This document was produced as a discussion document for the February 2005 Socialist Party national council. It concisely presents the Socialist Party’s outlook for economic and political developments in Britain at that time. It is slightly abridged.
Introduction
This statement should be read in conjunction with the British perspectives document produced for our 2004 conference – as most of the points made then are still very relevant but are not all repeated here. At that time we had experienced the huge anti-war movement which included the largest ever demonstration in Britain, when around two million people marched in London on 15 February 2003. Domestic events of the last year have not been so titanic, though there have been a number of important workers’ struggles, and as the occupation of Iraq descends further into disaster, the anti-war mood has not only remained but has increased, with polls showing support for the war down to an unprecedented low of 35%. Whether this results in resurgence of the anti-war movement on the scale of 2003 is another question, but certainly the 30 January elections in Iraq have solved none of the problems, have exacerbated tensions with the minority Sunni population and shown clearly the strong anti-imperialist anger throughout Iraq, so they have not improved the prospects in Iraq for Bush and Blair.
The Asian tidal wave catastrophe dominated the start of 2005 in Britain and worldwide, the repercussions of which are not covered in this statement as this is done in other written material. The next few months are marked by it being a pre-general election period. The government will try to put a number of developing issues on ‘hold’ if it can – whether it is the attacks on pensions, the worsening situation in Iraq or the growing economic problems. But this may not be possible even in the few short months before the expected election date, and definitely won’t be possible afterwards. A third-term New Labour government faces a stormy period in many respects, with renewed public sector struggles possible at an early stage.
As a result of growing pressure on the trade union leaders to lead action in response to the government’s attacks on pensions, there is now the prospect of a day of public sector strike action involving several unions before the election, in March, followed by further action. This, if realised, will be a very significant step forward and may turn out to be the start of a decisive change, from a period in which the number of struggles has been relatively very low, to a return to broader workers’ actions. While it is not possible to predict in advance the exact timing of this process of change and the speed at which events will develop, a combination of the underlying frustration, anger and tension already existing among workers and the planned attacks of New Labour, are certain to fuel explosive developments at some point.
Anger against the government’s agenda of cuts and privatisation and its role in the Iraq war and occupation is also fuelling important changes in consciousness. The situation regarding this and regarding struggle is complicated by the fact that there has not yet been a serious economic downturn and also by the lack of an alternative to the three major capitalist parties. Nevertheless there is a growing anti-privatisation mood, which in turn feeds anti-market sentiment and a smaller layer questioning the capitalist system itself. This was noted by British Petroleum’s chief executive Lord Browne, who warned fellow capitalists and their representatives at the January 2005 World Economic Forum in Davos that the use of internal markets for public services is “damaging professional people who probably should not be subject to these pseudo-markets” and added that the use of markets in the public sector is turning people against business in general.
These changes in consciousness, together with the underlying tension in workplaces and communities, mean that the relatively quiet period we have been through will not last indefinitely, so we must be prepared for major changes in the situation, possibly rapid ones, both regarding industrial struggle, and a general further politicisation of workers leading to concrete steps towards a new mass workers’ party. Above all, it is events that will prepare the way for a new party.
Inequality
The housing charity Shelter released a report on 26 November 2004 which said that children born this century would be starting life “more financially unequal than at any time since the Victorian era”. Inequality in Britain has increased at a rapid rate in recent decades. Over the last 25 years, share of growth in disposable income has fallen by a third for the poorest 10% of the population. During this same period, 40% of the total growth in disposal income has gone to the richest 10th of the population.
In a new book co-authored by Guardian journalist Polly Toynbee, it is claimed that “at best, Labour stopped inequality in the UK getting worse”. However, there are many facts and figures showing that inequality has definitely increased during New Labour’s two terms in power. The richest 1% of the population now owns 23% of Britain’s wealth, up from 20% when New Labour was elected in 1997. According to the office for national statistics, the top 1% have doubled their wealth since 1997, gaining an average of £737,000 per person. Just between the financial years ending in 2003 and 2004, Britain’s 1,000 richest people increased their wealth by 30%; they had £155bn in 2003 and £202bn in 2004.
