Hanging by a thread

Back in early March, I posted a blog about the UK election (The British election – it’s the economy, stoopid!, 7 March 2010),  in which I argued that New Labour would be defeated in the general election expected in May.  New Labour under Tony Blair and Gordon Brown had presided over an economy that had collapsed (along with the rest of the major capitalist economies) in the Great Recession of 2008-9.  This was despite the boast of Brown that New Labour had ended the ‘boom and bust’ cycles visible in the UK economy under the Tories and that Britain was “best placed” of all the major capitalist economies to weather the economic slump.

This pathetic hubris was shown to be what it was by the ensuing slump that led to a contraction in the UK’s national output larger than anything seen in 60 years (as New Labour’ s Chancellor Darling admitted).  No wonder there is no way back for Gordon Brown.  According to the latest public opinion polls, with a just over a week to go before election day, New Labour is polling about 28% of the vote, or down to the level of defeat that it suffered in 1983 when Margaret Thatcher was ascendant after her military ‘victory’ in the Falkland Islands and in the recovery period directly after the economic recession of 1980-2.

In my blog in March, I raised the issue of possible ‘hung parliament’ where none of the major parties had an outright majority in seats in a new parliament and would be forced to rely on the support of another party to form a government.  Then I thought that was unlikely.  Now it seems the most likely result, if the current polls are to be believed.

How did the possibility of a hung parliament become a probability?  Never before in a British election campaign has the influence of TV been so great.  TV rules over public meetings, party leaflets and canvassing and even over printed newspapers.  Because none of the party leaders have been prepared to face the electorate in the streets and in public meetings open to all, but instead  just conduct ‘photo opportunities’ with the media or hold meetings stuffed and exclusive to party members and officials, the general public does not get to question party leaders.  Only through questions delivered by TV or radio interviews and, above all, in the three great TV ‘debates’, do people hear the leaders’ policies put under the searchlight.  So it seems that whoever performs well on the night, rather like performers on the X factor, gains support – and that has rewarded Nick Clegg, the Liberal Democrat leader, at least so far.

The real positions of the parties remain obscure.  But there is one thing that New Labour, the Conservatives and the Liberal Democrats all agree on.  Public spending must be cut drastically in order to get the public sector debt burden down to ‘manageable’ levels.  Apparently, there is no alternative, as Margaret Thatcher famously used to say.

There is no talk of why this huge debt burden has arisen in the first place.  Is it the fault of public sector workers in Greece, Iceland, Britain, and the US?  Well, it is they who are going to lose their jobs while the services they provide to millions will be dismantled.  The government deficits and debts have arisen because the British banking system had to be ‘bailed out’ with taxpayers money or it would have taken capitalism down into a tailspin.  The resulting economic slump led to rising costs for unemployment and social benefits and a collapse in tax revenues – the banks paid no tax at all and many large UK companies also avoided any tax.

Sorry about that, the leaders say, but we’ll make sure it’ll never happen again.  In the meantime, we have to make cuts and you have to pay.  They are not telling us the truth about how large these cuts are going to be.  The politicians talked about “tough choices” – the Conservative shadow chancellor talks about a coming “age of austerity”.  They differ merely on when they start cutting and by how much.

The Institute of Fiscal Studies reckons that the Conservatives would plan to cut spending by £57bn a year, in today’s money, by 2015-16. The Liberal Democrats would cut by £51bn by 2016-17, and Labour would need to find cuts amounting to £47bn by 2016-17.  Given the protection that Labour and the Conservatives are offering to some departments like health or education, the cuts for other parts of spending would be even greater than these headline figures imply.

According to the IFS, the years 2011-2015 would involve the “deepest sustained cut to spending on public services since 1976-80”, when the UK was forced to borrow from the IMF. The Conservatives’ plans, starting in 2010, “imply cuts to spending on public services that have not been delivered over any five-year period since the Second World War.”

The IFS also confirms that tax increases over the next Parliament would be highest under Labour: in the region of £24bn, of which £17bn have already been announced.  The Conservatives would be looking for total tax increases of £14bn, including many of those proposed by Labour. But the pledge to avoid Labour’s National Insurance rise, along with other Conservative promises, will probably mean the Tories would need to raise taxes by an extra £3.5bn over the Parliament.

So there we have it – all three parties aim to clobber our public services and cut probably up to 500,000 public sector jobs over the next parliament, while also raising taxes further.   Whichever combination of coalition in parliament is formed after 6 May will make little difference.

There was and is an alternative.  The banking system should be a public service that looks after our money in deposits and provides loans to households to purchase big ticket items and small businesses to invest.  It should not be in the role of gambling and making bets on stocks and shares, bonds and even more exotic financial instruments with our money in order to make huge profits for its shareholders and grotesque bonuses for its top executives (the so-called ‘smart people’).   Public ownership of the banks under regulation and control of elected representatives could even now turn the financial sector into a socially useful sector of the economy.  That would go a long way in avoiding the financial crash that has led to the huge debt that the people of Greece, Iceland and Britain, among others are now being asked to pay.

It would also go a long way to avoiding the public spending cuts planned by the three parties as bank profits could be diverted from shareholders and bondholders to the government coffers.  As I write, the big UK banks are announcing their earnings for the last quarter – they are all returning to profit and in some cases to big profits.  So are many other large corporations.  This cash would go a long way to sustaining public services without large tax rises and even reduce the debt burden.

There is more to be said on this – but let’s stop there.

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