Issue 170 of SOCIALIST REVIEW Published December 1993 Copyright © Socialist Review



On the fiddle

Bastard Redwood
Bastard Redwood

The calm before the storm. The weeks leading up to budget day on 30 November had a slightly unreal air. There has probably never been so much advance speculation about a budget. Whatever the final contents of Kenneth Clarke's speech--we go to press before it is delivered--this budget is certain to create a political row with wide ramifications.

It will, firstly, almost certainly increase taxation. Norman Lamont's April budget is best remembered for slapping VAT on fuel (at 8 percent in April 1994 and 17.5 percent the following year). In addition, he planned to cut mortgage tax relief and raise National Insurance contributions (the equivalent of 1p in the pound on income tax).

The total increase in taxation will be £6 billion in 1994 and £10 billion in 1995. That is before any further tax increases to be announced.

Outcry at the imposition of VAT on fuel has been as great as the initial outcry against the poll tax. Even the electricity companies have written to the government complaining that if customers refuse to pay the tax, disconnections will be extremely difficult and politically embarrassing. All the signs are that this opposition will grow, especially since the government compensation package for pensioners and those on benefits is likely to be miserly and inadequate.

But there may be even greater anger next April when most people find their pay packets substantially reduced. A married man on £10,000 a year with a £30,000 mortgage will be £4.94 a week worse off, before VAT on fuel is taken into account, according to a Labour Party survey.

All this is in direct contravention to Tory election policies, which were centred on scare mongering that Labour was the party of high taxation and promises to reduce taxes. Those promises were always based on a lie (the burden of taxation rose overall during the Thatcher years, despite cuts in income tax). But now the row over taxation is one of the main issues threatening to blow the Tory Party apart.

The argument about whether to tax or not to tax, and how far to cut public spending, has raged within the cabinet and among Tory MPs over the past months. The right wing 'bastards'--Howard, Portillo, Lilley and Redwood--are adamant that taxation should fall or at least remain constant. To help cut the public sector borrowing deficit, they are demanding swingeing cuts in benefits for the unemployed, single parents, and the sick and invalids. Portillo has even floated getting rid of the universal state pension.

Their opponents in the cabinet are horrified. They have little inkling of the real levels of dissatisfaction which exist against the government, but they recognise that an all out assault on the welfare state will be deeply unpopular and probably unworkable.

In addition, they fear that the right wingers have got the upper hand in John Major's cabinet since the Tory Party conference two months ago. Then the right used the most crude racism and populism to stamp its authority on the conference and marginalise its opponents.

Juvenile criminals, single parents and foreigners were to blame for the ills of society. John Major--weak and vacillating as ever--has echoed some of these sentiments. His 'back to basics' campaign takes at least some of its narrow nationalism and bigotry from the agenda of the Tory right. While some of this may have a temporary appeal to some voters the Tories want to woo back to their fold, for the most part it appeals only to the converted, and it hardly papers over the cracks in society which are becoming more and more apparent.

Fiddling while Rome burns perhaps most aptly sums it up. All the big problems of British capitalism--welfare spending, unemployment, the decline of manufacturing industry, the decay of infrastructure--are ignored or tinkered with, while measures which are at best cosmetic are increasingly put forward as the new panacea.

The result is a Tory government even more unpopular than two months ago (one recent poll showed it 20 points behind Labour), and still wracked with divisions. As the Independent on Sunday reported before the budget:

Interestingly, the main counter attack--from Michael Heseltine--took place at the conference of the Confederation of British Industry, most of whose delegates were clearly unhappy with the anti-European stance of the Tory Party conference.

Britain's rulers have lost their way since the heyday of Thatcherism, when they really believed recession and stagnation had become things of the past. Now, they can see no clear strategy ahead, as reflected by the uncertainty and confusion dominating every level of the Tory Party.

The fortunes of the government look very shaky in the coming months. Tory splits are unlikely to be healed by the budget. Signs that economic recovery is under way are few. And the protests over VAT can turn into an explosion, as the full scale of the attacks across the whole of the working class become clear. As a former Tory minister said recently about the back to basics campaign, 'it may divert attention, but the underlying splits are all there.'

There has never been a better time to fight, and more and more groups of workers are beginning--despite the timidity of the union and Labour leaders--to come to this conclusion.


High risk strategy

'Ian Paisley will never vote to put VAT on the Bible'. The comment of one minister neatly sums up the Tory dilemma. They depend on the votes of Ulster Unionists to force through unpopular measures, but they cannot even rely on that band of bigots. Their room for manoeuvre is extremely limited. Both the budget and public spending are largely constrained by the previous decisions announced by Norman Lamont.

Whatever Clarke's claims about inflation and interest rates, 85 percent of the increase in tax revenues comes from workers and the poor--the freeze on tax allowances, VAT on fuel and increased National Insurance rates.

But the Tory strategy is a very high risk one. The assault on welfare and public sector pay will coincide with an increase in inflation. While the 'headline' rate of inflation may not rise above 4 percent, the impact of increases in rents and the cost of fuel and transport will be much heavier. Attacks on living standards and welfare right across the board make the possibility of widespread resistance much more likely now than this time last year.

