“Ouch! That hurt” was the Sun headline after the government’s October Comprehensive Spending Review. “Osborne whacks Britain” also sounds pretty uncomfortable but, as the paper’s other front page headline explains, the“£81bn cuts for all” are “to save our finances.” It might be unpleasant, but it’s all supposed to be for the good of the nation.
The next day the Sun reported a survey in which 58% of people thought that “the way the government is cutting spending to reduce the government’s deficit” was “unavoidable”. This was despite the fact that a majority thought it was a “desperate gamble” and would affect them personally.
It’s hardly surprising that people think cuts are inevitable. Attacks on living standards were already well underway under the Labour governments of Blair and Brown. This year’s general election had the main parties all offering slight variations on the main cuts theme, and Osborne’s budget and other measures have continued the process since.
As for who is going to be most affected, the Mail and Telegraph both thought that ‘middle class’ households with an income of more than £48,000 would be hardest hit. Two workers in a household both earning about £25,000 are still workers, and still hit, however the right-wing press want to label them.
Most papers took up the report of the Institute for Fiscal Studies (IFS) which demonstrated that the poorest would be hit the hardest. The poorest 10% (households with an annual income under £10,200) would be hit 15 times harder than the richest 10%. This comes on top of the Labour years where the gap between rich and poor widened throughout their time in office. It also doesn’t take into account things like food inflation, now running at about 10%, when food is a much more larger proportion of expenditure for the poorest.
It can’t be said too often: we’re not ‘all in this together’. We live in a class-divided society in which a capitalist class and the repressive power of its state rule over and exploit those who only have their labour power to sell. Those who are being asked to pay for the economic crisis of capitalism are not from the ranks of the capitalist class but from the working class.
What will happen as the measures take effect?
The fact that people think that widespread cuts are a ‘desperate gamble’ only reflects the conflicting predictions and proposals of economists. In the US the Federal Reserve has just embarked on a second round of ‘quantitative easing’, pumping more liquidity into the economy at the same time as the European Central Bank is withdrawing some of its emergency liquidity measures. If you look at the economy of the Irish Republic, as another example, its ongoing programmes of severe government cut-backs have lead to nothing except further cuts, with even more harsh measures due to be announced in the next budget on 7 December. Cuts don’t actually seem to work any more than the recourse to debt.
With the question of unemployment in the UK the only guarantee is that it will continue to rise. The government’s estimated figure for the increase in unemployment over the next five years is some 490,000. The Chartered Institute of Personnel and Development has done its sums and come up with some different figures. Its projections actually see a greater impact on the private sector, with, ultimately, the loss of 900,000 jobs, in comparison with the elimination of an estimated 725,000 (about 1 in 8) jobs in the public sector.
Also, it is worth looking at those areas which have been ‘protected’. Many will have reflected on the cuts in spending on prisons and defence and thought ‘if they can cut them they can cut anything’. Look at the NHS. Spending in real terms is advertised as rising by an annual rate of 0.01%. In reality, with an ageing population and the soaring cost of drugs, this will, on some projections, mean a 6% cut in resources available to the NHS. In addition, it should be recalled that Labour had already planned £20 billion worth of ‘savings’ in the NHS through ‘efficiency’ and ‘productivity’ measures before the election. These particular cuts will of course now be undertaken by the Lib-Con coalition.
When surveying his handiwork George Osborne was proud to say that while Labour had proposed across-the-board cuts of 20% the current government’s proposals only amounted to an average figure across departments of 19%. The IFS has actually shown that Osborne’s cuts are bigger. What the real figures do show is the essential continuity between the parties in the management of the economy – following the demands of the economic crisis with the imposition of austerity.
We’ve been this way before
In many commentaries on the measures adopted or proposed since the onset of the ‘credit crunch’ crisis there have been references to cuts in public spending made under Margaret Thatcher’s government in the 1980s. Alistair Darling, for example, openly said that the cuts Labour would introduce if re-elected would be ‘worse than Thatcher.’ Now Labour spokesman Alan Johnson is saying, as an accusation rather than as a complement, that Cameron/Osborne/Clegg’s cuts will be ‘worse than Thatcher’.
