Sunday, 17 October 2010

Britain’s big experiment begins.

This week Britain embarks on the biggest experiment in its post war political history. An experiment that will see Chancellor George Osborne attempt to cut the debt burden from 11% to 2% of GDP in the next five years, along the way making the biggest cuts in public spending seen since the war.

The gamble behind the experiment is that the private sector backed by the Bank of England will step in to rescue an economy that has become too dependant on government and that the ‘big society’ will do the same for communities across the county who have dependency issues of their own.

Gamblers, it should be remembered, tend more towards optimism than practicality, with a rise in VAT looming and the effect of mass redundancies in the public sector to be considered the outlook looks stormy to say the least. As shadow Chancellor Alan Johnson told the BBC on Sunday morning there is a risk of Britain experiencing something similar to Japan’s ‘lost decade’.

The situation is not improved by the emergence over the weekend as snippets of information about the negotiations between the Treasury and individual government departments that there is a distinct set of winners and losers when it comes to where the axe falls. Although ‘winning’ in this context is something of a relative concept.

The defence budget, it is believed, will only be cut by 8%, a significant victory for Defence Secretary Liam Fox who has pleased the military top brass by ‘going native’ more quickly and completely than most ministers. Even so the cuts that the military faces will still be severe and to some extent seem to lack common sense.

Reuters and other news agencies report that the Royal Navy will get the two new aircraft carriers they were promised by the last government, but it is by no means clear what planes will fly from their decks since the joint RAF/Fleet Air Arm Harrier jump jets look certain to be scrapped and funding for any replacement will be cut to the bone. The Army stands to lose 7,000 soldiers and its bases in Germany along with a large percentage of its artillery and armour.

A small morsel has been thrown to the wavering MP’s on the Liberal Democrat benches in the shape of a promise to save £750million on the cost of maintaining Trident, but nobody seems quite certain how this is to be done. The option of cancelling the country’s unusable nuclear deterrent altogether was whisked off the table before it could upset too many Tory backwoodsmen.

Whatever happens the cuts along with the ongoing pressures of the war in Afghanistan and other global commitments cannot help create, as Colonel Richard Kemp told the BBC over the weekend a sense of ‘corrosive’ uncertainty amongst members of the armed forces with the potential to cause ‘a real morale problem.’

Education or spending on schools anyway, also looks likely to escape a severe cut, although the wider education budget will not. Deputy Prime Minister Nick Clegg announced in a speech in Derbyshire last week the creation of a ‘pupil premium’ to support children from disadvantaged backgrounds from pre-school to university saying that it is ‘the right thing to do to invest in the future, even if it makes things harder today.’

Labour’s Andy Burnham, along, I imagine, with many parents remains unconvinced by the virtues of the ‘pupil premium’, telling the BBC that ‘beyond the smoke and mirrors’ it is was a distinct possibility the plan would involve money that was ‘not additional to the schools budget but recycled from within it’ and, if the Institute for Fiscal Studies is correct could ‘widen inequalities in funding for deprived pupils.’

Welfare looks set to be the biggest loser of all when the axe falls with George Osborne threatening a new range of punishments for people who make fraudulent, or simply mistaken, benefits claims. This is to be backed up by the hiring of 200 Gangbusters type inspectors to roam the country seeking out cheats in a plan, he said, to show once and for all that ‘benefit fraud is a crime that just doesn’t pay.’ Boy George, it would seem fancies himself as a latter day Eliot Ness.

During the election and the protracted build up to the spending review ‘fairness’ was the buzz word of the moment, so much so that it seems to have lost any real meaning now the cuts are about to become a reality. In its place we have a sort of bizarre auction in which whoever shouts loudest wins and the people who were silenced by disadvantage are certain to lose.

As a result defence wins because a lot of Tory voters in the shires would be upset if Britannia admitted to no longer being in a position to rule the waves, even though the problems relation to accommodation, overwork and poor support when they get injured on active service that have plagued the services for years remain unaddressed.

Protection spending on schools and bringing in a ‘pupil premium’ might quiet the troublesome consciences of a few Liberal Democrats, but is, as looks likely, unrestricted tuition fees price poor students out of going to university our historic problems relating to social mobility will get worse instead of better.

The big experiment is, in reality, little more than a gamble and one with high stakes too. As Peter Dixon of Commerzbank told Reuters last week if the gamble doesn’t work ‘it isn’t the rating agencies the government has to fear; it’s the electorate.’

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