The Tories manipulate a crisis

November 30, 2010

The cuts that politicians are planning to institute in Britain will slash services and throw millions into poverty--while letting bankers off the hook, writes Mike Marqusee.

BRITAIN'S COALITION government has embarked on an ambitious program of social engineering. The purpose of its historic package of public spending cuts and "reforms" is said to be the reduction of the fiscal deficit, which rose sharply in 2008 and 2009 as a result of the recession. But, as we shall see, the deficit is a pretext.

By a political sleight of hand masquerading as economic necessity, wealth and power are being redistributed in favor of the rich, whose deregulated appetite for short-term profit triggered the recession in the first place.

Government announcements have come thick and fast, each spending cut, reorganization or redefinition accompanied by an ideological polemic (echoed across the media) in favor of "personal responsibility," "individual choice" and the virtues of the private sector. Despite the rhetoric, it's not so much the "state" that's being shrunk as the infrastructure of social solidarity.

Over the next four years, the government plans to cut $28 billion from the welfare benefits bill, the vast bulk of which is spent on the elderly, children, people with disabilities and low-paid workers (not the largely mythical "work-shy" adult).

Public housing in East London
Public housing in East London (John Levett)

At the same time, it is increasing the flat-rated, regressive Value Added Tax from 17.5 percent to 20 percent, while slashing the corporation tax from 28 percent to 24 percent. Not surprisingly, the independent Institute of Fiscal Studies (IFS) concluded that the new tax-benefit regime was "clearly regressive," with the poor loosing a much higher proportion of their income than the rich.

Severe cuts in housing benefits and in construction of new affordable housing will mean increased homelessness, higher housing costs and more people living in temporary, overcrowded or sub-standard accommodation. Residential segregation will increase, with the Chartered Institute of Housing warning that the poor will be priced out of many towns and cities.

A spokesperson for Shelter, the country's leading homelessness charity, said the new policies "will see the door firmly closed on the aspirations of a whole generation for decent, secure, affordable housing to rent or buy."

The highly popular (and cost-effective) National Health Service (NHS), the core and crown of the post-war welfare state, is also under threat. According to a source inside the government, reduced spending will mean that in four years time the NHS will be able to do "a fifth less" than it does now.

On top of that, the proposed NHS reorganization will fragment the service and outsource many of its functions to the private sector, with accompanying increases in administrative costs and decreases in accountability. The quality of patient care will diminish. The already marked inequalities between income groups in life expectancy, cancer survival rates and disability-free years will widen.

IN EDUCATION, the government is pushing the formation of "academy schools" which will be free of local government oversight and open to private sector management. Over the next four years, while investment is directed selectively towards these schools, there will be (according to the IFS) a real terms cut in spending for 60 percent of primary and 87 percent of secondary school pupils. According to the Department of Education, 40,000 teachers (about 10 percent of the total) will lose their jobs and capital spending on schools will be slashed by 60 percent.

Universities are slated for rough treatment, with cuts in teaching funds and a proposed near tripling of tuition fees--which a recent poll shows may deter two thirds of pupils from disadvantaged backgrounds from applying. Science and arts funds face cuts of more than 30 percent.

Local councils, which provide a wide range of basic services (street cleaning, swimming pools, libraries, as well as care for children, the elderly and the disabled), are being told to slash budgets by 25 percent or more. And forget about the UK making any meaningful contribution to slowing global warming: there will be no significant investment in renewables or energy conservation.

Many of the government's welfare "reforms" are aimed ostensibly at getting people "off benefits and into work". Under tough new tests on people claiming benefits for disabilities recovering cancer patients and others with serious physical limitations are being deemed "fit for work". But where are the jobs? Already one million disabled adults are seeking work but unable to find it.

Unemployment currently stands at 2.5 million, 8 percent of the workforce, a figure that understates the work-shortage because it does not include the 1.5 million forced to work part-time. By its own admission, the government intends to shed about 500,000 public sector jobs. An additional 600,000 private sector jobs directly dependent on public spending will also go.

It's claimed that these losses will be compensated for by private sector growth, but since the private sector created only 570,000 jobs in the entire decade prior to the recession, when GDP growth was stronger than it is likely to be in the coming years, this is mere fantasy. As unemployment and under-employment increase, wages, conditions and security for those in work will deteriorate. The benefits bill will rise and with it the much-dreaded deficit.

The UK already has a higher proportion of its population (22 percent) living on low incomes than 21 of the 27 other EU countries. The extra money generated during the years of growth went overwhelmingly into the pockets of the top 20 percent, who now receive 51 percent of total national income, while the poorest 20 percent receive a mere 5.5 percent.

As a result of increasing inequality, Britain has fallen in recent years to 26th place in the UN's Human Development Index (HDI), behind not only Germany and France, but also crisis-stricken Greece, Spain and Ireland. If the government gets its way, poverty and inequality will grow more acute, living standards for the majority will decline, and the UK's HDI ranking will plummet further.

A SMALL but powerful minority does stand to gain from all this pain.

The pharmaceutical companies, for example, will rake in extra billions as a result of the government's decision to marginalize the body charged with ensuring cost-effectiveness in NHS drug purchases. Outsourcing and privatization in education, health care, welfare and the post office will open avenues to vast private profiteering, largely risk-free and tax-payer subsidised.

In the first five months of its existence, the government paid out $5.1 billion (more than the Department of Energy and Climate Change receives in a whole year) to a single firm, Capita, for undertaking previously in-house government functions. Meanwhile, the banks, saved from collapse by the public weal, remain unreformed: paying themselves $10.9 billion in bonuses this year (which happens to be the amount required to abolish university tuition fees altogether).

While benefit fraud costs the public $2.3 billion a year, tax evasion costs $109 billion a year and tax avoidance another $39 billion, totals that will rise because of cuts in Customs and Revenue staff. If one-third of the missing billions were collected each year, the deficit could be closed over five years without cuts.

But we are told that if we ensure the rich pay a fair share of taxes, they will all leave the country, and if we fail to make the cuts, the markets will pull the plug on us. Let's leave aside, for the moment, the fact that the structure of the UK national debt (largely long-term, low yield and domestically held) is quite sustainable, and forget also that Ireland's 12.5 percent corporate tax rate did nothing to protect it from the ravages of recession.

This attempt to coerce the majority of Britons into making sacrifices from which a small minority benefits raises fundamental questions about the purpose and direction of our society. The implication is that we must acquiesce to a perpetual dictatorship of the rich, that we are forbidden from disposing of the wealth we collectively create according to our collective priorities. Of course, the government presents the rich as the wealth creators, but this is a myth, our version of believing the sun revolves around the earth.

The overall impact of government policy will be to make the rich richer and more secure and the rest poorer and less secure. The damage will take generations to undo. This is the real threat to civilization in Britain, not the immigrants, Muslims or "benefit scroungers" targeted by politicians and the media.

First published in The Hindu.

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