David Cameron once described himself as the "heir to Blair." However, whereas Blair tried to combine the best features of left and right, yesterday's Budget combined the worst.
We saw the worst form of right-wingery in the attack upon low-paid workers. Let's be clear here. The proposed rise in the living wage - from £6.50 an hour now to £9.35 by 2020 does NOT offset the reduction in tax credits. The OBR estimates that the higher living wage will add £4bn to total annual wages by 2020, assuming no change in hours or employment (I'll come to this). But the cuts in tax credits are worth £5.8bn (measures 39-43 of table 2.1). £5.8bn is more than £4bn.
Those working part-time will suffer some massive losses even if they benefit fully from the proposed living wage. Monique Ebell at the NIESR estimates that a family with one child where one adult works 30 hours a week at the current NMW will lose £492 per year by 2020. The Resolution Foundation estimates that a single parent working 20 hours per week on the NMW will lose £1000 a year. The SMF agrees.
£10-20 per week might not seem much to those of us who are well-off - but it's a massive amount for those struggling to make ends meet.
Mr Osborne has contrived to combine this impoverishment of the worst off with one of the worst vices of the left - an under-appreciation of the role of incentives.
One way in which this is the case is that he has worsened incentives for the low-paid to work more or get better jobs. Ms Ebell points out that the increased taper rate for tax credits now means that a family earning more than £11000 per year but getting tax credits faces an effective marginal tax rate of 79%.
There is, though, another way in which Mr Osborne has paid insufficient heed to incentives: he is under-rating the fact that if you raise the price of something, you give people an incentive to buy less of it. It's for this reason that most advocates of a living wage saw it as an aspiration rather than something that could be enacted by law.
Raising the effective minimum wage by 44% over the next five years will encourage firms to reduce employment and hours. By how much?
The OBR (pdf) estimates that the living wage will cut 60,000 jobs.
This, though, is only half the damage. It estimates that the other half of the adjustment will come from cuts in hours.
And even this might be an under-estimate. It is based on the assumption of a price-elasticity of demand for labour of minus 0.4 - one based upon this paper (pdf).
However, it's likely that the elasticity of demand for sub-groups of workers is higher than that for the workforce as a whole, simply because employers can substitute between one group of workers and other groups more than between workers and capital alone. The NIESR's Rebecca Riley has estimated (pdf) that, for unskilled workers, the price elasticity of demand is 0.9 for over-30s and 1.6 for 15-29 year-olds. Applying the former elasticity more than doubles the cost of the living wage relative to the OBR's estimate. That implies a cut in labour demand equivalent to over 250,000 jobs.
Note here that the living wage will not apply to under-25s. It's possible therefore that employers will substiute away from workers in their late 20s to those in their early 20s. Whilst this might reduce youth unemployment, it could hit hard people with young families.
Some of the more honest right-wingers see this for what it is. The IEA's Mark Littlewood calls it "intellectually bankrupt."
I agree. We cannot give ourselves pay rises merely by legislative fiat. Instead, we need a more skilled workforce and companies who want to use those skills. Achieving this requires much more than despatch box rhetoric.