Paul Foot

Stop the Cuts

‘I believe that the White Paper, by levelling out public expenditure, after April 1977, will ensure that manufacturing industry can take full advantage of the upturn in trade, which is the only way we can obtain the extra resources. I have no doubt that the plans set out in the White Paper point the way to ensuring a genuine improvement in the use of resources in the country.’
Joel Burnett, Chief Secretary to the Treasury, House Of Commons, March 10 1976.

‘One wonders how Ministers will feel when they realise that all their labours have merely led to a gigantic redistribution of priorities in favour of the rentier owners of gilt-edged securities.’
Peter Jay, Economics Editor, The Times, 20 February 1976.

Yes, we can afford it!

Can we afford it? That’s the question which disturbs Maureen Robertson and hundreds of thousands of working people all over the country. Day after day they are told by the newspapers and by ‘experts’ on the television that Britain is like a drunken wastrel, soaking up millions and millions of pounds worth of health, education, and other social services which it can’t afford. The only way back to solvency, the argument goes on, is by cutting spending.

It’s true that we are producing less – less than last year, less than the year before, less, even, than during the three-day week in 1974 when Harold Wilson promised to ‘get Britain back to work’. But there’s a very simple explanation for that. About two million people who want to work are not able to work. These two million people – one and a quarter million registered as unemployed, the others, mainly women, unemployed but not registered -could be producing more goods and services. But they can’t because they can’t find an employer who’ll give them a job.

If they could work, they would pay taxes and insurance contributions which would help pay for more hospitals, schools, buses and so on. When they can’t find work, they have to scrape a pittance from the dole – and that dole money has to be found from other workers, taxes and insurance contributions. So there’s less around for hospitals, schools and buses.

Anthony Harris of the Financial Times has calculated that a drop of 500,000 in the unemployed would bring an extra two and half billion pounds to the Exchequer. If unemployment was brought down to what it was in the 1950’s and 1960’s – an average of about 400,000 on the register – another 5 billion pounds would be collected in insurance and taxes. Healey’s cuts are meant to ‘save’ 4.5 billion pounds. We could ‘afford’ all the spending programmes which Healey is slashing just by going back to unemployment rates which we know are possible – because we had them for nearly thirty years!

Why, suddenly do we have this vast unemployment? Because of ‘crisis’ and ‘recession’ say the government. But how have we got in a crisis and a recession? If you ask the Government that, they’ll tell you that they don’t really know.

Listen to Denis Healey, speaking in the House of Commons when he moved his spending cuts on March 9 this year:

“The depth of the world recession has come as an unpleasant surprise to all governments.”

Other Ministers say the same thing more poetically, Michael Foot, Minister for Unemployment, said at last year’s Labour Party conference:

“We are caught up in an economic typhoon.”

In a speech at Troon in March Michael Foot found another cause:

“We face the double plague of inflation and unemployment.”

Surprises, typhoons, plagues, – all these catastrophes spring up out of the blue and leave the government shocked and helpless. So the Government, to quote a favourite phrase of Harold Wilson was ‘blown off course’.

People get frightened by this kind of talk. They assume that the world of politics and economics is governed by mysterious elements beyond their control. They’re inclined to accept hardship and sacrifice as though they had been hit by an earthquake or a hurricane: and to agree to sacrifices and hardship accordingly.

But it is all nonsense. The affairs of men and women are arranged by men and women. The causes of the recession are human causes. There are remedies too – human remedies.

The central cause of the economic crisis is that production is organised for profit. No one works out what should be produced according to what people need or want. No one is asked what they need or want, so that production can be planned accordingly. Instead, wealthy men who are not elected by anyone decide what production renders them a profit, and organise production accordingly. As a result, the things which are needed most are produced least. And things which are needed least are produced most.

What’s the justification for the profit system? Go to any Tory Party conference and listen to rich people howling for more profit.

