Britain: Going back to basics

Austerity seems inescapable, even in a prosperous developed country like Britain, which is going through some of the worst cut-backs since the Great Depression.

Some of it simply comes from the UK, and so many other countries, still trying to find a way out of the financial crisis. But there is another element – a perception that things have gotten a bit too easy and that the once-beloved ‘welfare state system’ has gotten abused and needs to be tightened up.

Britain is instigating the biggest changes in its welfare state since the 1940’s, remaking a system that has been seen as an example for developed economies. The changes are across the board: housing and sickness benefits, disability allowances, and a cap on individual welfare payments.

If you are of working age and live in social housing which is deemed ‘”larger than you need” that housing benefit will be cut.

One percent – which is lower than the rate of inflation – will be the limit on increases in tax credits and working-age benefits. And total benefits will be limited to around $520 (£350) a week for a single person, and $750 (£500) a week for a couple.

All that is to say nothing of the changes to the National Health Service (NHS) which was hailed as a “cradle-to-grave” safety net to protect the worst-off.

Much of that budget will now go into the hands of so-called ‘Clinical Commissioning Groups’ who will now decide how to spend funds on local health services.

Back to work, back to growth

It is – for many Britons – a lot of drastic change, happening very quickly.

And it is all part of a push to get more people back to work, as Britain struggles with what is looking like the biggest structural deficit of any OECD country outside of Japan.

The government claims it is trying to get back to basics: those who can work should work, and a life lived on benefits must not be a more attractive option.

Conservative politician George Osborne said: “Defending benefits that trap people in poverty and penalise work is defending the indefensible. The benefits system is broken. It penalises those who try to do the right thing and the British people badly want it fixed. We agree and those who don’t are on the wrong side of the British public.”

But the plans have not gone unchallenged. There have been protests across the country and from the opposition Labour Party.

Shadow Treasury Minister Chris Leslie argued: “While millionaires get an average £100,000 tax cut in this year’s budget, IFS figures show that the average family will be £891 worse off this year because of tax and benefits changes since 2010,” adding: “The best way to get the benefits bill down is to get our economy growing strongly and get people back to work.”

So has the government got it right?

This week, Counting the Cost looks at both sides of the argument, as Britain tries to get back to work, and back to growth.

Egypt and the IMF

Continuing with the austerity theme, there has been a lot of talk about Egypt needing a loan from the IMF – something it initially rejected. But now there is an amended economic plan on the table from the Egyptians, simply because, they need that $4.8bn loan.

But Egypt is now targeting its own subsidies. Basics have just become a whole lot more expensive, and the rising cost of living will add to the difficult times.

Meanwhile, in Hong Kong, workers at the world’s largest container port are on strike, demanding higher wages. They say they have not received a pay rise in 10 years, and Hong Kong is not exactly the cheapest place to live.

Finally this week, for some old-fashioned lessons in business, we go behind the facade of a modern Middle Eastern corporation in Doha to find the ‘family business’ is still at the heart of it all.

Every big company, every multi-national corporation, has to start somewhere. Like the Salam Group, which is Qatar’s largest private sector family firm, with retail, investment and construction arms. But it started out simply as an idea in the middle of the desert.

Some 60 years ago, Abdul Salam Mohammed Abu Issa arrived from Palestine. He discovered a love of photography, and being someone who just wanted to make something of himself, opened the Salam photography studio.

These days his son, Issa Abdul Salam Abu Issa, runs the business.

We caught up with him at the multi-million dollar Gate development in Doha, the culmination of the Salam empire. And what became apparent very quickly is that it’s the lessons of the father which guide the son today.

Watch each week at the following times GMT: Friday: 2230; Saturday: 0930; Sunday: 0330; Monday: 1630. Click here for more Counting the Cost. Follow Kamahl Santamaria @KamahlAJE and business editor Abid Ali @abidoliverali