Chancellor’s autumn statement: The state is not being rolled back, it is leading the attack

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Changes to stamp duty, making it cheaper to buy an ordinary house but more expensive to buy one costing in excess of £2 million, provides a little cover for the cuts announced in George Osborne’s autumn statement. We should have no doubt that the proposed spending cuts are an attack first and foremost on working class living standards, and continue the policies carried out by governments of left or right since the credit crunch, and before.

Let us begin by looking at the effect on pay. Of course the Chancellor’s only direct announcements on pay concern the public sector, the 2 year freeze on pay we have already seen, followed by a 1% cap, means an ongoing cut in pay in real terms. In addition the cap on benefits makes lower pay feasible for employers. The success of this policy has led to workers in Britain suffering a continuous fall in real wages since 2008 and the largest fall in real wages of all G20 countries since 2010. New jobs have been mainly self-employed, part time or low paid to such an extent that there is a shortfall in expected tax receipts leading to this year’s government borrowing requirement being higher than expected. Result: more cuts are called for.

Cuts in welfare are a constant concern for the Chancellor – and for the whole ruling class – and it is no surprise that they feature prominently in the autumn statement. Given the promises to protect state pensions this will fall predominantly on working age benefits. “The welfare budget has already been cut by between £20-£25bn. [Osborne] wants to do half as much again as what’s happened in this parliament – which gives a sense of the scale of the cuts, and their likely impact. The working age welfare bill is currently around £95bn. He wants to cut that by a further £12bn.” (Andrew Hood, research economist at the Institute for Fiscal Studies quoted in The Guardian 5.12.14). The aim is to tighten the cap on benefits from £500 a week to £440. Working age benefits do not only go to those out of work for whatever reason but also to those in low paid jobs – of whom there are now so many more that it is affecting tax receipts. For these workers the state essentially tops up their pay to prevent it falling too far below what’s needed given the cost of living and cultural level in this country. Already two thirds of children in poverty have at least one parent in work.

Over the last 5 years spending by government departments has been reduced by 9.5%. This was not a new invention by the coalition government as the majority of the cuts they announced in May 2010 had already been envisaged by the outgoing Labour administration. The autumn statement envisages a further cut in spending of 14.1%. The Office for Budget Responsibility has pointed out that this will reduce the share of GDP spent by the state to the level of the 1930s and the IFS said it would reduce the role of the state to the extent that it would have “changed beyond recognition” (The Guardian 5.12.14).

So is Osborne rolling back the state? Changing it beyond all recognition? Or is it the same state, carrying out the same functions while taking account of the depth of the economic crisis, and calculating what they can get away with before the working class responds?

Leaving aside the very pertinent question of whether the state changed beyond recognition in the 1940s, let us look at the nature of the cuts that have been announced. Of course as the IFS points out, the chancellor has not explained how the cuts should be carried out beyond the next financial year. If the NHS, education and overseas aid remain protected, other departments will have to face a 40% cut over the next 5 years. But in any case, protected spending in the NHS, for instance, does not mean it is spared ‘efficiency savings’ or cuts, since it is required to provide increased services for the aging population out of the same funds, and staff are currently required to look at what can be done to reduce hospital attendances and look after more sick people at home. In relation to this we can look at the one area of spending that has already suffered a cut in excess of 40% over the current parliament: community and local government. Here we can see what has happened to the non-medical services available to the elderly, disabled and sick who the state is desperately trying to keep out of hospital. Care services are cut to the bone; carers are on zero hours contracts and are often on sub minimum wages once their travel is taken into account; they are limited to a ridiculously short time to spend with each client, and their services are often paid for or topped up by the clients themselves. This is a cut in living standards, for both care worker and client, not a change in the nature of local government which will continue to carry out the same functions, including collecting council tax, even if there is a substantial risk of some of them failing financially or being unable to carry out all their current statutory functions.

The army has been cut from 102,000 to 82,500, but this does not mean the British state is going to cease to defend its imperialist interests abroad. On the contrary, not only is  the MoD trying to build up the Territorial Army of part timers, it has also just announced the first British base East of Suez since the 1970s, a naval base in Bahrain. Cuts to the Justice department do not mean an end to state repression. So far they have meant a swingeing cut in legal aid, in other words greater difficulty for those who aren’t well off to get access to the courts. In line with the increased use of the TA the Policy Exchange think-tank has recommended a network of members of the public to help fight crime – it is not clear whether they have in mind special constables or Stasi-style informers.

Cuts to living standards are the only option for the ruling class. How quickly the new cuts are brought in may be an issue after the next election, but they are not any kind of rolling back of the state, they are the state policy of the capitalist class faced with the current economic crisis.

Alex  6.12.14



UK Economy