In Marx’s phrase, crises always bring forth swindlers of every type. In the current crisis Osborne and Cameron are the biggest swindlers of all. There was a fanfare to announce a £5 billion increase in government investment but real investment is set to decline further over the next several years. They have artificially reduced government debt by absorbing Royal Mail’s pension funds, but only accounted for the assets, not the liabilities. This has now been supplemented by accounting for the sale of proceeds for 4G telecoms licenses in an auction that has yet to take place. These and other measures are designed to avoid admitting that the government debt and deficit positions are both actually deteriorating under current policies- just as they have elsewhere in Europe.
Departmental spending has also been cut, including in education, transport and local government, which is now the main provider of any social services. This will almost certainly mean further public sector pay freezes and job cuts.
Part of the Tory plan is to increasingly load austerity measures into the years of the next Parliament to be elected in 2015. To give just one example, Osborne announced that working age discretionary benefits, tax credits and child benefits will all be increased by just one per cent per annum over the next three to five years rather than link them to inflation. The forecast is that higher inflation will erode the value of these benefits and reduce government outlays by £2.4 billion this side of the scheduled general election in 2015. But the intention is to stick to these real terms cuts in future years, where it is projected they will save £11.8 billion. In effect, the Tory plan is to demand Labour repeats its own disastrous policies.
The initial response from Shadow Chancellor Ed Balls failed to draw out the scale and regressive character of the Tories’ policy. This is primarily because the Labour leadership does not have a substantially different economic policy. The failure of austerity already means that Osborne is having to ‘cut the deficit more slowly’, by back-loading measures beyond 2014/15. There is no sign that the Labour leadership believes the other part of its own half-hearted mantra that the Tories are cutting ‘too far’. It has yet to identify a single major cut that it would reverse.
According to the Office for Budget Responsibility total departmental spending will be the same in five years time as in the current financial year in cash terms. Depending on which measure of inflation is used, this means departmental spending will be between 10 and 16 per cent lower in real terms than is currently the case. Unless the Labour leadership breaks from austerity these are the policies it will be implementing.