An avalanche of cuts

Submitted by Matthew on 26 October, 2012 - 8:43

Birmingham City Council’s Labour administration has forecast it will lose almost half its current controllable expenditure by 2017.

The council spends about £3.5 billion each year, but much of that is set by central government policies beyond its control. The “controllable” part of the council’s budget is about £1.2 billion, and it is set to lose £600 million.

Council leaders warn of “the end of local government as we know it”.

Northamptonshire’s Tory council has presented council unions with a choice for April 2013: 3.6% pay reduction and other cuts; or more than 300 compulsory redundancies.

Sometimes councils hype up such warnings so that, closer to budget day, they can push through horrible cuts with the excuse that they are, after all, less than the meltdown first predicted.

The underlying fact, though, is that local services are the hardest-hit major sector in the coalition’s planned cuts. Central government funding for local government is being cut 27% from 2011-2 to 2014-5, while council tax is effectively frozen.

April 2011 and April 2012 council budgets saw cruel cuts. April 2013 will be more cruel. With each year the cuts get closer to the bone.

Labour councils which think they can pass on Tory cuts and still be “fair” will get a shock. They will box themselves in to making, not just cuts, but some of the sharpest and most hurtful of the Tory cuts.

Also in April 2013 comes what at least one Labour council leader, Catherine West in Islington, has called “the new poll tax”.

“Next April, when high income earners start to benefit from the Tory-led government’s cut to the 50p tax rate, millions of people with the lowest incomes will receive council tax bills they cannot afford to pay because of the government’s changes to council tax benefit.

“5.9 million low-income households benefit from council tax benefit — more than any other means-tested benefit in the United Kingdom. [But] the Government will cut the funding councils receive by 10% and ask local councils to develop their own local scheme to collect the council tax required to make up the difference”.

On average, people who currently don’t pay council tax are likely to be made to pay £4 or £5 a week.

Overall, about 70% of the cuts the Government planned in 2010 are yet to come through. The planned cuts in welfare benefit spending in 2013-4 are over twice as big as in 2010-3 combined.

Two of the biggest items in 2013-4 are the phasing-out of child benefit for households with a high-waged member (from January 2013) and the rolling-on of the cut in contributory Employment and Support Allowance (what used to be Invalidity Benefit) which results from that allowance being automatically stopped after a year for disabled people who are told that “their condition means they should be preparing for work”.

In April 2013 the Government’s cap on the total benefits that a household can receive comes in. Housing benefit cuts which started in April 2011 are still rolling on. The final transitional protection for people who were already claiming will expire at the end of 2012.

Even a Daily Telegraph blog post aiming to show that the left had been needlessly scaremongering about those housing benefit changes found that Westminster’s Tory council reckons on about 1,200 extra people becoming homeless as a result of the cuts. Homelessness has risen by 26% over the last three years. Many other people will be holding on to their homes by taking more money out of their other benefits, or low wages, to make good the gap now opened up between housing benefits and rents.

Still only a proposal, but reaffirmed by George Osborne in October as part of a wish for ÂŁ10 billion extra welfare cuts, is the withdrawal of all housing benefit from all under-25s. The Government has cut the budget for new social housing by 60% over four years, and is pushing councils to set rents for new tenants at or near private-sector rates.

Another new measure from April 2013 is the replacement of Disability Living Allowance, for working-age people, by Personal Independence Payments. The government’s own estimate is that harsher criteria will throw 500,000 people off this benefit by 2015-6.

Increases in public-sector workers’ pension contribution rates from April 2013 will be much larger than in 2012-3, and the cumulative effects of the Government’s paring-away at Working Tax Credit will also be bigger in 2013-4.

The British Social Attitudes survey, published in mid-September, found the proportion saying that “unemployed benefits are too high and discourage work” had risen to 62%. It was only 24% in 1994.

Behind that finding, almost certainly, lies the big fall in average workers’ real wages since late 2009, a fall which is set to continue for several years more.

This is the first time there has been a sizeable and sustained fall in real wages in Britain since the 1920s. It must make some workers think that if wages are falling, then benefits should be cut too.

