The Government is approaching the end of its first year of austerity and accelerated debt reduction but few people fully appreciate that this rate of cutting is about to more than double – even as several hundred thousand public sector workers begin to join the jobless queues.
The past year has been about cutting £8.9 billion in tax increases, spending cuts and savings, under 1 per cent of gross domestic product. But from next month – with four years to go before a general election – the Government cuts target will be £32 billion or 2 per cent of economic output at a time when the economy is growing at a much, much slower pace than hoped for, or even shrinking, and tax receipts are falling.
When supermarket giants such as Sainsbury and Tesco say they are really beginning to feel the impact of reduced household spending alongside companies such as Primark – companies that have geared themselves to price-sensitive consumers – it does not herald a rosy economic prognosis for the short to medium term.
The Office of Budget Responsibility has already had to reduce its growth forecast for this year from 2.1 per cent to 1.7 per cent following last year’s the sharp lurch into negative growth at the end of last year.
The Government has said that it expects the private sector to step in to replace the lost public sector jobs.
Communities Secretary Eric Pickles said he hopes to accelerate this by removing the safety net for local government and public sector employees that is supposed to prevent them being transferred to a private sector supplier on lesser pay and conditions.
Experience has shown over and over again that such savings invariably go towards shareholder dividends and management bonuses.
But even as many households struggle in quiet desperation, concealing the full impact of the cuts to date, a cursory glance at the National Health Service does not bode well. The anti-cuts research group False Economy predicts that anything between 4,622 and 18,015 jobs will be lost in the next year.
Libraries, SureStart centres, Jobcentres and police stations are due to follow. Labour MPs this week jeered ministers’ provocative claims that redundancy payments may even provide short-term fiscal boosts to local economies.
The Government does understandably take heart from figures that suggest manufacturing for export is at a four-year high as order books fill.
But, ominously, statistics to date show the tax take – that which is necessary for the Government to bring down the deficit – has actually fallen compared to a year ago.
