The Austerity War and the impoverishment of disabled people Chris Edwards1, 3 September, 2012

Contents E e!utive summary 1" The aims of the study 2" #isabled people in the $% & who are they and what are their in!omes' 3" The effe!ts of the Austerity (a!)a*e on in!ome *roups +" Are disabled people sufferin* *reater losses than non,disabled people within ea!h in!ome *roup' -" The finan!ial !risis of 200./00 and ensuin* depression 1" The publi! se!tor defi!it, the 2010 2eneral Ele!tion and the Coalition 2overnment ." The Austerity (a!)a*e announ!ements 0" The !omponents of the Austerity (a!)a*e 3" The Austerity (a!)a*e !auses re!ession 10" The Austerity (a!)a*e is not even !uttin* the defi!it 11" 4ut there are alternatives 12" Are we all in this to*ether' The hypo!risy of the Coalition 2overnment 13" The !uts are !ounter,produ!tive 1+" The Austerity War and the need for a!tion Appendi 1 The Austerity (a!)a*e & the planned !uts Appendi 2 The !uts in disability benefits and the 5ob prospe!ts for disabled people 6eferen!es But today we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand, The result is that our possibilities of wealth may run to waste for a time perhaps for a long time (Keynes, 1930)

. Chris Edwards is a Research Associate at the University of East Ang ia in !orwich.

E e!utive summary Se!tions 1 and 2 "his re#ort st$dies the effects of the A$sterity %ac&age of the Coa ition 'overn(ent on disa) ed #eo# e "he govern(ent has ref$sed to do s$ch a st$dy, that is to esti(ate the c$($ ative i(#act of the c$ts on disa) ed #eo# e, c ai(ing that it is too co(# e* "his st$dy has )een carried o$t )y (e, an econo(ist who was not initia y fa(i iar with the statistica so$rces. +(agine what a tea( of s#ecia ists fro( the "reas$ry or ,e#art(ent for -or& and %ensions co$ d have done. /$t the fact that + have done s$ch a st$dy shows that the govern(ent was afraid that it wo$ d show that those ho$seho ds receiving disa)i ity )enefits are s$ffering ($ch greater osses in inco(e and )enefits0in0&ind as a res$ t of the A$sterity %ac&age than ho$seho ds in genera %eo# e with i(#air(ents sho$ d have a higher inco(e to ena) e the( to # ay an active and f$ fi ing ro e in society and to #revent the( fro( )eing disa) ed. +nstead the officia statistics show that ho$seho ds where so(eone is disa) ed are #oorer on average than ho$seho ds where no0one is disa) ed, and this 112 ga# is greater in the UK than the 132 ga# in the rich, 4EC, co$ntries as a who e 5ore ho$seho ds where so(eone is disa) ed are iving in #overty (with an inco(e ess than 102 of the socia (edian) than ho$seho ds where no0one is disa) ed Se!tions 3 and + and appendi!es 1 and 2 "he A$sterity %ac&age ana ysed here consists of c$ts in cash )enefits, increases in ta*es ((ost nota) y 6A") and c$ts in )enefits0in0&ind (c$ts in oca govern(ent , ed$cation, hea th and other ,e#art(enta E*#endit$re) a(o$nting to( 719 )i ion over the fo$r years fro( 3011013 thro$gh 30180 19. "he govern(ent has anno$nced f$rther c$ts of 739 )i ion in the two years 3019011 and 301101: )$t has not yet given the detai s. And so this re#ort oo&s at the 719 )i ion of c$ts # anned thro$gh to A#ri 3019, the ast (onth of the ne*t 'enera E ection "his has )een a de#ressing st$dy for (e to carry o$t )eca$se the )iggest )$rden )y far of the A$sterity %ac&age fa s on the #oorest ho$seho ds. "he esti(ated oss for the #oorest fifth of ho$seho ds a(o$nts to 73,100 over the fo$r years which, as a #ercentage of their initia cash inco(e # $s )enefits0in0&ind is 102. "his #ercentage oss is two and a ha f ti(es as )ig as the oss on the richest fifth of ho$seho ds. ;o to say, as the govern(ent has, that we are all in this together is a ie <ar fro( )eing a in it together, the govern(ent has not disco$raged ies in the ta) oid #ress a)o$t disa) ed #eo# e )eing fit to wor& )$t who avoid doing so. "he res$ t is that disa)i ity hate cri(es have re#orted to a have reached a record high in Eng and and -a es in recent (onths. +t is tr$e that fewer disa) ed #eo# e of wor&ing age are wor&ing than non0 disa) ed #eo# e. /$t s$rvey after s$rvey shows that disa) ed #eo# e want to wor& (ore )$t can=t get the >o)s and it is the ac& of >o)s that ca$se disa)i ity rather than the reverse. And it needs to )e re#eated ti(e and 3

again that disa)i ity )enefit fra$d is tiny. 4fficia errors and $nc ai(ed )enefits are )oth higher. C$ts in disa)i ity )enefits were anno$nced in 3010 and were reinforced )y the -e fare Refor( Act which the govern(ent forced thro$gh the ?o$se of @ords in 3013. "he govern(ent is notorio$s y re0assessing disa) ed #eo# e for wor& thro$gh the -or& Ca#a)i ity Assess(ent (-CA). "his and the <rench co(#any, A"4;, r$nning it $nder a 7900 (i ion contract have )een strong y criticised )y inde#endent e*#erts. "wo recent "6 #rogra((es )oth fo$nd that the -CA was dec aring #eo# e fit to wor& who c ear y were not fit to wor& and it has )een re#orted that the a##ea s syste( is grid oc&ed with 802 of a##ea s )y c ai(ants s$cceeding. "he c$ts to disa)i ity )enefits are esti(ated to tota 79 )i ion over the fo$r years, a)o$t a third of the tota #aid in 3009010. "his (eans that the #oorest fifth of the 3.: (i ion ho$seho ds receiving disa)i ity )enefits wi ose 112 of their cash inco(e # $s )enefits0in0&ind over the fo$r years. "his #ercentage oss is four ti(es as )ig as the oss for the richest fifth of ho$seho ds Se!tions - to 10 -hat is even worse is that the A$sterity %ac&age is not wor&ing. +n the 'reat ,e#ression of the 1930s, it too& five years for nationa o$t#$t to get )ac& to #re0recession eve s. "he Coa ition 'overn(ent is (is0(anaging an econo(y where nationa o$t#$t is i&e y to ta&e eight years to get )ac& to the eve of 300:. "he A$sterity %ac&age is ta&ing govern(ent cons$(#tion o$t of the econo(y at a ti(e when #ersona cons$(#tion is f at ining as the #rivate sector atte(#ts to c$t its acc$($ ated de)t. "o c$t govern(ent e*#endit$re at s$ch a ti(e is the #o itics of the (adho$se as %a$ Kr$g(an has arg$ed in this recent )oo&, nd this !epression "ow# "he govern(ent has )een throwing (oney at the #ro) e( thro$gh A$antitative Easing (AE) )$t no0one is s#ending it on goods and services. +t (ay have #$shed $# the #rices of shares and )onds and #ro#erty )$t it of itt e $se in sti($ ating o$t#$t. According to the /an& of Eng and, 802 of the gains fro( AE have accr$ed to the richest 92 of ho$seho ds. ;ince the financia crisis of 300:00B, the /ritish govern(ent has channe ed 71.3 tri ion to the financia sector in the for( of )ai o$ts, oans and g$arantees and yet the econo(y contin$es to stagnate. "his is the (adness of King (as 'overnor of the /an& of Eng and) and 'eorge (4s)orne, as Chance or of the E*cheC$er) +t is c ear that the @a)o$r 'overn(ents of / air and /rown were inco(#etent in not reg$ ating the )an&ing sector. /$t the acc$sation that @a)o$r et s#ending r$n o$t of contro )efore the recession to not stac& $#. "he deficit grew ra#id y )eca$se of the )an&ing crash and e*#endit$res $nderta&en to co$nter the recession. "he stated ai( of the Coa ition govern(ent when it ca(e to #ower in 3010 was to e i(inate the )$dget deficit (112 of ',% in 3009) )y 3019. <or fro( doing so, the $nder ying )$dget deficit was higher in the first ha f of 3013 than in the first ha f of 3011. +n D$ y 3013, ,avid Ca(eron was re#orted as saying that $ dont see a time when difficult spending choices are going to go away 3

"he annual cost of the A$sterity %ac&age in ter(s of ost o$t#$t is r$nning at a)o$t 7390 )i ion or a (ost 710,000 #er ho$seho d Se!tions 11 to 1+ /$t there are a ternatives to the A$sterity %ac&age which are set o$t in section 11. /road y these consist of ta*ing the rich (ore heavi y and introd$cing a financia transactions ta* and s#ending ha f the #roceeds. At #resent the richest fifth of ho$seho ds #ay ess ta* than the #oorest fifth so ta*ing the rich wo$ d )e eC$ita) e. +t wo$ d a so )e efficient since it wo$ d c ose the deficit whi e sti($ ating de(and since at the (argin the rich s#end itt e on do(estic goods and services. "he govern(ent says that Ewe are a in this together=. At #resent, this is c ear y nonsense. "he #oorest sections of society and in #artic$ ar disa) ed #eo# e are )earing the )iggest )$rden of the c$ts "his is a govern(ent of the rich ((ost y (en) serving the (short0ter() interests of the rich. "he fees for the #rivate schoo s attended )y (any if not (ost (e()ers of the Ca)inet are greater than the average ann$a inco(e of UK ho$seho ds. "he 5anifesto of the Conservative %arty for the 3010 e ection #ro(ised no c$t in the disa)i ity a owance. +n 3003, +ain ,$ncan ;(ith, then then eader of the Conservative #arty so$ght to re)rand the "ories as the party for the vulnerable# ?e is now the Coa ition=s -or& and %ensions ;ecretary and it is $nder his watch that the c$ts in disa)i ity )enefits are ta&ing # ace. "he A$sterity %ac&age is an A$sterity -ar and eading to the i(#overish(ent of disa) ed #eo# e. A the advances that disa) ed #eo# e have (ade over the #eriod since 1989 are )eing reversed. "he A$sterity %ac&age ($st )e o##osed

1" The aims of the study "his re#ort st$dies the effect of the A$sterity %ac&age of the Coa ition 'overn(ent on disa) ed #eo# e3. "here are five ways in which the rea inco(es of #eo# e can )e c$t. 4ne is )y a c$t in rea wagesF the second is )y )eing sac&ed and )eco(ing $ne(# oyedF the third is )y a rise in ta*esF the fo$rth )y a c$t in cash )enefitsF the fifth is )y a c$t in )enefits0in0&ind thro$gh c$ts in govern(ent s#ending on hea th, ed$cation and other s$##ort services. +n this re#ort + ana yse the third, fo$rth and fifth of these. As far as + &now, this is the on y st$dy carried o$t on the effects of the c$ts on disa) ed #eo# e oo&ing at the changes in ta*es, the c$ts in cash )enefits and the c$ts in )enefits0in0&ind thro$gh c$ts in other govern(ent e*#endit$re. Certain y there is no govern(ent st$dy of these effects on disa) ed #eo# e. +n 5ay 3013, + wrote to the ,e#art(ent for -or& and %ensions (,-%) as&ing if the 'overn(ent had esti(ated, or were # anning to esti(ate the c$($ ative effect of # anned refor(s on disa) ed #eo# e. "he re# y was a C$oted res#onse to a %ar ia(entary A$estion on the iss$e. + was to d that +n %ar ia(ent, the ;ecretary of ;tate had saidF The government is limited in what cumulative analysis is possible because of the comple%ity of the modelling re&uired and the amount of detailed information on individuals and families that is re&uired to estimate the interactions of a number of different policy changes# $n addition the 'overnments programme of welfare reform will not be fully implemented until ()*+,*- and many policy details are still to be worked through# &uality $mpact .ssessments are however carried out for individual policies where there is a re&uirement (e(ai to (e fro( the ,-% dated 5ay 3 3013) And so, the govern(ent arg$es, the ana ysis is too diffic$ t. As + write this re#ort, a gro$# of disa)i ity ca(#aigners have a$nched a #etition Gto stop and review the cuts to benefits and services which are falling disproportionately on disabled people, their carers and families# As of A$g$st 38 3013, (ore than 83,000 #eo# e had signed the #etition3. As + say, in this re#ort + have ana ysed the effects on disa) ed #eo# e of changes in ta*es, c$ts in cash )enefits and of c$ts in )enefits0in0&ind. "here are three ste#s in this ana ysis. "he first ste# is to oo& at the inco(e distri)$tion of ho$seho ds in the UK in five gro$#s or C$inti es. +n other words, the 31 (i ion ho$seho ds are divided into five inco(e gro$#s or C$inti es, each of >$st over 9 (i ion. "his ste# disting$ishes
3

. "his is an $#date of a re#ort that + wrote in Dan$ary 3011 (Edwards 3011). "he re#ort was #rod$ced for the !orfo & Coa ition of ,isa) ed %eo# e (!Co,%) and was wide y C$oted )y disa)i ity organisations and )y the (edia.
3

. .00,000 signat$res are needed to get the #etition considered for de)ate in the ?o$se of Co((ons. <or e0#etitions, go to the ,irect 'ov we)site

)etween ho$seho ds in which so(eone is disa) ed and ho$seho ds in which no0one is disa) ed. "he ho$seho ds in which so(eone is disa) ed are f$rther s# it into those receiving disa)i ity )enefits and those not receiving disa)i ity )enefits. "he infor(ation for this ste# co(es fro( the ann$a s$rvey #$) ished )y the ,-% and entit ed /ouseholds Below .verage $ncomes# "he second ste# is to ana yse the effects of the A$sterity %ac&age on the five inco(e gro$#s of ho$seho ds. As far as the changes in ta*es and )enefits are concerned, + have $sed the st$dies #$) ished )y the +nstit$te for <isca ;t$dies (+<;). +n (ost of their st$dies, the +<; oo&s at the effects of changes in ta*es and )enefits on different inco(e gro$#s. "he +<; gro$#s ho$seho ds into ten inco(e gro$#s or deci es and e*a(ines the effects of the changes in ta*es and )enefits on these deci es. ?owever )eca$se + have inco(e distri)$tion data for disa) ed #eo# e on y )y C$inti es, + have co a#sed the +<; data into C$inti es of ho$seho ds. 4ccasiona y the +<; carries o$t a st$dy on #artic$ ar gro$#s of ho$seho ds across the inco(e gro$#s, an e*a(# e )eing a st$dy entit ed The $mpact of .usterity 0easures on /ouseholds with 1hildren. "he re#ort=s a$thor was Da(es /rowne and it was #$) ished in Dan$ary 3013 (/rowne, Dan$ary 3013). /$t the +<; has not carried o$t a s#ecific st$dy of the effects of changes in ta*es and c$ts in cash )enefits on disa) ed #eo# e. !or has the +<; carried o$t a st$dy of c$ts in )enefits0in0&ind and so it does not inc $de all the changes in #$) ic e*#endit$re in its ana ysis. "his is a (a>or o(ission given that >$st $nder :02 of the # anned a$sterity #ac&age (to )e i(# e(ented $# to 3018019) consists of c$ts in s#ending on #$) ic services. A)o$t 312 is # anned to )e c$ts in cash )enefits and a itt e over 82 consists of net changes in direct and indirect ta*es. "he ne*t C$estion isF ?ow do we a ocate the s#ending on #$) ic services (s$ch as oca govern(ent, hea th, ed$cation, etc) )etween inco(e gro$#sH ?ere #$) ic service s#ending is a ocated across inco(e gro$#s according to the siIe of the ho$seho d and the ho$seho ds= re ative $se of the services, the atter derived fro( vario$s s$rveys. 4=,ea and %reston of the +<; have warned of the dangers of this a##roach arg$ing that cost is not the sa(e as the va $e to the $ser (see 4=,ea and %reston, 4cto)er 3010). ?owever (y answer to this isF given the i(#ortance of #$) ic e*#endit$re to the we fare of ho$seho ds and given the i(#ortance of changes in s#ending on services co(#ared to changes in ta*es and cash )enefits, it is s$re y a (ista&e not to atte(#t to (eas$re the i(#act of the c$ts in )enefits0in0 &ind. 4therwise we are oo&ing at on y a few trees in the forest. <ort$nate y for (e an ana ysis of the distri)$tion of, and c$ts in govern(ent service e*#endit$re has )een carried o$t )y ?oward Reed of @and(an Econo(ics and he has &ind y #rovided (e with the fig$res on the distri)$tion of )enefits0in0 &ind and the c$ts in these services )y C$inti e gro$#. "he third ste# is to (eas$re the effects of the c$ts in )enefits and increase in ta*es on those ho$seho ds receiving disa)i ity )enefits. "he so$rce for this is the ann$a ana ysis of the 4ffice of !ationa ;tatistics entit ed G ffects of Ta%es and Benefits on /ousehold $ncomeJ.

+ do not #retend that the ana ysis is #recise. +t co$ d do$)t ess )e i(#roved. +t has )een a diffic$ t st$dy to carry o$t. /$t the fact that + have achieved as ($ch as + have revea s the dishonesty of the 'overn(ent when it says that a c$($ ative i(#act assess(ent of the c$ts on disa) ed #eo# e is Etoo diffic$ t=. +t is c ear to (e that the 'overn(ent is afraid of revea ing the vicio$s effects of the c$ts on those ho$seho ds receiving disa)i ity )enefits. + have carried o$t this st$dy a one. +(agine what co$ d have )een done )y a tea( of #eo# e fro( the "reas$ry or fro( the ,e#art(ent for -or& and %ensions. As + say, it has )een a very diffic$ t st$dy to carry o$t. +t has a so )een de#ressing 0 for two reasons. <irst )eca$se digging o$t the infor(ation has )een diffic$ t since + was not, initia y, fa(i iar with a the s$rveys and so$rces. "he second reason for getting de#ressed was )eca$se as + )egan to co ect the infor(ation, it #ainted s$ch a harsh #ict$re. "he c$ts are hitting disa) ed #eo# e (arg$a) y the (ost v$ nera) e section of society) very hard indeed. +ndeed this is #ro)a) y the hardest hit of any gro$# in society. /$t not on y has the e*ercise )een de#ressing. +t has a so (ade (e angry since the who e A$sterity %ac&age e*ercise is so st$#id and $nnecessary. + fee the sa(e anger as is ref ected in nd this !epression "ow, the )oo& #$) ished ear ier this year and written )y %a$ Kr$g(an, the !o)e #riIe0winner (Kr$g(an 3013). "he ne*t few sections of this re#ort oo& at who the disa) ed #eo# e are, how (any of the( there are and how the A$sterity %ac&age (the c$ts in )enefits, rise in ta*es and c$ts in )enefits0in0&ind) is affecting those ho$seho ds receiving disa)i ity )enefits. "hen + set o$t the historica conte*t of the A$sterity %ac&age, its co(#onent #arts and why the #o icy is not on y vicio$s )$t a so co$nter0 #rod$ctive. "he fina sections oo& at the hy#ocrisy of the Coa ition 'overn(ent, sets o$t a ternative #o icies and the need for action to i(# e(ent a ternative #o icies. <irst we oo& at the n$()er of disa) ed #eo# e and at their inco(es.

