This winter in the UK, the impact of austerity is biting and the evidence of its failure is banging Brits over the head. The promised economic growth is not happening, and blaming the eurocrisis for the situation just does not hold water. That has not stopped the government from pointing the finger at the euro, or blaming the evil trade unions, or the weather. When I read Sir Stephen Nickell (economist and Office for Budget Responsibility member) hoped for a white Christmas, as that would keep the UK out of a double-dip recession due to the bounce-back in the first quarter of 2012, I actually blinked. Praying for snow to prevent another recession is about all the UK Government can hope for these days (http://www.bbc.co.uk/...).
The government is willing to do anything but admit the obvious. Cutting employment and wages for the majority during an economic crisis is simply stupid; growth is demand-led in the UK, cutting demand means no growth and that is exactly what we are seeing. Announcing 6 more years of austerity when all the current bout has done is impoverish the poor, working poor and working class, George Osborne seems to have a car as badly broken as Tony Blair’s which was also lacking a reverse gear. Moreover, pretending that these policies are growth creating, rather than growth contracting, merely demonstrates that they: 1) do not understand basic economics; 2) are delusional; and 3) are lying when they say nothing else could be done to ensure economic growth.
Unfortunately, they ignore the obvious: the spending of the majority supports economic growth in the UK. The government persists in cutting benefits, wages, and state sector jobs while at the same time it is cutting corporate taxes, providing guarantees to small businesses, and setting up free enterprise zones; none of these are leading to increases in economic growth.
The massive amounts of Quantitative Easing by the Bank of England has been a damp squib. The money is being hoarded by banks (following the buy-up of their bad debt) and is not being loaned or invested. Pretending the problem is one of liquidity (being able to move money, get loans, etc.), rather than that profits are not realisable caused by inability to sell goods at a profit due declining household incomes, does not help the situation In fact, the UK economy is worse and growth forecasts have been cut once again (also see, http://www.bbc.co.uk/...). Now, the word “recession” is being discussed openly on the BBC as opposed to hushed whispers in the boardrooms.
I. Career Opportunities?
A. General Unemployment
On November 11th, the Office of National Statistics (ONS) released its latest labour market statistics. The numbers of unemployed have not been this bad since 1994; it is currently at 2.62 million. The unemployment rate of 8.3% is the lowest since 1996.
The inactivity rate for those aged from 16 to 64 was 23.3 per cent, up 0.1 on the quarter. There were 9.36 million economically inactive people aged from 16 to 64, up 64,000 on the quarter--ONS.
Male unemployment (ages 16-64) has remained constant at 9.2%, female unemployment has risen from 6.6 to7.6% (see table 2.1 in http://www.ons.gov.uk/...). Youth unemployment (16-24 year olds) was 21.9% (up 1.7% from June) to a whopping 1.02 million. This includes those that are in full-time schooling but willing to work; excluding those in school but willing to work leaves 730,000 16-24 year olds or 20.6%; see http://www.ons.gov.uk/...).
I unfortunately could not get a breakdown across ethnic and racial lines as this information has not been updated since February 2011 relating to the 4th quarter of 2010; however, even back then there was a clear disparity in unemployment between whites and people of colour (see http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/november-2011/table-a09.xls).
In this data:
Total unemployment: among whites was at 4.5, while for minorities it was 8.6 with the largest impact upon blacks at 11.5%;
Men: 5.8%; white, 5.6%; all minorities: 9.5% and for blacks, 12.9%;
Women: 4.0% for all; white, 3.6%; all minorities 7.6% and black women: 11.4%).
Given the concentration of people of colour in the state sector and the attack on the state sector with job losses primarily in that sector, it is clear the situation for people of colour is far worst than the situation for whites in the UK.
B. The Public Sector:
• Public sector employment decreased by 111,000 in the second quarter of 2011, to 6.037 million.
• Local government employment decreased by 57,000; central government decreased by 47,000 and employment in public corporations decreased by 7,000.
• Civil Service employment decreased by 24,000 to 489,000. This decrease includes 14,000 people employed temporarily to undertake the 2011 Census.
• Employment in the private sector increased by 41,000 to 23.132 million.
• The Q2 2011 public sector estimate is 240,000 lower than the same quarter a year ago (http://www.ons.gov.uk/...).
