2 July 2010
Slash-and-burn Westminster Budget targets poor
BY EMMA CLANCY
TORY British Prime Minister David Cameron’s insistence that “We’re all in this together” in the lead-up to the announcement of his slash-and-burn Emergency Budget on June 22nd was met with anger and scepticism from those in the Government’s crosshairs.
The Tory/Liberal Democrat coalition’s Emergency Budget takes special aim at welfare recipients and public sector workers in its attempt to reduce the state’s £163bn deficit. Disregarding the fact that inflation is at 5%, child benefits are to be frozen for three years while tax credits and housing benefits will be cut. VAT is to be raised from 17.5% to 20% in January.
Public spending on services is to be slashed, which will result in thousands of job losses. British Chancellor George Osborne threatened 25% cuts in spending on education and other departments over the next four years. Public-sector pay for those on incomes above £21,000 is to be frozen for two years.
During the May Westminster election campaign, the Tories pledged to respond to the financial crisis and reduce the state deficit through “efficiency savings” - while “defending frontline services”. But once in power the coalition immediately began conditioning the public for unprecedented, savage cuts.
The Emergency Budget represents the first step in an ideologically-driven campaign by the Tories to “shrink the state”. It is a move they have no mandate for, which is unconnected to the recession, and which will inevitably jeopardise the recovery.
The Tories’ programme of attacking the public sector was decisively rejected by voters in the North of Ireland in the Westminster election: the party failed to win a single seat. The North is emerging from decades of conflict and suffers from high levels of social and economic deprivation. The strong public sector here helped insulate the North from the worst effects of the recession.
Despite this the Tory/Lib Dem coalition told the Executive in May to cut a further £128m from spending this year, on top of the £393m savings it already has to make. A White Paper on “rebalancing the economy” in the North will be produced by the British Government in autumn - Tory-speak for dismantling the public sector.
Organising resistance to the British Government cuts to public spending and services is a key Sinn Féin priority in the time ahead. The party has called for a united front of all sectors of society, and all parties in the Assembly, to resist such cuts.
Sinn Féin’s call for the transfer of fiscal powers from Westminster to the Assembly is gaining resonance among other parties, trade unions and business as the benefits of devolution become more obvious.
WHO CAUSED THE CRISIS?
‘Reducing the state deficit’ has become the mantra of governments across Europe as the global financial crisis, which hit world markets in 2008, has entered its second phase, the ‘sovereign debt crisis’. Most of the parties in the Assembly, and in the British parliament, have accepted the mantra that the state deficit must be reduced at all costs, and that this can only be achieved by cuts to public spending. The media obligingly echoes this idea.
The US, Britain and the Eurozone countries have collectively given the banks more than $14trillion since September 2008. The British Government has injected £850bn of taxpayers’ money in the financial system.
But this massive state intervention into the markets has been aimed at nursing the banks and financial institutions back to the condition where they could carry on as they had before the collapse, rather than taking them into permanent public ownership.
For example, taxpayers in Britain funded a direct rescue package of £54bn for the Royal Bank of Scotland in 2008 but last year the bank fell short of its obligation - a term of the public loan - to lend to business by £25bn. As it prepared to report losses of £5bn in February this year, RBS admitted it had spent £1.3bn in bonuses for 22,000 investment bankers, with some being rewarded with £15 million.
While it was the reckless speculation of the bankers and financial elite that brought the global economy to the brink of ruin in 2008, the financial crisis they caused is not over. It has entered a new phase of public debt resulting from the bail-outs and the nationalised debt is being repaid by states’ cuts to public spending.
CUTS DON’T WORK
The cuts the Tories are pushing are based on the party’s traditional ideological commitment to neo-liberal economic policies. If the coalition wanted to cut waste, it could start by withdrawing British troops from imperial adventures around the world and abandon investment into the Trident nuclear programme.
The key to economic recovery is kick-starting growth, which will in turn increase tax revenue. Reform of the financial system should also be a key priority in order to prevent a handful of reckless casino capitalists causing such a crisis in the future.
Across the Eurozone, the states with the highest public debt-to-GDP ratio are those that have implemented cuts rather than stimulus measures to deal with the recession. The 26-County state is a prime example.
Cutbacks to the public sector don’t automatically lead to growth in the private sector. In these circumstances, when such a profound crisis is still ongoing, the private sector is saving, not investing. Cutbacks in government spending and investment will, without a doubt, cause the whole British economy to decline further.
The cuts won’t work in terms of ensuring economic recovery - but what they will do is destroy people’s lives and livelihoods. The impact of these plans will be devastating for communities in the North and it is vital that united action is taken to resist them - and to take control of economic decisions from the Tory Cabinet of millionaires in London to the hands of local, democratic and accountable institutions.
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