2" #isabled people in the $% & who are they and what are their in!omes' +(#air(ents and disa)i ity are not the sa(e. 5any #eo# e with i(#air(ents )eco(e disa) ed as a res$ t of govern(ent action or rather the ac& of it. As a res$ t the n$()er of disa) ed #eo# e is #art y a f$nction of govern(ent s$##ort or the ac& of it. ?owever here we $se officia statistics and in #artic$ ar the /ouseholds Below .verage $ncomes (?/A+) s$rvey #rod$ced )y the ,-%. "he atest edition of this is the one #$) ished in D$ne 3013, covering 3010K11. "he ?/A+ is the )est officia so$rce for the n$()er of disa) ed #eo# e and their inco(es. +n 3010K11 the n$()er of disa) ed #eo# e in the UK was 11.9 (i ion, a itt e $nder 192 of the tota #o#$ ation of 11.1 (i ion 8 (,-%, D$ne 3013, 13). 12 of a
8

. "he ,-%=s re#ort states that for this analysis disability is defined as having any long2standing illness, disability or impairment that leads to a substantial difficulty with one or more areas of the individuals life# veryone classified as disabled under this definition would also be classified

chi dren, 192 of #eo# e of wor&ing age and 892 of #ensioners are disa) ed #eo# e. +n the sa(e year, the n$()er of #eo# e iving in fa(i ies where so(eone is disa) ed was 1:.9 (i ion. 11.B (i ion of these were not receiving disa)i ity )enefits whereas 1.1 (i ion were (,-% D$ne 3013, 18). "o (e these n$()ers of disa) ed #eo# e were s$r#rising y arge as do$)t ess they wi )e to (any other #eo# e. ,es#ite advances in socia #o icy over the #ast thirty years, disa) ed #eo# e are sti arge y invisi) e to the rest of the #o#$ ation, #artic$ ar y to those who are not c ose y re ated to, or caring for the(. "a) e 1 )e ow s$((arises so(e of the data on the inco(e distri)$tion of disa) ed and non0disa) ed #eo# e fro( the ?/A+ st$dy. +t can )e seen that the 1:.9 (i ion #eo# e iving in ho$seho ds where so(eone is disa) ed are #oorer than the 83.3 (i ion #eo# e iving in ho$seho ds in which no0one is disa) ed. <ro( the ta) e we can see that the three owest inco(e C$inti es contain 992 of the ho$seho ds where no0one is disa) ed co(#ared to a)o$t :32 of ho$seho ds where so(eone is disa) ed. <or 3010K3011, + have esti(ated the (edian wee& y inco(e of ho$seho ds where so(eone is disa) ed to have )een a)o$t 7319 (for an EeC$iva ised= ho$seho d)9 or a)o$t 112 )e ow the (edian for ho$seho ds in which no0one is disa) ed. !ote that this 112 ga# is significant y greater than the 132 ga# in the rich (4EC,) co$ntries as a who e (4EC, 3009, :).

Table 1 The Distribution of Disposable Income (before housing costs) in the UK; 2010/11 Me ian !ercentages in each "uintile ################################################### income $ousehol s $ousehol s %here someone &ll (' p%) %here is isable an (() househol s no#one ()recei*ing ( not recg) is isable isabilit+ isabilit+ Poorest fifth benefits benefits (bottom quintile) 216 18 15 30 20 Second quintile 318 18 30 24 20 Third quintile 419 19 30 18 20 ourth quintile 551 21 18 16 20 !ishest fifth ( ifth quintile) 846 24 " 13 20 Me ian/totals (,) (a) -1. 100 100 100 100 Totals (mn) -/)2 0)1 11)1 01)1 Me ian income (' per %ee2 # estimate ) --0 /03 /30 -1. 4ource; D5! 6une 20127 /.7 0#ote$ the medi%n income is not &er indi'idu%l but is (equi'%lised( for % cou&le )ith no children %) m%* not sum due to roundin+

as disabled under the &uality .ct ()*)# /owever, some individuals classified as disabled under the &uality .ct ()*) would not be captured by this definition (,-%, D$ne 3013, 93). "his ast state(ent i(# ies that the n$()er of disa) ed #eo# e in the ,-% re#ort wo$ d )e ower than the n$()er arrived at $sing the EC$a ity Act, 3010. !ote that the #resence of an i(#air(ent is not eC$ated with disa)i ity, as the 4ffice for !ationa ;tatistics is at #ains to #oint o$tF !isability is therefore a product of the social barriers to participation in different life areas e%perienced by people with impairments (4!;, ,ece()er 3010, 10). 9 . "hese 3010K11 (edian fig$res co(e fro( the 3013 the ?o$seho d /e ow Average +nco(es (?/A+) s$rvey and are for EeC$iva ised= ho$seho ds (that is for a co$# e with no chi dren).

"a) e 1 s$ggests that the (edian inco(e of this #oorest 102 of a ho$seho ds is ess than two0fifths of the inco(e of the richest fifth. +n fact it is #ro)a) y ($ch ess than two0fifths since the inco(e of the richest fifth see(s to )e considera) y $nderstated. "he inco(e of the richest fifth is #ro)a) y $nderstated )y as ($ch as a ha f (as /o* 1 )e ow #oints o$t) in which case the inco(e of the #oorest 102 is ess than a third of the richest fifth=s inco(e. !everthe ess, for the (o(ent, we have to $se the s$rvey fig$res a tho$gh it is worth )earing in (ind that they a (ost certain y understate ineC$a ity in the UK. -e now oo& at one (eas$re of #overty that has )een wide y $sed in the UK and see how disa) ed #eo# e ran& on this )asis. A ho$seho d is said to )e #oor if its inco(e is ess than 102 of the (edian inco(e for the #o#$ ation as a who e. +n 3010K11, 302 of individ$a s in fa(i ies where so(eone is disa) ed were iving in ho$seho ds with inco(es )e ow 102 of the (edian ho$seho d inco(e (to )e #recise, (edian net dis#osa) e ho$seho d inco(e, )efore ho$sing costs). "his co(#ares with 192 for ho$seho ds in which no disa) ed #eo# e were iving (,-%, D$ne 3013, 11). "herefore Edisa) ed ho$seho ds= are far (ore i&e y to )e iving in #overty than Enon0disa) ed ho$seho ds=.

4o 1 7ow 8ne9uality in the $% is understated +n the UK, as in other co$ntries, inco(e distri)$tion fig$res are o)tained fro( ho$seho d s$rveys. "his is tr$e of the ?o$seho ds /e ow Average +nco(es st$dy. ?owever the fig$res for tota inco(es o)tained in this way, genera y (iss o$t a (a>or #ro#ortion of inco(e. "he ?/A+ ad(its that its <a(i y Reso$rces ;$rvey $nderstate invest(ent inco(e and (ost ty#es of state s$##ort (,-%, D$ne 3013, 30). ;ince the (a>or inco(e $nderstate(ent is in invest(ent inco(e and since a (ost a of this goes to the re ative y rich, the s$rvey fig$res (a&e the distri)$tion of inco(e oo& (ore eC$a than in fact it is. +t is #ro)a) e that the inco(e of the richest tenth of ho$seho ds is $nderstated )y a)o$t a ha f, whereas the inco(e of the #oorest tenth is $nderstated )y a)o$t 92. "o re ate this to ta) e 1, it is #ro)a) e that whereas the s$rvey fig$res in ta) e 1 show the (edian wee& y inco(e of the richest 302 of ho$seho ds in the UK to )e a)o$t 7B81, their act$a (edian wee& y inco(e is i&e y to )e we a)ove 71,000. +n Dan$ary 3011, + was to d that the 4ffice of !ationa ;tatistics is oo&ing into this $nderstate(ent, )$t that the detai ed re#ort wo$ d not )e avai a) e $nti the (idd e of 3013. +n Dan$ary 3013, + was to d that the 4!; was wor&ing with 4EC,KE$rostat and is e*#ected to have detai s ready at the end of 3013 or ear y in 3013. 9

"herefore it is c ear that Edisa) ed ho$seho ds= are significant y #oorer than Enon0 disa) ed ho$seho ds= and yet if they were f$ y co(#ensated for their i(#air(ent, they sho$ d have a higher inco(e to get the sa(e standard of iving 1. According to the ,-% in 300B, over ha f of disa) ed #eo# e inc$rred e*tra e*#enses as a res$ t of their i(#air(ent (,-% D$ y 300B, 189) and according to a ,e(os 3010 re#ort, the #ro#ortion of ho$seho ds with a disa) ed #erson who are )e ow the #overty ine is (ore than do$) ed to 8:2 when the e*tra costs of iving with a disa)i ity are inc $ded (,e(os, 4cto)er 3010, 30). +n s#ite of this, the #resent govern(ent is c$tting e*#endit$re and raising ta*es in s$ch a regressive way that the c$ts and increased 6A" wi )e #artic$ ar y #ainf$ to the #oorest of disa) ed #eo# e. "his L the effects of the A$sterity %ac&age on disa) ed #eo# e 0 is what + oo& at in this st$dy. +t is i(#ortant to e(#hasise that neither the 'overn(ent nor the +nstit$te for <isca ;t$dies have carried o$t a st$dy of the effects of the A$sterity %ac&age on disa) ed #eo# e. /$t first we oo& at how the vario$s inco(e gro$#s ()oth disa) ed and non0 disa) ed) are affected )y the c$ts.

3" The effe!ts of the Austerity (a!)a*e on in!ome *roups + #ointed o$t ear ier that the A$sterity %ac&age consists of three co(#onents. "he first is a changes in ta*es (a rise in indirect ta*es thro$gh 6A" and a fa in inco(e ta*es thro$gh a rise in #ersona a owances and a dro# in the highest ta* rate)F the second is a c$t in we fare )enefitsF the third is a c$t in )enefits0in0&ind which here we a)e as c$ts in ,e#art(enta ;#ending. "o reca#, the siIe of these co(#onents $# to 3018K19 areF ta*es (73 )i ion), )enefits (71B )i ion) and c$ts in ,e#art(enta ;#ending (78: )i ion). As stated ear ier, the effects of the first two (ta* and )enefit changes) on inco(e gro$#s are traced )y the +<; and + have )ased this #art of the ana ysis on their fig$res. "a) e 3 )e ow s$((arises the effects of the changes in ta*es and )enefits on the five inco(e gro$#s or C$inti es.

. "he sa(e #oint was (ade )y a Rowntree re#ort of 4cto)er 3008 which esti(ated that the wee& y inco(e of a disa) ed #erson so e y de#endent on )enefits was 7300 )e ow the a(o$nt reC$ired for the( to ens$re an acce#ta) e, eC$ita) e C$a ity of ife. "he sa(e re#ort fo$nd that the inco(e of a disa) ed #erson wor&ing 30 ho$rs a wee& at the (ini($( wage was )etween 711B and 71B9 a wee& )e ow the a(o$nt reC$ired to give the( a E eve # aying fie d= with non0disa) ed #eo# e (Rowntree, 4cto)er 3008, <indings).

10

Table 2 8ear#b+#+ear cuts in income (2011#12 through 201-#1:) ;uintile <

ue to changes in benefits an ta9es

1 2 / (poorest) >ase isposable income (') .7./1 1372:: 2-72-0 //7/32 ?uts in base isposable income ue to changes in ta9es an benefits 2011/12 (,) 1,6 1,2 1,1 1,1 2012/1/ (,) 1,6 1,3 0,8 0,5 201//1- an 201-/1: 3,0 2,4 1,3 0,5 ?umulati*e (o*er the four +ears e9clu ing the 2012 >u get) 6,2 4,9 3,2 2,1 >u get 2012 (201//1-) -0,2 -0,3 -0,6 -0," ?umulati*e (o*er the four +ears) inclu ing the 2012 >u get 0)0 -)0 2)0 1)Notes a) @rom Aee 7 March 2012 (these figures are for 2010#2011) b @rom >ro%ne7 March 2011 (sli e 10) c) 6o+ce =o*ember 2011 (sli e 10) ) ?alculate from the pre*ious an the follo%ing ro%s e) >ro%ne7 6anuar+ 20127 (page 13) # %ithout uni*ersal cre it f) @rom table / belo%) These are all gains %hich ha*e to be subtracte from the other figures %hich are all losses in income

: =otes (richest) 027/20 % 2,5 0,5 0,5 3,5 -1,0 2): b c d e f

"he a)ove ta) e inc $des a the effects as shown )y the +<; st$dies inc $ding those of the 5arch 3013 /$dget. "he fig$res for the 5arch 3013 /$dget are ta&en fro( Ro)ert Doyce of the +<; tho$gh with so(e (odifications as shown in ta) e 3 )e ow.

Table / The effects of the March 2012 >u get in 201//1"uintile< I@4 estimates (,) Drop in top ta9 rate (,) 4tamp Dut+ (4D) change (,) Total -0,2 -0,3 -0,6 -0," 1 -0,2 2 -0,3 3 -0,6 4 -0," 5 -0,4 -0," 0,1 -1,0 #otes % b c

a) 6o+ce7 March 20127 sli e 12 ) These are cuts in ta9es an are therefore sho%n as negati*e cuts # that is7 gains in income to househol s b M+ estimate of the effect of the cut in the top rate of ta9 is as follo%s; the total income of the richest 20, of househol s is :)2 million househol s multiplie estimate b+ '027000 gi*ing a total income of '/22 billion) The loss in go*ernment income has been to be '2 billion b+ $eather 4te%art7 Buar ian7 March 227 2012 an '2)0 billion in 6ohnson7 March 2012 (page/)) The a*erage of these7 namel+ '2)/ billion7 is 0)3 per cent of '/22 billion c) M+ estimate

"he ne*t stage is to add in the # anned c$ts to )enefits0in0&ind (or ,e#art(enta ;#ending on hea th, ed$cation etc). "here are two #ossi) e so$rces for the va $e of )enefits0in0&ind #rovided )y state e*#endit$re to each inco(e gro$#. 4ne is the "reas$ry, the other is an ana ysis )y ?oward Reed of @and(an Econo(ics. "he (ore co(#rehensive so$rce is the one )y ?oward Reed. "his is the so$rce $sed 11

here and ?oward genero$s y s$## ied (e with his fig$res ada#ted to C$inti e inco(e gro$#s. ?is fig$res are shown in "a) e 8 )e ow.

Table - 8ear#b+#+ear cuts in benefits#in#2in (Departmental C9pen iture) (2011#12 through 201-#1:) ;uintile < Dalue of base ser*ices ('bn) ?umulati*e (' billion) () 2011#12 2012#1/ 201/#1201-#1: 4ource; Aee $7 2012 3-/ 1700. 17:20 17.1/ 33. 17110 17:0. 270/1 012 .317-0: 171:2 :0/ 1117211 170/0 -11 0.. 17011 17-1. 1 (poorest) 1070.1 137:01 107:1/ 1-70-. ?uts in benefits#in#2in (go*ernment ser*ices) 2 / : (richest) 12702:

!ow we can co()ine the c$ts in ta*es and )enefits ()ased on +<; data) and the c$ts in )enefits0in0&ind (,e#art(enta ;#ending) )ased on ?oward Reed=s data, as shown in "a) e 9 )e ow.

Table : ?uts from the austerit+ pac2age (2011/12 through 201-/1:) ;uintile < >ase isposable income (') Dalue of go*ernment ser*ices (') Total income plus benefits#in#2in 1 (&oorest) .7./1 1070.1 207022 2 1372:: 137:01 /-7110 / 2-72-0 107:1/ -0712. //7/32 1-70-. -37-21 : (richest) 027/20 12702: 3-7/:1 =otes

?umulati*e cuts o*er the four +ears to 201-/1: (') # ta9 an benefit changes :.0 3.# benefits#in#2in 17.1/ 270/1 # total losses o*er the four +ears 27:3. 271/2 Eosses o*er the four +ears as a percentage of total income plus benefits #in#2in 10

0/0 171:2 27-12

-03 170/0 270.3

17::1 17-1. /70-3

% b

a calculate from table 2 (eg for "uintile 17 0, of '.7./1) b) @rom table -

"a) e 9 shows that the )iggest osses (in a)so $te ter(s) are )eing i(#osed on the richest C$inti e. ?owever the #oorest fifth are s$ffering )y far the )iggest oss over the fo$r years as a #ercentage of their )ase dis#osa) e inco(e # $s )enefits0in0 &ind. "hey are s$ffering a oss of 102, two and a ha f ti(es as )ig as the oss for the richest fifth of 82. Ear ier, we have seen that a (ost three0C$arters of the ho$seho ds where so(eone is disa) ed are in the #oorest three C$inti es. "heir average oss over the fo$r years 13

can )e esti(ated fro( "a) e 9 to )e a)o$t 73,100. "his is a oss of a)o$t B2 over the fo$r years for ho$seho ds whose ann$a dis#osa) e inco(e is a)o$t 71:,000 and whose cash inco(e # $s )enefits0in0&ind tota is a)o$t 738,000. ?owever, o$r ana ysis so far has not differentiated )etween c$ts to ho$seho ds receiving disa)i ity )enefits and other ho$seho ds. -e now ta&e this ste#.

+" Are households re!eivin* disability benefits sufferin* *reater losses than non,disabled people within ea!h in!ome *roup' /efore answering this C$estion it is worth oo&ing at how the fig$res in ta) e 9 (atch the aggregate fig$res for the c$ts. "hat is, if we ($ ti# y the c$ts #er ho$seho d in each inco(e gro$# )y the n$()er of ho$seho ds, we sho$ d get the aggregate fig$res for the c$ts. "a) e 1 shows that the tota s fit reasona) y we .

Table 0 Matching the cuts (2011/12 through 201-/1:) ;uintile < =umber of househol s (mn) 1 (poorest) :)2 2 :)2 / :)2 : (richest) :)2 :)2 Totals &ggregate figures 20)0 'bn 21)0 -0)1 03)1 'bn 21): -3)0 01):

?umulati*e cuts o*er the four +ears to 201-/1: (') # ta9es an benefits :.0 3.# epartmental spen ing 17.1/ 270/1 # total o*er the four +ears 27:3. 271/2

0/0 171:2 27-12

-03 170/0 270.3

17::1 17-1. /70-3

4ources; ?umulati*e cuts from Table :; for aggregate figures7 see &ppen i9 1

!ow we need to see whether the c$ts to ho$seho ds receiving disa)i ity )enefits are greater than the c$ts to other ho$seho ds within each inco(e gro$#. +n a re#ort )y Da(es /rowne of the +<; on The $mpact of .usterity 0easures on /ouseholds with 1hildren #$) ished in Dan$ary 3013, the osses to the #oorest C$inti e of fa(i ies with chi dren were esti(ated to )e a)o$t 102 of net inco(e (/rowne, Dan$ary 3013, 1:). "his co(#ares with a oss for that inco(e gro$# as a who e of 1.32 (see ta) e 3 a)ove L Da(es /rowne=s Dan$ary 3013 fig$res do, of co$rse, e*c $de the effects of the 5arch 3013 )$dget). C ear y then ho$seho ds with fa(i ies in the #oorest C$inti e are esti(ated to )e s$ffering greater osses than the two other sets of ho$seho ds identified in the +<; Dan$ary 3013 re#ort, na(e y #ensioners (a 32 oss for the #oorest C$inti e) and wor&ing age ad$ ts witho$t chi dren (12 oss). Unfort$nate y L as + #ointed o$t ear ier 0 the +<; has not esti(ated the osses to disa) ed #eo# e as a category. /$t, fort$nate y, + have )een a) e to esti(ate the osses to ho$seho ds receiving disa)i ity )enefits.

