The public have so far acquiesced in the public spending cuts – but this will change when they start to feel the effects
For Labour, it was Iraq. For this government, the defining issue will be public spending.
So far it is winning the popular argument. The majority of people believe that the deficit is the great economic problem, according to the polls. It does not really matter that many economic experts disagree – including those who are hardly associated with Left-of-centre politics, such as Martin Wolf and Samuel Brittan of the Financial Times. Homespun analogies comparing the public finances to a purse or wallet are likely to win out in popular argument, as John Maynard Keynes himself noted.
But these views can and will change. Perceptive pollsters are already finding cracks as people start to think that cuts are happening too fast, too soon. Although public sector staff are demoralised and fear for their jobs, the wider community has yet to feel the direct impact of many of the government’s spending decisions. When they have – as with the cancellation of the Building Schools for the Future programme – there has been widespread anger.
Ministers started by telling us that the cuts would be pretty painless. At various times, the message has been that they can be achieved through efficiency, that vulnerable people will be protected and that they will not bring back a North/South divide.
These are pledges that cannot be honoured. Research from the Institute for Fiscal Studies shows that the poorest will lose most from the tax and benefit changes. The Trades Union Congress will soon be updating our post-Budget analysis of the effects of spending cuts on different sections of the population, but it is already clear that the poor and those in the middle will be the overwhelming losers.
And, of course, this is analysis only of what has happened so far, which is very small beer compared with the scale of the cuts expected in October’s Comprehensive Spending Review. But even the first £6bn of cuts hit support for unemployed people, free school meals and affordable housing projects.
Yet the government wants to remove £60bn from spending by 2014. There is no way that this can be done without savaging services. No-one will oppose genuine efficiency savings. Replacing bottled water in offices with tap water, for example, makes good financial and environmental sense. But the CSR will rip through public services in every part of the country, and it is when the cuts come up close and personal that the public mood will change.
That is when interest in economic alternatives will mount, and the government’s strategy will come under clear scrutiny. Its argument that the cuts are the only way to avoid a Greek-style crisis was, we are told, the decisive turning point for Liberal Democrats. But it is one of the most flawed.
The UK is not like Greece. Greece has two big problems. Many taxes go unpaid and government debt has to be paid back quickly. The UK has a tax gap, but it is nothing like the scale of tax evasion that is endemic in Greece, and the UK debt is some of the longest dated of any major economy.
Ratings agencies and lenders can all see that deliberately depressing an economy is not the right way to repay debt. Spain’s credit rating has been downgraded because of fears that it has cut too soon and too deep, and will not be able to pay back its debt because of a reduction in tax revenue.
Ireland began cutting public spending earlier than the rest of Europe. But the cuts have not worked. The Irish government predicted that growth and employment would recover. In fact, the economy shrank and unemployment grew in 2009. As a result, tax revenues are falling and the deficit has not improved.
The real tragedy is that it does not have to be this way. History shows us that deficits reduce when the economy is growing, as that is when the tax take regains momentum. The government should be arguing for co-ordinated growth strategies in the G20 meetings, not masochistic cut-backs. Action to make our tax system fairer, such as Robin Hood taxes on financial transactions, can garner even more of this increased activity.
How this all plays out will be up to the electorate. But pain without much gain is not a good electoral slogan.
Brendan Barber is the general secretary of the Trades Union Congress. The annual TUC Congress takes place in Manchester on September 13–16
