by Sally Bercow

With the amount of cereal my kids get through, action was required. Out went Kellogg’s Frosties at £2.69, in came Essential Waitrose frosted flakes at £1.69. The kids objected at first – not on taste grounds, mind, but because they missed seeing Tony the Frosties tiger cavorting about on the box. Happily though, as own-brand fish fingers have passed unnoticed, no such bond appears to have been forged with Captain Birdseye. Indeed, our cupboards are now heaving with Essential Waitrose and I’ve cut my weekly Ocado shopping bill by around a quarter (and, yes, I know I’d save even more shopping at Tesco or Sainsburys but, the last time I looked, neither would deliver to Parliament – apparently because it’s a business address).

Now I’m not going to pretend that switching from Kellogg’s to own brand means I’m in the same boat as families whose very existence is a struggle to make ends meet. But squeeze on living standards (the biggest in 90 years) is hitting everyone – even those, like David Cameron and George Osborne, multi-millionaires by birth, with rather a lot of cushioning and very little idea of what life is like for those who struggle to eke out an existence. Inflation is rising twice as fast as pay and the Chancellor is only making matters worse – adding to the squeeze with his 2.5% VAT hike in January.

That’s why Ed Miliband and Ed Balls are right to say that this country is undergoing a “cost of living crisis” and to call on George Osborne to use his second budget to help hard-pressed families, starting at the petrol pump. If Osborne thinks that merely cancelling or postponing the annual 1p-a-litre tax rise on petrol will be a sufficient sop to beleaguered motorists, he’s gravely mistaken. Instead, he needs to go beyond this and reverse the VAT rise altogether, by using the extra £800 million brought in by the bank levy.

Despite the brave, patrician face he puts on it, the chancellor’s economic strategy isn’t going to plan. The recovery has ground to a halt (the economy didn’t grow at all at the end of last year and the OBR will be forced to downgrade its GDP forecasts for this year and next), unemployment has soared to 8% (the highest since 1994) and youth employment, fast approaching one million, has never been higher. The most reckless and extreme public spending cuts in a generation, the VAT hike and, as outgoing CBI boss Richard Lambert recently observed, the complete absence of a growth strategy have all combined to mean that the government’s plan is hurting but not working.

So, if he were to do what makes economic sense, the chancellor would announce this week that the government will ease up on its deficit reduction plan and change course. After all, choosing to cut the deficit in one parliament was exactly that – a choice. Moreover, it was a deeply political choice – after all, if he’d stuck to the Brown/Darling plan of halving the deficit over four years, the chancellor wouldn’t need to cut deeper and faster than any other major economy. But that simply didn’t square with the Tories’ blind ideological mission to shrink the state for political reasons, irrespective of the economic consequences.

The best way to reduce the deficit is to get the economy moving again and get people back into work. So that’s why the chancellor should heed Labour’s call to repeat the banker’s bonus tax in order to help create the jobs and growth we need. (Not to mention that a banker’s bonus tax would have the added advantage of making the people who caused the global financial crisis pay a fair share.) As Ed Balls has outlined, raising an extra £2 billion via a bonus tax on banks would enable the government to fund the construction of 25,000 more homes (in turn generating more than 20,000 new jobs and as many as 1,500 construction apprenticeships) at a cost of £1.2 billion; to establish a £600 million fund to help more than 90,000 young people into jobs; and to boost the regional growth fund by £200 million, thereby supporting investment in the regions.

Instead, it seems likely that a central plank of the government’s new-found “growth strategy”, to be announced in Wednesday’s budget, will be to cut red tape for business and attack the “enemies of enterprise” (that’s civil servants to you and me). It has been suggested that, as part of a deregulation drive to assist firms with fewer than 10 staff, employers may be exempted from honouring some employment rights (eg. maternity and paternity leave). This is quite wrong: the needs of parents and their children do not vary according to the size of their employer’s company. The last thing the country needs is 3.8 million insecure, demotivated, second-class citizens in the workplace.

The budget is also expected to include £100 million to boost growth in 10 enterprise zones. This is a complete waste of money – enterprise zones didn’t work in the 1980s and they won’t work now. Their defining feature is bringing short-lived prosperity to one area at the expense of another (a recent survey by the work foundation reported that 80% of jobs in enterprise zones have just been displaced from elsewhere and that each job created within them cost £23,000).

If he were progressively-minded, the Chancellor would:

a) reverse the child benefit change which hits single-earner higher rate tax payers but leaves a couple on £80,000 to get off scot free;

b) pledge to cut, sooner rather than later, the rate of VAT which is a deeply regressive tax;

c) introduce a fuel stabiliser to insulate motorists and businesses from swings in the oil price;

d) increase the minimum wage for apprentices (currently £2.50 for under-19s and anyone in their first year of training) and start to acknowledge their value;

e) offer tax incentives to companies which adopt the living wage for their workers.

Unfortunately, he isn’t, so he won’t. While I like to look on the bright side, there’s not much point looking into the crystal ball when you can read the book. In practice, George Osborne’s offer to the hard-pressed will be meagre, dressed up as majestic. Expect a lot of noise about very little come Wednesday afternoon. Doubtless, the chancellor will raise the income tax threshold a bit, scrap the 1p fuel duty rise, make a song and dance about enterprise zones, tinker with planning laws and trample on workers’ rights under the spurious Tory guise of cutting red tape. He might even decide to merge income tax and national insurance. Yet behind all the bravado and rhetoric, there will be little of substance. What the country needs is a change of course and a banker’s bonus tax to support jobs and growth. What the country will get is standard Tory fare.

Sally Bercow is a Labour activist, and a writer and broadcaster.

Tags: Budget, George Osborne, Sally Bercow

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