13

<irst we oo& at disa)i ity )enefits #aid in 3009K10. "a) e : shows the disa)i ity )enefits #aid according to a st$dy )y Din -enchao et a . in !ove()er 3010.

Table 3 >enefits pai to isable >enefit

people (200.#10) ?laimants as C9pen iture in @eb 2010 (millions) (' billion) 0)1 1)/ 11): :)1 1): 1)0 0)1 23)/ C9pen iture '000 /)1 2)0 /)0 /)2 2)1 :)2):

200.#10 per claimant

Incapacit+ >enefit Cmplo+ment an 4upport &llo%ance (C4&) Disabilit+ Ei*ing &llo%ance (DE&) &tten ance &llo%ance ?arerFs &llo%ance 5ar !ensions In ustrial InGuries >enefits Total 4ource; 5enchao 6in et al7 =o*ember 20107 -.

1).0)-1 /)11)01 0):/ 0)11 0)/2

=ote that this table e9clu es the relati*el+ small amounts pai in the form of 4tatutor+ 4ic2 !a+ an the Dehicle @un

As we can see, the tota is 73:.3 )i ion in 3009K10. "a) e B co(#ares these fig$res with the tota s derived fro( the GEffects of "a*es and /enefits on ?o$seho d +nco(esJ (E"/) st$dy for the sa(e year. "he tota given in the atter is 71B )i ion, a)o$t 902 ower than the tota of 73: )i ion in the Din -enchao st$dy. 4ne of the (ain reasons for the difference is that the @iving Costs and <ood ;$rvey (fro( which the E"/=s fig$res on )enefits are derived) is a s$rvey of #rivate ho$seho ds and therefore e*c $des #eo# e iving in hoste s, hote s, )oarding ho$ses or

18

instit$tions (e(ai fro( Richard "on&in of the 4!; dated 33 A#ri 3013).
Table 1 Disabilit+ benefits b+ "uintile 200./2010 ;uintiles ran2e b+ (e"ui*alise ) 1 2 / (&oorest) .ouseholds (mn) 5,2 5,2 5,2 Disabilit+ >enefits (' per +ear per /0 349 300 196 12 "6 114 96 22 40 59 "5 342 230 554 5"8 S325//30 32 45 49 6%r &ensions 3 11 28 Tot%l 30 "30 1083 1022 7S2 Total D> ('bn) /)1 :)0 :)/ ;uintile < isposable income (' per +ear) : &*e) Total (richest) ('bn) 5,2 5,2 20)0 househol ) 90 18 190 :)0 42 68 58 2)1 55 10 48 1)2 260 8" 342 1). 52 13 38 1)0 11 13 13 0)/ 510 209 689 11): 2)3 1)1 11):

Totals ('bn) #otes as gi*en in Table 3 0)1 % 1): % :)1 % 11): % 0)1 % 1)0 20)0 % 1)/ 23)/ b

#otes %, 2ll from 8The 7ffects of T%9es %nd 0enefits on .ousehold /ncome 20095108: ;#S: <une 2011: t%ble 142 #otes$ 12 = 1%rer(s 2llo)%nce$ 22 = 2ttend%nce 2llo)%nce$ 342 = 3is%bilit* 4i'in+ 2llo)%nce S32 = Se'ere 3is%blement 2llo)%nce$ //30 = /ndustri%l /n>uries 3is%blement 0enefit$ Tot%l 30 = Tot%l 3is%bilit* 0enefits$ 7S2 = 7m&lo*ment Su&&ort 2llo)%nce b, The tot%ls for e%ch quintile %re sim&l* the %'er%+e multi&lied b* the number of households, #ote th%t the tot%ls for the 7T0 stud* do not %+ree )ith those in the / S stud* (6ench%o <in et %l #o'ember 2010),

"he ne*t stage of this ana ysis is to esti(ate the osses in disa)i ity )enefits over the fo$r years of 3011013 thro$gh 3018019. ?ere + $se two so$rces. <irst, a recent y0#$) ished ,E54; re#ort of ;$((er 3013 esti(ated that the osses in )enefit inco(e to disa)i ity )enefit c ai(ants in this co$ntry over the fo$r years (3011K13 to 3018K19) wo$ d )e 79 )i ion (,E54;, ;$((er 3013, B1). "ota )enefits #aid to disa) ed #eo# e in 3009K10 were 73:.3 )i ion (see ta) es : and B) so that the c$ts of 79 )i ion re#resent a c$t in initia )enefit inco(e of a)o$t a third. "his esti(ate is )ac&ed $# )y another so$rce 0 this ti(e fro( +ain ,$ncan ;(ith, the -or& and %ensions ;ecretary. +n 5ay 3013, he c ai(ed (in an interview with the ,ai y "e egra#h) that the 'overn(ent is c$tting ann$a disa)i ity )enefit #ay(ents )y 73.38 )i ion and the n$()er of c ai(ants )y 900,000 (,ai y "e egra#h we)site, accessed on 18 5ay 3013):. 4ver the fo$r years, this adds $# to 79 )i ion, the fig$re in the ,E54; re#ortB. !ote that this is a c$t of a third in )enefit inco(e, which is not the sa(e as a c$t in dis#osa) e (or net) inco(e for those ho$seho ds receiving disa)i ity )enefits. ?owever the 4ffice of !ationa ;tatistics has #rovided (e ()y inco(e C$inti e) with the n$()er of ho$seho ds receiving ho$seho d )enefits and their average dis#osa) e inco(e. +t needs to )e noted that these data are )ased on fair y s(a sa(# es so that the res$ ts sho$ d )e ta&en as a##ro*i(ate 9.

. "he ,ai y "e egra#h carried o$t a #o on disa)i ity )enefits. 3,:38 (112) voted that c ai(ant n$()ers have soared and the syste( is a)$sed, whi e 1,93B (382) voted that the 'overn(ent is (a&ing the v$ nera) e )ear the )r$nt of the crisis. B . ;ee A##endi* 3 for detai s of the c$ts in disa)i ity )enefits 9 . +t is #ro)a) e that in addition to sa(# ing errors, there are non0sa(# ing errors which #rovides a f$rther reason for ta&ing the fig$res as indicative.

19

"a) e 9 )e ow esti(ates the osses for each C$inti e gro$# of ho$seho ds receiving disa)i ity )enefits as a #ercentage of their average dis#osa) e inco(e.

Table . Eosses in isabilit+ benefits b+ "uintile 200./2010 ;uintiles ran2e 1 (&oorest) b+ isposable income (' per +ear) 2 / : Total (richest) ('bn) #otes 5,3 "94 6," 2,2 24,0 .)/ 2," 410 6,6 2,2 32," 0)3 1,1 115 9,6 3,2 60,1 :)/ 11): 273:0)3 2)2 2/)2 .)0 %

;uintile <

Total isabilit+ benefits ('bn) 3,8 $ousehol s recei*ing isabilit+ #umber (000) 502 2'er%+e dis%bilit* benefits (?000) ",6 1uts of % third o'er the four *e%rs ((?000) 2,5 2'er%+e dis&os%ble income (?000) 13,9 ?uts in isabilit+ benefits as , of income 11)1

5,6 benefits 934 6,0 2,0 18," 10)3

Source em%il d%ted 2u+ust 30 2012 from 3ominic 6ebber of the ;#S #otes %, see t%ble 8

-e need to add to this the changes in ta*es. "he (ost noticea) e of these in the increase in 6A" and the change in #ersona a owances anno$nced in the 5arch 3013 )$dget. "he overa effect is given in ta) e 10 )e ow. As ta) e 10 shows, the osses to ho$seho ds receiving disa)i ity )enefits are three to fo$r ti(es greater than the osses to a ho$seho ds. <or the #oorest C$inti e, the oss over the fo$r years is a staggering 1B.12 of initia inco(e a)o$t three ti(es the oss to a ho$seho ds in the #oorest C$inti e. "he oss for those in the second C$inti e is 11.:2 and is 3.9 ti(es the oss to a ho$seho ds in that C$inti e. "he oss for those in the third C$inti e is 102, a (ost fo$r ti(es the oss to a ho$seho ds in that C$inti e. +f we oo& at the ho$seho ds where so(eone is disa) ed and receiving disa)i ity )enefits in the #oorest three C$inti es the oss is esti(ated as 13.B2 of inco(e co(#ared to a oss for a ho$seho ds in the #oorest three C$inti es of 8.82.

11

Table 10 Eosses to househol s o*er the four +ears from 2011#12 through 201-#1: ;uintiles ran2e b+ isposable income (' per +ear) 1 2 / : (&oorest) (richest) #otes Eosses to househol s recei*ing isabilit+ benefits (, of isposable income) - cuts in dis%bilit* benefits 18,1 10," 9,3 6," 5,3 % - rise in @2T 1,8 1,3 1,3 1,2 1,1 b - t%9 ch%n+es in the bud+et of A%rch 2012 -0,2 -0,3 -0,6 -0," -1,0 c Total loss 1.)3 11)3 10)0 3)2 :);uintile Eosses to all househol s (, of isposable income) 0)0 =otes %, see b, see c, see d, see

-)0

2)0

1)-

2):

t%ble 9 slide " of 0ro)ne <: 2010 t%ble 3 t%ble 2

"his is the oss fro( the c$ts in )enefits and the rise in ta*es initiated )y the Coa ition 'overn(ent. +t has )een diffic$ t to esti(ate these effects, )$t when we co(e to oo& at the c$ts in )enefits0in0&ind, the esti(ates are even (ore diffic$ t. -e have seen that, for a ho$seho ds e*ce#t the richest C$inti e, c$ts in govern(ent services ()enefits0in0&ind) are far (ore i(#ortant than c$ts in cash )enefits and increases in ta*es (as shown in ta) e 9 a)ove). ?owever, it is )eyond the sco#e of this st$dy to say whether the c$ts in govern(ent services are hitting disa) ed #eo# e harder than non0disa) ed #eo# e. 4ne de#art(ent of govern(ent that is )eing c$t #artic$ ar y hard is @oca 'overn(ent and it is high y i&e y that these c$ts are hitting disa) ed #eo# e (ore severe y than non0disa) ed #eo# e. +n the re#ort of a year ago, + oo&ed at the c$ts in the services )$dgeted )y one oca govern(ent, na(e y !orfo & Co$nty Co$nci (see Edwards Dan$ary 3011, #ages 3303B). "owards the end of 3010, the Co$nci had anno$nced that it wo$ d have to c$t its net e*#endit$re )y 7131 (i ion over the fo owing three fisca years (3011K13 to 3013K18). "his c$t was >$st $nder a C$arter of the tota )$dgeted e*#endit$re of 79:9 (i ion for 3010K11. 882 of this was targeted for 3011K13, 332 for 3013K13 and 382 for 3018K19 (Eastern ,ai y %ress, 19 Dan$ary 3013). + esti(ated that so(ething i&e 789 (i ion of the 7131 (i ion wo$ d e*c $sive y affect disa) ed #eo# e in !orfo &. 5y esti(ate of the n$()er of disa) ed #eo# e in !orfo & in 3009 is 1::,000 or a)o$t 312 of the tota #o#$ ation (B93,000). "herefore at east a third of the c$ts were hitting 312 of the #o#$ ation. "he Co$nci =s EC$a ity +(#act Assess(ent on the /$dget #ro#osa s stated that G .t this early stage in the process, it is clear that the budget proposals would, if implemented in their current form, significantly impact on disabled and older 1:

residents of "orfolk, their carers and families 3!co,%, M(as card 3010). %a$ 5orse, the then eader of the @i)era ,e(ocrats, in the Co$nty Co$nci ca ed it a horror show for the vulnerable (Eastern ,ai y %ress, 19 Dan$ary 3011). "herefore it wo$ d see( that c$ts in )enefits0in0&ind (that is c$ts in ,e#art(enta E*#endit$re) are i&e y, in genera , to har( disa) ed #eo# e (ore than non0 disa) ed #eo# e. /$t here we ta&e a ca$tio$s esti(ate and ass$(e that ho$seho ds where so(eone is disa) ed and receiving disa)i ity )enefits are osing the sa(e va $e of )enefits0in0&ind as a ho$seho ds in each C$inti e. "a) e 11 s$((arises the fig$res for the c$ts in )enefits, the rise in ta*es and the c$ts in )enefits0in0&ind for the 3.:9 (i ion ho$seho ds receiving disa)i ity )enefits.

Table 11 Eosses to househol s recei*ing isabilit+ benefits o*er the four +ears from 2011#12 through 201-#1: ;uintiles ran2e 1 (poorest) 13,9 16,1 /0)0 b+ isposable income (' per +ear) 2 / : (richest) =otes 24,0 16,6 -0)0 32," 14,0 -0)3 60,1 12,0 32)1 % b

;uintile

>ase isposable income ('000) Dalue of benefits#in#2in ('000) Total income plus benefits# #in#2in ( '000)

18," 1",6 /0)/

?umulati*e cuts o*er the four +ears to 201-#1: ('000) # ta9 an benefit changes 2)3 2)2 # benefits#in#2in 2)0 2)0 # Total losses o*er the four +ears -)3 -)2 Eosses o*er the four +ears as a percentage of total income plus benefits#in#2in 10 12

2)1). -)/

/): 1)0 :)1

/)2 1): -)3

c d

11

11

=otes %, see t%ble 9 b, see t%ble 5 c, c%lcul%ted from t%bles 9 %nd 10 - for e9%m&le for those in the &oorest quintile: the loss is is 19,"B of ?13:900 d, see t%ble 5

"he oss to the ho$seho ds receiving disa)i ity )enefits and in the #oorest C$inti e is esti(ated to )e 112 of inco(e # $s )enefits0in0&ind which is very ($ch higher than the 102 esti(ate for a ho$seho ds in this, the #oorest C$inti e. "he oss for ho$seho ds receiving disa)i ity )enefits in the second #oorest C$inti e are esti(ated as 132 co(#ared to B2 for a ho$seho ds. "hese esti(ates are ad(itted y cr$de )$t are, if anything, #ro)a) y an $nderstate(ent of the osses )eing s$ffered )y disa) ed #eo# e. +t is tr$ y a horror show for disa) ed #eo# e. "his s$ffering of ho$seho ds receiving disa)i ity )enefits is )ad eno$gh. ?owever what (a&es it worse is that the A$sterity %ac&age is si(# y not necessary. "his is what we oo& at in the fo owing sections. 1B

-" The finan!ial !risis of 200./00 and ensuin* depression <or the UK, the financia crisis of 300:K0B has )een fo owed )y a de#ression which is the worst since the 'reat ,e#ression of the 1930s. /y the s$((er of 300B the UK was in recession10, then )y Dan$ary 3010 it was o$t of recession, )$t two years ater, in ear y 3013, the UK was )ac& in recession. /y the end of the second C$arter of 3013, the UK=s ',% had dro##ed )y a f$rther 12 co(#ared to the end of 3011. "he recovery fro( the financia crisis has )een #itif$ y wea&. +ndeed it has )een so wea& that nationa o$t#$t in the first C$arter of 3013 was )e ow the eve of the first C$arter of 300:. +n the 'reat ,e#ression of the 1930=s it too& five years for the ',% to get )ac& to #re0recession eve s. "he #resent recovery is certain to ta&e even onger L at east eight years 0 as shown in ta) e 13 )e ow. 11

Table 12 The UK # the 1./0s an Aeal BD! 8ear 1929 1930 1931 1932 1933 1934 1935 1936 193" 4ources 1r%fts # 2011: T%ble 1 for the 1930s (in e9) 100 99,9 94,4 95,1 96,0 102,8 106,6 109,9 114," 8ear 200" 2008 2009 2010 2011 2012

the present crisis # a comparison Aeal BD! (in e9) 100 98,9 94,6 96,6 9",2 end-<une 96,4 98,0 99,9 102,6 105,"

2012 forec%st C 2013 forec%st C 2014 forec%st C 2015 forec%st C

Du%rdi%n d%t%blo+ for re%l D3P for 200" to 2011 Du%rdi%n 25 2u+ust for end-<une 2012: follo)in+ ;#S re'ision The forec%sts for D3P %re from the ;ffice of 0ud+et !es&onsibilit* (;0!: A%rch 2012: 79ec Summ%r* %nd t%ble 1,1)

As we can see, it is on y in 3018 that tota o$t#$t is e*#ected to recover to 300: eve s and note that this is a forecast fro( the 4ffice for /$dget Res#onsi)i ity
10

. "he definition of a recession is a dro# in rea o$t#$t ('ross ,o(estic 4$t#$t or ',%) for two s$ccessive C$arters. 11 . +n ter(s of o$t#$t, the recovery is ta&ing onger. /$t $ne(# oy(ent was worse in the 'reat ,e#ression. Une(# oy(ent is now over B2, )$t in 1930 the rate was 13.32 and it re(ained a)ove 102 $nti 193:. Une(# oy(ent has not risen as fast as ',% has fa en, (ain y )eca$se of an increase in the #ro#ortion of #art0ti(e >o)s (see '$ardian, 11 A$g$st 3013).

19

(4/R) which has )een so(ewhat o#ti(istic, (ost nota) y on #$) ic )orrowing and )$siness invest(ent. +n D$ne 3013, 5ervyn King ad(ittted that 4hen this crisis began in ())+ most people did not think that we would still be right in the thick of it &uite this late# $ dont think that were yet halfway through 5## my estimate of how long it will take to recover is e%panding all the time ('$ardian, 3: D$ne 3013).

1" The publi! se!tor defi!it, the 2010 2eneral Ele!tion and the Coalition 2overnment" /y the end of 300B, the UK=s rea o$t#$t had fa en )y >$st over 12 co(#ared to a year ear ier. +n the ne*t year it fe again )$t this ti(e )y (ore than 82. +n the first ha f of 3010 it recovered s ight y, rising )y 1.32 over the si* (onths, )$t as a res$ t of the )an&ing co a#se and the )ai o$t of so(e of the )an&s )y the govern(ent in 300: and 300B, the govern(ent=s net ann$a )orrowing rose shar# y fro( 738 )i ion in 300: to 7193 )i ion in 3009. A tho$gh net )orrowing fe very s ight y to 7189 )i ion in 3010, it was sti (ore than 102 of the UK=s tota o$t#$t ('ross ,o(estic %rod$ct) co(#ared to a itt e over 32 in 300:. "his was the conte*t in which the 'enera E ection was he d on "h$rsday 5ay 1, 3010. "he res$ t was a h$ng #ar ia(ent with none of the #arties achieving the 331 seats needed for an overa (a>ority. "his was on y the second h$ng #ar ia(ent since 1989. After five days of negotiation )etween the Conservative %arty (with 301 seats) and the @i)era ,e(ocrats (with 13), the two #arties for(ed a coa ition govern(ent and on 5ay 11 3011, 'ordon /rown resigned as %ri(e 5inister. "he @a)o$r %arty was #$shed o$t after 13 years of r$ e. "he Coa ition Agree(ent dec ared that deficit reduction ## is the most urgent issue facing Britain and that 5 the main burden of deficit reduction 6be7 borne by reduced spending rather than increased ta%es# +t f$rther agreed that 5 a full 8pending 9eview should be held, reporting this .utumn J (Con0@i) 5ay 3010). "he A$sterity %ac&age was $nderway.

