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How to fight spending cuts

As Britain heads for state bankruptcy, we urgently need a bold strategy that rejects the massive cuts in public spending being planned by New Labour and the Tories because, clearly, the present economic set-up is not sustainable.

On the one side is growing mass unemployment, especially among young people, a rise in repossessions and growing poverty; on the other side, there are hidden plans for government-inflicted pain on key services because the economic and financial meltdown has devastated public finances.

A report today from the National Audit Office (NAO) reveals the steepest decline in government revenues since the 1920s. They fell by an estimated £32 billion or 5% in 2008-9, as the recession took its toll on taxes and VAT receipts. Taking this and bank bail-outs into account, the government will have to borrow a massive £230 billion in the coming year or about 40% of 12 months’ public expenditure.

There’s no guarantee that the financial markets will stump up this sort of money or, if they do, the interest charged will rise to take account of the possibility that the state may not be able to meet its repayment obligations. All this means that whoever wins the next general election will slash and burn to balance the books.

If you want to see the consequences of losing control of state finances, you need look no further than Ireland. The country has gone from being the so-called Celtic Tiger to the toothless pussycat in the flicker of an eye, joining Iceland as one of the most precarious economies in Europe.

Irish prime minister Brian Cowen has put his name to a 300-page report that includes proposals to slash social welfare payments and make cuts in healthcare and education. “The scale of the issues are such that no area of expenditure is immune from consideration,” he warned.

The Cowen government, which includes the Greens, has already passed two emergency budgets to stop the deficit soaring to 15% of the country’s annual wealth. They have not been enough. At least 17,300 public sector workers could now be laid off, even though unemployment is already 12% and heading for 16% next year.

Education faces severe cuts. Scores of rural schools will close, and 6,900 teachers must go. "The attacks outlined in this report would represent an education disaster and light a short fuse on a social time bomb," said the Teachers Union of Ireland. Child benefit is being reduced by 20% in a desperate bid to cut government borrowing, which is running at £345m a week, with punitive interest rates a large chunk of the bill.

If ever proof was required of the insane nature of capitalism, what is taking place in Ireland and what is planned for Britain is surely enough evidence to convict. Services built up over decades as the result of the campaigns and struggles of ordinary people are suddenly to be dismantled because global capitalism not only isn’t working but is on a path of self-destruction.

A crash programme is required to stabilise the position as a first step to reorganising the economy in a more sustainable way. The programme has to include:

Of course, neither New Labour nor the Tories would dare to challenge the vested interests of capitalism in this fashion. Carrying through this alternative to horrific spending cuts will require the building of a movement for revolutionary change that can turn society upside down – or perhaps put it the right way up!

Paul Feldman
Communications editor
21 July 2009

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