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U-turn, what U-turn?
Billions in cuts still to come

Gerry Gold analyses the reality behind the headlines of the autumn statement and concludes that far from ending, austerity is deepening.

Behind the apparent U-turn on tax credits is a more sobering fact. Billions upon billions of cuts to welfare, education, transport, public health are on the way, as a close reading of the autumn statement makes clear.

The Institute for Fiscal Studies summed it all up: “This is not the end of austerity. This spending review is still one of the tightest in post-war history,” said director Paul Johnson. “The long-term generosity of the welfare system will be cut just as much as was ever intended."

According to the Office for Budget Responsibility (OBR) “the cost of the tax credit reversal is more than offset by cuts to a variety of other benefits”, even if delayed by a year or three as the switch to Universal Credits kicks in.

squeeze more severe than anything to date

As the OBR put it in the run-up to the statement, “in 2016-17 and 2017-18 the squeeze becomes much more severe than anything we have seen to date”.   

The Scottish, Northern Irish and Welsh budgets see real cuts of 5%, 5% and 4.5% respectively.

Increased spending on health will be entirely absorbed by expected hospital deficits of £2.2 billion and the seriously troubled proposed shift to seven-day working. Anita Charlesworth, chief economist at the Health Foundation, put the increase into context. Health spending per head would remain static, she said, with the proportion of GDP actually falling.

“The total health budget is rising by £4.5bn in real terms over the next five years, an increase of less than 1% a year above inflation. This means real terms health spending per person will be broadly the same at the end of this decade as it was at the start, despite the growing needs of an ageing population. The share of UK GDP devoted to publicly funded health will fall from an internationally low 7.3% in 2015-16 to just 6.7% of GDP in 2020-21.”

The encouraging noises from OBR offering an unexpected bonus of £27 billion for the budget come largely from a change to the way they calculate the forecast income from national insurance contributions and VAT – and from crazily optimistic estimates of growth.

factored in global economy in retreat?

Have they factored in the underlying reality of a global economy in retreat, with growth slowing, quantitative easing programmes failing to prevent recessions, commodity prices dropping, demand shrinking, capital investment falling? It doesn’t look like it. But it does make you wonder whether they’ve taken account of the loss of tax income from retailer Boots when it joins the exodus to tax havens later this year.

There’s a definite strategy at work in this latest package, and its one that George Osborne is determined to pursue even when knocked slightly but temporarily off course by the unelected Lords.

Boosting the secret state will be used to attempt to head off and suppress opposition from wherever it arises. The security and intelligence agencies will see their budgets rise by 18% in real terms.

In the wake of the slowest recovery from crisis since the industrial revolution despite six years of intense austerity and continued monstrous injections of new credit, Cameron and his chancellor are set on continuing to accelerate an unprecedented transfer of value.

Inequality, already at record levels, will grow as wealth shifts further away from the majority to the minority who own the global corporations and investment banks. The majority will be left to borrow to make ends meet.

UK forecast houshold debt

That’s the context for changing student nurses’ grants into loans; and for the £7 billion direct handout to boost the profits of the big house builders primed supposedly to add 400,000 houses for purchase by a new generation of mortgage debtors.

Private sector tenants’ rents will rise to pay the 3% stamp duty surcharge on buy-to-let landlords’ property purchases. Will the housing crisis be eased? Not when caps on housing benefit undermine provision by housing associations, and when those associations’ accumulated debt is sold off to the private sector.

And then there are the tax increases. As well as a toothless apprenticeship levy on business, householders are set to pay up to 2% more in council tax to prevent the collapse of the social care sector, much of which is contracted from for-profit private providers.

In their professed, but hopeless determination to turn a deficit into a surplus, the Tories are pressing ahead with selling off publicly-held assets, so that they can be remodelled and start to turn a profit for the lucky investors.

As well as releasing an additional £4.5 billion worth of surplus land and property assets to the private sector, and loosening planning controls to allow unregulated development including fracking, state assets to be sold off include the Land Registry, Ordnance Survey, Green Investment Bank, and National Air Traffic Control Services.

Any pretence of action on climate change has long gone as businesses come under increasing pressure. Renewable energy levies are to be lifted for heavy industrial energy users in the name of profitable competition. Funding for carbon capture and storage technology research and development has been ended and renewable heat incentive payments reduced.

26 November 2015

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