The Time for Resistance.

On Saturday 26th of March there will be a national demonstration in London led by the TUC in opposition to the austerity measures that are being imposed by the Con-Dem Coalition. It will be a massive demonstration led by trade unions, modest estimates of how many people will turn up range from 100,000 to 250,000. Though it has been in preparation since November and could be much bigger. The dust has yet to settle since the economic crisis, which led to the collapse of New Labour and the Right quickly tried to reconstitute itself as a Liberal-Conservative coalition. But the dust still has yet to settle from the economic crisis and the attempt by the government to reaffirm the system is still ongoing. A rise in racist populism could lead to a successful reconfiguration in the political class, which might push through the cuts whilst playing the poor against one another. But there is a genuine opportunity for a left-wing realignment to defend the welfare state, public services and trade unions against the Coalition.

Despite the party-line accepted in the media there is an alternative to spending cuts and regressive taxes. There are numerous facts that are absent in the press and for if these facts were widely available there would be no hope of the cuts being imposed. Here are 5 reasons why the cuts are unnecessary and ideological:
1. In 2010 government debt amounted to about 70% of GDP, whereas the budget deficit is 11% of GDP, just compare this figure to 1945 when the debt was 260% of GDP. Note that in the late 1940s the welfare state was established and the NHS was founded. From 1920 to 1960 the debt never fell below 100% and it was only in the 1970s that it dipped below that. Under the Thatcherites government debt was shrunk to 35% in 1990, whilst wages stagnated, inequality exploded and social democracy was "rolled back". The debt is not enormous by historical standards.

2. According to  the IMF World Economic Outlook Database, in April 2010, the UK has the lowest government debt as a proportion of GDP amongst the G7 countries: the US, Canada, Germany, Britain, Japan, Italy and France. So it is not true that the UK is in one of the worst situations, in terms of debt, in the world.

3. The examples of Greece and Ireland as a "warning" of what might happen, if we don't cut, are inappropriate. As the British situation differs greatly, for instance the majority of the UK's debt is internal to the country and not owed to foreign financiers. The government debt has a maturity rate of 12 years, which means the debt is long-term not short term unlike Ireland, Greece and Portugal where the debt maturity is around 6 years. This means that the UK is capable of financing its debt on a sustainable basis.

4. The increase in public spending seen in the early years of New Labour, as well as a surplus early on, but this was from historically low levels of spending for around 20 years. The biggest lie is that spending was out-of-control under New Labour, spending as a proportion of GDP was far lower in the 2000s than at any time in the 60s.
5. Economic growth is generated by exports, investments, consumption and public spending. In the UK exports have been in decline for decades, consumption is driven mostly by various forms of credit as wages have slowed in growth. Investments and public spending are vital to maintain economic growth. To fill the holes created by a recession governments traditionally provided stimulus packages to increase public spending, to facilitate the increase of investment and consumption. There is little evidence that households and businesses are ready to fill in the holes left by the recession, note this is essentially what all the talk of the "Big Society" amounts to.

The deficit is the consequence of the recession, as the collapse of companies led to an increase in unemployment and government revenue from taxes went into decline. As a result the rate of public spending, which had risen steadily with growth and inflation, became temporarily unsustainable. Normally tax-revenues increase as public spending rises, but the collapse of tax-revenues in a recession creates or exacerbates a budget deficit. Though at the current rate of taxation billions are being lost through loopholes, estimates range from £30 billion to £125 billion. The cuts will lower the rate of public spending to the unusually low level of tax-revenues in a recession. A more tried and tested approach would be to increase the rate of expenditure to create jobs, which would boost demand as well as lead to an increase in tax-revenue that would effectively pay for the deficit over time. There is no crisis, there is a problem and that problem can be resolved over time. This is not a radical proposal, but a Keynesian alternative to the slash and burn policy offered by the Coalition. For more information on alternatives to cuts see Can't Pay, Won't Pay!