The state and local government

³⁴⁴
Malcolm Wicks, Croydon North Labour MP, asked David Cameron: "How does this square with your advocacy of the 'Great Society' which, as I understand your thinking, would see an enhanced role for voluntary bodies?" He referred in particular to the Croydon Rape and Sexual Abuse Centre which is to lose its £30,000 grant. Wicks also urged the Prime Minister to meet a delegation from the local organisations to hear an explanation of the work they do and "the impact of the council's decision which in some cases will mean the closure of these bodies".³⁴⁵ And this contradiction – that is, cuts in funding for voluntary bodies despite the "Great Society" rhetoric about "an enhanced role" for them – is being replicated across the country.
The 'most socially unrepresentative parliament since the 1930s' (Seamus Milne)

Nick Clegg presented himself as the outsider in the April 2010 leaders’ TV debates. But, as Seumas Milne noted:

Clegg isn’t an outsider at all. Along with what he calls the ‘old parties’, the Liberal Democrats are an integral part of the political establishment, in Westminster and across Britain. Personally, Clegg is part of the free-market ‘Orange Book’ right of his party, which overlaps heavily with the dominant New Labour and Cameron wings of the other two main parties. There is already a three-party coalition in support of cuts, privatisation and the war in Afghanistan...which doesn’t reflect public opinion.³⁴⁶
Moreover, the Tory-Liberal Democrat government’s decision to hold down employers’ national insurance contributions but raise them for employees and ‘significantly accelerate’ cuts in public expenditure³⁴⁷ was ‘the product of an unalloyed elite...supported by the most socially unrepresentative parliament since the 1930s.’³⁴⁸ Roughly 40 per cent of Conservative MPs, 30 per cent of Liberal Democrats and 20 per cent of Labour MPs are Oxbridge graduates. According to an analysis by the Sutton Trust, 35 per cent of MPs in the new parliament went to private schools, which only educate seven per cent of all pupils. However, the backgrounds of many new MPs do reflect the ascendancy of the city and associated professions over the past decade: since the proportion coming from “financial services” has doubled to 10 per cent since 1997, those from “consultancy” has tripled to 12 per cent and the proportion with backgrounds in “business and law” has increased from 23 to 27 per cent. That is, although two former bricklayers and a miner do feature among Labour’s intake: ‘Ten years after Tony Blair and New Labour declared “we’re all middle-class now”, the claim appears to be largely true – at least of the new House of Commons’.³⁴⁹ And local government will be hardest hit by the cuts announced on 24 May 2010: since – out of £6.2 billion overall cuts – just under £2 billion in-year savings will come from local government-related spending. Local government itself will face £1.166 billion cuts, while Communities and Local Government and its arms length bodies face a further £780 million.³⁵⁰

The resignation of “hatchet man” David Laws, the Chief Secretary to the Treasury on 29 May 2010 – following his decision to pay back £40,000 in expenses he claimed to pay rent on rooms in the home of his long term partner³⁵¹ – also indicated both the continuity of “old” and “class politics”. For, as John Wight pointed out:

Bottom of Form

The sickening hypocrisy of the political class...with regard to the resignation of David Laws provides a sharp lesson in the class divide which continues to define British society....anyone caught claiming 40 grand in housing benefit they weren’t entitled to...certainly wouldn’t be eulogised all over the media...On the contrary, they could expect to be pilloried in the most withering terms before facing the courts and the near certainty of a prison sentence.³⁵²

We are not "all in this together"

The resignation of Laws will not affect the coalition government’s strategy to further accelerate cuts in the autumn, which are now subject to “peer review” by the neoliberal EU.³⁵³ For, as David Cameron on 7 June 2010 warned, dealing with the public deficit would be “unavoidably tough” and would affect “our whole way of life”. Conversely, as Dave Prentis, general secretary of UNISON, the largest trade union in local government, said: Cameron’s speech was a “chilling attack on the public sector. There was nothing in this speech that told the rich, the banking and financial sector or the city speculators that their privileged way of life will change.”³⁵⁴ The consultancy firm Capital Economics, moreover, believes that 750,000 jobs will go in the public sector under the new austerity measures, with the hoarding of labour during the worst of the recession resulting in little compensatory hiring from the private sector. It expects unemployment to climb close to, or perhaps hit, three million.³⁵⁵

