Friday, October 29, 2010

Never waste a good crisis

Rahm Emanuel dixit. And promptly, did exactly what he said one shouldn't do (although I would agree that Obama hasn't been nearly as disappointing as many commentators think).

But Cameron and Clegg are not wasting this crisis. In fact, under the guise of emergency measures to save us from the terrifying vengeance of the bond markets, the current Con-Lib coalition government is actually recalibrating British public spending in fundamental ways. Labour increased public spending in a range of areas, including health, education, pensions and some benefits for the low paid and workless.

But the coalition is not reducing spending in ways proportionate to Labour's increases. Instead, in fact, they are freezing health spending - by far the biggest beneficiary of Labour's largesse - and cutting areas where Labour barely increased spending at all.

In fact, therefore, we are witnessing a major redistribution of spending as well as cuts. And it is a redistribution which will largely favour the elderly - health and pensions spending will be safeguarded - and harm mostly the poor, and especially poor children. The hardest hit will be children - mainly in London - who will have to move house and change school when the housing benefit cap is implemented.

The housing benefit system is clearly disfunctional. But is the only way to deal with it capping benefits and forcibly relocating beneficiaries? The real winners in the housing benefit game are private landlords, already incentivized with colossal tax privileges, and whose windfall gains due to the housing market bubble have yet to be touched by the coalition.

The pretence that deficit reduction has anything at all to do with fairness is wearing thin after only a week.