As can be seen below, in the graph provided by ONS (http://www.ons.gov.uk/...) job losses are being driven through government cuts to local councils and through the 2 year local council tax freeze imposed by the government; that is what is leading to library closures and cut-backs in services like youth centres and meals-on-wheels.
In many senses, the 110,000 stated loss is misleading as the actual figures compared to a year ago show the following according to the ONS:
Compared with the same quarter a year ago, there were decreases in public sector employment for all English regions. […] England (195,000; 3.9 per cent), Scotland (25,000; 4.1 per cent), Wales (10,000; 2.9 per cent) and Northern Ireland (4,000; 1.8 per cent) all showed a decrease in public sector employment in the year to Q2 2011. In the year to Q2 2011, public sector employment in Great Britain decreased by 230,000 (3.8 per cent) as did total public sector employment in the United Kingdom (240,000; 3.8 per cent (seasonally adjusted); see, http://www.ons.gov.uk/...).
For industrial sectoral breakdown comparisons of job losses in the public sector, (Standard Industrial Classification 2007), the largest decrease in the second quarter 2011, compared with the first quarter 2011, was in public administration (43,000; 3.7 per cent). The National Health Service (26,000; 1.6 per cent), education (16,000; 1.0 per cent), other public sector (14,000; 1.6 per cent), other health and social work (7,000; 1.9 per cent), Police (4,000; 1.4 per cent) and construction (1,000; 2.3 per cent) all showed decreases in employment between Q1 2011 and Q2 2011. HM Forces showed no change in employment (http://www.ons.gov.uk/...). These are summarised below from the ONS (same link).
II. A new definition of fair …
A. Cuts in Wages and Increasing Job Loss Projections
On November 29th, the day before the public sector workers strike, the Chancellor of the Exchequer George Osborne made some changes to the budget in his Autumn Statement .
Osborne eliminated the 2 year public sector wage freeze, but then capped public sector wage growth at 1% to save £1bn by 2014-15. Given that inflation is at 5%, this is a clear cut in real wages. Taking into account forced increased contribution to pensions, Bob Crow of the Rail, Maritime and Transport Union says state workers will actually be 25% worse off .
Using the term wage stagnation is erroneous. What we are seeing is actual cuts in money wages (take home pay) and real wages (what people can purchase with their wages).
Moreover, the supposedly independent Office for Budget and Responsibility (OBR) has revised its earlier estimates of public sector job losses (which had already been revised from its initial estimate of 610,000 downwards to 410,000) upwards again to 710,000 jobs lost due to the introduction of austerity measures (http://www.bbc.co.uk/...).
B. Think of the Children; Won’t Someone Think of the Children?
Osborne’s Autumn Statement eliminated the lies that the government is attempting to balance the budget fairly. The IFS showed that there will be a fall of 4.7% in real household disposable income (RHDI) between 2009-12; the largest fall over a three year period on record since 1955). Moreover, RHDI will be lower in 2016 than it was in 2006 (http://www.ifs.org.uk/...).
While the latest measures did not impact on the poorest, it is clear that the working poor (the 2nd and 3rd income deciles) were clear losers and are now sharing the loss of income due to the introduction of austerity measures in the UK with the poor. The distributional impact examination done by the Institute for Fiscal Studies clearly demonstrated that it is the lower 4 income deciles that are bearing the brunt of the austerity measures (http://www.ifs.org.uk/...). This is the truth, however much it is denied by David Cameron during Prime Minister’s Question Time.
(Institute for Fiscal Studies, http://www.ifs.org.uk/..., p. 10.)
Of course, the impact of austerity measures is falling far harder on families with children; but this should be expected given the measures.
a href="http://s1234.photobucket.com/... target="_blank"> (Institute for Fiscal Studies, http://www.ifs.org.uk/..., p. 11).
Of those in the lowest income decile, unemployed single parents are impacted the most by the introduction of a benefit cap of £500/week which is inclusive of housing benefits, unemployment benefits, income support, child-benefits, carer benefits and disability benefits. (http://www.dwp.gov.uk/...) We really didn’t need to dig far. The government openly admits this:
“Approximately 40% of households who are likely to be affected by the cap Will consist of five or more children whilst over 80% Will consist of 3 or more children. Fewer than 10% of households likely to be affected by the cap will consist of no children at all (http://www.dwp.gov.uk/..., p. 4).
