Darling's budget deception

You have to hand it to Alistair Darling. Britain is in the midst of a major financial and economic crisis and all the major parties are planning unprecedented cuts in public spending after the upcoming general election. Except you wouldn’t know that from listening to the chancellor of the exchequer drone on yesterday.

The gigantic budget deficit that results from bailing out the banks and the global recession combined was left out of the equation in a bid to fool the electorate that all will be fine so long as you re-elect New Labour. And when he actually got round to talking about the economy, Darling’s forecasts for growth were soon dismissed by experts as fantasy figures. So much for truth and transparency!

Darling’s difficult task was to give the managers of global financial markets enough to hold off their attack on the government over borrowing levels whilst announcing attractive headlines to persuade people to cast their vote for New Labour in a few weeks time.

So, in an hour long speech full of detail, on the vote-getting side we heard an attempt to restart the housing market with stamp duty changes, an extension to the winter fuel payment for pensioners … and not much else. Only later, after the media had mostly lost interest, came the negative news, marked for the attention of the bond traders and currency speculators.

The yield on government bonds – the rate the government has to pay to borrow from the credit markets to fund the deficit – had begun to creep up, not by much, perhaps, but just enough to remind New Labour’s ministers who or rather what forces are in charge of the economy.

Swelling deficits worldwide are forcing governments including the US to increase their borrowing by issuing bonds, and the market is flooded. When that happens they have to pay more to get lenders to invest. The same happens when credit rating agencies mark a country down – as they did with Portugal yesterday, as its sovereign debt crisis deepened.

The unavoidable fact is that whoever lead the next British government will be required to launch an assault on almost every section of the population in an attempt to reduce the monumental - and increasingly expensive – public debt.

Every international gambler, every credit rating agency and every supranational agency like the OECD, the IMF and the European Central Bank is insisting that the assault must begin sooner rather than later.

And indeed it has already. Just like in Greece, Ireland, Iceland, Spain, Portugal and the once mighty US, millions of ordinary people are being forced to bear the cost of a crisis over which they have no control. In Britain, universities and hospitals are already feeling the heat as “efficiency savings” – aka cuts – take their toll.

Resistance is growing. As Darling prepared to deliver his holding operation 250,000 civil servants throughout the UK were on strike against cuts in redundancy pay and many were picketing government buildings. Brown shrugged them off in England, but in Wales, Labour and Plaid Cymru seats were empty in the National Assembly with some Assembly Members refusing to cross the picket line (but cynically working elsewhere). British Airways cabin crew are due to resume their strike action this weekend and rail workers are fighting job cuts and have voted to walk out.

Yesterday’s phoney budget reinforces our call to “Hang on to your vote” at the election rather than giving any of the parties a mandate to destroy services, alongside the building of People’s Assemblies which would begin to wrest control of our future out of the hands of the hedge funds and corporations.

Gerry Gold
Economics editor