Forest of Dean & Wye Valley

Why the Cuts just aren’t necessary

In T. Chinnick on June 30, 2011 at 1:53 pm

Although the case against the Government-imposed cuts has already been made, the perniciousness and ubiquity of the myths underpinning and justifying the cuts’ agenda are so great that it becomes necessary to refute them yet again.
Myth One: The debt is historically unprecedented.
I doubt if the Government has claimed this directly, but the frighteningly effective propaganda campaign they’ve waged since the election has had the effect of instilling this utterly false notion in the minds of the general public.
The truth is that our national debt was greater in the post-war years, when we managed to build the NHS and the welfare state. It was bigger during the war when we were fighting the Nazis. It was bigger at the height of the Empire – and it was bigger during the industrial revolution. In fact Britain’s debt, as a proportion of GDP, is lower now than it has been for 200 of the past 250 years.
Myth Two: Labour’s public spending got us into this mess.
Again, not true. Our debt before the crash was actually the second lowest of all the “G7” nations. It remained below 50 per cent throughout Labour’s time in office – only breaking this limit (imposed by Gordon Brown in 1997) when we were forced to bail out the banks. It is also worth noting what the Tories were saying at this time. George Osborne pledged to match Labour public spending right up until the crash. He even said as late as 2007 that we should follow the example of Ireland by de-regulating banks and financial markets even further! Knowing this makes one thing crystal clear. If the Tories had been in office the crisis would have been even worse.
Myth Three: Only cutting the debt will produce growth.
Quite the opposite in fact. Herbert Hoover, president of the US at the time of the Wall Street Crash, took basically the same route as that now being taken by Cameron – ie, cutting spending to pay off the debt. Then called laissez-faire, and now called the “free market”, his hands-off approach helped to plunge America headlong into the great depression. It was only massive spending by the federal government after president Roosevelt’s election that saw the USA start to recover, and only the even more massive public spending of World War Two finally ended one of the darkest chapters of capitalist history for good.
Still not convinced? Then look at the world today. Ireland was hard hit by the crisis because it followed the Tory/George Osborne path of de-regulation. The remedy according to those same economists and financial “experts” who helped to create the crisis? Austerity! After a tough austerity package Ireland went bankrupt. Compare this to the case in America where Obama rejected the debt hawks and took the Keynesian road, instigating two unprecedented stimulus packages. The US economy is now growing – sluggishly yes, but it is growing.
Now let’s look at our situation. Gordon Brown, for all his faults, did the right thing by co-ordinating a global fightback to the crisis and, like Obama, instigating a stimulus package. Not only that but he began to bring forward capital spending projects planned for the future and cut VAT. This had the effect of stimulating the economy enough , so that we had begun to see growth towards the end of the last Labour Government and the early days of the coalition. After less than a year of Osborne and his cuts’ agenda, growth in the economy has ground to a halt. 
Myth Four: The only way to reduce the debt is by making savage cuts to public spending.
Wrong. If we do want to tackle the debt there are a number of ways of doing it. We could, for example, make the banks pay back all the money we lent them (350-£120 billion). We could introduce what has been dubbed a “Robin Hood tax” on financial transactions. This would only apply to transactions that didn’t involve the public, like bonds, derivatives, currency speculation, etc., and if introduced at just five per cent is predicted to raise more than £100 billion (and possibly more than double that). Or tackle tax avoidance which would generate somewhere in the region of £25 billion. these are just a fraction of the alternatives available.
What is so depressing about the national debate is that the Labour Party is mounting such a feeble defence. Its basic response so far has been the equivalent of saying, “sorry Mr Cameron, sir, I mean couldn’t we just cut a bit slower, sir?” Like Oliver Twist fearfully asking for a second portion in the workhouse.
The consequence is that opinion amongst the general public , and even among a worrying number of progressives, is that there is no alternative to the cuts. This approach is ultimately self-defeating for them, because it tacitly admits that the Tories’ premise is correct – and therefore it follows that it was Labour’s public spending that got us into this mess. The logical next step is to believe that public spending has to be cut. That prevents Ed Miliband and his team from mounting a proper defence both of their record in office and of the public sector. It makes it impossible for the Labour front bench to reveal the cuts agenda for what they are – a vicious, unnecessary and ideologically driven attack on the public sector. The Tories have quite cynically and shamelessly harnessed a crisis of the private sector to launch an attack on the public sector.
This leaves us on the left with the unenviable task of defending the public sector and promoting an alternative agenda. So when we go against not only the Government but the Opposition too (not to mention a complicit and unquestioning media) by saying that the Government should be spending not cutting, it makes us sound like we’re simply burying our heads in the sand.
We’re not, of course. The true effects of the cuts have yet to be properly felt. People still feel that although the medicine is hard to swallow it’s necessary and will work. If I’m right, and the cuts fail to revitalise the economy, people will start to wonder what on earth all the pain and hardship is for, and question whether the Government knows what it is doing. Only then will our agenda start to gain purchase with a public beaten down by depressed wages, higher inflation, higher VAT, unemployment and vandalised public services.
It would benefit the Labour Party enormously if it adopted a position comparable to the one I’ve outlined above. The sooner they adopt such a position the easier it will be for us to win the argument and, crucially, the more credible they will seem at the next election.
1: GQ Magazine 2011-04/11; Johann Hari, UK debt-deficit statistics.
2 Telegraph: Tories vow to match Labour spending
3: Osborne calls Ireland a “shining example”- the Times.


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