And:
[…] we estimate that of the households that are likely to be affected by the cap, approximately 30 per cent will contain somebody who is from an ethnic minority. Ethnic minorities form less than 20 per cent of the overall benefit population (http://www.dwp.gov.uk/..., p. 7).
And:
[…] we expect around 60% of customers who are likely to have their benefit reduced by the cap to be single females but only around 3% to be single men. Most of the single women affected are likely to be lone parents, this is because we expect the vast majority of households affected by this policy (around 90%) to have children. Approximately 60% of those who will be capped are single women. Single women form around 40% of the overall benefit population (http://www.dwp.gov.uk/...).”
In all cases, the DWP (Department of Work and Pensions) have said that the mitigation of this policy will be the fact that it will get people into work. After all, that is what it is designed for: to get the lazy unemployed “slackers” back into work. However, what we are seeing is not increasing employment, but rising unemployment. So where does that leave people on benefits? They are literally up the creek without a paddle, especially if they have children. The combination of Benthamite lesser eligibility criteria ( those on benefit must have lower incomes than working people) with the Malthusian punishment (the benefits decrease the larger the family size) brings back horrible (and unsuccessful) methods of addressing poverty from the 19th century back into vogue. Poverty derives from the failures of the capitalist system to enable full employment (it is not consistent with competitive criteria) rather than from the actions and choices of the poor. But for Iain Duncan Smith (secretary of state for work and pensions) it is much easier to blame the victims than deal with reality.
So now they have decided to share the misery with the working poor and working class. The reason for the fall in income is that there was an increase of child tax credit that had been pencilled into the original budget which has now been removed; this is why the 2nd – 4th deciles are seeing income losses:
“The Government will not go ahead with the planned £110 above inflation increase to the child element of the Child Tax Credit and will not uprate the couple and lone parent elements of the Working Tax Credit in 2012–13, to ensure the welfare system remains affordable (http://cdn.hm-treasury.gov.uk/..., p. 8).”
Reneging on promises to increase the child portion of the child tax credit and freezing working tax credits will hit working families (especially single parent families) hardest. Instead this money has been shifted to lowering the planned increase in fuel duty from 5p to 3p and public transport increases kept to 6% rather than the planned 8% (transport policy, what transport policy?). This is what is leading to the projected fall in income of deciles 2-4; with the lowering of fuel duty improving incomes of the middle class and above whom are not as dependent upon child tax credits and working tax credit.
According to Tom Clark of the Guardian:
It is a little over £2 a week for each child, which may not sound much until you think that equates to £300 or £400 off the annual budget for every cash-strapped family with three or four kids, a serious hit that they can ill afford in current conditions. Every penny of the £975m being raised through this raid in the next year alone is being given away in an easing of fuel duties (http://www.guardian.co.uk/...).
According to Kirsty Walker:
More than 5.7million families claim the child element of tax credits, which are available to those with joint incomes of up to £40,000. They are made up of the family element, worth up to £545 a year and a child element of up to £2,555 for each child in the family. In another blow, the Government is also freezing the lone parent and couple element of working tax credits in a move which will save a further £1.4billion over the next five years (http://www.thisismoney.co.uk/...).
III. Coddling the business and finance sectors
A. While working families got the shaft, unsurprisingly, there were special presents to the private sector (http://www.businesslink.gov.uk/...; see also, http://www.taxjournal.com/...) including the decrease in Corporate taxes to 23% by 2014, the establishment of enterprise zones, and rate holidays for small businesses (along with an attempt to increase available liquidity for loans for investment through government guarantees … these lead me to wonder whether the banks will be able to earn only the gilt rate on loans for investment to small businesses as risks are taken out of the equation).
B. For those following the news on the eurocrisis and attempts by Merkel and Sarkozy to fix the mess, we got to witness David Cameron’s staunch defense of the City against European aggression; the threat against the City (as an aside: the UK’s version of Wall Street is located in the old City of London and the Docklands; so when you hear The City, we are not talking about London, but the heart of the UK financial sector) was not to be borne:
“Arguing he had to protect the City of London, Cameron demanded that any transfer of power from national regulators to an EU regulator on financial services be subject to a veto; the UK be free to place higher capital requirements on banks; that the European Banking Authority remain in London; and the European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone. He also argued that non-EU institutions operating in the City but not in the eurozone, such as American banks, should be exempt from EU regulation (http://www.guardian.co.uk/...)."