." The Austerity (a!)a*e announ!ements "he A$sterity %ac&age has )een i(# e(ented over the #ast two years. "here has )een, so far, no U0t$rn. /$t there wi )e. "here wi )e, )eca$se the e ectorate wi not stand for it13 . /etween 3010 and now, there have )een a n$()er of #o icy anno$nce(ents (a&ing $# the A$sterity %ac&age. +n 3010, we had a /$dget in D$ne, a Co(#rehensive ;#ending Review (C;R) in 4cto)er and a we fare refor( anno$nced in !ove()er.
13

. +t is i(#ortant to note that, in a the #revio$s e#isodes in /ritish a$sterity, no #ri(e (inister (rangeing fro( @ oyd 'eorge thro$gh Da(es Ca aghan to 5argaret "hatcher) has (anaged to (a&e a their #ro(ised c$ts (research )y %rofessor %eter "ay or0'oo)y at the University of Kent referred to in the '$ardian of 38 D$ y 3013)

30

8n :une 2010, the 4ud*et stated that the (ost $rgent tas& facing the UK was to i(# e(ent an acce erated # an to red$ce the deficit. 'iven this, the /$dget # anned for Eadditiona conso idation= of 780 )i ion a year )y 3018K19 consisting of s#ending c$ts of 733 )i ion (inc $ding 711)n of Ewe fare refor( savings=) and net ta* increases (inc $ding 6A") of 7B )i ion a year. "he increase in 6A" fro( 1:.92 to 302 in Dan$ary 3011 was e*#ected to )ring in an e*tra 713 )i ion in its first f$ fisca year (3011K13). +n addition to the s#ending red$ctions, the /$dget anno$nced a two0year #ay freeIe in #$) ic sector #ay (e*ce#t for those earning ess than 731,000 #er year) ("reas$ry D$ne 3010, 3). 8n ;!tober 2010, the Comprehensive Spendin* 6eview <CS6= anno$nced c$ts in rea ter(s of B.32 of de#art(enta c$rrent )$dgets over the fo$r years fro( 3010K11 to 3018K19 ("reas$ry 4cto)er 3010, 10). +n addition, ,e#art(enta Ca#ita /$dgets (these were a)o$t 112 of the c$rrent e*#endit$re in 3010K11) were to )e c$t )y 392 in rea ter(s. +f we foc$s on c$rrent e*#endit$re, the (a>or ,e#art(enta /$dgets which were hit hardest were @oca 'overn(ent (a rea c$t of 3:2), "rans#ort ((in$s 312), /$siness, +nnovation and ;&i s ((in$s 392) and ?o(e 4ffice and D$stice ()oth with (in$s 332) ("reas$ry, 4cto)er 3010, 10). 4f these, as we have seen, it is the c$t in the @oca 'overn(ent )$dget that is i&e y to affect disa) ed #eo# e (ost severe y since ($ch of their service s$##ort is #rovided thro$gh @oca A$thorities. "he C;R anno$nced that tota grants fro( the 'overn(ent to @oca A$thorities were to )e c$t fro( 3B.9 )i ion in 3010K11 to 733.9 )i ion in 3018K19. "his c$t of 79.1 (i ion re#resents a c$t in cash ter(s of 19.12 )$t a c$t in rea ter(s of 3:2. 8n >ovember 2010, a White (aper on welfare reform was published with refor(s d$e to co(e into force in 3013. +an ,$ncan ;(ith (-or& and %ensions ;ecretary) has #ro#osed a E$niversa credit= re# acing Do)0;ee&ers= A owance (D;A), E(# oy(ent ;$##ort A owance (E;A) and ?o$sing /enefit (,e(os, 4cto)er 3010, 11). "he centra idea is that as inco(es rise there sho$ d )e a sing e net )enefit or ta* designed to ens$re that #eo# e are a ways )etter off wor&ing. "he facts advanced to s$##ort the theory are thatF there are five (i ion c ai(s for >o) ess )enefitsF that we fare s#ending has risen )y 802 in rea ter(s over the ast decadeF and that the #resent syste( of ta*es and )enefits has disincentives )$i t into the str$ct$re. "he ast of these (ay )e tr$e )$t the govern(ent=s c ai(s that we fare s#ending is o$t of contro are far fro( tr$e. As %a$ 'regg shows ('regg 3010), the rea #ict$re that e(erges for the we fare syste( is one of ong0ter( dec ines in )oth the n$()er of c ai(s and in tota s#ending as a share of ',% ('regg 3010, 19 L see a so +<; !ove()er 3010, section 8). <$rther(ore, 'regg #oints o$t, a sing e syste( wi )e diffic$ t to introd$ce, since so(e )enefits L ho$sing )enefit, co$nci ta* )enefit, the higher va $e of )enefits for disa)i ity than for >o)see&ers, L are additiona costs that on y a## y to so(e c ai(ants. ;o the idea that there can )e one sing e syste( (essentia y one /asic +nco(e 'rant or /+') is attractive, at first sight, )$t the /+' wo$ d have to )e so high to cover every)ody that it wo$ d )e e*tre(e y e*#ensive and therefore o$t of 31

the C$estion at #resent L #artic$ ar y for this govern(ent13. As 'regg #$ts itF GThe simpler the new system, is the more it results in large numbers of losers even with substantial e%tra costs to the Treasury# The more comple% it is, the less radical a reform it represents and the less attractive it becomes J. As a res$ t, he #oints o$tF Git is not surprising that the government plans to start with only new claims ('regg 3010, 11). <o owing the state(ent of c$ts in the /$dget and then (ore c$ts in the C;R, the strategy of the Ca(eronKC egg govern(ent was descri)ed )y "ravers in ,ece()er asF G5 get the bad stuff over in ()*) and ()** so that sunlit uplands can be seen in ()*: and ()*;J ("ravers, ,ece()er 9, 3010). As "ravers goes on to say, this strategy is )rave )$t to the #oint of )eing foo hardy. Even the right0wing Econo(ist conc $ded that 'eorge 4s)orne has not got the overa fisca stance right ( conomist, 3 4cto)er 3010) and it is $n i&e y that the s$((it $# ands wo$ d )e seen in 3013 and 3018. /$t (ore a$sterity was to fo ow, #artic$ ar y for the #oor. +n 3011 there were two sets of #o icy anno$nce(ents significant y affecting #$) ic recei#ts and e*#endit$re and in 5arch 3013 there was a /$dget state(ent. 8n ?ar!h 2011, the 4ud*et anno$nced yet another red$ction in Cor#oration "a*, a rise in /an& evies, an increase in #ersona ta* a owances, a change to !ationa +ns$rance contri)$tions, a red$ction in # anned f$e d$ty, an increase in !orth ;ea 4i ta* and a red$ction in ta* avoidance. "hese, together with other (inor changes, (eant a net change of 70.3 )i ion. %a$ Dohnson of the +<; saidF .s far as public finances are concerned, the totality of measures announced in yesterdays Budget was a fiscal non2event (Dohnson, 38 5arch 3011), )$t it is worth noting that )eca$se at the ti(e of the )$dget, inf ation was higher than e*#ected, rea c$ts to govern(ent s#ending were on co$rse to )e 12 higher over the ne*t fo$r years than anno$nced in the Co(#rehensive ;#ending Review. +n >ovember 2011, the Autumn Statement anno$nced changes that were re ative y s(a for the years $# to 3018K19 a tho$gh those changes that were (ade (ost y affected ower inco(e gro$#s. Co$nci ta* was froIen in 3013013 and a two year 1 #er cent #$) ic sector #ay ca# was to fo ow the two year wage freeIe. +n addition Chi d "a* Credits were red$ced )e ow the # anned eve , other e e(ents of the -or&ing "a* Credit were froIen and # anned f$e d$ty increases were de ayed. 4s)orne a so anno$nced that he wo$ d change "U%E reg$ ations which govern the rights of wor&ers whose >o)s are #rivatised. /$t the )iggest change anno$nced )y the Autumn Statement was an e*tension of the A$sterity %ac&age )eyond 3018K19 with the anno$nce(ent that f$rther c$ts to govern(ent s#ending wo$ d )e (ade in 3019K11 and 3011K1:. "he "reas$ry anno$nced that spending will be <*= billion lower in ()*>,*+ than it would be if increased in line with inflation from ()*;,*= ("reas$ry !ove()er 3011, 8:)# "his was fo owed )y an anno$nce(ent in the 4ud*et of ?ar!h 2012 that a f$rther shar# c$t (of 710 )i ion) in we fare )enefits wo$ d )e (ade in 3019K11 and
13

. As %o y "oyn)ee #$ts itF ?eoples circumstances are complicated, and so the benefit system must be too, as it tries to grade levels as fairly as possible# Beware politicians promising simplification ('$ardian 13 Dan$ary 3013)

33

3011K1: (4s)orne C$oted in the "e egra#h of 33 5arch 3013, accessed on A#ri 3 3013). "he Coa ition 'overn(ent has therefore stated that there wi f$rther c$ts in 30190 11 and 301101: of so(ething i&e 739 )i ion in we fare and other e*#endit$re. "he other changes anno$nced in the ?ar!h 2012 4ud*et consisted of a re a*ation of the A$sterity %ac&age, (ost y for higher0inco(e gro$#s. %ersona ta* a owances were raised (a tho$gh co$ntered to so(e e*tent )y a #hasing o$t of the Age0 Re ated A owances) )$t there was a f$rther red$ction in Cor#oration "a* and a red$ction in the to# rate of inco(e ta* (co$ntered )y a rise in ;ta(# ,$ty). As ana ysed )y the +nstit$te for <isca ;t$dies, the ?ar!h 2012 4ud*et (eas$res wi )e of (ost )enefit to (idd e and $##er0(idd e inco(e gro$#s. ?owever, they e*c $ded fro( their ana ysis the dro# in the to# ta* rate and the increase in the ;ta(# ,$ty L )oth (eas$res affecting on y the very rich. + esti(ate that the dro# in the to# rate of ta* fro( 902 to 892 fro( 3013K18 wi )enefit the richest fifth of ho$seho ds )y a)o$t 0.:2 of their inco(e18 with the rise in ;ta(# ,$ty costing the sa(e gro$# a)o$t 0.12 of inco(e. "he who e #ac&age (inc $ding the dro# in the highest rate of ta* and the rise in ;ta(# ,$ty) (eant that the richest C$inti e wi gain )y 12 of inco(e. "heir gain is a)o$t 71,300 #er year or a)o$t 7119 #er wee&. /y contrast the #oorest fifth gain )$t on y )y a)o$t 7300 #er year or >$st $nder 78 #er wee&. ;o the richest fifth gain a)o$t 30 ti(es as ($ch as the #oorest fifth. "he 5arch 3013 /$dget invo ved a net ta* concession, )$t a#art fro( this /$dget, a the #o icy anno$nce(ents of the Coa ition 'overn(ent have )een #ro(oting a$sterity. "he ne*t section s$((arises the overa s$(s invo ved.

0" The !omponents of the Austerity (a!)a*e According to the '$ardian data) og of 4cto)er 3010 and ?orton and Reed 3010 (s ide :), the a$sterity #ac&age )y 3018K19 was e*#ected to tota 7B1 )i ion, consisting ofF red$ced de)t interest of 710 )i ion red$ced )enefits and ta* credits a(o$nting to 71B )i ionF other govern(ent e*#endit$re c$ts (ca these ,e#art(enta ;#ending c$ts) in no(ina ter(s of 793)n. (+n 3010K11 #rices, these were e*#ected to )e 78B )i ion).

18

. "he c$t in the to# rate of inco(e ta* fro( 902 to 892 a## ies to those with ta*a) e inco(es of (ore than 7190,000 fro( A#ri 3013. 5y esti(ate of the effect is as fo owsF the tota inco(e of the richest 30 #er cent of ho$seho ds is 9.3 (i ion ho$seho ds ($ ti# ied )y 713,000 average dis#osa) e inco(e giving a tota inco(e for that gro$# of 7333 )i ion. "he ann$a oss in govern(ent inco(e fro( the red$ction in the to# rate of ta* has )een esti(ated to )e 73 )i ion )y ?eather ;tewart in the '$ardian of 5arch 33, 3013 and 73.1 )i ion in Dohnson, 5arch 3013, 3. +f we ta&e the average of these two fig$res of 73.3 )i ion, the gain to the richest fifth is 0.: #er cent (see ta) e 3 a)ove).

33

+f we e*c $de the 710 )i ion of esti(ated savings in de)t interest and e*#ress the c$ts in 3010K11 #rices, they co(e to 71B )i ion # $s 78B )i ion giving a tota of 711 )i ion. "hese fig$res e%clude the (eas$res ta&en in the /$dgets of D$ne 3010 and of 5arch 3013. "he :une 2010 4ud*et increased 6A" (e*#ected to )ring in an e*tra 713 )i ion a year and i(# e(ented on Dan$ary 8 3011 L see '$ardian 9 Dan$ary 3013) )$t a so contained vario$s ta* giveaways tota ing 78 )i ion. As a res$ t, we have a net increase in the ta*es esti(ated at 7B )i ion #er year ('$ardian, 9 Dan 3013). "he 4ud*et of 2012 was c ai(ed to )e (ore or ess ne$tra , )$t )y (y ca c$ ations, it gave away a)o$t 79 )i ion. ;o the net effect of these two /$dgets is an increase in ta*es of 73 )i ion. "herefore the # anned change in govern(ent finance over the fo$r years (3011K13 to 3018K19 inc $sive) is a tota red$ction of 711 )i ion # $s 73 )i ion N 719 )i ion. "his consists of a net increase in direct and indirect ta*es of 73 )i ion, c$ts in )enefits of 71B )i ion and c$ts in ,e#art(enta ;#ending of 78B )i ion. "hese are the s$(s that need to )e a ocated across inco(e gro$#s. +t is worth noting at this #oint that a (inority of the c$ts in )enefits and ,e#art(enta ;#ending had )een (ade )y the end of the 3011K13 ta* year. 5y esti(ate is that ess than 302 of the c$ts in )enefitsKincreases in ta*es and ess than 802 of the c$ts in ,e#art(enta ;#ending had )een i(# e(ented )y the end of the 3011K13 ta* year. "herefore the (a>or #art of the a$sterity #ac&age (in the for( of c$ts in we fare )enefits and c$ts in other govern(ent s#ending) are sti to )e i(# e(ented. "his is #artic$ ar y tr$e if we inc $de the c$ts # anned for 3019K11 and 3011K1:. +nc $ding these, we can see that on y a)o$t a third of a the # anned c$ts were # anned to )e i(# e(ented in 3011K13 (see A##endi* 1). !ote that this inc $des the increase in 6A". ?owever the econo(y has a ready )een #$shed )ac& into recession. Oet (ore de(and is d$e to )e ta&en o$t of the econo(y at a ti(e when the econo(y is starving. +t is a #o icy of the (adho$se as the ne*t section e*# ains.

3" The Austerity (a!)a*e !auses re!ession "he a$sterity #ac&age ca$ses recession )eca$se it has invo ved (and contin$es to invo ve) c$tting #$) ic sector de(and at a ti(e when a other so$rces of de(and are drying $#. ?ere it is i(#ortant to e(#hasise that a nationa econo(y is very different fro( a ho$seho d=s econo(y (as high ighted )y Kr$g(an 3013). +f a ho$seho d is s#ending (ore than its inco(e, it wi , in the a)sence of savings, )e forced to red$ce its e*#endit$re. @et=s ass$(e that one of the ad$ ts in the ho$seho d is a # $()er (the ;(ith ho$seho d), and as a res$ t of a dro# in )$siness, the ;(iths decide to )$y ess (eat. "his (eans that the )$tcher=s inco(e dro#s and the )$tcher=s ho$seho d (the /rown ho$seho d) (ay decide to #$t off re# acing its o d centra heating )oi er. ,e(and for # $()ers fa s f$rther and the ;(ith ho$seho d decides to c$t its e*#endit$re again. "his ti(e it (ay )e eating o$t which is c$t and the 38

inco(e of the Dones fa(i y which is r$nning the cafP or resta$rant is c$t and they decide to c$t their e*#endit$re. -e can see that the econo(y as a who e is in a downward s#ira . "here is a &noc&0 on effect. "he esson is that the ho$seho ds are not inde#endent of one another. Oo$r s#ending is (y inco(e and (y s#ending is yo$r inco(e. 4f co$rse it (ay )e that each of these fa(i ies can #$t off their c$ts in s#ending )y )orrowing (ore L )y increasing their credit card de)t or )y r$nning a )an& overdraft. /$t this cannot go on for ong. ;ooner or ater the )an&s wi reC$ire these ho$seho ds to c$t their e*#endit$re as the downward s#ira gathers (o(ent$(. "he sit$ation is do$) y serio$s )eca$se it is $n i&e y that any of these )$sinesses wi thin& of investing (ore. "he )$tcher (ay have )een thin&ing of e*tending the sho#F the cafP owner (ay have )een thin&ing of e*#anding the cafP. 'iven the dro# in de(and, these # ans are i&e y to )e dro##ed or deferred. ;o #rivate invest(ent in far(s, factories and sho#s stagnates or even fa s. +n res#onse, the govern(ent (ay #rint (ore (oney so that interest rates are &e#t ow. /$t if the de(and is not there, the ;(ith and /rown ho$seho ds are $n i&e y to )e enticed into an e*#ansion of their )$sinesses )y a dro# in interest rates. Even at a very ow rate of interest, the ac& of c$sto(ers is i&e y to (a&e the( hesitate to e*#and their )$sinesses. -e have the sit$ation where #ersona cons$(#tion and #rivate invest(ent are stagnant or even fa ing. "his is what has )een ha##ening in the UK and the sit$ation is $n i&e y to change witho$t a (assive U0t$rn in govern(ent #o icy. (ersonal !onsumption ((a&ing $# 182 of the UK=s tota de(and in 3011) is $n i&e y to rise. +t is $n i&e y to rise )eca$se of the rise in $ne(# oy(ent (fro( 9.32 in 300: to over B2 in A#ri 301319), the rise in 6A", the c$ts in )enefits and the high eve of #ersona de)t. A re#ort )y the !ationa +nstit$te of Econo(ic and ;ocia Research (!+E;R) for the Reso $tion <o$ndation on $ne&uality, !ebt and 'rowth high ighted the ro e that de)t has # ayed in (aintaining cons$(#tion over the recent #ast. -hereas )etween 199: and 300:, the dis#osa) e inco(e of the #oorest 102 rose )y 1:2, their cons$(#tion rose )y 832. +f we oo& at the (idd e inco(e gro$# in the fifth deci e of inco(es, their sit$ation was s ight y )etter. ?owever even for the(, whereas their inco(e rose )y 332, their cons$(#tion rose )y 812 (see G,e)t and ineC$a ity con$ndr$(sJ, 4EC, +nsights / og, accessed on 3: D$ne 3013).
19

. 4ver the ast three (onths of 3011, $ne(# oy(ent in the UK was rising )y a)o$t 1,300 #er day. "he $ne(# oy(ent rate for the 11038 age gro$# now stands at (ore than a fifth, the highest since records )egan in 1993. <ro( D$ne 3011, 1B #redo(inant y #rivate contractors have )een given the >o) of finding e(# oy(ent and wi )e #aid )y res$ ts. 1.3 (i ion #eo# e are e*#ected to go thro$gh the -or& %rogra((e in 3011K13 and 3013K13. "he sche(e is (andatory for a those on >o)0see&ers= a owance, on e(# oy(ent s$##ort and one #arents with chi dren over five ('$ardian 10 D$ne 3011). /$t the n$()ers )eing referred to contractors are far (ore than officia #ro>ections and critics fear that the deteriorating >o) (ar&et wi (a&e the #rogra((e $ns$staina) e in its #resent for(. "he !ationa A$dit 4ffice has said that the sche(e was i&e y to he # on y 392 of those o$t of wor& rather than the esti(ated 802 ('$ardian 33 <e)r$ary 3013). +t is worth re#eating here that the rise in $ne(# oy(ent has )een s ower than the fa in ',% )eca$se of a rise in the #ro#ortion of #art0ti(e e(# oy(ent.

