The Coalition’s Record on Employment: Policy, Spending and Outcomes 2010-2015

Youngest children and poorer households worst hit by Coalition’s selective cuts, according to major new report.

This is Working Paper 15 in the series; the full report can be found here. This paper assesses the Coalition’s record on employment, looking at policy, spending and outcomes, between 2010 and 2015. The press release for the full report can be found below.

Poorer groups have been worst affected by changes to direct taxes, benefits and tax credits despite the Coalition’s promise that the rich would carry the burden of austerity, according to a major new report from LSE and the Universities of Manchester and York. As a result, poverty has been increasing and will get worse in the next five years.

The authors acknowledge that the Coalition faced a high level of debt and current budget deficit following the global financial crisis.  In response it made some strategic choices: not to cut the NHS (in cash, though not in need terms) nor schools; to increase spending on pensions; to raise the income tax threshold and to cut the top rate of tax.

Its tax and benefit decisions meant that cuts to benefits and tax credits that hit low income families hardest were offset by tax reductions for better-off households and made no impact on the deficit. Meanwhile its choices to protect very large areas of public spending meant that its austerity programme was more limited in practice than its rhetoric suggested, and that austerity measures were concentrated on particular policy areas. Year-on-year public spending has dropped less than 3 per cent, but cuts of around a third have been made to ‘unprotected’ services, including those for pre-school children under five, vulnerable and older adults needing local authority social care.  In practice, people with health and care needs and children moving from pre-school to university frequently cross the boundary between protected and unprotected services.  Even ‘protected’ areas such as the NHS have faced rising demands on fixed or falling budgets.

The main findings include:

• Although one Coalition stated aim was that the better-off would carry the greatest burden from deficit reduction, changes to direct taxes, benefits and tax credits were mainly regressive, as cuts to tax credits and cash benefits took more away from those in the bottom half than they gained through higher tax allowances.  The savings from these cuts were not sufficient to contribute to deficit reduction, however, as they were offset by the costs of lower direct taxes for better-off groups.  Estimates suggest that poverty increased after 2012/13 and will get worse in future years.
• There was a 17% fall in the number of adult learners between 2009/10 and 2013/14 as funding for adult skills was heavily cut.   Despite the controversial hike in tuition fees, increasing numbers of disadvantaged young people are going to university, but the numbers of part-time and mature students dropped by 40%.
• Growth in self-employment drove the recovery in the labour market but dramatic falls in average real earnings for all types of workers has affected households’ living standards, consumption and government tax receipts. The outcome is that household budgets have been squeezed and the government’s deficit reduction plans have been affected.

The research follows a similar review of the Labour social policy record, published in 2013, Labour’s Social Policy Record: Policy, Spending and Outcomes 1997-2010, Both were funded by the Nuffield Foundation, Joseph Rowntree Foundation and Trust for London.

There are nine individual papers covering employment, taxes and benefits, health, adult social care, housing, children under five, schools, further and higher education and skills, and area regeneration. There is also an overview The Coalition’s Social Policy Record: Policy, Spending and Outcomes 2010-2015.