Let them eat Nando’s: how Rishi Sunak’s budget exploits the young and poor

Older readers may remember a time, two days ago, when the government’s summer budget was going to give us all a £500 voucher. In the sober light of today, this has warped into an eye-popping, pre-watershed invitation to ‘Eat Out To Help Out’ – an altogether less generous offer to go halves on your food bill, up to £10 per head, Mondays through Wednesdays, throughout August, in participating restaurants. Effectively, it’s a massive Groupon, only administered by HMRC, rather than your nan and the tokens she’s been diligently cutting out of newspapers. 

Where it differs substantially from other countries’ COVID giveaways – such as Spain’s Universal Basic Income, or even the United States’ one-time stimulus checks of $1,200 – is in how conditional it is. Rather than giving citizens money which they might save, it requires them to spend. This is underpinned by an economic logic which seeks to undo the collapse in consumer confidence wrought by lockdown, encouraging a resumption in spending habits which will, in theory, benefit businesses, and (again, in theory) by extension, help protect jobs. Who is this deal for, though?

‘EAT OUT TO HELP OUT’ IS NOT FOR EVERYONE 

There are 13 days in August that you’d be eligible for the discount. Let’s say you eat out every one of those days and scoop the full discount each occasion: you’d have to spend £130 of your own money On the one hand, you’d receive an additional £130 extra in food; decent. On the other, this necessarily benefits those who can afford to spend £130 a month eating in restaurants a lot more than those who have had their incomes and savings decimated by, say, coronavirus.

You could really maximise things by visiting multiple participating restaurants throughout the day, but that would have the slightly troubling side effect of exponentially increasing your risk of exposure to the (still very much active) virus. It’s a scheme which benefits you the more disposable income you have, and the more you’re willing to put yourself in harm’s way. It is pointedly not a flat £500 for everyone. 

However, as Tory policy favouring the already wealthy goes, it is at least widely accessible; even if only enjoyed sparingly. This is in stark contrast to their other big-ticket giveaway: stamp duty relief.

“Housing (is made) even more unaffordable, while further lining the pockets of the already wealthy. This isn’t accidental”

WHO ACTUALLY BENEFITS FROM THE STAMP DUTY CUT

Stamp Duty Land Tax (SDLT) is a tax on residential property purchases in England and Northern Ireland. This had previously been exempt on all properties below £125,000, and those worth £300,000 for first-time buyers. This has been relaxed to all properties up to £500,000 for everyone until March 31. 

As the tax is a percentage, the relief is more significant the more you spend. At the upper limit (£500,000), you’d save £15,000 in tax. If there’s one section of society that urgently needed a beefy handout after this crisis, it’s those who can afford properties worth half a million pounds. 

Will this benefit you? If you belong to an exclusive cohort able to spend above £300,000 on your first home, then yes! Likewise, pre-existing homeowners able to shop around in this range. If you’re a landlord looking to expand your portfolio; also in luck! You will only have to pay the pre-existing surcharge (which was previously on top of rates). If you were planning on buying a home worth over half a million; you’re still in luck: you pay 0 per cent on the first 500k. Crucially, unless you’re awash with cash, it also requires you to be drawing a salary high and secure enough to be granted a mortgage – increasingly rare in these post-plague times. If none of these categories applies: then no. This is, in fact, less than no benefit to you.

This next bit gets a bit technical, but it highlights the real inequality at the heart of this. Previously limiting this relief to first-time buyers was an attempt to allow those without pre-existing assets an ability to compete in the market. An offer of £300,000 from a first-time buyer and an offer of £300,000 from an investor would appear identical bids. The seller wouldn’t necessarily know the former was being relieved of stamp duty, and in any case, it wouldn’t matter, because the amount they would personally receive would remain the same. 

Now, though, sellers are aware that this discount applies across the board, meaning the maximum ceiling for investors has just been increased. Sellers can raise their house prices accordingly, leaving behind first-time buyers, who were only at the table due to an offer previously exclusively available to them. This will likely occur expansively, as sellers look to absorb this tax relief to their advantage. Not only does this forfeit untold millions in tax revenues, it makes housing even more unaffordable, while further lining the pockets of the already wealthy. This isn’t accidental.

In a best-case-scenario; this scheme might encourage movement in the property market. Someone occupying an ‘affordable’ home might take advantage, and move up the ladder, vacating their property for the rung below. However, this presumes everyone will sell as they move, rather than retain their old homes as additional property to let. In our present economy, capital (assets, like rental property) derives generally a greater and more secure income than labour (wages). Combined with a predicted jobocalypse – arguably, already happening – you are effectively incentivised to amass and retain as much property as you possibly can. 

“The British economy is absurdly dependent on our hideously engorged property market. It feeds our parasitic financial sector, built on mortgage, debt, and speculation”

SOCIAL HOUSING AND GENERATION RENT

It might also be argued this will create second-order jobs. Construction, for instance. If this were the intention, then why not commit to a scheme of social housebuilding; guaranteeing work, jobs, and affordable housing? Because this is not the intention. Over the last four decades of housing provision being left to the private sector, supply has been consistently, deliberately limited, rather than increased, to meet demand. The fewer homes being built, the more valuable the existing become. The more people excluded from home-ownership and forced to rent privately, the more you can charge for rent. The greater the rent that can be extracted from a property, the more valuable property becomes. A sudden proliferation of social housing threatens this self-perpetuating relationship. 

