Rachel Reeves MP & Wes Streeting MP: How to show austerity's impact on the poorest households

Posted On: 
5th September 2016

Theresa May needs to be up front about budget winners and losers if she wants to be taken seriously on life chances, according to two Labour members of the Treasury Select Committee.

Former Chancellor George Osborne presenting a previous Budget

As members of the Treasury Select Committee we're more aware than most about how challenging it is to navigate through the smoke and mirrors of a Government Budget. During the last Budget, George Osborne used advance briefing about the forced academisation of schools and then the unveiling of the sugar tax on the day to keep the focus away from the fact that he'd missed every single one of his targets.

But the most important analysis for those of us committed to tackling Britain's growing inequality is that which looks at the impact of the tax, welfare and public spending changes in Government's Budgets on the poorest households. Until the general election, every single one of George Osborne's budgets was accompanied by a distributional analysis compiled by civil servants at the Treasury, which looked in detail at the impact of the Budget on households with different levels of income. Osborne himself has described this analysis as ‘the most comprehensive and robust assessment available’. But as soon as the Tories found themselves governing alone, the analysis was abandoned. The move was condemned at the time by a wide range of anti-poverty charities as ‘a serious mistake.’

It is no surprise that Osborne chose to ditch the distributional analysis in the same budget that saw three million low income households about the lose £1,000 a year as a result of the Tories’ plan to cut tax credits. When the Institute for Fiscal Studies conducted its own distributional analysis of the first Conservative Budget since 1997 it found that the poorest households were hardest hit.

The Treasury continues to gather the data used in the distributional analysis. The decision not to publish is a political choice, not practical judgement. Even so, it is an unpopular one with some of Osborne’s Conservative colleagues on the Treasury Select Committee. Writing to the new Chancellor, Phillip Hammond, the Chairman of the Treasury Select Committee, Andrew Tyrie, expressed concern that since last year’s summer Budget ‘the Treasury has replaced its previously excellent budget distributional analysis with a manifestly deficient substitute’.

Since her elevation of the office of Prime Minister, Theresa May has made great fanfare of the commitment she made outside 10 Downing Street to lead a Government that works ‘not for a privileged few, but for every one of us’. To say that we are cynical would be an understatement, but for the sake of our poorest constituents we would like to be proven wrong. As Andrew Tyrie wrote to the new Chancellor, ‘a high level of transparency about the effects of tax and welfare policy on households across the income distribution would seem to be a logical, perhaps essential starting point.’

That’s why we have tabled an amendment to the Government’s Finance Bill that would, in effect, require the Chancellor to bring the distributional analysis back. There is an opportunity for a new Chancellor and a new Prime Minister to return to the previous practice of publishing the effects of their Budgets on low-income households without losing any face. It would certainly help concentrate the minds of ministers and civil servants as they prepare the first Budget under Prime Minister May.

The best antidote to Tory policies that hit the poorest hardest is a Labour government. The last Labour Government lifted over a million children and pensioners out of poverty and used Budgets to target help to those who needed it most – from university grants for the poorest students to tax credits for those working hard on low pay. In the meantime, we have to provide effective opposition to push the Government to do the right thing – just as our Labour colleagues in the House of Lords did to reverse planned cuts to working tax credits.   

A Budget is the most important document that the government publishes annually. It is a reflection of that government’s priorities and it has far reaching consequences for citizens, families and our public services. If the Prime Minister wants to be taken seriously when she talks about life chances, she will back our amendment.

Rachel Reeves MP and Wes Streeting MP are members of the Treasury Select Committee. They are the Labour MPs for Leeds West & Ilford North