23.07.1998

Spending spree veils new attack

After two years of continuing the Tories’ squeeze on health and education New Labour is now playing the bountiful benefactor for all it is worth. Workers should not be fooled

In last week’s comprehensive spending review - the CSR - Gordon Brown announced large increases in government money for the NHS and schools for the three years commencing April 1999 - at the expense of public sector workers. The extra cash - a total of £21 billion for health and £19 billion for education - is not to be found by taxing the rich, but by continuing to clamp down on the pay of nurses and teachers.

Although NHS spending is projected to rise by an average of 4.7% per year in real terms (after allowing for inflation) from next April, the overall annual increase, taking into account the previous two years’ cutbacks, will average 3.7% a year over Labour’s five-year term of office. This compares to an average annual increase of around 3% during the Tories’ 19-year period of government. During the last years of the Major administration the real annual rise in health spending was down to 2.5%, but during the early 80s it had exceeded 5%.

Nevertheless such increases in public spending were more often than not made with shamefaced reluctance by the Conservatives. In contrast Brown’s heady speech surely underlined that Labour - New or Old - remains a different creature, with a positive belief in the desirability of state intervention.

The announcement of extra funding was greeted with near euphoria within the NHS and education. Stephen Thornton, the chief executive of the NHS Confederation, declared that the increases were “beyond our wildest dreams”. The Royal College of Nursing spoke of “one of the most exciting opportunities to revolutionise quality in the history of the NHS”. Education workers and union leaders also expressed surprise and delight.

The truth is, however, that there is nothing very remarkable at all about Labour’s projections. For example, education will account for 5% of the gross domestic product under Labour, compared with 4.9% under the Tories. And the RCN’s hopes that Brown’s plans will “revolutionise quality” were soon put into perspective, when health secretary Frank Dobson revealed that the NHS expected to have to treat three million extra patients over the three-year period of the spending review. He intended to recruit 7,000 extra doctors and 15,000 extra nurses to try to meet this additional demand.

Despite the continuous rise in health spending over the past two decades the service, as every user knows, has deteriorated. It is not only the ageing population, combined with the artificially high cost of new treatments, that has caused this, but the monopolistic profiteering of drugs and equipment suppliers. The provision of healthcare according to need would be no problem in a democratically planned workers’ state, given the present level of productive forces in the advanced capitalist countries. It is precisely the contradictions within the capitalist mode of production that makes such rational delivery almost impossible. The Conservatives tried to resolve the effects of market capitalism through introducing more of the same - the so-called ‘internal market’. They failed and deterioration continued. Dobson will be lucky if quality is maintained, let alone radically improved.

The extra spending appears generous only in contrast to the squeeze of recent years. Increases which, in all likelihood, will fail to keep up with demand are made to appear huge by comparison. For all the talk of a “crisis of expectations” peddled by the left - most notably the Socialist Workers Party - workers had very few illusions in Tony Blair on May 1 1997. Their expectations were dismally low. So Dobson’s undertaking not to impose new health fees and to raise prescriptions charges only in line with inflation was greeted as though a real improvement was in the pipeline. In fact the prescription ‘tax on health’ will soon have reached £6 an item.

Taken as a whole, the rise in state spending is very modest indeed - especially considering the freeze of New Labour’s first two years. Brown made it clear that his projections are “subject to the overall financial discipline” of last month’s economic and fiscal strategy report. The EFSR foresees annual increases of 2.75% in real terms - but the announcement of this moderate easing of restrictions did not receive the kind of acclaim accorded to the chancellor last week. In fact Brown is making cuts in other spheres in order to balance the books - particularly in defence. Imperialism’s interests no longer demand such a concentration of resources, following the defeat of ‘communism’.

Labour has been able to plan for these small increases because of the outwardly strong appearance of the British economy, with comparatively low unemployment and inflation and steady growth. This has allowed the government to pay off debt, reducing the burden of interest payments. It also plans to continue selling off state assets - even if there are no more major privatisation bonanzas to be had. All this leads Brown to project a current account surplus - with revenue from taxation exceeding spending requirements - by 2002.

