The cuts are the biggest and most sustained since the second world war: never before has public spending been cut five years in succession, and in every previous austerity round a far higher share of the gap has been raised through taxation rather than cuts.
In the early 1990s the Tories raised 50% of the spending gap from taxes and 50% from cuts: but in 2010 George Osborne is aiming to raise 77% of much bigger total savings through spending cuts, and just 23% through taxes. Much of that will be through VAT, which will disproportionately affect pensioners and the poor.
Another novel feature of these cuts is the extent to which they are coupled with privatisation, carving up what’s left of the public sector budget to benefit profit-seeking private companies.
Where for-profit firms can’t yet be brought in, ministers are pushing for the “social enterprise” model, in which services are broken up into autonomous ‘non-profit’ businesses which create and retain surpluses, and which could easily move to full-scale privatisation or be taken over by private companies later on. Examples include academy schools, and Foundation Trusts in the NHS.
The cuts that are coming are substantial.
The budget made clear that a hefty £11 billion is to be cut from benefit payments by changing the inflation index used for uprating payments year by year. The very poorest are to be made even poorer.
On top of this we already know that housing benefit for long-term claimants is to be cut by 10% from 2013 – with no idea of where the gap in payments is to be found.
2.4 million people on disability benefit are being forced to go through a brutally biased reassessment process, in which up to three quarters are being assessed as ‘fit for work’ and likely to lose benefit – despite the lack of any suitable job vacancies for them to fill even if they were fit enough.
Single parents are also targeted for mean-spirited cuts, with 135,000 to be moved from social security to Job Seekers Allowance: by 2012 single mums with children as young as 5 will be compelled to seek work.
Work and Pensions minister Chris Grayling is on record as favouring a vicious Dickensian tariff of penalties for any JSA claimant turning down a job, in which one refusal would result in one month’s loss of benefit, two jobs refused would trigger a 3-month suspension of benefits and three refusals would result in a 3-year exclusion from all state benefits.
This press-gang approach gives the green light to the most unscrupulous and exploitative employers to keep wages at rock-bottom: but even on these terms it seems certain that vacancies will remain thin on the ground, as tens of thousands of public sector workers lose their jobs in the cutbacks that are being driven through in the NHS, local government, civil service, and even in the police force by ConDem spending cuts.
Local government has been shedding jobs each year, losing 43,000 since 2007, but is braced for a succession of year-on-year cuts to be announced in October’s spending review – possibly as much as 10% actual cuts in budget for the next four years. The NHS is also already squeezing out jobs as hospitals and mental health Trusts wrestle with deficits, but faces the prospect of the abolition of Strategic Health Authorities and Primary Care Trusts, which between them employ 60,000 or more, and a big reduction in spending on management, throwing some 30,000 or so out of work. Higher education is also being squeezed, with a cap on student numbers, widespread cuts in academic and support staff, and some universities fending off bankruptcy and closure.
This haemorrhage of relatively well-paid and previously secure jobs, transforming public sector workers from tax-payers to claimants, alongside knock-on cuts affecting private sector suppliers of goods and services to public sector organisations, seems certain to trigger the feared “double-dip” recession, especially when coupled with the prolonged pay freeze on public sector workers.
As a result of the combination of cuts with the overall squeeze on the economy, Public Finance magazine projects that even by 2014 the numbers claiming Job Seekers Allowance will still be a massive 3 million.
The accelerated increase in the retirement age to 66, with plans to scrap it altogether – and oblige many more to work until they drop dead or are forced off work with chronic illness – will also have the perverse effect of denying jobs to younger workers, including the vast numbers of graduates emerging from universities with almost worthless 2.2 degrees and tens of thousands of pounds in debts hanging round their necks.
For public sector unions, now a mainstay of the trade union movement, this is a crucial turning point: the combination of policies being forced through is aimed at smashing their strength and fragmenting all of the public services, so that anti-union laws can be used at will to make any form of national concerted action virtually impossible.
The union leaders have already undermined their own position by tolerating attacks on jobs, and pensions, and privatisation of services under New Labour, raising only token verbal objections. The Tories have spotted this weakness and are determined to exploit it to the full.
If the public sector unions don’t fight now, they will be in a far weaker position to fight back later, when the first round of Tory attacks have already taken place. Every concession, every show of weakness just encourages the government and the employers to press through ruthlessly, demanding more.
If ministers can impose a one-year, or two-year pay freeze on public sector workers and face no challenge, why would they want to offer any future pay increases?
If they can tear up redundancy terms to cut the cost of sacking one group of workers without any resistance, why wouldn’t they try it with ever-larger groups of workers, and then move on to slash pensions, sick pay and other terms and conditions?
If they feel their moves to denationalise the NHS – and reduce it from a national service employing almost 1 million in England to a “social market” in which taxpayers’ money is used to buy in services from hundreds of effectively privatised providers – are not going to be seriously resisted, won’t ConDem ministers conclude that the union leaders have given up on fighting to defend even the most popular and sacred of our public services?
Of course the unions and campaigners resisting cuts and privatisation face a challenge. They must unpick the spin, the tissue of lies and mythology on which the Tory policies (and New Labour’s too, in many cases) depend, and show to union members, the press and the wider public what is really at stake, and what it means to them.
We need to demonstrate how even ‘voluntary’ redundancies pile increased work and pressure on the fewer staff who remain and undermine the quality of services.
We need to keep exposing the shoddy quality, inflated cost and inefficiency of private sector provision and the cost of the bureaucratic and fragmented market system that can allow private firms to cream off profit from the public purse.
We need to bang home the arguments on why ‘social enterprises’ will increasingly feel and act just like for-profit businesses to their staff and to those requiring their services. Far from ‘empowering’ staff, most of the social enterprises already established have been the result of little Hitler managers riding roughshod over the views and wishes of their employees.
Above all we need to puncture the myth that public service workers have somehow been “feather-bedded” with higher pay, better pensions or greater job security than the private sector.
In reality pay increases in the private sector last year and this are running at around double the average for public sector workers, while the public sector now faces at least a 2-year freeze, with no equivalent limit on private sector earnings.
Most public sector pensions are far from generous, averaging just £4,000 a year in local government and £9,000 for teachers, while many lower-paid workers die relatively soon after retirement.
Of course few fat cat public sector bosses pick up headline-grabbing pay and perks, but even these are left in the shade by the top directors of private companies.
So public sector workers are not a privileged elite, but staff who deliver services we all depend upon.
And the “public sector deficit”, of course is not a result of public sector failings, but the collapse of the banking system, which is now returning to profit and big bonuses – even as the full cost of its crisis is dumped upon millions of workers and those needing public services and welfare.
The challenge in the next few months is to build a sufficiently broad, combative and confident alliance of public sector unions, campaigners, pensioners and the wider public to ensure that the maximum pressure is put on a coalition with no mandate to devastate our public services or eviscerate our NHS.
No concessions. No cuts. No privatisation. Stop the ConDems before they wreck our public services and plunge the whole economy into another downward spiral.