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Britain's so-called 'booming economy'

NEW LABOUR have made the economy the centre-piece of their election campaign.
Invoking people's memories of Thatcherism and mass unemployment, chancellor Gordon Brown boasts that Britain is now experiencing the longest period of growth since 1701.
Apparently we've never had it so good. True, the economy has been growing the past few years.
But with workers toiling longer hours, public services deteriorating, persistent poverty, an increasing wealth gap and our quality of life plunging, the best capitalism can offer ordinary people after 300 years amounts to very little.
What's the reality of Brown's 'booming' economy, will it last, and just who has got their hands on all that new wealth created by millions of working people over the last eight years? JIM HORTON writes.

UNDER NEW Labour the British economy has grown at a 2.8% average annual rate, but this is only fractionally higher than the 2.7% under the Tory Prime Minister John Major. Even this historically modest growth has been based on credit-led consumer spending and more recently growth in the public sector.

Manufacturing industry's long-term decline has continued with output now lower than in 2001 and only just above the level inherited by New Labour in 1997.

Brown says low unemployment proves his sound economic management. Unfortunately for Brown and Blair their ludicrous claims that we're all benefiting from their profit-driven, market-orientated economy came just as up to 20,000 workers are set to join the dole queue with the collapse of MG Rover, the last British-owned mass car producer.

They join one million other manufacturing workers who lost their jobs since Brown took over stewardship of the economy on behalf of big business. This leaves manufacturing employment at an all-time low.

Relatively well-paid, trade union-organised manufacturing employment has been replaced by poor quality, low-paid, insecure service sector jobs including the call centre 'factories'. There hard-nosed managers, generally facing unorganised workforces, trample on working conditions and employment rights.


Another feature is the mushrooming of job agencies - there are 72 of them in Stoke-on-Trent alone! Thousands of workers traipse from one temporary job to another with reduced employment rights and no prospect of securing permanent work.

Yes, unemployment is at a 30-year low, but working life for millions has worsened, with increased levels of stress resulting in more workers taking time off sick. Family life, hypocritically promoted by all the main parties, is straining under the burdens of extended hours, the constant struggle to make ends meet and the impossibility of surviving on a single wage.

For all Brown's boasting, the United Kingdom actually fell from ninth place in 1997 to 17th place in 2004 in the global competitiveness rankings. Massive profits for the bosses over the past eight years have not encouraged them to substantially increase investment to boost productivity. Instead they crudely forced the real wealth-creators, the working class, to work harder for longer hours and less pay.

Rather than a strong economy, Britain's weak manufacturing base reflects the serious economic and social situation confronting British capitalism. Britain's unhealthy economy is running its highest trade deficit ever in modern history, about 3 billion a month. In the longer term this is unsustainable.

Tax and public spending - who pays, who gains?

A BIG issue in the election campaign debate on the economy has been tax and public spending. Understandably, bamboozled with 'facts', 'counter-facts', statistics and bare-faced lies, many potential voters switched off weeks ago. They rightly conclude that whether New Labour, Tory or Liberal, politicians representing big business are not to be trusted.

In reality very little divides the three main parties on tax and public spending. Although Blair promised not to increase the basic or top rates of income tax in 2001 (a pledge he repeated in this election) the government hiked up national insurance contributions in 2003 to pay for extra spending on the NHS.

New Labour has not ruled out doing the same again. In total since 1997 it has increased taxes by 26.4 billion, with working people paying a greater proportion of their income in tax than the rich.

The Office of National Statistics says the poorest 20% of the population pay 37.8% of their gross income in tax (including VAT, fuel tax etc) compared to just 35.1% for the richest 20%. The tax paid by the poorest 10% rose from 44% in 1997 to 46.7% in 2003.

Meanwhile, corporation tax has been slashed by the government to just 30%. Twenty years ago it was 52%. The rich have pocketed this extra cash for themselves along with the massive profits they made over the past few years.

In the 1980s and 1990s public spending was cut back as a proportion of national income. In their first term, New Labour also cut public spending by 2.6%, while raising taxes by 2.4%. This created a budget surplus by the 2001 general election.

In their second term, public spending was increased by 3.3%, mainly on the NHS and education, with local government continuing to face shortfalls resulting in cuts, privatisation and big increases in council tax.

Brown has pledged to increase public spending by 3% a year and Howard by 2%. But most economists, including the Institute for Fiscal Studies and the International Monetary Fund, warn that which ever party wins the election they will have to increase taxes by 11 billion and/or cut public spending in order to plug the big hole in public finances.

