...compared with his April estimate of 3.5%. That contraction in the economy contrasts with the 1991 last recession figure of 1.4% (and there have been six consecutive falls in GDP).
Within the UK, unemployment remains at high levels and although the trend rate has flattened off to 2.49 million in October it is still the worst for 13 years. The Office for National Statistics reported that the labour force survey, which uses the wider International Labour Organization (ILO) measure of unemployment, rose by its smallest quarterly amount since March to May last year ( by just 21,000 in the three months to October) . But that was still enough to give a jobless rate of 7.9%, .The figures also showed that the youth unemployment rate now stands at 18.4%. The data revealed that the number of 16- to 24-year-olds out of work was 952,000 in the three months to October, a quarterly rise of 6,000 and the highest figure since records began in 1992.
There are some trends that defy that the overall gloom. A 122,000 jump in part-time working in the three months to October was entirely driven by women taking those jobs. This was at least partly due to 23,000 jobs being created in the National Health Service in the latest quarter, which pushed up employment in the public sector to 6.1 million – about a fifth of all jobs
Another factor affecting the smaller than anticipated rise in unemployment has been the cut in hours. This has helped prevent unemployment rising as far or as fast as in the recessions of the early 1980s or 1990s or as fast as in the United States, where the jobless rate has doubled to 10%.
Inflation has been largely negative during 2009 but December figures show that it is beginning to rise and is now into positive figures (at 0.3%). Experts predict that this trend will continue and that 2010 will see further rises. As inflation rises however pay freezes exist throughout the economy, depress earnings and thus consumer spending. Alistair Darling announced a 1% cap on salary increases for the public sector in 2011as he announced a public sector pay squeeze to help curb soaring national debt. However large numbers of public sector workers are currently tied into the final year of long term deals that already promise them more than that (NHS Staff for example). How will that circle be squared? This situation of pay cuts will be exacerbated in 2011 by an increase in National Insurance contributions by 0.5%. Public sector pensions remain under attack.
It was the banking sector that caused this recession. Bailing out the banks cost the Treasury billions, (losses at RBS and Lloyds are standing at £26bn), money that should have been spend on essential services. Yet the bankers now presume to tell us that government attempts to direct their business models is politically motivated and the Bankers Association continues to talk of “a model that has served us well”. However, most sensible economists tell us that the size of the financial services sector demands wholesale reform. International banking has simply become a form of gambling, heads they win and collect the profits, tails the taxpayer picks up the pieces. Bonus systems are designed to encourage gambling and short term profiteering but like all gamblers who insist they have a system their models are deeply flawed and their gambles cost.
Paul Volkler is only one international expert who recommends that banks be broken up with limitations on size and risk taking, a new regulatory and supervisory regime introduced, with increased capital requirements. Boris Johnson, champion of the city sector tells us that it must continue to grow. He fails to recognise that the British economy has been grossly distorted by the size and power of the city, to the detriment of our manufactures and exporters. Banker’s bonuses are to be taxed at 50% if they are over £25000 per year yet already tax avoidance lawyers are devising new schemes to ensure the effect is minimal.
Darling has laid out plans to pay for all this by slashing public spending in real terms from 2011 – after the election. The Chancellor has made £5bn pounds in spending cuts, and predicts that growth will fall to 0.8% across government budgets. These are detailed as:-
11bn of savings by 2012-13 through measures announced in the Smarter Government report - of this, £8bn comes from savings outlined in the Operational Efficiency Programme, while a further £3bn comes from new measures including streamlining arms lengths bodies, a 50% cut in consultancy spend, a 25% cut in marketing and communications spend, and greater use of online systems, as well as £550m from efficiencies in local government, including waste collection. £5bn of savings by 2012-13 from reforming the criminal justice system and legal aid, reducing the NHS computerization programmed and phasing out temporary employment programmes. Some individual departmental budgets for public services from 2011 onwards will be ring fenced including:
• NHS near-cash frontline spending to rise in line with inflation in 2010-11 and 2012-13.
• Spending on schools to rise by 0.7% a year in the next two years
• Spending on Sure Start children's centres maintained in line with inflation
• "Sufficient funding" to maintain the number of police officers and community support officers
It is yet to be seen what ring fencing means in this context but the Government has made it clear that the Total Place initiative, currently being piloted, will play a role. This programme seeks to “eliminate duplication across the public services.” Since the timing of these announcements in the pre budget report, Mandelson has already announced major cuts in the Higher Education sector.
The Tory response to these initiatives, from George Osborne was simple. He accused Darling of having "ducked" crucial decisions to get public finances back on track. Labour had put electioneering ahead of fixing the economy, putting off tough spending decisions until after the poll. His view is based on a simplistic view that what matters in the economy is the size of the public sector debt. This approach, shared by many media commentators, says the only way forward is to follow the Irish example and we all know the Celtic tiger will roar no more.
The Irish Government’s austerity programme means for public sector workers 5% pay cuts are the order of the day, while social security and child benefit are also targets. Health provision for the elderly has been cut. One billion Euros are to be cut from the public finances and taxes have risen. Lenihan the Finance Minister has been responsible for a squeeze worth 4.5% of GDP.
A major area of difference between the two parties is on taxation policy. Top of the changes that the Tories have trailed is the need to reform inheritance tax. That will be for estates over £1 million. The other changes that are always on the Tory agenda are tax cuts, particularly for those earning more, but also to reinforce behaviour that they approve of, such as tax advantages for married couples. Labour cannot be said to have been neutral, as inequality in income has grown under their period in office.
