Chancellor George Osborne’s early Christmas present came in the form of the Autumn Statement, which threatened to cut public spending to levels not seen since the 1930s, writes Jeremy Dewar
Despite early attempts by the Tories to spin the Chancellor’s Autumn Statement as a tweaking of their austerity programme, with Prime Minister David Cameron even trying, with typical Etonian arrogance, to claim that we are 80 per cent through the pain, it soon emerged that £55 billion of cuts – on top of the £35 billion already implemented – were yet to come.
The Institute of Fiscal Studies said, “There are huge cuts to come. How do we get to this sunlit upland in which we have a budget surplus? Spending cuts on a colossal scale is how.”
On one level this represents an enormous failure for the Coalition, which came to power promising to cut the deficit – the amount of money spent by the government over and above its income – to zero by May 2015, and to start to reduce the state debt – the total amount of money owed by the government.
The deficit stands at £91.3 billion. In the last year, according to the Office for Budget Responsibility, the government department set up by the Tories to force future governments to cut the deficit, it fell by just £6.3 billion, “the second smallest year-on-year reduction since its peak in 2009-10, despite this being the strongest year for GDP growth”.
Around half this figure, i.e. £1 billion a week, is handed straight over to the bankers for servicing the £1.45 trillion national debt, a figure equal to 81 per cent of GDP. Rather than reducing the debt, Osborne has increased it over his term in office. The OBR projects that the debt will in fact balloon till it costs £1.5 billion a week by 2018.
The new world order
The truth is that austerity has, and will continue to fail as a policy to raise us out of the historic slump we are in. Cameron and Osborne at the same time continue to blame overspending by previous Labour governments for this but the real reasons lie elsewhere.
First, the world economy has not recovered from the crisis of 2007-08, with the Eurozone in crisis again, the US faltering and the BRIC economies slowing down or going into recession. So the plan for the UK to grow through exports has not worked; manufacturing output remains below its pre-crisis level; new banking collapses, e.g. Russia’s Trust Bank, are beginning to re-emerge.
Second, despite the recovery in employment and the rapid fall in unemployment to below two million, income tax receipts have stubbornly refused to rise. Why? Because, as we have pointed out previously, “since the start of the financial crisis in 2008, real pay has fallen by 10 per cent, the biggest fall in any five-year period since the 1920s” due to a combination of pay freezes, actual pay cuts and the replacement of skilled, unionised and relatively well-paid jobs with part-time, zero-hours contract and temporary work in the service sector, as well as bogus self-employment.
The TUC estimates that total wages fell from £690 billion in 2007 to £638 billion in 2012. And they certainly haven’t picked up since then.
Low-paying employers have been getting away with this because they have been subsidised by Working Tax Credits. But Osborne’s plan to freeze, i.e. cut these credits in the Autumn Statement will now rob the working class of another £2 billion a year and further impoverish the swelling ranks of working poor.
Third, the bosses and the banks have refused, despite the free money given to them in the forms of historically low interest rates and quantitative easing, to invest. Productivity is stagnant at best. And UK plc remains unrestructured and overwhelmingly reliant on the financial sector and hence exposed to shocks in the world markets.
This is why the period ahead, whoever wins in the May elections, will continue to see the capitalist class hell-bent on offloading the cost of their crisis onto the working class. This will take the form of cuts to the welfare state and benefits, to jobs and pay. But it will increasingly take the form of new conflicts and wars, not only in the Middle East, but also a new cold war with Russia and eventually China, which could at any point tip over into a new hot, i.e. shooting war.
Nature of the new cuts
Osborne says he will continue to “ringfence” the NHS and education from cuts. Leaving aside for the moment the fact that this promise makes neither vital service safe as both have suffered historic attacks in the form of budget cuts (£20 billion already taken from the NHS) and privatisation (academies, free schools and the growing private sector providers within the NHS), this does mean extreme cuts, averaging 60 per cent, in the rest of the public sector.
If implemented, these cuts will reduce state spending to 35 per cent of GDP. To put this into perspective, this is lower than it has been since the 1930s – before the creation of the modern welfare state.
Over 600,000 jobs have already been destroyed here, but the new proposals will shed a further million jobs over the next five years.
This prospect has already thrown the so-called “left” leaders in the TUC into panic. Faced with the prospect of losing the check-off system, whereby members have their union subs deducted at source by the employer, the PCS leadership in the civil service has, instead of launching a campaign to defend facility time and the check-off through strike action, announced a financial crisis and proposed the reduction of union democracy by cancelling annual union elections.
To see where this would lead, one only has to look at the state of local government services. According to the Local Government Association, a Tory-led council bosses’ union, local authorities have already suffered a 40 per cent reduction in central government grants since 2010. This year, councils face an average cut of another 8.8 per cent… with more to follow.
The total hypocrisy of the three main parties, Tory, Labour and Lib-Dem, pretending to “understand” the Scottish electorate’s rejection of rule by Westminster is revealed. Where is the promise to restore council democracy and the right to set local business rates and raise taxes on the rich? Not a whisper.
In truth, the Tories are aiming at another huge round of privatisation, as councils take the easy option of not fighting back, but opt for putting all their services out to tender, as Barnet and Northampton are already doing.
Resistance and its obstacles
We need to learn the lessons of the last five years fast, if we are to avoid the prospect of Austerity-max. Like most Hollywood blockbusters, it will try to compensate for a threadbare, regurgitated plot with bigger crashes and louder sound effects. But if we’re not to sit there in stunned silence, we will have to fashion a new ending.
On the positive side, we can be sure there will be fightbacks in other countries that we can gain inspiration – and solidarity – from. But that cannot take the form of routinism. We have to think bold and big.
Our new year resolutions are:
• To rebuild the unions from the bottom up, by encouraging rank and file workers to take control of their unions, demanding real resistance up to and including all out strike action against every single attack, and membership control of every dispute. Those trade unionists who recognise the failings of the left bureaucracts like Mark Serwotka and Janice Godrich, Alex Kenny and Kevin Courtney, Billy Hayes and Matt Wrack, should come together to form a new rank and file movement to oust the bureaucracy and reclaim the unions for the members.
• To relaunch the anti-war movement on a consistent anti-imperialist basis by opposing Britain’s role in promoting new conflicts and participating in new wars – not only in the Middle East, but in the Nato build up in Eastern Europe and elsewhere. Without covering up for the crimes of Vladimir Putin or Xi Jinping, we should insist the principal enemy of workers in Britain is to be found in Westminster and the working class of Russia and China are our allies.
• To build local councils of action where all the unions, campaigns and residents can send delegates to discuss how to coordinate our struggles and provide solidarity with each other.
• To form a new working class party and a new, Fifth International. Of course millions of workers will vote for the Labour Party in May, hoping for a buffer between them and the capitalist offensive. And we will do our utmost to aid them in this, while placing clear demands on Eds Miliband and Balls. But they will betray those hopes and do the bosses’ bidding if elected. That’s why we are in Left Unity, fighting to build it as an revolutionary socialist party with a class struggle orientation that will enable it to play a decisive role in the coming struggles.