There is also widening inequality in wage levels. The average pay rise for bosses is 80 times more than that of workers. In 2003 the 1,000 top executives of Britain’s largest companies took an average increase of £76,000 – a 16% rise, to get £550,000 each. Workers on the other hand only had an average increase of 3.8% – about £900 per year. Chief Executives of the top companies now get £1.7 million per year on average in pay and perks! . This figure climbed 12.8% in 2003, more than three times faster than the 3.6% ordinary earnings rise. These ‘obese cats’ are getting 69 times the average wage of £24,741, and 170 times the wage of workers who are struggling on less than £10,000 per year, such as many in the civil service. The overtly pro-big business Blair government has recently decided not to legislate against excessive pay-outs for directors – including for those who have led failing companies – leaving it to shareholders to carve up their own deals with directors instead.
This is the reality of inequality in Britain today, and is a picture far removed from Blair and Gordon Brown’s portrayal of a government that is assisting the poorest in society. The poorest 10-20% of the population has seen little or no improvement in their real incomes for a generation. It is also the case that the poorest fifth of earners pay more of their income in tax than the richest fifth.
It is not just the poorest layer that is in difficulties. Although official statistics show that a majority of the population have had an increase in their living standards, these figures do not take into account widespread financial insecurity, job insecurity, the effect of deteriorating services and infrastructure, attacks on pensions and many other problems. British people work the longest hours in Europe, and with the bosses’ attempts to increase productivity are the victims of record stress levels. Around half the population has little or no wealth in the form of property or other means and is now plagued by debt. Much of the other half – with the exception of the super-rich – may own their own house and have some shares or savings, but also face increased insecurity, debt etc.
Blair and Brown made reducing child poverty one of their mantras. Yet a Rowntree Foundation report last December showed that 20% of children across Britain live in families relying on means-tested benefits. Large numbers are concentrated in particular pockets of poverty; 70% of the poorest children live just in the four cities of Manchester, London, Merseyside and Glasgow. At the other end of the age scale poverty is also rife, and this will worsen if the government’s proposals on pensions are not defeated. The Prudential finance group has reported that pensioners’ “incomes are not keeping pace with the cost of running a home and bills for gas, electricity, water and council tax rises”. In an article titled ‘Britain tops the league of shame’, the Observer commented that “if you are a pensioner living in either the UK or Ireland, you are more likely to die during the winter season than in any other country in northern Europe”. It was noted in the article that the charity Age Concern is saying that at least 22,000 old people are predicted to die from cold-related illnesses this winter.
This is in a country that was ranked by the OECD as the fourth largest in the world for economic activity in 2002 and the eleventh largest for average income per head. The widening inequality is not viewed as acceptable by most people. A study by Professor John Hills, head of the Centre for Analysis of Social Exclusion, recently showed that 80% of people believe the gap between rich and poor is too large and less than a fifth believe ‘it’s necessary for prosperity’. Less than a quarter were prepared to ‘blame the low income of the poor on laziness’.
Economy
The Chancellor, Gordon Brown, has boasted that Britain is ‘safeguarded’ from the economic problems in Europe, the US and world-wide, but this couldn’t be further from the truth. With the extent of economic interlinking in the world, it is impossible for any country to be excluded from the effects of crisis in any of the major world economies, particularly in the US or China, the main engines of world growth in the recent period. Never before in world history has a crisis in one key economy had the potential to spread rapidly across the world to the extent it can today. The processes taking place internationally have been covered in other written material we have produced, which forms an essential background to a discussion on the prospects for the British economy, but it is necessary to remind ourselves here that the world economy is heading for a very dramatic worsening with potentially disastrous consequences worldwide. The exact timing of economic decline is not possible to predict, but bearing in mind the vast scale of the accumulated financial problems, it could be very abrupt and fast, so we must make sure our comrades are not unprepared for such events.
Even if the impending world economic downturn hits later rather than sooner, the British economy is in an unhealthy state. It is running its highest ever trade deficit in modern history and this financial year’s budget deficit could end up being well over Gordon Brown’s March forecast. Net government borrowing in the first nine months of the financial year was £37.1bn, whereas Brown’s forecast was £34bn for the entire year. The war on Iraq and occupation, costing over £5bn so far, has exacerbated the situation. Brown is relying on tax income from North Sea oil to improve the deficit, but this won’t be enough to plug the gap, and the depleting supply of North Sea oil is no long term solution. The Institute for Fiscal Studies predicts that Brown will have to raise taxes or make further cuts of £11bn per year after the general election if he’s to avoid breaking his ‘golden rule’ of not borrowing to fund current public expenditure, only to fund investment.
