x Abu Dhabi, UAEFriday 21 July 2017

Time for middle earners to show a bit of class

Budget cuts announced by the UK government will hit the middle tier of society, but maybe it's about time they walked a mile in the shoes of those at the lowest strata.

Budget cuts announced by the UK government will hit the middle tier of society, but maybe it's about time they walked a mile in the shoes of those at the lowest strata.

The UK is facing a "sober" decade of spending less and saving more after the easy excesses of the past 10 years.

The remarks this week by Mervyn King, the governor of the Bank of England, brought it home to the British middle classes.

True, Wednesday's comprehensive review spared no one in the government's effort to cut £84 billion (Dh485.63bn) from public spending in the next four years, the sharpest savings since the Second World War.

At first glance, the axe may seem to fall hardest on the middle layer of society that has broad enough shoulders to take a bigger burden.

For example, take an average middle-class family in a very middle-class village in Essex, in the south of England.

The breadwinner has three children, a stay-at-home wife and commutes to work in London.

He is too rich to claim benefits but not rich enough to have a nanny or more than a yearly holiday in Europe. His is the typical household that is crying "foul" over the spending cuts.

For it is a blow on several fronts. First is the loss of child benefits from 2013 for families with one higher-rate taxpayer whose income exceeds £44,000 a year, saving the government £2.5bn a year. (The lucky ones with two parents earning, say, £43,000 each a year can continue claiming, which strikes many as irrational).

Then there is the possible lifting of the cap on university tuition fees from its current £3,290, which could lead to graduates starting working life in debt by about £30,000.

Then there is: the drop in pension provision; the rise in rail fares to a maximum of 3 per cent as of 2012, from 1 per cent; and the January rise in value-added tax to 20 from 17.5 per cent. Top that off with the government's dire prediction of 500,000 job losses in the public sector, a two-year pay freeze for civil servants and higher state pension contributions from next year … and the future seems unbelievably bleak.

"The middle-class encompasses a huge number of families who are far from comfortably off and who will be really struggling," says Justine Roberts, a mother of four and co-founder of Mumsnet, the community website for mothers.

"I think the scales fell from the nation's eyes when the Government announced that the broad-shouldered middle class would be taking more than their fair share of the burden of cuts."

But is it not fair for the British middle class to share the burden of society in bad times, as they have enjoyed the benefits in the good times? We are all in this together, says George Osborne, the chancellor of the exchequer. Everyone will have to do their share.

Banks will pay a permanent levy from next year. Even the Queen is pitching in, agreeing to a cut in her income from the public purse.

And the truth is it is the poorest of society who appear to be most adversely affected by the review. Mr Osborne is cutting their welfare benefits again, saving a further £7bn on top of the £11bn already announced. One million people on employment and support allowances will have 12 months to find work or face a benefits cut. The social housing budget has been reduced substantially and new tenants will be charged 80 per cent of market rates.

True, the welfare budget makes up more than a quarter of the total government spending of £697bn this year. But it could mean families feeding their children potato chips. So the squeezed middle class may be whingeing too loudly. They may not be able to save more, as Mr King suggests. But they can certainly spend less: keep the children's clothes longer and postpone the holidays.

Even the panic over the raising of the cap on university fees is unnecessary. It is still a proposal, and even if introduced would be paid by loans that graduates would not have to repay until they earn £21,000 a year.

Pension worries? Cheer up. The review has decided to keep universal benefits for pensioners.

So keep things in perspective. Britain's middle class should. They are still much better off than the working class.

 

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