They argue that there are a few people in society (like themselves) who have initiative and enterprise. They understand how to turn the country’s wealth to the advantage of everyone.

They will invest it in machinery which will produce more goods and better services. The prospect of enrichment for them will spur them to produce the things which are needed most and which will expand the wealth of all of us. So continues the argument, the workers who have no initiative and no enterprise will benefit most if they allow huge surpluses to be drawn off the wealth which they produce and made over to the dynamic men of initiative and enterprise of the type who is now speaking at the rostrum.

The last Tory Government practised what they preached. In 1973, they presided over the biggest boom in the history of British industry. All their policies were designed to insure that massive profits were made during that year. They succeeded. Profits rose higher than ever before in history – a massive increase over the previous year. Restrictions were lifted off banks. The supply of money was increased. The flow of wealth to the initiative dynamos in banking, industry and finance swelled into a torrent.

Throughout 1973 wages were successfully held down and council house rents pushed up by Tory laws. The Tories rejoiced. Not only did they and their friends grow massively richer during the year. But they achieved what they believed to be the ‘regeneration of Britain’ Peter Walker, who was Secretary of State for Trade and Industry, told a Young Conservative meeting in November 11, 1973:

“The years 1973 and 1974 will be noted both for the beginning of sustained economic growth and for the beginning of a renewal of capitalism.”

A week later, Anthony Barber, Tory Chancellor of the Exchequer, was telling the House of Commons that Britain was in crisis and he was cutting £1,400m off public spending.

The boom collapsed. The ‘renewal of capitalism’ turned into the deepest recession for thirty years. Why? Here’s an editorial in the Investors Chronicle of September 11, 1974, explaining:

“In the summer of 1973, the government was allowing the amount of money for use in the country to expand rapidly in the hope that industry would use it to invest in new plant to produce more goods and earn more foreign exchange by exporting.

“It did not work out that way, because industry was not confident that it could sell enough goods profitably enough to cover the money for new plant. So the extra money being pumped into the economy found other uses.

“At first some of it found its way into buying shares where it helped to force prices up. More important, vast amounts of money were being leant by the banking system to buy property. Since property is in limited supply, the main effect was to force prices sky-high”

It’s been estimated by people even more knowledgeable than the Investors Chronicle that something like 80% of the extra wealth created in 1973 was poured into the gutter of society – into crooked fringe banks and into property speculation which led to evictions of working class people from their homes and the conversion of large areas of our cities into office block waste lands.

Let’s put it bluntly, The ‘men with initiative’ the ‘economic dynamos’ and ‘capitalist regenerators’ filched the lot. They persuaded their government to hand over billions of pounds of other peoples wealth and stored it in areas where they could make the fastest buck. Investment went down on the previous year. The number of houses built went down;

The great boom in demand bulged into a bottleneck of old machinery, high prices, and low wages. Having made – and wasted their profit – the ‘initiative men’ could not sustain their boom. They preferred to sack workers rather than sell goods at ‘unprofitable’ prices. As they sacked them, so there was less money around. So they sacked more.

This didn’t just happen in Britain. Unemployment is not a ‘British disease’ or a ‘symbol of British decline’. There was even higher unemployment in the 1930’s when Britain was still ruling the waves. Today, British workers share high unemployment with other industrial countries – a million unemployed in Germany, a million in Japan, a million in France and Italy, nine million in America. It’s not a national sickness. Its international. It’s roots are sunk deep in a system which produces for profit.

So the ‘crisis’ and the ‘recession’ is not caused by the weather in the Pacific or a plague bacillus. It’s caused, deliberately and directly by a class of people who control production for profit.

They can’t plan the. use of labour, because they are always looking for ways to rob labour, and competing to rob it with other brigands all over the world. So, in 1973, they built up production to make the maximum profit, and wasted the profit in an orgy. When the crisis followed, what did they do?

Did they lie low in shame and disguise?

Did they shelter in their tax havens, until the storm had died down?

On the contrary. They came out shouting for more!

