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.