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
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)
"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,
are obsessing about inflation when the real threat is deflation,
preaching the need for belt-tightening when the real problem is
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
Public service cuts are
driven by ideology not economics
There is nothing inevitable
about public service cuts - they do not make economic
FACT: for every £1 earned
by public service worker around 70p goes back into local
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
FACT: for every 1 public
sector job lost, at least 1 will be lost in private
These measures hit the
poorest far more than the rich - we are not 'all in
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!
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