Opponents of cutbacks may get a surprise

IF THE unions expect broad public support for a campaign of action against the Government’s planned spending cuts, they might be in for a nasty surprise.

For one thing, such a campaign will, ultimately, have less to do with protecting service levels than with avoiding pay freezes and redundancies, both of which have been a reality for workers in the private sector for the past two years.

For another, however, the ideology behind the mooted campaign is just plain wrong.

Take, for example, Paul Kenny, general secretary of the GMB union, who claimed yesterday that the spending cuts are “needless”.

“It was the excesses of the bankers not high public spending that caused the recession,” he said. “The deficit in public finances is mainly due to the loss of 6% of national output because of the recession.”

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The role of the banks in creating the conditions which led to the recession should not be underestimated, but their fault lay in the nature of their lending and risk management strategies rather than the size of their bonuses.

Nor were the banks solely to blame. For every ill-judged loan there was also a borrower, and consumers generally were happy to take up the debt on offer – in many cases to levels which were unsustainable.

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Governments too got in on the act, not least among them New Labour in the UK. Well before the financial crisis hit, Gordon Brown’s compliance with his so-called “golden rules” on spending and debt had become largely a work of fiction.

After a decade of relatively benign economic conditions, the public finances should have been in considerably better shape than they were. The cost of bailing out the banks therefore pushed the country further into the red than need have been the case.

The notion that the deficit in the public finances we now face is simply due to loss of output during the recession completely ignores the previous government’s management of the economy up to the point when recession hit.

Even were this not so, it would still be dangerous to assume that all we need do now is to sit tight and wait for economic growth to wipe out the deficit.

Without decisive action on spending the gap in the public finances will continue to grow and the UK’s credit rating will be at risk. Should this be downgraded, the result will be substantially higher interest rates than would otherwise have been the case, so blighting the recovery and setting the economy on a downward spiral.

The Government’s planned spending cuts will be unpalatable in their impact, for sure, but they are anything but “needless”. The consequences of not addressing the deficit decisively would be far worse in the long run.

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