Letter to the Guardian with Tony Benn reveals union extremism

August 04, 2010 6:59 PM


Tonybennseatcase The letter in the Guardian today from Tony Benn - inventor of the seatcase - and seventy-three of his comrades is quite revealing.  Most of the signatories are the usual suspects, washed up socialists with little relevance to the practical debate over how Britain deals with a serious fiscal crisis.  But two of them are general secretaries of significant public sector unions; Mark Serwotka of the PCS and Bob Crow of the RMT.  Those two unions have the capacity to cause considerable disruption, so it is worrying that they have signed up to such a radical letter.  Let's take a look at some of the letter's claims:

"The government claims the cuts are unavoidable because the welfare state has been too generous. This is nonsense. Ordinary people are being forced to pay for the bankers' profligacy."

The fiscal crisis is simply the result of a massive growth in spending.  You can see that sharp increase, and how it went far beyond that in other developed economies, quite clearly in the OECD statistics:


Spendingvsoecd2

That spending was proving impossible to finance even before the crisis.  When the financial crisis hit, it became clear that the fruits of a temporary economic boom had been spent as if they were a permanent improvement in our economic fortunes.  The financial crisis isn't the main cause of Britain's fiscal problems, it is just that exceptionally high tax returns from financial services are no longer disguising the effects of irresponsible hikes in spending.

"The £11bn welfare cuts, rise in VAT to 20%, and 25% reductions across government departments target the most vulnerable – disabled people, single parents, those on housing benefit, black and other ethnic minority communities, students, migrant workers, LGBT people and pensioners.

Women are expected to bear 75% of the burden. The poorest will be hit six times harder than the richest."

The claim that cuts "target" those groups is a bit far fetched.  That implies the Government actively set out to hurt them.

The more plausible claim here is that the cuts will affect some groups more than others.  Though the evidence that cuts will particularly affect some of the groups they name is a bit thin on the ground.  How exactly will the cuts announced at the Emergency Budget disproportionately affect LGBT people?  And pensioners?

As Stephanie Flanders - BBC Economics Editor - has noted on her blog, the greater effect of cuts on women reflects mostly the fact that more of them work in the public sector.  And that is the counterpart to the reduction in earnings and employment from the recession hitting the disproportionately male private sector.  In another blog, she sets out how the elderly are being treated relatively generously, pensioners aren't being hit particularly hard by cuts.

But back to today's letter:

"Internal Treasury documents estimate 1.3 million job losses in public and private sectors."

Cuts may cost jobs in the public sector and parts of the private sector dependent on catering to public sector demand.  But by improving economic confidence and stopping new tax hikes they can boost employment as well.  A recent TPA research note reported results from the Beacon Economic Forecasting model that suggest a programme of lower spending and taxes could deliver higher employment by 2020.

"We reject this malicious vandalism and resolve to campaign for a radical alternative, with the level of determination shown by trade unionists and social movements in Greece and other European countries."

This is the really offensive part of the letter, it endorses a movement in Greece that has included violent riots.  The riots in Greece have achieved nothing.  The country is having to make far sharper cuts than are proposed here and has needed a bailout from the rest of Europe.  But the riots did result in three ordinary workers in a bank branch dying.  Two women - one pregnant - and a man choked to death after a Molotov Cocktail was thrown into the Marfin Bank.

"An alternative budget would place the banks under democratic control,
and raise revenue by increasing tax for the rich, plugging tax
loopholes, withdrawing troops from Afghanistan, abolishing the nuclear
"deterrent" by cancelling the Trident replacement."

There are plans for cuts in defence spending already, pulling out of Afghanistan and abandoning the replacement of Trident wouldn't get us close to the amount needed to deal with the fiscal crisis.  Further hiking taxes on the rich tends to lose money, independent forecasters expect the 50p rate to reduce revenue.  And if there were huge amounts of revenue to be had from closing loopholes, do we really think that Governments desperate for revenue over a number of years wouldn't have closed them already?

This letter is a project of dangerous fantasy.  The fact that Mark Serwotka and Bob Crow have signed it shows that some of the unions are not going to be reasonable about necessary cuts.  The Government will need to face them down.


