Thursday, October 21, 2010

Spending review axe falls on the poor.

I know it's just me, but I found it quite sickening to watch Nick Clegg pat George Osborne's back as he sat down having announced his brutal spending cuts.

Osborne was as smarmy and self pleased as he always is, as clear a product of the upper end of Britain's class system as one is ever likely to see, taking obscene pleasure in removing vital benefits from people in need.

Outlining his long-awaited comprehensive spending review, which will cut £81bn from government spending, Osborne vowed to restore "sanity to our public finances and stability to our economy". Perhaps the most striking of the new cuts announced was a package of £7bn in extra welfare cuts on top of the £11bn already made in the last budget. This will include the withdrawal of £50 a week from the million people claiming incapacity benefit for more than a year.

In a rapid-fire speech to the Commons, Osborne slashed £350m from the legal aid budget, reduced the police budget by 20% over four years, and hacked two-thirds off the £9bn communities department budget, including more than halving the support for social housing over four years. The pension age will rise to 66 from 2018.

Rail fares will be allowed to increase by 3% above RPI inflation from 2012, higher education spending will be cut by 40% – £2.9bn – by 2014/15, and flood defences by 15%. Further education will be cut by £1.1bn by 2014/15 and the "poorly targeted" education maintenance allowance for 16- to 19-year-olds is abolished.

And, most sickening of all, he then reduced the entire process to an Oxford debating society game, by announcing that the extra £7bn savings on tax credits and a range of other welfare benefits had enabled him to limit the overall reductions in the budgets of Whitehall spending departments to 19% over the next four years – less than the 20% pencilled in by the Labour chancellor, Alistair Darling.

If that wasn't an example of pathetic schoolboy one-upmanship, then I don't know what else it could possibly be.

For months he spoke of the need to cut these departments by between 25 and 40%, only, in the end, to play a game where he could score the cheapest of points against his rivals. And that tactic was only made possible by further slashing benefits needed by the poor, the old and the disabled.

Alan Johnson did well to point out the obscenity of what we were witnessing.

"We have seen people cheering the deepest cuts to public spending in living memory," he said. "For some people opposite this is their ideological objective. For many of them, not all of them, this is what they came into politics for."

And that, I think, is what I found the most obscene about the entire process. Had they announced these cuts in a sombre mood one might have deduced that we were witnessing what Osborne has always claimed, a government having to do something because there was no alternative. But what we witnessed was a Conservative celebration. Conservatives cheering to the rafters as they deprived benefits to the incapacitated, and slashed money for social housing. It was quite a sight. To see people actually cheering as they celebrated the loss of 490,000 public sector jobs over the lifetime of this parliament.

And the myth that the deficit will be paid on the shoulders of Britain's highest earners was exposed as the lie it always was. It is the poor, the disabled, the unemployed and the old who will be asked to suffer the most.

Taking the measures one at a time, the first – and the biggest – was to "time limit contributory employment and support allowance" for one year, that is the benefit formerly known as incapacity benefit. What this means is that a disabled or seriously sick person who has a working spouse, however low-paid their job may be, will lose their personal entitlement to benefits after a year.

Singles will be able to fall back on a means-tested safety net, but everyone else will be forced to rely on the generosity of their partner. Expect wheelchairs in Downing Street as the coalition does away with the long-established principle that people who have contributed their own national insurance in the past, and then become sick and disabled, should expect a modest stipend from the state in recognition of this.

On housing benefit, already savaged in June, there was a move to link the maximum rents paid for council and housing association properties to the market rent, something which will further encourage the cleansing of the poor out of central London.

This is what his Conservative colleagues were applauding. Reducing the savings credit, which rewarded pensioners who had saved from seeing their income support entitlement removed pound by pound to, in effect, punish them for their prudence.

How that fits in with the Tory philosophy is simply beyond me, especially as he went to such lengths to placate the equitable life savers of Middle England.

But, as much as Osborne and the rest of them will harp on about the reductions being 19% as opposed to the threatened 25% or 40%, one thing is worth remembering: these are the most brutal cuts in public spending in Britain since WWII.

And they do risk - the loss of 490,000 jobs in the public sector alone highlights the risk - of a double dip recession.

Those who oppose Keynesian economics, as Osborne clearly does, are pinning all their hopes on the Confidence Fairy.

Advocates of austerity believe that mystically, as the deficits come down, confidence in the economy will be restored and investment will boom. For 75 years there has been a contest between this theory and Keynesian theory, which argued that spending more now, especially on public investments (or tax cuts designed to encourage private investment) was more likely to restore growth, even though it increased the deficit.

