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Resist the ideology and embrace the facts

February 20, 2011

When George Osborne read out his budget in June 2010 Liberal Democrat MPs looked as if ‘their dog had died’. Conservative MPs were ecstatic, whooping and cheering as the list of things that the Government were not going to pay for anymore was read out.

They were celebrating cuts to Education. Celebrating cuts to Housing. Celebrating cuts to all our public services. Rejoicing at corporation tax cuts for the next four years(1).

I was not there myself. That was the account Diane Abbot gave of the death knell of the public sector today at Progressive London; a day where people left of centre from across the social spectrum gathered to have a good moan about it all.

The cuts feel wrong. But feeling that something is wrong is not enough. The Conservatives ‘feel’ a welfare state is wrong and use this as their basis to almost eradicate it from existence. They ‘feel’ that the NHS is not working and have a ‘feeling’ that the free market will make it better again.

We cannot use the same way of thinking to strategise our response to this nonsense. And there is no need to. Mehdi Hasan, your battle cry has been heard: ‘these people are there for the taking’.

What follows are FACTS that I encourage you to share, talk about, discuss, disseminate and even dispute with everyone you know because the cuts are WRONG, this Conservative party is DANGEROUS and its about time we put their silly ideas to bed, once and for all.

FACT 1: The deficit of a country bears no resemblance to your credit card bill.

Layman’s language is a funny old thing. Politicians talk about deficits, inflation, interest, quantitative easing, taxation and investment, which are easy concepts in principal (well, not quantitative easing).

The economic and political conditions that influence decisions on these things are not so easy to understand. Conservatives, Neo-cons and other people we can file under ‘ignorant’ love describing the UK deficit as a bank account that is £130billion overdrawn. They say the less we take out, the sooner we can stop seeing that ‘insufficient funds’ warning when we try to withdraw ten pounds from the hole in the wall (2).

This is dumbing down to the Nth degree.

All governments are too big to control deficits. I have a better analogy. It is a little longer but bear with me.

Imagine having an annual income of £10,000. And an annual expenditure of £20,000. You’ll be making yourself £10,000 poorer each year, right?

Wrong. Because £1,000 of your expenditure gets spent on an electricity bill. You need that to keep the lights on. You need the lights because you knit scarves for a living, and you cannot knit in the dark. Your scarf knitting business makes £2,000 a year, and it’s growing by 7 per cent a year. So it is important you continue to keep paying the light bill so you can not only keep earning, but keep increasing your earnings. It is not frivolous,  waste, it is required.

You spend another £1,000 for your son’s knitting classes. When he graduates he gets to work for you. This allows you to make more scarves and earn more money (it is really cold these days). But he really needs to learn how to knit before he can do that. So that expenditure is not a loss, it’s an investment too.

You spend £3,000 on wool…oh whatever, you get the idea.

The coalition is saying very unsophisticated things about cuts and the ‘necessity’ of them for the survival of our country and the ‘responsibility’ they are taking to make these ‘difficult decisions’. Do not fall for their crocodile tears. This is just smokescreen. They know the deficit is not that bad; that is why they cut Corporation Tax. They could afford to do so.

FACT 2: The UK is not in that much debt at all

We are at number 21 in the world for debt as a percentage of total income, below Canada, France, Belgium, Italy, Singapore, Portugal, Italy (in no particular order).

We are below the United stated and the WHOLE of the Eurozone if you include private debt.

What does this mean? Do have a friend, who is always broke? The kind of person who always asks if a proprietor accepts Visa Electron? The UK is NOT that friend, so there is no need to worry.

The Coalition is using the deficit as an excuse to downsize the welfare state. Obama’s commitment to government spending is not publically popular but it is economically successful.

We are doing the opposite. Why?

FACT 3: The cuts are ideological

The government should not cut public spending, it should cut the crap. The last three Nobel prize winners for economics say reactionary spending cuts are disastrous for the economy.

These people know what they are talking about. Cuts do not work. One hundred years of world economic history show a very negative relationship between decreases in public expenditure and the debt to GDP ratio. This means that when the government spends less, a country earns less.