39

+t is c ear that #ersona de)t has risen shar# y in the UK over the #ast 10019 years and that this is not s$staina) e. A n$()er of econo(ists have e(#hasised the ro e of de)t in the c$rrent crisis (see /o* 3 )e ow). +t is c ear that #ersona cons$(#tion is i&e y to stagnate $n ess the growing ineC$a ity in the econo(y is corrected or $n ess a f$rther financia crisis goes so(e way to iC$idating the de)t. +n the #ast two decades, inco(e has shifted towards the very rich (#artic$ ar y the richest 10 #er cent), )$t the very rich s#end itt e of their e*tra inco(e on goods and services so tota #ersona cons$(#tion is i&e y to contin$e to stagnate $n ess this ineC$a ity trend is shar# y reversed. C ear y the stagnation of #ersona cons$(#tion is a (a>or #ro) e( for the /ritish econo(y, given the high #ercentage of tota de(and re#resented )y #ersona cons$(#tion. -e have seen that with #ersona cons$(#tion f at0 ining or even fa ing, the #ros#ects for private investment are ) ea&. +n 5arch 3013, the 4/R #ointed o$t that this had fa en )y 3.12 in 3010 and esti(ated that it rose )y on y 0.32 in 3011. And yet it forecast a rise of 0.:2 in 3013 and f$rther rises of 1.82, B.92 and 10.32 in the fo owing three years (4/R, 5arch 3013, #age 11). +t is worth noting that in !ove()er 3011 the 4/R had forecast that )$siness invest(ent wo$ d rise )y :.:2 in 3013 (4/R !ove()er 3011, #age 88). +n 5arch 3013 (on y five (onths ater) the forecast for the sa(e year is a rise of 0.:2. +n the ight of s$ch changes, it is hard to see how it can )e ca ed Einde#endent=, et a one Res#onsi) e. -ith the econo(y a ready o#erating with e*cess ca#acity and with the #ros#ects ) ea&, why sho$ d the #rivate sector investH "he #ros#ects then for #ersona cons$(#tion and #rivate invest(ent are wea&. C ear y at a ti(e when de)tors are trying to ower their cons$(#tion to #ay off their de)t, it is essentia that so(eone does the o##osite. +f #ersona cons$(ers and #rivate investors are not going to do it, we are eft with foreigners and the govern(ent. <irst, et=s oo& at foreign de(and. <or foreigners to # ay a ro e we want the( to increase their #$rchases fro( $s faster than we increase o$r #$rchases fro( the(. "hat is, we want to see a rise in net e ports" /$t this has not )een ha##ening. A$ite the contrary. 4ver the five years fro( 3010 to 3019, the 4/R has forecast that net e*#orts wo$ d grow )y a)o$t 79 )i ion a year. "o do this, e*#orts wo$ d have to grow twice as fast as i(#orts. +s this i&e yH "he answer ($st )e no, even tho$gh )etween the end of 300: and 5ay 3013, the #o$nd has dro##ed )y 13211 so that e*#orts and i(#ort0s$)stit$tes are (ore #rofita) e.

11

. "he rea effective e*change rate inde* for ster ing at the end of 300: was 131.: and at the end of 5ay 3013 it was 109.: (/an& for +nternationa ;ett e(ents we)site accessed in D$ y 3013)

31

4o 2 #elevera*in* debt and @balan!e sheet re!essionsA "he ro e of de)t in econo(ic crises was stressed )y Keynes (a /ritish econo(ist) in the 1930s and )y ?y(an 5ins&y (a U; econo(ist) in the 19:0s and 19B0s. 5ore recent y, a heavy e(#hasis on the high of #ersona de)t (in A$stra ia, the U;A as we as UK) can )e fo$nd in the wor& of ;teve Keen, %rofessor of Econo(ics at ;ydney, A$stra ia. ;ee #artic$ ar y the two ect$res that he gave at Ca()ridge, UK in !ove()er 3011 (goog e G;teve Keen at Ca()ridgeJ). !ote that in the UK, the #ersona de)t0to0inco(e #ercentage in the UK do$) ed fro( 89 in 19B0 to 90 in 199: and a (ost do$) ed again )etween 199: and 300B (@ans ey, A$g$st 3010, 8). A si(i ar e(#hasis on the re ationshi# )etween high eve s of de)t and the crisis can )e fo$nd in the wor& of Richard Koo of !o($ra Research, who has coined the ter( E/a ance ;heet Recession= to denote the i(#ortance and diffic$ ty of ad>$sting de)t eve s to the crisis. Koo arg$es that the #rivate sector in the UK is c$tting de)t )$t no0one is )orrowing and s#ending the savings. "his is e*act y what ha##ened in the 'reat ,e#ression when everyone was #aying down de)t and no0one was )orrowing and s#ending. +t is this de everaging of #rivate sector de)t that Koo ca s a E/a ance ;heet Recession= (Koo 3011, 33). Koo arg$es that the Da#anese govern(ent avoided a de#ression in the 1990s (ain y )eca$se the govern(ent )orrowed and s#ent the #rivate sector=s savings. ?e esti(ates that )etween 1990 and 3009, Da#an s#ent an e*tra 813 tri ion yen )$t )y so doing saved a oss of 3000 tri ion yen in o$t#$t (Koo 3011, 38). Recent research on de)t and de everaging )y 5cKinsey (the (anage(ent cons$ tancy gro$#) esti(ates that the UK faces a diffic$ t cha enge over the ne*t decade as it s ow y ad>$sts to an econo(y ess de#endent on de)t0 f$e ed growth (5cKinsey 3013). <or the critica ro e of ho$seho d de)t in the U; econo(y, see a so Kr$g(an, 3013, 89 +t has )een a co((on shared )e ief )y (any econo(ists ((ost nota) y Costas @a#avitsas of the ;choo of 4rienta and African ;t$dies at the University of @ondon) that the UK econo(y is s$ffering fro( financialisation, which has three feat$res. Birst arge cor#orations re y ess on )an&s and have acC$ired financia ca#acities of their ownF se!ond, )an&s have shifted their activities towards (ediating in o#en financia (ar&ets and transacting with ho$seho dsF third, ho$seho ds have )eco(e increasing y invo ved in the o#erations of finance. ?o$seho ds have )eco(e increasing y invo ved with finance )eca$se they have had to increase their de)t to (aintain cons$(#tion. "his is )eca$se of a stagnation or even a fa in their inco(es. A 3013 re#ort )y the Reso $tion <o$ndation ca ed 8&uee@ed Britain and which foc$ses on 9.B (i ion @ower and 5idd e +nco(e (@5+) ho$seho ds states that wages have )een f at for the ty#ica wor&er since 3003 and rea ho$seho d inco(es for this @5+ gro$# were )road y the sa(e in 3010K11 as they were in 3001K03. 3:

Recent evidence casts do$)t on getting anywhere near 79 )i ion a year growth in net e*#orts. /etween 300B and 3010, the va $e of net e*#orts (goods and services) rose )y on y a)o$t 73 )i ion (that is )y an average of 71 )i ion a year). "he record for 3011 was )etter with net e*#orts growing )y a)o$t 71 )i ion co(#ared to 3010 (4!; <e)r$ary 3013). /$t this is sti we )e ow the 4/R=s forecast and with the crisis in the 1:0nation E$roIone s owing growth there, the #ros#ects of net e*#orts resc$ing the UK econo(y are very wea& indeed. +ndeed in 5ay 3013, the UK=s deficit in the trade of goods and services was s ight y higher (at 73.: )i ion) than in 5ay 3011 (at 73.8 )i ion) (4!; we)site accessed in D$ y 3013). ;o we have a sit$ation where #ersona cons$(#tion is $n i&e y to grow, where the #ros#ects for significant growth fro( #rivate sector invest(ent are wea& and where net e*#orts are hard y changing. +n 3011, these sectors (ade $# a)o$t :32 of tota de(and. -e are eft with govern(ent cons$(#tion and govern(ent invest(ent1:, )$t >$st at the ti(e that these sho$ d )e e*#anded, they are )eing c$t. As a res$ t, a contin$ing de#ression is very ($ch on the cards for the near f$t$re. Rea o$t#$t dro##ed in the ast C$arter of 3011 and yet, at east 713 )i ion (ore c$ts are to )e (ade over the five years fro( 3013 thro$gh 301101: (see A##endi* 1). "he f$t$re of the UK econo(y is ) ea& $n ess there is a radica U0t$rn in #o icy. "he UK=s $ne(# oy(ent in 5arch 3013 was 3.: (i ion and the 4/R does not e*#ect this to fa significant y $nti at east ;e#te()er 3013. 4n the contrary, the +nstit$te for %$) ic %o icy Research (+%%R) has warned that a f$rther 100,000 wi )e (ade >o) ess )y ;e#te()er 30131B. As an U!C"A, re#ort for 3011 #$ts itF Those who support fiscal tightening argue that it is indispensable for restoring the confidence of financial markets, which is perceived as key to economic recovery# This is despite the almost universal recognition that the crisis was the result of financial market failure in the first placeJ (#age v). "he fact that ong0ter( interest rates on govern(ent )onds are ow is seen )y 'eorge 4s)orne and ,avid Ca(eron as a tri$(#h for the govern(ent. /$t this is not necessari y the sign of a strong econo(y nor even of ow de)t. After a Da#an has a very ow interest rate and yet has one of the highest ratios of de)t0to0',% for any of the rich co$ntries. "he ow interest rate facing the UK is as ($ch a f$nction of fa ing rea inco(es, the s ow0down in the econo(y and a rise in (oney s$## y. As a recent edition of the -or d /an&=s 'lobal conomic ?rospects #oints o$tF GThe world could be thrown into recession as large or even larger than that of ())-,)A# (-or d /an&, 3013). /$t as U!C"A, has #ointed o$t, a$sterity #ac&ages are not the correct ones. +nstead GThe countries threatened by recession and deflation should avoid intensified austerity measures because these are unlikely to produce the intended outcomes and could propel the world into a renewed
1:

. !ote that 'overn(ent cons$(#tion # $s invest(ent acco$nt for 3:2 of tota ',%. "his is not the sa(e as tota govern(ent e*#endit$re after inc $ding transfer #ay(ents (s$ch as )enefits). 1B . +n D$ y 3013, it was re#orted that $ne(# oy(ent had )een c$t to 3.9B (i ion, the owest eve in a year. 4n the other hand, the n$()er of #eo# e who had )een $ne(# oyed for 3 years or (ore was at a fifteen0year high.

3B

bout of recession or even into an outright depression J (U!C"A, %o icy /rief, ,ece()er 3011, #age 3) "he +nternationa 5onetary <$nd (+5<) has st$died 1:3 cases of a$sterity #ac&ages in rich co$ntries since the 19:0s and a have ed to dec ines not growth in ',% (+5< 3011). 'overn(ents co((on y $se two ways of inf $encing the econo(y at the aggregate or (acro eve . 4ne is thro$gh interest rates and (oney s$## y ((onetary #o icy). "he other is thro$gh changes in ta*es and e*#endit$re (fisca #o icy). "he UK is one of (any co$ntries now threatened )y a renewed )o$t of recession, and as a res$ t needs a (ore, not ess e*#ansionary fisca #o icy. +nstead it has )een fo owing a contractionary fisca #o icy a ongside an e*#ansionary (onetary #o icy. A (a>or ro e in (onetary #o icy has )een # ayed )y &uantitative easing# Under this sche(e, the /an& of Eng and )$ys financia assets (s$ch as govern(ent )onds) in an atte(#t to sti($ ate the econo(y. +n 3009 the AE #rogra((e was 73:9 )i ion and then in 3011 and 3013 it was e*#anded to a tota of 73:9 )i ion. ?owever for this to sti($ ate the econo(y, so(eone has to )orrow it fro( the )an&s and s#end it. @et=s oo& at so(e of the fig$res. According to the +5<, the /ritish 'overn(ent has channe ed 71.3 tri ion to the financia sector in the for( of )ai o$ts, oans and state g$arantees on )an&ers= trading ('$ardian 3 D$ y 3013). "his a(o$nts to a (ost 790,000 for every ho$seho d. "he #ro) e( is that itt e of the (oney going to the )an&s has )een ent on, and (ost of what has )een ent on has gone in the for( of oans to the #ro#erty and financia sector. "his is tr$e )oth )efore and after the crisis. +n 5arch 300B, a)o$t three0C$arters of a )an&s and )$i ding society oans went to the #ro#erty and financia sectors and in 5arch 3013, the sa(e #ro#ortion was sti going to these sectors ('$ardian 3 D$ y 3013). 4f co$rse, the (oney ent o$t for #ro#erty #$rchases (ay #$sh $# the #rices of #ro#erty19 (or #revent the( fro( fa ing), and as a res$ t, we (ay see a s(a )oost to cons$(er de(and )$t the effect is high y indirect and is i&e y to ead to another financia crisis when the ne*t )$)) e )$rsts. "herefore (onetary #o icy is of itt e $se, as even 5ervyn King has recognised. +n <e)r$ary, he was C$oted as sayingF 4hile the 0onetary ?olicy 1ommittee can use bank rate or asset purchases to ease the transition 6to a more balanced economy7, there is a limit to what monetary policy can achieve when real adBustments are re&uired (C$oted in '$ardian, <e)r$ary 19, 3013). -hat is needed are rea changes L changes in #o icies on s#ending and ta*es 0 in other words fisca #o icy.
19

. ?owever in s#ite of the atte(#ted in>ection of (oney into the econo(y thro$gh A$antitative Easing (AE), #ro#erty #rices were re#orted in D$ y 3013 to have fa en )y 1.:2, which is the argest dro# in D$ y for fo$r years ('$ardian 11 D$ y 3013). /$t the #rices of shares and )onds have )een #$shed $# )y AE )oosting the va $e of ho$seho ds= financia wea th he d o$tside #ension f$nds. According to a /an& of Eng and re#ort, 802 of these gains have accr$ed to the richest 92 of ho$seho ds (/an& of Eng and, 13 D$ y 3013)

39

?owever, $nder the a$sterity #ac&age, the govern(ent is c$tting rather than increasing de(and so the econo(y is i&e y to shrin& f$rther. A do$) e0di# recession (ay we )eco(e a tri# eLdi# recession with o$t#$t fa ing and $ne(# oy(ent rising f$rther. "his is )ad eno$gh, )$t the #rinci#a stated o)>ective of the A$sterity %ac&age L na(e y a correction of the deficit 0 is not )eing (et, as disc$ssed in the ne*t section.

10" The Austerity (a!)a*e is not even !uttin* the defi!it As + #ointed o$t ear ier, it is c ear that the @a)o$r govern(ent $nder / air and /rown were inco(#etent in not &ee#ing a c ose eye on the )an&s, a fai $re for which Ed /a s (the ;hadow Chance or) a#o ogised in the Co((ons on ;e#te()er 13, 3011. +t was Ed /a s who had dec ared in 3001F G"othing should be done to put at risk a light2touch, risk2based regulatory regime (C$oted in the '$ardian 3 D$ y 3013). /$t it was #recise y this ight0to$ch reg$ atory regi(e which was the ca$se of the financia crisis30. +t was the )ai ing o$t of the )an&s and the ens$ing #o icy which was the (a>or ca$se of the deficit31. "he charges )y the Coa ition that @a)o$r et s#ending r$n o$t of contro before the recession do not stac& $# (,o #hin, Dan$ary 3011, 3). "he cyc ica y0ad>$sted )$dget deficit in 300:K0B ()efore the )ai o$t) was ess than 12 of ',%. "he deficit grew ra#id y )eca$se of the )an&ing crash and e*#endit$res $nderta&en to co$nter the recession (,o #hin, Dan$ary 3011, 1). "herefore the )iggest cri(e of the / air and /rown govern(ents was in not reg$ ating the )an&s. "he cri(e was not in s#ending #$) ic (oney )efore the crisis. !everthe ess, as a res$ t of the )an& )ai o$t and the dro# in o$t#$t in 300B and 3009, there was a arge deficit when the Coa ition govern(ent ca(e into #ower in 3010. /y the ca endar year 3009, the UK was recording a genera govern(ent deficit of 7199 )i ion, eC$iva ent to 112 of ',%. "his was high )y EU standards even tho$gh )y the sa(e standards the UK has a reasona) e de)t0to0',% ratio. "he de)t0to0',% ratio is a so ow in UK historica ter(s. +n 3010K11, the de)t was 132
30

. +t is o)vio$s that the "ory #arty is c ose to the City of @ondon L after a , it gets ha f of its f$nding fro( the finance ind$stry. /$t the / air and /rown govern(ents were a so far too cosy with the City of @ondon. ;hort y after "ony / air eft !o 10, he was cha$ffe$red straight into a 73.9 (i ion a year #art0ti(e >o) with D% 5organ and >$st a few (onths )efore !orthern Roc& co a#sed, 'ordon /rown had to d financiersF This is an era that history will record as a new golden age for the 1ity of Condon ('$ardian 3 D$ y 3013) 31 . +n 4cto)er 300B, the @ oyds )an& and the Roya /an& of ;cot and were )ai ed o$t )y the ta*#ayers. Event$a y 719 )i ion was $sed )y the govern(ent to #ro# $# these two )an&s. "he govern(ent=s shares are >$st over 802 in @ oyds and B32 in R/;. At the end of 3011 the #ros#ective oss in these two )an&s was esti(ated at 780 )i ion. "his was the argest end0of0year #a#er oss for the two )an&s since they were )ai ed o$t. +f this oss were to )e rea ised, it wo$ d fo ow the arge oss on !orthern Roc&. !orthern Roc& was )ai ed o$t in <e)r$ary 300B and so d to 6irgin in 3011. "he ta&e0over )y 6irgin was d$e to start on 1 Dan$ary 3013. "he oss to the govern(ent on the dea with 6irgin is esti(ated at a)o$t 78B0 (i ion )$t in addition the govern(ent owns )i ions of (ortgages and other oans when !orthern Roc& was s# it into a E)ad= )an& and a Egood= )an& in 3010. +n a recent a$dit of the dea , the !ationa A$dit 4ffice conc $ded that UK ta*#ayers face osses of at east 73 )i ion on the state ownershi# of !orthern Roc& (!A4, 1B 5ay, 3013, Key <acts).

30

of ',% against 1::2 in 1933 with de)t interest #ay(ents at 1.32 of #$) ic e*#endit$re, co(#ared with 802 in 1933. "h$s the de)t stock was and is 4K. +t is the flow that was and is worrying. ,$e to the financia crisis and the )ai o$t of the )an&s, the r$nning deficit was high and so(ething had to )e done. -hen the Coa ition govern(ent ca(e into #ower in 3010, the stated ai( of the A$sterity %ac&age was to effective y e i(inate the deficit )y 3019. /$t what has, and is )eing done )y the Coa ition 'overn(ent now is st$#id y inco(#etent since it wi wor& on y very s ow y to e i(inate the deficit, if at a , and in the (eanti(e the (a>ority of the #o#$ ation s$ffer, #artic$ ar y the #oorest. As -i ia( Keegan o)served in The DbserverF GThey 3Dsborne,1leggE have effortlessly altered the tenor of the debate from whether there should be drastic cuts at a time of relatively low economic activity to the &uestion of how and where the cuts should be administered (-i ia( Keegan, Dbserver, 13 ,ec 3010). -hat is the $#shot of a thisH "he conc $sion is that not on y are the c$ts heavi y )iased against the #oor, )$t the c$ts are not even i&e y to achieve their o)>ective of ra#id y red$cing the govern(ent=s deficit. +n D$ne 3010, the 'overn(ent e*#ected net #$) ic )orrowing over the fo$r years 3011K13 to 3018K19 to )e 7303 )i ion. +n !ove()er 3011, it e*#ected this c$($ ative )orrowing to )e 7831 )i ion, a (assive rise of 7138 )i ion on the forecast of on y 1: (onths #revio$s y ("reas$ry, !ove()er 3011, #age B0). +n ;e#te()er 3011, the +5<=s <isca 5onitor had e*#ected a )$dget deficit for the UK in 3013 of :.12 of ',%. +n 5arch 3013, they were e*#ecting a )$dget deficit of B2. !ot s$r#rising y, whereas in ;e#te()er 3010, the +5< saw the UK econo(y as Gon the (endJ, )y 5ay 3013, it was warning a)o$t the ong0ter( da(age of contin$ing with the c$ts ('$ardian, 33 5ay 3013). 5ore recent y, )y D$ y 3013, it was c ear that the $nder ying trend was towards a rising rather than fa ing deficit. +n the first si* (onths of 3013, the $nder ying deficit was 71: )i ion, $# )y 7: )i ion co(#ared to the first si* (onths of 3011. + say E$nder ying= )eca$se in the first ha f of 3013, the 'overn(ent too& over the Roya 5ai =s %ension <$nds and inc $ded the assets )$t not the ia)i ities. As a res$ t, these fig$res hide the $nder ying rise in the deficit (see /$r&e 5 3013). "he $nder ying deterioration was revea ed f$rther )y the fig$res for D$ y 3013 when there was a s(a deficit co(#ared to a s$r# $s in D$ y 3011, giving an overa worsening of 73 )i ion (see '$ardian, 33 A$g$st 3013). 4n D$ y 1B, 3013, the ,ai y "e egra#h re#orted that the Chance or had # edged that s#ending c$ts wo$ d )e co(# ete )y 3019. !ot s$r#rising y, ast year, he e*tended that to 301: a(id a deteriorating econo(ic sit$ation. "hen, in an interview with ,avid Ca(eron, the "e egra#h as&ed whether this wo$ d now )eco(e a ten0year a$sterity #rogra((e and Ca(eron=s re# y wasF $ cant see any time soon whenthe pressure will be off# $ dont see a time when difficult spending choices are going to go away# (,ai y "e egra#h we)site accessed on D$ y 31 3013)

31

"he #ro) e( is that atte(#ting to c$t the deficit )y c$tting #$) ic e*#endit$re shar# y has triggered a do$) e di# recession or what Keynes referred to as the death s#ira where ta* reven$es dec ine ra#id y, $ne(# oy(ent rises ra#id y and so too do we fare )enefits, in s#ite of )eing c$t in $nit ter(s. ;$ch a death s#ira is high y i&e y as the UK is not a one in #$rs$ing fisca a$sterity. As stated, since ($ch of the E$roIone is on a def ationary co$rse, it is easy to see how the c$ts wi initiate a death s#ira in the UK. "he econo(ic oss fro( these #o icies is enor(o$s. As we saw in "a) e 10, the UK econo(y is c$rrent y o#erating at >$st $nder 32 )e ow ca#acity and in !ove()er 3011, the 4ffice for /$dget Res#onsi)i ity (4/R) e*#ected this o$t#$t ga# to re(ain at this eve thro$gh 3013K18 ("reas$ry, !ove()er 3011, :9). "his di# co(#ares with an average ann$a rea growth rate )etween 199: and 300: of 3.32 a year. "his (eans that if the growth had )een 3.32 a year fro( 300:, the ',% in 3011 wo$ d have )een a)o$t 7390 )i ion greater than it was. "his (eans that the ann$a cost of these A$sterity #o icies is r$nning at over 78,000 #er head of the #o#$ ation. "his co(#ares with a ',% #er head in 3011 of 738,000. "he res#onse of the Coa ition 'overn(ent to this is that there is no a ternative. "his is si(# y not tr$e as e*# ained in the ne*t section.

11" 4ut there are alternatives "he @a)o$r govern(ent $nder / air and /rown was inco(#etent in not &ee#ing a c ose eye on the )an&s and, as a res$ t, it was the )ai ing o$t of the )an&s which was the (a>or ca$se of the deficit. And so, as the res$ t of the financia crisis and the )ai o$t of the )an&s, the r$nning deficit was and is high and so(ething had to )e done. /$t what is )eing done now is st$#id y inco(#etent andKor )r$ta y ideo ogica . /$t if the Coa ition govern(ent=s a##roach is wrong, what then are the a ternativesH +s it the fate of (odern ca#ita is( to s$ffer fro( #eriodic crisesH "his wo$ d see( to )e the conc $sion of A an 'reens#an, the for(er head of the U; <edera Reserve. +n 5arch 3010, he stated that $ fear that preventing bubbles will in the end turn out to be infeasible# .ssuaging their aftermath seems the best we can hope for# ?olicies both private and public, should focus on ameliorating the e%tent of deprivation and hardship caused by deflationary crises (5ason 3010, 31B)# "his is a dis(a conc $sion ta&ing $s )ac& to the days of the wor&ho$se. Are there no a ternatives to thisH %a$ 5ason arg$es that the /ritish econo(y is #artic$ ar y de icate y #oised with the a(o$nt # edged )y the govern(ent to s$##ort the )an&s )eing e*ce#tiona y arge co(#ared to other rich co$ntries, which (eans that /ritain has (ore to ose than any other co$ntry fro( a g o)a do$) e di# (5ason 3010, 330). ?aving said that, he goes on to say that it is hard to see what choice the UK had other than the fina (i* of ta* raising and s#ending c$ts. 33

But 0ason is wrong on the choices# There was and still is an alternative# "he a ternative is to increase ta*es on the very rich at the sa(e ti(e as (aintaining or even increasing #$) ic e*#endit$re. "his #o icy (i*t$re wo$ d )oth c$t the deficit and generate growth since the ta* on the very rich wo$ d not c$t effective de(and33. + set o$t these a ternatives a year ago )$t they were ta&en fro( +rvin et a 3010 and they are worth re#eating, as fo owsF a 902 ta* rate on gross inco(e a)ove 7100,000 a year (at #resent it is 902 on 7190,000 or (oreF fro( the 3013K18 ta* year, it wi )e 892 on 7190,000 or (ore ). Raising it wo$ d )ring in at east an e*tra 73.3 )i ion a year $nca# !ationa +ns$rance Contri)$tions (!+Cs) so that they are #aid at 132 a the way $# the inco(e sca e 0 this wo$ d raise 79.1 )i ion a year 33 introd$ce (ini($( ta* rates for certain eve s of gross inco(e 0 this wo$ d raise 718.9 )i ion a year increase the ta* #aya) e for ho$ses in Co$nci ta* )ands E to ? L this wo$ d raise a f$rther 78.3 )i ion a year (ini(ise #ersona and cor#orate ta* avoidance )y reC$iring ta* havens to disc ose infor(ation f$ y and )y changing the definition of ta* residence L this wo$ d raise a f$rther 710 )i ion a year38. +n the Coa ition 'overn(ent=s agree(ent it was stated that The parties agree that tackling ta% avoidance is essential for the new government, and that all efforts will be made to do so, including detailed development of Ciberal !emocrat proposals (Con0@i) 5ay 3010, 3)39.

33

. A #a#er )y 5ichae K$(hof and Ro(ain Ranciere of the +nternationa 5onetary <$nd #oints o$t that ineC$a ity in the U;A grew )efore the -a ;treet crash of 1939 and again )efore the 300B crash. "he in& )etween ineC$a ity and crisis is )eca$se credit has to )e e*tended (ore and (ore to the #oor and (idd e inco(e gro$#s so that they can )$y st$ff. "his is what has ha##ened in the UK (see /o* 3 a)ove). K$(hof and Ranciere arg$e that s$ch trends have invaria) y res$ ted in a cost y financia crisis with associated )ai o$ts and financia restr$ct$ring. /y contrast redistri)$tion #o icies are (ore desira) e and efficient since they are i&e y to #revent the financia crisis in the first # ace (K$(hof and Ranciere, 3010).
33

. !ote that !+Cs have )een raised for 3011K13 )oth for the rich (fro( 12 to 32 for those earning a)ove 7B1: a wee&) and for the rest (fro( 112 to 132). "hey sho$ d )e raised for the rich fro( 32 to 132. 38 . "his is #ro)a) y an $nderstate(ent. +n the 4)server of 19 A#ri , 3013, Richard 5$r#hy esti(ated that 739 )i ion is ost ann$a y thro$gh ta* avoidance. 713 )i ion of this is avoided )y individ$a s and 713 )i ion )y the argest :00 Cor#orations. 39 . EUnreso ved= cor#orate ta* )i s of (ore than 739 )i ion have )een high ighted in a re#ort )y the Co((ons %$) ic Acco$nts Co((ittee as have Esweetheart= dea s a##arent y wor&ed o$t )etween the ta* de#art(ent and 6odafone and 'o d(an ;achs ('$ardian 31 and 38 ,ece()er 3011). "he head of Reven$e and C$sto(s (,ave ?artnett) is d$e to eave his #ost in the s$((er of 3013 with a #ension #ot worth 71.: (i ion ('$ardian 10 ,ece()er 3011). 4ver 19 ti(es as ($ch is ost to ta* avoidance at the to# than is ost to )enefit fra$d at the )otto( (Co(#ass 3009). A c assic e*a(# e of ta* avoidance is the ta*0free dividend #aid to the wife of %hi i# 'reen (owner of /?;, "o#sho# and (any other stores) of 71.3 )i ion (sic) in 3009. "he dividend was #aid )y 'reen=s co(#any, Arcadia to his non0resident, 5onaco0)ased, wife to avoid ta* (%eston 300B, 11 and 1B). "he ta* saved for the 'reen fa(i y was esti(ated at 7300 (i ion. 'reen had )o$ght Arcadia for 79.3 (i ion in 3003 so the dividend in that one year re#resented a ret$rn of 130 ti(es the initia invest(ent (%eston 300B, :3)

33

introd$ce a financia transactions ta* at a rate of 0.12 a## ica) e to a ster ing transactions L this wo$ d raise a (ini($( of 78.3 )i ion and a (a*i($( of 738 )i ion31.

;$ch refor(s wo$ d (ean that there wo$ d )e no need for s#ending c$ts since the a)ove co(es to a tota of (ore than 790 )i ion e*tra reven$e for the "reas$ry and co(#ares with the Coa ition=s (i*t$re of c$ts and ta* changes of a)o$t 719 )i ion over the fo$r years fro( 3011K13 to 3018K19. +f this 790 )i ion were not eno$gh, evies on )an& )on$ses co$ d )e increasedF and if f$rther s#ending c$ts were reC$ired, then it is defence e*#endit$re that co$ d and sho$ d )e c$t to the eve of that of 'er(any or Da#an, that is a)o$t 12 of ',% instead of (ore than do$) e that. ;$ch a c$t wo$ d )ring in at east 719 )i ion. +t is a)s$rd that a dec ining co$ntry i&e the UK sho$ d have troo#s in first +raC, and then Afghanistan. "he sco#e for raising reven$e )y higher ta*ation on the rich is enor(o$s. "he richest fifth of a ho$seho ds has, since 19B:, #aid a ower #ro#ortion of their inco(es in the for( of ta*es than the #oorest fifth (see @ans ey 300B, 31) and in 5ay 3013, it was re#orted that over the #ast three years the wea th of the richest 1,000 #eo# e in the UK increased )y 7199 )i ion (;$nday "i(es Rich @ist C$oted in '$ardian 3 5ay 3013). ?igher ta*ation of the rich wo$ d not on y red$ce ineC$a ity, )$t it co$ d a so he # to generate growth if, say, ha f of the reven$e raised were to )e #$(#ed )ac& into the econo(y thro$gh govern(ent e*#endit$re. "he ta*ation of the rich wo$ d do itt e to red$ce #ersona cons$(#tion since, at the (argin, the rich s#end itt e on #ersona cons$(#tion. "herefore s$ch a #attern of ta* changes (acco(#anied )y a reversa of the c$ts anno$nced )y the Coa ition 'overn(ent) wo$ d )ring the UK o$t of recession whereas the Coa ition=s #resent (i* of s#ending c$ts and ta* rises is i&e y to #ro ong recession. ;$ch a #attern is a so fairer and wo$ d go so(e way to reversing the ineC$a ity trend in the /ritish econo(y. 4ne indication of increasing ineC$a ity in the UK is the increase in the ratio of the inco(e of the richest C$inti e to that of the #oorest. "his has risen fro( 9.3 in 1998K99 to 1.0 in 300BK09 (,-% 3010, 39). 4ver the ast decade, the #oorest tenth of the #o#$ ation have, on average, seen a fa in their rea inco(es after ded$cting ho$sing costs. +n other words, after ad>$sting for inf ation, their inco(es are s ight y ower than a decade ago (#overty.org we)site accessed on 19 ,ec 3010). /etween 19:0 and 3009, the )efore0ta* inco(e of the richest 12 in the UK increased )y (ore than 1B02. 4ver the sa(e #eriod, the share of the richest 12 in after0ta* inco(e in the UK has (ore than do$) ed (%C;, 3013, 3,3). Again, it is worth e(#hasising that the officia statistics $nderstate the level of ineC$a ity in the UK (see /o* 1) and (ay even $nderstate the growth of ineC$a ity, since it is
31

. ;$ch a "o)in ta* (first #$) icised )y the U; econo(ist, Da(es "o)in) has )een #ro#osed )y the <rench and 'er(an govern(ents )$t re>ected )y the /ritish govern(ent. <or (ore on <inancia ;ector "a*es, see ,o #hin D$ne 3010.

38

invest(ent inco(e which is vast y $nderstated and it is this for( of inco(e that has grown the fastest over the #ast decade or so. @et=s #$t it (ore si(# y. + esti(ate that the osses for the #oorest ha f of disa) ed #eo# e over the fo$r years to 3018K19 wi )e 73,800 (fro( "a) e 9). A)o$t 73,000 of these osses wi co(e fro( c$ts in govern(ent services, the rest fro( c$ts in )enefits and increases in ta*es. "his is for ho$seho ds whose average dis#osa) e inco(e is $nder 718,000 #er year. Co(#are the sit$ation of this #oorest ha f of disa) ed #eo# e with that of the richest 102 of ho$seho ds. "heir average wea th is (ore than 71.: (i ion #er ho$seho d, their tota wea th 78.9 tri ion2.. A one0off ta* of on y 102 on this wo$ d raise 7890 )i ion, eno$gh to #ay off 802 of the UK=s !ationa ,e)t and (ore than three ti(es the c$rrent ann$a )orrowing )y the govern(ent. "his is a that is reC$ired to #revent a recession and to reverse a oss of 73,800 #er ho$seho d over fo$r years for the #oorest ha f of disa) ed #eo# e. A that is needed is a ta* of E10 fro( 10= L a ta* of 102 on the wea th of the richest 102. As Dean0@$c 5e enchon (one of the candidates in the <rench %residentia E ection) #$t itF 5we have to smash this preBudice that the rich are useful Bust because theyre rich ('$ardian, : A#ri 3013) 12" Are we all in this to*ether' The hypo!risy of the Coalition 2overnment ,avid Ca(eron, in his first s#eech as %ri(e 5inister to the Conservative %arty Conference on 4cto)er 1 3010, said that Gwe are all in this togetherJ. ?e a so said that G$t is FrightF that those with broader shoulders bore a larger share of the burden of reducing the deficit, and the 'overnment would always aim to ensure measures to cut spending were FfairF. "his stated ai( of the Coa ition 'overn(ent has c ear y not )een achieved and the (eas$res to c$t s#ending are #atent y not fair. "hose with )roader sho$ ders L the rich 0 are not )earing a arger share of the )$rden of red$cing the deficit. As we have seen, the c$ts anno$nced in 3010, 3011 and 3013 wi red$ce the iving standards of the #oorest )y a ($ch greater #ercentage than those of the richest. "he Coa ition 'overn(ent=s c ai( is that we are a in this together is nonsense. "he osses fro( the a$sterity #ac&age for the richest fifth of ho$seho ds are on y 82 of their dis#osa) e inco(e # $s )enefits0in0&ind whereas the osses of 73,9:9 for the #oorest fifth of ho$seho ds is eC$iva ent to >$st $nder 102 of their dis#osa) e inco(e # $s )enefits0in0&ind (see ta) e 9). "herefore the #oorest fifth is )earing two and a ha f ti(es the )$rden of the richest fifth fro( the c$ts in cash )enefits, rise in ta*es and c$ts in )enefits0in0&ind.

3:

. "he tota wea th (#ro#erty, financia , #hysica L vehic es etc L and #rivate #ensions) of the richest 102 of ho$seho ds (3.1 (i ion of the() in 300B030010 was 78.9 tri ion L that is 78,900,000,000,000 (see 4!; D$ y 3013, "ota -ea th 3). "he tota wea th of a the ho$seho ds in the UK was 710.3 tri ion so the richest 102 had 882 of the tota wea th. /y contrast, the net wea th of the #oorest 102 was 7:.1 )i ion or ess than 12 of the UK tota .

