Osborne budget: war on the working class

The ‘nasty medicine’ served up by George Osborne and the coalition government will provoke resistance and pull the Labour Party to the left, predicts Eddie Ford


When the capitalist economic-financial system went into near global meltdown, and catastrophe was only narrowly averted by frantic and massive state intervention, it was always going to be the working class that would have to pay the price. We would have to carry the can, not the capitalists and bankers – the supposed masters of the universe – who lost control of their system. Well, we are now getting our first glimpses of what the new age of austerity will be like – when, to use the words of David Cameron, the “rubber really hits the road”.

So this week chancellor George Osborne delivered his first ever budget, widely described as a “defining moment” for the new coalition government and the country as a whole. He was the man, of course, who last year hypocritically declared that “we are all in this together” – unless you happen to be wealthy, that is. Like the 23 cabinet ministers who have assets and investments worth more than £1 million, who will hardly have to apply for a crisis loan from social security. Naturally, Osborne’s “tough but fair” budget was anything but “fair” – representing an assault, albeit just the initial wave, on the jobs and living standards of the working class. Yes, the age of austerity is going to be extraordinarily nasty.

As predicted, the budget delivered an aggressive mix of anti-working class spending cuts and tax increases – all with the aim of ‘balancing the books’ by 2016. Hence, as from next January the main rate of VAT will rise from 17.5% to 20% – which, of course, will clobber ordinary workers and the poor, as will the £11 billion cut in overall welfare spending. This will include measures to freeze child benefit for three years, and curtail disability living allowance. Particularly vicious are a raft of proposals to crack down on housing benefit. Quite vindictively, after April 2013 the unemployed will see their benefit cut by 10% after 12 months of claiming Jobseekers Allowance – presumably on the basis that if you make the lazy bastards suffer even more, threaten them with potential homelessness, then that will ‘incentivise’ them to get off their backsides and find a (non-existent) job. Housing benefit will also be cut for people who are in larger homes than their family size officially “warrants”.

Furthermore, from next year – excluding the state pension and pension credit – benefits, tax credits and public service pensions will rise in line with the consumer price index rather than the retail price index, which is generally higher. There will be a two-year pay freeze for public sector workers earning over £21,000, even if last year Osborne was talking about making it £18,000 – presumably a Liberal Democrat-brokered ‘compromise’. The government will “accelerate” the increase in state pension age to 66 and Osborne also revealed – a real sting in the tail – that all government departments apart from health and international aid, which are ring-fenced, will face an average 25% cut in their budgets over the course of the parliament, the exact details to be determined by a sweeping “spending review” in the autumn.

George Osborne stated that the UK “can look to a brighter future”, thanks to the budget, while even less convincingly the Liberal Democrat chief secretary to the treasury, Danny Alexander, declared that proposals his party had previously denounced with righteous fury as a “Tory VAT bombshell” were a “necessary” response to the “big gap” in public finances the new government had inherited. Similarly, Vince Cable said his party had helped secure some “very big and progressive steps”, such as raising tax thresholds for the lowest-paid and a £150 annual rise in child tax credits for the poorest families.

So, Lib Dem emollients and flummery aside – we have the expected cuts, cuts, cuts. But communists have to ask the basic question, why are they doing this? Indeed, some elements within the establishment think that an austerity drive under today’s concrete conditions is tantamount to madness. After all, the UK has only just come out of recession officially – though more on a statistical technicality than in substance. The UK’s ‘growth’ barely registers, having expanded at an average rate of 0.30% in the last quarter. In fact, according to the Global Economics Research unit, this “upturn in production may be short-lived, as it was the result of inventory adjustments and a rise in exports prompted by the weak pound”. That is, rather than “trying to increase market share by lowering foreign currency prices”, exporters instead “have been rebuilding their profit margins” and this – in connection with “weak growth” in Europe, which imports 50% of UK products – “may sooner or later erase the advantage of a lower exchange rate”. Furthermore, as a result of the cuts, VAT increase, etc announced in the budget, “we should anticipate an additional drop in consumer spending, which in turn may make companies postpone investments and hiring and slow down the recovery”.[1]

Hence, it fundamentally goes against all post-war bourgeois orthodoxy – Keynesian economics, in a nutshell – to cut rather than spend when attempting to crawl out of a recessionary hole. A state in debt is not the same as an individual in debt – quite the opposite. Rather states need urgently to spend, spend, spend in order to stimulate demand and avoid an even deeper recession: keep on spending, keep on investing, so they can eventually recover. And capitalist states have always borrowed to finance their spending and generate economic growth.

However, the Osborne budget signals the opposite approach – to drive down spending and dampen demand. To sit in your hole and just keep digging. So a sharp rise in the number of unemployed therefore means more spending on unemployment benefit and social security – money straight down the drain, in that respect. The unemployed have less ready cash, so obviously spend less. Therefore demand drops, which in turn means there is less incentive for capital to invest in production. The UK could spiral down into the much feared double-dip recession, making George Osborne’s “tough” budget an exercise in suicide economics. And, of course, we have seen intimations of this downward spiral in Europe – not just in semi-basket-case economies like Greece or Portugal, but in a ‘powerhouse’ like Germany, which is now experiencing its own austerity drive.

