Osborne's class war

What Osborne unleashed on 20 October was an all out class war. It was comprehensive, as promised, and a precision assault on the working class. Let’s work through it:

Osborne pronounces his cuts will mean half a million public sector job losses, which the Chartered Institute for Personnel and Development says will be nearer 750,000. But before he does that his government is attempting to tear up the redundancy terms of civil servants, so that they can be sacked on the cheap.

For those that do remain, their pensions will be cut and he will perpetuate the lie about ‘rising’ and ‘unsustainable’ costs, when in fact the costs are falling as the Hutton report showed. Workers will also face a pay freeze for two years – a real terms cut of nearly 10%.

There is no strategy to create jobs, and rising unemployment is implicitly accepted. Since there will be a knock-on effect on the private sector from cutting public sector investment and capital spending, another million people will be out of work, and eligible for various elements of welfare.

Osborne is ahead of the game here, having now announced £18 billion of welfare cuts since June. Those still eligible to claim jobseekers allowance will face delays, a poor service and privatised contractors paid by results, profiting from your misery.

This is because the DWP is being forced to shed 15,000 jobs to help finance the new Work Programme, which will be run entirely by the private and voluntary sectors, which – DWP’s own research suggests – are less effective at supporting people into work than Jobcentre Plus staff

Then of course there’s the problem of getting to a Jobcentre since the network will be “rationalised” (i.e. cut). It will mean a bus or even train ride for many now – and the fares are about to skyrocket, as bus subsidies are cut and rail companies have been allowed to raise fares by 30% over the next four years.

There are further cuts to housing benefit and a huge hike to 80% of market rates for new social tenants (there won’t be many since the budget for new housing has been halved). Yet Osborne of course does nothing about private landlords’ inflated rent demands or investing in council housing. This is a recipe for mass homelessness. There are already 1.8 million families on council waiting lists and 100,000 families living in temporary accommodation.

For those on Incapacity Benefit, Employment and Support Allowance or Disability Living Allowance there are cuts and privatised profit-making and target-driven assessments to shift sick and disabled people onto the lower Jobseeker’s Allowance.
So Osborne is demonising those on benefits, and introducing new workfare policies, when there are already 2.5 million unemployed and less than 500,000 vacancies.

His answer is that the Big Society will step in – the social equivalent of laissez-faire – yet voluntary sector funding is being cut by central and local government and the Charity Commission (which regulates the sector) received a budget cut of 33%.

In case of any media dissent, Osborne has cut the only major not-for-profit broadcaster, the BBC, by 16%, while cutting the regulation of private media through cuts to Ofcom.

If that wasn’t enough, Osborne will also be handing over public assets like the Royal Mail, the Tote, Royal Mint, Ordnance Survey and air traffic control to his mates in the City. All of these bring in revenue to the Exchequer, and that’s why they are attractive to big business.

This government will also soon allow market rates of interest on student debt, making it attractive to the private sector, and the CSR again proposed privatising the student loan debt which will be big money once that debt amasses at £7-12,000 per year.

Osborne also announced he is giving up on child poverty – “the Spending Review has no measurable impact on child poverty over the next two years”, he proudly announced in his speech. There are currently nearly four million children living in poverty, and that will rise as more of their parents lose their jobs and have their benefits cut.

So it’s class war, all-out class war, and so to mitigate against people becoming aware of that Osborne is taking two logical steps – firstly lying about the necessity for cuts, but secondly to divide and rule: between public sector and private sector workers, and between those in work and those out of work.

There is a third step too – the devolution of many cuts to local government to implement, dividing the blame.

We therefore have to challenge each of these strands if we are to mobilise effectively. We must re-but his lies, and explain the alternatives at every opportunity: public ownership, tax justice, a wealth tax, a million climate jobs, etc. We also have to not let ourselves be divided – and say that there should be no cuts – not in welfare, public services, jobs or pensions – and no privatisation and marketisation of our public services.

The question of councils implementing the cuts needs serious discussions. In May 2011, Labour is likely to gain more councils as the backlash bites against the Tories and their Liberal lapdogs. These newly elected councillors will need to consider how they can resist the cuts. It’s a discussion that local LRCs and community anti-cuts campaign are having now.

Osborne has unleashed an all-out class war. If we are to defeat this we need to bring our trade unions and the Labour Party back into struggle – otherwise what do we replace this government with? It is not going to be easy, but there really is no alternative.

*This is the second part of an article that appears in the November 2010 issue of Labour Briefing.

Osborne's unavoidable desire to roll back the state

To analyse the coalition government’s Comprehensive Spending Review (CSR) we have to understand its purpose. Was this the economic strategy to get "our country back from the brink of bankruptcy" as George Osborne said in the final rhetorical flourish of his Commons statement?

