Cuts are about ideology, not economics 02.09.2010


Andrew Fisher, LEAP co-ordinator, explains that the ConDem Coalition is exaggerating the “crisis” to destroy public services.

David Cameron’s Government is using the financial crisis much like the Bush Administration used the events of 11th September – as the opportunity they needed to implement the plans they’d always wanted. The current austerity drive is a cover for the dismantling of the welfare state and key public services like the NHS, education and council housing. At the same time business is being relieved of the burdens it faces: taxation, pay rises, pensions and health and safety law.
The Budget was the start for this turbo-charged neo-liberal assault. It cut £11 billion from welfare – not in just a crude slash, but a surgical operation. The changes to housing benefit put Shirley Porter to shame with the scale of their social cleansing. One of Porter’s successors, Westminster councillor Philippa Roe, welcomed Osborne’s move: “[before] there was also little incentive for them to move or work, as under the benefit laws they would lose much of their generous housing payments.” The reality is that housing benefit claims are often paid direct to landlords – and even if they are not, they are used by people (only one in eight of whom in London are unemployed) to pay rent to their landlords who are demanding “generous housing payments”.
These changes will only save about £4.2 billion nationally over the next five years, a drop in the ocean in budgetary terms, yet they will make many parts of London no-go areas. One outer London borough has found that 71% of the households assisted with private sector rents exceed the new cap. The cap will therefore force those on housing benefit into more deprived parts of London, into overcrowded lodgings, and into homelessness. What’s important is the lesson: you’re on your own (in the big society)
Elsewhere in the June Emergency Budget, child benefit was frozen for three years, which will be a real terms cut of over 10% by the third year. However, worry not: the “family-friendly”, “progressive alliance” is trying to dissuade you from having children anyway – by cutting the Health in Pregnancy grant and the Sure Start maternity grant.
For welfare recipients, privatised medical reassessments await those on Disability Living Allowance – predetermined to result in savings of £1.4 billion.
The value of all benefits will suffer by linking them to the Consumer Price Index (CPI) instead of Retail Price Index (RPI) measure of inflation. CPI is like RPI, except the cost of housing is removed. It would therefore be useful in societies where everyone was housed for free – or in neolithic societies, where self-built mud brick dwellings were the norm. For the modern UK it is of no practical use.
The Tories estimate that this will save them £6 billion over the next five years. It is worth reminding readers that even RPI lags behind the rise in average earnings. If unemployment benefit had been linked with earnings since 1979, it would today be worth £110 per week. Instead it is £64.05. This gap between benefits and earnings will now increase even further.
The final piece in the jigsaw was the two-year public sector pay freeze. The argument goes that the private sector has suffered pay freezes and now the public sector should – the intellectual equivalent of breaking your leg and then “logically” breaking the leg of your best mate so that it’s fair. However, the Tories’ argument is inconveniently undermined by the facts. In 2009 the average pay rise in both the public and private sectors was 2%, and so far this year the average private sector pay rise has been 3.6%, while in the public sector it has been 2.8%.
You might argue that all this is necessary. After all there is “a debt crisis unprecedented in our peacetime history”, according to the Prime Minister. This is simply not true. UK debt is currently 53% of GDP – lower than that of the US, Japan, France and Germany. From 1918 to 1961 UK debt was over 100% of GDP, and when John Major left office in 1997 it was 42%.
Further, the cost of all the above measures combined – and add in the cuts to tax credits too – is less than the £25 billion cost of subsidies to big business through the corporation tax cut, small business rate cut and higher threshold for employer National Insurance, which were also announced. The one remaining Budget measure that actually cuts the deficit was therefore the VAT rise – a tax rise which disproportionately hits the poorest hardest. The cuts are unnecessary and ideologically driven to redistribute wealth and power from poor to rich – as a matter of urgency.
They also won’t solve that unprecedented debt crisis. The most likely scenario of the cuts planned in the Budget, and to be unveiled in full in the Comprehensive Spending Review in October, is that they will cause further unemployment. Leaked Treasury papers suggest the planned 600,000 job reduction in the public sector will cause 700,000 job losses in the private sector. This will decrease tax revenues and increase welfare costs – and therefore increase national debt. The failure to reduce the deficit is what will slay this Government in the mainstream media, but it is the practical impact of their ideological attack on the public services that will mobilise communities.
We should be clear that this Government is not having to start from square one. In each area of attack, it is building on the legacy of New Labour. The housing squeeze and rising costs of the private rented sector are due to the lack of council housing built under New Labour (less than any post-war government). The attacks on welfare benefits and demonisation of claimants build on the legacy of Hutton, Purnell and Freud. The privatisation of statutory education is the City Academies programme of Blunkett, Adonis and Balls writ large. The carve-up of the NHS is the unrestrained policy of Milburn, Reid and Hewitt.
Cameron warned us this would be the case almost from day one – when he positioned himself as “heir to Blair”, calling Gordon Brown a “roadblock to reform”. This is free-wheeling neo-liberalism, everything Blair wanted to do but couldn’t get away with – not because Brown stopped him, but because the party membership, the unions, and the required electoral base provided, albeit limited, restraints. That same triple alliance of party members, trade unionists and working class communities must now be mobilised to bring down this Government.

For more LEAP analysis, visit http://leap-lrc.blogspot.com/.

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