Saturday, 21 November 2009

Attention! Deficit disorder


John McDonnell MP

From today's Morning Star

This week the Treasury confirmed that the government budget deficit had reached record levels of £11.4 billion last month.

This bombshell means the experts have had to revise their estimate of what the annual deficit could pan out to be. A whopping £190bn is their calculation.

Add to this collapsing tax receipts as the recession bites and the costs of having over 2.5 million people unemployed, and you're left with a major economic headache.

The big three parties are all in firm agreement that reducing and eliminating the deficit are central priorities for the coming period, whoever is in office.

The only difference between them is the timescale they have in mind.

In the Queen's speech this week Labour introduced proposals for a Fiscal Responsibility Bill, which would commit it to cutting the deficit by 50 per cent in four years, while Vince Cable and Nick Clegg of the Lib Dems are calling for Gordon Brown to launch into "savage cuts."

As part of his strategy to position the Conservatives as the party of economic responsibility, David Cameron is playing hardball. He's suggested that a Tory government would eliminate the whole deficit in one Parliament.

Cameron's recent speeches referring to the iniquities of big government are crude attempts to lay down some semblance of justification for plans to cut public spending and reduce public borrowing.

His big-government theme is reminiscent of the Thatcherite arguments of the 1970s and '80s, when the government pushed policies to "get government off people's backs."

A return to economic growth could reduce the deficit, but even if the current recession is coming to an end, few would predict spectacular growth over the next few years.

The Organisation for Economic Co-operation and Development is predicting no more than 1 to 2 per cent growth up to 2011.

There is residual anxiety that the shaky US property market could still tip the British economy back into recession at any stage during this period.

The only alternative available to reduce the deficit is to secure more tax revenues.

But neither Labour nor the Tories are willing to increase taxes or take any serious measures to tackle the large-scale tax evasion and avoidance which are sapping our public finances to the tune of £150bn a year, according to the Tax Justice Network.

This political consensus across the main parties holds out the prospect of public service cutbacks on a scale not seen in this country since the '30s.

According to the Budget figures for 2009, the government's total managed annual expenditure is £671bn.

Even if we allowed for the predicted 1 per cent growth in the economy over the coming years, any government aiming to wipe off £190bn debt within one period of office would have to launch a programme of cuts of £30-35bn per year for the five years of that Parliament.

This would mean cutting 25 per cent of all government expenditure.

People need to be made aware of what a 25 per cent cut in public services would look like.

Crudely, 25 per cent cuts could mean the axing of over:

7,000 GPs
4,000 NHS dentists
400 NHS hospitals
750 secondary schools
100,000 teachers
10,000 firefighters.

The Tories have made it clear that they want to cut the welfare benefits bill, particularly the dole and pensions.

Cuts on the scale required to make any real impact on the deficit would require a cut in unemployment benefit, already the lowest in Europe, to £48 per week and raising the state retirement age to 69 immediately.

This is what we are now facing as a result of an economic recession created by bankers, speculators, profiteers and their supporters in government.

All the main political parties have decided that we will pay for this crisis, not the the institutions or individuals that caused it.

Having used our money to stabilise the financial system, the government has stood back and allowed the speculators to return to business as usual. Bankers are in line to receive £6bn in bonuses this Christmas.

But even if the main political parties are not willing to consider an alternative to this insanity, many people are.

Ordinary people are still fuming at the bankers with their bonuses and the politicians with their expenses, who colluded to bring about this crisis and who are now colluding to ensure it is us not them that pay for it.

The role of the People's Charter is to fill the vacuum left by the bankrupt strategy of these political parties.

By setting out a straightforward analysis of the crisis, the charter provides an alternative view of causes of the unemployment and the threat to our public services that we are facing.

By setting out a common-sense set of basic policies, the charter offers a way of developing an alternative strategy to take the economy out of recession in a way that could transform the future of our society.

Already endorsed by trade unions, the TUC and enthusiastically supported by the Labour Representation Committee at its annual conference last week, the charter is beginning to catch the wind at a time when an alternative to the sterile consensus of the main political parties is desperately needed.

The charter could be the benchmark by which people will decide how they cast their votes in the coming election.

John McDonnell MP is Chair of the Labour Representation Committee.