Similarly, in a report published on 10 June 2010, the
Chartered Institute of Personnel and Development (CIPD) predicted that the government’s spending cuts will increase unemployment to 2.95 million in the second half of 2012, which will remain at this level until 2015 – the entire period of the coalition government. ‘There is little prospect of real wage growth on average throughout this period and ongoing real wage cuts in the public sector’, according to the CIPD, which also concludes that that the freeze on recruitment in Whitehall followed by the wave of job cuts in local government, police and schools could slash the number of public sector staff by around 15 per cent (750,000 jobs). It said the burden of cuts would fall on the most disadvantaged and present a major challenge to a government that has pledged to "protect people living in poverty and enhance social mobility". The CIPD also suggests that a majority of the staff likely to lose their jobs will be women in part-time work or on low wages, who make up a large proportion of the public sector workforce.³⁵⁶ CIPD chief economic adviser John Philpott said redundant public sector workers in previous recessions found work in the private sector, but this was unlikely given the poor state of the economy and the austerity measures taken in the Britain's major export markets in the eurozone.
The fallacies of the Canadian model

According to John Phillpott:

It is evident that the coalition government's approach to deficit reduction owes much to that successfully pursued by Canada's Liberal government in the 1990s. This resulted in the loss of 265,000 jobs from the then 3 million-strong Canadian public sector workforce and an eventual fall in the share of public sector employment in total employment from 26 per cent to 19 per cent. On an equivalent scale, this translates into around 500,000 UK public sector job cuts, in line with the CIPD's own pre-general election baseline estimate for the period 2010-2015. However, the latter estimate was based on a roughly 60:40 split between cuts in public spending and tax hikes as means of deficit reduction. If as seems likely the coalition government adopts a split closer to 80:20, UK public sector jobs losses of around 725,000 are expected.³⁵⁷
Moreover, as the TUC points out – although Canada reduced its deficit by half – economists estimate that 'around 80 per cent of this decline was due to the expansion of the economy as a result of growth across the world during the 1990s and early 2000s'; and 'there is “grave doubt on whether the degree of social spending cuts was ever warranted or needed to balance government budgets”'.³⁵⁸ And, as TUC general secretary Brendan Barber said, the coalition was in danger of damaging the economy and increasing the north-south divide:
Northern regions depend more on public sector jobs, and staff who lose their jobs will find it harder to get new ones. The private sector will be hit hard too as public procurement is cut. The risk of a double-dip recession across the UK as a whole is growing – and is now a near certainty in those regions that were worst hit by the recession. The net result could well be that the deficit is hardly dented as tax receipts fall and benefit spending grows.³⁵⁹

In the next five years 1.3 million jobs will be lost

A private Treasury assessment leaked to The Guardian, which was published on 30 June 2010, shows that George Osborne's austerity budget will result in the loss of up to 1.3 million jobs across the economy over the next five years. A slide from the final version says: '100-120,000 public sector jobs and 120-140,000 private sector jobs assumed to be lost per annum for five years through cuts'.³⁶⁰ Hence the government – due to the biggest cuts in public expenditure since the Great Depression of the 1930s – is expecting between 500,000 and 600,000 jobs go in the public sector and between 600,000 and 700,000 to disappear in the private sector by 2015. The private sector will be affected both through the loss of government contracts and from the knock-on impact of lower public spending. The Treasury is assuming that growth in the private sector will create 2.5 million jobs in the next five years to compensate for the spending squeeze. But, as John Philpott said there "is not a hope in hell's chance of this happening": because Osborne was expecting a similar rise in employment over the next five years to that seen during 13 years of the last New Labour government, when around a third of the employment growth came from the public sector; and this "is a slower growth environment and there will be no contribution from the public sector".³⁶¹ Moreover, the political independence of the government's new Office for Budget Responsibility (OBR) was called into question when it then rushed out figures showing 490,000 public sector jobs will be lost by 2015 and 600,000 by 2016; and also projecting that there would have been only 30,000 fewer job losses to 2015 under Labour's spending plans. David Cameron during question time then quoted the OBR figures claiming that in the next two years public sector job losses would have been 150,000 higher under Labour's plans than under the Tories. But, as Patrick Wintour noted:
He did not mention the OBR figures showing that in the two years after that, the public sector job losses escalate far faster under his plans than Labour's. They also show that in 2012-13, total employment will be 110,000 lower under the Tory plans than Labour's.³⁶²
Monopoly capital's "special pleading"

These warnings coincided with the employers' organisation the CBI demanding that the public sector should bear the brunt of budget cuts, the chancellor should bring the top rate of income tax back down from 50 per cent to 40 per cent and water down plans to raise revenue from the better-off through tougher CGT rules and by restricting tax relief on pensions. TUC general secretary, Brendan Barber, said:

