Scale of coalition government attacks on welfare

The most drastic cuts in the Budget affect welfare. The headline announcements are:

• Freezing Child Benefit for three years
• Linking benefit increases to CPI instead of RPI
• Cutting tax credits for middle-income households
• Capping housing benefit
• Cutting £1.4 billion from Disability Living Allowance
• Cutting Jobseekers Allowance for the long-term unemployed

These measures are an attack on the most vulnerable people in society. Let's look at the likely impact of each:

Freezing child benefit
New Labour, for all its faults, increased Child Benefit above inflation in their period of office. Child Benefit is one of the dwindling band of universal benefits - collected as of right. With inflation likely to average around 4-4.5% this year and 3% in the next two years, this is a real terms cut of 10% by the third year. This will inevitably impact upon child poverty, despite the increase in Child Tax Credit (which of course is means-tested and has a lower take-up rate).

Linking benefit increases to CPI instead of RPI
The government states this will save over £6 billion over the next four years - as CPI as a measure of inflation is consistently lower than the RPI measure (which itself is more often than not lower than the increase in average earnings). This is because CPI excludes housing costs, which would make it an accurate measure if everyone lived in tents. Since most people require housing, which needs paying for, excluding housing costs from inflation measures is therefore a nonsense.

Take Jobseekers Allowance for example. If that had been linked with earnings since 1979, it would today mean the unemployed receiving £110 per week. Instead they receive £64.05. This gap between benefits and earnings will now increase even further under this "progressive alliance" government.

Cutting tax credits for middle-income households
Tax credits are unwieldy - they're costly to administer and complicated to claim. However, by cutting them from households earning less than £30,000 (i.e. two people on say £18,000 and £12,000) this will hit the disposable incomes of not very wealthy households. Cameron says he wants a private sector-led recovery. That surely requires people with higher disposable incomes to buy things (add on the VAT rise and Cameron's economic hopes are looking very shaky.

Capping housing benefit
In one of the most idiotic pieces ever posted on Comment is Free, Westminster Councillor Philippa Roe welcomes Osborn's move: "[before] there was also little incentive for them to move or work, as under the benefit laws they would lose much of their generous housing payments". Philippa obviously doesn't understand that housing benefit claims are often directly paid to landlords, and even if not are used by people (only 1 in 8 of whom in London are unemployed) to pay their rent.

The real problem of course is that the Thatcher government abolished Fair Rent Tribunals and attacked council housing. So now if people need housing, there is none available and the state ends up subsidising the inflated demands of private landlords. As ever, the problem of the poor is the rich.

Cutting £1.4 billion from Disability Living Allowance
The Government is already continuing the inherited programme of giving everyone on IB/ESA a work capability assessment (i.e. re-assessing every single Incapacity Benefit claimant) - well a private company called ATOS Healthcare is anyway. This is now to be extended to Disability Living Allowance. By 2014-15 this will be saving over £1bn per year - taking away support from disabled people which helps them live independently.

Cutting Jobseekers Allowance for the long-term unemployed
Almost gone unnoticed so far is the Coalition Government's plan to cut benefits for those who are long-term unemployed. Having lived for a year on £64 per week, the government thinks people will have built up enough of a nest-egg to be able to survive on 10% less. Just to put this in perspective, the number of people currently unemployed for 12 months or more is 258,000. There are currently 2.51 million people unemployed in total and only 492,000 vacancies.

Now, you might argue that all this is necessary. After all there is an unprecedented (post-war) national deficit. However, the cost of all the above measures combined - and throw in the public sector pay freeze too - is less than the more than £25 billion subsidies to big business through corporation tax cut, small business rate cut and higher threshold for employer NI.

These are not welfare cuts to pay down the deficit, they are welfare cuts to subsidise big business. Welcome to the "progressive alliance".

Budget: Redistribution from poor to big business

The Coalition Government's concept of 'fairness' is obviously about fairness to their mates in business. Today's Emergency Budget will redistribute wealth from the poor to big business.

In response to the Chancellor's Emergency Budget today, John McDonnell MP, LEAP Chair, said:

"The budget is a significant redistribution of wealth from the poorest in our society to big business. Cuts in welfare benefits to children, pregnant women and the homeless are being used to fund cuts in corporation taxes for big business. Welcome to the Coalition's concept of 'fairness'

"People rightfully perceive a grotesque unfairness in that they are being forced to pay with cuts in their jobs and services for a crisis caused by the greed of the bankers. Cuts on this scale will inevitably be met by resistance from not just trade unions but from across our community".

The Budget announced a 4% cut in corporation tax from 28% to 24%, a higher threshold for employer NI contributions and employer NI exemptions for new businesses, and a cut in the small business rate of tax.

Meanwhile, £11bn of cuts are announced on welfare, benefits will only now be uprated in line with CPI not RPI, maternity grants are abolished, child benefit will be frozen for three years and public sector pay frozen for two years.

Left economists say low interest rates is right

From the Morning Star
Monday 10 May 2010
by Louise Nousratpour

Left-wing economists have welcomed the Bank of England's decision to hold interest rates at record lows as policymakers weigh up the impact of a eurozone bailout and a hung parliament.

