The Chancellor’s 24 May announcement of £6.2 billion of public spending cuts in the current financial year was a declaration of intent; far worse is to come. In FRFI 214 we reported that former Labour Chancellor Alistair Darling had promised the deepest cuts for decades. Before the General Election the Conservative Party called for immediate cuts of £6 billion; the Liberal Democrats and Labour preferred a delay, saying that they feared such a hasty move would push the economy into a double-dip recession. Now ensconced in the Cabinet, Liberal Democrat ministers have quickly acquired a taste for ‘fiscal responsibility’; Liberal Democrat Chief Secretary to the Treasury David Laws (now resigned) announced we ‘are moving from an age of plenty to an age of austerity in public finances’. Trevor Rayne reports.
Laws, together with Conservative Francis Maude, headed the new Efficiency and Reform Group charged with identifying areas for cuts. Laws made his first million as a gilts and derivatives trader for JP Morgan before moving to Barclays de Zoete Wedd.
The 24 May cuts include axing the child trust fund payments of £250 to each baby at birth, the ‘baby bonds’, and removing 10,000 planned university places in the coming year, plus cutting spending on each student by an average of 2%. Lord Freud, formerly a Labour government adviser and employee of investment banks SG Warburg and UBS, has been appointed Minister for Welfare Reform. While advising Labour Freud issued a green paper stating that all recipients of benefits be required to work. The City is in command. 50,000 public sector jobs are expected to be lost as a result just of the £6.2 billion cuts, adding to the 2.51 million people (8%) officially out of work before the Election. The coalition government intends to eliminate the current annual budget deficit of £156 billion before the 2015 General Election. If the government acts as it intends to, the result will be the removal of services, benefits and jobs essential to millions of people in Britain; the social safety net will be torn up, sacrificed to the Golden Calf of international markets.
Other measures outlined on 24 May include reducing grants to local government, cutting funds used to help teenagers not in employment, education or training (NEETS), cutting the money given to Transport for London, freezing civil service recruitment and, as window dressing, ending senior civil servants’ right to subsidised first class rail travel – which on their salaries is easily affordable anyway (the average bonus for a top civil servant last year was £12,700 on top of six figure salaries). A budget is scheduled for 22 June and in the autumn the government will publish a three year spending review. Of particular note is the policy of encouraging the most successful local government maintained schools to become academies. This will introduce significantly more private capital into education and be part of an assault on teachers’ pay. The Financial Times editorial of 21 May states that the coalition government is ready for a ‘pitched battle’ with public sector unions. 68% of public sector employees are bound by collective pay agreements and these will be attacked. Additionally, a commission is to be set up to ascertain whether public sector pensions are affordable. Police overtime and early retirement are to be reviewed. The 2.6 million people who are in receipt of incapacity benefit will be reassessed for readiness to work and if deemed capable put on the lower jobseeker’s allowance.
The leaderships of the Conservative and Liberal Democratic parties have tried to minimise the prospects of disputes between their parties wrecking the government by establishing reviews and commissions to study contentious issues: repeal of the Human Rights Act, banking reform, reform of the House of Lords, sentencing policy, treatment of terrorist suspects, extradition, employment rights, alcohol pricing and constitutional matters relating to Scotland, Wales and the north of Ireland. For now Cameron, Clegg and associates are agreed that cutting the deficit ‘takes precedence over any other measures in this agreement’. However, should serious resistance to their plans emerge among people in Britain, especially among public sector workers, divisions will threaten the coalition. When people show their anger it will require more than a shared penchant for well-cut suits and the trappings of power to keep the parties together; each is likely to blame the other.
Even if the government were to try and halve the budget deficit by 2013-14 it would require annual public spending cuts of between £37 billion and £57 billion, depending on what spending the government protects, for example on the NHS, and what taxes it raises. That is a sum equivalent to a third to a half of spending on the NHS and up to two thirds the cost of the state pension each year. On 25 April The Sunday Times published its rich list for 2010 showing that the wealth of the richest 1,000 people in Britain had climbed by almost 30% in 2009 to £335.5 billion. Labour’s Lord Mandelson said the Labour Party was ‘intensely relaxed about people getting filthy rich’, provided they paid their taxes. Since the Labour government came to power in 1997 the combined wealth of the 1,000 richest people in Britain has increased by 239% – more than triple. Were they to pay a wealth tax of 47% they would still be multi-millionaires and billionaires and the entire budget deficit could be repaid. The wealth of just 100 people in Britain is £182.8 billion. These huge concentrations of capital are what determine government policy in Britain. Soon that policy will be conducted not by spending targets, taxes and interest rates alone, but by riot police, criminal law, the courts and prisons.
FRFI 215 June/July 2010
