The Socialist 19 July 2002 |
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Public spending review: What we think
Not So Generous Gordon
GORDON BROWN, or 'Gorgeous Gordon' as he is now being called by some in the media, has just announced the biggest sustained rise in public spending since the 1970s. Total public spending will, he says, amount to £511 billion by 2006 - a rise of nearly £100 billion.
Increased health spending of 7.4 % over five years was announced in the budget earlier this year. Now education is set to secure a rise to £12.5 billion by 2006 - an average increase of 6%. As a proportion of gross domestic product (GDP) (5.6%) this is higher than the EU average.
This increased spending on public services is welcome but it is not enough. Because of five years of 'prudence' (code for holding down spending on public services) public spending as a share of GDP will still be lower than it was under the Tories in 14 out of the 18 years they were in government. In no way does this represent a return to Old Labour policies.
The latest figures are based on rates of economic growth which Digby Jones, director of the bosses' club the CBI, says are "too optimistic". As Brown was giving his speech share prices were tumbling on the world stock exchanges. Plummeting shares prices could have a profound effect on the real economy (see Behind The Financial Scandals). According to fund manager Gerrard, a further 20% fall would knock nearly 1% off projected growth next year.
Working-class people will already be paying for the latest increases through a hike in national insurance contributions which takes effect from April next year. If the economy doesn't grow as expected, New Labour will have to either increase taxation or borrow money to plug the gap, or cut spending or, most likely, a combination of all three.
Brown has made it clear that the payoff for extra money for public services has to be more 'reform' and 'modernisation' - privatisation. In education this will mean the end of comprehensive education and a return to the inequality of the era of secondary modern and grammar schools.
Much of the new money will in fact find itself in the pockets of private profiteers. Since New Labour came to power in 1997, private financing of public/private projects has gone up from £3.5 billion to more than £14 billion.
According to the Financial Times (FT) (11 July), policing, prisons and asylum policy will mean "decent pickings" for the private sector. "Secondary schools are likely to be the big winners" they explain "... and the biggest operators in the £5 billion a year outsourcing market will benefit".
Of course many of these private companies are seeing their shares fall and investors are getting nervous (see also page 4). However the FT reckons that "... the billions of pounds on offer through the spending review are likely to be too tempting for many companies to shun them". If companies fail however, it will be public money that will be used to bail them out as with Railtrack and the air traffic control service.
While the privateers profit, public sector workers will be expected to pay through the attacks on jobs, pay and conditions which privatisation brings. This 'generous' spending review was announced just as 1.3 million public sector workers went on strike against low pay.
The average pay of local government workers is less as a proportion of average earnings than it was in the 1970s. The lowest paid local government workers, most of whom are women, earn just £4.80 an hour.
The employers (and behind them the New Labour government) have refused to budge even though it would cost just £500 million to meet the workers ' demands of 6% or £1,750 a year, whichever is greater.
But public-sector workers have had enough. This was the biggest industrial strike in Britain for 20 years. RMT workers on London Underground are also striking over safety and privatisation and London teachers are being balloted for further action over pay.
There is huge unrest amongst postal workers, firefighters, college lecturers and health workers.
What is needed now is a one-day public sector strike, which can unite together public sector workers with service users to demand that services are adequately funded with public sector money, that public-sector workers are paid a decent wage and that services are fully publicly owned and democratically run in the interests of workers and users rather those of the private corporations.