The Bank's Monetary Policy Committee voted to hold rates at 0.5 per cent and left its £200 billion programme to boost the money supply unchanged.

The widely expected decision came as European leaders agreed to prop up the euro and prevent Greece's sovereign debt crisis from spreading - while talks over a possible coalition in Britain continued following last week's indecisive election.

Despite worries over inflation, the current political and economic uncertainty is expected to reinforce the MPC's "no change" stance as Britain makes a fragile recovery from recession.

Left Economics Advisory Panel co-ordinator Andrew Fisher said: "With personal insolvencies and bankruptcies at record levels, and home repossessions continuing, the Bank of England was right to keep interest rates low.

"Raising interest rates now would hit the poorest hardest."

Mr Fisher warned against raising interest rates to combat inflation, arguing that the government should instead suppress gas and electricity prices, which would benefit the poorest members of society.

"This would be best achieved taking the utilities into public ownership to directly regulate prices," he said.

Rate-setters have not changed policy since November - and are unlikely to until the scale of government public-spending cuts can be felt and the economy shows signs of stronger growth.

Mr Fisher argued that the Bank "should not be looking to economic growth figures, eurozone fears or inflation spikes when judging interest rates, but at personal debt and mortgage defaults."

More on the Great Rail Rip-off

Following on from our post of 4th May about threatened rail cuts, news now emerges of franchises redesignating peak times to increase - by up to 4 times - rail fares.

In our January 2009 report for the RMT union, we identified the following threats from the rail companies:

1. Either attempting to renegotiate franchise agreements, which could
include:
a. Reducing premium payments or requesting extra subsidies
b. Cutting services on less profitable routes

2. Cutting staff numbers to reduce overhead costs, which would increase
unemployment and could lead to worse services and less passenger
safety

3. Raising rail fares, which could drive passengers from the rail into
private transport

We have now seen all three in this recession. On point 3, the BBC reports that "Virgin decided to extend ticket restrictions for more than an hour a day", so many services are now peak. One example is that last year, taking the 0915 from London Euston to Manchester, returning at 0855 the next day, would have cost £66. Now that Virgin has extended its peak hours, the same ticket costs £262. It's a similar story at South West Trains - owned by homophobe Brian Souter.


Virgin remember is owned by tax exile Richard Branson who takes tax subsidy but avoids tax. Virgin is so named not because of its owner's sex appeal but because it is based in the Virgin Isles.

Afraid of more franchises defaulting, it appears the Office of Rail Regulation inside the Department for Transport is doing nothing and allowing passengers to be fleeced.

However on the East Coast mainline, which was taken over by the government last year, five trains a week have been reassigned the other way, from peak to off-peak.

The answer is simple: renationalise the railways!

Election crisis: markets call the shots

The hung parliament that has resulted from Britain’s inconclusive general election is certain to lead to a prolonged period of political instability slap bang in the middle of the gravest economic and financial crisis since the 1930s.

Now the horse-trading begins – behind the voters’ backs – to put together a government that is unlikely to see the year out. The Tories, New Labour and the Lib Dems don’t have much time, as the markets made clear while the last votes were being counted.

Sterling fell on the foreign exchange markets, while the cost of borrowing to fund the huge budget deficit rose as dealers in British bonds began to take evasive action. Shares on the FTSE 250 – which more closely reflects the British economy – fell by over 270 points. “They have got until the markets open on Monday to sort this out,” one dealer said.

Paralysis at Westminster comes amidst turmoil coursing through global markets in the wake of Greece’s bail-out by the International Monetary Fund and other eurozone countries. Few think the £100 billion rescue package will be sufficient and the resistance by Greek workers has further unnerved the markets.

“The election is shaping up to create the worst possible outcome at the worst possible time,” warned David Morrison, strategist at GFT. “Investors’ nerves are already jangling and this added uncertainty will undermine UK equities further. The sell-off in gilts [bonds] and sterling is a clear indication of how unimpressed the City is by the lack of a clear winner.”

If the City was unimpressed, so too were the electorate. Their refusal to give any party a clear mandate could be seen to express a fear that such an outcome would make massive cuts in services and living standards more certain. While the turnout was up slightly on 2005, in many inner-city areas it was below 60%. More than one in three registered voters did not participate, despite intense pressure to do so.

Clearly the TV debates did nothing to enable voters to distinguish one party from another, apart from the style of the respective leaders. Many undecided voters failed to work out a choice in time while thousands of those who made up their minds late in the day found themselves locked out because polling stations were understaffed.

All the major parties have now pledged to act “in the national interest”, which is tantamount to saying that the markets must be mollified by a cross-party agreement to make the cuts they hinted at but shied away from spelling out in any detail during the election campaign. Ruling in the people’s interest is not an option for any of them.

One thing is clear. New Labour spent 13 years in office promoting a market capitalist economy that ultimately crashed and in doing so created the political space for the hated Tories to make a comeback from the dead. In 1997, New Labour got 43% of the vote and more than 12 million votes. Now they are down to a 29% share and 8 million votes.

