2013 Spring Budget: Full Budget Analysis

Date Posted: Wednesday 17th April 2013

2013 Spring Budget


You can read the full analysis here.


The coalition’s latest Budget betrays the Chancellor’s claim that he wants to help “strivers … people who want to work hard and get on”. George Osborne’s fourth Budget entrenched the government’s austerity policies, yet it is these very policies that prevent ordinary people from “getting on”. Huge cuts to public spending will prolong economic depression and intensify inequality.

One of the WBG’s biggest concerns is that the government’s plans will create an economy dependent on a low-skilled workforce, who can find no advancement or secure employment. Private sector wage employment has increased over the past year for women and men, but public sector employment, where women make up two thirds of the workforce, has fallen. As a consequence overall employment rates for women and men are still lower than in 2007, and unemployment remains high and has increased for women in the past year. Moreover the quality of jobs is declining.

People earning low wages, especially low-paid women workers, are working hard but not “getting on”. Instead they are trapped in poorly paid, precarious employment. A workforce where people are trapped in low-paid employment could lead to underinvestment in employee skills and technology, which will generate a low skilled, low wage, and low growth economy incapable of producing high quality goods and services. In turn, this would make it difficult for Britain to compete globally. Instead the UK should compete with other countries on the basis of high quality goods and  services, based on long term investment in social as well as physical capital, rather than development of obscure financial products.

Another problem arising from an over-reliance on a low-skilled, insecure workforce is the decrease in productivity levels and falling real wages. This makes it difficult for people to subsist without social security to supplement their wages. Government spending on social security to top up the wages of poorly paid workers is effectively a subsidy for employers and will make it harder to reduce the deficit. Thus low and middle income working women and men remain disadvantaged, while the deficit spirals.

If the government’s aim is simply to reduce the size of the deficit, then raising taxes is more effective than cutting expenditure. Recent evidence shows that cutting expenditure has a bigger negative impact on output and employment, than raising taxes. Cuts to public spending make it difficult for people to find jobs, pay taxes, and contribute to deficit reduction.

To guarantee the wellbeing of everyone living in the UK it is necessary to invest not only in physical infrastructure but also in social infrastructure, such as child care services. Evidence shows that women are disproportionately working below their potential owing to inaccessible or unaffordable childcare provision. Social infrastructure generates jobs for women, and helps to counterbalance the predominantly male job creation arising from physical infrastructure investment. We need investment in social infrastructure to enable people to develop skills and fulfil their potential and move into regular and rewarding employment. The government is focused on austerity and on fostering a ‘free’ economy that privileges the wealthy. The WBG argues that government policy should be based on feminist and heterodox economics analysis, which demonstrate that, “many problems are not a result of scarcity but of maldistribution”, that is, a result of the unequal distribution of resources, which this budget is making worse.

You can read the full analysis here.