Not quite a clash of Titans

Both Labour and the Tories are pledged to a full spectrum of public spending cuts. John Lister looks at the consequences

In a new year clash of Titans, Chancellor Alistair Darling locked horns with two other mighty beasts, Tory leader David Cameron and his shadow chancellor George Osborne – to claim that the Tories had left a £34 billion gap between their promises and the amount they would raise to pay for them.

In turn David Cameron has improbably laid claim to the Tories being “the party of the NHS”, suggesting that Tory cuts in this key public service will be less hurtful than those that would be inflicted by Labour.

Of course it’s as convincing as Godzilla versus King Kong. It’s a phoney war between two parties both of which are completely committed to inflicting truly massive cutbacks in public spending in order to clear the billions of debts run up when Darling bailed out the banks with our money in order to rescue British capitalism.

Darling has refused to say just exactly what he would cut if Brown were to win the general election, but made it very obvious that no department or public service could be protected. He justifies this by arguing that the scale of the problem that will need to be confronted is not yet clear – and he does not want to commit to cuts that turn out to be bigger than required. This in turn appears to gain a smidgeon of respectability as an argument as long-awaited signs of some economic recovery have been announced since the New Year.

The Tories, by contrast, have dropped clear hints that they would tear up Darling’s 2010-11 spending plans as soon as David Cameron stepped into Number 10, and inflict big and immediate cuts from the outset. And Lib Dem leader Nick Clegg, for what it’s worth, has gone even further, insisting on the need for “massive cuts” while tacitly offering to hold the coat and briefcase of whichever party emerges on top.

So if the main parties agree on the general assessment and the need for drastic public spending cuts, where is the political debate? Do they perhaps disagree on who should be forced to pay the price?

Sadly, here too the right wing think tanks, Tory politicians and Labour ministers all seem to be singing largely from the same hymn sheet. All are agreed that the victims need to be working class, and preferably employed in the public sector … and there need to be a lot of them.

Shouting the unthinkable, right wing think tank Reform has demanded the axing of a million public sector jobs (one in six), to cut the public sector wage bill by 15%, ignoring quite reasonable objections that this huge and sudden additional burden on the social security bill might not contribute to economic growth so much as drag the economy down into a new wave of recession. Reform want the biggest cuts to land on the (politically popular) services that have had the biggest growth – the NHS, police and education: and uniquely they insist that frontline services will have to go, not just seeking “efficiency savings”.

Mean-spirited Tory views

While no political party could afford the gamble of backing the Reform proposals, the two big parties are agreed on one target. With social security budgets currently running at £189 billion – almost as much as the NHS and education budgets put together – Tory and Labour ministers have fixed their attention on squeezing the unemployed – focusing more on denying people benefits altogether than on simply cutting bits off their benefits.

Both the Labour and Tory policies have been drawn up by the same right winger – now Lord Freud – who was brought in by Labour’s James Purnell during his brief tenure as a minister. Purnell and Freud both wanted to get tough with unemployed single parents and draw up plans to force claimants to “work for their benefits”, before Purnell stormed out of Gordon Brown’s cabinet wanting a leadership election and Freud sloped off to join the Tory benches as shadow welfare minister.

Of course Freud didn’t need to change sides: he had merely volunteered his mean-spirited Tory views to a willing Labour minister, and now his so-called “Flexible New Deal Scheme” is being wheeled out as Labour policy, offering generous contracts to private providers who will work to place long term unemployed into jobs. In place of the original idea of paying them (handsomely) “by results” for taking the “risk” of trying to place the unemployed in work, the contractors now get hefty up-front fees for taking on the task of finding people jobs in recession-hit Britain – making it less stressful for them when it becomes clear no jobs are to be had.

Of course there will also be some tight-fisted cuts in benefits. Many unemployed people, especially those with disabilities or with young children to look after, will remain sceptical of the government and Tory attempts to press-gang them into low-paid or unsuitable employment, and will need to be coerced into these schemes with a real threat that existing entitlements would be cut. Citizens Advice Bureaux already report growing numbers of desperately poor people deal facing “sanctions” (such as £15 slashed from a £64 weekly claim) imposed in this way.

