New Internationalist

Cuts, ahoy! Women and children first!

In the twisted chivalry of Britain's public-schoolboy-led Coalition, it’s 'women and children first' to brave the cuts deemed necessary to reduce the national deficit.

Ahead of the spending review on Wednesday, the Government has already made a full-frontal attack on child benefit. Other measures are sneakier in their sexism. The determination to cut thousands of public sector jobs will affect women disproportionately as so many are employed in the public services. Women are also greater users of public services facing the chop. 

While women and children (especially already poor ones) are about to be launched onto the cruel seas of austerity, the rich (mainly) male captains will remain on board the sinking ship – and crack open the champagne.

Because – and don't tell anyone this – the ship isn't really sinking at all.

In fact it's quite buoyant according to the International Monetary Fund which says we could double our deficit and still be okay. At £155 billion our current deficit is 70 per of GDP and the IMF says we could have a debt of 140 per cent of GDP without a bond crisis.

Having a big national deficit is actually quite a normal state of affairs – between 1920 and 1960 the British deficit never fell below 100 per cent of GDP. And immediately after the war it reached 250 per cent of GDP. What did Britain do then? It spent money on public goods like creating the National Health Service and building lots more social housing. It created jobs. It fostered recovery.

'But look at what's happened in Greece!' the pro-cuts lobby protests. OK. Let's look. Greece is not Britain. Its deficit is much larger than Britain's. Its tax gap – the gap between what it is meant to get in tax and what it does actually receive – is also much larger. Much of its debt was held abroad; most of Britain's is held within the country. And Britain, unlike Greece, has its own currency and so technically cannot default.

More useful, perhaps, is to look at what's happening in Ireland. Having gone fast and furiously down the cuts route it now has an economy that is too small to sustain recovery and is entering another recession. Like their forebears, Irish workers are once again migrating to find work. Spain has been cutting much more slowly – thanks partly to stronger public resistance – and is in a better shape for recovery.

Yet the view that fast and deep public spending cuts are ‘inevitable' appears to have gained considerable currency in the UK. This is partly because it's presented as a 'common sense' approach: we should not be living beyond our means; would we run our own households like this? (In fact, anyone who has a mortgage already does).

Tory chancellor George Osborne has indicated he wants to reduce the national deficit by £86 billion - some £66 billion of which is to be achieved by cutting public spending over the next six years. His more detailed plans will be revealed in the Spending Review on Wednesday, 20 October.

But if you take a closer look at what the cuts are going to cost, both socially and economically, the supposed savings start to evaporate. High unemployment wrecks lives, destroys communities. The economic, as well as the social costs, are pervasive and far-reaching.

If Tory plans to cut 725,000 public sector jobs go ahead, it will cost the UK economy £6.6 billion in lost tax revenue and an extra £8.8 billion to the State's benefit bill, according to research carried out by the trade union UNISON. This will have a knock on effect on private sector jobs. The Treasury has admitted that cutting 600,000 public sector jobs would cost 700,000 private sector jobs, according to leading tax analyst Richard Murphy, writing in Public Finance.

Small businesses dependent on public sector contracts will take a hit. Unison estimates that economic output will fall by £46 billion as a result.

The Government is likely to offer small bundles of benefits – sops and sweeties – in an attempt to counteract the 'nasty party' image that the Tories acquired last time they were in power.

But their intention in driving through public sector cuts is plainly political and ideological: to reduce the size of the state and to clear the way for a few private sector companies who will cherry-pick the bits that will make them rich and leave the rest. There will be profits for some, probably already wealthy, people – and considerable social and economic loss for many, many more.

What's the alternative? There are better, easier ways of raising money, by using a system that already exists precisely for that purpose: Taxation. 

Some tax increases are being introduced by the government but they account for less than a quarter of the £86 billion target. A lot more could be raised by tackling tax evasion and avoidance which are losing the country billions a year. In September Revenue and Customs estimate the gap between potential and actual tax is £42 billion. If you take into account the 26 billion paid in late tax, the gap increases to £68 billion.

However, even this figure is far too low, says tax analyst Richard Murphy – and the World Bank agrees with him. He reckons the tax gap is closer to £70 billion lost in evasion and a further £25 billion in avoidance a year.  Include the £26 billion late paid tax and that brings the total to £120 billion. If even a fraction of this were collected at once, damaging and costly cuts could be prevented.

UNISON too has produced an alternative budget that could save more than £78 million without cutting services and without affecting the incomes of the majority by making sure the financial sector and the super-rich pay a fairer share.www.unison.org.uk/acrobat/18887.pdf

For example: £4.7 billion could be raised every year by introducing a 50 per cent tax rate on incomes over £100,000; £5 billion could be raised every year with an Empty Property Tax on vacant dwellings which exacerbate housing shortages and harm neighbourhoods; £10 billion could be raised every year by reforming tax havens and residence rules to reduce tax avoidance by corporations and non-domiciled residents. £14.9bn could be raised every year by using minimum tax rates to stop relief being used to disproportionately subsidize incomes over £100,000; £20-30 billion could be raised every year by introducing a Major Financial Transactions Tax (or 'Robin Hood Tax') on UK financial institutions.

The long-term net cost of the bank bailouts have been estimated at £120 billion by the IMF. This money must be paid back. 

Meanwhile, even the IMF is advising that Britain borrow now to create new investment in the economy, to prevent unemployment and generate tax revenues.

We would go further and say: use this opportunity to invest in the green economy that we know we are going to need to combat climate change and to built eco-compliant social housing.


 SOME USEFUL FACTS

·        The Coalition's cuts will hit the poorest households 13 times harder than the richest, according to a TUC/Unison study.

·        Using public money to bailout banks has cost the country £120 billion, according to the IMF.

·        Public spending is not out of control. It's the private sector that has caused the problems. Before the credit crunch public sector debt was less than 40 per cent of national income while private corporate debt was out of control at 300 per cent of national income.

·        The UK still devotes a much smaller share of its income to the public services and social security than most other developed countries.

·        A Major Financial Transactions tax on banks could raise £30 billion - 15 times more than the government's paltry levy will raise.

·        Cancelling Trident could save £76 billion.

Look out for the Argument in next month's edition of New Internationalist which is - 'Are Cuts in Public Services Justified?'

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