Chancellor Darling’s pre-budget report (PBR) is a confidence trick aimed at disguising the massive cuts in spending that either New Labour or the Tories (or a national government?) will impose when next year’s general election is over.
Stretched by the deepening global crisis pulling him one way and an election pulling the other, Darling postponed publicly announcing the detail of inevitable slashing cuts in public spending needed to reduce the government’s deficit, hiding them behind short-term deceitful protection for schools, health and policing.
Yet deep cuts lie like ticking bombs buried deep in the detail, awaiting the outcome of the election to be detonated. Meanwhile, working people will start to pay for bailing out the bankers through higher taxes and pay cuts.
The PBR itself was shot through with deceptions. Darling’s projections are based upon hopes of a return to profitable growth at the end of the year, rising to 3% in 2011. This is an optimistic fantasy that contrasts sharply with his forced admission that the 4.75% shrinkage of the economy now expected this year is worse than he expected.
Twinned with a borrowing requirement expected to spiral to £175 billion by 2014, the measures announced in the PBR report fall well short of the devastation that must come as Darling’s hopes once again fail to materialise.
The headlined one-off tax on bonuses paid to top bankers is intended to pacify an enraged electorate, and may fool the media. But it is surely obvious that if any of the paltry estimated £500 million tax is raised it will in any case be funded by further bail-outs. Accountants are already hard at work on ways of avoiding it.
Real incomes are set to fall sharply. A two-year 1% cap on public sector wage increases plus an 0.5% increase in National Insurance contributions – what the employers call a tax on jobs - will cross with sharply rising prices beginning in January when the temporary 15% VAT rate returns to 17.5%. The lower rate was designed to stimulate spending, so the resumption of the higher rate can only deepen the recession, and add to unemployment which is already expected to continue rising for years.
British capitalism is in the deepest and longest recession in its history. But it is far from alone. The Irish government isn’t facing an election for another two years, so its budget announced simultaneously gives a clearer flavour of what is to come: a 7% cut in the total budget will decimate public services. 400,000 state workers - a fifth of the country's work force - will suffer pay cuts ranging from 5% to 15%.
Both increased taxes and public spending cuts will be needed to reduce the spiralling government debt incurred by successive and mounting borrowing used to prop up the banks. This has been New Labour’s contribution to the emergency life-support demanded by their masters who control the vast wealth of the global corporations and financial institutions.
Another way is possible. The power that global corporations use to exploit cheap labour and deplete the world’s resources must give way to a mass movement pursuing revolutionary solutions. Productive resources must be taken into social ownership and directed towards meeting democratically-determined needs.
Financial markets must be transformed into not-for-profit support for a global system of fair trade optimising local production to minimise unnecessary shipping. Budgets for the distribution of wealth will be determined through a democratic process that starts with local committees of producers and consumers.
By taking part in developing a Manifesto of Revolutionary Solutions you can help shape the future and prevent the spending cuts devastation being prepared behind closed doors in Whitehall.
Gerry Gold
Economics editor
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