2015 and the bumpy road ahead for the UK

As we draw closer and closer towards the general election in 2015 there is much to be concerned and worried about going forward. Not least that whoever gains power next year be it a coalition or a majority government of any sort we will be in for a lot worse cuts and tax rises to come of that we can be in no doubt. “The Conservative-led coalition faces an election next May and its main pledge when it came into office in May 2010 was to ‘balance the budget’ and reduce government debt. After the huge bank bailout and the impact of the Great Recession of 2008-9 on tax revenues and welfare spending, the government deficit stood at over 10% of GDP and gross government debt had rocketed to over 75% of GDP. The government blamed this on the profligacy of the previous Labour government. This was nonsense, of course. Labour had run relatively small deficits, has reduced government spending as a share of GDP and debt was low until the global banking crash.” “And the Conservatives would have done exactly the same as Labour in bailing out the City of London with more borrowing. The Conservatives are obsessed with the government deficit and debt – getting them down has been their measure of ‘prosperity’. But even on this measure, they have failed. Osborne made much of the reduction in the deficit ‘by half’ by April 2015. But back in 2010, he forecast that he would balance the budget by April 2016. He has now announced that this target will not be achieved until April 2019.” With an estimated figure of about 40% of cuts seen so far we are still yet to feel the worst of austerity to be honest. Huge chunks of the public sector could be privatised parts of local government could cease to function as they should and a hell of a lot more out sourcing is on its way to a country which already leads the way in out sourcing. The coalitions plan of eliminating the deficit by 2015 looks incredibly woeful now going into the next 5 years we can expect a very bumpy ride if any plan to eliminate any deficit is to be achieved “And to meet this target, even assuming that Britain continues to grow at 2-3% over the next four years, the government will have to impose a massive round of public spending cuts on welfare benefits and services. It will also have to raise taxes, although it claims that it can cut income tax again during the life of the next government (although that promise is pushed back to 2019). And the deficit is one thing. Government debt is still rising in real terms. Debt is over £160 billion more than forecast back in 2010 and is now well over 90% of GDP on a gross basis and is not expected to peak on the best forecasts until 2019. The government has failed because the UK economy has not grown in income anywhere near as much as the government forecast back 2010. Osborne forecast real GDP growth would average about 2.7% a year; instead it has averaged up to this year only 1.3%, half the rate. At the same time, although unemployment has come down, most of the new jobs have been part-time, low-paid and self employment ( This has meant that real incomes (i.e. after inflation) have fallen by the largest amount since the Great Depression of the 1930s.” We have to be clear young people who have been hit the hardest in real terms by austerity and have seen their pay fall the furthest have very little cause for optimism I’d suggest their future looks very bleak indeed. With little in the way of meaningful jobs and even more so of those which pay a decent wage to the fact many will never see a pension or even afford to buy their own home let alone affording a rent the future for young people growing up today is a very dark one indeed. “The government stood back from imposing too severe a reduction in the budget deficit after 2012, for fear that the economy would drop back into a new slump – and it nearly did. But that just means, in its obsession with the deficit, that if the Conservatives win the election in May, they will launch a new round of austerity measures. Maybe a new round of austerity won’t happen because the Conservatives won’t win next May. But all three major parties are committed to more spending cuts in bowing to the God of ‘fiscal probity’. “All parties support balancing the current budget in the next Parliament. Deficit spending is clearly still deemed to be politically untenable in the UK.” Gavin Davies, FT. Compared to the Chancellor’s plan, Labour would permit extra borrowing to finance investment (1.5% of GDP) and would allow them longer to attain balance for the current budget. But they would still impose austerity to the tune of half the amount of the conservatives. Behind the obsession with deficits and debt lies the real agenda. It is two-fold: to reduce the size of the public sector and destroy any vestiges of the ‘welfare state’, opening up public goods and services to deliver profits to the capitalist sector. The other aim is lower the burden of tax on and increase the subsidies to the capitalist sector over the long term to boost profitability. This hidden agenda is sometimes exposed. Only this week, a Conservative MP called for huge cuts. “The Chancellor could make a £20 billion start by culling Whitehall’s sprawling bureaucracy, enforcing public sector pay settlements, freezing benefits, reducing the welfare cap, scaling back middle-class welfare and looking again at the state pension.” Dominic Raab, Conservative MP for Esher and Walton. Note the attack on the state pension. This has been sacrosanct up to now. But the Conservatives are now preparing to dismantle it, using the argument that the young should not have to pay for the old and that’s unfair. The right-wing Economist magazine took up this call: “Britain’s fiscal problems are partly the result of over-generous spending on the old. They should pay off some of the debts instead of passing them all on to the young.” But apparently it is not unfair for the poor to pay for the rich. In the UK the bottom 10% of income earners pay more in all taxes as a percentage of their income than the top 10%. The government could switch its priorities on spending from defence, subsidies to industry, lowering corporation tax, more tax cuts for the rich to boosting public investment, services and welfare. Despite its headline noise on a few infrastructure projects (rail, flood protection etc), it is doing no such thing. Faster growth would soon deal with any deficit anyway. In terms of real annual GDP growth, the OBR estimates that a 0.1% point increase would do as much over the four years from 2015-16 for the deficit as roughly £3 billion of spending cuts. The trouble is that the UK economy may be growing at 3% a year currently, but nobody expects that to last. The Office for Budget Responsibility has actually revised down its forecasts for growth after this year for every year up to 2019. Even Osborne admitted that the "warning lights" are flashing over the health of the global economy, and Britain "cannot be immune". Yes, any new downturn in the world economy would soon push the UK economy back into recession too. Osborne raises only that risk to a booming UK economy (the fastest in the G7 this year). But there are serious domestic risks too. Most of the contribution to the ‘boom’ of 2014 is coming from the unproductive sectors of the economy (housing – prices rising at 12% a year; and financial services as the City of London ploughs on). Manufacturing output is still struggling and despite a huge devaluation of the pound back in 2010, UK exports have failed to get anywhere near the government’s expectations.” “That’s mainly because the business sector is unwilling to invest in new technology or skilled labour at good rates of pay. Investment to GDP in most major capitalist economies has been falling. But it is particularly low in the UK. And that is because profitability in the corporate sector, although improving a little after all the austerity measures so far, is still below levels seen in the late 1990s or even 2005. After six years, the UK economy has only just got back to where it was before the Great Recession.” It’s certainly going to get a lot lot worse before we even see a glimmer of improvement for most people. With thanks to the excellent Michael Roberts for quotes and extract, you can read his full post and blog over at http://www.applevis.com/forum