There are a number of signs of slowing economic growth, which in any case is at a relatively low level. Economic growth only expanded by 0.5% in the third quarter of 2004 and 0.7% in the fourth quarter. The 2004 annual growth rate is expected to be calculated at around 3%, much below levels achieved in the decades of the post war boom. Economists can point to a few positive figures, such as that exports and business investment grew a bit faster than GDP in 2004, but estimates of future growth are being revised down by the CBI and financial institutes. According to the Office for National Statistics, the December 2004 Christmas shopping was the worst since 1981. House prices fell for the fifth consecutive month in December 2004 and factory production declined in the second and third quarters of 2004. Business investment is falling and expansion in the service sector is slowing.
Economic growth, such that it is, has been sustained by consumer spending, which has in turn been sustained by the build up of debt through mortgages, credit cards and other loans. Household debt has doubled in ten years to reach 140% of disposable income. This is above the US level and that of most other large European countries according to the Financial Stability Review published on 13.12.04. It has now gone over £1 trillion, which is equivalent to £17,000 for every man, woman and child in the UK. These levels of debt are unsustainable. High house prices have been a major factor behind the debt build-up, as a layer of home owners have borrowed money on the basis of the increased value of their home. But this is set to end as the bubble in house prices is expected to burst soon Interest rates, increased five times since November 2003 up to 4.75%, are worsening the debt burden. The bursting of the housing bubble leading to reduced consumer spending could be a trigger for the onset of recession, as would a rapid worsening of the world economy and/or turmoil on the world currency markets. With exports suffering due to the sluggish growth in the Eurozone (which accounts for half of Britain’s exports) the economy is even more reliant on domestic demand, which as touched on above, is based on unsustainable debt levels.
With recession, the unprecedented pile up of debt will be a great problem for the middle class as well as the working class. Even in this ‘growth’ period, personal insolvencies are at a high level; in the second quarter of 2004 they were recorded as being the highest since records began in 1960, and the figure for the year, at 46,651 was 30% greater than the year before. Over the past ten years more than 300,000 people have become insolvent – more than the population of Coventry – and the Citizens Advice Bureau says that debt is the single biggest problem they deal with, having seen 1.1 million people about it in the 2003-04 financial year. These figures and the human misery they represent are set to worsen massively.
Capitalist financial ‘experts’ and politicians are constantly telling workers that the economy cannot afford increases in funding public services and public sector workers’ wages and pensions. It is true that British capitalists face a real ongoing economic decline which drives them to support reduced state provision in order to boost their own wealth. But it is also the case that the overall trend since the 1970s has even been declining overall public spending as a share of GDP. Governments, both Tory and New Labour have rushed to do the bidding of the ruling class by making spending cuts and massively reducing the taxes paid by the rich. Corporation tax was 52% between 1973 and 1983, but from 1983 onwards was reduced to 33% by the Tories and then to 30% by New Labour. Income tax is now 22% basic rate and 40% higher rate. However, in the 1970s the highest top rate was 83%. In 1979 it was cut to 60%, and then was cut further in the 1990s.
Manufacturing & employment
We commented in our 2004 statement on Britain that the term ‘advanced industrial’ countries is a misnomer in the sense that they are now in reality ‘advanced de-industrialised’ countries. Agreement comes in a report published in December 2004 by the EEF engineering organisation, where it is simply announced that mass production in Britain and other developed countries is over. Instead, industry is reduced to making ‘specialist products for narrow market niches’, where there is less competition from low-wage countries. The trade deficit is set to be the highest on record in 2004, at an estimated £58bn. This is the worst situation for British capitalism in three centuries! The service sector is now 80% of the economy and Britain does have a surplus from investments abroad and in services, which hides to some extent the industrial position. But it is hard for the bosses to hide regular news of large scale redundancies, such as at the Browns Lane Jaguar plant in Coventry. And even in services there is a worsening position; the surplus trade in services went down from £15 billion in 2002 to £11 billion in 2003.
