It Doesn’t Have to be Cuts, There are plenty of Alternatives

John McDonnell

The backdrop to the Pre-Budget statement is the potential for the Government's annual deficit, previously estimated at £175 billion, to be on course to balloon up to £190 billion. All three main political parties are committed to reducing and eventually eliminating the deficit. Labour’s new Fiscal Responsibility Bill commits the Government to cutting the deficit by 50% in four years, while Cameron is proposing to eliminate the whole deficit in one Parliament. Clegg and Cable are calling from the sidelines for a detailed programme of “savage cuts.”

Despite threats to bankers’ bonuses and on-and-off calls for a Tobin Tax, none of the main political parties is willing to look at a serious increase in the tax take – either by increasing redistributive taxes or tackling large scale tax evasion and avoidance. Only the Chancellor and the most deluded elements of the Bank of England’s Monetary Policy Committee (MPC) believe that significant economic growth will materialise in the next two years to lift tax revenues and ease the deficit. The OECD is predicting no more than 1% to 2% growth up to 2011 – and David Blanchflower, former MPC member, is cautioning about the potential of a double dip recession.

The result is a consensus across all the main parties that demands a cutback in public spending not seen in this country since the 1930s.

To achieve a cut of £190 billion, even if the so-called ‘smart government’ savings were achievable, a Government would have to cut £30-35bn per year for the five years of that Parliament. This would require a 25% cut in public services. On this scale, the Government would need to make cuts that would include over 7,000 GPs, over 4,000 NHS dentists, over 400 NHS hospitals, over 750 secondary schools, over 100,000 teachers and over 10,000 firefighters. Welfare benefits and pensions would inevitably come under attack, and to secure this level of savings would mean cutting unemployment benefit to £45 per week and for the pension age to increase to 69.

If New Labour refuses to break the cross-party consensus on who is to pay for the economic crisis, we are facing the prospect of a sufficient number of Labour supporters staying at home at the General Election to allow the Tories to slip back into office or at best a hung Parliament based upon a cross party economic deal around public expenditure cuts.

The only hope of mobilising our supporters and Labour retaining office with a workable majority is a demonstrable, radical change in political direction by the Government, carried over into its election manifesto. An alternative programme to set out on a new course would include:

• large scale public service investment;
• ending privatisation;
• rebalancing our economy by creating and protecting jobs with investment in manufacturing;
• increasing the minimum wage, state benefits and pensions;
• building and refurbishing the affordable homes we need to overcome our housing crisis;
• making a real commitment to tackling climate change by adopting the green new deal programme for renewable energy and transport;
• securing a peace dividend by withdrawing from Iraq and Afghanistan and scrapping Trident and ID cards;
• confronting the corporate tax evasion scandals and tax injustices and the waste of public resources on Trident and ID cards.

Even at this late stage, adopting a programme like this – and unashamedly promoting it to the electorate – could save a Labour Government, and the economy, but time is rapidly running out.


*This article is taken from the LEAP Red Papers: The Cuts, which can be discussed in full on the LRC website