The British economy is absurdly dependent on our hideously engorged property market. It feeds our parasitic financial sector, built on mortgage, debt, and speculation. Keeping it satiated requires property continuing to appreciate; and so, perversely, on successfully keeping housing scarce and rents rising. Happily for the Tories, this aligns with the material interests of many of their voters. 

Even before these latest announcements, the Conservatives made a succession of extraordinary interventions to protect the financial interests of homeowners and landlords – inuring them from the effects of the crisis by offering mortgage relief and generous ‘bounce back’ loans. Meanwhile, private renters – who make up 20 per cent of households (4.6 million people) in England alone – were only given a short exemption from eviction. Shelter estimates that the number of tenants now in arrears to their landlords stands at 442,000, with 230,000 facing eviction when this window lifts in a matter of weeks.

But if so many can’t afford to rent, particularly given their dwindling job prospects and likely mass youth unemployment, how will this hierarchy sustain itself?

“(The Kickstart jobs scheme) is not about ‘kickstarting’ young people’s careers, it’s about preparing them for badly paid exploitative labour, and for feeling they should be so lucky to even get that”

ENTER: THE KICKSTART JOBS SCHEME

Given the history of the Tory party, it is another not-insubstantial intervention; a £2 billion scheme whereby the government will subsidise six-month work placements for 16-24 year-olds, up to the minimum wage, for 25 hours a week. 

If you’re a young person facing unemployment, it’s understandable to be personally relieved by this guaranteed, albeit brief, income. It’s also laughably inadequate. Despite being able to afford these wages, the government has made a point of effectively filtering them through employers, rather than paying them directly, which would be too much like UBI. If they insist on wages being contingent on labour, the government could itself facilitate the creation of new jobs, new structures, and new institutions in the public sector – renewables, for instance. Instead, it gifts private companies which derive profits from exploitative low-paid precarious wage labour, free labour for 6 months, with virtually no conditions – labour which remains low-paid and precarious.

Conspicuously, and conveniently, the scheme omits those 25 and above, which may have more than something to do with this being the age at which you are entitled to the maximum minimum wage. Faced with a choice between employing someone on the maximum possible minimum wage, and a young person for, essentially, free, who will most employers plump for? There is no requirement to keep the employee on once the six months elapses, either, so employers could cycle through this pool to their heart’s content. The overall effect is to depress wages and weaken workers’ rights at the lower end. 

It is a scheme which does nothing to challenge the structures and conditions threatening the precariat – as devastatingly exposed by the virus – and instead, buttresses them. It is not about ‘kickstarting’ young people’s careers, it’s about preparing them for badly paid exploitative labour, and for feeling they should be so lucky to even get that. If you’re between 21-24 years old, you’re entitled to £8.20 an hour. Over 25 hours a week, that’s £205. This is nowhere near enough to save towards a deposit, but it might be enough to cover your rent. Which, you have to feel, is precisely the point.

“The government’s measures aren’t about transforming the economy to meet the new realities created and necessitated by the virus. They are a desperate bid to return to the way things were, to preserve our grotesquely unfair economy based on vulturous extraction and exploitation, even as it pushes us towards mass extinction”

A RECESSION IS LOOMING, BUT WHO RIDES IT OUT?

A recession is a real threat, and perhaps we’re already in it. Those best prepared to ride it out will be those with savings and assets. One section of society has been given an impetus to amass as much as they can over the next six months, and repeatedly had these financial gambles protected. The rest of us are expected to support the misdeeds. For so long, young people have been goaded with their profligate avocado habits, apparently preventing them from affording property. Not only is this patently nonsense, it’s also exactly what wealth extractors explicitly encourage and need us to do; spend our remaining meagre disposable on meagre luxuries like our preferred foodstuffs, in order to float an economy which benefits them and punishes us.

Tory backbenchers are already pressuring Sunak to commit to future cuts to pay for his stimulus. By Tory logic, someone has to pay for the current spending commitments, like the stamp duty relief, and they will almost certainly not be the people who benefitted from them. If backbenchers get their way, public services will be gutted to recoup the hundreds of millions of lost tax revenues granted to property speculators. This would be a naked, upwards transferral of wealth. No wage rises for nurses, to pay for a £15,000 giveaway to landlords.

The government’s measures aren’t about transforming the economy to meet the new realities created and necessitated by the virus. They are a desperate bid to return to the way things were, to preserve our grotesquely unfair economy based on vulturous extraction and exploitation, even as it pushes us towards mass extinction. If you were doing well before the virus, and have remained largely unaffected by it throughout, the announcements will be fantastic. If you weren’t, you’re being expected to carry the can to protect the financial gambles of the wealthy. The Conservatives think they can get away with simply letting us eat half-price Nandos. They need to hope our appetites don’t turn elsewhere. The rich, for example.