The two prescriptions could not have been more different. Thanks to the IMF, multiple experiments have been conducted – for instance, in east Asia in 1997-98 and a little later in Argentina – and almost all come to the same conclusion: the Keynesian prescription works. Austerity converts downturns into recessions, recessions into depressions. The confidence fairy that the austerity advocates claim will appear never does, partly perhaps because the downturns mean that the deficit reductions are always smaller than was hoped.

It was brutal, and there is every chance that it won't work, and yet that was what caused Clegg to reach out his hand and pat Osborne's back as he took to his seat.

That moment truly made me wince. Because it shows that Clegg is not, as some have unfairly suggested, making deals for the sake of achieving political power. He is a true believer. He rejects Keynesian policies as vigorously as Osborne does.

My problem is that I think both of them are terribly wrong. And I fear we will all pay for their mistakes. And no-one, despite the claims of Osborne and Clegg, will pay more in the short term than the poor, the unemployed, the old and the disabled.

Watching Conservatives applaud that yesterday, and watching Clegg pat Osborne's back to celebrate his cruelty, are about as sickening a thing as I have ever seen on the floor of the Commons.


It's well worth reading Johann Hari on this:

George Osborne has just gambled your future on an extreme economic theory that has failed whenever and wherever it has been tried. In the Great Depression, we learned some basic principles. When an economy falters, ordinary people – perfectly sensibly – cut back their spending and try to pay down their debts. This causes a further fall in demand, and makes the economy worse. If the government cuts back at the same time, then there is no demand at all, and the economy goes into freefall. That's why virtually every country in the world reacted to the Great Crash of 2008 – caused entirely by deregulated bankers – by increasing spending, funded by temporary debt. Better a deficit we repay in the good times than an endless depression. The countries that stimulated hardest, like South Korea, came out of recession first.

David Cameron and George Osborne have ignored all this. They have ignored the warnings of the Financial Times, the newspaper most critical of their strategy. They have dismissed the warnings of Nobel economics laureates like Paul Krugman and Joseph Stiglitz, who have consistently been proved right in this crisis. They have refused to learn from the fact that the country they held up as a model for how to deal with a recession – "Look and learn from across the Irish Sea," Osborne said – has suffered the worst collapse in the developed world. They have instead blindly obeyed the ideological precepts they learned as baby Thatcherites: slash the state, and make the poor pay most.

It's simply never, ever worked before. And yet Osborne, Clegg and Cameron insist that this time it will.

It can't be coincidental that this is being done to us by three men – Cameron, Osborne, and Nick Clegg – who have never worried about a bill in their lives. On a basic level, they do not understand the effects of these decisions on real people. Remember, Cameron said before the election: "The papers keep writing that [my wife, Samantha] comes from a very blue-blooded background", but "she is actually very unconventional. She went to a day school." Osborne is a beneficiary of a £4m trust fund he did nothing whatsoever to earn and which is stashed offshore to avoid tax. Clegg actually thought the state pension was £30 a week, a level that would kill pensioners.

These attitudes have real consequences. We're not in this together. Who isn't in it with us? Them, their friends, and their families.


There are two stories in today's Independent which really do perfectly highlight the Tory mindset.

The first tells us that Tory whips had actually warned MP's not to look too happy when Osborne announced the cuts:
Tory MPs had been told by party whips not to cheer the cuts too loudly. The message was that the cuts were a grim necessity, not something to enjoy or do with ideological zeal.
What does it say about the Tories that their own whips actually have to warn them not to look too happy as they make 490,000 people unemployed? And, worse, when they find themselves unable to comply with such a request?

Then tucked away inside is this gem:

The Queen is set to become one of the wealthiest crowned heads in Europe after the future of the British monarchy was secured in a historic deal with the Government that will give the House of Windsor a share of the £210m profits from government estates relinquished by George III.

The Civil List and the parliamentary system for funding the head of state are to be abolished, and from 2013, the Queen will receive her funding directly from the Crown Estate, which owns £6bn of British land and business. The deal means the Queen, and her successors, will not have to dip into her private wealth to help fund her crumbling palaces and staff wages, reducing financial concerns for Prince Charles when he ascends the throne, and potentially leaving him with a vast income.

Nice to know, as Clegg, Cameron and Osborne are so fond of telling us, that we are all in this together. He actually announced this in the same speech in which he took away billions in people's benefits.

Click here for full article.

No comments: