Summer budget: What the experts say
Experts at the University of Sheffield comment on George Osborne's Summer Budget (Wednesday 8 July 2015).
Dr Craig Berry, Deputy Director of the Sheffield Political Economy Research Institute (SPERI)
George Osborne’s budget speech was, as usual, a masterclass in combining the rhetoric of change with reality of continuity. Britain has, according to Osborne, left ‘the age of irresponsibility’ behind. There is very little basis for this claim. It rests upon the proposal that governments should be compelled to run budget surpluses under ‘normal’ economic circumstances. This represents a staggeringly irresponsible agenda, insofar as it constrains government’s ability to borrow to fund very long term investments that will benefit future generations.
At the same time, the government will continue to prop up the housing market through several measures, including the extension of Help to Buy and inheritance tax cuts. There were some minor reforms to the tax relief available to buy-to-let landlords (at the behest of the Bank of England), but Britain clearly remains a buy-to-let paradise. Our economy remains under the threat of a burst of the property bubble – and the threat is a severe one.
The rebranding of the National Minimum Wage as the National Living Wage is gimmickry of the highest order, designed only to soften criticism of the continuing downward pressure on wages rather than bring about real pay rises, and it seems likely that any gains for employees will be offset by losses arising from significant tax credit cuts.
Professor Jason Heyes, Chair in Employment Relations at the University's Management School
The Chancellor has announced that a Living Wage will be introduced from April 2016. It will initially be set at £7.20 an hour – 50 pence higher than the value of the National Minimum Wage once the October 2015 increase in implemented. However, the current value of the Living Wage, as set by the Living Wage Foundation, is £9.15 an hour in London and £7.85 elsewhere. These figures represent minimum hourly rates that might enable people to enjoy a decent standard of living. The government’s own living wage falls far short and it is not expected to reach £9 an hour until 2020. When combined with the announced freezing of working age benefits and lower earnings threshold for the withdrawal of tax credits, it is not clear that the governments’ ‘living wage’ will result in a substantial reduction in the extent of in-work poverty, which in 2013 amounted to 8 percent of people in work.
A Living Wage of £7.20 an hour will do little to achieve the Chancellor’s stated objective of making the UK a ‘high wage’ economy. Furthermore, it is possible that it will undermine campaigning efforts in relation to the current Living Wage, given that the government’s lower rate might come to be seen as the new benchmark for employers.