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Public Works is UNISON Scotland's campaign for jobs, services, fair taxation and the Living Wage. This blog will provide news and analysis on the delivery of public services in Scotland. We welcome comments and if you would like to contribute to this blog, please contact Dave Watson d.watson@unison.co.uk. For other information on what's happening in UNISON Scotland please visit our website.

Wednesday, 3 December 2014

The real chill in the Autumn Statement

A budget package in December may not be Autumn, but it certainly had a real chill for those least able to afford its consequences.

This was a classic Osborne budget statement. Massive real cuts, sugar coated by handing back a few pennies in the form of announcements on the NHS and infrastructure. Yes, Scotland will get £129m of Barnett consequentials from the NHS announcements, but this goes nowhere near making up for the real cuts ahead. This chart from the Office of Budget Responsibility makes it perfectly clear where public spending is going.

Public spending in the UK will be the lowest for 80 years, not quite the dark ages, but back to the dark years of the Great Recession. Danny Alexander told us yesterday that there were 'smallish' cuts to come. Today, we got the truth from the OBR, who say:

"Between 2009-10 and 2019-20, spending on public services, administration and grants by central government is projected to fall from 21.2 per cent to 12.6 per cent of GDP and from £5,650 to £3,880 per head in 2014-15 prices. Around 40 per cent of these cuts would have been delivered during this Parliament, with around 60 per cent to come during the next. The implied squeeze on local authority spending is similarly severe."

This is also an entirely home grown consequence of the failure of austerity economics. The OBR also tell us that real earnings will not return to pre-crisis levels over the next five years after a continuous fall since the crash. Pay freezes, low paid new jobs, low incomes of the involuntary self-employed are behind the apparently improving unemployment figures. This is the reason why tax revenues have not grown sufficiently, and public borrowing has increased despite draconian public spending cuts. This infographic from the JRF shows just how the low paid have taken the brunt of pay cuts. And it's public sector workers who take the biggest cuts yet again.

Osborne told us proudly that he has halved the deficit. But in 2010 he told us that it would have gone by next year. Instead he has borrowed more than Labour as this chart shows.

In any case the budget deficit is the wrong target. The UK's main deficit is in investment and equality. We need a massive programme of public investment in social care, public transport, housing, child care and education, which will tackle the investment and decent work deficit. Then we need labour market policies to ensure that the fall in labour’s share of national income in the past decades is reversed, and the recovery is wage-led rather than debt-led. Household debt will grow faster than previously forecast until it’s larger than before the recession. In simple terms, take care of full employment, decent pay for women and men, equality, and sustainability, and the budget will take care of itself.

If you were in any doubt about the political strategy behind the Autumn Statement, have a look at this distributional analysis.

The top 10% will vote Tory come what may to protect their tax cuts that are threatened by Labour. The big losers are again at the bottom, the 'dog end voters in the outlying regions' as one Tory MP put it. Osborne’s economic policies have been deliberately designed to shift money from the poorest to the richest. Research from the London School of Economics has found that the changes he has introduced to benefits and income tax have seen the poorest five per cent lose income while the top one per cent have gained.

Austerity economics have been a massive failure as the numbers behind today's statement show all too clearly. A short term housing bubble is the only fig leaf he has left to get past next year's election But there is also a challenge for the opposition parties and Labour in particular. There has to be a clear dividing line on economic policy. Austerity is the Tories cover for their real political goal of reducing the size and role of the state - it should not feature in the policy of a party with a democratic socialist mission.

 

 

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