Osborne's budget for business at our expense

Put simply this was a ConDem budget statement for business at the expense of those who depend on public services, those who have to rely on benefits and the millions who will have to wait years longer to draw their state pension.

The aim of the ConDems is to roll back all the post-war achievements of the welfare state. This is confirmed by the fact that the Office for Budget Responsibility says that if the governments meets its target, spending as a proportion of total national income (GDP) will be the smallest since 1948.

The short-term view (leaving out spending commitments beyond the election) disguises the necessity for further huge cuts and intensification of austerity after 2015, when the optimistically forecast limited “growth”  is expected to decline.

Chancellor George Osborne announced a cap on the total welfare budget, to be voted on each year (daring Labour to oppose, which it won’t), further cuts in public spending and also brought forward the plan to make people work longer before they can get a pension.

That’s if they can hang on to a job until they’re 70. As Caroline Abrahams from Age UK commented: "Far too many people are losing their jobs in their 50s and 60s." Osborne’s plans will leave them penniless for a decade.

He ratcheted up the threat to withdraw benefits from the young unemployed claimants unless they took workfare jobs dressed up as “training”.

Another £3 billion of spending cuts are to be piled on top of the major reductions still to be fully felt as local councils, in particular, struggle to reduce their budgets by 25% over the lifetime of this parliament with their tax powers frozen.

There will be even fewer resources for councils following Osborne’s concessions on business rates for small firms, who were handed out all sorts of tax breaks by the government.

Despite the window-dressing of new tax-avoidance plans, these will leave untouched the global corporations like Amazon who “offshore” their payments, leaving the UK with precious little revenue from the major transnationals’ activities. Meanwhile, fracking firms drilling for shale gas are going to get even more tax concessions on their first profits.

At the same time, the sale of social housing will be accelerated and more and more people made dependent on unaffordable private housing, either to rent or, if they are extremely well off, to buy in a market that produced soaring prices.

The real story is an economy desperate to attract inward investment from China for infrastructure energy and transport projects.

Making the UK more attractive to corporations and sovereign wealth funds held by China and other countries in deteriorating conditions worldwide comes at immense, unbearable cost to increasing numbers of hard-pressed households huddling up over the winter, with many dependent on foodbanks, and others have to choose between heating and eating.

Osborne and the ConDems fool no one. The burgeoning trade gap is due to the fact that the so-called “recovery” is  driven by consumer borrowing and cheap (for now) mortgages. With productivity stagnant, the conditions are being set for rapid inflation and a house price asset bubble.

Already price increases continue to outstrip earnings, leaving ordinary people far worse off than before the recession. The UK has equal highest inflation rate among 28 European Union countries and despite the measures to cut fuel bills, they will still rise above inflation next year.

What we saw today was the confident determination of a line of front-bench millionaires insistent on reducing benefits to those on low-pay, in increasing the proportion of part-time, zero-hour contracts and striving to overcome falling profit rates for the global corporations.

Despite Osborne’s boast about reducing spending, the long-term, underlying “structural deficit” has barely changed since 2010. So behind all the public relations bravado, the ConDems plan is for austerity for as far as the eye can see.

Their ambition is a market economy where workers are totally at the mercy of the employers and the state. Ending austerity not only involves removing this government. It must also suggest alternatives to a capitalist system that offers only pain and more pain to the majority of its citizens.

Gerry Gold and Paul Feldman

Memo to McCluskey: you can't fight the ConDems with hot air

The second wave of austerity without end, if not halted, will mean the end of many public services, a huge increase in unemployment and huge subsidies for big corporations so they can cash in on infrastructure projects.

A continuing massive transfer of wealth from taxpayers to the private sector is what lies at the heart of the ConDems’ latest budget cuts pencilled in for 2015-16. They are intended to commit the next government to the planned spending cuts.

There won’t be a problem for the Tories. And with Labour pledged to stand by the coalition’s cuts, it means that the general election scheduled for 2015 will be as meaningless as the 2010 one in terms of voter choice.

A vote for any of the mainstream parties will bring massive, sustained cuts in public spending on services provided by local councils, further real wage cuts as well as further attacks on welfare benefits. Your vote will count for very little indeed.

Ed Miliband’s party says it needs “time” to think about its response to chancellor Osborne’s decision to extend the time before unemployed people can lodge a claim to seven days. In other words, Labour supports it, as they do other benefit cuts.

The more you look at Osborne’s plans, the more astonishingly savage it all gets. To finance more roads, nuclear power stations and a railway project designed to favour shareholder dividends, the latest package - £11.5bn of spending cuts for 2015-16 – is in addition to what will have been five years of austerity.

