The newly created Office for Budget Responsibility (OBR) has announced that the economy should grow 1.3% this year. In what is likely to be one of the shortest economic predictions, because of the impending budget on 22 June, the OBR has also said that borrowing is down to £155bn in the current financial year which is below the £163bn forecast in Labour's last Budget in March.
Whilst OBR suggest that economic growth is slightly lower than predicted the reduction in borrowing is a good news story that has been buried by the ConDem government. Borrowing going down, because the Treasury has protected the tax yield and the fiscal intervention policy of the last labour government is starting to reap dividends, is not the story that they want because it fundamentally undermines the justification for swingeing public sector cuts.
We should not be fooled into believing that the latest OBR figures prove the merits of the ConDem plans to take public sector spending down this year by over £6b. There will be no immunity from a double dip recession based on these figures and Osborne’s budget plans.
The CIPD estimated last week that the number of public sector job losses could be 45% higher than originally predicted, seeing off 725,000 public sector jobs. The Government has still not ruled out a VAT rise, an unfair tax that hits the poorest hardest and will have a negative impact on consumer spending. House price inflation looks set to rise as well as overall inflation figures. So the perfect storm is cooked up; unfair taxation, rising inflation and higher house prices, increased unemployment and public sector pay freezes or pay cuts, within a fragile economic recovery. All the ingredients to drop us right back into recession.
The right wing argue that lost public sector jobs will migrate into the corporate sector thus rebalancing the economy. This is highly unlikely in the timescales of huge cuts immediately, and the fact that the private sector still do not see bank lending at the levels that they need. Private sector economic growth with be tortuous and not sufficient enough to absorb the loss of three quarters of a million public sector job losses over the next three years.
The fact that public sector debt has grown because we have taken on the corporate debt of the banks hasn’t made the headlines either - debt switched from the banks to the public sector balance sheet which caused the deficit growth in the first place! The public sector is now being asked to write off the bankers debts by paying for them with their jobs and pensions and all the while the ConDem government professes to be taking a tough line on bankers. They should be halting the spending cuts and demanding the repayments from the banks – that would be a far quicker, more equitable and sustainable way to ‘rebalance’ the economy. Our members jobs are not to be treated as ‘collateral damage’ in a phoney war on state excesses. The excesses are the bankers not the workers.
Anna Rose
