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More Cuts Please


Crisis, what crisis? There must be one: George Osborne, Chancellor of the Exchequer, said so twelve times in yesterday’s speech(1). But if it really is as bad as he says, why is he squandering what remains of our money like an aristocratic gambler in a Russian novel?

 

This column is about the cuts the government has failed to make. It’s about the profligate, pointless spending which has not been slashed, and the money Osborne could have raised but instead has decided to fritter away. For the sake of argument it accepts his estimate of the amount that will need to be saved. But it will show that over half of it could be found with much less pain.

Let us begin with the easiest cut of all: one that would hurt no one except a few grasping corporations. By cancelling its planned re-organisation of the National Health Service, the government would save £2bn(2). That would allow it to drop three-quarters of the cuts to the NHS’s capital spending budget it has planned for the next 4 years(3).

 

To show how reasonable I mean to be, I won’t adopt Simon Jenkins’s arresting proposal that we cut the entire armed forces budget(4). I’ll suggest we drop only the military projects of such withering pointlessness that even the government can’t decide what they’re for.

 

The strategic purpose of the war in Afghanistan changes by the week. Its prospects of achieving any of its fluctuating aims recede by the day. Pulling out would save us £4.5bn a year(5). That’s equivalent to the entire cut in the government grant to local authorities(6), plus the entire cut to the housing budget, which will raise social rents to impossible levels(7). So here’s the choice: Sure Start centres, libraries, citizens’ advice bureaux, affordable housing, all the other services that give the poor a chance of a decent life; or an unwinnable war likely to sow further conflict.

 

Whatever else the ministry of defence gets wrong, however, you can’t fault it for innovation. It’s spending £6.2bn on a pair of aircraft carriers with a unique feature: they won’t carry any aircraft(8). The jets they were to have supported won’t be ready in time, or perhaps at all. They will drift around the oceans like the Flying Dutchman, the embodied ghosts of our imperial pretensions. Because of the commitments already made, cancelling them now would save only £1.2bn(9). But that’s enough to avert all but £200m of the government’s cuts to early intervention programmes for families which might otherwise run into trouble(10).

 

While we’re on the subject of pointless foreign intervention, could someone in government please explain the survival of the Export Credit Guarantee Department? Its purpose is to subsidise multinational companies, by underwriting their business in other countries: such as drilling for oil in fragile environments or selling weapons to dodgy regimes(11,12a,12b). It costs the government £20m a year(13). This money could saved the Sustainable Development Commission and the Royal Commission on Environmental Pollution four times over(14).

 

The road schemes the government wants to fund would have been pointless and destructive in the boom years. In this time of crisis and contraction, they’re a refined form of madness. A report by the Campaign for Better Transport analyses the local authority transport schemes the government lists as the “best and final bids” for new money(15). The government will make its decision in December, and you have until 14th October to respond(16).

 

Though it generates the least employment, does the greatest damage to the environment and creates the fewest social benefits, road building is in line for the greatest share of the new transport spending: £897m(17). Some of the schemes being proposed, such as the £86m Bexhill to Hastings link road (covering all of 6km) or the £108m Kingskerswell Bypass (also 6km) have been fought by local people for years. Like the useless new roads the last Tory government built, they will simply bump the traffic problem along to the next bottleneck. The same money would have kept the education maintenance allowance afloat for eighteen months(18), or, as we’re talking about transport, provided mobility for disabled people in residential care (one of the cruellest of the proposed cuts) for 300 years(19).

The Beast of Brentwood, known to his mother as Eric Pickles, has insisted – on the expert advice of the leader writers of the Daily Mail – that councils reinstate weekly bin collections, at a cost of £250m(20). This spending, unlike some of the examples I’m listing, will do no harm. But a government which believes that it’s a higher priority than, say, legal aid for people with no representation (now cut by £300m a year(21)) is a government that’s lost all sense of proportion.

 

Such sums are trifling by comparison to the money the government has selflessly foregone. Wherever it has spotted a relatively painless means of plugging the spending gap, it has hurried away to find an excruciating alternative. It continues to hold out against a Robin Hood tax on financial transactions. Levied at just 0.05%, this would raise around £20bn a year from the people who brought us the crisis(22). That’s equivalent to one quarter of all the cuts the government is making(23).

When he slapped new charges on the North Sea companies making tanker-loads of money from a mineral resource that belongs to the nation, George Osborne could have banked the £2bn he raised(24). He could have used the oil revenues to cancel almost all the cuts to disability living allowance(25). Instead he gave it, as a tax rebate, to a group some way from the top of the priority list: motorists. When he struck a deal with Switzerland and the British tax evaders stashing their ill-gotten gains in its banks, Osborne could have held out for £25bn. Instead he settled for £5bn, all malfeasance forgotten(26). He threw away the equivalent of another quarter of this year’s cuts.

