Canada markets closed
  • S&P/TSX

    19,351.32
    +29.42 (+0.15%)
     
  • S&P 500

    4,185.47
    +15.05 (+0.36%)
     
  • DOW

    34,200.67
    +164.68 (+0.48%)
     
  • CAD/USD

    0.7997
    +0.0020 (+0.26%)
     
  • CRUDE OIL

    63.07
    -0.39 (-0.61%)
     
  • BTC-CAD

    77,736.48
    -1,175.85 (-1.49%)
     
  • CMC Crypto 200

    1,398.97
    +7.26 (+0.52%)
     
  • GOLD FUTURES

    1,777.30
    +10.50 (+0.59%)
     
  • RUSSELL 2000

    2,262.67
    +5.60 (+0.25%)
     
  • 10-Yr Bond

    1.5730
    +0.0430 (+2.81%)
     
  • NASDAQ

    14,052.34
    +13.58 (+0.10%)
     
  • VOLATILITY

    16.25
    -0.32 (-1.93%)
     
  • FTSE

    7,019.53
    +36.03 (+0.52%)
     
  • NIKKEI 225

    29,683.37
    +40.68 (+0.14%)
     
  • CAD/EUR

    0.6670
    +0.0012 (+0.18%)
     

The Observer view on Rishi Sunak’s ‘generous’ budget

Observer editorial
·3 min read

The word “generous” was liberally peppered through the chancellor’s budget speech last Wednesday. Rishi Sunak has gone out of his way to portray himself as the nation’s benefactor, ensuring that hard-pressed individuals and businesses have enough financial support to weather this economic and public health crisis.

For many, this budget will do the trick. But, like every budget delivered by a Conservative chancellor over the last decade, it offered much grimmer pickings for low-paid parents and young people, who have suffered some of the worst economic effects of this crisis.

This pandemic has hit everyone hard, but the health and economic consequences have been felt much more sharply by some than others. Professional workers are more likely to have been able to work from home, reducing their exposure to the virus, and more affluent households have been able to save more during this crisis as their outgoings have dropped. Low-paid workers are more likely to have been doing essential jobs like care work, delivery driving and supermarket work, that mean they have had to risk their health by going out to work during the pandemic. They have seen their outgoings go up as a result of the higher costs of having children at home and rising food prices.

Related: 'Young people need help now': Britons want more from 2021 budget

There was zero acknowledgement of this in Sunak’s budget. On the contrary, he announced a universal credit cut of £20 a week from October, which will mean the poorest households will see incomes drop by 7%, just as the country is forecast to hit peak unemployment. This will leave unemployment benefit at the lowest real level it has been since the early 1990s. This comes in the context of a decade of steep cuts to the financial support for low-paid families with children: some families have lost thousands of pounds of tax credits a year since 2010. Sunak’s predecessor George Osborne said these cuts were a necessity. They were a political choice: the proceeds paid for billions of pounds of tax cuts a year for businesses and more affluent households. It was an intentional redistribution from the low-paid to the comfortably affluent.

Young people have also suffered economically during this crisis. They are always scarred most by recessions in the long term, but this recession in particular has hit the hospitality and leisure sectors that disproportionately employ young people. Yet, as the former prime minister Gordon Brown pointed out last week, the Kickstart youth job scheme has created only three jobs for every 1,000 young people so far. More broadly, the government has done too little to avoid long-term unemployment: not a single person has been helped by the Restart scheme yet, and there is nowhere near enough funding for retraining of people facing structural unemployment as a result of this crisis.

Instead, the chancellor has bet that a big stimulus to business investment – delivered through tax breaks – will be enough to encourage growth. A more measured approach would have been to tackle inequality and inject demand into the economy at the same time by giving low-income families more cash to spend, and NHS workers a much-deserved pay rise rather than a real-terms pay cut.

But this was a budget designed to appeal to Conservative swing voters rather than to alleviate hardship among those who need the most support. There is no greater tell than the way in which the new funds announced to provide support to the most deprived parts of the UK are skewed towards Conservative seats, despite many being relatively affluent. The chancellor’s own constituency, Richmondshire, has been put in the top-priority group despite being in the top five most prosperous places in England. Yet Sunak could not find the money to help hard-pressed key workers put food on the table for their children. Generous he is not.