Public sector worker pay freeze

Cameron's basic error will cost this country dearly

Just as Labour has got the economy fluttering to life, promised Tory cuts to the public sector would put it all at risk

o guardian.co.uk, Friday 11 September 2009 22.00 BST
o Article history

The all-conquering Conservatives are marching headlong into an elephant trap. Overconfident, they are starting to make mistakes. Too certain of victory, recklessly they dare to make enemies of the entire public sector. David Cameron transformed attitudes to his party overnight with that clever promise to stick to Labour spending plans: it blocked any Labour scaremongering about Tory cuts. It made Cameron look moderate, undogmatic and a friend of the public sector. He stole the trick from Labour, whose painful two-year freeze allayed old red fears. But now with Labour in directionless disarray, cocksure Cameron and Osborne ignore the perils of policies that lost them three elections. Their shrink-the-state glee is transparently ideological. Thatcher never promised cuts in advance.

The tax-and-spend battle began in earnest this week. But with every speech, Osborne and Cameron offer nastier medicine, sharper knives and worse to come: since when was inflicting pain a winning strategy? Through ceaseless repetition they and their press have persuaded voters that paying down national debt fast trumps all else. So far they have won the argument, mostly because Gordon Brown was denying that anything whatever need be done. Now that Alistair Darling has forced Brown to his senses, the debate has shifted to whose debt-reduction plans are best.

With encouraging indicators this week that Britain is starting to emerge from recession a little ahead of Treasury forecasts, early signs suggest public opinion is shifting to the view that Labour's fiscal stimulus worked. Recovery will be fragile all next year, with fear of a double dip. So where are the Tories? Thoroughly trounced, proven to be wrong when all through the crisis they alone in the world opposed all intervention, including the bailing-out of banks. They have virtually no reputable economic allies.

Economists Anatole Kaletsky of the Times and Martin Wolf of the Financial Times, both conservatives, this week walloped the Tory fixation with rapid and savage paying down of debt. Mervyn King, no Labour friend, has been the great promoter of quantitative easing. Robert Chote of the IFS warns Britain may already be planning to withdraw fiscal stimulus too soon. Every country, except Argentina, intends to keep spending through 2010, despite equally high debts. Nonetheless, at the spring election, just as recovery is fluttering to life, the Conservatives' one great priority will be to put it all at risk with immediate deep cuts, unprecedented anywhere else. Whatever blame Brown deserves for the bubble, is that a winning ticket for the Tories, really?

Even less popular will be their assault on the public sector. They are winning the argument now by talking of quangos, Whitehall bureaucrats and gold-plated public pensions. Everyone has a pet example of public jobsworths to cull. But vague assaults on the public sector can't take the Tories through an election. Once they get specific, they will be in trouble. For example, Tory sabres rattle at public-sector pensions, but a TUC report based on Office for National Statistics figures shows that taxpayers contribute 10 times more in pension tax relief to the richest 1% of earners than the state pays to all retired public servants. If Labour made proper use of this killer fact, they would promise instead to abolish all higher-rate income tax pension subsidies, bringing in £6bn – far more than public pensions cost.

The Institute of Directors and the Taxpayers' Alliance just produced their own juicy menu of cuts. While this is rightwing kite-flying, it offers a good frightener for what lies ahead. People may be stirred to anger by Tory tales of public waste, but voters will swing back pretty fast once real cuts are spelled out. On this £50bn death-list was Sure Start, Labour's best hope for rescuing young children. Away goes the educational maintenance allowance that has kept poor children in school beyond 16. Away go all grants from the Department of Communities and Local Government – mostly to charities. Freeze public pay for two years, freeze the state pension, end child benefit and no free travel for the old. Harmless-sounding cuts to non-frontline NHS staff mean fewer clerks to find hospital notes, make appointments and send samples to labs.

This useful report is a necessary reminder that few cuts are painless, most affect everyone, though the poor are hit hardest. Get out a political calculator and tot up how many tens of millions of voters will suddenly think that paying down debt fast is not the only priority after all. Ipsos Mori shows attitudes to the public sector are perverse: people criticise services in the abstract, but praise them mightily in their own community – where cuts will fall. I have been judging the Guardian Public Services Awards, looking at remarkable innovations and good ideas big and small by staff full of enthusiasm and energy. I can only think sadly that much of this would be gone when the Conservative axe falls. At election time, voters will contemplate this too – and daft public staff now telling pollsters they will vote Tory will come to their senses too.

The autumn's pre-budget report must be bravely specific about what cuts and tax rises Labour will use to reduce the debt. Only clarity will force the Tories to produce their own plans. Labour will need to make some cuts – but they can raise some taxes too. One per cent on National Insurance yields £10bn. Capital gains on private homes would raise £3bn. Abolishing tax relief on savings and investments, which goes mainly to the rich, brings £3bn.

This week figures showed that banks tripled the profit they made on mortgages in the last year: time to siphon some of that off. Meanwhile, a YouGov poll for Compass has found that 73% would support a new tax on bonuses above £10,000. Sixty-three per cent support the creation of a High Pay Commission. Labour has a chance to seize this public sentiment, since much public anger with politics springs from a sense that the parties are in cahoots with wealth. Cameron is making irreversible errors in his assault on the public sector. But Labour walks in an orchard of low-hanging fruit with its eyes tight shut, failing to take the chances on offer.

What world do you live in? That is the status quo!
There are a handful of people who genuinely need help (disabled, mentally ill etc)
But then you have a lot of other people who just abuse the system because it is less effort and free money.