Say No to the Cuts

04/05/2011

Say No to the cuts  - Reject the Coalition's Big Lies (taken from NW Regional Government Service Group Motion to LG Conference 2011)

SAY NO TO THE CUTS

REJECT THE COALITION’S BIG LIES

BIG LIE: An Unprecedented Deficit Due to Government Overspending

Deficit is the difference between government spending and the income from tax receipts. Global recession created by the banking crisis caused job losses and reduced company profits, so UK tax take fell dramatically in 2008/9 - £100 billion less than it would have been without the recession. Government had to borrow more to make up the difference, although the rate of spending increase remained the same, so the national debt increased. That’s what caused the deficit – not government overspending.

BIG LIE: The National Debt is Out of Control

Debt must be seen as a proportion of Gross Domestic Product (GDP, the national income) and the cost of repayment. UK GDP in 2010 was £1.435 trillion – the 6th highest GDP in the world. Net national debt was £952 billion, the bulk of which is private, personal debt through mortgages, mortgage equity and easy credit granted by banks during 2000 to 2009 (before they took £15 billion out of the economy last year). That’s a debt ratio of 64.6% of GDP, and if we exclude the £100 billion of bank debt taken on through the bailout it’s 57.1% of GDP.  From 1691 to the present that debt-GDP ratio has only been lower in around 60 of those years. It was higher throughout most of the 20th century, peaking at 261% at the end of WWII falling to 133% by 1960 – during which time public spending built the Welfare State.

BIG LIE: Debt Repayments Are Higher Than Ever

Government ministers often trot out that interest payments are costing us £120 million each day, representing 2.84% of GDP income. In 1981, during the Thatcher government onslaught, debt repayment was 5.15% of GDP income, or £174 million each day. In 2010 just 6p in every £1 of government spending went on servicing debt. As recently as 1996 it was 8p in every £1.

BIG LIE: Cuts are Inevitable and Necessary

In 2010 the deficit was forecast to be £167 billion but was actually £145 billion, mainly because the economy returned to slow growth so the tax take began to rise again. Yet the Comprehensive Spending Review will take £83 billion of public spending a year out of the economy by 2015 - £6.1 billion from grant funding to local government alone. This will have disastrous consequences –

·         A million potential job losses, pay restraint and reduced conditions with consequential massive loss of tax income and increased benefit spending;

·         Public services reduced or stopped altogether;

·         Decimating the framework of the Community and Voluntary Sector;

·         Disproportionate impact on the lowest earning households, the most vulnerable, women and families, young people;

·         Further widening of pernicious income inequality;

·         Prolonged economic downturn, potential recession, significantly delayed recovery.

The detrimental social legacy created will be felt for generations.  But the one thing it is unlikely to do at all is reduce the deficit– which could actually grow.

Canada’s austerity programme in the 1990’s is held up as a model of “progressive Conservatism”. Education was cut by 12%, health by 18%, social services by 20%, benefits by 21%. At the time the deficit was halved but economists put that down to the global economic growth of the time. Canada’s debt-GDP income ratio remains higher than the UK. Ireland is also quoted after moving into recession in September 2008. But unemployment nearly doubled, the economy shrank by 10%, the tax take fell and the deficit has not improved.  The world’s leading economists, including Nobel Prize winners, agree that you don’t cut your way out of recession.

BIG LIE: There is NO Alternative to Cuts

Measured, steady economic growth is the only sustainable way to reduce the deficit and the national debt, including improved technologies and rebalancing the economy away from over-reliance on finance in favour of increased manufacturing and production. This increases the tax take by maintaining and creating jobs and through trade revenues. Public spending is a key component to stimulate employment and responsible private sector growth, support the community and voluntary sector and through its beneficial multiplier effect on local economies.

There are 13 years to repay government borrowing (longer in some cases) so there is no need to try and pay off 100% of the deficit in just 4 years – at a time when, as the FACTS show, our debt is low in real and historical terms as is the cost of repayment.  Even under the current tax regime £100+ billion is lost each year through avoidance and evasion, yet the Government is cutting the tax collecting service. UK tax take accounts for 36.6% of GDP income, the EU16 average is 40.4%.

There is room for genuine debate about an alternative economic approach to massive cuts. But that space is being denied by the shared ‘conventional wisdom’ of the main political parties and most of the media. The only ‘real’ debate is on “how deep and how fast” and not whether cuts are actually necessary or desirable.

The Government claim that there is no alternative is the Biggest Lie Of All. Their real agenda is exposed as nothing to do with the deficit or economics. It is entirely ideological – to massively shrink the state as fast as possible as an accelerant for fundamentally reshaping society.

Dismantling Local Government – The Impact of the Cuts

As a proportion of its government grant funding local government is taking one of the biggest hits of all public services. Government ministers talk about back office efficiencies and profligate waste yet local government has delivered 24% efficiency savings in the last 8 years. It is just impossible to make cuts of this magnitude, together with halving capital funding, without affecting all services in some way.

Different studies have concluded that the North West will feel the impact more severely than anywhere else. The major population centres of Liverpool and Manchester are in the worst affected authorities nationally. Across the Region we are seeing huge cutbacks to adult social care, children and family services, Connexions and youth services, libraries and museums, leisure, grounds maintenance, refuse and cleansing, construction and property related services, public health and protection.

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