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From: Home, 1 January 2010: Socialist Party news and analysis

Search site for keywords: Budget - Jobs - Labour - Pay - Public sector - Banks

Pre-budget report

Build a mass movement to...

Stop the slaughter of jobs and services

Alistair Darling, cartoon by Suz

Alistair Darling, cartoon by Suz

The pre-budget report marked the beginning of the 2010 general election campaign. Never before has a government tried to win an election by offering such a relentless diet of pain for the majority of the population.

Hannah Sell, Socialist Party deputy general secretary

As the Financial Times put it on 10 December 2009:

"Not in the past 40 years has Britain experienced such a sustained squeeze on public spending than that planned by this government. The International Monetary Fund in the 1970s, Margaret Thatcher in the 1980s and John Major in the 1990s were mice compared with the lions of Gordon Brown and Alistair Darling in the desire to curtail the role of the state in the years ahead."

Nationalise the banks

New Labour tried to the disguise pain for the majority behind some very mild attempts to trim the fingernails of the City by announcing plans to levy an immediate 50% 'super tax' on banks' bonus pay-outs over 25,000.

Such is the anger with the bankers that even the Tories could not oppose these measures, which have also been welcomed by the capitalist governments of France and Germany.

In fact, Treasury officials estimate that the new levy will apply to little more than half the bonus pools being set aside for the new year.

It will apply only to discretionary awards, not those written into bankers' contracts. The measure is expected to raise 550 million, a tiny fraction of the 6 billion the City will get in bonuses this year.

The very limited nature of the tax did not stop Price Waterhouse Cooper and other City firms squealing in outrage and threatening to move abroad.

Despite Darling's feeble attempts to curb the excesses of the City of London, it remains one of the most deregulated finance centres in the world.

However, taxes can never be low enough or deregulation complete enough to satisfy the profit lust of the financiers.

The only effective answer to the City blackmailers is clear: nationalise the banks and the giants of the finance sector.

The trade unions and organisations of the working class should demand nationalisation of all the major financial institutions, with compensation paid only to small shareholders and depositors on the basis of proven need.

This should be just a first step to the unification of all the banks into one democratically controlled financial system and the introduction of a state monopoly of foreign trade.

Instead of being run by and for the profiteers, a nationalised finance sector could be run by and for the mass of the population with majority representation at all levels of these banks, drawn from workers, including from the unions in the banking industry and the wider working class and labour movement, with the government also represented.

New Labour, however, acts not in the interests of the majority, but in the interests of the capitalist markets.

The markets demand that working and middle class people pay for the crisis, and New Labour rushes to obey.

Hence a 'pre-election report' where the main tax rises were not aimed at the bankers or the billionaires, but at all but the lowest paid workers.

VAT will return to 17.5% from January. The 0.5% rise in national insurance contributions for all those earning more than 20,000 allowed Tory Shadow Chancellor, George Osborne to claim: "Now we know what Labour's class war means - a tax on anyone earning over 20,000".

Osborne, however, did not make a commitment to repeal that tax.

Ireland is our future

The main feature of the report was a diet of relentless attacks on public services and public sector workers.

New Labour's only selling point is that it is 'not as bad as Ireland' - at least not yet! In Ireland the government is demanding that public sector workers accept pay cuts of up to 15%.

Darling hopes to convince workers that New Labour will wield the axe more gently than a Tory government would.

For example, whereas New Labour is proposing a maximum 1% pay increase for all public sector workers for two years or more from 2011, the Tories are proposing to freeze pay for 80% of public sector workers.

Both are in effect pay cuts - but the Tories is the larger. No doubt some workers will, through gritted teeth, vote for New Labour in order to try and prevent the nightmare of a return to Tory government.

Others, including some 'traditional' Labour voters, are so angry that they cannot bring themselves to vote for New Labour again.

There are no fundamental differences between the plans of New Labour and those of the Tories. In reality the pre-budget report demonstrated this. It declared that public sector pensions are to be 'brought into line' with private sector pensions, in other words face draconian cuts.

