Nearly 50,000 households in Croydon receive Universal Credit. The £20 per week cut in UC made by the government earlier this month has therefore taken almost £1million per week out of Croydon’s local economy, and left many of the poorest households more than £1,000 worse off per year.
For those on Universal Credit, this week’s Budget brought some amelioration for people in low-paid work through the cut in the taper rate – the deduction you get in your Universal Credit payment for each additional £1 you earn in work. The taper rate is being cut from 63 per cent to 55 per cent, meaning that after tax and National Insurance deductions, you’ll keep 45p of every £1, rather than 37p.
But most Universal Credit claimants are out of work, and will see no benefit at all.
When we went into lockdown in March 2020, unemployment in the UK was 1.2million. It’s now more than 2million, a 67 per cent increase. In Croydon there were 10,835 unemployed in March 2020. Today it’s 18,925, a 75 per cent increase.
People’s energy bills are also about to rise by £139 this year, and an even larger increase is expected in April 2022.
More people with less income means there will be less to spend in local shops, hitting local high streets which are struggling as the pandemic has accelerated the shift to online retail, something which put the final nail in the coffin of the flawed deal to bring Westfield to Croydon town centre. Higher energy bills are also hitting the margins of many retailers.
One small ray of positive news was on the minimum wage, which will rise by 6.6 per cent next year, to £9.50 an hour. The impact of that rise is less significant, though, in the context of inflation, estimated at more than 4 per cent. It contrasts to last year’s minimum wage rise, which at only 2.2 per cent was less than the current rate of inflation (3.1 per cent).
However, with the government is freezing the income tax threshold for five years, so that low-paid workers will pay more income tax on more of their income; the hike in National Insurance contributions will cost a minimum wage worker an extra £115 a year.
Council funding and Council Tax
Another Budget measure that will suppress demand was hidden deep within the small print: a Council Tax bombshell.
Expected Council Tax revenue receipts suggest Council Tax bills will rise by 33 per cent across England by 2026.
Last year’s 5 per cent rise added more than £70 per year to the average household bill.
Croydon’s council received £58million less in central government funding compared with 2015-2016 – a 40 per cent cut, which is slightly above the average cut across London of 35 per cent.
This year Croydon has to make further cuts of £38million, which is why the council is consulting on proposals to cut Council Tax support for low-income households.
Until 2013, a national scheme called Council Tax Benefit existed, but this was axed and the funding devolved to councils to devise their own schemes. However, the funding given to local authorities to run those schemes is less than the government provided for the national scheme. And the administration costs for Council Tax support now fall on every local authority in England.
The Local Government Financial Settlement – detailing the level of grants paid by central government to local authorities around the country – is normally published in December. What Croydon should be pushing for is some “levelling up” with our neighbouring London boroughs. While Croydon, with 330,000 residents, got £88million for 2021-2022, next door Lambeth, with fewer residents, received nearly £144million and Westminster (with more than 100,000 fewer residents) received £120million.
Perhaps Croydon South’s Conservative MP could press his Chancellor to practice some of his “levelling up” for Croydon’s hard-pressed residents?
Public services and the NHS
Investment in skills and education is vital if the government genuinely wants to “level up”.
One of the positives of the Budget was the cash to restore per pupil funding to 2010 levels by 2024-2025. But this simply highlights that school pupils for the last decade have had less investment than the previous generation.
The extra money committed on skills and further education is good news too for Croydon College and the new South Bank University campus in our borough (a genuine success by the Labour-controlled council). Hopefully, the extra funding will help to settle current pay disputes in the sector and give staff at Croydon College a genuine pay rise.
Across the public sector, the Chancellor announced an end to the public sector pay freeze, but did not commit to real terms increases in public sector pay settlements. With inflation about to rise to 4 per cent, any pay rise less than that will mean a real-terms cut in living standards for public sector workers, with knock-on effects on recruitment and retention.
The huge treatment backlogs facing the NHS are a pressing issue – depriving many people waiting for operations of a decent quality of life. There are also increasing delays for people starting cancer treatment.
While the government announced “a £5.9billion capital investment for the NHS to tackle the backlog”, the major issue facing the NHS is a staff shortage – and without solving that, for which there was precious little in the Budget, delays in treatment are unlikely to reduce.
There may be particularly bad news for Croydon’s civil servants – as buried in the Budget documents is a commitment to cut around 30,000 of their jobs, which appears additional to the existing commitment to move 22,000 civil service roles outside London by 2030. What this means for Croydon-based workers at places like Lunar House and Southern House remains to be seen.
What the Budget clearly does mean for Croydon is that whoever becomes the borough’s inaugural directly-elected Mayor next May will face some very big challenges.
- Croydon resident Andrew Fisher has worked as a trades union official, researcher and writer, and served as Director of Policy of the Labour Party under Jeremy Corbyn from 2015 to 2019. He is the author of The Failed Experiment – and how to build an economy that works
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