Let’s analyse that claim. As a sovereign country with its own currency bankruptcy is near-impossible – we can always print more money. But that technicality aside, Britain would have to be in unprecedented levels of crisis to become functionally bankrupt. The UK’s national debt is lower than that of Germany, France, the US – and about a quarter of Japan’s! Our debt, currently 56% of GDP is not high by historical standards, and we are able to borrow over long repayment periods at low rates. Our debt is nowhere near high risk.

Osborne and many monetarist economists would argue that the deficit – the annual gap between expenditure and revenue – is however a problem, wider than that of many nations and at an historically high level. He said in the Budget that the deficit was the result of Labour’s profligate public spending, amassed “from a decade of debt”.

A quick check of the figures proves this to be untrue. Labour inherited a national debt of 42% in 1997, which had been reduced to 29% by 2002, and rose slightly to 36% in 2008. Then the global banking crisis occurred and the deficit rocketed as unemployment rose, tax revenues collapsed and welfare spending increased.

But whatever the reasons, it is perhaps true that “tackling this budget deficit is unavoidable”. It is certainly desirable – as otherwise debt will increase and interest payments will eat further into spending and curtail useful expenditure.

If we accept that dealing with the deficit is desirable, that still does not make Osborne’s choices unavoidable.

There are three ways to deal with the deficit: I’ll characterise them as Marxist class war, Keynesian, and Osborne’s class war. Each could achieve the goal of closing the deficit, they are political choices.

The first is the ‘Marxist route’ – this is not deficit-denial, but debt denial – deny that we should pay. You either expropriate from the rich and big business to pay or risk the invocation of sanctions, embargos and even war by repudiating the debt and not paying at all. Argentina managed it a few years back, but it requires us to be in a revolutionary situation and we are not, yet, so let’s move on.

The next is the Keynesian path. This requires restoring revenues (rather than cutting expenditure) to close the deficit. It means deficit spending, public investment, job creation, probably aligned with redistributive taxation.

Of course what we got was the Osborne class war model: cutting capital expenditure, freezing pay, increasing VAT, cutting jobs and welfare, yet still expecting a private sector led recovery. It is not just anti-Keynesian, it is anti-logical.

It means rolling back the state, to cut expenditure to match reduced revenue. Growth is subject to a laissez-faire leave-it-to-the-market strategy, but public spending must be pared back.

*This is the first half of an article that appears in the November 2010 issue of Labour Briefing

Confirmed: Cuts will hit poorest hardest

Working people, the unemployed and the sick will be hit 10 times harder by spending cuts than previous Con-Dem predictions, a new TUC analysis revealed on Friday.

TUC-commissioned economists shattered myths peddled by Chancellor George Osborne and Deputy Prime Minister Nick Clegg that the spending review was about "fairness."

They revealed that the poorest 10 per cent will be hit 15 times harder than the richest 10 per cent.

The new analysis stands in stark contrast to government claims that overall the cuts would hit the worst off only five times more than the richest in society.

The TUC originally predicted in its Where The Money Goes report that cuts of 25 per cent by 2012-13 would mean that the poorest 10 per cent of households would lose around 20 per cent of their income.

But using data from the Spending Review the TUC showed that overall cuts to public spending - excluding benefits and tax credits - of £48 billion by 2014-15 will be even more regressive, partly because of deep cuts to services which are disproportionately used by the poorest households, such as social housing and social care.

TUC commissioned economist Howard Reed pointed out that if the cuts were examined by their social "function" rather than by department, the picture looks even bleaker.

"Social care will be cut by 20 per cent, social housing 24 per cent, policing 20 per cent and higher and further education 27 per cent," he said.

TUC general secretary Brendan Barber said: "Even when the effects of benefit changes are taken out of the equation, cuts to services surgically target the poorest households and leave the rich relatively untouched."

And Haringey Council leader Claire Kober warned that cuts to local budgets, services and housing allowances will make it impossible for local authorities to cope with the influx.

"We are being set up to fail," she said.

Left Economics Advisory Project co-ordinator Andrew Fisher called on the TUC to co-ordinate resistance to the coalition's "obscene attacks."

He said: "The TUC analysis of Osborne's spending review is to be congratulated and confirms what the IFS said the day before and what our instincts told us all immediately: the CSR was all-out class war.

"At the June Budget and again this week, Osborne lied to us that his cuts would be fair.

"Within a matter of hours again his lies have been irrefutably exposed."

*This article appeared in the Morning Star on Sat 23 Oct

Initial thoughts on the CSR announcement

George Osborne announced his Comprehensive Spending Review - we'll do a more considered response in time, but a few initial thoughts:

• We're told this CSR will be fair and hit the richest hardest ... he said that last time. It's not true this time either.


• The Government will invest £900 million in HMRC can bring in £7 billion in tax evasion. Spending 90p gets you £7, that's a good return on investment. There's a £120 billion tax gap - maybe invest a bit more?


