Aberdeenshire UNISON

Public service cuts do not make sense

The story so far

Update 20th March 2013
Another Budget, a stagnating economy, another increase in borrowing and still the Condem Government refuses to change course

Another budget, growth forecast reduced yet again, this time to 0.6%, debt increasing as a percentage of GDP, youth unemployment at 21% and still there is no Plan B. Still George Osborne is not for turning.

Click here for UNISON Scotland's Budget response

The 1% cap on public sector pay is to continue to 2015, despite all the evidence that freezing pay - a pay cut for workers in real terms of some 15% with rises in the cost of fuel and food - is cutting tax receipts into the treasury and creating the need for more borrowing. We said in January 2011 that this would happen because public service workers are the workers who always pay our taxes.

And cutting the real value of workers’ wages means that we all have less to spend in our local economies and that has a knock on effect on the private sector. We have all seen more and more high street retailers go bust.We always said that for every public sector job that goes at least one will go in the private sector and we were right. We are the people who spend locally. The wealthiest in this country don’t.

And the private sector has not stepped in to create the jobs lost in the public sector. Most of the increase in the numbers of jobs in the private sector are jobs which used to be done in the public sector, now outsourced at lower wages and poorer terms and conditions to ensure a profit margin for private companies. An example - private equity companies are speculating on the back of socially necessary facilities –such as care homes for the elderly: Allianz Capital, made 90% profit buying and selling care homes.

But, the worst thing is, the country as a whole hasn't got any poorer. As we predicted, the money is there - it is just in the wrong hands. The wealth of the richest 1000 people in this country has increased by £155 billion over the last three years whilst 1.6 million children live in poverty.

We said in January 2011 that the austerity measures of this government would not work. We said that they were driven by ideology not economics. We said that they would hit the poor far more than the rich. In all of this we have been proven right. We said there would be a double dip recession and now we are on the brink of a triple dip recession.

What this government is doing is, in fact, presiding over a mass transfer of wealth from the rest of us to a super-rich elite. Whilst we pay our taxes and see our standards of living drop year on year, the richest 1% continue to amass huge amounts of wealth. That wealth is not subject to proper taxation and is not used to stimulate growth. The rich do not spend their money in local economies so they do not support local shops and businesses.

Therefore, not only is this unfair and unjust, it is also, as we predicted, very bad for the economy.

Scroll down and look again at what eminent economists said back in 2010. And please spread the word - austerity does not make sense. And now we are seeing the proof of that.


Update 21st Sept 2011
Key messages are coming to pass and still the government is not listening

The Branch put up these key messages (see below) in January 2011 to show why we were campaigning against this Conservative/Lib Dem Government's ideological cuts to public services.

We warned that the strategy of austerity, imposed by this government to deal with the deficit caused by the bank bail-out would not work; that it did not make economic sense and that it could lead to a double dip recession - that what the country needed to get back on trackwas a strategy to promote growth by investing in jobs and services.

We warned that slashing public service budgets; cutting public sector wages and throwing public service workers out of work would make matters worse. Not only would it cause misery to those who lost their jobs and/or the services they depend on, but it would reduce the amount of tax put into the treasury (after all, with PAYE we are the group of workers who always pay their taxes) and would mean greater benefits pay-outs.

We also warned that the government's austerity measures would affect the private sector just as much, both by reducing spending in local economies (because people have less disposable income and are more careful about spending) and because public services are key contractors of the private sector. We have seen this happen too. The expectation that the private sector would step in and create jobs lost in the public sector has just not materialised.

Now we are seeing that our predictions, that cuts would prevent growth in the economy - predictions which were completely unheeded by this government and by much of the press and media - have come to pass. The IMF warned on 21st Sept 2011 of a 17% chance of a double dip recession in the UK and has revised the UK growth forecast down to 1.1% for 2011. http://news.sky.com/home/business/article/16073633

In giving these warnings we were in good company. They were also made by a number of well respected economists -

Prof David Blanchflower (former member of the Bank of England Monetary Policy Committee) said of the UK Government's June 2010 budget, "This unnecessary and dangerous budget will to push the economy back into recession."

Joseph Stiglitz (who has won a Nobel prize in economics) predicted that,
"cutbacks in Germany, Britain and France will mean all of Europe will suffer. The cuts will all feed back negatively. And if everyone follows this policy, their budget deficits will get worse, so they will have to make more cuts and raise taxes more. It's a vicious downward spiral. We're now looking at a long, hard, slow recovery with the possibility of a double dip if everybody cuts back at the same time."

Paul Krugman (another Nobel prize winning economist) stated,
"governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending."

There is no pleasure in saying "I told you so!" Just a great deal of frustration that the government did not listen to UNISON, our colleagues in the TUC and STUC, and these repected economists at the time. Sadly it seems, the government is still not listening.


    Key messages

  • Public service cuts are driven by ideology not economics

  • There is nothing inevitable about public service cuts - they do not make economic sense 1

  • FACT: for every 1 earned by public service worker around 70p goes back into local economy. 2

  • The economy depends on healthy public services - cuts risk a double dip recession

  • There is no private/public divide. The private sector depends on public sector contracts.

  • FACT: for every 1 public sector job lost, at least 1 will be lost in private sector. 3

  • These measures hit the poorest far more than the rich - we are not 'all in this together'

  • FACT: The poorest families will be hit by government cuts FIVE times worse than top earners. 4

  • FACT: After the second world war the deficit was at least three times (at peak 5 times) higher than it is now, yet we built the NHS and the Welfare State 5

There is an alternative!

Click here to find out more

1. http://www.thereisabetterway.org/top-myths-about-the-crisis/there-is-no-alternative
2. Association for Public Service Excellence, Exploring the economic footprint of public services September 2008
3. Treasury Report Guardian 29 June 2010
4. Institute for Fiscal Studies August 2010
5. http://www.ukpublicspending.co.uk/uk_national_debt_chart.html