His schemes could so easily collapse. While the switch to a more long-term approach heralded by the three-year comprehensive spending review is portrayed as an example of prudent far-sightedness, the words ‘long-term’ and ‘capitalism’ do not sit easily together. The CSR may seem “reminiscent of the early Soviet five-year plans” to The Independent (July 15), but conscious regulation of economic activity is just as difficult (indeed it is impossible) under capitalism as it was under the Soviet bureaucratic regime. Capitalism depends on the spontaneous, autonomous activity of thousands of enterprises and many millions of individuals. The forces they generate cannot be accurately directed or consistently controlled.

As a result the system is subject to constant cyclical booms and slumps. Unfortunately for Labour there are warnings of a recession just around the corner. Only this week Adair Turner, director general of the Confederation of British Industry, was predicting new difficulties: “Our overall judgement is that the economy is now beginning to slow at a quite rapid pace,” he said. “Manufacturing and exports are in really quite a severe situation now.” The Ernst and Young Item Club forecast a rise in unemployment of 500,000 and called for interest rates to be hiked up by 1.25 points to 8.75%.

In view of this perhaps there is more than meets the eye to Labour’s categorical failure under the CSR to meet its clear commitment to cut welfare spending. Although Brown initially managed to keep the focus on his health and education promises, it was finally dragged out of Whitehall that, far from the social services budget being slashed, New Labour envisages increases (£27 billion over three years) that dwarf those for schools and hospitals.

“It is difficult to see why social security spending should rise at all during a period of economic boom,” commented Anne Segal in The Daily Telegraph. The fact of the matter is that it is not so much a question of Blair’s inability to push through welfare ‘reforms’ that is preventing the promised cuts. Rather he foresees a net increase despite individual savings, as unemployment soars. In other words a greater number of jobless workers will face intensified harassment and cuts in benefit.

Even allowing for this contingency, Brown could come completely unstuck. In a recession, not only does unemployment rise, but there is a consequent drop in state revenue from taxes. If spending is to be maintained, tax rates must be pushed up or government borrowing increased. Thus, even if we examine the British economy in isolation (hardly useful in view of capitalism’s global nature), Labour’s schemes look extremely fragile. There is some truth in the jibe of Francis Maude, the shadow chancellor, that the government is “spending its way into a recession”. But it does not take a great deal of imagination to picture a world crash resulting from the continuing Asian currency crisis and a Japanese slump. In such an eventuality all Brown’s plans would come unstuck.

In addition to the implicit onslaught on workers through likely redundancies combined with fewer benefit rights, there is a second, more explicit, attack. There are to be “tough new rules on public pay”, as the government assumes even greater control over the ‘independent’ review committees. These will now have to “bear in mind” Brown’s 2.5% inflation target, as well as taking into account the relevant department’s budget. While inflation is running at 3.7%, public sector pay - after several years of capping - increased by only 2.8% over the last year. In contrast average income rose by 6.2% in the private sector over the last 12 months.

If the two were to be equalised, the extra pay in health and education alone would eat up just about the entire projected spending increase. At present both the NHS and state education have severe recruitment problems as a result of these differentials. Yet Dobson wants to attract an additional 15,000 nurses. Christine Hancock, RCN general secretary, asked: “Where are these nurses going to come from if we don’t tackle pay? There are currently 8,000 nursing vacancies.”

This concern was also reflected among some sections of the bourgeoisie. The Independent’s editorial led with the headline, “Money is welcome, but what about the teachers and nurses?” That was music to the ears of a variety of union tops, from Rodney Bickerstaffe to Doug McAvoy. But these Labour-loyal misleaders will not want to do anything to put at risk the government’s ‘generous’ spending plans.

At present working class combativity is at an all-time low. Yet hundreds of thousands who work in what they view as valued service industries feel bitter at their own undervaluation. When even some elements of the ruling class are calling for their pay to be boosted, it is possible that their frustration may produce militancy - despite the union leaders.

The increases for health and education are not being conceded out of the goodness of Blair’s heart. Leaving aside electoral considerations, he knows that the system needs a healthy, well educated working class. Like his programme for constitutional change, perceived improvements are to be handed down from above.

Our class needs its own programme - one that fights not only for the healthcare, education, pay and benefits that we actually need, but one which challenges Blair’s plans to consolidate capital’s rule.

Alan Fox