On November 25, Chancellor George Osborne presented his Autumn Statement and Spending Review, announcing large, sweeping cuts to social programmes, pressing ahead with austerity. The Spending Review also represented a furthering of the neo-liberal agenda for the economy in general, particularly in regard to the government’s privatisation agenda and cutbacks in the funding of social programmes. At the same time, it reflected a determination to find ways to press ahead with the “austerity” programme in the face of the opposition of the working class and people.
The Review announced a real-terms reduction in day-to-day departmental spending of 0.8% a year on average by 2020, which amounts to a cut of £20bn. Within that, the operational budget of the Department of Transport will fall by 37% (although capital funding of transport projects will rise by 50%, reflecting the continued demand for such infrastructure projects as a safe place to invest capital). The resource budget of the Department of Energy and Climate Change will lose 22%. The day-to-day budgets of the Department of Business, Innovation and Skills will be cut by 17% and that of the Department for Environment, Food and Rural Affairs by 15%. Though the Arts Council will receive additional funding, the Department for Culture, Media and Sport will have its budget cut by by 5%. It should be emphasised that these are cuts upon cuts. For example, The Department for Culture, Media and Sport had its budget cut by 7% in the 2013 Spending Review.
The NHS in England is set to see further cuts over the parliament. Though the total budget for England is set to rise from £101bn to £120bn, this actually equates to 3.5% per year, leaving a much smaller change after factoring in inflation. At the same time, the NHS in England will be required to make £22bn additional “efficiency” savings, and the resource budget of the Department of Health will be reduced by 25%. Further, student nurse grants will be abolished in favour of loans.
The Health Service Journal (HSJ) pointed out:
“Documents published as the chancellor finished his speech revealed that much of the real terms funding increase promised for NHS England over the parliament will come at the expense of huge real terms cuts to other areas of Department of Health spending.
“The £15.3bn pot of DH funding that pays for health education, public health, capital projects and other arm’s length bodies will be cut to £13.2bn by 2020-21. The Health Foundation calculates the real terms cut at 21 per cent.”
The HSJ added: “The NHS will be encouraged to create ‘long term partnerships’ with the private sector to develop new models of care and upgrade diagnostics services.”
Education spending will be geared to reorganising education on market and business-centric lines. “We’re going to open 500 new Free Schools and University Technical Colleges… Our goal is to complete this schools revolution – and help every secondary school become an Academy. And I can announce that we will let Sixth Form Colleges become Academies too,” said Osborne.
Programmes relating to climate change are a casualty of the Review, with the ending of support for carbon capture development at power stations along with a permanent exemption for Energy Intensive Industries (such as steel and chemicals) from environmental tariffs. Though Osborne claimed that “support for low-carbon electricity and renewables will more than double”, he announced almost in the same breath that the Renewable Heat Incentive will be cut by £700m. The main focus is to be on new nuclear power, which has always been linked to the military programme in Britain, with “a major commitment to small modular nuclear reactors”.
Regarding welfare, much has been made of the U-turn on tax credits. The cuts to these credits met with such popular opposition, reflected in the Lords defeat, that the government thought better of imposing them outright. Instead, Osborne reinforced his commitment to deliver the planned £12bn in welfare cuts, delivered in various ways such as cuts to housing benefit. In particular, the planned Universal Credit will result in large cuts affecting millions of people. The Resolution Foundation has analysed that families in the lowest half of income distribution will lose on average £650 Universal Credit; the top half will suffer no average loss.
Further, the Department of Work and Pensions budget is to be cut by 14%. The Chancellor announced a rise in the state pension to £119.30 a week in 2016, which only amounts to 2.9%, barely enough to keep up with inflation, and is still at poverty-level.
Despite all of the above, the depth of the cuts was not what had been circulating in anticipation of the Review, and headlines have been dominated by its alleged U-turns. Paul Johnson, Director of the Institute for Fiscal Studies, said:
“July’s fiscal arithmetic implied average cuts of 27% to the resource spending of ‘unprotected’ departmental spending – that is to day-to-day spending other than that on health, schools, ODA and defence which was explicitly protected. The comparable figure after yesterday’s announcements is ‘just’ 18%, one third less than implied in July. Yet the planned surplus for 2019-20 is largely unchanged.”
The explanation given for the supposed turnaround was that the Office for Budget Responsibility (OBR) improved its predictions at the last moment: tax revenue up, national debt and interests payments down, giving the Treasury £23bn extra than predicted in July. Very convenient, and reinforcing the narrative that the government is ameliorating its attacks, and is demonstrating “responsibility” and making sure that public finances are “sustainable”.
Regardless, the Director of the Institute of Fiscal Studies pointed out: “The first thing to say is that this is not the end of ‘austerity’. This spending review is still one of the tightest in post war history. Total managed expenditure is due to fall from 40.9% of national income in 2014-15 to 36.5% in 2019-20. A swathe of departments will see real terms cuts. The 3% cumulative increase in health spending over the next five years is not far off the average annual increase in spending in the last 50 years.”
In other words, the objective remains austerity and the neo-liberal agenda. Privatisation and the transfer of responsibility from the government as the public authority to the private sector was a running theme of the review. One clear example was housing: the Review announced the removal of restrictions on shared ownership, opening up this market, while relaxing the planning system to favour the big building companies. Housing association tenants will to have Right to Buy extended to them, at the expense of housing associations, which are now subject to similar erosion as council housing.
“Localism” and “devolution” are being used to drive the shift of responsibility and power from central government to private interests. To “shift power”, said Osborne, “we have to give all local councils the tools to drive the growth of business in their area… So I can confirm today that, as we set out last month, we will abolish the uniform business rate. By the end of the parliament local government will keep all of the revenue from business rates.”
“We’ll give councils the power to cut rates and make their area more attractive to business,” he said. “And elected mayors will be able to raise rates, provided they’re used to fund specific infrastructure projects supported by the local business community.”
Councils will be “encouraged” to sell their assets, including housing. “Local government is sitting on property worth quarter of a trillion pounds,” said Osborne. “So we’re going to let councils spend 100% of the receipts from the assets they sell to improve their local services.” When local government is the owner of property it is “sitting on” it; when the private sector deprives the people of affordable housing, it is dealing in “attractive” investment opportunities.
Unison General Secretary Dave Prentis exposed the funding pressure councils will be under:
“Today was a bad day for local government. The Chancellor grabbed another £1.9bn from council budgets, at a time when they needed more money, not less… Local councils have already had to cut billions from their budgets, and now they have to dig even deeper. The closure of more essential local services is inevitable, as councils are forced to lay off thousands of experienced staff over the coming months. The day is not far off when councils can only afford to run the services the law demands they do. Other services will either disappear or residents will have to pay much more to use them.”
“Our social care system is already in meltdown,” he said. “It needed a desperate injection of cash today, but all that happened was George Osborne passed the buck to local taxpayers.”
An area of state expenditure that benefited from the Review was the capacity for war and intervention. The combined “hard power of military might and the soft power of international development” is to be increased. The Defence budget is to rise by 18% by 2020 to £40bn and the overseas “aid” budget will increase to £16bn. The budget of the Foreign Office will be maintained in real terms. To protect the “hard power” at home, the Chancellor abandoned plans to cut the police budget in England and Wales.
In every way, the Spending Review is a continued attempt to push through the neo-liberal agenda, despite the growing anti-austerity movement. Now in the current conditions, it is also serving the drive for intervention and war. In the face of this manipulation, the opposition must not let up so that a complete change in the direction of the economy into the alternative can be realised.