Faced with the calamitous results of their own capitalist policies, capitalist governments have only one strategy – as shown in the spending review…
Government triumphalism and public anger at welfare and job cuts in the comprehensive spending review mask the failure of the British ruling class to be able to run the country. Their response is simply to make workers pay for that failure.
Chancellor George Osborne announced the results of his spending review on 20 October and set out the government’s financial plans for the next three years. He attempted to present this as a path to growth, fairness and reform. The figures on debt and the scale of budget cuts are spectacular but they have been coming for a long time. The dive in the economy triggered by bank failure and rescue was not caused by bonuses, no matter how ill-earned they are.
Government expenditure is currently £697 billion a year, including interest payments of £44 billion and rising net EU payments of £6.5 billion. That is funded by tax, and borrowings of £110 billion. Borrowing and interest have risen steeply since 2008, so that government debt is now around £950 billion – that’s equal to 64 per cent of annual gross domestic product. Even excluding the cost of bailing out banks the debt is over £770 billion, or 57 per cent of GDP.
Attack by the markets
The government said it had to act and that the course of the previous administration was unsustainable. As well as the growing debt, tax revenue is falling and they claim that capital markets will start to attack Britain in the way that Ireland and Greece have experienced.
23 October: workers on the streets of Sheffield make their feelings known about one of “their” MPs.|
The initial reaction from workers is clear and unequivocal: they do not believe they caused this crisis and do not want to pay for it. Beyond that the picture is less certain. There is no agreement yet on what action to take, nor whether unions are prepared. The predicatable response of the Labour opposition is that cuts are avoidable and are bad because they discriminate against the most vulnerable. There is no admission from Ed Miliband that Labour was in any way responsible through its total belief in capitalist markets, or that they were planning something similar.
Osborne claimed that he will lighten the burden of the state. That’s true only if you are a non-resident tax avoider. The increases in National Insurance and VAT announced by Darling will still happen and there is no guarantee they will be the last. Pension tax relief changes will hit many more of those who still have a final salary pension plan. The cuts in benefits of all types and a move to a universal credit have the potential to impoverish many workers who thought they would be immune from the worst effects of the crisis. And the decline in support for public services will shift the cost of that crisis to workers. It will ensure that people pay more for transport and other essential services. Whether this is described as ideological rolling back of the state or pragmatic cost-cutting does not matter.
The spending review does not stop there. There are measures which result in an increase in the number of people needing work. Raising pension age and removing benefit entitlement not only reduces expenditure, it puts more workers in competition for jobs. And added to those numbers will be more young people deciding they cannot afford higher education, plus families who need two incomes to support themselves.
Nearly half a million public sector jobs are expected to go. For those still working, conditions will worsen through pay and recruitment freezes, higher pension contributions, longer working hours and so on. The indirect effects of those cuts will include even more people looking for work, as well as job losses in private firms and charities that contract to the pubic sector – estimated at around another half a million jobs. Rising unemployment from all causes will further reduce tax receipts and increase benefit payments.
Defence and other capital spending cuts look ill-prepared and poorly planned. No one can believe that an aircraft carrier without planes is the answer to reducing defence spending, yet there is still a commitment to Trident and wars in Asia. Long-term capital projects such as ships and power stations cannot be switched off instantly. The moratorium on capital spending stretches to IT as well, whatever the government says about encouraging growth. Once the jobs disappear it is hard to get them back; the risk is the loss of even more skills in the working class.
The wish to “reform” the public sector unites Cameron and Clegg with Brown and Blair. The spending review gives the latest capitalist vision for deregulation and changing the role of the state. Overall taxation will be more regressive – that is the wealthier you are, the lower proportion of your income you pay. And the burden of tax will also shift further from businesses to individuals.
Cuts in central and local government will be over 30 per cent in many places. Cutting out so-called waste and overheads sounds sensible, but it actually means an increase in arbitrary and unresponsive bureaucracy and more contracting out. It encourages “virtual councils” and other ways to subvert local government controls on government action or distance them from having any influence. In the longer term, the spending review also signals structural changes to the NHS which will undermine it as a universal service and higher education focused mainly on profit.
The arrogance and bravado of this latest bunch of chancers keen to serve the needs of finance capital must be knocked on the head. We have to get our act together to attack those bent on destroying our economy and our society for their profit.