39

As has )een high ighted, for disa) ed #eo# e within the #oorest fifth, the oss is even greater. Even )efore the c$ts, their average inco(es were ower and their >o) o##ort$nities worse. ;o whichever way one oo&s at the fig$res, disa) ed #eo# e are the hardest hit3B. "he Coa ition 'overn(ent is a rich (an=s govern(ent in two senses. <irst, the individ$a (e()ers of the Ca)inet are very rich (see )o* 3 )e ow) and, second, they are serving the short0ter( interests of the very rich.

4o 3 The wealth of the Coalition Cabinet <and espe!ially the (rime ?inister= +n 3010, 33 of the 39 (e()ers of the Ca)inet were (i ionaires. "he @i) ,e(s on the Ca)inet were >$st as wea thy as the "ories (5ai 4n ine, 33 5ay 3010 accessed on 13 Dan 3013). ;ee the 5ai =s we)site for f$rther detai s on the individ$a s )$t c ear y one of the richest is the %ri(e 5inister, ,avid Ca(eron. @i&e others in the Ca)inet, ,avid Ca(eron went to Eton ;choo where the ann$a fees are now a)o$t 731,000 #er year # $s e*tras for ($sic, )oating c $), ho$se s$)scri#tions and others. "he average dis#osa) e inco(e of a ho$seho d (non0eC$iva ised) in the UK in 3009K10 was a)o$t 731,900 (Reso $tion <o$ndation 3013, 11) so that the fees at Eton for one st$dent are a)o$t eC$a to the who e of the average ho$seho d inco(e in the UK. ,avid Ca(eron=s wea th is a eged to )e (ore than 730 (i ion. "he 5ai on ;$nday disc osed that he #aid off the 7:9,000 (ortgage on the 71.9 (i ion ho(e in !orth Kensington, @ondon, that he owns with his wife ;a(antha, after they too& o$t a 7390,000 ta*#ayer0f$nded ?;/C (ortgage on his designated 4*fordshire constit$ency second ho(e. Ca(eron c ai(s he was a) e to #ay off the (ortgage on his @ondon ho(e )y se ing shares. /$t he is sti o#en to the charge that so(eone whoQs c ear y worth a few )o) was Q# ayingQ the syste( )y c ai(ing (ore than 731,300 fro( ta*#ayers in 30090 3001, for the (ortgage interest #aid on his constit$ency ho(e (5ai 4n ine we)site 1 D$ne 3009, accessed on Dan$ary 31 3013).

"he wea thy sit$ation of the (e()ers of the Coa ition Ca)inet is in star& contrast to the sit$ation of disa) ed #eo# e (see )o* 8 )e ow L for other, detai ed case st$dies, see ,E54;, ;$((er 3013).
3B

. <$rther(ore it sho$ d )e noted again 5#that no adBustment is made to disposable household income to take into account any additional costs that may be incurred due to the illness or disability in &uestion# This means that the position in the income distribution of these groups, Ras shown in ta) e 3 a)oveS, may be somewhat upwardly biased (,-% 5ay 3011, 39)#

31

4o + Case studies of disabled people <ro( Dane Ca(#)e ('$ardian, 1 5arch 3013) $ am reminded every day of the tremendous progress made over the last :) years in the GH to enable disabled people to become active citi@ens# .utonomy and freedom would not have been part of my vocabulary half a century ago# $ might have been reliant upon my family for support, with the prospect of being put in an institution when they could no longer cope# $nstead, at =(, $ am an independent crossbench peer and member of the Ioint 1ommittee on /uman 9ights 3I1/9E which reports today on its *(2 month in&uiry into the right to independent living for disabled people# "ow decades of positive progress are at risk of being reversed as economic austerity is used as Bustification for denying independence# $f my local authority cuts my care package, $ lose control of my life# $ might have to leave parliament, or give up work altogether 3because $ need social work payments to do everything from eating a sandwich to delivering a speechE# $ am only a few bureaucratic decisions away from returning to the ine&uality $ endured at *-#

<ro( the '$ardian of 31 D$ne 3013 Iulie 1awardine, ;(, from 1aerphilly in 4ales, suffers from fibromyalgia, an all2over muscular ache, and has three herniated discs in her neck# 8he developed depression, commonly associated with her condition# But, she says, it was her battle with the benefits and tribunals system that had tipped her over the edge when she attempted suicide in Ianuary#

"he Coa ition 'overn(ent is not on y a rich (an=s govern(ent. +t is a so a hy#ocritica one. +t ca(e to #ower in 5ay 3010 and i((ediate y )egan i(# e(enting a series of refor(s, (ost of which were not in the E ection 5anifestos of either the @i)era ,e(ocrats nor the Conservative %arty. Ca(eron=s (anifesto for the e ection #ro(ised no c$t in the disa)i ity a owance and he said G$ would never do anything to hurt disabled childrenJ (C$oted '$ardian, 13 Dan$ary 3013). +n the '$ardian of Dan$ary 1: 3013, E((a <ord descri)ed how )efore the E ection in 5ay 3010, she had e*#ressed her worries a)o$t a #ossi) e c$t in )enefits )y the Conservatives and how <rancis 5a$de (her 5% and now a Ca)inet 5inister) had reass$red her )y sayingF GJou know about !avid 1amerons son, thats why you know theres no way were going to harm disabled children like yours ('$ardian 1: Dan$ary 3013).

3:

-hat has ha##ened since Ca(eron got in as %ri(e 5inisterH ?is govern(ent has to d horror stories a)o$t the rising )enefits )$dget and not disco$raged stories of disa)i ity fra$d, even tho$gh the ,e#art(ent of -or& and %ensions fig$res show fra$d on the ,@A to )e on y 0.92. ;i(i ar y the fra$d for +nca#acity /enefit is a so on y 0.92 (5cAndrew 3011, 3). 5cAndrew #oints o$t the fra$d on these )enefits is the owest for any we fare )enefits. <$rther(ore 5cAndrew saysF it should be noted that the figures for official error for both benefits are actually higher than the level of fraud, at *#+K for $ncapacity Benefit and )#-K for !C. (5cAndrew 3011, 3). !ot on y is fra$d s(a er than officia errors, )$t so(e )enefits are not c ai(ed, as the ,-% itse f has #ointed o$tF G##there is research evidence that some eligible people do not claim benefits either because they do not see themselves as disabled, or because they prefer not to be dependent on state support 3 ,-% 3010, B). +n 3003, +ain ,$ncan ;(ith (the then Conservative %arty eader) so$ght to re)rand the "ories at the %arty=s ;#ring Conference as Gthe party for the vulnerableJ ('$ardian 8 Dan$ary 3013). ?e had >$st #aid a visit to the de#rived Easterho$se estate in ' asgow where he was (oved and shoc&ed )y what he saw. ?e said that the "ories wo$ d not )e Gthe party that drives past asterhouse on the motorway J and he dec aredF G. nation that leaves its vulnerable behind diminishes its futureJ ('$ardian 8 Dan$ary 3013). ?e is now the Coa ition=s -or& and %ensions ;ecretary and it is $nder his watch that the c$ts in )enefits are ta&ing # ace. +n D$ne 3013, /o) ?o (an, the co(($nity activist who too& +ain ,$ncan ;(ith aro$nd the estate=s co(($nity #ro>ect, ca ed on the 5inister to resign and )eco(e a ca(#aigner for the end of #overty ('$ardian, 30 D$ne 3013).

13" The !uts are !ounter,produ!tive" "he A$sterity %ac&age is ca$sing distress to the #oorest. "hat is )ad eno$gh. "he A$sterity %ac&age is ca$sing h$ge osses in nationa o$t#$t. "hat is )ad eno$gh. ?owever, on to# of a these, the A$sterity %ac&age is co$nter0#rod$ctive at the eve of the individ$a . At this eve , the A$sterity %ac&age is co$nter0#rod$ctive )eca$se disa) ed #eo# e, de#rived of their )enefits, are i&e y to end $# in hos#ita and the cost to the 'overn(ent of their treat(ent, es#ecia y for #eo# e over 19, is i&e y to #rove to )e greater than the c$ts in )enefits. At this eve , the A$sterity %ac&age is co$nter0#rod$ctive )eca$se disa) ed #eo# e, de#rived of s$##ort services, are ess i&e y to )e a) e to wor& so that they )eco(e (ore de#endent, not ess, on )enefits. An esti(ated 39,000 #eo# e wi have to give $# wor& when they ose ,@A, and whereas the "reas$ry wi gain 790 (i ion fro( the ,@A c$t, it wi ose 718: (i ion in ost ta*es ass$(ing that the 39,000 #eo# e are on average #ay ('$ardian 38 A$g$st 3013). "he A$sterity %ac&age is 3B

co(# ete y (ad )eca$se on to# of a these #ro) e(s, the %ac&age is not even (eeting its stated o)>ective of red$cing the deficit. 1+" The Austerity War and the need for a!tion As stated, the Coa ition 'overn(ent consists of very rich #eo# e ((ost y (a e) #$rs$ing the short0ter( interests of the very rich. /$t there is a so a high eve of inco(#etence in the govern(ent if we )e ieve what so(e in the 'overn(ent say. <or e*a(# e ,avid Ca(eron is re#orted to have said that things are proving harder than anyone envisaged ('$ardian 30 !ove()er 3011). "his is in s#ite of n$(ero$s warnings fro( econo(ists ()oth !o)e #riIe0winners and others) forecasting for so(e ti(e that the econo(y is i&e y to (ove into a do$) e0di# recession. +t is on y the (ost e*tre(e of neo0 i)era econo(ists who co$ d )e ieve that the ac& of de(and fro( the (ass of cons$(ers and the govern(ent wo$ d )e offset )y fi*ed invest(ent and net e*#orts )y the #rivate sector. +t is on y the (ost e*tre(e of neo0 i)era econo(ists who co$ d )e ieve that ra#id c$ts in the govern(ent deficit wo$ d )e co(#ati) e with econo(ic growth. "he (ass of econo(ists (@i)era , Keynesian and 5ar*ist) )e ieved, and sti )e ieve, that the actions of the govern(ent wo$ d )ring a)o$t another recession and that the deficit wo$ d )e s ow to c ose with the contin$ation of s$ch idiotic #o icies. -e have seen ear ier that the (a>or #ro) e( of the UK econo(y is one of de everaging de)t whether it is the de)t of ho$seho ds, govern(ent or financia instit$tions. +neC$a ity has to )e drastica y red$ced and the financia isation of the econo(y ro ed )ac& )$t these changes are $n i&e y $nder a Conservative0 ed 'overn(ent given that the financia services sector now #rovides ha f of a "ory #arty f$nds (the we)site of the /$rea$ of +nvestigative Do$rna is(, ;e#te()er 30 3011 accessed on 31 Dan$ary 3013). +s the govern(ent inco(#etent or ) ind y #$rs$ing the interests of the richH +t co$ d of co$rse )e )oth. +t (ay )e so intent on #$rs$ing the short2term interests of the very rich that it ends $# )eing thrown o$t of govern(ent, )$t in the (eanti(e having inf icted h$ge da(age on the UK econo(y. -e saw in section 10 that the govern(ent=s def ationary #o icies ca$sed a oss in 3011 of 7390 )i ion to the /ritish econo(y. +n section 9, we saw that the di# in o$t#$t, starting in 300:, is i&e y to e*tend over at east : or (ore years. "he average di# in o$t#$t over this #eriod is i&e y to average (ore than 3.92 of ',%. Even if we ass$(e that with (ore e*#ansionary #o icies, an average growth rate of on y 1.92 a year co$ d have )een achieved, the oss to the UK econo(y fro( the inco(#etent #o icies a(o$nts to 82 a year over : or B years or a)o$t 302. "his is eC$a to 7890 )i ion or (ore than 71:,000 for every UK ho$seho d. Action is )ad y needed to end this A$sterity -ar. Action is $nderway. +n recent years, there has )een a strea( of re#orts on the (a 0distri)$tion of inco(e in the UK. 5any of these re#orts have )een #rod$ced )y gro$#s of disa) ed #eo# e andKor )y gro$#s re#resenting disa) ed #eo# e. "here has )een considera) e o##osition to the -e fare Refor( in the ?o$se of @ords. "his o##osition needs to contin$e and e*#and. + a( confident that it wi . 39

Appendi 1C The Austerity (a!)a*eC the planned !uts "a) e A.1 s$((arises the c$ts and s# its the( )etween those which were # anned for 3011K13, those # anned for the three years (3013K13, 3013K18 and 3018K19) and those # anned for 3019K11 and 3011K1:.

Table &)1 The total &usterit+ !ac2age (' billion) 8ears< 2011/12 2012/1/ 4ub#total H201//1H201-/1: Ta9es an >enefits 1/)1)1 21): ?uts in Departmental 4pen ing 13)0 /0)0 -3)0 Total &usterit+ !ac2age /0)/1)1 01): !ercentage -:0 100 !ercentage // -1 =otes; a) ?alculate from tables 2 an 0 b) ?alculate from tables - an 0

201:/10 H2010/13 10)0 1:)0 2:)0 23

Total

=otes

/1): 02)0 ./): 100

% b

"he ta) e shows that )y the end of 3011K13, a)o$t 882 of the tota c$ts # anned to the end of 5arch 3019 were # anned to have )een i(# e(ented. +f the additiona c$ts anno$nced for 3019K11 and 3011K1: are inc $ded in the overa A$sterity %ac&age, on y a third of the tota c$ts have )een i(# e(ented )y the end of the 3011K13 ta* year.

Appendi 2C The !uts in disability benefits and the 5ob prospe!ts for disabled people /etween 1999 and 3010 there was a ra#id growth in the n$()er of #eo# e in recei#t of disa)i ity )enefits. +n 1999, 92 of the #o#$ ation was receiving disa)i ity )enefits. /y 3010, this had risen to 102 (,-% D$ne 3013, :3). "his is not )eca$se there was an increase in the #ro#ortion of fa(i ies in which so(eone was disa) ed. "hat #ro#ortion has re(ained (ore or ess constant at a)o$t 3B #er cent. 4ver the sa(e fifteen years, there has a so )een a growth in disa)i ity )enefits #aid. +n rea ter(s the growth has )een fro( 733 )i ion in 1999K91 to 73:.3 )i ion in 3010K11. "his is a rea rise of 79 )i ion or >$st $nder a C$arter over the fifteen years. -hat are the reasons for this growthH <irst, an ageing of the #o#$ ation. ;econd, a recognition that #eo# e with i(#air(ents need s$##ort if they are not )e (argina ised, )$t third, #eo# e with i(#air(ents are not getting s$fficient s$##ort to ena) e the( to wor& where they are of wor&ing age, so they are re $ctant y de#endent on )enefits. 80

@et=s ta&e a oo& at each of these. <irst, the ageing of the #o#$ ation. +n the (id0 1990s the #ercentage of the UK #o#$ ation over 19 years of age was 112 of the tota F )y 3010 it had grown to 302. ;ince this is the age0gro$# which has the highest #ro#ortion of disa) ed #eo# e, the ageing #o#$ ation wo$ d tend to generate an increase in disa) ed #eo# e. ;econd, it is c ear that #eo# e with i(#air(ents have not o)tained s$fficient s$##ort to #revent the( )eco(ing (argina ised. ,isa) ed #eo# e have a ways )een a(ong the #oor, if #oor is defined as those iving )e ow 102 of the (edian ho$seho d inco(e. +n the (id01990s, a)o$t a third of #oor ho$seho ds were fa(i ies where so(eone was disa) ed. +n 3009K10, the sa(e #ro#ortion was sti in #overty (,-% D$ne 3013, :B). !ote that a third is a)o$t fo$r #er cent (ore than their #ro#ortion in the #o#$ ation as a who e. "hird, it is c ear that the ac& of s$##ort and the ac& of >o)s for disa) ed #eo# e transfor( i(#air(ents into disa)i ity. "his #oint is worth e*a(ining in (ore detai . "here are 9.8 (i ion disa) ed #eo# e of wor&ing age (,-% D$ne 3013, 13). "his is 8:2 of a disa) ed #eo# e. "he ta) oid #ress in this co$ntry freC$ent y )angs on a)o$t this gro$# of disa) ed #eo# e s&iving, saying that disa) ed #eo# e are fit to wor& )$t avoid doing so (see )o* 9 )e ow) 4o - The employment of disabled people and the lies of the press As stated in the re#ort of the ,isa)i ity /enefits Consorti$(, on y a s(a #ercentage of disa) ed #eo# e do not want to wor&. "his wi ingness is in star& contrast to co((ents in the ta) oid #ress, as fo owsF !ear y 3 (i ion on sic&ness )enefits for years co$ d )e fit to wor&F ,ai y 5ai 19 5arch 3011 :92 on sic& are s&ivingF ,ai y E*#ress, 31 Dan$ary 3011 800,000 Ewere trying it on= to get sic&ness )enefitsF 982 of the reci#ients of inca#acity )enefits can wor&F ,ai y 5ai , 1 <e)r$ary 3010 "wo0thirds on disa)i ity )enefits are fit to wor& L costing ta*#ayers 7900 (i ionF ,ai y 5ai 1 <e)r$ary 3010 D$st one in 30 )enefit a## icants E#er(anent y $na) e to wor&=F ,ai y "e egra#h, 18 4cto)er 3009 9 o$t of 10 on the sic& we eno$gh to wor&F "he ;$n, 18 D$ y 3009

(;o$rceF ,/C 5arch 3011, : and the '$ardian, <e)r$ary 1, 3013) %erha#s it is not s$r#rising, given this sort of #ress coverage, that the n$()er of disa)i ity hate cri(es re#orted to the #o ice in Eng and and -a es has reached a record high in recent (onths ('$ardian 13 A$g$st 3013)

81

"his is r$))ish. +t is tr$e that disa) ed #eo# e are significant y ess i&e y to )e in e(# oy(ent than non0disa) ed #eo# e and the trend shows that there has consistent y )een an e(# oy(ent rate ga#. +n 3010, 8B2 of disa) ed #eo# e of wor&ing age were in e(# oy(ent co(#ared to ::2 of non0disa) ed #eo# e , <$rther(ore disa) ed #eo# e were far ess i&e y to )e wor&ing in f$ 0ti(e >o)s L 382 co(#ared to 992 for non0disa) ed #eo# e (fig$res fro( !isability &uality $ndicators co ected )y the 4ffice for ,isa)i ity +ss$es 0 see 4,+, 3011). ?owever the sa(e so$rce (!isability &uality $ndicators) a so #oints o$t that disa) ed #eo# e in e(# oy(ent are as i&e y as non0disa) ed #eo# e to want to wor& (ore ho$rs and the ,isa)i ity /enefits Consorti$( #oints o$t that on y 82 of those not in wor& said that they do not want to wor&. "his is in star& contrast to the (edia #ortraya of )enefit c ai(ants as re $ctant to wor& (see again /o* 9). "he >o)s are si(# y not avai a) e east of a for disa) ed #eo# e and it is the govern(ent=s #o icies that are ens$ring that they are not avai a) e. +t is i(#ortant to note that for those of wor&ing age, it is the ac& of >o)s which itse f generates disa)i ity, a #oint (ade )y 4wen Dones in his recent )oo&, 1havsL the !emoni@ation of the 4orking 1lass (Dones, 3011)# Dones descri)es how the n$()er of c ai(ants on +nca#acity /enefit grew five0fo d )etween 1913 and 3009 (Dones, 3011, 19:). Dones arg$es that it is se f0evident that society is hea thier in those 81 years, so how can we e*# ain the growthH ?e says that #art of the e*# anation is that inca#acity )enefit was $sed to cover $# the $ne(# oy(ent fig$res )etween 19:9 and 199: (the #eriod of the "hatcherK5a>or govern(ents). ?e C$otes +ain ,$ncan0 ;(ith as sayingF Dver the years, $B was, to some degree, used as a way of slightly getting out of the unemployment figures and not being overly honest (Dones 3011, 19:,19B) Dones goes on to #oint o$t that the +/ c ai(ants have )een concentrated in the o d ind$stria areas of the !orth of Eng and, -a es and ;cot and. ?e oo&ed at the research of two a)o$r (ar&et e*#erts (/eatty and <othergi ) who did a s$rvey on the iss$e and who conc $ded that the GHs very high incapacity claimant numbers are an issue of Bobs and of health (see Dones, 3011, 199 L the e(#hasis is in the origina ) Dones #oints o$t that ' asgow is a #artic$ ar y stri&ing e*a(# e of how the de0 ind$stria isation of /ritain has eft contin$ing, )$t #artia y disg$ised, (ass $ne(# oy(ent in its wa&e. A gro$# of ' asgow University and City Co$nci #eo# e oo&ed at how the n$()er of inca#acity )enefit c ai(ants increased d$ring the 19B0s and conc $ded GThe main reason for the huge growth in sickness benefit claims was the citys rapid de2industriali@ation (C$oted in Dones, 3011, 199) Dones #oints o$t that the #ro) e( i(#roved in ' asgow in the #eriod fro( 3000 to 3010 as the n$()er of disa)i ity )enefit c ai(ants dro##ed fro( three ti(es to do$) e the nationa rate (Dones 3011, 199). "he &ey finding was that the dec ine was #ri(ari y d$e to a strengthening a)o$r (ar&et.