Don’t tell me there is no money left

As we are told everyday there I no money left so we must cut cut and cut some more by Tory and labour MP’s alike. Even labours too far too fast line would still ensure huge cuts to the public sector The PCS union has the right idea in smashing the myths about the cuts and the recession.

From 1918 to 1961 the UK national debt was over 100% of GDP. During that period the government introduced the welfare state, the NHS, state pensions, comprehensive education, built millions of council houses, and nationalized a range of industries. The public sector grew and there was economic growth.
Today, the coalition government wants to turn back the clock. It is set on dismantling the NHS and comprehensive education, and it is attacking the welfare state. It is not doing this because the country is on the verge of economic collapse, it is doing it because it is ideologically opposed to public services and the welfare state, and committed to handing over more of our public assets to big business.
Cutting public sector jobs will increase unemployment. This would mean increased costs for government in benefit payments and lost tax revenue. If people’s incomes are taken away or cut through pay freezes they will spend less. Fewer consumers spending means cuts in the private sector, and lower VAT revenues.
Internal analysis by HM Treasury proves this to be the case. Leaked documents estimated that over the next six years700,000 public sector jobs would be cut, and many more private sector jobs would also be lost – based on the current government’s policies.
Job cuts are therefore counterproductive. Mass job cuts would worsen the economic situation by reducing demand in the economy, and providing less tax revenue.
The government claims it can make cuts of between 25% and 40%, and still “protect frontline public services”. This is impossible – not just because ‘frontline services’ are being cut, but because services rely on ‘back office’ support staff. For example, cutting support staff like NHS cleaners has meant an increase in healthcare acquired infections, costing the NHS £1 billion. All public services require tax revenues to fund them, yet HM Revenue & Customs has cut 25,000 staff in recent years, which has led to uncollected tax at record levels and a growing tax gap.
The impact is likely to be highly divisive too. There is evidence of this already in the UK. In areas where public sector workers have already been laid off, retail sales have fallen faster than the UK average. In nations and regions where public sector workers make up a high proportion of the workforce, major public sector cuts could destroy local economies. Any attack on the public sector will also disproportionately affect women, as 68% of the public sector workforce is female. The public sector also has a much better record of employing disabled workers too.
The global race to cut labour costs is central to the economic collapse we have seen around the world. Squeezed consumers are defaulting on mortgages and personal debts, and are less able to spend in the economy. In the UK, the value of wages has declined from nearly 65% of GDP in the mid-1970s to 55% today. Over the same period, the rate of corporate profit has increased from 13% to 21%. It is no coincidence that in this period trade union rights were severely restricted, large swathes of the economy privatized, markets deregulated and corporation tax slashed.
There is an urgent need to rebalance the economy in the interests of people over big business.