Social security is also the budget that forks out the measly state pension, and ministers have also been looking at ways in which they can pay out less – perhaps by trying again to force up the retirement age for public sector employees. This would keep pension claims down, ensuring more people would die before even making a claim – but of course the downside is that it would further limit the hopes of finding work for the younger unemployed.

Even finding work is of course no guarantee of finding a living wage. Official figures show that 60% of children living in poverty have at least one parent in work. And as the recession takes hold, and the Flexible New Deal swings into action, employers will take every opportunity to keep wages low and jobs insecure for those unlucky enough to need them.

Swimming pools and libraries

Big employers of public sector workers include local government, education, the NHS and the civil service: Alistair Darling has already made it clear that all of these sectors will face the axe.

He has been egged on by another right wing think tank “Localis”, working with city consultants KPMG, who in November published a joint report suggesting a 20% cut in council spending through “doing less, outsourcing and becoming more financially innovative”.

Councils should immediately stop “all ‘marginally beneficial’ services”, the report insisted, noting that there is no legal requirement to provide either swimming pools or libraries.

“Outsourcing” council work to private companies is of course the new word for privatisation, and has been urged on councils by the government since the summer as a possible means of saving money at the expense of their workforce. The redundancy or forcible transfer of staff from the council payroll to various profiteering private companies would offer a double whammy in potentially cutting some costs, but also further limiting the public sector liability to pay out pensions to public employees. However the net result would almost certainly be more claiming unemployment benefits.

Where outright privatisation is not on the cards, councils might look to collaborate with their equivalents in an area to pool resources and share services, axing the numbers of staff involved and appearing more “efficient”. Again jobs and spending could be axed this way – at a price.

But it’s not just local government under the hammer: Gordon Brown has pledged to force through a massive “streamlining” of central government, too, with a 20% cut in the senior civil service pay bill, the abolition or merger of 123 quangos, and moving some of the remaining minority of civil servants out of London.

Civil service union leader Mark Serwotka has pointed out that many of the 123 quangos were in fact created by the Labour government itself, and there are real limits to how much can be achieved by such measures without damaging actual services.

Mandelson dumbs down universities

But ministers are not at all abashed at reversing their previous policies in the name of cash savings. The recent announcement by Lord Mandelson of a fresh wave of cuts in University spending, adding up to almost £1 billion over the longer term, accompanied by the loss of 10,000 student places and draconian fines on Universities which recruit above their quota this year, amounts to a complete abandonment of the government’s controversial pledge for 50% of school leavers to go to university.

Teaching budgets are being slashed, with teaching and other jobs are facing the axe in many universities, as ministers effectively give up on the notion of a skills-led recovery and opt for quicker, short-termist cutbacks.

University courses are also to face pressure from Mandelson’s department to down-scale from 3-year degree courses to little more than 2-year training courses teaching ‘skills’ for industry, as the very quality of higher education itself comes under threat in many of the new universities.

And despite the claims from both major parties that they wish to protect it, the NHS, too, is lined up for truly massive cuts, bigger than at any time in its history.

Tories and Labour both claim of course to be “protecting” front line NHS services by increasing funding in line with inflation – ignoring the fact that the NHS needs an extra £5 billion a year to keep pace with the costs of a growing population, a rising elderly population, and new drugs and technology.

And even if front line budgets are protected, many spending plans for the next few years already assume massive “efficiency” savings of up to 5% a year, without any evidence that savings on this scale can be achieved without cuts. And the 5% of the NHS which is NOT seen as “front line” includes training and research budgets, which could be slashed.

The squeeze will hit hospital services hardest of all – with a 4-year freeze on the tariff determining hospital budgets, and a massive cut in funding for any additional A&E patients treated in excess of the 2008-9 caseload. The Health Service Journal argues that by 2014 “savings on this scale could entail perhaps half a dozen general hospitals going to the wall in each Strategic Health Authority”.

Even NHS chief executive David Nicholson admits that the coming cuts are “tougher than the NHS has ever had, through its history. And it’s for a sustained period”. Hardest hit will be hospitals with large fixed overhead costs – in particular those funded through the Private Finance Initiative.