83

4f co$rse there are #eo# e who # ay the syste( and fa se y c ai( )enefits. "he right0wing #ress (which is, of co$rse, (ost of it) re ishes h$nting down the (ost o$trageo$s e*a(# es of fra$d (see /o* 9). /$t it is i(#ortant to note that the fra$d is s(a , as stated ear ier. +t is $nacy to c assify #eo# e with i(#air(ents as a) e to wor& and yet at the sa(e ti(e to c$t their disa)i ity )enefits when at the sa(e ti(e the econo(y is in a do$) e0di# recession and $ne(# oy(ent is high. Oet this is what the govern(ent is doing. "he c$ts in disa)i ity )enefits anno$nced in 3010 were the fo owingF A ca# on ho$sing )enefitsF A change in the )asis for $#rating )enefits L inc $ding +nca#acity /enefit, ,isa)i ity @iving A owance, Carer=s A owance and ?o$sing /enefit L )y $sing the Cons$(er %rice +nde* instead of the Retai %rice +nde*. "his is a c$t )eca$se the Cons$(er %rice +nde* tends to rise at a s ower rate than the Retai %rice +nde*. /etween 3001 and 3010, the C%+ rose at an ann$a average of 3.12 co(#ared to 3.B2 #er year for the R%+F A reassess(ent of a 3.9 (i ion +nca#acity /enefit c ai(ants $sing the high y contested -or& Ca#a)i ity Assess(ent, with the ai( of (oving those fo$nd fit to wor& to E(# oy(ent ;$##ort A owance (E;A). "he E;A is eC$a to the Do) ;ee&ers A owance for the first 13 wee&s and then de#ending on the res$ ts of the assess(ent, the c ai(ants are s# it into a s$##ort gro$# and a wor&0re ated activity gro$#. "he atter (assessed as fit for wor&) receive a ower rate of E;AF "o reassess a c ai(ants of ,isa)i ity @iving A owance (,@A) $sing a (edica assess(ent si(i ar to the -or& Ca#a)i ity Assess(entF "o rea ign the ;$##ort for 5ortgage +nterest #ay(ents.

<$rther dra(atic deve o#(ents too& # ace in <e)r$ary and 5arch 3013 when the -e fare Refor( Act (-RA) was #$shed thro$gh %ar ia(ent. "he -RA had a stic&y #assage thro$gh the ?o$se of @ords and so(e concessions were (ade )$t s$)stantia a(end(ents were re>ected )y the 'overn(ent. "o do this, the 'overn(ent invo&ed Efinancia #rivi ege=, an archaic reso $tion dating fro( the year 11:1 $nder which the #owers of the ?o$se of @ords are sC$ashed (,E54;, ;$((er 3013, 39). ,E54; s$((arises the &ey e e(ents of the -RA (ost i&e y to affect disa) ed #eo# e asF A new %ersona +nde#endence %ay(ent (%+%) to re# ace the c$rrent ,@A fro( A#ri 3013, )$t )$i t within it is a target to red$ce ,@A s#ending )y 302F ?o$sing /enefit to )e red$ced for socia ho$sing tenants whose acco((odation is arger than neededF the E$nder occ$#ation= #ena ty wi affect 182 of socia rentersF %ay(ent of contri)$tory E;A for those in the -or& Re ated Activity 'ro$# (-RA') to )e i(ited to a 130(onth #eriodF 83

"he tota a(o$nt of )enefit that can )e c ai(ed to )e ca##ed at 731,000 a year. "he ,-% esti(ates that, )y 3018K19, a)o$t :9,000 ho$seho ds wi )e affected )y the (eas$reF Universa Credit to introd$ced to re# ace si* (eans0tested )enefits and ta* credits for #eo# e of wor&ing age fro( A#ri 3013 (,E54; ;$((er 3013, 33)

"he #ro#osed changes were shar# y criticised in a re#ort #$) ished in 3013 and entit ed 9esponsible 9eform (Ca(#)e et a 3013). A)o$t three years ago, one of the a$thors, ;$e 5arsh, started her own ironica y0tit ed ) og, !iary of a Benefit 8crounger, to (onitor the #ro#osed c$ts to disa)i ity )enefits. 9esponsible 9eform fo$nd that the 'overn(ent #resented a high y (is eading view of the cons$ tation carried o$t on this change. "he govern(ent had c ai(ed that ,@A fig$res had risen )y 302 in eight years. "he re#ort=s ana ysis showed this was an overstate(ent. +ndeed the govern(ent ad(itted that their c ai( gives a distorted view and yet contin$ed to $se the fig$re when #$shing for refor( ('$ardian 9 Dan$ary 3013). "he re#ort c ai(ed that the govern(ent was (a&ing the change (otivated on y )y cost. "he re#ort conc $ded that the ,@A sho$ d )e retained (Ca(#)e et a , 3013, #age 8). 9esponsible 9eform arg$ed that .lthough not mentioned in the consultation, it was largely felt that the driving force for the reform was to cut ()K from e%penditure and that There is now a terrible Trust !eficit between 'overnment and disabled people# 4e have been subBected to poor reforms, ever tougher sanctions, and an insidious, scrounger rhetoric from both politicians and the press (#ages 9 and :). "he re#ort #ointed o$t that Galthough !C. is not a work related benefit, in many cases, respondents clearly laid out how funding through !C. covered their additional disability e%penses without which they would not be able to afford to work, either practically or financially (Ca(#)e et a 3013, 3:) ;ince 3010, the -or& Ca#a)i ity Assess(ent has )een s$)>ected to a n$()er of #ro) e(s (see /o* 1 )e ow)

4o 1 The problems of the Wor) Capability Assessment <WCA= +n !ove()er 3010, %rofessor 5a co ( ?arrington did a high y critica review of the -CA and in 5arch 3011, %rofessor %a$ 'regg warned that the -CA is a complete messJ and Gbadly malfunctioningJ (C$oted in 5cAndrew 3011). "he -CA and the <rench co(#any r$nning it, Atos, are the s$)>ect of fear and anger in (any C$arters (5cAndrew 3011). Atos was awarded a contract in 3009 for assessing c ai(ants for disa)i ity )enefits. "he contract was worth 7900 (i ion and co(es $# for renewa in 3013. A recent re#ort )y the CitiIens Advice /$rea$ (CA/, 3013) was high y critica of the -CA saying G1.B advisers tell us that inaccurate medical assessment reports are creating huge difficulties for their clients (#age 3). "he ,isa)i ity /enefits Consorti$( carried o$t a s$rvey of disa) ed #eo# e in ate 88

3010 and ear y 3011. +t stated that Dver half of those respondents who had been for a medical assessment for 8. found it stressful and more than four in ten said it actually made their health condition or impairment worse because of the stress and an%iety caused (,/C 3011,3) "he CA/ re#ort #oints o$t that, $# to <e)r$ary 3011, 392 of a##ea s against the assess(ent have )een overt$rned in favo$r of the c ai(ant (#age 3). "he re#ort f$rther states that the CA/=s ana ysis indicates that the eve of acc$racy in -CAs is worrying y ow and it ca s on the ,-% to $nderta&e, as (atter of $rgency, reg$ ar inde#endent (onitoring of the acc$racy of the -CAs. +n !ove()er 3011, the '$ardian stated that Thousands of ill and disabled people have become trapped in a revolving door of medical assessments and appeals at a cost of <-) million, with many claimants on their second and third attempts to overturn rulings that remove their benefits ('$ardian, 31 !ove()er 3011) and a Channe 8 !ews investigation re#orted that the syste( Gis teetering on the brink of collapse# 5ore recent y sti , %a$ <ar(er (Chief E*ec$tive of 5+!,) resigned fro( the 'overn(entQs ;cr$tiny %ane for the -or& Ca#a)i ity Assess(ent set $# as #art of the ?arrington review. ?is reasons for resigning are that the 'overn(ent ref$sed to isten to criticis(s of the -or& Ca#a)i ity Assess(ent and said that his #osition was Gno onger tena) eT (see the 5+!, we)site, accessed on 10 A#ri 3013). "wo recent "6 #rogra((es (Channe 8=s ,is#atches G/ritain on the ;ic&J and //C %anora(a=s G,isa) ed or <a&ing +tJ) )oth fo$nd that the -CA was dec aring #eo# e fit to wor& who c ear y were not fit to wor&. +t is not therefore s$r#rising that, (ore recent y sti , it was re#orted that the a##ea s syste( is grid oc&ed with a one year )ac& og. <$rther(ore, note that 802 of a##ea s s$cceed ('$ardian 38 A$g$st 3013)

"o s$( $#. +t is craIy to )e ste##ing $# the assess(ent of disa) ed #eo# e for wor& when $ne(# oy(ent is high and growing rather than dec ining. As the atest !estination Gnknown )y ,E54; re#ortsF .t the moment, we know that =)),))) people will lose their !isability Civing .llowance 3!C.E in ()*:5## 4e know too, that the number of councils funding support for people with substantial and critical needs only has risen from +-K to -*K from ()**,*( to ()**,*(, and that only three local authorities no longer take income from !C. into account when assessing how much a person has to pay towards their care (,E54;, ;$((er 3013,1B)# "he ,E54; re#ort goes on to as& whether we have the faintest idea how (any #eo# e wi s$ffer fro( these changes and what s$ch changes wi do to their ho$seho d inco(e and C$a ity of ife. "his is the A$sterity -ar that is )eing waged. 89

6EBE6E>CES 4an) of En*land 12 :uly 2012C The !istributional ffects of .sset ?urchases 4rowne :, 2010C ?ersonal ta%es and distributional impact of budget measures, Da(es /rowne, +nstit$te for <isca ;t$dies 4rowne :, ?ar!h 2011C ?ersonal ta% and benefit changes, Da(es /rowne, +nstit$te for <isca ;t$dies 4rowne :, :anuary 2012C The $mpact of austerity measures on households with children, Da(es /rowne, +nstit$te for <isca ;t$dies. 4ur)e ?, :uly 2012C D"he UK=s )$dget deficit is rising not fa ingJ, 8ocialist Econo(ic /$ etin CA4 2012C 9ight first timeM .n indicative study of the accuracy of 8. work capability assessment reports, CitiIen=s Advice /$rea$ (CA/), Dan$ary 3013 Campbell, #r S : et al 2012F 9esponsible 9eformL a report on the proposed changes to the !isability Civing .llowance, Ca(#)e , ;$e 5arsh and others, Dan$ary 3013. Compass 2003C Ta% avoidanceL were closing in Con,Eib ?ay 2010C 1onservative Ciberal !emocrat coalition agreements, 5ay 13, 3010 (accessed thro$gh @i) ,e(s we)site on 10 ,ec 3010) Crafts, >, 2011C !elivering growth while reducing deficitsN lessons from the *A:)s, Centre<or$(, -arwic& University, UK #4C ?ar!h 2011C Benefiting disabled peopleM, ,isa)i ity /enefits Consorti$( (,/C) #emos, ;!tober 2010C !estination Gnknown )y C a$dia -ood and E$gene 'rant, ,e(os, @ondon #emos, #e!ember 2010C 1ounting The 1ost, )y C a$dia -ood and E$gene 'rant, ,e(os, @ondon #emos, Summer 2012C !estination Gnknown, C a$dia -ood, ,e(os, @ondon #olphin T, :une 2010C GOinancial 8ector Ta%es, +nstit$te for %$) ic %o icy Research #olphin T, :anuary 2011F !ebts and !eficits, +nstit$te for %$) ic %o icy Research. #W(, :uly 2000C %periences and %pectations of !isabled ?eople, . research report for the Dffice for !isability $ssues, ,e#art(ent of -or& and %ensions #W(, 2010C .ttendance .llowance, !isability Civing .llowance and 1arers .llowanceL retrospective e&uality impact assessment# #W( ?ay 2011C /ouseholds Below .verage $ncome 3/B.$EL an analysis of the income distribution, *AA;,A= ())A,*), ,e#art(ent of -or& and %ensions #W( :une 2012C /ouseholds Below .verage $ncome 3/B.$EL an analysis of the income distribution, *AA;,A= ()*),**, ,e#art(ent of -or& and %ensions Edwards C, :anuary 2011C The $mpact of "ational budget cuts, ta% changes and local reductions in services on disabled people and their families in "orfolk, !orfo & Coa ition of ,isa) ed %eo# e (!Co,%) 2re** (, 2010F GRadica we fare refor(J, 9esearch in ?ublic ?olicy, -inter 7orton T and 6eed 7, 2010C 4here the money goesL /ow we benefit from public services, "UC, ;e#te()er 8?B 2011C %pansionary .usterityL "ew $nternational vidence, '$ar>ardo D, @eigh , and %escatori A, +5< -or&ing %a#er, 11K19B 8rvin et al 2010C The <*)) Billion 'amble on growth without the state, +rvin ', Reed ? and 'annon U, Co(#ass. 81

:ohnson (, 2+ ?ar!h 2011C The big news is the old news %a$ Dohnson, +nstit$te for <isca ;t$dies :ones ;, 2011C 1havsL the !emoni@ation of the 4orking 1lass, 6erso :oy!e 6, >ovember 2011C G-hat does yesterday=s news (ean for iving standardsHJ, Ro)ert Doyce, +nstit$te for <isca ;t$dies :oy!e 6, ?ar!h 2012C Ta% and benefit changes, e%cluding those affecting mainly the very rich, Ro)ert Doyce, +nstit$te for <isca ;t$dies. %eynes : ? 1330C "he 'reat ; $(# of 1930, The "ation and .thenaeum, !ecember () and (+ *A:), Condon %oo 6 C 2011C G"he wor d in )a ance sheet recessionF ca$ses, c$re and #o iticsJ, Richard Koo, !o($ra Research +nstit$te, "o&yo %ru*man (, 2012C nd this !epression "ow, - - !orton and Co(#any, !ew Oor& and @ondon %umhof ? and 6an!iere 6, 2010C $ne&uality, Ceverage and 1rises, +nternationa 5onetary <$nd (+5<) -or&ing %a#er, !ove()er Eansley Stewart, 2000C D!o the super2rich matterM, Touchstone Eansley Stewart, Au*ust 2010C D/ow soaring ine&uality fuelled the crash, "he 4ther "a*#ayers= A iance. ?!Andrew % 2011C DBetraying disabled people and welfare, (see E&& esia we)site accessed on 30 <e)r$ary 3013) ?!%insey 2012C !ebt and deleveragingL uneven progress on the path to growth Char es Ro*)$rgh et a , /5cKinsey ' o)a +nstit$te, Dan$ary ?ason (aul, 2010F 0eltdownL the nd of the .ge of 'reed, 6erso, @ondon >A;, 10 ?ay 2012C The 1reation and 8ale of "orthern 9ock plc, !ationa A$dit 4ffice, @ondon ;46, >ovember 2011C conomic and Oiscal Dutlook, 4ffice for /$dget Res#onsi)i ity (4/R) ;46, ?ar!h 2012C conomic and Oiscal Dutlook, 4ffice for /$dget Res#onsi)i ity (4/R) ;A#ea and (reston, ;!tober 2010C 1an we assess the distributional impact of cuts to spending on public servicesM, +nstit$te for <isca ;t$dies ;#8 2011C 9oadmap ()(=, .chieving !isability &uality by ()(=F !isability &uality $ndicators, 4ffice for ,isa)i ity +ss$es (4,+) ;EC# 2003F 8ickness, !isability and 4ork, 4rganisation for Econo(ic Coo#eration and ,eve o#(ent ;>S, #e!ember 2010F Cife Dpportunities 8urvey 8tatistical Bulletin, 4ffice for !ationa ;tatistics, ,ece()er 9 ;>S, ?ay 2011C ffects of Ta%es and Benefits on /ousehold $ncome, ())A,*) 4ffice for !ationa ;tatistics ;>S Bebruary 2012C 8tatistical stimate of '!?L ;th &uarter ()**, 4ffice for !ationa ;tatistics ;>S :uly 2012C Total 4ealth, ())-2*) (CS 2012C $ne&ualityL the price of .usterity, %$) ic and Co((ercia ;ervices Union (eston 6obert, 2000C 4ho 9uns BritainM, ?odder 6eed 7, ?ar!h 2012C Oigures supplied to 1hris dwards by /oward 9eed of Candman conomics 6esolution Boundation 2012C 8&uee@ed BritainL the annual audit of low to middle income households, 5atthew -hitta&er and Dess /ai ey, Dan$ary 8:

6owntree, ;!tober 200+F !isabled peoples costs of living, Dose#h Rowntree <o$ndation Travers, 3 #e! 2010C %$) ic <inance (%<) / og (%< we)site accessed on ,ece()er 13, 3010) Treasury, :une 2010C Budget ()*), ?C11 Treasury, ;!tober 2010C 8pending 9eview ()*), C( :983 Treasury, >ovember 2011C .utumn 8tatement ()** C( B331 $>CTA# (oli!y 4rief, #e!ember 2011C Dn the brinkL fiscal austerity threatens a global recession, /rief !o 38, ,ece()er Wen!hao :in, (eter Eevell and #avid (hillips, >ovember 2010C . survey of the GH Benefit 8ystem, +nstit$te for <isca ;t$dies, !ove()er World 4an), 2012C 'lobal conomic ?rospects

8B