Investing in public services is the solution to the deficit crisis. Instead of cutting jobs, we should be creating them. Jobs are not created by bullying people on benefits into jobs that don’t exist. Instead there are several areas where public sector jobs urgently need to be created.
It has been estimated that over a million ‘climate jobs’ could be created if the government was serious about tackling both climate change and unemployment – these would include areas like housing, renewable energy and public transport investment including high speed rail, bus networks and electric car manufacture.
Today there are 1.8 million families (representing over 5 million people) on council house waiting lists. There is an urgent need to build affordable housing for these people, which would also help reduce housing benefit payments.

Addressing the ‘tax gap’ is a vital part of tackling the deficit. Figures produced for PCS by the Tax Justice Network show that £25 billion is lost annually in tax avoidance and a further £70 billion in tax evasion by large companies and wealthy individuals.
An additional £26 billion is going uncollected. Therefore PCS estimates the total annual tax gap at over £120 billion (more than three-quarters of the annual deficit!). It is not just PCS calculating this; leaked Treasury documents in 2006 estimated the tax gap at between £97 and £150 billion.
If we compare the PCS estimate of the tax gap with the DWP estimate of benefit fraud, we can see that benefit fraud is less than 1% of the total lost in the tax gap
Employing more staff at HM Revenue & Customs would enable more tax to be collected, more investigations to take place and evasion reduced. Compliance officers in HMRC bring in over £658,000 in revenue per employee.
Even If the modest Robin Hood tax which we feel would only trim the finger nails of capitalism but would be a good step forward of course – a 0.05% tax on global financial transactions – was applied to UK financial institutions it would raise an estimated £20–30bn per year. This alone would reduce the annual deficit by between 12.5% and 20%.

Alongside this it is estimated big banks and business currently sit on a figure around 750 billion This is a huge contradiction of capitalism and hits the nail on the head for me that this sys
Pounds on idol money just sitting on it as they do not see a profitable outlet at this tem if it can’t improve things for people it has become a bankrupt system and is no longer a system we can afford. A system where the wealth is concentrated in fewer and fewer hands is not a healthy system and you may even go as far as to say it’s corrupt. I wouldn’t disagree. I think capitalism has reached saturation point and few potential avenues for profit are open for it at present in Europe and the UK certainly at this present stage.
This is part of the reason why privatising the NHS is such a popular idea with big business as this could be rich picking for capitalists who can make a big profit at our expense on health care. It is already rumoured Richard Branson of Virgin is eyeing up bids for parts of our health care.
We as socialists do not accept a single cut is needed. If you do you are wrong and have been fooled into thinking some cuts are necessary. As this piece shows and other evidence is out there that does not need to be any cuts at all. Labour councils do not need to pass on the cuts they could refuse but they don’t as they like the Tories agree the need for cuts unfortunately. We disagree.

SO alongside the PCS and the RMT we are firmly against all cuts no cuts are necessary as the previous facts and figures which can be categorically backed up and verified. So where we stand against all cuts is not as nuts or as loony left as people tell me it is a logical position to take. We did not cause this crisis so why should we be made to pay for it?

There is clearly wealth and money out there and I haven’t even begun to mention Trident and the scraping of that and how much extra money that’d bring in to the public purse.
Of course these are reformist measures but even on a reformist platform you can argue there does not need to be any cuts at all. Why isn’t labour saying all this? Well for a start it agrees that ordinary working people should pay for this crisis just like the Tories and the liberals. They are bankrupt in terms of ideas and their silly line of too far and too fast is no comfort to ordinary people suffering heavily under this crisis.

It is clear to me that this will only get worse unless some big changes happen. With an economy based for people’s needs over profits of a few these can happen. But unfortunately this will not happen under the main 3 political parties who all serve their capitalist masters now.

It’s time to fight for a change. A change in society a society that is run in the interest of the majority of people. A socialist society.

With extracts taken from the PCS union
http://www.pcs.org.uk/en/campaigns/campaign-resources/there-is-an-alternative-the-case-against-cuts-in-public-spending.cfm