GWYNNE BLOG: Osborne’s Mystery Cuts

_83250546_camSince Parliament returned, there have been two important developments out of Downing Street.

That the cuts to all departments besides the NHS and schools will be huge, and that the rest of the Royal Mail will be sold off to private investors.

These huge cuts simply do not make sense. Researchers from both the International Monetary Fund and the Organisation for Organisation for Economic Co-operation and Development have questioned the necessity of these cuts.

The IMF report suggested that, ‘The mantra that it is always desirable to reduce public debt must not go unquestioned. A comparison of costs and benefits must underpin policy advice.’

Recent economic figures from the United Kingdom, which suggest that growth is derisory and hovering on the thin line between negative and positive, show that we must not take the recovery for granted. If anything, we should now recognise that the costs of slashing the debt to our economy and even the fabric of our society outweigh the benefits of lower interest payments and assuaging the debt markets.

The OECD researchers said that, ‘Real public spending is to fall significantly in fiscal years 2016 and 2017, to stabilise in 2018 and rebound in 2019. Evening out the profile of fiscal consolidation would lower its impact on growth.’

The implication of their report is that slashing and burning public services is not necessary. The same results can be achieved with a slower reduction in spending.

They go on to say, ‘Although the composition of measures is yet to be defined, it is important that they mitigate distributional effects.’ The implication of this is clear – that they are imploring the Chancellor not to let the burden of his cuts fall on the poorest.

We can safely assume from the scale of the cuts to the Department of Work and Pension that he will not be heeding their advice.

The cuts to the DWP will amount to around £12bn a year by 2018. We know where about £1.5bn of these cuts will come from – the scrapping of housing benefit from 18 to 21-year-olds, and the lowering of the benefit cap. That still leaves £10.5bn of cuts to benefits – both in-work and out-of-work – that have yet to be defined.

Where these cuts fall will form the bulk of social policy for the next five years, and will define this Government’s record. The lesson from the last Government was that cuts to welfare do not necessarily result in actual savings. Iain Duncan Smith made about £18bn of cuts, mostly through the below-inflation uprating of benefits, yet made only £2bn in net savings, because of overspending on disability benefits and housing benefit.

Cameron goes on about being a Prime Minister in the mould of Disraeli, yet he knows that these cuts to benefits will be certain to hit the poor and the disabled.

Now, having appointed Robert “Workers’ Party” Halfon to be the Tory Deputy Chair, he has announced that the rest of the Royal Mail will be sold off without any of the shares going to workers already serving the company. A fire sale of national assets, including the Eurostar and the Royal Mail, will, in the short term, create the impression of deficit reduction. But it is a mug’s game, with long-term profits from these assets now going to private investors instead of the taxpayer – you.

This Government is going down the wrong track and, following our election defeat, we will not give up on opposing these decisions where we believe they are not in the public interest.

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