Tonybennseatcase The letter in the Guardian today from Tony Benn - inventor of the seatcase - and seventy-three of his comrades is quite revealing.  Most of the signatories are the usual suspects, washed up socialists with little relevance to the practical debate over how Britain deals with a serious fiscal crisis.  But two of them are general secretaries of significant public sector unions; Mark Serwotka of the PCS and Bob Crow of the RMT.  Those two unions have the capacity to cause considerable disruption, so it is worrying that they have signed up to such a radical letter.  Let's take a look at some of the letter's claims:

"The government claims the cuts are unavoidable because the welfare state has been too generous. This is nonsense. Ordinary people are being forced to pay for the bankers' profligacy."

The fiscal crisis is simply the result of a massive growth in spending.  You can see that sharp increase, and how it went far beyond that in other developed economies, quite clearly in the OECD statistics:


Spendingvsoecd2

That spending was proving impossible to finance even before the crisis.  When the financial crisis hit, it became clear that the fruits of a temporary economic boom had been spent as if they were a permanent improvement in our economic fortunes.  The financial crisis isn't the main cause of Britain's fiscal problems, it is just that exceptionally high tax returns from financial services are no longer disguising the effects of irresponsible hikes in spending.

"The £11bn welfare cuts, rise in VAT to 20%, and 25% reductions across government departments target the most vulnerable – disabled people, single parents, those on housing benefit, black and other ethnic minority communities, students, migrant workers, LGBT people and pensioners.

Women are expected to bear 75% of the burden. The poorest will be hit six times harder than the richest."

The claim that cuts "target" those groups is a bit far fetched.  That implies the Government actively set out to hurt them.

The more plausible claim here is that the cuts will affect some groups more than others.  Though the evidence that cuts will particularly affect some of the groups they name is a bit thin on the ground.  How exactly will the cuts announced at the Emergency Budget disproportionately affect LGBT people?  And pensioners?

As Stephanie Flanders - BBC Economics Editor - has noted on her blog, the greater effect of cuts on women reflects mostly the fact that more of them work in the public sector.  And that is the counterpart to the reduction in earnings and employment from the recession hitting the disproportionately male private sector.  In another blog, she sets out how the elderly are being treated relatively generously, pensioners aren't being hit particularly hard by cuts.

But back to today's letter:

"Internal Treasury documents estimate 1.3 million job losses in public and private sectors."

Cuts may cost jobs in the public sector and parts of the private sector dependent on catering to public sector demand.  But by improving economic confidence and stopping new tax hikes they can boost employment as well.  A recent TPA research note reported results from the Beacon Economic Forecasting model that suggest a programme of lower spending and taxes could deliver higher employment by 2020.

"We reject this malicious vandalism and resolve to campaign for a radical alternative, with the level of determination shown by trade unionists and social movements in Greece and other European countries."

This is the really offensive part of the letter, it endorses a movement in Greece that has included violent riots.  The riots in Greece have achieved nothing.  The country is having to make far sharper cuts than are proposed here and has needed a bailout from the rest of Europe.  But the riots did result in three ordinary workers in a bank branch dying.  Two women - one pregnant - and a man choked to death after a Molotov Cocktail was thrown into the Marfin Bank.

"An alternative budget would place the banks under democratic control,
and raise revenue by increasing tax for the rich, plugging tax
loopholes, withdrawing troops from Afghanistan, abolishing the nuclear
"deterrent" by cancelling the Trident replacement."

There are plans for cuts in defence spending already, pulling out of Afghanistan and abandoning the replacement of Trident wouldn't get us close to the amount needed to deal with the fiscal crisis.  Further hiking taxes on the rich tends to lose money, independent forecasters expect the 50p rate to reduce revenue.  And if there were huge amounts of revenue to be had from closing loopholes, do we really think that Governments desperate for revenue over a number of years wouldn't have closed them already?

This letter is a project of dangerous fantasy.  The fact that Mark Serwotka and Bob Crow have signed it shows that some of the unions are not going to be reasonable about necessary cuts.  The Government will need to face them down.

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