A majority New Labour government is now no longer a practical possibility in British politics. Any pact with the Lib Dems would simply confirm a new political alignment that is not so much “progressive” as anti-socialist, anti-trade union and pro-business.

The election result shows that the Parliamentary system is in melt-down, one that reflects the real chaos in global economics and finance. An anti-people regime without any mandate will set about clobbering the electorate very shortly. On that basis, we have an absolute right to oppose and reject whatever government and policies emerges this weekend. More than that, we should set out creating the framework for a real democracy in the shape of a network of People’s Assemblies. The old system is broken and can’t be fixed.

Paul Feldman
Communications editor
7 May 2010
www.aworldtowin.net

Greek workers light the fuse

The general strike that got under way in Greece today, bringing the country to a standstill, is a foretaste of the struggles to come throughout the capitalist world as the global financial crisis moves from the banking system to debt-ridden sovereign states.

Stock on markets around the world from Europe to Brazil, to the US and Canada fell as the horrible truth dawned on the hedge fund managers that gamble with peoples’ lives. And the truth? It’s a two-headed monster.

Head 1: Greek workers aren’t prepared to accept the pain for a crisis not of their making, including savage wage and pension cuts and tax increases.

Head 2: Greece is just one of the many countries caught up in the consequences of the worsening global crisis and the only “solutions” available will trigger revolt throughout the world.

Spain is reported to be talking to the International Monetary Fund (IMF) about its own bail-out. Iceland remains paralysed after a referendum showed its population were overwhelmingly opposed to the terms of the rescue of its banks. None of the major parties contending for votes in Britain’s fraudulent election tomorrow can admit the scale of the assault on the electorate that will follow immediately a government is cobbled together.

According to the Financial Times columnist Wolfgang Munchau, the bailout funds needed for Greece, Portugal, Spain, Ireland and possibly Italy could add up to “somewhere between €500bn ($665bn, £435bn) and €1,000bn”. The demand for new credit from all those countries will drive up interest rates “at a time when they are either in recession or just limping out of one”.

His conclusion? “The private sector in some of those countries is simply not viable at those higher rates.” It’s a prescient conclusion. In other words it means capitalist production is no longer sustainable. But that doesn’t stop them trying to fix it.

The turmoil in Greece began when the Greek government, led by the “socialist” PASOK party, found it impossible to pay the interest on loans made to cover the country’s soaring budget deficit. But even the three-year bail out package totalling nearly £100 billion, funded by the Eurozone countries and the IMF, may be inadequate for the purpose, such is the level of indebtedness.

Finance Minister George Papaconstantinou, looking both ways, said Greece had been called on to make a "basic choice between collapse or salvation". He said: "It is not going to be easy on Greek citizens, despite the efforts that have been made and will continue to be made to protect the weakest in society." But he then acknowledged the real intent – to win back the trust of the lenders: “The whole idea of the programme is … return to markets as soon as possible, so we’re hoping that next year we’ll be doing that.”

New emergency legislation authorising the cuts and tax rises is now being drafted and is due to be put before parliament for approval by the end of the week in time for the IMF’s Board meeting on Sunday to consider Greece’s application for help. It’s there and in the boardrooms of the capitalist corporations and financial markets that the key decisions are made affecting the lives of ordinary people in every country.

No one anywhere in the world voted for the bail-out of the global banking system funded by colossal sums of government debt. The “choice” in the British general election is non-existent. Only pain, pain and more pain is on the ballot form, in the form of the three major capitalist parties. Greek workers have lit the fuse of resistance which will spread like wildfire over the coming months. It’s time for a new kind of democracy. Join us on the revolutionary road. Sign up for our conference on 22 May.

Gerry Gold
Economics editor, A World to Win, www.aworldtowin.net
5 May 2010

More rail cuts ahead

In January 2009 LEAP published RMT-commissioned research on the UK rail system.



We said that our findings raised "serious questions about the viability of the Department for Transport's (DfT) franchise model in a period of recession."

We elaborated that, we expected rail companies to attempt "to renegotiate franchise agreements, which could include ... cutting services on less profitable routes".

Today, the Daily Telegraph reports that proposals to give rail operators an incentive to cut unprofitable routes was drawn up not by rail operators, but by the DfT in January.

Of course the ludicrous franchising system means that operators receive subsidies to operate these routes, and with no party guaranteeing transport funding it is of course the DfT who would initially benefit by not having to pay the subsidies. However, the rail companies would also benefit, since they could lease less rolling stock and roster fewer staff as they would be running fewer services.

But what about the government's other policies (i.e. apart from cutting the deficit)?


In our January 2009 report, we identified the following government policies that would be threatened by rail cuts:

1. Modal shift from road to rail to reduce carbon emissions;
2. Social exclusion – increased rail fares will drive poorer farepayers with no alternative private transport options from the railways;
3. Increasing employment towards a target of 80%;
4. Improving passenger safety at rail stations and reducing staff assaults

All of which will be sacrificed if DfT plans go ahead it seems.