Far from having cushy pensions, the average pension in local government is already only 4,000 a year, and less than 2,000 for women, but the government plans to cut back even these modest sums.

Darling outlined horrendous cuts of between 10-15%, over three years from 2011, for all public services except health, schools and the police.

Public services are already over-stretched and under-funded. These cuts would bring them to the point of complete collapse. Even those sectors that are 'ring-fenced' will face cuts. The NHS Confederation estimates that the health service will have to find 15-20 billion of 'efficiency savings' over the next five years.

Worst to come

Brutal as were the cuts outlined by Darling, the worst is yet to come. The economic crisis and the bailout of the banks mean that government borrowing will rise to 178 billion this year and the government estimates it will be 176 billion next year.

This year's borrowing exceeds 12% of national income in 2009-10, the worst British deficit ever in peacetime.

Any government which accepts the logic of the market also accepts that it is necessary to cut the size of the public deficit at some point.

The arbiters of the logic of the market, such as Moody's Ratings Agency (the same people who gave sub-prime mortgage firms AAA ratings!), have declared that Britain's "affordability is stretched to the limits of what is consistent with a top rating", and are threatening that Britain, like Greece, will face its debt being downgraded at some point in the future if cuts are not made fast enough.

Already insurance premium for lending to Britain is higher than that charged for lending to Slovakia.

New Labour, Liberals and Tories all agree that the only way out is to present the working class with the bill for their system's crisis and launch an onslaught on the public sector.

Darling has set the target of halving the deficit, as a share of national income, by 2013-14. To achieve this would require far larger cuts than he has already outlined.

In addition it is unlikely that Darling's projections for the growth of the British economy will prove to be accurate.

Britain, alone of the G20 countries, was still officially in recession in the third quarter of this year.

Darling predicts that GDP will fall by 4.75% in the current financial year, but then grow by 1-1.5% next year, accelerating to 3.5% in following years.

The latter figure is highly optimistic. It is all too possible that the end of the government's quantitative easing programme, combined with the start of attacks on the public sector, will create a 'double-dip' recession.

Time to fight back

The working class needs to prepare to oppose the onslaught it will face from the next government - whether Tory, Labour or a hung parliament.

So brutal was the pre-budget report that even the most pro-New Labour trade union leaders have been forced to criticise it.

Dave Prentis, general secretary of UNISON, said: "I am not going to sign up to this. I know how our members feel: they feel angry and betrayed. It is just not on to make nurses, social workers, dinner ladies, cleaners and hospital porters pay the price for the folly of the bankers." Even Brendan Barber, general secretary of the TUC, said that, "public sector workers - many of whom are low paid - should not have to pay the price for a crash they did nothing to cause."

We agree, but words are not enough. The trade union movement needs to be preparing now for a militant and determined fight back against the onslaught we are facing instead of witch-hunting trade union fighters, as is unfortunately the case with the current leadership of UNISON.

The first step should be a massive national demonstration in the first part of next year under the slogans: 'We won't pay for their crisis', and 'No cuts - defend all jobs and services'.

This would send a warning to the next government that the trade union movement will not accept cuts in workers' pay, conditions or pensions, or cuts in public services.

The next step in the struggle to defeat the cuts programme of the next government would be a 24-hour public sector general strike, as step towards a complete 24-hour general strike.

An industrial fight back is crucial, but a political alternative is also needed. Unfortunately, the majority of the national trade union leaders continue to cling to the trouser legs of Darling and Brown, even as they launch an onslaught on their members.

But a never-ending choice between two different anti-working class, pro-big business parties is no choice at all.

The trade unions need to urgently stop funding New Labour and begin to build a new mass party that stands in workers' interests.

The Socialist Party is taking part in discussions with others, including leading members of the railway workers' union - the RMT - about forming a socialist and trade union coalition for the general election.

Such a coalition would be an important step towards the foundation of a mass party - with a socialist programme - which would act to politically arm the working class in the mighty struggles it faces beyond the general election.

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