Oxfam says UK budget shouldn’t hit the ‘squashed bottom’. Call coincides with major conference on Scottish poverty

Oxfam has urged the Chancellor to use next week’s budget to raise new tax revenues from those who can afford it, not make further cuts from those who can’t.

The charity believes George Osborne should introduce more progressive taxation policies to raise new revenues from wealthy individuals and use the proceeds to limit cuts to public services and the welfare system.

The call comes as politicians, policy-makers, commentators and charities meet in Glasgow for the Scottish Assembly for Tackling Poverty (15-16 March), organised by the Poverty Alliance. The conference is exploring new solutions to poverty and inequality in Scotland and yesterday (Thursday) heard from Judith Robertson, the Head of Oxfam Scotland.

She said: “The Government is aiming to make up nearly three quarters of the deficit with spending cuts, which disproportionately harm the poorest in society. It’s grossly unfair that ordinary people are bearing the brunt of deficit reduction, whilst the wealthy financial sector is still pocketing billions in bonuses.”

Oxfam believes the Government needs to re-balance its deficit reduction strategy, to rely less on cuts that disproportionately impact the poorest in society, including the 1 in 7 of UK workers who are currently classed as living below the poverty line.

With debate ahead of the Budget focused on the 50p top rate of tax, Oxfam argues that offering any form of tax break to higher earners at a time when working tax credits are being cut for many on low incomes would be a complete betrayal of the poorest in society.

One form of progressive taxation that Oxfam is championing is a Robin Hood Tax on financial transactions, which the charity believes could raise up to £20 billion in the UK to invest in poverty reduction at home and abroad, as well as tackling climate change.

New analysis in Oxfam’s upcoming report on UK poverty, The Perfect Storm (working title), shows that for every pound the Government is seeking to raise in new taxes during this parliament to put towards reducing the deficit, it is seeking to save £3 through budget cuts.

Research suggests that planned cuts to public services could be equivalent to the loss of a fifth of income for the poorest 10 per cent of the UK population [1], whilst welfare payments for working age people will be reduced by up to £18 billion a year by 2015 [2].

Judith Robertson said: “People on the lowest incomes are being hit from all sides, with rocketing living costs, stagnating or falling wages, rising unemployment and cuts to benefits such as working tax credits and support services when they are most needed. These people are not the squeezed middle; they are becoming the squashed bottom.”

Oxfam’s report will demonstrate how the livelihoods of the poorest people in the UK are being stretched to breaking point by an accumulation of factors, including:

* Soaring living costs: In the past two years, the price of food has increased by 7.7 per cent and average private sector rents have risen by 8.3 per cent. Meanwhile the costs of electricity, gas and other fuel prices have rocketed by 21.2 per cent [3].

* Falling or stagnating wages: Last year, earnings of Directors and Chief Executives went up by 15 per cent, while the annual pay of waiters and waitresses fell by 11.2 per cent and the earnings of cleaning staff fell by 3.4 per cent [4].

* Lack of jobs paying a living wage: One in seven working age adults, 4 million people, have a job, but are still living below the poverty line [5].

* Government cuts: Cuts in Working Tax Credits will mean more than 200,000 working families will lose up to £3,870 per year, with the average qualifying family expected to lose £2,000 a year because of benefit cuts [6].

Judith Robertson added: “The Governor of the Bank of England recently warned that we are seeing the biggest sustained squeeze on living standards since the 1920s. The Government must go further to redress rising income inequalities in the UK, with a Budget that protects the squashed bottom rather than those at the top. To do the reverse would be a recipe for a more divided Britain.”

The Perfect Storm report will be published in May 2012.

[1] TUC.
[2] HM Treasury Spending Review October 2010.
[3] Food & fuel figures: Consumer Price Index; Housing figures: LSL Buy to Let Index, February 2012 and February 2011.
[4] 2011 Annual Survey of Hours and Earnings.
[5] Department for Work and Pensions, Households Below Average Income: An analysis of the income distribution 1994/95-2009/10 (2011), p.158.
[6] TUC.