If (God help us) David Cameron wins the general election, what will he really do? Amid all the charges and counter-charges in the febrile pre-election atmosphere, two solid and reliable sources of evidence stick out. One is what is now happening in the Republic of Ireland where the Fianna Fail coalition government is implementing a virtual carbon copy of Tory economic policy. Indeed the last Irish budget was hailed by the Daily Telegraph as a role model for the British Chancellor of the Exchequer.
Michael Forsyth, the former Tory Scottish Secretary who is now chair of Cameron’s policy commission on tax, recently told a Conservative Intelligence (which some may regard as something of an a oxymoron) conference: “It seems to me that we need to be able to reduce the overall level of public expenditure over a parliament by about £75 billion a year”.
That £75 billion – just a single year’s proposed cuts, according to Forsyth – amounts to about 5 per cent of Britain’s gross domestic product. That is what the Irish government has delivered – three slash-and-burn budgets over the past 18 months which cut the country’s GDP by 5 per cent. So what has happened?
The unemployment rate in the Irish Republic is now 12.5 per cent and could well rise on the current trend to more than 15 per cent before the slump is over. The rapid meltdown in the private sector has been exacerbated, not mitigated. That is hardly surprising when the prospects of profitability for private investment are so bleak. However, it is contrary to the claims of Cameron’s Tories that rapid cutting of the deficit will produce a faster turnaround faster. Mass mortgage defaults caused by unemployment and falling house prices are now forecast as the next stage of the Irish economic collapse. All this is just in one year.
Forsyth is recommending that a Tory government should administer this poison for five years, which would cut public spending in Britain by a total of £375 billion or 25 per cent of GDP over the whole period. That is almost unimaginable – it would amount to half of total current government spending.
Again, though, that is exactly what the Irish government intends to do – shrink the Irish state by no less than 25 per cent within less than half a decade. Think of what has happened in Ireland over the past year, multiply that by five and you will have some idea of what a Cameron government is threatening to inflict on the United Kingdom.
Some of the social consequences of this monetarist medicine are now becoming clear in the south of Ireland. It is already predicted that tens of thousands of families will lose their homes. However, because the government has used all the state’s resources to look after bankrupt banks and other institutions – the amount already expended on the Anglo Irish Bank alone is equal to the total revenue of the Irish exchequer last year – there will be little or no money to assist the victims of this vicious slump.
Yet again, we are told the same in Britain: that with a budget deficit of £178 billion this year, there’s little that can be done for the unemployed, the homeless or the small businesses that have gone bust. If that is the case now, what would the next four years be like with an intensification of this policy?
It might be said that this is an exaggeration and the Tories would never go so far. But it would be a mistake to think that. In 1980, at the start of Margaret Thatcher’s reign and in the middle of a deep worldwide slump, the Tories did exactly that. In the budget of March 1980, the Tory Government doubled VAT, raised the minimum lending rate to 14 per cent, cut money supply and government borrowing, and made the first of a series of harsh cuts in public spending. The results were brutal and predictable. A mounting wave of bankruptcies, plant closures and lay-offs quickly ensued. Within nine months, unemployment had reached 2.13 million and continued to rise for another six years until it reached 3.2 million in August 1986. Manufacturing employment fell by 28 per cent between 1979-86 – a loss of two million jobs. Inflation also soared to reach 22 per cent in May 1980. And the competitive position of British companies collapsed by a staggering 35-45 per cent.
Moreover, this was just one front in an all-out war. The Thatcherites unleashed market forces without restraint, shifting the balance of power in industry and in violent confrontations – at Orgreave and Wapping, for example – in favour of capital. They ended the post-war consensus of using macro-economic policy to ensure full employment and underpin growth, and directed it instead at combating inflation. They rolled back the state by implementing huge cuts in public spending. Expenditure on housing alone was cut from 6.1 per cent in 1979 to just 1.6 per cent by 1990 – a cutback equivalent to no less than £65 billion a year in today’s money. And the Conservatives set about neutering the unions with determination and relish through six vehemently anti-trade union acts of Parliament – one after another increasingly turning the screw in an attempt to destroy the labour movement.
With the professed aim of setting markets free, they introduced the new weapons of privatisation and de-regulation, as well as sharply reducing cash limits. This created deep demoralisation in the public sector and a permanent atmosphere of financial crisis and retrenchment. Further, in order to enforce compliance at local level, the Thatcherites also centralised power quite markedly. Finance and functions were away from town halls, with measures to allow schools and council estates to opt out of local authority control, to transfer responsibility for inner-city regeneration to private agencies, and to replace domestic property rates with the hated poll tax.
Much of the public sector was in constant turmoil, but the Tory Government repeatedly showed it was determined to squeeze budgets regardless, whatever the consequences for the organisation of the quality of its services to the public.
No attempt was made to formulate a national industrial strategy. Thatcher and her ministers appeared indifferent to the fate of manufacturing, seeing the expansion of services as a replacement. Above all, the elevation of financial markets and the City of London were a central objective of the neo-liberal agenda that Thatcher forced through. It is a system of market fundamentalism which is still being played out today. The stark question now facing us as the election approaches is: does Britain really wish to return to the next stage of reactionary counter-revolution initiated by the last Tory Government?