Workers have already faced a massive attack on their living standards with pay freezes in industry and the 1.5 percent pay limit in the public sector during the past 12 months. Yet resistance so far has been muted--and the official statistics for strikes in September are the lowest on record.

However there are several reasons why this is likely to change. First, every pay policy or freeze introduced in the past has always met with little resistance in the first year. That was as true of the Tory 'pay pause' in 1957 as Labour's Social Contract two decades later in 1975.

Second, inflation has fallen steeply in the past year or so. In April 1992 the inflation rate was 4.3 percent; recently it has been less than 1.5 percent. These figures reflect the experience of millions of workers: the cost of people's mortgages has come down rapidly, supermarkets have been discounting food prices, clothes shops have had permanent sales.

Third, earnings still rose faster than prices despite the attack on pay. In some cases much faster. According to the official earnings figures for the 12 months to April 1993, the earnings of British Rail workers went up by more than 10 percent. Council staff had increases of between 7 percent and 9 percent. Civil servants had pay rises of between 8 percent and 11 percent.

These statistics reflect the fact that these workers received two pay increases in 12 months because their previous pay rise was delayed. Teachers' pay, by contrast, only rose by 3 or 4 percent because they only had one increase in the period (though this is still more than inflation). But the point is that many workers in the public sector did not feel particularly hard pressed over pay. Despite this there were still large minorities prepared to vote for strike action, for example in the councils and the ambulance service.

Things are quite different now. Their last increase was 1.5 percent or less. Now public sector workers are being told to accept no increase at all at a time of rising costs and thumping tax increases.

The problem for the Tories is that this is not just risky--it doesn't solve their problems. If they get away with a pay freeze it may save them £2-3 billion, at least for a time. But in the current financial year alone, the interest the government pays on public sector debt will be more than £19 billion. Its spending plans are so tight that, on one estimate, if inflation were to rise to 4 percent the government would have to spend an extra £20 billion to maintain the current level of services.

The Tories can cover their debts if the economy grows fast enough, but this year the recovery of British capitalism is both fragile and feverish, constrained by the slump in the rest of Europe and very low investment levels. British capitalism does not have the capacity to grow rapidly without sucking in imports and stoking inflation. Investment has been low for a long time, but the last recession depressed it much further. The official figures show the value of public sector investment fell by more than half between 1988 and 1992. Manufacturing investment, measured as a proportion of output, is at its lowest level for more than 30 years. A recent National Opinion Poll survey of 450 companies shows only one in seven of them increased investment last year, despite the introduction of special 40 percent tax breaks.

As an article by Financial Times economist Sam Brittan argues, 'The productivity of workers using existing capacity is increasing rapidly, but at the same time there is inadequate capacity to support a true recovery'.


Welfare checks

Pensioners: on the march
Pensioners: on the march

The arguments put by politicians and our rulers in Britain on welfare spending are almost identical to those put by every other capitalist class. 'The country can't afford it,' they cry. Even worse, the population is gradually getting older, and the proportion of those working to those on benefits is set to fall which means that, they claim, a higher proportion of the wealth produced as Gross Domestic Product will be taken up with welfare spending. Unless there are drastic cutbacks, then more and more money will go on benefits, and less and less on producing things.

Their motive is the same the world over: to push the burden of welfare onto workers, and so make them pay a higher proportion of their income to welfare provision--in effect paying twice over.

In fact, welfare spending in Britain is relatively low. There has been a steady but fairly slow increase in the amounts spent as a proportion of national wealth. And 'the relative scale of Britain's welfare state is smaller than that of most industrialised countries--17th out of the 21 countries listed in the provisional figures for 1989, down from 13th in 1981. In the European Community, only Portugal had a lower share.'

This, and many other fascinating conclusions can be found in a new study The Future of Welfare by John Hills, published by the Joseph Rowntree Foundation. Hills makes the point that welfare spending is not out of control, or anything like it. 'In the three years up to 1992-3, its share of GDP rose from 21.4 to 26.4 percent.' This means that just over a quarter of national income goes on all of health, education, pensions, housing, the unemployed and the sick.

Will these figures shoot up as the old live longer and receive better medical treatment? Not according to Hills. He says that if we assume age patterns for 50 years' time (when over 65s are forecast to be 24 percent of the population, compared with 16 percent now), spending would of course rise--but not by the sort of amount the Tories claim. It would give an increase of around 3.8 percent of GDP at 1992 spending levels. The ageing population would 'imply spending growth at a rate of 0.32 percent per year over the next fifty years'.

The amounts involved are relatively small; and Britain's situation is relatively favourable in relation to its competitors internationally. And 'not all welfare spending goes on the elderly population, so a 50 percent rise in its population share only adds 17 percent to average spending.'

Hills argues there is no fundamental crisis in welfare spending: 'even if benefit levels were to keep up with overall living standards the net effects [of higher pensions and an ageing population] on the public finances over the next fifty years would add up to 5 percent of GDP--no more than the recent increase related to recession over the past three years.'