It is worth looking at what happened in the late 1970s/early 1980s to see what is similar and what has changed. The Labour government of Jim Callaghan had entered into an agreement with the unions, the Social Contract, which kept wages down and tried to keep a lid on the class struggle. Towards the end of the Callaghan government the unions were having a great deal of difficulty in selling the ‘Social Con-trick’ (as leftists tended to call it) to the working class. Also, the government’s majority had almost vanished, so it entered into a pact with the Liberal party. Under this arrangement came Phase 4 of Labour’s pay policy. One aspect of this was a 5% limit on wage rises. At a time when inflation was at 20% this was a major attack on working class incomes. Simultaneously, following desperate pleas for support from the International Monetary Fund, Labour introduced massive cuts in public spending. These measures, introduced by Chancellor Denis Healey were the forerunners to the monetarist policies of the Thatcher government. They also led to the wave of struggles of 1978-79 known by the media as the ‘winter of discontent’ which involved Ford workers and lorry drivers as well as workers throughout the public sector.
How do the Labour measures of the late 1970s and the Lib-Lab pact compare with the current Lib-Con Coalition? Total managed expenditure is due to decline in real terms by 3.3% by 2014-15. Compare this with Labour in 1977-78 where real spending was cut by 3.9% in just one year. Add in the rate of inflation that so eroded real wages and it’s easy to see why workers took to the streets to demonstrate and why so many went on strike. Rapid changes in material conditions soon lead to angry protests.
While reflecting on events of thirty years ago it’s a good moment to consider a recent poll of 18-24 -year-olds that found 76% favouring spending cuts against just 16% for tax rises. And the most popular targets for cuts were unemployment benefit (JSA) and building new homes. On the surface this might look strange: after all, aren’t younger people more rebellious than their elders? And wouldn’t those from an age group with high rates of unemployment and with currently large numbers still living with parents actually benefit from not having cuts in these areas?
The first thing to say is that the question on spending cuts is loaded as it asks what measures a government should take if it wants to balance the books. The question effectively demands that we accept the reality of the capitalist crisis, which means ‘heads they win, tails we lose’. For an individual being polled a tax rise seems very real, actual money being taken out of a wallet or purse; whereas the prospect of public spending cuts could seem rather abstract. If you’re 24 or younger you’ll have had no direct experience of the sort of cuts made in the late 1970s and early 80s, no exposure to high inflation rates, and little idea of the solidarity that exists in collective struggles. If the young can sometimes sound just like the least enlightened of their parents’ generation it’s because the reactionary ideas of capitalist society weigh on us all, and it’s in only in times of great social upheaval that the questionings of a minority become increasingly more widespread.
Against the ‘logic’ of capitalism
The richest have done well out of both Labour and Lib-Con governments, and the rescued banks must surely be grateful for the lashings of state hand-outs that have come their way. However, it is important to remember that the domination of capital does not only mean billionaires and their bankers but is a whole mode of production which touches every aspect of social life.
For leftists like the Socialist Workers Party, who talk of socialism and revolution while putting forward ideas that serve the cause of neither, there is the possibility of a democratic capitalism, an exploiting society which can benefit the majority.
Following Osborne’s latest announcements Socialist Worker (21/10/10) declared “There is no need to cut any job or service. But even if cuts were necessary, there are plenty of other ways to raise cash. The richest 1,000 people in Britain have £336 billion and they are getting richer all the time ― their wealth rose by £77 billion last year. The government could raise money by increasing corporation tax and taxing the super-rich. Yet Osborne has promised to cut corporation tax every year that the Tories are in office. The review included a small levy on the banks, but cuts in corporation tax mean they will actually come out with more cash.”
In Socialist Review (November 2010) you can read “According to HM Revenue and Customs, the UK’s ‘tax gap’ - the amount lost through tax evasion, avoidance and non-payment - is £42 billion a year. Why not clamp down on businesses that break the law or exploit tax loopholes? Or why not nationalise Britain’s big five banks, which made state-subsidised profits of over £15 billion in the first half of 2010 alone?”
What’s proposed here are a number of economic reforms inside the capitalist system. More state intervention, some changes in taxes, and a more vigorous approach to tax collection: with such measures there is supposedly ‘no need to cut any job or service’ or, ‘if cuts were necessary,’ there are always ways to raise cash. And haven’t most big British banks been nationalised already?
This vision is in direct opposition to the marxist tradition. Where the SWP call on measures from the capitalist state, the tradition of Marx and Lenin looks to the struggle of the working class and the destruction of the state. Where the SWP looks for ways of raising cash, marxists look toward a society without money, based on human solidarity, where the main principal is ‘from each according to their abilities, to each according to their needs’.
The logic of the capitalist crisis leads to state-imposed austerity; the struggles of the working class give a perspective towards a world-wide human community.
Car , 5/11/10.