The end of austerity has been heralded many times by leading Tories over the last few years but never actually arrived. Behind the populist declarations nothing has been done to reverse the deep and damaging cuts of the last decade. Government departments were asked to cut budgets by five per cent at the start of this year. The living standards of the working class remain squeezed.
However, coronavirus has forced Boris Johnson’s government to spend big. As in many other countries, the Tories have turned to state spending to try and limit the catastrophic economic falls triggered by the health crisis – £280 billion of pandemic-related spending has already been made, including £73 billion for job retention measures.
This ‘Covid Keynesianism’ runs contrary to the Tories’ usual neo-liberal instincts. There are ideologues on the right of the party who have swallowed their own lies that austerity was an economic necessity hook, line and sinker. There have been rumblings of discontent from these deficit hawks even as the health crisis rages on. They’re already looking to sharpen the axe for public spending.
The Office for Budgetary Responsibility’s forecast that the British economy will contract by 11.3% this year, the worst fall in three centuries, will stay the hand of the more strategic capitalist representatives. They have been forced to recognise that their system is reliant on state spending at the moment, both to try and prevent economic crisis turning into complete meltdown and to limit social unrest. But they too will try and make the working class pay for it.
Chancellor Rishi Sunak claimed in advance of his recent Spending Review that it would not see a return to austerity. The reality was more mixed. A further £55 billion is being spent on dealing with the Covid crisis, mainly in the short term. But government departments will have to cut another £10 billion from their non-Covid spending. There were no direct tax increases but local authorities will be allowed to raise council tax by 5% to offset reduced government support. If passed on by councils that would be an increase of £70 a year for the average household.
The biggest headlines were grabbed by the announcement of a public sector pay freeze. This real terms pay cut will hit 1.3 million workers, outside of the NHS and the lowest paid. Thanks to a decade of Tory austerity these workers are already worse off than they were ten years ago. Sunak is Santa for the big businesses that have been handed lucrative government contracts but Scrooge for the vital workers that deliver them. This is not a return to austerity, because it never went away, this is a continuation of it.
The demand for further public sector pay restraint was put forward and costed by the right-wing think tank the Centre for Policy Studies (CPS). These evangelists of austerity and shrinking the state are influential among the Conservatives. Their director Robert Colvile was one of the authors of the party’s 2019 manifesto.
They released a report in October, called Saving £30 Billion: Nine Simple Steps, which contains further attacks on the working class and transfers of wealth to big business. It gives an indication of what will be coming in the future.
One of the measures proposed in the report has already been enacted in the Spending Review. Overseas aid spending is to be cut from 0.7% of gross domestic product (GDP) to 0.5%; a move that the government says will save them around £4 billion. This breaks a Tory manifesto promise and has led to the resignation of Baroness Sugg as minister for sustainable development, overseas territories and the Caribbean.
Other proposals from the CPS include selling and leasing back public land, and selling and replacing high-value council properties as they become vacant. They estimate these would generate £10 billion and £1.5 billion respectively. This would amount to a huge transfer of public property to wealthy private developers. Selling off council housing in more expensive areas would accelerate gentrification and social cleansing and contribute to rising rents.
They also propose cutting both national and local government administrative staff. They say had civil service administration jobs had been cut as rapidly as those in the private sector since 2000 then £3.5 billion a year could be saved. Their crude calculations ignore the complexities of the actual situation. But one thing is clear, cutting the 160,000 jobs they call for would be extremely reckless when unemployment is surging and predicted to persist beyond the pandemic.
In order to save £2 billion a year the CPS want to remove the minimum 2.5% annual rise in the state pension which forms part of the Tories’ much vaunted ‘triple lock’. They also call for the Winter Fuel Allowance to be taxed. These measures would be a vicious attack on the incomes of pensioners, especially when the UK state pension is already the lowest in the OECD group of developed countries, relative to income.
The CPS may describe the attacks they put forward as “simple steps” but it is far easier to fill a report with back-of-a-fag packet calculations than it is to implement its proposals. One of the obstacles could and should be the response of the working class. Union leaders have already responded angrily to the pay freeze and mooted strikes against it. These words need to be matched with action – the Tories got away with repeated attacks on public sector workers after the 2011 pensions strike was sold out. However, coming on the heels of a decade of austerity and another damaging crisis the mood from below to fight back will be even greater.
Unfortunately the Tories will be able to find solace in the lack of opposition from Labour. Rachel Reeves, who once said they would be tougher on benefits than the Tories, was promoted back into the shadow cabinet by Keir Starmer. That is just one indication that under his leadership Labour will be quite comfortable with a rebranded austerity agenda.
In whatever way it may be presented, austerity still springs from the struggle between class interests which is inherent in capitalism. In the introduction to its report the CPS states that even before the crisis government borrowing was “close to its limits”. This is made just as an assertion. The rise of government debt to over 100% of GDP will be certainly be the cause of much clutching of pearls by the Tory right. But in a relatively wealthy country like the UK the government can still support that debt at the moment. Although this may change at some point, the money markets are not moving against them as they did with Greek sovereign debt in the crisis that began in 2010. On the contrary, while UK government debt is the biggest it has been since world war two it is also the cheapest it has been in that time. Investors have been rushing to buy government debt, seeing it is a safe haven in this time of crisis and receiving just 0.32% on ten-year bonds. UK government debt is a lower proportion of GDP than in France, Spain or Belgium.
The CPS asserts that raising taxes on business should be ruled out as it would damage the economy. But worldwide the wealth of billionaires has risen by over a quarter this year. They’ve certainly got far broader shoulders for carrying the cost of the crisis than the working class who have already suffered years of austerity.
Taxing the rich would be a far more equitable way of covering government spending than the measures put forward by the CPS. But it wouldn’t end a crisis that has been triggered by coronavirus but caused by the contradictions of a capitalist system based on competition and exploitation for profit. To do that requires democratic socialist planning of the economy by putting the resources of society under the ownership and control of the working class.