Clearly, there are definitely different operating procedures between Cameron and Mrs. Thatcher (who would never leave an EU meeting until all discussions were concluded due to a reasonable fear that she would not have any influence on the outcome). Cameron’s deep concern with the city of London and American banks (with 548 of foreign owned financial service companies in the UK being American owned) providing 3.5% of jobs (http://www.cityoflondon.gov.uk/...) in the UK is heart-warming but stands in sharp contrast to his lack of concern over public sector jobs that used to provide 21% and now provide 20.7% of employment in the UK; these jobs he has no trouble eliminating (Public sector employment: http://www.econstats.com/...). Public sector employment (http://www.ons.gov.uk/...) decreased by 111,000 from April to November (1.8%).
But we know the PM is a champion of big business, especially the City so let’s look at what he found so completely objectionable. I find myself in a weird situation of actually agreeing with Cameron’s decision, but for rather different reasons.
Cameron and Osborne strongly oppose the introduction of financial transactions taxes (FTT). They have been using the excuse of simultaneous international introduction of FTTs to oppose them as they know that will never happen due to opposition in the US and other countries. Simply the threat of their passage was enough to send the Tories and the financial sector into a tizzy (http://en.wikipedia.org/...) and even though the FTT was not on the agenda of discussions in Europe, he demanded a separate legally binding protocol to protect the City (http://www.bbc.co.uk/...).
Being a supporter of the introduction of FTTs, it is rather disconcerting that I find sympathy with Mr. Cameron. However, the last thing that I want is for these taxes to cover the eurozone bailout funds rather than be used for green infrastructure and manufacturing development and to cover the social welfare state, so I would have passed on this as well. Robbing Paul (bankers) to pay Paul (bankers) is not the purpose of these taxes in my book; I want some income redistribution and want to rob the bankers to cover the majority for job creation and welfare state coverage.
The additional demands of the fiscal pact were a constitutional mandate concerning budget rules specifically those around deficits; quite honestly, I did not support the balanced budget amendment in the US and I will not support it in Europe. If we are ever rid of the neoliberals from government, the last thing we need is to be tied constitutionally to limited budget deficits established by a neoliberal EU:
“For eurozone countries, it means they will have to enshrine in their own national constitutions tougher budget rules which were in the Maastricht treaty, but have since been broken. These include an agreement that structural budget deficits never exceed 0.5% of gross domestic product (GDP), sanctions for those whose deficit exceeds 3% of GDP and a requirement that they submit their national budgets to the European Commission (http://www.bbc.co.uk/...).”
Constitutional enshrinement of budgetary criteria is simply bad ideology rather than good economics and leaves states unable to respond to a crisis; it is fundamentally wrong from an economic perspective and prevents the use of Keynesian stabilisation policies to deal with recessions. I cannot for the life of me understand why any country would agree to this. While it only affects eurozone members (and thus it is a mystery why Cameron would reject it as it does not effect all EU members), it is literally a policy that does nothing except to ensure the continuance of attacks on wages and incomes in the advanced capitalist world. Moreover, the Maastricht treaty and Stability and Growth Pact (where these rules are enumerated) needs to be eliminated, not enshrined constitutionally.
Of course, this is not Cameron’s reason for rejecting this Fiscal agreement; his government is introducing similar policies in the UK as those demanded in Europe. His problem is one of national sovereignty and control over fiscal policy decisions. Already chaffing under EU regulations on business that destroy their introduction of “flexible labour markets” (read low wage labour markets with no worker protections), the last thing they want is something that may undermine their race to the bottom.
Quite honestly, the impact of Cameron’s strop and inability to organise a group in opposition (hello, Scandinavia?!) is yet unknown; but we do know that he has really isolated the UK and angered both Sarkozy and Merkel. An isolated UK has less leverage and weight on other decisions in the EU; throwing a strop of this nature without garnishing support among other sympathetic countries demonstrated a serious lack of diplomatic skill and since the agreement did not affect the UK (as it is not a member of the eurozone) was simply unnecessarily incompetent.
However, the real problem for Cameron comes down to the question of how fast can you beggar thy neighbour before thy neighbour beggars you? That seems to be the name of the game over here. It is a literal race to be bottom …
And God Bless Us ALL, said Tiny Tim …