While NHS chiefs are already discussing these issues in secret, the actual plans are beginning to emerge. NHS London is leading the charge, with cuts (based on a secret briefing by US-based private management consultants McKinsey, that they have refused to publish even under the Freedom of Information Act), aimed at slashing up to £5 billion from the capital’s £13 billion PCT budget by 2017.

Among the London plans is a massive downgrading of district hospitals to “local hospitals” with reduced specialist services, leaving just a handful of “major acute” hospitals.

NHS London also wants to chop A&E caseload by 60% – diverting almost 2 million patients a year to unproven or non-existent primary “polysystems” –and hospital outpatient attendances by 55%. These changes would mean cutting at least another £1.1 billion from London hospital budgets, driving many to the wall. NHS London also wants to slash staffing in “non acute” services by 66% – and even cut GP appointment times by 33%.

Elsewhere Strategic Health Authorities have not yet gone to these lengths, but they are all being called upon in the new NHS Operating Framework to begin to implement policies to cut spending by billions over the next few years, beginning with cuts from April.

But this has not stopped them from pressing ahead with complex and costly expansion, reorganisation and further fragmentation of management, appointing new “commercial directors” on inflated salaries to drive more privatisation, and employing droves of useless management consultants.

Profiteering in NHS

The divide between SHA/PCT “commissioners” of service and the Trusts and Foundation Trusts that deliver health care has widened as an expensive and bureaucratic “market” in health care has been created, and new avenues have been opened up for private providers to scoop up a profit.

Trusts have been resorting to desperate measures, especially those lumbered with massive, costly PFI projects as a dead weight of inflated overheads for the next 25 years or more. Some are already shedding jobs, freezing vacancies and checking out which services lose money and should therefore be closed down in the fight for financial survival.

The crisis is also hitting GP services. For the first time ever GPs as well as hospitals are being required to deliver efficiency savings, in addition to facing pressure to cut consultation times, it seems most unlikely that primary care can soak up anything like the numbers that NHS London and others are planning.

It is clear that there is no NHS capital available to expand health centres and community services, or build “polyclinics” and “polysystems” (which are not mentioned at all in the new NHS Operating Plan). But private funding carries additional heavy costs and may not be affordable: many Darzi-style health centres are costing far more than average primary care services.

From the whole mess one grim conclusion arises: the collapse of the private sector in the form of the banking crisis is now taking a terrible toll of the public sector and the services and jobs that are vital to working people.

Among the three larger parties the political trajectory is one way only: none of the political notions driving these cuts is in any way progressive, socialist or internationalist. And the collapse of social democratic politics engineered by Tony Blair’s New Labour hi-jack operation in the 1990s has now ensured that any progressive solutions are seen as marginal, or dismissed without debate.

The huge NHS spending cuts for example could be dramatically reduced in scope and impact if the government slammed the brakes on its own costly “reforms” which have squandered billions on bureaucracy and parasitic management consultants, allowed the banks to corner the market in new hospital building, and created a brand new, profit-seeking private sector while NHS hospitals are driven to the wall.

The University funding crisis flows first and foremost from the refusal of Labour ministers to apply a progressive tax system to ensure that those (like many graduates) who earn more money pay more towards public services).

Time and again short term, desperate, dirty fixes take the place of longer term investment in people, skills, infrastructure, systems and society.

Back in November, Gordon Brown fleetingly surprised many with a suggestion that flew in the face of all this: he floated the idea of a Tobin tax, a tax on financial transactions in the City of London. Even levied at the laughably low level of 0.5%, it could generate a staggering £45 billion a year – easily enough to avoid any of the grubby cuts and political unpleasantness we have been discussing.

Of course it has gone no further than a speech or two and some discussion in the financial press. Why? Because this would get the bankers to pay back at least some of the cash they have milked from the public sector. It would avert the need to slash services, but require New Labour to confront the city of London.

And that’s the other factor that unites the old Etonian Tory leadership and those who are supposed to oppose them from New Labour. They are linked by their dedication to capital, their hostility to the trade unions, and their determination to make workers pay.

That’s why even this year’s uncertain electoral contest is only part of the political story that needs to unfold for working people. Yet again social democracy has been found wanting – with the left unable to offer a credible or broad alternative.

Let’s do what we can to ensure we never get caught this way again.