During the 1980s and 1990s British capitalism prided itself on being Europe’s premier location for foreign direct investment (FDI), with Japanese and East Asian multinationals setting up car and electronics factories in the former industrial heartlands of Scotland, Wales and North England. The government offered financial incentives with public money, to attract as many foreign companies as possible. But money put in from capitalists abroad can be taken out when other pressures come to bear on them, and this happened sharply from 2001 to 2003. At the same time, domestic companies increased investment abroad, mostly to the US and Eastern Europe. In 2004, there was some recovery in FDI levels partly due to mergers and acquisitions, but this is not set to continue with the approaching downturn in the world economy.
The official number of unemployed in Britain is at its lowest level for 30 years and long-term unemployment is among the lowest in Europe at present. Caution is needed here, as official figures always under-calculate the real level of unemployment, and national figures don’t show regional variations – the fact that some areas have much higher unemployment than others. However, the other vital side of this issue is the quality of the jobs that people have. From 2001 to 2005 about 1.5 million jobs were created and one million lost, but the quality of the new jobs regarding length of contracts, pay and conditions has massively worsened. Low pay is endemic, with a large proportion of families now unable to survive on a single wage. Women now make up half the workforce, but are concentrated particularly in lower paid sectors and earn on average 82% of men’s wages. 60% of public sector jobs are done by women. One consequence of the overall decline in ‘proper’ jobs with long term contracts has been a rise in the number of job agencies – who hire out temporary labour while themselves taking a fat cut of the wages paid. It was reported during our January 2005 national committee discussion on Britain that there are now 72 job agencies in Stoke on Trent alone! The general assault on wages and conditions is accompanied by an obsessive government-led drive to get everyone into work, including single parents and people living with disabilities and incapacities. The government intends to make a major attack on the 2.5 million incapacity benefit claimants (7.6% of the working age population) in its third term of office. The intention is to reduce the numbers claiming and replace the present benefit levels with a flat-rate allowance (at present the amount rises after 6 months and again after 12 months).
As well as attempts by British bosses to drive down the wages and conditions of their existing workforce, workers face the consequences of increased outsourcing of jobs to countries with lower wage costs. This has become a preoccupation of a section of the ruling class, and is predicted to rise further in the next period. It no longer just encompasses manufacturing jobs, such as MG Rover’s present intention of moving a production line of the Rover 75 to China, but has extended into services, with call centres and finance jobs being moved to countries where English is widely used, particularly India. This process is not without big difficulties for the bosses involved, as providing an on-going service to a customer base in a different continent is more problematic in many ways than producing goods in different parts of the world.
There is also the growing process of the use of people traffickers bringing in ‘illegal’ labour to the UK to provide a pool of extra-cheap labour with no rights, and to undermine workers’ wages and conditions generally. The lack of protection these migrant workers have was exposed publicly when 23 Chinese cockle pickers died in Morecambe Bay last February. The Guardian carried out an investigation into migrant working and found that gangmasters involved in bringing workers into Britain illegally, control hundreds of thousands of foreign workers on behalf of supermarkets and other major British industries. This has spread across all sectors of the economy, from agriculture and cleaning to the print industry and health service. They concluded that “a large and growing section of the British economy has developed beyond the normal parameters that regulate business”. Many ways of circumventing labour law are used by the traffickers, involving false identities, abuse and violence. The Department of Work and Pensions told the Guardian that there are 1.8 million unexplained national insurance numbers in circulation.
The driving down of wages and conditions by using gangmasters to bring in workers from Eastern Europe and other parts of the world reflects a certain degeneration of a section of the capitalist class. It contributes to the massive assault which is underway on the post-war labour rights and conditions of British workers, in the name of increased rates of profit for the rich. The particular rottenness of the British capitalist class is shown in its transition from spearheading the workshop of the world to now running one of the worst sweatshops of at least Europe.
Privatisation & cuts
Driven on by Blair and those around him, the government continues with its unrelenting drive to privatise public services, a process that is handing the opportunity of massive further profits to the super-rich. Blair wants to go much further with both cuts and privatisations after the general election – outsourcing is predicted by the Public Finance magazine to double or treble in the next three years – but in the meanwhile is pushing ahead with many previously announced cuts and some new ones. These vary from reducing night-time fire service cover in the West Midlands to forcing more than 600 rejected asylum seekers who cannot go home immediately (because it’s too dangerous, they’re too ill etc) to do compulsory unpaid work in return for benefits and housing.