The Tories attack benefits and state pensions, but ignore the huge levels of state subsidies going to the middle classes in the form of tax concessions. In 1992-3 these included £5.2 billion for mortgage interest, £8.1 billion for occupational pension schemes and £2.4 billion for personal pension schemes.

In addition, the government ignores the fact that the welfare state is not a honeypot which millions benefit from but put nothing into. In fact, it acts as a kind of 'savings bank' with millions contributing to it throughout their working lives, and then receiving some benefits towards the end of their life (many, especially working class men, die around retirement age anyway, thus receiving hardly any of the benefits for which they have paid).

And benefits are--in a very small way--a means of distributing money from the rich to the poor. Universal benefits, with everyone receiving them and the rich having the money clawed back through tax, are the best means of helping the poor and the lower paid.

The international attack on benefit levels and the availability of benefits is not a serious argument about what can or cannot be afforded. This is a government which continues to maintain a gigantic defence capability, and which is prepared to spend millions of pounds on complete irrelevancies--introducing a 'corporate image' among DSS staff has already cost £1.7 million in uniforms and administration.

The money is there to maintain and extend the level of welfare. It is the priorities of the system which are wrong. The ideological onslaught is about taking more from the poor and ordinary working people to maintain the profit levels of the already rich. In the process the ruling classes feel that they have to tamper with--and possibly roll back--the welfare settlement on which postwar prosperity was based.

Already throughout Europe much of the discontent is about cuts in welfare provision. The sorts of attacks suggested by the likes of Portillo will provoke even greater howls of rage.
The Future of Welfare by John Hills is available from the Joseph Rowntree Foundation, The Homestead, 40 Water End, York Y03 6LP, price £8.50


Moral minority

The right wing is pursuing a new moral crusade. John Major's 'back to basics' campaign is aimed at delivering little, but making a great many people who should be on the receiving end of non existent benefits feel even more guilty.

Millions of people are struggling to bring up children on low wages or even lower social security payments. These children are faced with a deteriorating education system and diminishing prospects of a job when they leave school. The chances of their lives being an improvement on their parents' have become more and more remote.

Yet the government has launched a concerted campaign to blame them for the problems of society. We are told that the large number of one parent families (now at 1.3 million or one in five of all families) has led to declining moral standards, a greater crime rate, more truancy from school and a weakening of the whole fabric of society.

This, so John Major claims, is very different from the world of the 1950s when most people led decent lives. Former Thatcherite right hand man Lord Tebbit has put a more sinister view of his own 'basic values'. Britain was a paradise, according to him, until the break up of Britain's 'Christian-Judaean' tradition, as well as the break up of the family. He cites the problem as a 'substantial and growing Muslim minority' which has not been integrated into British society.

Home Secretary Michael Howard has explained the decline of 'family values' as stemming from the liberal values of the 1960s, which broke down respect for father figures. These values in turn were created as a result of mobilisation for the Second World War, when heads of families had to go off to fight and so could not exert the required discipline.

Howard claims that 'the longer the same father had been part of the child's life, and the more effectively the father has taken part in that life of the family, the better the results for the child.' He cites as evidence three studies, none of which are at all conclusive. One study, by Eileen Crellin, found that illegitimate children born in 1958 were disadvantaged in infant mortality, birth weight and in reading ability.

But there are two major flaws. It does not take into account other social factors which might cause such disadvantages; and it is a study from a period where the number of one parent families was tiny compared with now. Today one in four single parents are owner occupiers, and are by no means all poor or dependent on benefits.

Another major study leaned on by the Tories was based on 264 men and women born in Newcastle in 1947, which connects illegitimacy and crime. Again this narrowly based study did not take into account other factors which might lead to crime.

Even the government's own advisers reject such evidence as conclusive. A recent leaked cabinet paper argued:

There is, of course, an alternative explanation for what is occurring. During the 1950s, British capitalism grew--like everywhere else--on an unprecedented scale. Welfare benefits, an improving health and education service, were available to all. Unemployment dropped to negligible levels, and crime rates were low.

Britain has experienced three major recessions since then. The government and employers have spent the last 15 years desperately cutting back the costs of welfare and provoking more and more discontent as they do so. The talk of the new morality is an attempt to push the costs of welfare further onto the individual family and away from the capitalist state. At the same time, its aim is to prevent those who feel discontented from doing anything about it.

The problem for the Tories is that British society has changed irrevocably and for the better since the 1950s. People who would have accepted being treated as outcasts because they had a child outside marriage are no longer prepared to do so. Many women choose to live on their own and to have children on their own, and today there is very little stigma attached to this attitude.

Even John Major has begun to recognise that his constant attacks on single parents are counter productive. He has told his ministers to lay off, for fear of alienating potential supporters. He may also feel that constant debate about single parents living on benefits raises a couple of awkward and fairly fundamental questions: why are women's wages so low that they are virtually as well off on the appalling level of benefits than they are in work? And why is the child care provision in Britain one of the worst in Europe?

An encouraging sign of recent months is that despite the government's disgusting scapegoating of single parents, most of the women under attack are not prepared to submit to this kind of discrimination. One of the legacies of the 1960s is a generation of women who refuse to be regarded as second class citizens, and who are willing to fight to ensure a degree of equality.

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