These cuts are twice the size of Maggie ‘ the School Dinner Snatcher’ Thatcher’s cuts. They deny the unreliable efficiency of the private sector. In fact, they deny the inherent inefficiency of the private sector when it is vertically integrated into public service provision. The agency who employs the receptionist at your GP will want a cut. The firm that sells your GP your much needed mammogram demands a cut. Then the firm that takes a look at your results wants their percentage too. At every stage, every service a private company provides will be exposed to a percentage on top of the service charge.

We spend 8 per cent of our GDP on health. America spends 16 per cent. And we have an NHS!

The two changes that increase the GDP of a nation have proven to be population growth and technological change. The government is not yet asking us to bin our coils and buy a load of iPhones. Let’s expand on this ideology.

FACT 4: It is the intent of the coalition to sacrifice wages for credit rating

Conservatives believe high unemployment and low wages are the worthwhile costs of a better credit rating. This is because the better credit rating a country has, the easier it is to borrow money. This means a country can suffer tax cuts (from the rich) and remain viable. How ironic! A better credit rating to get into more debt.

Mervyn King said it himself in November 2005.

Real wages will be lower in 2011 than they were in 2005. They have been depreciating six years in a row. This is highly unusual, the last time this happened was in the 1920s.

In his words it is the ‘inevitable cost of the financial crisis’.

We know there is a cost to the financial crisis, but who on Earth why should  ‘alarm clock Britain’ have to pay for it? Because Conservatives believe in profits, and not people, should come first. This is their ideology.

It is not just about borrowing. It is about exports. All decent Conservative countries like to sell lots of stuff. At the moment, the current publically acknowledged fiscal policy to do so is to convert our diplomats into salesman, promoting our wares to their prospective countries. I am sure you remember when Osborne and Cable went to China to try and sell PG Tips in exchange for all the tea they had and a panda (probably).

There is more about their gallivanting here.

This is obviously not their real policy to increase exports, especially at a time when every country is trying to sell their cheap tat to someone else.

There are two better ways to make products cheaper and drive exports. Devalue sterling or depress wages.

Sterling is already devalued, and Mervyn has run out of printer ink to churn out more fivers. Pay cuts all round! The coalition thinks this is great because it will raise GDP. Who cares if GDP is growing if standards of living, public services and equality goes down?

The IMF, of all people, care. They support measurement of wages as a percentage of GDP before assessing debt.

They argue, quite correctly, that the explosion in private debt was because wages were not growing. They say the best way to grow an economy is to shift power structures towards the labour market, not business owners. The biggest benefit comes from investment, not cuts. They are the IMF! Who are we to argue with that?

FACT 5: Higher education is NOT a waste of money

The OECD says governments should invest in HE to boost employment. For every £1 invested in HE, £3.53 revenue in taxes is generated.

This is all I have to say on that matter.

FACT 6: There IS money left

Liam Byrne is not a funny man and he is not an accurate person either. There is plenty of money left. We know this because when we look at the world’s largest organisations, profits are rising.

They are literally swimming in it

Yet last year, the lowest number of houses were built in the UK since 1923. The private sector is having its own ‘investment strike’. They want to keep their money. This downturn is characterised by a refusal of business to invest in the countries they call home, and the coalition is adamant they will never have to (N.B. plastering bikes in London with the name of your bank is not investment).

Two simultaneous things are happening right now. The percentage of GDP that goes to wages is falling. The percentage of GDP that goes to profit is rising. In layman’s terms: we are getting shafted.

FACT 7: You do not have to put up with this


All of the facts, figures and references in this post came from speakers at Progressive London:

Mehdi hasan

Ken Livingstone

Jon Trickett MP

Cllr Salma Yaqoob

Mick Burke

Prof Vicky Chick

Douglas Coe

Duncan Weldon

***

(1)   Corporation tax was cut by 4 per cent for large businesses, and by a hugely minimal amount of 21p to 20p for small businesses. Osborne said the cut in corporation tax would mean Britain would have “the lowest rate of any major Western economy, one of the lowest rates in the G20, and the lowest rate this country has ever known.”

(2)   http://www.bbc.co.uk/news/business-12275815

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