Tuesday, 26 May 2009

Budget article in Labour Briefing

(This article appears in the June issue of Labour Briefing)

The Budget on 22nd April was the legacy of the flawed bank bailout plan of October 2008. As John McDonnell said at the time of Darling's bailout, "this will deepen and lengthen the recession" and "will mean increases in taxes or cuts in public services".

It didn't have to be this way. The Government could have nationalised the banks, used them to strategically invest in the economy, run them efficiently and allowed any profits to help restore government finances. Instead New Labour bailed out the banks, plunging us into massive debt, and took no direct control over them.

Now, the government is further indebting the nation by spending billions bailing out the private finance initiative schemes which Brown told us would be better value for the taxpayer.

With a national debt reaching £175 billion, the modest tax increase on the top 1 per cent of earners will raise around £5 billion to £7 billion. Not significant sums. Instead, buried deep within the Budget were £30 billion of public-sector cuts, which Darling calls "efficiency savings," and privatisations, which Darling calls "asset sales."

The £14 billion of cuts will inevitably damage services and mean job losses, further sapping demand from the economy and undermining growth. The Government is privatising revenue generating state assets to plug the budget gap they created by propping up the banks. It is slaughtering the geese that lay golden eggs (including the Royal Mint, Royal Mail, the QE2 conference centre, Ordnance Survey and the Land Registry) in lieu of the banks' debts.

Meanwhile in the real world they have done nothing to stop the recession hitting the most vulnerable people. Unemployment is now rising so fast that it might hit 3m by September and we are looking on course for 75,000 homes repossessed by the end of the year. In the first quarter of 2009 the repossession rate was 1,000 homes per week and rising – as more people slip into arrears.

Nevermind though, without any obvious government direction or noticeable sign the economy will pick up towards the end of the year and recovery will magically emerge – if you live in the surely drug-induced world of Darling and Brown. The economy will shrink at over 4% this year, possibly nearer 5% - yet Darling says 3.5%, and growing again in 2010. So Darling will be back in November 2009 at the Pre-Budget report suggesting new tax rises and new cuts.

Sadly my own union Unite seems as lost. It vacillates between endorsing BNP slogans and cuddling up to Digby Jones. The logic of this latter position is to call for the Government to subsidise companies putting workers on short-time. In return the Government gets nothing, doesn’t take a stake in return, doesn’t get a share of the profits – just subsidises wages on behalf of big business. The Woodley-Simpson-Jones tie-up is as ill-conceived as it sounds, even if the Government still had resources with which to subsidise the corporate sector.

The Budget was described by LEAP economist Graham Turner as a "do-nothing Budget". It pins all its hopes on 'recovery' yet does nothing to create one. This was the last budget that has any time to take effect before a general election – and it went with a whimper rather than a bang. So it's up to us to create that bang.

The stark reality of the economic crisis will force solutions. One will be further attacks on services, pay and a depression with all the societal ills that will unleash. The other is that the Government starts doing what it could have done 12 years ago: redistributing wealth, nationalising industry, directing investment and building a sustainable economy. It's socialism or barbarism – and all three political parties are signed up to the latter.

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