Oppose the Death Spiral of Public Sector Cuts
"A terrible consensus has taken hold of the political coalitions in both parts of this island with regard to how they can weather the current economic storm".

Speaking to a meeting of the Northern Regional Executive of the Workers' Party,  Justin O’Hagan, member of the Central Executive Committee, said:


"A terrible consensus has taken hold of the political coalitions in both parts of this island with regard to how they can weather the current economic storm. In the South, where the government has more control over its own affairs, they have set up NAMA which has granted €73 billion, equivalent to 47% of GDP in 2010, to the banks. The state may get some of this money back but according to some recent research by the Economic and Social Research Institute (ESRI), “it is possible that the net cost to the taxpayer of this support to the banking system, based on the latest figures available, will be of the order of €25 billion or more”. Furthermore the government gifts at least €25 billion to the banks, with no prospects of any return, while on the other hand it sets about dismantling the public sector as we know it. The Stormont Coalition is unable to give money directly to banks, but as with its southern counterpart, it is determined to cut public expenditure. Unemployment in the North is likely to grow to 65,000 by the end of this year and the real unemployment figure (which includes those “economically inactive” people of employment age who want to work but have given up looking) is currently around 12%.


Cutbacks in the public sector have an obvious knock-on effect in the private sector and on government revenues. If I am a civil servant and I lose my job, my purchasing power collapses. If a large number of public sector workers lose their jobs, - as prime Minister David Cameron is threatening - this has, for example, obvious negative effects on workers in the retail sector. A proportion of these workers will, in turn, lose their jobs and the vicious downward spiral continues. Meanwhile, workers who once provided the government with a steady flow of taxation now languish on the dole, neither producing goods and services nor providing taxes. Research by the Green New Deal Group of UK economists shows that if the UK government cuts the job of an employee earning 25,000 a year it may, after tax revenues lost and benefits paid are taken into account, save under 2,000 a year, whilst risking a loss in spending that could tip another person in the private sector into unemployment as well. Cutting jobs and services in a global recession is a disastrous policy.


The ESRI forecasts that in the next year there will be a freeze in welfare payments and public sector pay rates together with further reductions in the volume of public consumption of 2% in 2011. The impact on the wider economy is to reduce the growth rate by approximately one percentage point. Should there be an actual reduction in welfare payment rates then the growth rate will fall even further. In addition, the level of employment is forecast to be lower and emigration flows higher as a result of the programme of fiscal consolidation being pursued by the government. Thus, while shoring up the banks, they are causing serious damage to the living standards of the people.


Ulster bank economist Richard Ramsey believes that the services sector - notably retail - and construction will bear the brunt of the public expenditure cuts promised by the Stormont Coalition. Northern Ireland is the only UK region where the private sector is still experiencing declining levels of output. However, in the UK as a whole growth is weak. The Office of Budget Responsibility is forecasting growth of 2.6% in 2011, below the 3.25% predicted in Labour’s March Budget.  Senior Economist, David Blanchflower, hardly a radical, indeed a former member of the Bank of England’s Monetary Policy Committee, has predicted that cutting public spending could send the UK economy into a “death spiral”. As the Green New Deal Group puts it, a “recession is not the time for public retrenchment. The public sector has to take up the slack with public works that are financed by loans.”


We in the Workers’ Party fight for a socially just society in which workers are in control of their workplaces, in which production is planned and geared towards the agreed needs of the people. In the current anarchic system, production is geared towards the profits of a tiny few and the system is prone to cyclical crises which result from the inability of workers to pay for the goods which they – the workers- produce. This is insane system, is now a cause of misery, ecological destruction and war on a global scale. The Communist Manifesto might have been written yesterday. Our goal is socialism.

We realise that a programme of jobs production is very far removed from our goal, and indeed might strengthen the system in ways that the neo-Thatcherite misery offered by Cowen, Cameron, and Stormont will not. But we want to see workers in work, we want to see money in their pockets, we want to see a high level of public service and social infrastructure, we don’t want the spectre of mass emigration to return to the country. Only a commitment to state-led job creation through public works will ensure that the workers on this island do not face further misery".


Peace, Work, Democracy, and Class Politics