2012 Spring Budget: Full WBG Analysis

A lost opportunity for a recovery plan with gender equality at its heart

The 2012 Budget grabbed headlines for its tax measures – tax reductions for some, and increases for others. We discuss these in detail below. These measures should not be seen in isolation, instead they must be situated in the context of an increasing squeeze on public spending, even greater than forecast last year; cuts in public sector services; loss of public sector jobs; the public sector pay freeze, and now the prospect of further falls in public sector pay in the poorest regions. These factors will disproportionately impact women and make it harder for them to contribute to the wellbeing of their families and communities.

The Women’s Budget Group believes that the budget will further undermine gender equality in the UK:

• The Chancellor said that, in order not to have to increase the cuts in other departments’ real expenditure, he would have to cut a further £10 b from what he called ‘welfare’ spending by 2016/17. As benefits make up, on average, one-fifth of women’s income, compared with only a tenth for men, if the government succeeded in this, the impact would be devastating for women.
• The Office for Budget Responsibility has increased its estimate of how many jobs will be lost in the public sector between the beginning of 2011 and the start of 2017 by 30,000, to 730,000. Women account for two thirds of employment in the public sector, and therefore will face the brunt of these losses. Women’s unemployment is at the highest level in 25 years; and women account for two thirds of the latest monthly increase in unemployment.
• Many women who do have a job face the prospect of further reductions in their real
  earnings, and not only if they are subject to the public sector pay freeze. Just before the Budget, the government announced that the minimum wage for young people will be frozen for 2012/13. Even the for older workers the 11p rise is a cut in real terms. Women make up the majority of those on the minimum wage.
• The Chancellor wants to introduce ‘regional pay’ in the public sector, to reduce the gap between earnings in the public sector and the private sector. The Treasury says that currently public sector workers earn on average 8% more than private sector workers, but in some areas the gap is bigger: in Wales the gap is up to 18%.5 However, these averages mask differences between different groups of workers: according to the Office for National Statistics, employees with a degree in fact earn about 4% less on average in the public sector than in the private sector; whereas employees with low educational qualifications earn more in the public sector. The proposal is not to reduce the gap by increasing private sector wages, but by reducing public sector wage. Lower income women – home helps and dinner
  ladies, for instance, will be disproportionately affected by such a move to regional pay. More women work in the public sector than in the private sector, with a particularly high concentration in some of the regions which would be worst affected (for example, the North East). There will also be a knock-on impact on local economies, as public sector workers’ cut back on their spending. The TUC estimates that reducing public sector pay by 1% would take at least £1.7bn out of the poorest local economies.

The Chancellor has missed a major opportunity to put forward an economic recovery strategy with gender equality at its heart.

The government’s belief that tax cuts for business, relaxing regulations that protect worker’s rights and the environment, reducing real pay, and cutting public sector employment will stimulate growth is flawed. This strategy is based on intensifying inequality in what is already one of the most unequal economies if the world. It does nothing to address what the National Institute of Economic and Social Research calls, “the major factor depressing business investment this year: a lack of demand”.

Instead money should be put in the hands of lower income people, particularly women, where it is more likely to be spent in local shops on immediate needs and on local services. Putting more money in the hands of low-income women, through improvements in benefits, tax credits, pensions, and public sector employment opportunities would do more to stimulate demand than tax cuts for rich men and the corporations that they largely control.

Read our full report here