Meanwhile the TUC have demonstrated that £25Bn per annum is lost to tax avoidance by individuals and corporations. In addition so called tax planning by wealthy individuals cost the economy a further eight billion. A government committed to reducing inequality and to maximizing its own revenues has got to have an alternative tax policy and one that could provide considerable resources for public expenditure.
Meantime the Daily Telegraph led the headlines over the summer with tales not of heroics and do-derring but of over-claims and over-payments. It tended to lead with headlines of the party in power but it would be fair to say that all parties shared in milking the political purse and lining their own pockets. What astounded people was the sense of entitlement that these members of the political class had. A generous salary and pension, a subsidised canteen and bar and an allowance for staff was not enough.
Every daily expense from the mortgage and the council tax, to cleaning and gardening through to food and drink was to be paid for by the tax payer. Everyone was left with the same disgusted impression. To the ordinary worker their arrogance and their sense of entitlement, their lack of being in touch with reality was truly shocking.
Previously conspicuous consumers were celebrities, and merchant bankers spending their ill gotten gains. Now the evidence was before us that the whole political class was corrupt. For anyone who lived through the years of Tory sleaze this was nothing new. Mention Aitken, Archer or Hamilton and the immediate image is of large brown envelopes stuffed with ill gotten gains. But for those on the left, for whom New Labour was a political betrayal of the working class, the extent to which representatives of the movement had become sucked into legalised fraud and vice was astounding. The excuse that “it was all in the rules” sounds suspiciously like the old Nazi classic “we were just following orders”. Regulation and morality is not the same thing.
How could the majority of Labour MP listen to a low paid woman worker explaining how she could not make ends meet, with increased rent or mortgage, the school uniforms due and the supermarket bill rising every week, then gaily fill in expenses forms for everything and anything they wanted. Parliamentary reform of the expenses system is now paramount.
What does all this mean in terms of political omens? The Tory poll lead is quoted as being between 10 and 17%. Slimy Dave Cameron is seeking to portray himself as a statesman with the connivance of the majority of British media outlets. Recently his Tory party have become more circumspect about their messages over spending cuts and austerity measures, but at their conference in September, it was clear Osborne remains committed to deep and damaging cuts in the public sector.
Contrast the approach of Brown to that of the Tories during the last recession when “unemployment was a price worth paying”. At least Labour is trying to alleviate the worst effects of the recession, stimulate demand, and deal with rising unemployment. It is correct to argue that they could have done more, but at least their approach is proactive and is having a positive effect on the economy. The Tory argument has been the size of the public debt is paramount and that the country cannot afford the level of public expenditure to which it is now committed.
That means that the forthcoming General Election presents a significant challenge to UNISON and the trade union movement. Cameron is seeking to portray the Government as the ancient regime unable to deal with the problems facing the country. The public are not completely convinced by this, even with the media onslaught unleashed by the likes of Murdoch. But crucial to Cameron is the atmosphere of general distrust, cynicism and suspicion that has been generated through the expenses scandal.
An election about differences in economic policy is being conducted in an atmosphere where the general apathy and distain for political engagement has become prevalent and pervasive. In such an atmosphere, an election of sound bites and studio based leaders debates is likely to be treated with contempt. It is time for the stakes to be raised. It is also time to realise that however much some on the left feel that there is not a socialist party that is suitable for us to vote for, we are where we are, and no great red hope will ride over the horizon in 2010.
Now is the time for clear political statements about what kind of a society we want to live in and that does mean dealing with class politics. Those in new Labour for whom such a concept is abhorrent, have forgotten their political roots and will only get what they deserve at the polls and leave a gap to be exploited by the fascists of the BNP.
It is relevant that Cameron’s political party have no concept of what it is like to attend the same schools as the rest of us. Yes, the concept of it being acceptable to be filthy rich and avoid paying taxes is morally repugnant. Yes, the ideas of superiority, entitlement, privilege and cronyism should have no place in our society.
Why? Because the inverse of all of those ideas is that the poor are always with us, that sub standard state education suits the masses and that the only moral principle is to take what you can get away with taking. Defending public services is not an end in itself. Defending public services is a statement about solidarity between individuals and about real social justice. It means a right to education, and a right to health, not an entitlement based on the amount of money that you have in the bank. It means tackling the injustices of British society - health inequalities, child poverty, poor education and failed lifetime opportunity all rooted in a status quo that can only be described as a question of class and that can only be dealt with through realising that.
Public services are important as the guarantor of those rights. This election has to be about them and about public sector cuts are a denial of those rights. It has to contradict those for whom profit-making privatised pseudo public services are “good enough”. They are not and have been clearly shown not to be. Tory plans for bigger cuts in the public sector jobs pay and pensions are not a possible threat or a veiled threat. They are a direct threat to a great number of hard working people in this country. That threat must be made clear.
It also means a commitment to recovering trust in the political system, something that cannot be done by the imposition of solutions from above. The achievement of the Scottish Parliament was not by a piece of legislation. It was routed in a country wide movement based on the unions, political parties and all sections of civil society, which led to the Scottish Constitutional Convention. How could such a movement be created at local and regional levels of this country to allow the electorate to decide their own priorities and not ones based on the perceived concerns of the newspaper commentators such as PR, voting reform or reform of the House of Lords?
Trade unions can lose the General Election spectacularly by taking a cautious approach of blindly supporting the Labour Party or can make a difference as UNISON must, by setting out an alternative economic and social agenda now.