It will lead to the sacking of another 144,000 public sector workers, delivers student debt into the hands of private sector specialists in extortion, ends pay rises for public sector workers and forces millions of unemployed and those in work but dependent on benefits into increased reliance on food banks and payday loans,

There will be a sell-off of publicly-owned land,  social housing rents will rise faster than inflation and vital services provided by local councils will simply cease to exist. And yet, the savagery does not begin to match the scale of the crisis facing capitalism in Britain and globally.

As revised figures revealed by the Office for National Statistics show, the sadistic scale of this new round of slashing cuts in government spending fails by light-years to match up to task set for the coalition by the 2007/8 crash and its aftermath, as  the spending review will have been based on earlier, much more optimistic estimates. The recession was deeper than thought. Compared with the 1997 to 2008 average, output is now 17.7% below that line.

The growth in output that the system requires to expand is simply not coming through. Instead, the crash continues to take its toll. With mountains of debt still in the system – with trillions added by central banks since 2007 through “quantitative easing” – worse is to come.

Institute for Fiscal Studies director Paul Johnson said the scale of cuts would have caused social unrest in any other era. "At almost any other moment in the past 60 years, announcements of spending cuts of this scale would have created a storm. As would an announcement that 144,000 public sector jobs would go in one year as part of a programme that could see one million jobs lost by 2017-18."

The absence of the “storm” that Johnson refers to is down entirely to the Labour and trade union leaders’ response – or should that be lack of one. Labour has effectively endorsed the government’s plans, including the singling out of benefit claimants.

As for the union leaders, it is hot air all round. Last week, Len McCluskey, general secretary of the Unite union, talking of making Britain “ungovernable” while TUC general secretary Francis O’Grady also made militant noises about resisting the ConDems. Well, Osborne’s new attack is a golden opportunity for them to make good on their rhetoric.

Don’t hold your breath. 

Gerry Gold and Paul Feldman

Political system 'incapable' of solving crisis, warns leading Tory

The ConDem government’s plan to, in effect, engineer a state-financed, speculative housing boom in a bid to stimulate expansion, sums up the increasingly desperate state of both the economy and the political classes.

So much so that a leading Tory commentator suggests that yesterday’s Budget signals the absolute inability of representative democracy to tackle the crisis. A Coalition brought together to tackle the budget deficit and restore some balance to the economy, has patently failed to do either. Moreover, there are indications that the ConDems don’t really have a clue what to do next.

Chancellor George Osborne’s package of tax cuts for big business and state funding to underwrite house buying, combined with cheaper beer and a continuing pay freeze for public sector workers, was announced against a background of a worsening economy.

The Office for Budget Responsibility has revised its forecasts for growth down (yet again) and its projections for government debt up (yet again). Despite the savagery of Osborne’s austerity policies, the total of state debt is actually rising.

According to yesterday’s figures, it is scheduled to stand at approximately £1,400 billion in 2015, up from the £800 billion inherited from Labour in 2010 – a rise of £600 billion in just five years. Net debt is forecast to peak at 85.6% per cent of GDP in 2016-17. Back in June 2010, it was forecast to peak at 70.3% of GDP this year.  

The expansion of the economy that would bring the levels down through greater tax receipts exists only in the imagination. As the Financial Times gloomily commented: “Growth is, once again, jam tomorrow but never jam today.”

As to underwriting house buying through mortgage guarantees, the verdict is pretty unanimous. Builders and estate agents will get rich quickly, while house prices will soar and create another asset bubble ready to go pop when someone misses a payment.

Ian Williams, analyst at Peel Hunt, said: “As a policy for driving economic growth – limited. For solving the national shortage of housing – no impact. For wrecking long-term affordability of housing – tremendous.”  

With incentives to extract shale gas and various other concessions, the chancellor budget’s will accelerate climate change in pursuit of growth that simply won’t happen, in Britain or anywhere else. Today’s news about deepening downturn in leading eurozone economies confirms that.

With the Financial Times, describing the Budget as a “failure” which won’t make a difference, what will? The paper that speaks for significant sections of capitalism demands “greater radicalism”, without further elaboration.

As  resistance to austerity grows across in Britain and the rest of Europe, the ruling classes are faced with a serious problem. There are no rabbit-in-the-hat solutions, as the Budget shows. Political elites are struggling to cope, which brings us back to Peter Oborne of the Daily Telegraph.

