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3 December 2014

Editorial from the Socialist issue 836

50 billion cuts still to come

Osborne's solution deficit

On Wednesday 3 December, Chancellor George Osborne made his autumn budget statement. These events are about party politics as much as economics. Especially this one: six months before the general election.

Normally such a budget would be stuffed with 'election sweeteners' to try to convince voters that this Con-Dem government isn't so bad after all. But this time there was very little, because the government's own strategy of 'eliminating the deficit' is failing.

In fact all the main parties are committed to repeating the same bankrupt strategy of austerity. For many people it is further proof that the main parties have no solutions.

The best Osborne has been able to come up with in advance of budget day has been 2 billion 'more' to the NHS, 15 billion on road building and 2.5 billion on flood defence. This infrastructure spending, previously announced anyway, is in the context of overall cuts, for example in road maintenance and local government.

The NHS spending turns out to be 1.3 billion taken from other services and 700,000 'reallocated' from within the NHS. Yes they say they will use 1 billion from banking fines over the foreign exchange scandal to put into GP surgeries, but these are really just a sop. They are totally inadequate to cover the 30 billion deficit in the NHS expected by 2020. So called "efficiency savings", ie 20 billion cuts, and in particular the massive bill for Private Finance Initiative (privatisation), are devastating the NHS.

Growth?

Osborne made a big deal of the fact that the economy is growing - with 3% predicted for this year. But it took until 2014 for it to get back to 2008 pre-recession levels, the slowest ever post-war recovery. The neoliberal strategy of slashing public services did not in fact revive the economy in the way the government expected: it merely further depressed demand.

This recovery is very fragile. When he said: "red warning lights are once again flashing on the dashboard of the global economy", Cameron was already preparing his excuses. He listed the Eurozone crisis, slowdown in emerging economies, international tensions and Ebola as potential triggers for further crisis.

It is clear to everyone that the benefits of this recovery are only going to the super-rich. Wages have fallen dramatically in real terms. Over the last year average wages have risen by 0.1%, well below living costs. This has been a 'low wage and low hours' recovery. There has been an increase in the number of jobs, but many of these are zero-hour and minimum wage, with a big increase in low income self-employment. Three million workers are 'underemployed', not getting the hours they need.

This fall in living standards doesn't just make workers angry, but also has an impact on the budget deficit. The government expected economic growth to result in more people paying more tax, so they could close the gap between government spending and income. But this has not happened, to a large degree because wages are so low.

The Con-Dem plan originally was to clear the deficit by this general election so they could show how 'prudent' and good at managing the economy they are. But the deficit is now expected to rise to around 100 billion this year. The more they cut, the bigger it gets.

The gap between spending and income is plugged by borrowing. This adds to a debt pile of 1.45 trillion, equal to 80% of national income. The interest we pay on this 'national debt' is 1 billion a week.

But the government strategy to deal with this failure is more of the same! The Financial Times (FT) estimates that we are only half way through the cuts previously announced. The government has talked about a further 25 billion needed in the next Parliament, but the FT has calculated there will actually be 50 billion more cuts needed to reach its target. A lot more pain for working class people is to come if they get away with it.

The poorest have of course suffered the most, and this will continue. Welfare in particular has been targeted, with a further 12 billion of cuts planned. The government has already announced a freeze (real cut) in working age benefits, with no guarantees that it wouldn't be extended. Under 25s are to be excluded from housing benefit.

Balanced budget

Now the government even wants to introduce a law to enshrine the idea of a 'balanced budget', to be realised by 2017/2018. This is partly meant to be a trap for Labour, who while agreeing with the aim of obtaining a balanced budget by the end of the next parliament, just wanted to do it marginally slower. Osborne wants to expose Labour as being anti-business, but far from it, they have been at pains to pledge they will stick to Tory spending plans.

Labour will not come to the rescue of public services or living standards, they fully accept a capitalist approach. This why the Socialist argues for co-ordinated strike action to fight back against the cuts, we cannot 'wait for a Labour government'.

But it is also why the Socialist Party takes part in the Trade Unionist and Socialist Coalition in elections (see How can councils fight the cuts? TUSC's election challenge). What is missing at the moment is a mass organised expression of the anger that exists to fight for an alternative. This anger will not remain under the surface forever; it could erupt at any time.

Socialist alternative

A socialist alternative would fund the services we need. We would reverse the cuts and use the vast wealth that does exist in society to properly develop health, education, infrastructure, welfare etc. Osborne is also claiming to be 'cracking down on tax evasion'. But any steps they take are cosmetic; they wouldn't want to upset their big business mates. The figure, publicised by the PCS union, of 125 billion uncollected in tax due to evasion and avoidance by the rich, shows a glimpse of what is available.

To access that a socialist government would democratically nationalise the banking system, abolish the national debt and also bring into public ownership the top 150 companies that dominate the economy. Then a democratic plan to use that wealth for the benefit of the whole of society would be possible.

Cuts in public spending, or even easing those cuts under capitalism, will not deal with the underlying problems. Only a socialist alternative can.




http://www.socialistparty.org.uk/articles/19775




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