Photo: Guy Smallman
The Osborne Axe has fallen. The chancellor’s spending review heralds the deepest assault on the public sector since the Second World War. George Osborne’s key lines of attack give the lie to his claim that “we are all in it together”.
The area hit hardest is welfare. Housing benefit will be cut, with those under 35 forced to live in a single room; disabled people in full-time care will lose mobility allowances; working tax credits will be frozen; incapacity benefit will be limited to a single year. The state pension age for both men and women will rise to 66. Public sector workers will also feel the pain. The half a million jobs Osborne predicts will go are just the start. Those who remain face an effective pay cut, as wages are frozen and pension contributions are ramped up by 3 percent.
The third big attack is on local government, with funding slashed by a quarter over the next four years, destroying more jobs and services.
The Tories are determined to fight this war down to the very last drop of our blood. They will tell us their measures are necessary to cut the deficit and prevent Britain going bankrupt.
Yet government debt has grown across most major economies since the crisis erupted two years ago. States across the globe took centre stage in the crisis – organising stimulus packages, banking bailouts and liquidity injections on a scale never seen before. They did this as tax revenues fell and spending was forced up by rising unemployment. But the notion that the debts incurred must now be scaled back by an assault on the working class ignores two points.
First, Britain is nowhere near defaulting on its debts – which remain below the average over the past two centuries. Under Osborne’s plans Britain’s debt would peak at 70 percent of GDP in 2014-15. US debt is set to reach 85 percent by this point, with barely a murmur from the bond markets. Japan’s debt will be 153 percent.
Second, why should the working class, who did nothing to cause the crisis, pay for it?
Osborne claims he will save just over £80 billion in four years. 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?
The attacks are not a pragmatic response to events. The core of the Tory party remains, in economic ideology, Thatcherite.
Osborne loves the free market so much that he called his daughter Liberty. In a speech in April 2008, five months before the collapse of Lehman Brothers, he was already arguing for a downsized public sector. “For those who question how meaningful a commitment this really is,” he told his audience, “let me remind you that it took eight years for Margaret Thatcher’s government to reduce the share of national income taken by the state below the level which she inherited.”
When David Cameron was challenged by a firefighter at a Birmingham meeting to say that he would restore public sector funding when the economy improved, he refused, insisting that the cuts must be “sustainable” – in other words, permanent.
That does not mean that Cameron and Osborne plan to abolish the welfare state. Public services make working class life a little easier, but they also play a vital role for capitalism – providing a sufficiently stable, healthy and educated workforce. Post-war state spending has hovered around 40 percent of GDP through successive governments. But the Tories believe they can eradicate chunks of the system that do not help boost profits, and that private firms can deliver many of the services that remain more efficiently (and certainly more profitably).
The Tories have to take something else into account – the potential scale of opposition. Cameron is not Thatcher. His party only became electable again once he softened his economic liberalism with a dose of social liberalism. Unlike when Thatcher came to power, there is little popular support for a war on workers. One side-effect of the low level of class struggle in recent years is that few people could blame union militancy for the crisis.
So Osborne trod carefully around key areas of the welfare state – protecting the NHS’s funding and retaining winter heating allowances for pensioners, for example.
Nevertheless, the Tories have taken two huge gambles. The first is their wager that the economy will respond favourably to their onslaught. The cuts are expected to knock at least 4 percent off GDP over the next four years. This can make the difference between a slowly expanding economy and one sinking into the mire.
Cameron and Osborne believe that as they cut spending the private sector will expand to take up the slack. But as economics professor Malcolm Sawyer showed recently, the government’s projections rely on exports growing by a third and private investment by 44 percent by 2015. This would mean more rapid growth than we have seen in a decade.
Even if businesses were prepared to invest to try to raise exports, the currency wars between rival states and the wave of austerity in Europe mean intensifying competition for ever more restricted export markets.
The coalition is also gambling that the anger from below can be contained. One recent poll revealed that a third of the population opposed all cuts to public services. A second claimed that 30 percent supported coordinated strike action against the attacks.
If that level of opposition already exists the left can aspire to reach a potential audience of 10 million workers, and large numbers of students, unemployed people and pensioners.
Resistance is not automatic. Workers remain caught between fear and anger. But in such a situation the action of socialists can be crucial in detonating struggles, providing examples of how to fight and beginning to give confidence to workers. In doing this, we should take advantage of anything that raises the temperature – whether it is the fighting talk of union leaders or the examples of struggle in Europe.
We have to seek to draw together the emerging cuts campaigns, the trade union struggles and student agitation in universities. Organisations such as Right to Work can give an overall national direction and coordination to these struggles. But we also need the big battalions of our class to engage in the battle. The anger and instability today mean that arguments for a general strike, which seemed like an empty slogan a year ago, can suddenly begin to resonate with large numbers of workers.
For better or for worse, we are at a critical juncture, one where the path forwards will define politics for years to come. The Tories are gambling with our lives. We have to gamble on the possibility of resistance.
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