By Yuri Prasad
Downloading PDF. Please wait... Issue 2124

Big flaws in Labour’s new spending plans

This article is over 13 years, 2 months old
How quickly New Labour’s old orthodoxies of the free market have come crashing down.
Issue 2124

How quickly New Labour’s old orthodoxies of the free market have come crashing down.

Not long ago Tony Blair and his “Iron Chancellor” Gordon Brown told us that sticking to agreed spending plans meant there could be no utopian dreams of council housing, good transport infrastructure, or even school roofs that didn’t leak.

They said that in the era of globalisation it was no longer possible for the state to intervene in the economy.

Those who disagreed were at best old fashioned and at worst, enemies of “reform”, they said.

Now, with the financial crisis and the onset of recession, it appears that times have changed. Chancellor Alistair Darling says that he is prepared to spend billions on capital projects in order to stave off another Great Depression.

Housing minister Margaret Beckett will be given millions to buy up empty homes for council houses. More money will be splurged on a strange collection of “public works” such as aircraft carriers, replacing Trident nuclear submarines, the Olympics and London’s Crossrail project.

The ranks of disillusioned Labour voters – who have endured years of cuts in pay and public services alongside tax breaks for the rich – will doubtless be wondering why it has taken an economic calamity for the government to abandon its free market dogma.

Many will have watched the signs of economic collapse and feared a return to the Tories and the mass unemployment of the 1980s.

Now they will hope that Labour’s spending plans can avert disaster.

Closer look

But a closer look at Labour’s new spending plans reveals the enormous gap between what the government is prepared to dole out to the banks, and what it is says it will do for ordinary people.

On housing, the first phase of Beckett’s plan will release £13 million in London – enough to buy up just 335 unsold homes.

There are 9,000 people on the council house waiting list in the London borough of Barking & Dagenham alone.

Subsequent phases will release a further £200 million around the country. But according to town hall leaders, by then the numbers waiting for a home will have reached around 2 million.

That means the plan, if it were divided equally between all on the waiting list, will be worth just £100 each.

The money for this plan – and those for other big money “capital projects” such as new school buildings – is not new. It is merely being brought forward a year.

And the stark reality is that the government’s spending plans do not go nearly far enough.

First, there is the question of scale. Economists are predicting that up to 2.2 million will be on the dole by the end of next year. The current measures could not save more than a few tens of thousands of jobs.

To build and maintain a new generation of council houses that could really make a dent in the number on the waiting list would require spending that approached the amount used to bail out the banks.

Second, there is the question of what is being prioritised.

The government has decided it is prepared to spend nearly £4 billion on two new aircraft carriers.

But most people, given the choice, would rather see the skills of 10,000 workers that depend on those contracts used to improve lives, rather than threaten them.

Lastly, there is the question of who will benefit most from the spending.

If much of the government’s investment money is handed to the same developers who profit from schemes such as Private Finance Initiatives (PFI), then how much of the public’s money will actually benefit the public?


In the NHS there are fears that government plans to “spend their way out of recession” will result in “retargeted spending” to create short-term jobs, and that the much slower growth in spending after 2010 will lead to cuts in services.

The demise of the world economy has killed the rationale for New Labour’s obsession with the market. But we are some considerable way from policies that could really benefit working people during a recession.

Thanks to the scale of the bank bailout, Gordon Brown now runs four banks and most of Britain’s mortgages. Surely they should now be made to operate in the interests of workers, rather than the rich.

We need a fight for real public investment – under the control of those who build, use and protect public services. And we should keep pointing out that the the market has failed – it is time to kick it out of public services for good.

These are the fights that hold the key to the future.

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