08.07.2009

Workers must not pay the price

No-one can doubt what the future has in store if the ruling class is allowed to get away with it, writes Eddie Ford

Following the chaos that was the global financial meltdown, and the frantic state intervention that followed in order to shore up the ‘free market’ system - the god that betrayed them - there was, of course, much pious talk about learning from one’s mistakes and never returning to the bad economic-financial habits of the past.

There was going to be a return to ‘good, old-fashioned, boring banking’. Banks would rein in the cocaine-fuelled wiz kids and stop gambling away obscenely vast fortunes on all manner of highly speculative and hugely complex financial schemes. Strict curbs on the ‘bonus culture’. No more ‘reckless lending’ and other such obvious nonsense.

Yet we all knew there was a big squeeze to come. By hook or by crook, the government would attempt to reduce the near mind-boggling debts it racked up as a result of its various Keynesian anti-slump measures - whether successful or not. Naturally, it was totally predictable who would end up eventually paying the price - and, oddly enough, it was not going to be the popularly reviled ‘greedy bankers’ and ‘fat cats’. No, rather it was always going to be you and me.

Well, Steve Bundred, the thoroughly unelected chief executive of the audit commission - who has to survive on a salary of £246,000 a year - has well and truly let the cat out of the bag in the pages of The Observer (‘We’ve had years of growth - so let’s not be afraid of cuts’, July 5). We should not forget that Bundred ‘has form’ - as chief executive of Camden council in the 1990s he slashed the budget by millions, sold off just about every asset he could lay his hands on, and within 18 months had got rid of some 3,000 workers.

So Bundred informs us that the “British problem” is that “we want Swedish levels of public service with US levels of tax”. Of course, says Bundred, the politicians are running scared of the voters in the gradual run-up to a general election, so will not be “completely candid” about the true nature of the cuts to come. Hard to disagree on that one.

The “real choice”, he writes, is about the “balance to be struck between tax rises and spending cuts”, and where exactly they should fall. If we are to be realistic, Bundred continues, we must “dismiss the notion that spending on health and education will be protected” or should “be immune from cuts”. After all, he remarks, there are “good reasons why they won’t and shouldn’t”.

Which are? Firstly, thinks Bundred, at a time when inflation is likely to be somewhere between 2% and 3%, a “pain-free” way of reducing public spending would be to “freeze” public sector pay - or at the very least “impose severe pay restraint”. According to him, this is only ‘fair’, seeing how “real wages” in the private sector are “still falling” - thus government ministers, if they are wise, will “correctly assume” that public sector workers “have done well over the past decade”, and hence will “tolerate some modest real reduction in earnings”.

Secondly, argues Bundred, both health and education have “experienced massive growth over the past decade” - and therefore have “faced less pressure than other parts of the public sector to provide value for money”, which can only mean there are “efficiency savings available that will not affect service quality”.

Cheerily, then, Bundred reminds us that “cuts are inevitable”, urges us to refute the “myth” that “spending cuts will destroy the quality of public services” and to reject the “shroud wavers” who would have us believe that “grannies will die and children starve if spending is cut”. And if we are to talk the hard, unsentimental language of pounds, shillings and pence - this is the boss of the audit commission talking, remember - he warns us to “expect a reduction” of £5 billion or more in real terms from public sector pay - which amounts to a “significant chunk” of the £50 billion or more that “may need to be found” through spending cuts and tax increases. But, Bundred concludes, that “still leaves much to be done”.

Get the picture? Though, in some respects, we should almost thank him for his brutal frankness, no-one can now doubt what the future has in store for public sector and other workers - if the ruling class is allowed to get away with its plans.

Like a shot, the chancellor, Alistair Darling, moved to back Bundred’s sentiments (although, predictably, he was rather less blunt and more vague and ‘diplomatic’). Stating that public sector pay has got to “reflect prevailing conditions” - especially with regards to the current low level of inflation - Darling also ventured the view that pay has to be “fair to people who work for the public sector, just as we have to be fair to the private sector”. Presumably, workers in both sectors should be eagerly looking forward to an equality of misery.

