February is a CP Month of Action against public sector cuts. A new leaflet and stickers are available from Party Centre to assist in street, shopping centre, workplace and door-to-door activities.
It’s not too late to go into action, which could also include organising Party, Morning Star, Trades Councils and local community meetings and letters to the local press.
A giant fraud is being perpetrated on the public by the New Labour government, the Tory opposition, the City of London and large sections of the mass media.
In essence, they all peddle the same message about the state of Britain’s public finances—that they are in such deficit and debt as to require tight curbs on public expenditure, cuts in public services, a wage freeze and reduced pension entitlements for public sector workers.
Of course, they disagree about who or what is to blame for this supposedly perilous situation and why or how, exactly, it came about.
But New Labour want to postpone the biggest cuts until the 2011-12 financial year onwards (which means not having to announce them before the General Election). They also want to restrain any cuts in front-line school and NHS spending. The Tories would like deeper cuts as soon as possible, in almost every area except the police and intelligence services, the courts, the military, nuclear power and the like. But they don’t want to say so this side of the election, while challenging Labour to bite the bullet.
New Labour don’t want to announce too many tax increases for potential voters, preferring delayed National Insurance rises and ‘populist’ but largely ineffectual measures such as a higher 50 per cent income tax band—being introduced this April—and the one-off levy on bank bonuses. The Tories are in a similar position, while the LibDems are prepared to contemplate income tax increases for every section including the better paid working class and the super-rich.
City of London financiers and speculators are, of course, opposed to any additional taxation on bank bonuses, windfall profits or the wealthy. Instead, they are demanding that the government announce deeper cuts in spending on public services, in public sector wages (below the 1 per cent cap already threatened) and in pensions, social security benefits, state pensions etc. to reduce any pressure for higher taxation on the wealthy and monopoly capital, and to force governments to privatise yet more parts of the public sector.
This offensive against the public sector is taking place across Europe, with the European Commission demanding that member state governments head back towards the severe ‘Growth and Stability Pact’ limits on borrowing and debt. Austerity programmes are being proposed almost everywhere, with bankers and speculators joining the EU Commission in a pincer movement on the Greek government to enforce deep public spending cuts, as the EU Commission and European Central Bank move to take control of that country’s public finances. Spain, Portugal and Italy may be next.
In Britain, we see City hedge fund managers and other Treasury Bond dealers and currency speculators beginning to threaten Britain’s credit rating on the financial markets if quicker and deeper cuts are not made.
Yet even the curbs and cuts announced so far are unnecessary.
Following December’s Pre-Budget Report, current public spending (ie., on labour, goods and services) in real terms is due to go up by 3.6 per cent in 2010. Afterwards, spending growth will slow down by 0.8 per cent a year on average between 2011 and 2014.
As a proportion of national economic demand, however, current expenditure is intended to fall from 44 per cent of GDP to 39.6 per cent over the same period. This would take it below the levels under Thatcher in the first half of the 1980s.
Admittedly, these proportions are based on the government’s possibly optimistic estimates of future economic growth and inflation. Even so, they indicate that such a slowdown is not required, and could be positively dangerous if more demand is needed to maintain economic activity (and keep down unemployment costs).
Public investment in capital programmes is being slashed from an already meagre £60 billion to £47 billion, down from 4 per cent of GDP to 2.6 per cent—lower than at any time under Thatcher and Major, and less than a third of Tory and Labour capital spending in the 1970s. This reflects the government’s growing dependence on PFI, PPP and other privatising policies to keep down immediate capital costs—while adding to the longer-term leasing and redemption liabilities.
Government borrowing is intended to fall from 12 per cent of GDP this year to 4.4 per cent by 2014, which will be lower than most of the 1970s and early 1990s. Once again, it must be noted that projected revenues from taxation, excise duty etc. rely on the government’s economic forecasts proving to be realistic.
But the truth is that neither the Treasury, nor the New Labour government, nor the Tory and LibDem oppositions, nor the Bank of England and the City believe that the Pre-Budget Report even begins to outline the real magnitude of the cuts that will be made, whoever wins the General Election.
They think it unlikely that the British economy will grow by 2 per cent in 2010 and then by 3.25 per cent for each of the next four years. So they intend to reduce an otherwise bigger public sector deficit by chopping public services, jobs, wages and pensions rather than tax monopoly profits or the rich.
They know that one-third of the extra current spending this year is debt interest (much of it from privatisation and bailing out the banks) while another 45 per cent is to keep pace with inflation. And they don’t intend to let RPI inflation run as high as the projected 3 per cent from this year onwards, and see much bigger cuts in public expenditure as an important deflationary weapon.
That is why a Treasury document leaked to the Tories in April 2009 projected a real-term reduction of 9.3 per cent in public spending between 2010 and 2014.
Last September 20, press reports put the planned cuts at up to £75 billion a year, around 11 per cent, with budgets slashed by as much as 30 per cent in transport and ‘defence’ (the one possible silver lining, with no replacement for Trident). On January 22 this year, Jonathan Baume, general secretary of top civil servants union the FDA, revealed that Whitehall departmental teams are drawing up plan to axe budgets by 17 per cent on average over the next three years.
We have been warned!