The Coalition's interests lie in business, not fairness

Osborne claimed in his June budget that the Coalition's economic strategy would be fair and progressive. Yet the brunt of their attack on the deficit will be borne by the poor, while business has been shown some astonishing largesse.
Oliver Huitson
25 January 2011

In the run up to last year’s general election there was a heated debate over the background of our present Prime Minister and Chancellor, David Cameron and George Osborne respectively. While Gordon Brown was accused of attempting to wage a ‘class war’ against his Tory rivals, a chorus of voices across the political spectrum argued that the pair he opposed ‘should be judged on actions, not background’. What was obvious enough then, and is now confirmed, is a crucial difference of interest. In his June budget Osborne set out his strategy. He would eliminate the structural deficit in five years, proclaiming his approach would be fair and even progressive with the pain falling equally on the rich and poor.

While there has been much discussion about whether the Coalition partners have been honest with respect to their election promises there has been little coverage of how dishonest they have been since getting to office. Far from being fair, the brunt of their attack on the deficit will be borne by the poor, the unemployed, the young and the disabled. At the same time, for business, the Coalition has shown some astonishing largesse, as Andrew Bowman has recently set out.

In opposition, Cameron had called for a £2,000 cap on bonuses at any state-owned bank. Earlier this week came the climb-down over bank bonuses. Osborne insisted it would be “totally unacceptable” for bonuses to be paid where the tax-payer had a controlling stake in the institution. But when action was required, and achievable, it became clear that such words were a charade. Just like Labour, the government pretended it could only be a mere bystander. Restraint is only “asked for”, or “encouraged”. Failing that, at least some “sensitivity” should be shown, Clegg pleaded. For all the theatrics and soundbites, the banking industry, closely tied as it is to both main parties, was chosen over the taxpayer. The chasm between the words in opposition and the lack of action in government, the continual give-aways to business, the shabbiness of it all, just seems never ending whichever party's in. So confident have the banks become, that Bob Diamond saw fit to declare that “the time for the banks to apologise is over”.

On taxes, the rise in VAT to 20% will hit the poorest hardest, according to the IFS. For business, they are to be treated to a staggered decline in corporation tax, falling to 24%. After taking on over a trillion pounds of private sector debt as sovereign debt, the private sector now has its tax reduced as the remedy. Time and again, claims that the cuts are ‘progressive’ come under question.

Labour market “flexibility” has also been back on the agenda; yet more power must shift from employee to employer to maintain a suitably pliant workforce (all in the interests of “growth”, ostensibly). The qualifying period to claim unfair dismissal may be doubled to two years, making it much easier for firms to fire staff on spurious grounds.

Under various forms of privatisation, a broad programme of asset stripping is again underway. After insisting pre-election that there would be no “top down” reforms of the health service and that the Tories were “the party of the NHS”, since taking power they have begun the “denationalisation” process at lightning speed. If previous privatisations are anything to go by, the NHS may well be forced to keep its prices artificially high to allow private firms to compete.

This week, the sale of Royal Mail was passed in the Commons. The universal service obligation will likely come under increasing pressure, and prices should be expected to rise. The commonly cited pension shortfall will remain a public liability. As ever, it’s only profits which are to be privatised. The BBC predicted the bill could result in “90% of the firm ending up in foreign hands”. When will the political class run out of things to sell? UK plc now resembles an enormous, floating business park, largely owned by foreign oligarchs and tycoons with zero concern for the nation or its interests. Whether its Cadburys or Manchester United, everything is for sale.

There is at least signs of rapid opposition to the plunder of our woodlands, thanks especially to 38 degrees. Hopefully they will stop the forests from being sold off to the highest bidder for redevelopment. Although Caroline Spelman, the Environment Secretary, is expected to announce plans to depose of about half of the woodland overseen by the Forestry Commission by 2020, this may prove a move too far.

In education, Michael Gove’s reforms, ostensibly about “choice”, will open up the nation’s schools to private ownership from profit-making firms, something he has welcomed as a “good thing”. The expansion of “free schools” and academies, all taxpayer-funded, will also pave the way for more faith schools. The highly divisive effect of these schools combined with the inflammatory nature of some of their teaching are serious issues; two thirds of the public oppose them. But for the Coalition, marketisation comes first.

Were deficit reduction the Coalition’s primary focus, maximising tax intake would be high on the agenda. Avoidance is estimated to cost the economy £25bn a year, and evasion £70bn. But HRMC, tasked with bringing this money in, are facing 15% cuts.  As George Monbiot has argued:

“While the government's new strategy for reducing benefit fraud, according to the Association of Revenue and Customs, is likely to harvest £3 for every £1 it spends; money invested in HMRC to deal with tax avoidance and evasion brings in £60 for every £1 spent… The Tories have seized the chance afforded by the economic crisis to free corporations and the very rich from their obligations to society.”

The idea that “we’re all in this together” is now so laughable that the Coalition may well regret ever coining the phrase. 

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