This is special pleading by the CBI. Not only do they want the deficit closed quickly, but they're saying that business should play no part in this. It beggars belief that they are calling for spending cuts that will inevitably hit the poor and all those who depend on public services, and for these people to suffer just to pay for tax cuts on the pensions of those earning more than £150,000 a year.³⁶³
Likewise, unions have also demolished the myths about 'gold-plated' payouts peddled by the CBI and Con-Dem ministers – in their attempts to divide public and private sector workers – by pointing out that pubic pensions cost £4.1 billion a year compared to the £10 billion a year that millionaires save in tax relief and that in local government the average pension is just £,4,000 a year, dropping to £2,600 for women.³⁶⁴ And unions have rejected the CBI's proposals urging Tory ministers – who came to power with only 36.1 per cent of the votes cast and the vote of only 23.5 per cent of the electorate (see Table 11.12) – to 'ensure industrial action...always has the support of 40 per cent of the balloted workforce in addition to a majority of votes cast'.³⁶⁵ For, as:

TUC general secretary Brendan Barber stressed...Britain 'already has some of the toughest legal restrictions on the right to strike in the world,' while civil servants union PCS leader Mark Serwotka pointed out that it was hardly a coincidence that the Tories were threatening new restrictions 'just as public-sector unions are planning co-ordinated industrial action to fight massive spending cuts.' Railworkers' union RMT leader Bob Crow weighed in against the threat to accuse ministers of 'declaring war' on unions because 'the Con-Dems know that by far the biggest campaign of resistance to their austerity and cuts plans will come from us. They are running scared and are now looking to tighten the noose of the anti-union laws around the workers' necks to choke off resistance,' he stated.³⁶⁶

Projects worth £10.5 billion frozen or cancelled

On 17 June 2010 the coalition government froze or cancelled £10.5 billion projects announced in the dying days of the New Labour government, suspending new libraries, hospitals and job schemes for young people. The symbolic Labour policy of free swimming for children and pensioners was also scrapped outright. Danny Alexander, the Liberal Democrat chief secretary to the Treasury, announcing the review of 217 schemes signed off by Labour since January, said £2 billion worth of projects would be scrapped completely. They include an £80 million loan to Sheffield Forgemasters, the £450 million North Tees and Hartlepool hospital building project, nearly £1 billion in programmes to help the unemployed and the government's £25 million contribution to the new Stonehenge visitor centre. Projects worth a further £8.5 billion have been suspended and will be revised in the autumn spending review, including a libraries modernisation programme, the Sheffield retail quarter, a Department of Health-funded wellbeing centre for Leeds and a new magistrates court for Birmingham. A new retail quarter for Sheffield was also put on hold and a £13 million grant to buy the old Outokumpu steelworks in the city was scrapped, in a further sign that many traditionally Labour areas are now losing out under the coalition government. The Department for Culture, Media and Sport separately spelled out a raft of cuts, some additional to the Treasury's announcements. It included scrapping the £45 million British Film Institute film centre on London's Southbank, which was to include five screens and rival Leicester Square in hosting international premieres. The BFI said in a statement: "We are concerned that film is bearing the brunt – over 50 per cent of the department's cuts that have been announced are coming from film." The new Stonehenge visitor centre will lose £45 million in public funding, though the government said it could still go ahead if private funding could be found. The roll-out of the Future Jobs Fund, an extension of the Young Person's Guarantee to 2011/12 and the two year Jobseekers guarantee – all programmes to help guarantee work or training for longer term unemployed people in the recession – were cut altogether, saving £995 million.³⁶⁷ George Osborne's emergency Budget on 22 June 2010 included these cuts.
The next phase of the crisis – 'a budget of the rich, by the rich, for the rich' (Roger Bagley)

The 'next phase of the crisis', as Hillel Ticktin notes, is therefore

one of fetishised class warfare, in which countries cut their budgets resulting in reduced welfare benefits, lower levels of employment, and declining salaries. These policies are sold as necessary....because the governments have acted injudiciously or corruptly. Thereby the blame, which rests with the ruling class, is passed on to governments....The press gives the impression that the system itself is sound but was let down by the greed of a series of big bankers.³⁶⁸
Moreover, for Marxists
the cause of the crisis lies with a system which has turned capital into its monetised form – finance capital....The switch to finance capital in the seventies was itself a mode of insulating the capitalist class from class struggle, and it is the lack of investment outlets...that lies behind the change in strategy.³⁶⁹
Hence Roger Bagley aptly describes the multimillionaire George Osborne's 'brutal' June 2010 Budget as 'a budget of the rich, by the rich, for the rich.'³⁷⁰ For, as the Treasury's Red Book – summarising the scale of 'consolidation' (the new code word for cuts) – states:
This Budget delivers additional consolidation on top of the plans set in the March Budget for the period to 2014-15, with additional spending reductions of £32 billion a year by 2014-15 and additional net tax increases of £8 billion. This results in plans for a total consolidation of £128 billion per year by 2015-16, consisting of total reductions in spending of £99 billion and a net increase in taxes of £29 billion.³⁷¹
Furthermore
once the Government’s commitments on protecting health and overseas aid are taken into account, other departments could see average real cuts to their budgets of around 25 per cent over the four years. This compares with the average real cuts of around 20 per cent for unprotected departments implied by the March Budget.³⁷²
And by 2012-13:
The impact of direct tax, indirect tax, and benefit and tax credit changes as an absolute amount by income decile is shown in Chart A1. The top decile see the largest absolute losses, losing more than twice as much as the ninth decile, and more than ten times as much as the bottom decile.³⁷³
The poorest will be hit six times harder than the richest