An astute commentator, whose Triumph of the political class is worth reading, he now concludes that the political system is incapable of doing what’s necessary. He derides not only the chancellor but Labour for not having “the faintest idea how to confront the economic crisis” or appreciates of “the scale, let alone the nature, of the disaster we are now facing”. In other words, the political will to take the axe to public spending is not there (not that would actually do the trick, anyway). Oborne adds:

 “So we should all ponder whether there is an ugly truth lurking out there: is the British electoral system simply incapable of coping any more with serious economic crises?  Alexis de Tocqueville remarked that: 'The American Republic will endure until the day Congress discovers it can bribe the public with the public’s money.' This observation is just as true of British representative democracy.

“The Coalition, brought together to confront the national economic emergency, has failed in its mission. So we are entering a momentous period in our national life: if the politicians cannot address the problem – and they can’t – who will?”

So we have a combined crisis of the economy, politics and ecology which parliament cannot address. The implication of Oborne’s article is that some form of dictatorship may be the outcome. With the Bank of England getting new powers and the Privy Council dusted down for action, you can’t say we haven’t been warned.

Paul Feldman

Communications editor

  

Fear not, the TUC remains 'vigilant' as Osborne attacks rights

Chancellor George Osborne’s plan for workers to sell off their employment rights, making it easier and cheaper for bosses to sack people, might well have produced a tough reaction from a trade union leadership prepared to confront the despised ConDems.

The proposals are to be rushed through parliament to come into effect next April. Dressed up as a voluntary scheme, it is almost certain to be compulsory for new employees, however.

They will have to sign a contract that abandons hard-fought for rights on redundancy pay, unfair dismissal and maternity leave. In exchange for a few shares of dubious value, workers will also give up rights to training and flexible working.

At a stroke, these laws will create a modern form of bonded labour to satisfy some mad Tory dogma as well the deeply reactionary people who constitute the party conference delegates assembled in Birmingham.

With the TUC threatening all sorts of action some time next year over public sector pay, here was a golden opportunity to ratchet up the rhetoric at least. But over at Congress House, home of the Trades Union Congress, there was not so much fire in the belly as a

dose of post-lunch sleepiness.

Outgoing general secretary Brendan Barber restricted himself to “deploring” the plans, adding that “these complex proposals do not look as if they will have very much impact as few small businesses will want to tie themselves up in the tangle of red tape necessary to trigger these exemptions”. Amazing, Barber claimed that Osborne’s plans were “said for effect” but the TUC would be “vigilant” just in case they were the thin end of a “future anti-employee wedge”.

So that’s okay then. No need to get alarmed. Just a keep watch just in case the Tories turn really nasty! What world is Barber living in, you may ask? The Tories and the Lib Dem – who hate unions just as much as their Coalition partners – are whittling away rights at a rapid rate.

Only recently, business secretary Vince Cable – who, as we know exchanges frequent text messages with Ed Miliband – announced plans to restrict payouts for employees who win employment tribunal cases, as well as making it harder for them to make a claim in the first place.

Pension rights for millions of public sector workers have been eroded, without much resistance from union leaders with one or two notable exceptions such as Mark Serwotka of the civil servants PCS. Real wages have been cut by years of pay freezing. But don’t despair, the TUC remains “vigilant”!

Which makes you wonder about the thinking behind the TUC-organised October 20 March for a Future that Works. Taking place safely on a non-working day to avoid any kind of strike action, it is surely designed to let off steam while letting the ConDems off the hook.

As the economy continues to deteriorate, with public finances going from bad to worse according to the International Monetary Fund today, Osborne and the rest of the cabinet have their backs to the wall and are extremely vulnerable.

Neither the TUC nor Miliband’s Labour Party have any intention of rocking the political boat, however. They are prepared to wait it out to 2015 in the forlorn hope that a change of government will put things right. With Labour committed to spending cuts and attacks on welfare benefits, that’s not going to happen.

Yesterday, Osborne cynically used the phrase “workers of the world unite” when announcing his plan to scrap employment rights, while last week Miliband invoked the imperialist Tory Disraeli in a speech that over 50 times mentioned the phrase “One Nation”. With the parties virtually interchangeable, it tells you everything you wanted to know about British politics and forgot to ask.

Paul Feldman

Communications editor

Economic crisis meets disillusioned voters

Coalition Chancellor Osborne says that economic “recovery” is taking longer than expected, but this is a deliberate deception because all the indications are that recession in the UK is part of an international trend.

This is accentuated rather than slowed by government austerity programmes under the cosh of the financial markets, the IMF and the European Central Bank.

If conditions in Europe are anything to go by – and they most certainly are – the world economy is in an uncontrollable downward spiral.

