Chancellor George Osborne believes he has found a way to
secure continued support from the Tories’ corporate backers while embarrassing
Labour sufficiently enough to keep Ed Miliband’s party backing austerity
policies into the distant future.
His announcement that another £25 billion of cuts are needed
to balance the government’s books and that welfare claimants are the target was
a calculated move. His aim, says Osborne, is a smaller state.
Sounding very much like the Tea Party reactionaries in the
Republican Party in Washington, Osborne managed to frighten some in his own
party who know that
claimants account for a small fraction of welfare spending
and wonder where the cuts are going to come from.
But it was music to the ears of the bankers and international
moneylenders who finance the UK government’s debt. It provides a guarantee to
business that the UK will continue to be a good place to make profits. And it
had the desired effect of sending Labour into another spin as they clearly have
no alternatives to austerity and support the attack on claimants.
The government also says it intends protect pensions, which
is an obvious and cynical attempt at attracting support from the last segment
of the population still casting votes. The “triple lock” purports to preserve
the value of pension payments by ensuring they rise annually by whichever is
the higher of 2.5%, the rate of inflation or average earnings
But the faked appearance of kind-hearted, caring generosity
supposedly providing protection from the effects of a further five years of
austerity won’t cut much ice amongst the rapidly growing numbers who fare worst
amongst all pensioners in the European Union.
The basic UK state pension of £87.30 a week is equivalent to
just 17% of the average wage. Average income for UK pensioners rises to 30%
once payments related to earnings are taken into account. But this is still
only half the EU average of 60%. The rate is 32.5% in Ireland, 40% in Germany
and over 51% in France.
Conditions for pensioners are certain to worsen should the
Tories remain in power after the 2015 election, as they ramp up the savage
assault on the health and social services so many of the elderly increasingly
depend upon and which form a crucial part of their real income.
But whichever flavour of government is in power will be
subject to the dramatic changes now beginning to unfold in the global
economy.
The repercussions from the pre-Christmas US Federal Reserve
decision to begin a reduction in the rate of credit creation through
quantitative easing (QE) will become clearer as the weeks unfold. But the
implications are enormous.
The benefits of QE and associated measures in the US have been
astonishing for the wealthy but have failed to generate the economic recovery
that the Obama administration has been banking on.
The stock market ended 2013 at an all-time high — giving shareholders
their biggest annual gain in almost two decades. Corporate profits are at an
all-time record peak and expected to grow in 2014. This was achieved by using
extreme levels of unemployment to force wages down.
Corporate earnings now represent the largest share of the
gross domestic product — and wages the smallest share of GDP — than at any time
since records have been kept. And fewer Americans are working than at any time
in the past three decades.
The five year post-crash orgy of credit saw $4 trillion
dollars pouring into and pumping up stock and property bubbles in the so-called
“emerging economies” like the Philippines, Malaysia, Indonesia and Thailand
where ultra-cheap labour attracted hot-money investors.
Watch closely and you could see them burst. Add in the credit
chaos engulfing China and you have the makings of a stormy 2014 for the
global economy.
Gerry Gold
Economics editor
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