The government tries to use the smokescreen of claiming to increase ‘upfront’ services by reducing ‘backroom’ functions. However, as public sector workers know only too well, all upfront services need adequate backroom administrative support. It is also the case that the government is highly selective about which ‘frontline’ services it wants to increase. Many civil servants working in the front line – having direct contact with the public – have faced a steady increase in workload that has adversely affected the service they can give and this will worsen much further if the government’s proposed civil service job cuts are implemented. Even the bosses’ organisation, the CBI, was driven to say recently that the government’s ‘efficiency savings’ could damage front-line services.
In an attempt to reduce criticism of privatisation of public services, the government is promoting (to a lesser degree) both the voluntary sector and ‘social enterprise’ – the latter meaning companies that trade for a social purpose, like Fare Trade. Alan Milburn, New Labour’s election and policy co-ordinator has said that these sectors should become ‘as integral to public service delivery as the public or private sectors’ and Gordon Brown has also tried to promote the idea that the voluntary sector can be an alternative to the private sector when services are outsourced. Many people are dependent on services provided by voluntary organisations and charities and many self-sacrificing people work for them (and some not so self-sacrificing!). However, socialists cannot support increased service provision from charities or ‘social enterprise’ at the expense of publicly run and funded services. Vital services should not be delivered on the basis of the precarious nature of voluntary donations or ‘ethical’ trading and the decision-making of rich benefactors, but by democratically controlled bodies with state funding. The large-scale introduction of philanthropy into state provision would be turning the clock back to the days before the welfare state was won, the days of poor houses and of access only to charitable health and education provision for the working class. Not surprisingly, the government’s promotion of the voluntary sector appears to apply only to the privately funded part of the sector. Many voluntary organisations that receive public funding, particularly at local level, have faced cuts in this funding, forcing them into closure or to run campaigns for survival. Our party members have been involved in some of these campaigns.
Pensions
Attacks on pensions have swept across the private sector, with companies having taken contributions ‘holidays’ for periods of time, and 70% of final salary schemes in the UK now being closed to new employees. 65,000 workers have lost their pension entitlement entirely following their firms going bust. A pensions’ economist, Ros Altmann, has predicted that in 2005 there will be the first efforts by employers to shut occupational schemes altogether to their existing employees. The government is now intent on making pension cuts across the public sector, as part of its drive to massively cut public spending further. It aims to increase the age of pension entitlement from 60 to 65, increase the amount workers have to contribute towards their pension, curtail early retirement on the basis of ill health and probably move to basing pensions on career average earnings rather than final salary. It is estimated that it would claw back as much as £100 billion from its announced initial proposals on raising the retirement age. These attacks are with the starting position of Britain’s state pension being among the lowest in Europe, also lower than in the US.
The first pension cuts are due to hit local authority workers this April. In a consultation ballot among Unison’s 800,000 local authority workers on taking strike action before April against this attack, 80% voted yes. Unison, Ucatt, the TGWU, and Amicus have decided to ballot their local authority workers for action on 23 March, the PCS will ballot civil servants for action on the same date, and other unions such as the FBU and Natfhe are presently considering it, with the potential that over one million workers could be involved in strike action on that date. Other unions are still discussing their own response to the pension attacks and to PCS general secretary Mark Serwotka’s call for a united one-day public sector strike – a call first raised by our party.
The government’s response is conditioned at present by the fact that it is a pre-election period. It has privately pleaded with the union leaders to not call action before the general election, though if the unions go ahead, the government’s fear of pre-election action does not mean that it will decide to delay or make concessions on the present attacks, not least because it would face problems in undoing some of the changes already set in motion. In any event, before and after the election, the government is likely to continue to try to cut across a united workers’ response by planning pension cuts for different sections of workers at different times, and by varying the exact nature of the cuts. The single threat that will affect the largest number of public sector workers is the increase in pension age to 65, so this is the best issue around which united action can be organised.