 

Then there are the straight giveaways: acts of profligacy at any time, of Bullingdonian debauchery today. The government’s cuts to corporation tax will cost us £1bn a year by 2014(27). Changes to controlled foreign company rules, capital gains tax, capital allowances, inheritance tax and similar levies, all of which reward only corporations or the ultra-rich, will deprive the Exchequer of a further £1.5bn a year by 2015(28). That’s almost enough to have reversed the fiscally-destructive cuts to the tax collection service: a net £2.3bn(29). The freezing of air passenger duty, excise duty for lorries and the aggregates levy – which in all cases, like the spending on new roads, damages the environment as much as the economy – will cost us another £175m(30).

 

Far from running out of funds, this looks like a government with money to burn. While the poor and middle struggle to survive the crisis George Osborne bewails, he’s giving away our money to those who need it least. So let’s support him when he calls for cuts, but demand that he directs them at the welfare state he’s running for corporations and billionaires, which is now turning this crisis into a calamity.

References:

1.http://www.conservatives.com/News/Speeches/2011/10/Osborne_together_we_will_ride_out_the_storm.aspx

2. http://www.guardian.co.uk/commentisfree/2011/sep/02/nhs-bill-what-mps-must-know

3. The Treasury’s Comprehensive Spending Review, October 2010, shows the cuts to NHS capital spending against the baseline year (2010-2011) for the following four years. They amount to £2.6bn. Table 2, page 11. http://cdn.hm-treasury.gov.uk/sr2010_completereport.pdf

4. http://www.guardian.co.uk/commentisfree/2010/jun/08/cuts-armed-services-fantasy-enemies

5. http://www.guardian.co.uk/commentisfree/2011/sep/29/defence-spending-strategic-mistakes-editorial

6. ” But the LGA, which represents councils in England and Wales, said once the police grant was excluded, central government funding for council services was being cut by 12.1%, from £28.3bn to £24.9bn.” http://www.bbc.co.uk/news/uk-politics-11990047

7. http://www.guardian.co.uk/politics/2010/oct/20/spending-review-2010-key-points

8. http://www.guardian.co.uk/commentisfree/2008/jul/05/military.defence

9. http://www.guardian.co.uk/uk/2011/jul/14/cameron-disclose-papers-aircraft-carrier-costs

10. http://www.guardian.co.uk/commentisfree/2011/jan/28/children-legacy-debt-sure-start

11. http://www.guardian.co.uk/environment/2010/jun/30/uk-loans-brazil-offshore-drilling

12a. http://www.guardian.co.uk/environment/2007/aug/16/russia.climatechange

12b. http://www.guardian.co.uk/commentisfree/2009/oct/02/bae-jobs-sfo

13. This year’s budget is £23m. HM Treasury, October 2010. Page 88, Table A.12. Comprehensive Spending Review. http://cdn.hm-treasury.gov.uk/sr2010_completereport.pdf

14. DEFRA tells me that the SDC’s budget was £4.1m a year and the RCEP’s just over £1million a year. By email, 3rd October 2011.

15. Campaign for Better Transport, 21st September 2011. Development Pool Briefing: why councils are gambling on bypasses and ring roads while making cuts to services.http://www.bettertransport.org.uk/system/files/Dev_Pool_Briefing_2011_FINAL.pdf

16. http://www.dft.gov.uk/publications/local-major-transport-schemes

17. Campaign for Better Transport, as above.

18. http://www.guardian.co.uk/commentisfree/2010/nov/19/students-education-maintenance-allowance

19. Scope tells me that the mobility component varies from £18.95 to £49.85 per week. The plan to cut it is thought to affect up to 80,000 people.

20. http://www.guardian.co.uk/politics/2011/sep/30/250m-weekly-bin-collections-fund-pickles

21. http://www.bbc.co.uk/news/uk-politics-13951626

22. Robin Hood Tax campaign, by phone, 3rd October 2011.

23. £83bn a year. Comprehensive spending review, page 16, as above.

24. HM Treasury, 2011. Budget. Table 2.1, Page 42. http://cdn.hm-treasury.gov.uk/2011budget_complete.pdf

25. “Disability living allowance will be cut by 20% – worth £2.43bn”.http://www.guardian.co.uk/society/2011/mar/30/cuts-disability-services

26. Richard Murphy, Tax Research UK, by phone, 3rd October 2011.

27. HM Treasury, 2011. Budget. Table 2.1, Page 42. http://cdn.hm-treasury.gov.uk/2011budget_complete.pdf

28. As above.

29. Graham Black, Association of Revenue and Customs, 3rd October 2011. By phone.

30. This applies to 2011-2012. Budget 2011, as above.

  

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