Osborne plans new cuts

Submitted by martin on 14 March, 2016 - 4:22 Author: Martin Thomas

Tory chancellor George Osborne will make fresh cuts to social spending in his 19 March 2016 budget. So he has said in advance, following official estimates that economic slowdown will increase the government's excess of spending over revenues.

At the same time he will probably make some small new tax cuts, whose benefits to working-class people will almost certainly be smaller than the social cuts, but which will feed through into clear gains for the well-off.

NHS trusts are running up unprecedented deficits. Local authorities face a squeeze which threatens even their ability to provide the services they are legally obliged to provide, and which, in particular, has slashed social care, putting more pressure on the NHS. Spending on schools is set to be cut. Millions of jobs have been cut from public services. Benefit cuts have hit the disabled especially hard, but also squeezed a vast number of lower-paid or even middle-paid workers.

Osborne wants more of that.

We can guess that shadow chancellor John McDonnell's speech about "fiscal responsibility" on 11 March was intended to buy him space to attack the coming cuts.

However, the economic superstitions from which he was trying to buy reprieve will not render good value for money in return for his concessions!

All the anxious talk about a future Labour government balancing current spending with current revenues - although Osborne still doesn't do that after six years as chancellor - only feeds the superstition that the economic problems since 2008 are due to the Blair and Brown Labour governments "overspending".

It's a strange place to find ourselves as socialists, defending Blair and Brown, but the fact is that they are faultless on that score. The increased public spending, on the NHS, on schools, on tax credits, and so on, which they did organise, was no factor at all in the 2008 crash and its depressed aftermath.

The reason for the crash and the slump was the giddy profiteering and speculating by the banks, not public spending.

There is no special merit in a government increasing its debt burden. However, a rigid rule of balancing current spending with current revenues is foolish. As Simon Wren-Lewis, professor of economics at Oxford University and an adviser to McDonnell, has pointed out, "the rule is likely to make the deficit much less of a shock absorber, and so lead to unnecessary volatility in taxes or spending". He could have added: since raising taxes is politically difficult, and slower in effect, and involves much running uphill in times of economic crises which reduce the tax base, the rule has a built-in bias towards panic "volatility" (cuts) in spending.

McDonnell has long campaigned against cuts. It looks as if he has been pushed into his latest statements by the conservative elements in the Labour leadership office, grouped around sympathisers of the allegedly-Marxist Socialist Action group. They have warned McDonnell and Corbyn against supposed "ultra-leftism", and argued for accepting "fiscal responsibility", since the Labour leadership election and again more recently.

Probably also a reflection of that section of the Labour leadership office were McDonnell's off-key statements about "the wealth-creators".

"The Labour party are the representatives of the wealth creators - the designers, the producers, the entrepreneurs, the workers on the shop floor. That's always been the Labour party tradition and I'm restoring the Labour party to that tradition." He claimed that "wealth creators" from across the political spectrum, including the bosses' CBI, support his policy.

"It has been welcomed this morning by [people] right across the business sector, business leaders, entrepreneurs as well as trade unions. The wealth creators have welcomed it".

According to Mike Savage, a researcher at the LSE, inherited loot is 70% of all household wealth in Britain today, and is rising towards 80% by 2050. One of the most booming industries in slump-ridden Britain is the rise of "family offices", where financiers work full-time on managing and conserving the wealth of rich families.

"Wealth-creator" is a term conventionally used by conservatives to describe capitalists. In fact every bit of their riches comes from the exploitation of the real wealth-creators, the working class. Often the rich do not even need to be active "working" exploiters, but gain their wealth from active exploitation done by their parents and grandparents.

McDonnell knows this, and tries to balance his statement by adding "the workers on the shop floor" at the end of his list of "wealth-creators", and putting "designers" (ie. just particularly skilled workers) at the start of the list. But the idea that a good economic policy can be pursued in alliance with the whole "business sector" is false, and can only prepare the way for a collapse when the CBI and other bosses' groups denounce left-wing policies from Corbyn and McDonnell, which they will.

We urgently need to build a counterweight in the labour movement to all the conservative pressures on the Labour leadership, a solid body of opinion arguing forthrightly for working-class socialist policies.

This website uses cookies, you can find out more and set your preferences here.
By continuing to use this website, you agree to our Privacy Policy and Terms & Conditions.