The civil service is at the sharpest edge of these attacks as it not only faces those on pensions, but also the prospect of massive job losses. This combination amounts to the biggest attack on a workforce since Thatcher’s attack on the miners in the 1980s. The main civil service union, the PCS, is armed with a left leadership thanks particularly to the work of our own members in that union, who have important leadership positions. However, they are working in a situation where the right-wing still controls sections of the union, and government attacks are hitting different sections in very different ways, for example the Department of Work and Pensions is threatened with 30,000 job losses out of a workforce of 100,000, whereas there are other sections that are not facing any at this stage. The union also has to deal with the problem of having 200 negotiating sections with management, a situation the PCS leadership is trying to change.
Despite these difficulties, the success of the one-day civil service strike on 5 November 2004 showed the potential for action. Over 200,000 workers took strike action in the first all-civil service strike for ten years, with many young workers participating in strike action for the first time. There is a mood, amongst the workers involved, that the strike was worthwhile as some concessions have been gained, such as the withdrawal of the government’s threat to their paid sick leave and greater caution on the government’s part in proceeding with compulsory redundancies. Over 8,000 workers joined the PCS in the run-up to the strike, showing the attractiveness of a union with a left leadership that is prepared to give a lead in defending their members’ interests. Before the 5 November strike, the PCS (also in large part as a result of work by our party members) was responsible for putting pressure on the TUC that led to the first TUC national demonstration for over ten years, on 19 June 04, against the attacks on pensions.
There is great anger across the public sector workforce over the pension threats. Determined action by one union or section of the public sector workforce could force the government to at least temporarily back down regarding that section or make concessions. However, united action across several or all the main public sector unions would be the most powerful and effective form of action, and is a necessary response given the scale of the government’s attacks. The prospect of such unified action has come about through the pressure the union leaders have been placed under and our own trade union comrades channelling some of this pressure and playing a key role in co-ordinating negotiation and planning between unions. However, if united action is not achieved in the end through this route due to the obstructiverole played by most of the union general secretaries and those around them, or because of problems with the timing of school holidays, union ballot results etc, then it would be a mistake if this were to be used as a reason for sections of workers to take no action at all. Following experiences of strike action such as that of the fire fighters, there is a mood among workers that struggles need to be unified across the public sector in order to defeat the attack on pensions. However, determined action by a single section of workers could act as a catalyst in developing support from below throughout the public sector and beyond, placing much greater pressure on all the leaders to act.
The struggles to stop large-scale job losses in the civil service and against pension cuts across the public sector are crucial struggles for the British working class at this conjuncture. The issue of job losses is both an industrial and a political issue in that it affects the civil servants themselves, including future generations of workers, and services received by the working class as a whole. At this stage, the TUC public services committee has only gone as far as calling a day of action on pensions on 18 February 2005. This is greatly insufficient, but can be usedas a stepping stone towards a one day public sector strike. News of the New Year strike wave in France – involving electricity, rail, teaching, post and civil service workers – although sparse in the British press, will have an effect on workers here who heard about it, and be a factor encouraging them to take their own action.
Other disputes
Apart from the major disputes over public sector pensions and job losses summarised above, the recent period has been marked by some significant local (and occasionally national) disputes, though the overall levels of strike action have continued to be relatively very low. Some have been of an official nature – eg between the rail unions and London Underground, the TGWU against Jaguar, and undertakers against the Co-op funeral service, while others have involved unofficial action – such as postal workers walking out when told to work after lunchtime on Christmas eve, the walk out by British Airways baggage handlers or the 24 hour stoppage by car workers at the Vauxhall Ellesmere Port factory last autumn against 46 dismissals.
The Wembley stadium dispute last summer took the form of a lock-out by management that was made official by one union, the GMB, but not by Amicus. After four weeks of determined action, which also included the removal of an Amicus official from the negotiations after storming the union headquarters, the workers gained an important victory with full reinstatement and compensation. In the strike by nursery nurses in Scotland the low paid women workers involved showed huge determination and staying power in their fight over a long period of time. The mood is so tense and angry in many workplaces that we must be prepared for new struggles to break out, sometimes unexpectedly, both locally and nationally in the coming period.
(The Trade unions, NHS, Education, anti-terror legislation, the political parties and the general election)
