Friday, 22 October 2010

Time to end the profit system

The Lib-Con Coalition government’s Spending Review is an attempt to rescue an already bankrupt economy. With £81bn cuts in public spending, it is the biggest and most sustained assault on the public sector since the creation of the welfare state sixty years ago.

But the reality is that despite the ruthless measures announced yesterday, the cuts will hardly make a dent on Britain’s budget deficit, which at £162 billion is the largest of the world’s major economies.

The plan is to bring government borrowing down by £149 billion in four years. This is a 19% per cent cut in real terms, as opposed to New Labour’s proposed 12 per cent. But can this gamble succeed? The very measures intended to reduce the deficit will deepen the crisis.

The one million people who will be thrown out of work and those made homeless will need some kind of support. And whilst blighting the lives of countless citizens, especially the most vulnerable, government spending will continue to rise by an additional £38 billion over the coming four years. As Chancellor Osborne announced: “total public expenditure – capital and current – over the coming years will be £702 billion next year, then £713 billion, £724 billion and £740 billion in 2014-15.”

An additional £7 billion cut brings the total cut in the welfare budget to £18 billion so far. The poorest ten per cent of the population stand to lose the most. It is a monstrous bludgeon expected to achieve just a £5 billion reduction in the £43 billion per year interest payments.

The measures include:

  • a 30% cut in funding for local authorities
  • a 74% cut in the budget for house-building combined with a trebling of rents for new tenants in social housing
  • insecure tenancy of council house dwellers
  • the minimum possible increase for the NHS, that will leave health care struggling to keep up with an aging population and scientific advance
    ending the universal right to Child benefits
  • a 3.4% real cut in education
  • cancellation of major infrastructure projects, like the renewal energy from the Severn Barrage
  • a 10% increase in rail fares
  • a £7 billion cut in the welfare budget
  • Culture Department to be cut by 42% with almost 30% cut for Arts Council
  • up to 30% cuts in budgets for government departments
  • 20% cut in funding for the police
  • rapid acceleration in the process of adding a year to the working life of a man and six to that of a woman before they can claim a state pension
  • huge and damaging reductions in the settlements for Scotland, Wales and Northern Ireland.

    There is certain to be much more pain as the contraction of the global capitalist economy tightens its grip. The attempt to reduce repayments to the money markets will be undermined by tax revenues falling faster as the recession turns to slump. The populist gesture of £2 billion to be raised from a permanent levy on banks will surely be passed on in the form of higher costs of borrowing.

    Cuts in administration of around 30% over four years will lead to a loss of an estimated 490,000 public sector jobs, 8% of the total. The effects of the overall programme confirms consultancy PriceWaterhouseCooper’s estimate of a further 500,000 jobs evaporating in the private sector as spending is reduced and contracts are cancelled.

    The Coalition has issued a sinister threat with its promise that it will always be better to be in work than on benefits. It means that they’re hard at work on schemes to reduce wages across the board. No doubt employers will be rubbing their hands at the prospect of new sources of cheap labour from the enlarged European Union and beyond.

    This is only the beginning. The Spending Review spells out that the capitalist state can no longer afford to fund any of the rights or life-support benefits won by unions in a century of struggle.

    The intention to reduce the wide and complex range of benefits needed by millions of people suffering the effects of three decades of profit-chasing globalisation to an all-encompassing single payment, and a time-limit on the Employment and Support Allowance reflects a profound contempt for the individuals whose needs have been assessed by cohorts of public sector workers. Capitalism in crisis wants to reduce millions of people to bottom-line cyphers of cost before trying to eliminate them altogether.

    Calls outside Downing Street for “French-style” strikes are a welcome move from the total inaction of the Trade Union Congress. But even industrial action needs a political purpose. The desperate gamblers in No10 and 11 are driven by a real economic crisis of the capitalist system itself.

    The solution to the debt mountain comes in the shape of action by People's Assemblies, formed locally throughout the country with a view to defending services, livelihoods, jobs, and homes. Eventually a government formed from a network of people's assemblies will need to take control of the financial sector, cancel the debts and turn it into a not-for-profit service.

    The global capitalist classes are watching to see the results of Osborne’s cruel experiment. It’s time to realise that we too must enter new territory.

    Gerry Gold
    Economics editor, 21 October 2010
    reposted from

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