Spending

Half of poorest countries cut health spending despite Covid, says Oxfam | Inequality

Many of the world’s poorest countries have cut health spending in the past two years, sometimes to pay off debts to wealthy creditors, according to an Oxfam report that shows inequalities between rich and poor have worsened during the coronavirus pandemic.

Analysis of national budgets from 161 countries found that despite the biggest global health emergency in a century, half of low- and lower-middle-income countries cut health spending, while nearly half cut budgets and nearly three-quarters have cut back on education spending.

Oxfam said the 2022 Commitment to Reducing Inequality Index found that wealthy countries including the UK ‘have exacerbated an explosion of economic inequality’ by overseeing lenders’ demands for huge loan repayments. debts as the pandemic ravaged annual spending plans.

As finance ministers gather in Washington this week for the annual meetings of the International Monetary Fund (IMF) and the World Bank, Oxfam said developing countries face “a global economy that is increasingly making difficult to meet the needs of their population”.

The charity accused the IMF of exacerbating economic inequality and poverty in poor countries by insisting on new austerity measures to reduce debts and budget deficits.

Oxfam and Development Finance International said analysis of IMF data showed that three-quarters of all countries planned further cuts in public spending over the next five years, totaling $7.8 billion ( £7 billion).

In the fourth edition of the index, Oxfam ranked governments on their commitment to reducing inequality. Areas covered include public services and social protection, taxation and workers’ rights. Policy commitments are also subject to scrutiny to test their implementation and impact on inequality.

Liz Truss’ administration was also embarking on spending that would increase inequality in the UK with tax cuts that benefited the wealthiest households, according to Oxfam.

Katy Chakrabortty, Policy Officer at Oxfam, said: “The Index shows how governments around the world are not only succeeding in reducing growing inequality, but many are also deliberately choosing policies that will profoundly disadvantage the poorest for years to come. coming.

“Here in the UK, if the proposed cuts in real terms to health, education and social safety nets are implemented, we will fall even further behind other rich countries in the fight against inequality. The impact on families already struggling to make ends meet will be horrific.

The report says that in 2021, low-income countries spent 27.5% of their budget to pay off their debts – “twice the amount they spent on their education, four times that on health and almost 12 times that of social protection”.

China and other non-Paris Club lenders of institutions that have historically dominated lending to developing countries are playing an increasingly important role in loan financing.

However, banks based in the US, UK, France, Germany and Switzerland are also the beneficiaries of debt repayments that have crippled the finances of developing countries.

The UK ranked 14th in the 2022 index, up eight places from the previous analysis in 2020.

Oxfam said the increase could be attributed to compliance with new Organization for Economic Co-operation and Development (OECD) rules on corporate tax avoidance.

“Despite improving its position, the UK fell in the rankings for public services, labor rights and progressive tax,” the report said.

“UK spending on social care and education is now below the OECD average and the corporate tax rate is the third lowest in the OECD, with tax collection also below the OECD average,” he added.

Among the countries that have underperformed this year is France, which fell 10 places in the index after cutting corporate tax rates and scrapping its wealth tax.

Other countries that lowered the index include Jordan, which cut its budget share for health spending by a fifth. Nigeria froze its minimum wage and the United States failed to improve a federal minimum wage from 2009, according to the report.

Nepal was among a handful of poorer countries to increase health spending as a share of its budget, in its case by 50%. Costa Rica increased its top income tax by 10% and New Zealand by 6%. The Occupied Palestinian Territory increased its social spending from 37% to 47% of its budget.

Barbados introduced a comprehensive set of laws to improve women’s labor rights, and the Maldives introduced its first national minimum wage, according to the report.

Matthew Martin, Director of DFI, said: “The debate has shifted catastrophically from how we deal with the economic fallout from Covid-19 to how we reduce debt through savage public spending cuts and public spending freezes. wages. With the help of the IMF, the world is sleepwalking into measures that will further increase inequality.

“For every dollar spent on health, developing countries repay four dollars of debt to wealthy creditors. Comprehensive debt relief and higher taxes for the wealthy are essential for them to significantly reduce inequality.”