markit’s Household Finance Index published this week showed 37% of UK households expecting their financial situation to worsen this month, against only 7% expecting an improvement.  
 
Look at the detail of the inflation figures and we see the reality for families.  Bills for gas and electricity have risen 9.9% in the past month, and are up 18.3% on the year.  Transport has risen 12.8% on the year, and food was 6% higher than 12 months ago. We know the poorer you are the higher the proportion of income is used in food and heating.  I fear that this winter many more will be choosing between heating and eating, as the decision to cut winter fuel payments adds to the misery.
 
The Government needs a plan to tackle this, and if they are to do so they must be willing to take on the short-termism of the energy industry and be tougher than simply thinking that switching supplier is the answer.  Last week’s stunt by the Prime Minister goes nowhere near far enough in helping families manage the spiralling costs of energy.
 
On food costs, the Government is failing to give teeth to the Groceries Code adjudicator – a new body that will be funded by the supermarkets.  LibDem minister Ed Davey has said it will “safeguard the consumer interest” and it will lead, in the words of the National Farmers Union, to fewer instances of “flagrant bully boy tactics” by the supermarkets.  Yet Ministers have rejected two select committee reports calling on them to implement it quickly.  
 
What families in this country need more than anything is growth in the economy. We are in a vicious circle that needs reversing and to get things moving we need spending in the economy to increase, with a kickstart from the government.
 
Labour has offered a plan.  Reverse the VAT increase until growth is sustained; cut VAT to 5% for home improvements; bring forward investment in schools and hospitals; repeat the bankers bonus tax to invest building new homes and thereby create work for 100,000 more young people; and offer small business a national insurance incentive for taking on new staff.
 
Ministers will say we can’t afford it.  We say you can’t afford not to.  Where else is growth going to come from? Families in this country are up against it.  The conversations around the kitchen table are very bleak.  Too many can’t tighten their belts much more and the real impact of many of the cuts is still to come.  The poorest are hit hardest. It is not fair. Without a change of heart from the government and serious progressive measures, I fear massive social problems, a sustained recession and a blight on families chances for a generation.