05 November 2010

Facts About The Deficit

Until the banking crisis hit in 2008, Labour had reduced the national debt from what they inherited off the Tories in 1997. Even now the UK national debt is lower than most developed industrial countries, only Canada's is lower in the G7. Japan and Italy have debts twice as large as us, even Germany and France have bigger debts than the UK, but nobody seems to know this (for the record the Tories always quote borrowing this year, not the overall debt and the media never seem to point this out and the Tories only belatedly (in 2009) changed their policy on matching Labour spending).

Was Labour and Gordon Brown really responsible for the global banking crisis, the collapse of Lehman brothers in the US. Ask yourself what would have happened with the Tories in power. That is the big question. The Tories wanted LESS regulation, yet everyone acknowledges that Labour should have regulated more. The crisis would have been worse under the Tories. Labour managed to keep unemployment as low in the worst recession in living memory as the Tories managed in the middle of a boom. Yet somehow most people believe the Tory/Media line on this and they blame Labour for the private sector banking crisis. Worse the 'bloated' public sector is getting blamed for the crisis when actually it has less employees than it did in 1997 - it has dropped from 23% of the workforce to 21% of the workforce. This is an historically low figure, yet the media never tell anyone this.

We on the left have got to work hard against media lies on the deficit. Could Labour have spent less? Well yes, but people wanted a better NHS, with lower waiting times, more police, nurses, teachers and doctors. Labour delivered on this and yet we still spend less than our European neighbours on health and education and other public services.

The Tories say 'get on the bus' as they force people out of their homes and into poorer areas while simultaneously increasing bus fares and reducing bus grants which will lead to worse services.

Are we really so poor as a country that we have to increase fees on council services for the most vulnerable? Reduce housing/council tax benefit when two thirds of those who receive it are in work but struggling to pay the bills. The Tories are going to force people out of work who rely on it and move them into areas where there is no work.

And the best of all, I doubt the Tories will actually reduce the deficit OR the welfare bill. They actually have a very poor record on this. Thatcher and Major blew billions of North sea oil revenue on paying benefits to the growing millions forced onto welfare, and instead of paying off the deficit when they had the chance they reduced the top rate of tax instead.

This government has increased the most regressive tax - VAT to 20% and cut services to the poorest by £83bn. Yet with the increased unemployment and increased crime and social problems that will result it is doubtful it will shave anything significant of the deficit - it may make it worse (as Ireland is discovering).

Only growth will reduce the deficit, if that is damaged - as most economists expect it will be, then these cuts will not save money, they will just cause a lot of pain and redistribute from poor to rich. Either the Tories know this and that is their real agenda or they really are ignorant of what they are doing. I suspect the former. But the simple message has been sold to the public that government debt is the same as joe bloggs with a large credit card bill. Growth is different, that is why the national debt is more like a mortgage than a personal loan. You don't pay off your mortgage in 4 years if you have to end up on the street to do it.

The Lib Dems have now decided with their Tory brothers to triple student fees, despite vigorously critising Labour for having any fees at all. Are the Lib Dems now going to credit Labour for introducing them in the first place? I mean surely the national debt would have been even bigger without them and clearly hitting students is now on the Lib Dem's agenda.

As hundreds of thousands of frontline public sector workers face losing their jobs, the cost of these changes may even outweigh the savings meaning even more cuts (redundancy costs, aircraft carriers with no aircraft, quango scrapping payouts could take ten years to recoup). A spiral the Tories have said they will do nothing to stop and they have even frozen council tax. They claim they have devolved power to councils by letting them 'cut where they like' but they won't allow councils to ask their electorate in elections if they would rather pay more tax instead. Given a choice of losing your job or paying a grand more tax, which would you choose? Real devolution of power would allow councils not just to tax what they like, but what type of taxes to use. Council tax is very regressive and crying out for reform. Why should a millionaire pay only 2.8 times someone on the minimum wage?

The biggest lie of all about this government is that 'we cannot afford' public services. The cuts amount to £83bn over 4 years, the richest half of the population have 93% of the wealth, a massive £8,000bn - a small land value tax of less than 3% would raise over £83bn and be impossible to avoid (100 people own one third of the land - pretty much the same 100 families that owned this land in the 19th century).

Are we really to believe it is fair to hit public services that affect the poorest half the most? The poorest half of the population pay a higher percentage of their incomes in tax than the richest half? Is that fair? VAT and other indirect taxation hit the poorest the most (even those on benefit pay more than half their disposable income back to their exchequer), and the myriad ways of avoiding tax mean the very richest don't even pay the little that is asked of them. Is that in any way fair? While government ministers from Osborne down use legal loopholes to avoid tax, how are we to have any faith that they will cut down on tax evasion and avoidance? The UK has the most tax havens and defends them vigorously in international negotiations.

I can support the coalition saving more by reducing prison numbers, lawyer fees, defence and police cuts. That really does cut waste. But notice how these interests screamed the most and got the most friendly media attention and the tiniest cuts when compared to welfare and council services. That is still the Tory way and the Lib Dems are now yellow Tories. The Lib Dems have paid a high price for a referendum on a voting system they are not that keen on and might lose anyway. Oh dear!

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