In fact the budget was driven far more by a political agenda than an economic one. Clearly, the coalition government – and those it represents – sees a golden opportunity to roll back the welfare state and tilt the balance of class forces in favour of capital, the ‘deficit crisis’ making a perfect excuse for such an offensive. Hence, except for some paltry concessions here and there to those sections of the working class deemed to be the ‘worthy poor’, what we are confronted with is a naked attempt to shift the deficit burden onto the backs of the working class by ruthlessly driving down living standards. Work longer for less, retire later and poorer – if you have a job at all, of course, as it is an absolute certainty that unemployment will sharply shoot up as a direct consequence of the approach outlined by Osborne.

Which will please The Times, to name but one rightwing rag. Last week it implored Osborne to restore the UK’s “credibility with the markets” – by “going further” and “faster” with regards to cuts, meaning that the chancellor “needs to be ambitious with the nasty medicine he offers”. For the Times, this logically meant that the “greater part of the burden” has to come from “spending cuts”, not rises in taxation – therefore “tough action” is required on public sector pay, pensions and benefits, as part of the endeavour to “scale back the middle class welfare state” and set the UK on the glorious path to a “low tax economy”.[2] Sections of the ruling class resent spending money on the working class and have said enough is enough. Osborne’s budget represents this declaration of war, this desire for red-in-tooth-and-claw class revenge.

Now, the same Times editorial noted what it called Labour’s “raucous opposition to everything” – ie, to the budget cuts in particular. Of course, when in government, the Labour Party was committed – to all intents and purposes – to the same basic programme as outlined by George Osborne. But, now enjoying the ‘luxury of opposition’, the Labour leadership is making loud anti-cuts noises. Thus Harriet Harman, acting Labour leader, described the budget as “reckless” – it would stifle economic growth, “throw people out of work” and “hit hardest those who can least afford it”. Just as angrily, John Prescott condemned ex-Labour cabinet minister John Hutton – appointed by the coalition government to head a commission into public sector pensions – for being a “collaborator”.

Indeed, senior Labour figures are now talking left. The language of resistance. Militancy. Even a whiff of political cordite in the air. Leadership candidate Ed Balls, speaking on the BBC’s Andrew Marr show, condemned “the callousness of the cuts which are being proposed” and the “unfairness” of the VAT rise, as well as the undermining of the recovery and jobs. Balls also slammed Osborne for turning to the likes of Norman Lamont, Geoffrey Howe, Nigel Lawson – “the people who gave us the deflation and the unemployment of the 1980s”.[3]

Needless to say, union leaders have reacted with anger. Unison general secretary Dave Prentis accused the coalition government of “declaring war” on public services, to the extent that the budget would “raise the spectre of breadline Britain” in some parts of the country. Public sector workers, Prentis spat, “will be shocked and angry that they are the innocent victims of job cuts and pay freezes”. Prentis is quite right, of course. In reaction, it is inevitable there will be mass fightbacks, including strikes and demonstrations – with left bureaucrats like Prentis, Derek Simpson, Tony Woodley, Mark Serwotka, etc making fiery speeches from the podium denouncing the manifold evils of the Con-Lib government. And, of course, they could well be sharing a platform with the likes of Ed Balls, Harriet Harman and the Milibands – all presenting a new-found left face to the working class.

Herein lies the danger. If form is anything to go by, the comrades in the Socialist Party in England Wales and the Socialist Workers Party, for example, will act as loyal lieutenants of the trade union bureaucracy – which will lend them a spurious legitimacy. Which, of course, was precisely why the SWP’s May 22 invasion of the talks between British Airways and Unite negotiators was such a spectacular, and idiotic, own goal. How did such a stunt – which saw a furious Tony Woodley shouting at the comrades – further the SWP’s self-professed project of forming a ‘united front’ with brothers Prentis, Woodley, Simpson, etc?

It is not the role of the left to simply constitute itself as an adjunct of the union bureaucracy – no mater how left it might be posing at any one time. Nor is it our role just to be the most militant proponents of strike action – strikes in and of themselves are not enough – no matter how much we communists fight to build, support and give them direction. Look at Greece: call the general strike, then what? No, we need a strategy leading to an alternative society. First and foremost we need to fight for the only political vehicle that can take us there – a united Communist Party, guided by a principled Marxist programme.

As we have seen in the Netherlands and Belgium – which disastrously is on the verge of breaking apart – so far it has been the far right which has benefited from the economic crisis. But with the correct tactics and strategy – the right programme – it can be the revolutionary left in Britain and elsewhere which can take leadership of the struggles.

eddie.ford@weeklyworker.org.uk
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Notes

  1. www.tradingeconomics.com/Economics/GDP-Growth.aspx?Symbol=GBP
  2. The Times June 19.
  3. For the full transcript, see news.bbc.co.uk/1/hi/programmes/andrew_marr_show/8750245.stm
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