Monday, 25 October 2010
Cuts, cuts, cuts - reality and perception
So what do we know about the public spending review announced last week by a smirking George Osborne, as his Tory colleagues cheered him and waved their order papers?
They are part of a package of measures being introduced since June of this year and still being processed.
Some of the facts and early assessments:
- £81 billion savings to be cut from public spending in the next 4 years
- 450,000 public sector jobs to go
- 2 year pay freeze for remaining public sector staff
- 62% cuts from local government and the communities department
- international development spending now subjected almost exclusively to Britain's military and strategic needs
- £5 billion yanked out of current spending in 2010 alone
- student fees up to £7000 a year, repayable now by interest-loaded loans, giving all but the richest students a hefty average debt of £23,000 at the start of their working life.
- £18 billion hacked off the welfare budget - mainly by reducing working age benefits for poorer households
- removal of child benefit from working mother if she or her partner are earning more than £38,000 a year
- a rise in VAT from 17.5% to 20% in january
- 25% cut in policing
- 25% cut in prisons and courts
- 27% cut in grants to local authorities
- one third of Forestry Commission land to be sold off privately to developers
- 2 newly commissioned aircraft carriers to be deprived of Harrier Jump Jets
- 20-year Building Schools for the Future programme valued at £55 billion cancelled so 715 new school buildings and services will be scrapped.
- estimated cut in housing allowance will force eviction of 170,000 poorest Londoners from their own city
- employment support allowance to be suspended after one year,(Tories say all welfare benefits to be tilted so that it would be more economic to have a job rather than be on benefit, but the majority of jobless beneficiaries will fail to find a job anyway within that new one year limit.)
When George Osborne announced the cuts in Parliament the Tories cheered and waved their order papers. Alan Johnson glowered with real anger when he gave his response in the Commons. (In fact, the Tories were only cheering an end of speech quip from Osborne that his overall 19% budget cut was marginally less than the one proposed by Alistair Darling before Labour lost the election. It still made it appear that despite Cameron's best PR efforts that they were ready cheer the cuts as a whole. It was a rare PR error for the Tories and in the next few years the Tory image-makers may yet regret that quip and that cheering as it is liable to repeated in Labour party broadcasts during elections).
Most people were dismayed at these results. Or were they?
The public initially reacted with a resigned shrug. Why?
After all, the Conservatives are bringing in measures which the Institute of Fiscal Studies has condemned as proportionately unfair on the poor and lower income families; 4 Nobel prize winning economists have expressed seriously concern that the savage cuts could lead to a double-dip recession and that the argument that the private sector will provide the jobs lost in the public sector, is almost without foundation, and at best a gamble.
So is the opposition gearing up to read a national sense of public outrage leading to a comprehensive condemnation of these cuts? It is trying, but it is missing a/ proper leadership, b/ a properly worked out alternative strategy, and c/ any large scale national public outrage.
This is because whatever the coalition government may get right or otherwise in this immense political and economic gamble, the one area which they have secured is the right PR. Amazingly, bcause of this, they have a sort of reluctant churlish form of public support for what they are doing.
Whatever else he has been, David Cameron has been a past-master at presentation of himself and his policies. He had been the radical anti-European anti-state Tory to his Conservative followers, but represented the face of progressive eco-aware liberalism to the country at large. Initially the electorate did not trust him because of this uncertain Janus-like image, but in view of the unpopularity of Gordon Brown he was given a modest dollop of public support at the last election.
He has proved canny in his dealings with the Liberal Democrats and knew how to extract power in such a way that he is not subordinate any longer to his Tory backwoodsmen.
Now the language is the language of "fairness" where we all, rich and poor apparently share equally in the social costs of the cuts. However this is pitched on top of a mantra repeated by both coalition partners, day in and day out since the election, that the current deficit is "Labour's legacy". This is Cameron's huge PR victory because the Labour Party was so absorbed with its own very boring fight for the leadership that it had no national platform on which to respond to these taunts about the reasons for the deficit.
There was no mention in the popular press or media to remind electors about the role in the slump of the bankers, the world recession, the overblown US real estate market and the undervalued Chinese currency flooding the world with Chinese goods exported in containers arriving empty from the Western world. There was nobody around to say "It was the bankers, stupid!"
Labour was not totally blameless of course and Ed Miliband was right to apologise for this. It is true that in the last year before the recession Gordon Brown could have built up a certain reserve from the golden boom years. In that period he was too involved in seeking to oust Tony Blair to concentrate on his economic record and perhaps hubris had set in. It is true that the bankers and savings companies should have been better regulated. But Labour was still too timid at the time, despite 12 years of power, of tackling the myth of an unbridled financial market and feared being lynched by Cameron, backed by a Tory press for doing so.
It is telling that Cameron with his tiny coalition majority has shown 20 times more boldness in action over the last 6 months than Tony Blair and Gordon Brown had shown over their first 6 years. He knows how to use the levers of power.
Cameron had prepared the "fairness" grounds so well that he and Osborne went out of their way to earn the ire of the Tory press and delegates at the Conservative conference over the removal of child benefit for those individuals paying the higher tax so as to be able to demonstrate 3 weeks later that the spending review was causing the rich to squeal with pain as well. The Insitute of Fiscal Studies has shown up the emptiness of this argument but many are still swallowing it.
The Government has shown that their number one priority is not economic growth, which remains a gamble, but the credit rating from Standard and Poor and from Moodys, as if they are to be the new arbiters of Britain's economic strategy.
The Tories retain their public support for their risky strategy because
a/ Labour has failed to challenge their argument that Labour is entirely to blame for the deficit,
b/ because they are still ready to show what they have NOT cut (including winter payout's for pensioners, capital schemes for London, the schools budget, pensioners' travel passes),
c/ they have promised action to cap immigration
d/ ensured that the most vital and delicate cuts will come through local councils, who will now reap the opprobrium for the Government's policies,
e/ they have concentrated their attackes on the welfare budget, described by them as an attack on "welfare cheats", a popular figure to denigrate around the housing estates, as well as among the middle classes.
The CBI big business giants have praised the Tory strategy but, interstingly enough, the Federation of Small Businesses has condemned it.
Labour has a minefield to cross here in order to regain public trust in their stewardship of the economy and seize the debate over the future of the economy.
So, here we go, Ed Miliband. Are you ready?
1/ With use of frequent reminders remind people about the bankers' role in the crisis and argue for taxation of banking profits.
2/ Play the emotional card. Use Alan Johnson as front man in showing the perversity and unfairness of the cuts, with lots of heart-breaking local examples, especially involving the elderly and children.
3/ Argue the case for protecting the small businesses which are vital for future growth but will suffer most in the economy. (Remind them of Sir Philip Green's principle official advice to the Government on saving in purchasing contracts - pay your suppliers late!)
4/ Don't simulate over which cuts are good or bad, but remember the general strategy that Tories cutting too much, too quickly and too unfairly.
5/ Cooperate with trade unions, charities and professional organisations seeking to challenge and protest against the cuts.
6/ Remind Lib Dem voters again and again what happened to their party leaders' election pledges.
7/ Be consistent with pre-election platform and support AV during the coming referendum. This will split the Lib Dems, show the electorate that Labour still favours "new politics", and if successful in referendum, the result will weaken Tories in next election.
8/ Show up the Tories' evasiveness over tax avoidance, especially citing the cases of Lord Ashcroft, Vodaphone and the banks.
9/ Suppport capital building programmes, especially in rail infrastructure, wind energy and social housing.
10/ Show those cheering Tories in the cuts debate again and again.
PS. Memo to Dr Liam Fox on possible defence cuts. Labour should guarantee its support.
1/ Do not renew Trident missile programme.
2/ Consolidate savings in Royal Navy. Share use of aircraft carriers with French fleet and French aircraft.
3/ Consolidate savings in Royal Air Force by combining with Polish Air Force in new Joint Striker Fighter programme. UK to replace Tornado, Poles to replace MiGs and SU-22s, and rely on British Typhoon Eurofighter and Polish F-16s squadrons working together on home front and in NATO operations. (Good historical precedent for Brit-Polish cooperation in the air - Battle of Britain vets would approve!)