Issue 208 of SOCIALIST REVIEW Published May 1997 Copyright Socialist Review

Election special:The squeeze has got to stop

Pete Morgan

One of the main reasons for the Tory wipe-out was the many attacks they made on the welfare state. It is now a reality in Britain today that thousands of pensioners die of hypothermia each winter and people are denied the most basic medical care. Millions of people expect Labour to repair at least some of the damage that the Tories have inflicted on the welfare state. However, this was the first election campaign since the foundation of the modern welfare state in 1945 in which Labour did not promise to spend more on pensions, benefits, health and education. In 1992 Labour had a programme to spend more than 3 billion a year extra on welfare. The 1997 campaign saw Labour promising only a limited one off levy on the privatised utilities.

Labour has committed itself to accept the Tories' plans for public spending for the next two years. which is set to rise by an average of 0.4 percent a year. This compares with an average of 1.9 percent a year for the 18 years when the Tories were in power. This means that public spending in the last year of the next parliament will be about 24 billion lower than if the previous spending was maintained. And the appointment of Labour right winger Frank Field as number two at Social Security will mean further attacks on the welfare state and those who rely on benefits.

If it sticks to Tory spending limits Labour will find it impossible to meet people's demands for more spending on health and pensioners. A recent report from the Institute of Fiscal Studies argued that projected spending on the NHS 'was particularly tight'. Although there is cash allocated for an increase in spending this year, zero increases have been allocated for the next two years. This is the lowest three year spending projection since the NHS was founded. Labour made much during the election campaign about the need to switch resources in the NHS from spending on management and 'bureaucracy' to front line care such as nurses and doctors. But this is nowhere near enough to repair much of the damage done by the Tories.

The upshot of these policies is that under Labour spending on health in Britain will continue to be less (as a percentage of GDP) than in the US, Canada, France, Germany, Japan, and Italy. And some of the most unsavoury symbols of Toryism the old and the sick left to die on trolleys in understaffed, unresourced hospitals, or the sight of desperate ambulance drivers driving for miles to find an emergency unit capable of reviving a dying patient are likely to continue under a Blair government.

One of the issues over which Labour attacked the Tories with some success during the election campaign was pensions. The reforms that the Tories had planned to introduce, announced by Peter Lilley in March, were, in effect, the privatisation of the state pension. Their proposals involved scrapping the basic state pension and Serps, the earnings related pension scheme set up by Labour in 1978, with a pension partly paid by the state but then invested with one of the many private pension companies on the market. The government would then have given everyone a 5 percent rebate on their national insurance contributions giving a state subsidy to the private pension firms.

For many this was a prospect that filled them with horror. The idea that one of the cornerstones of the welfare state was to be privatised brought genuine fear. When Major tried to reassure voters that their plans were designed to give people even better pensions in the future he was simply not believed. This is not surprising when you consider that the value of the pension under the Tories has been drastically cut since the link between the level of the state pension and average wages was broken.

At last year's Labour conference former Labour cabinet minister Barbara Castle led calls for an increase in the state pension and a return to the link with average earnings, yet Labour leaders claimed this was too expensive. So if Labour sticks to the spending limits for the next two years, the value of the pension will continue to fall relative to average earnings, and significantly, during the election campaign, Labour refused to rule out a compulsory extension of private pensions.

So the future for pensioners still looks bleak. Labour's victory will have warmed their hearts, but will it give them the economic security they deserve?


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