Details of Public Expenditure Cuts

Cutting the budget deficit drastically commands the support of all the bourgeois parties – Conservative, Labour and Lib Dem.  Before it was ousted from office following the May General Election, the Labour Government had announced its intention to half the budget deficit over a period of four years.  Taking over from Labour, and hugely encouraged by Labour’s stance on cuts to public expenditure, the new government, ConDem Coalition, is going even further in the direction of swingeing cuts to public expenditure and wielding the axe on public services and state benefits.  Almost the only difference between the outgoing Labour administration and the incoming ConDem Coalition has been over the question of when the cuts should begin to take effect.  While Labour stood by the starting date of 2011, as any earlier date, argued Labour, would tip the British economy into recession yet again, the ConDem Coalition has decided on immediate cuts, for failure to do so, it argues, would cost Britain dearly through loss of investor confidence.  Both Labour and ConDem Coalition are committed body and soul to safeguarding the interests of British finance capital and the maintenance of the City as one of the two major financial centres of the world.

The depth of the cuts being undertaken by the Coalition, as well as their devastating consequences for millions of working people, are captured in the following extracts from an article in an American paper:

Last month, the British government abolished the U.K. Film Council, the Health protection Agency and dozens of other groups that regulate, advise and distribute money in the arts, health care, industry and other areas.

It seemed shockingly abrupt, a mass execution without appeal.  But it was just a tiny taste of what was to come.

Like a shipwrecked sailor on a starvation diet, the new British coalition government is preparing to shrink down to its bare bones as it cuts expenditures by $130 billion over the next five years and drastically scales back its responsibilities.  The result, said the Institute for Fiscal Studies, a research group, will be ‘the longest, deepest sustained period of cuts to public services spending’ since World War II” (Sarah Lyall, ‘Britain reels as austerity cuts begin,’ New York Times, 9 August 2010).

Governments in all the imperialist countries are involved in the same exercise, as for all of them the interests of finance capital take precedence over everything else, while the welfare of their people takes its ‘rightful’ place at the bottom of the pile.

As Marx explained long ago, the speculative fever is merely an expression of the lack of profitable investment opportunities in the productive economy.  Over a hundred years ago, capitalism reached a new, and highest, stage in its development, that of monopoly capitalism, since when the problem of over accumulation of capital, and with it the lack of investment opportunities, has become increasingly acute.  The problem is not too little capital, but too much of it.  The most recent speculative bubble, which burst in 2008 causing mayhem in the financial markets and very nearly the collapse of the entire edifice of finance capital, is the essential outcome and expression of this phenomenon.

Instead of taking action to control the activity of the financial sharks, to bail out whom the governments have accumulated mountains of debt, bourgeois administrations are busy passing the burdens on to the backs of the masses.  In the case of Britain, consequent upon the bail-out of banks and the stimulus measures to avert an immediate collapse in economic activity, public debt shot up from 44 per cent of GDP in 2007 to 68 per cent in 2009.  To resolve the problem of such a large hole in public finances, the ConDem Coalition is proposing measures, which are bound to lead to a steep rise in unemployment, poverty and misery, blighting the lives of millions of people and hitting the most poor and vulnerable sections of the population the hardest.  Here is a brief list of some of the government’s proposed measures; announced in the Coalition’s emergency Budget presented to Parliament on 22 June:

·       £113 billion of expenditure cuts and tax increases over the next four years – an increase of £40 billion over and above the measures announced by Labour Chancellor Alistair Darling in his March 2010 Budget just a few weeks prior to the election;

·       State welfare budget to be reduced by £11 billion;

·       Housing benefit is to be cut by 7 per cent through the introduction of maximum payment limits and other measures, with the result that three quarters of a million people stand in danger of losing their houses in the south east alone;

·       1.8 million people on disability allowance will be obliged to undertake more stringent medical examinations to determine their capacity for work;

·       State benefits, with the exception of state pensions and pension credit, are to rise in line with CPI (the Consumer Price Index) rather than RPI (the Retail Price Index) – another act of robbery by stealth since the CPI, which excludes the cost of housing, rises more slowly than the RPI;

·       As from January 2011, Child Benefit is to be frozen for three years;

·       Single parents are to be expected to search for work once their youngest child attends school;

·       ‘Health in pregnancy grants’ to be got rid of from April 2011 and ‘Sure Start maternity grants’ to be restricted to the first child;

·       Tax credits for families with incomes in excess of £40,000 and less than £58,000 a year to be abolished, affecting approximately 600,000 families from better off sections of the working class and lower layers of the betty bourgeoisie;

·       The pay of public sector workers earning above £21,000 a year to be frozen for two years;

·       VAT is to rise to 20 per cent, disproportionately affecting ordinary people;

·       As a sop to the LibDems, capital gains tax will go up but only to 28 per cent for those on higher tax rates, while remaining at 18 per cent for those on basic income tax rate;

·       Also as a sop to LibDems, the tax threshold of those on basic tax is to go up by £1,000 to £7,475;

·       Corporation tax is to come down from 28 per cent to 24 per cent;

Further details of the planned brutal spending cuts are to be announced in the autumn spending review.  Departments will be required to come up with proposals of expenditure cuts of 25 per cent.  However, since the government is committed to ring-fencing the health and overseas budgets and restricted cuts to about 10 per cent in defence and education, other departments may well be faced with far larger cuts.  As a result, the public sector, which employs 6 million workers could be forced to shed an estimated 750,000 jobs, with devastating consequences for the workers in the public sector and the million plus workers in the private sector directly dependent on government contracts.

Even the ring-fencing of the health budget is a public relations exercise as the government is proceeding with what it calls “efficiency savings” – but are actually cuts – of £20 billion, which accounts for a fifth of the health budget.

In addition, the government’s reorganisation of the health service is proceeding inexorably along the lines of cost cutting and privatisation.  “We are committed to the continuous improvement of the quality of services to patients, and to achieving this through much greater involvement of the independent and voluntary providers” (our emphasis), says the Coalition’s penultimate proposal on health policy, making perfectly clear its designs.

Something similar is going on in the field of education.

The overall result of the government’s measures, says the IFS (Institute of Fiscal Studies), is that while the incomes of the poorest fifth of the population are set to decline by 8 per cent, those of the middle fifth by 4 per cent and the richest fifth by less than 3 per cent.  The poorer you are the harder you will be hit by the government’s retrogressive emergency budget, which Chancellor Osborne, and his LibDem stooges, had the temerity to call a “progressive” and a “fair” budget.

The Coalition government is continuing, and intensifying further still, the war on the working class declared by labour.  The working class must answer this war by resistance and a declaration of war on the bourgeoisie.