Over time, more and more will realise that most of the benefit cuts hit, not some special class of idlers, but people in working households on low wages; and some of them hit a lot of people on middling and higher wages too.

After being bailed out by the taxpayer in 2008, banks are set to make about ÂŁ35 billion profits this year. That is a sum comparable to the total cuts planned by the coalition government in education and welfare by 2014-5.

Despite a few high-profile bankers such as Stephen Hester of RBS being shamed into not taking bonuses, the banks and other financial firms paid out ÂŁ13 billion in bonuses in 2011-2.

Dividends paid out to shareholders in 2012 will total around £78.6 billion. This is a 16% increase on 2011, and to a level way above the pre-crisis in 2007. Directors’ pay at the top 100 companies rose 49% in 2010-11 and 14% in 2011-2.

In short, top bosses and profiteers are doing very well. The cuts in benefits and the driving-down of wages are not alternatives, but part of a single drive by the Government to use the crisis to reduce costs for capital, to push down the working class, and to make society more unequal

In October 2013 will come another shock to the welfare system, when Universal Credit is brought in as a compendium replacement for Jobseekers’ Allowance, housing benefit, council tax benefit, child tax credit, and working tax credit.

It will be introduced for new out-of-work claimants from October 2013, for new in-work claimants from April 2014. All claimants who report a change in circumstances after October 2013 will be moved onto it, and all working-age claimants will be moved over to Universal Credit by 2017. Households will get some transitional protection from cash losses as long as their circumstances do not change.

Universal Credit will be paid monthly and will be based on monthly assessments of income.

In theory, the idea of simplifying benefits and reducing perverse cut-offs (where a wage rise can leave you worse off, or no better off, because you lose benefits) has merit. But Universal Credit is being introduced within a regime of general and large cuts in welfare, by a government which, in George Osborne’s speech to Tory party conference in October 2012, has already said it wants to cut yet a further £10 billion from benefits. Millions will lose out.

Universities and older school students have already been hit by the drastic cut in government funding for university teaching budgets, the introduction of ÂŁ9,000-a-year university fees, and the scrapping of EMA paid to 16 and 17 year olds.

The Government initially claimed that the Health Service and schools would be protected from its cuts. But in October 2011 the Institute for Fiscal Studies found that around two-thirds of primary schools and over 80% of secondary schools would see real-terms cuts between 2010–11 and 2014–15; and that estimate didn’t include, for example, the impact of diversion of resources to the Government’s favoured “free schools”.

The Government plans £50 billion cumulative cuts (“efficiency savings”) in the Health Service by 2019-20, at the same time as costs of administration and amounts paid out to private profiteers rise steeply with its Health and Social Care Act.

The damage to the fabric of the NHS from these cuts is certain to step up in the financial year beginning April 2013.

The Government’s NHS measures are of a different order from its other cuts, because they threaten to change the whole nature of the NHS, changing it from a public service which provides for all into a marketplace with government subsidies which allow most people access only to some treatments.

But they mesh into a broad picture of a severe squeeze not only on the “middle”, but on the working-class majority of society, operating simultaneously through service cuts, benefit cuts, tax rises, and reduced real wages, which in straight money terms are the biggest factor of all.

Individual scraping-by and misery, or collective resistance: those are the choices for us as to how to respond.

And with collective resistance we can win.

It is not true that the government budget deficit makes these cuts inevitable.

At present these cuts are increasing the deficit, not reducing it. The cuts reduce government tax revenue — by reducing income and spending across the economy — more than they reduce government spending.

And, cruel though the cuts are, their financial amount is quite small compared to the loot of the wealthy.

The Government’s total cut in annual social budgets (not counting reductions in military spending, for example, which socialists do not object to) is planned to rise to maybe £65 billion by 2014-5. A 16% super-tax on the incomes of the top 10% (not touching their wealth), or a 1.3% tax on their wealth (not touching their incomes), or a combination, would be enough to put that £65 billion back in.

The first step is to prepare the fightback for the new cuts avalanche which faces us in April 2013.

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