Of course, the likes of Steve Bundred are quite happy to peddle their own myths - or mendacious, self-serving lies. Writing in The Guardian, Alastair Hatchett and Ken Mulkearn of Incomes Data Services (IDS) highlighted the “urban myth” that all pay in the private sector is frozen, and thus public-sector pay should be frozen too in the interest of ‘fairness’. In reality, they point out, “pay awards have continued in the private sector this year - about two-thirds have awarded increases, from 1% to 4% or more”. Quite obviously, the reason why the private sector pay figures look so “dramatically negative” is “almost entirely because of a large drop in bonus earnings in the financial sector” between February and March. That is, the “earnings growth in finance in February was -28.4% because of the drop in bonuses for high flyers”. In reality, they argue, there is a wide spectrum, with pay freezes at one end and increases at the other (July 7).

In other words, the figures and statistics presented by those advocates of a total war on public sector workers are utterly skewed because they disingenuously include the huge - and no doubt very temporary - drop in bonuses amongst the ‘whizz kids’ and ‘greedy bankers’ during the specific and limited months of February and March. Talk about lies, damned lies and statistics ...

Of course, even if it were true that public sector workers have been doing so well, compared to their private sector brothers and sisters, no-one should be fooled by such appeals to ‘fairness’.

It is the system of capital that caused the crisis, slump and huge debt, not those who produce capital’s wealth. Nevertheless, it is worth looking at the pay reality. To get a balanced and true representation of private sector awards - as the IDS statistics show - all you have to do is look at the data for April 2009, but using non-seasonally adjusted figures and excluding the relatively large drop in City bonuses.

Hardly rocket, science is it? These reveal an earnings growth of 2.5% in the private sector and 3.3% in the public sector. In the private sector, the official figures show manufacturing - where most of the freezes are - at 1% and private services at 2.9%.

Yet the plight of public sector workers is much worse than suggested above. Teachers, civil servants and a range of others have not “done well” over the past 10 years. Below-inflation awards have been common, particularly over the last three or four years, and are frequently tied to attacks on workers’ terms and conditions - not least their pensions.

Millions of workers are severely feeling the pinch. Last year the government imposed a 2% cap on public sector pay rises, at a time when living costs were seriously escalating across the board and inflation was hovering around the 5% mark. An actual pay freeze would represent a serious reduction in the living standards of workers already struggling to make ends meet - it would be a full-frontal attack.

And worse is to come, have no fear. Ominously - as if the axe-wielding Bundred was not enough - The Sunday Times featured reports about how “secret ‘doomsday’ plans” for 20% cuts in public spending are currently being hatched by senior civil servants. According to the newspaper, the Whitehall mandarins have “begun creating detailed dossiers containing reductions in expenditure that are far deeper than the more modest savings being proposed” by both Labour and the Tories - the latter, using figures produced by the Institute for Fiscal Studies, says that there has to be public spending cuts of up to 10%.

Some of the proposals “likely” to be put forward by the high-level officials, claims The Sunday Times, include reductions in spending on London Underground, “renegotiating” Labour’s “generous” pay deal for GPs and “savage cuts in funding” for local authorities. Apparently, the “doomsday” documents will be colour-coded blue for a Conservative victory, red for Labour and yellow for a hung parliament with the Liberal Democrats holding the balance of power (July 5).

The writing is on the wall. We need to start seriously preparing and organising for the struggles to come - to defend public services and fight against the cutbacks. The very same disgraced bankers, wiz kids, bosses, unelected bureaucrats and myopic politicians who oversaw the economic crisis and collapse of financial institutions - are now uniting around calls to cut public spending and the wages of public sector workers. They want the workers to make the sacrifices, while, for all their fine words of regret, they carry on just as before - doing all in their power to defend a crisis-ridden system in terminal decline.