This deficit has grown over the last few years because of government borrowing, 34.4 billion in 2004, partly to compensate for the shortfall in corporation tax, estimated at 26 billion, 2.1% of national income.

Stress and pressure at work

"I'VE WORKED in manufacturing for 30 years. After facing redundancy in 2002, I now travel 88 miles a day round trip to work at JCB in Stafford. The good pay and conditions are under attack: our final salary pension recently closed to new workers.

A JCB worker

JCB announced record sales and turnover for 2004 but at a price.

At a recent all-employees meeting JCB told us how competition was hard. They said labour costs to JCB were 15 per hour in the UK compared to 75p in India where they've a new factory. We were told of the need to increase productivity by 30%.

Workers fear jobs could go to countries like India if they don't meet these increases. The time we're given to do the job is constantly under review and in many cases has been cut by over 25%.

Many workers can't do the job in the time given and feel under constant pressure to work harder. Many lose time off work as the stress is too much to cope with."

Profiteers' bonanza as sell-offs grow

PUBLIC-SECTOR workers are doing their best to provide a decent service but we are paying more for worse public services. This is because increasing amounts of our hard-earned money are going into the greedy profiteers' coffers through privatisation.

Despite only 11% of the population supporting privatisation, Blair has pledged a third Labour government will step up the 'reform' of our public services. Big business wants to get its grubby hands on government spending, which accounts for 42% of national income. Blair and Brown are only too willing to comply.

In 1997, the private market for NHS clinical services was less than 200 million. It is predicted to rise to 2 billion by 2007. Then there's the Private Finance Initiative (PFI). There are currently 30 PFI hospitals, with 40 more under construction, with a combined capital value of 5 billion. Annual repayments for the current 30 are costing the NHS almost 500 million a year.

Another 50 hospitals, with a capital value of 12 billion, are in the pipeline. Despite government denials, privatisation is a step towards dismantling the NHS.

In effect we're subsidising private companies to run our public services, from which they make a handsome profit. Private rail operators are being subsidised 1.5 billion a year, with millions more going to private Tube companies.

Or take education: 600 million has gone into state schools from the private sector. In return the government has outsourced to private companies 4.2 billion of our money for schools, that's 11.7% of the total schools budget of 36 billion.

In addition 4.8 billion of the school budget is going on PFI projects, or running costs and outgoings. Total outsourcing of the public sector to private companies, including local and central government, is predicted to rise to 60 billion by 2007.

Increased public expenditure since 2001 has been a big factor in Britain's continued economic growth, providing 583,000 new jobs since 1998. Yet public-sector employment is still below the level of the early 1990s and is set to fall with planned cuts of 104,000 civil service jobs, affecting front-line services. If the Tories win over 200,000 jobs will go.

The government also hopes that increased privatisation of public services will weaken the trade unions' ability to defend their members' pay and conditions.

Yet privatisation has been a disaster, literally so on the railways where 'profit before safety' has resulted in lost lives and horrific injuries. School academies have not improved education and the outsourcing of clinical services also makes no sense.

A leaked Department of Health memo revealed that cataract operations will cost 115 more than when carried out in-house. Meanwhile foundation hospitals are going into deficit because they do not have enough cash to provide the necessary services.

An economic recession in the next few years will have devastating consequences for public services. Private companies are likely to walk away with their amassed wealth, like the Phoenix directors at Rover, leaving millions of workers to pick up the pieces.

Wealth and poverty - the growing divide

SOME PEOPLE have done all right out of New Labour's 'booming' economy. The Office for National Statistics says the wealth of the top 1% has doubled from 355 billion to 797 billion. This is more than the government spent in the last five years on health, education and housing combined.

Wealth inequality has widened. The bosses' average pay rises have been 80 times more than workers while the poorest 10% of the population have seen no improvement in their real incomes for a generation. Average take-home pay fell last year for the first time since the recession of the early 1990s.

The poorest of the poor do not feature in this election. Department of Work and Pensions figures show 3.5 million children still live below the official poverty line. Some 3.1 million people sought either a crisis loan or budgeting loan from the benefits agency but more than one in five were refused.

The government is encouraging under-funded charities to provide alternative relief for the poor. The Family Welfare Association (FWA) already provides 3,000 grants a year to help families pay for essential items such as beds, fridges and heating.