• Raising the state pension age to 66 will have a disproportionate impact on the poorest who have shorter life expectancy and are less able to afford to retire early


• Osborne implied that public sector pension costs are rising. In fact the costs are falling as the Hutton report showed


• the new 'Work Programme' (workfare/welfare conditionality) will be entirely delivered by the private and voluntary sectors with payments by result (profiting from welfare) even though the DWP's own research shows Jobcentre Plus staff more effective and efficient


• The extra £7 billion cuts in welfare, on top of £11 billion announced in June, is effectively taking £1000 from 18 million people


• Another attack on housing benefit - this time people under-35 targeted, and their housing benefit will be effectively halved. Disgusting.
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• Further attacks on Working Tax Credits, including reducing childcare element


• George Osborne said "the Spending Review has no measurable impact on child poverty over the next two years" as if that was something to be proud of?! Also the CSR period is 4 years so what about the last 2 years? There are over 3m children living in poverty ...


• "By cutting business taxes we are giving business the freedom to compete" - what a load of nonsense


• Administration budgets across departments will be cut by 34%, overall expenditure down 19% - 490,000 job cuts across public sector as Danny Alexander 'told' us yesterday


• Train fares will rise 3% above RPI inflation for the next 3 years - RPI is currently 4.6% - FFS nationalise!!


• He used "will be protected in cash terms" a lot - what that translates as is a real terms cut.

Osborne cuts 'will wreck economy'

How the Morning Star covered the publication of LEAP's dossier on Osborne.

by Roger Bagley in Parliament

Left-wing economists stripped the facade today from Chancellor George Osborne's disastrous attack on public services and the poor.

Mr Osborne's big lie that Con-Dem spending cuts are "fair" was also punctured when a bunch of 35 super-rich big business bosses signed a letter to the Daily Telegraph expressing their fulsome support for the Chancellor's policies.

On the eve of tomorrow's Comprehensive Spending Review containing further huge cuts, the Left Economics Advisory Panel (Leap) issued a dossier highlighting Mr Osborne's flawed assertions, mistakes and U-turns since his June Budget.

Leap chairman John McDonnell MP accused Mr Osborne of being "wrong time and time again."

Mr McDonnell said: "Our community is now about to be devastated by four years of cuts in valuable public services with hundreds of thousands losing their jobs as a result of his faulty economic calculations and recklessly risky policies."

The bosses of Marks and Spencer, Asda, Alliance Boots, BT, Diageo, Microsoft and GlaxoSmithKline were among 35 big business chiefs signing the Telegraph letter, which claimed it would be a "mistake" for the Chancellor to water down his cuts.

"Addressing the debt problem in a decisive way will improve business and consumer confidence," they argued.

But Leap co-ordinator Andrew Fisher accused Mr Osborne (pictured, left) of pursuing "a pessimistic strategy based on failed monetarist policies."

He added: "Fundamentally, the Osborne economic strategy is simply a Thatcherite ideology that wishes to roll back the state. Today, the small government idea is the Big Society, which is not about strengthening society, but burdening it."

The Leap dossier pointed out that cutting the public sector would not "make room" for the private sector, but would sap demand and weaken the private sector as well.

A leaked document from the Office for Budget Responsibility had recognised this by estimating that cutting 600,000 public-sector jobs would lead to a knock-on loss of 700,000 jobs in the private sector.

Leap also pointed out that, since the June Budget, leading economic forecasters had downgraded prospects for growth in the British economy.

In addition to Mr Osborne's U-turn over withdrawing child benefit from households with a higher rate taxpayer, the overall three-year freeze on child benefit would mean a 10 per cent cut in real terms.

LEAP publishes 'Ready Reckoner' on Osborne’s economic strategy

Ahead of the Comprehensive Spending Review later this week, LEAP has published a dossier 'The Osborne Ready Reckoner' (free download) testing the statements the Chancellor of the Exchequer, George Osborne, made at the June Budget Statement.

The dossier highlights the flawed assertions, mistakes and u-turns contained within that statement and puts the arguments against the coalition government's economic strategy.


John McDonnell MP, LEAP Chair, said:

"In the short space of time George Osborne has been Chancellor he has already been proved wrong time and time again.

"Our community is now about to be devastated by four years of cuts in valuable public services with hundreds of thousands losing their jobs as a result of his faulty economic calculations and recklessly risky policies."

Fundamentally, the Osborne economic strategy is simply a Thatcherite ideology that wishes to ‘roll back the state’. Today the small government idea is the ‘Big Society’. This is not about strengthening society, but burdening it.

The same Party that tells us the Big Society will take on the role of the state in key areas, also tells us we are living in a ‘broken society’. The effect of the cuts planned on this scale would be, if implemented, to leave Britain with a legacy of a ‘broken government’ to match the Tories’ broken society.

Government revenues have fallen due to the recession – there are more people out of work claiming benefit and paying taxes, because there are fewer jobs. Today there are 2.5 million people unemployed and less than 500,000 vacancies.

The Tories have no strategy for job creation or economic growth – only for cutting spending down to the level of revenues from an underperforming economy. The only outcome of their pessimistic strategy is misery for millions of families.

This dossier puts the economic arguments against the Osborne strategy. Download here.