Analysis by the Institute of Fiscal Studies(IFS) – which splits out what was already in the pipeline (New Labour's proposals) from what was new in the budget up to 1914 – shows that the bottom decile (the poorest 10 per cent who were left almost untouched by Labour's plans) will see their incomes cut by more than 2.5 per cent (more than all the other nine deciles) with the top decile (the richest 10 per cent) only cut by 0.7 per cent.³⁷⁴ That is, the budget will cost poorer households nearly four times more than the richest ones – even before counting the swingeing cuts to public services which will disproportionately hit the poor. By 2014-15, the budget will reduce the income of the bottom 10 per cent of the population by more than 2.5 per cent, that is £5 a week. Given that the bottom 10 per cent of the income distribution, on an average of £190 a week, already struggle to make ends meet this reduction in incomes will hit families hard and plunge more children in to poverty. For those fortunate enough to be in the top 10 per cent of the income distribution, incomes will fall by a mere 0.7 per cent or £11 a week. Moreover, as research by the Fabian Society shows, the combined impact of the emergency budget and future spending cuts on the poorest 10 per cent of households earning under £14,200 will cut their income by 21.7 per cent. By contrast, the richest 10 per cent – those earning over £49,700 – will only see a 3.6 per cent cut in their household income. That is, the poorest will be hit six times harder than the richest.³⁷⁵

In addition, a study by the House of Commons library on behalf of the shadow welfare secretary, Yvette Cooper, revealed that women will shoulder nearly three-quarters of the burden. Cooper stated that:
This is despite the fact that women's income and wealth is still considerably lower than men's. Even more significant, this doesn't include the impact of public spending cuts. As women make up more of the public sector workforce they will be more heavily hit by the public sector pay freeze and the projected 600,000 net public sector job losses.³⁷⁶
The analysis looks at a net total of £8 billion raised by 2014-15 through direct tax and benefit measures. It includes the effects of raising the personal tax allowance, the increase in capital gains tax, the freezing of benefits and the changes to pensions. A typical assumption in the analysis is: 94 per cent of child benefit recipients are women, so of the £975 million saving from child benefit, it follows that 94 per cent (£913 million) is coming from women and the rest from men. However, on capital gains tax around 27 per cent of receipts currently come from women, so of the £925 million additional revenue, 27 per cent (£249 million) is coming from women and 73 per cent (£676 million) from men. The analysis also includes the impact of changing to using the consumer price index for calculating benefits and tax credits. A weighted average is used in order to take account of the different impact of each of these on women and men. Men will pay £2.2 billion while women will pay £5.8 billion.³⁷⁷

TUC analysis reveals that at least half a million working families a year will lose more than £1,000 as a result of technical changes to tax credit allowances set out. Currently tax credit entitlements are calculated on a household's previous year's income. If a family's earnings fall during the course of a year – for example due to unemployment, illness, a family break up, retirement, bereavement or a household member losing working hours – their annual tax credit calculation is adjusted to take account of their new income. However, changes announced in the June Budget mean that from 2012-13 households receiving tax credits who see their wages fall during the year will have the first £2,500 of income they lose disregarded when their new in-year tax credit entitlement is calculated. The Treasury is expecting this change to save the government around £550 million a year. The TUC believes this represents a significant cut in families' income and that many of the lowest earning families will be particularly hard hit – although all families receiving tax credits who experience a fall in earnings will be affected. The government has been keen to point out that the Budget will mean low earners are £200 a year better off as a result of the increase in the threshold at which income tax is payable. However, TUC's analysis shows low-earning families whose incomes fall during the tax year will be much worse off – with most losing over five times more than they gain.

Table: 15.1 Household Tax Credit entitlements 2012-13 before and after the disregarded income rule change (all other changes announced in the Budget are included) for families