Families applying to the FWA to buy clothes for their children have on average just 3 per head a day to live on. Millions of the working poor subsist on poverty pay, working long hours and dependent on tax credits to survive. Meanwhile their bosses laugh all the way to the bank.

Unnatural wastage

OFFICIALLY, THE Driver and Vehicle Licensing Agency (DVLA) isn't badly affected by the civil service cuts - it won't have compulsory or voluntary redundancies. But 500 jobs will go through 'natural wastage.' People will retire and not be replaced, and especially for casuals, it's an uncertain time.

A civil service worker

One casual worker I know worked here six months. One day she was dismissed, without warning, as she'd been sick on two occasions. I suppose that's 'natural wastage'.

Workloads are high and people feel very pressurised; that will get worse when those jobs are gone. People go sick because work makes them stressed. Where I work management are aggressive, bullying and make up the rules as they go along. This makes it hard for shop-floor union reps to speak out, but if we let them bully us into silence it will get worse.

Who will pay for the crisis?

WITH MANUFACTURING output static, consumer spending has underpinned economic growth, accounting for about two-thirds of the economy. But, since last September retail sales, which account for 40% of consumer spending, have started to stall. At the same time there has been a fall in mortgage lending and stagnation in property prices.

Burdened by debt totalling 1 trillion (equal to 120% of pre-tax income) many consumers are beginning to rein in their spending. This is bad news for corporate profits and the economy. A fall in house prices and likely tax rises could send the economy into recession.

Britain and the rest of the world have sustained their economies thanks to the heavily indebted American consumer. The US has been the buyer of last resort for the world economy, in the process running up a massive $60 billion a month trade deficit. China has also provided a growing market, but it too is dependent on the spending power of the US.

But the capitalist economic institutions, the IMF and OECD, warn this cannot continue. High oil prices are already hitting many countries. Europe and Japan's economies are stagnating. A contracting American market would have devastating consequences on millions of workers' lives worldwide. In Britain a likely global economic downturn would scupper Brown's forecasts for economic growth and his tax and expenditure plans. Workers, not the bosses, would pay the real price.

The last eight years have seen a greedy bonanza for the rich. All the establishment parties, New Labour, Tories and the Liberal Democrats, willingly do big business' bidding. There is barely space for a cigarette paper between their economic policies.

Ideologically wedded to boosting profits at the expense of our living standards, their fat-cat friends have wallowed in obscene wealth. Now with discomforting news that all's not well with the world economy and the threat of a squeeze on profits, they are determined that workers will pay for any crisis in their capitalist system.

In Germany and France the bosses are already increasing hours and cutting pay.

Across Europe, including Britain, there is an attack on our pension rights. This is what the 'booming' capitalist economy has brought us: longer hours, poverty pay, deteriorating services and the prospect of working until we drop.

The socialist alternative

BRITAIN IS a wealthy country, but that wealth and our economic resources are in the hands of a few millionaires, unaccountable to the millions of workers who produce the goods and provide our services.

Production for profit in boom times means increased wealth for the bosses and a few extra crumbs for some workers, while millions languish in poverty. But when the economy takes a dive it won't be the fat cats who are thrown into destitution.

There is an alternative. Even just fairly distributing the existing wealth could eliminate poverty, poor health and homelessness. But big business would never allow their ill-gotten profits to be used to benefit the majority of society.

We need democratic public ownership of the commanding heights of the economy, at present owned by just 150 giant companies, which would allow working people to plan for all our needs. This is socialism, an economy where the majority - through democratically elected committees - would decide how best to allocate resources.

Health, education and protection of the environment would take priority. Across the globe, socialism could make starvation, war and environmental destruction a thing of the past.

But none of the main parties are putting this forward. The trade unions will have to prepare for big attacks on our pay, jobs and pensions after polling day, whichever party wins. But, above all, we cannot go through another general election without an alternative being offered by a mass party representing the interests of the working class.


Home   |   The Socialist 28 April - 5 May 2005  |   Join the Socialist Party

Subscribe   |   Donate   |   Bookshop

In this issue

Vote Socialist on 5 May

Fighting the jobs massacre in Birmingham

Election Feature

Standing for socialism in Scotland

Leicester NHS phone in - socialists v. the rest

Needed - a new party for working people

Big business scuppers Jamie's school dinners

Britain's so-called 'booming economy'

Mukhtar Mai - a rape victim in search of justice in Pakistan

End world poverty

Why we celebrate May Day

Stalinism, socialism and capitalism

Labour's the problem not the answer

Usdaw - Need for change at the top


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January 2019