From the TUC

The Case Against Cuts

16 Jun 2010, by in Public services

The cuts being planned by the Coalition government will damage our chances of recovery, hit the poorest members of society and force hundreds of thousands of people out of work. Every day, backed up by their chorus in the Conservative newspapers, government ministers insist that the deficit has to be cut immediately.

The reasons why we must have immediate cuts in public services and benefits change – sometimes it is the exchange rate, sometimes the bond market, currently the favourite reason is that it is unfair to the poor to have high debt payments (because that would mean we might have to … er, cut their benefits and services). But, whatever the diagnosis, the prescription remains the same: cut, cut now and cut hard.

The Coalition has promised “arrangements that will protect those on low incomes from the effect of public sector pay constraint and other spending constraints.” The TUC has argued that the government should apply a Fairness Test to all its plans, to make sure that the poorest and most vulnerable aren’t hit.

But, to be honest, given the scale of the cuts the government has in mind (a figure of £60 billion is often mentioned) it is hard to work out how they are going to live up to their promises. As we point out in All Pain, No Gain, a new report published today, public services are part of the system of re-distribution. They are used more frequently by people in the bottom half of the income distribution and most frequently by those with the lowest incomes. Social security benefits are, to a large extent, directly targeted on the poorest. As we have pointed out repeatedly, the measures that have already been announced – which were supposedly ‘efficiency savings’, not real cuts – are hurting the most vulnerable: cuts to youth services, the Future Jobs Fund, the Child Trust Fund, legal aid.

Cuts on the scale being considered by the government will lead to the loss of up to three quarters of a million jobs, and the reduction in demand could shove us back into recession. As David Blanchflower has said, even the taster we have had so far will lower GDP by at least half a per cent.

Yesterday a journalist asked me why I had the temerity to oppose cuts when the governments of Europe are rushing to impose them. Actually, this tells us nothing about whether cuts are a good or bad idea, but, as it happens, we’re in good company. Like Paul Krugman, and Martin Wolf, we don’t think the bond markets are forcing us to get the deficit down – the UK’s debt has exceptionally long maturity (how long before it has to be paid off) and we are not currently facing high interest rates by the standards of recent history. Like Joseph Stiglitz, we believe that faster growth is the best way to pay off the deficit. And, like the businesses surveyed by accountants BDO, we believe that business confidence (and bond market confidence) can be threatened by cuts as much as by deficits.

The Case Against Cuts is the opening shot in our campaign against cuts and the rest of the conventional madness. Unfortunately, it looks as if it’s going to be a long one.

2 Responses to The Case Against Cuts

  1. Tweets that mention The Case Against Cuts | ToUChstone blog: A public policy blog from the TUC —
    Jun 16th 2010, 5:59 pm

    […] This post was mentioned on Twitter by ToUChstone blog, Goldsmiths UCU. Goldsmiths UCU said: RT @touchstoneblog: The Case Against Cuts […]

  2. james
    Jun 16th 2010, 10:20 pm

    At a time when there’s a Mexican stand-off by private investors, the idea that public debts and the structural deficit can be reduced by spending cuts – further contracting the economy and thus lowering tax returns, increasing spending on unemployment benefits, etc. – does not add up.

    It’s great that the TUC is making the case against cuts. The logical next step is to start arguing for a Green New Deal to reduce unemployment, increase aggregate demand in the private sector, and prevent rising energy costs crippling the economy in the future.