Economy and public finances Low income earners will bear the brunt of the cuts 21 October 2010 by James Plunkett James Plunkett To protect those at the very bottom, those in work, but on low and modest incomes, are being asked to make sacrifices Thanks to Danny Alexander’s spotless car windows, we have already had a sneak-peak of two pages of today’sspending review. It’s hardly news: 490,000 public sector jobs will go. But the pages also reveal coalition plans to encourage public sector employers to strike deals for shorter hours, in an attempt to keep redundancies down. It’s a theme that’s coming to characterise the coalition’s policies, and it shouldn’t go unnoticed. To protect those at the very bottom, those in work, but on low and modest incomes, are being asked to make sacrifices. It runs surprisingly counter to the coalition’s claims to be on the side of the “doers and the grafters”, but it also goes to the heart of their fairness message: the poorest should not shoulder the burden, and we must make sure the path into work is one that pays. In the short term, if reductions in working hours save jobs, that’s clearly a good thing. Workers in the private sector have been facing unemployment and reduced hours for the past two years, and there may be little sympathy for those in the public sector, now exposed to the same labour market realities. But in the longer term, it’s important we remember that it’s those in work, on low and modest incomes, that have already been hit hardest by this recession. Less protected by the stability of state support, their incomes have fallen faster than that of those dependent on benefits. Under-employment is far more prevalent among the low skilled than those in higher-paid jobs. With in-work poverty a growing problem, it’s vital that we don’t see benefits for those in low-paid work as a free meal ticket. And just as important, we need to see these reforms in aggregate. For those in work, on low incomes, and struggling towards the cherished goal of economic independence, this must feel like the perfect storm. In an environment of stagnant living standards, widespread public sector job cuts, and rising food and fuel prices, state support is increasingly being withdrawn from household on incomes in the £20-30ks. The child tax credit changes announced in the June budget means support will fade out quickly at an income around £23,000, rather than slowly, from £50,000. Cuts in the state funding of transport, affordable housing and childcare will have to be made up from somewhere in household budgets. Flat rate user-charges will fall heaviest on those in work, but just above exemption thresholds and most dependent on buses, childcare places, and other local services for their ability to make a living. We don’t yet know what’s on the other pages of today’s spending review. But if further steps are taken on cash-transfers like education maintenance allowances, combined with measures to shield the poorest, it’s important we measure the fallout for those just above them. For many, the struggle to get on in work, and break from poverty, is as hard as entering work in the first place. The climb from low to modest income can be a steep one, characterised by insecurity, long hours, and few savings to fall back on. In its worthy goal of protecting the poorest and giving the unemployed a leg up into work, the coalition must also do all it can to back the aspirational.