The Office for National Statistics says Britain's annual output (GDP) fell 0.2% in the first quarter of 2012 after contracting by 0.3% at the end of 2011, putting the economy back into recession. Since these are provisional figures, it may well be a lot worse

On Monday, a Bank of Spain report showed gross domestic product in that country falling 0.4% in the first three months of 2012, adding to a 0.3 %  contraction in the previous quarter. Unemployment is 23% and growing. A continuing fall in property prices is choking the supply of bank credit as lenders are forced to make provision for increasing quantities of bad loans.

The Bank of Greece forecasts the Greek economy will shrink by about 5% this year – the fifth consecutive year of contraction. This year’s contraction comes after a 6.9% drop in 2011 and a cumulative shrinkage of more than 13% since 2008. Unemployment is to set to put one in five Greeks out of work this year.

Many private sector workers are facing wages delays as 300,000 companies do not pay salaries on time because of a drop in sales and scarce funds. Their pay is also plummeting by over 15%. Greece had one million companies in 2009, but 250,000 have since closed.

In Germany, which has carried the burden of the eurozone debt crisis, manufacturing output is shrinking at the fastest pace since 2009 while further spending cuts are on the agenda in France and Italy.

In the UK, public sector workers whose salaries have been frozen whilst inflation surges are the sharp end. A million young people are without work, condemned to becoming a lost generation.

With the ConDem regime staggering from one political crisis to another and becoming increasingly unstable, it is not surprising that only 24% now believe the current system of coalition government is working, according to the Hansard Society’s latest survey.

Dr Ruth Fox, director of the Hansard Society's parliament and government programme, said: "2011 was one of the most turbulent and momentous years in recent history, but it appears that the economic crisis, the summer riots and phone hacking did not lead to any greater interest in or knowledge of politics.” She added: "The public seem to be disgruntled, disillusioned and disengaged.”  The survey showed:

* 42% of people said they were interested in politics - down 16% on 2010 and the lowest figure since the audit was first carried out

* 48% of people said they would definitely vote if a general election was called tomorrow - down 10% from last year and again, the lowest figure in the audit's history

* 30% said they were unlikely or absolutely certain not to vote - up 10% from 2010

  

The collapse of the Dutch government and the rejection of the major parties by voters in France are European-wide indications that, as one leading economics commentator put it, “the street might overwhelm the establishment”.

So, the economy is broken and people have lost faith in the political system. Now is clearly the time for a sustainable, not-for-profit economy that is freed from the need to “grow” directed by a new system of democracy based on a global network of Peoples Assemblies.

Gerry Gold

Economics editor

A panic Budget as economy worsens

Figures published by the Office for Budget Responsibility on the morning of the Budget statement, and the Office for National Statistics today tell us more about the state of the economy than George Osborne did.

The austerity programme introduced to reduce government debt and attract investment has so far failed. Savage cuts in public sector services and jobs were supposed to lead to a resurgence of the private sector, and pave the way for the growth that capitalism feeds off. It hasn’t worked.

According to the OBR's pre-Budget forecast in June 2010 growth in the UK was supposed to be driven by business investment, which was predicted to grow by 8% in 2011, 9.8% in 2012 and in double digits after that. It turns out that in 2011 it grew by 0.2% and in the new, equally over-optimistic forecast the OBR expects investment to in 2012 to grow by only 0.7%.

Government borrowing hit a record for the month of February, rising to £15.18 billion, double what many expected.

UK retail sales volumes fell by 0.8% in February compared with the previous month, according to the ONS, and January's unexpectedly strong growth in sales volumes of 0.9% was also revised down to show an expansion of only 0.3% compared with December.

The lack of growth has meant that tax receipts are down 2.7% on a year ago, principally from declining income tax receipts. Government spending is up by 8.3% on a year ago, because of higher social benefits due to rising unemployment.

So the immediate 1% additional reduction in corporation tax, whilst the increase in personal allowances for those fortunate to be still in work is deferred for a year, shows something of the panic behind the confident bluster of the Coalition’s Budget.

The wrecking of the planning system (reducing more than 1000 pages of controls to 50), combined with measures to further drive down wages is designed to encourage investment from international capital markets into low wage areas of the UK.

Reducing the 50 pence top rate of tax will have no impact on the rich, but the reduction in age-related allowances will further reduce living standards for millions of older people who already receive amongst the lowest pensions in Europe.

The 2012 programme of Budget measures are a precursor for a far more brutal assault on living standards as global economic conditions continue to deteriorate. As astute Tory commentator Peter Oborne puts it today, “the risks ahead are immense – eurozone collapse, war with Iran, economic stagnation. It must be said that Mr Osborne does not have the air of a man who is fully in control.”

Gerry Gold
Economics editor