Tune in, if you can bear it, to the Radio Programme, Any Questions. One of the programme’s most popular performers is Edward Du Cann. Du Cann is billed as a responsible member of society, an MP and a senior member of the Tory Party. He is chairman of the ‘prestigious’ House of Commons Public Accounts Committee. Du Cann was one of the most profligate wasters of the 1973 boom. He was a director of Lonrho when that company was paying its senior executives enormous salaries through tax havens in the Cayman Islands.

He was a chairman of the biggest fringe bank of them all, Keyser Ullman, which, after a number of rather dubious enterprises (like the Vehicle and General Insurance scandal, where Keyser Ullman were bankers and investment advisers at the same time) collapsed in a heap owing some £67m. Du Cann was (and is) paid huge salaries by both organisations. He made a fortune out of the 1973 orgy.

When Du Cann is asked a question about the economic crisis, he turns at once to his favourite subject – public expenditure.

He concocts a theory which has been peddled consistently by the Tories ever since they lost office in February, 1974. It introduces a new culprit – a new cause for the crisis – the ‘non-productive worker’. ‘Non-productive workers’ (so says Du Cann, ex-fringe banker, Margaret Thatcher, ex-tax avoidance lawyer, and countless other patriots and predators in the Tory Party) are ‘paid for’ by ‘productive workers’. They are then taxed to pay for hospitals and schools and so on. People who work in hospitals and schools, buses, trains and post offices are ‘non-productive’.

So, the theory goes, we are spending far too much on ‘non-productive’ workers. We should spend less on them. Then investment and production in factories will rise, and everyone will be richer.

And so the cry goes up: ‘CUT PUBLIC SPENDING’.

After a short token resistance, the entire Labour Government has now been won over to this theory. The motion on 9th March moved in the House of Commons by Denis Healey and supported by the whole Labour Government, said:

“That this House recognises the need to ensure that manufacturing industry can take full advantage of the upturn in world trade by levelling off public expenditure.”

In other words, if we cut public spending, the resources saved by the cuts will flow back into manufacturing (productive) industry.

It’s the Tory propaganda neatly summarised in a Labour Government motion.

Once again, if the chorus is loud enough, it begins to be heard. If the Government, the Tories, the Press and television, economic experts, trade union leaders and industrialists all start shouting at the public sector worker, she begins to get nervous. She begins to think to herself:

“Well, perhaps I’m not producing anything directly towards the country’s wealth. Perhaps I am a drag on the economy. Perhaps I shouldn’t fight the cuts. Perhaps the cuts will get us back on our feet again”.

But a little thought about the argument shows what bilge it is. Take a few examples:

Thatcher and Healey say that nursery school workers and child-minders are ‘non-productive’.

Every nursery school teacher, every child minder releases at least 10 women (or men) to take part in production. Every nursery school closed under the Thatcher/Healey cuts prevents scores of women (and men) from getting anywhere near a production line.

Thatcher and Healey say that factory inspectors are ‘non-productive’. So the cuts in the civil service will mean less factory inspectors. As a result, more workers will be maimed by machinery, ropes, electrocutions, falling masonry, damaged pit props. Does production gain by that?

Healey and Thatcher says that teachers and canteen workers in the schools and universities are non-productive. But where does technology come from, if not from educating people? Has production grown out of illiteracy? If classes grow bigger, schools become more and more intolerable, children are sent home, and parents have to leave work to look after them. Does that assist production?

Nurses, hospital porters, hospital administrators, they are all non-productive, shout Healey and Thatcher.

We must get rid of as many as we can in the interests of production. What happens then? What happens if workers become sick – and have to wait longer in hospital queues: if treatment becomes less readily available, if working men and women have to spend more time with sick children in hospitals? How does that speed production?

Bus drivers, tube drivers, porters, transport workers of every description – they’re ‘non-productive’ too. Yet how do longer and more expensive journeys to work assist production? How does production benefit from tired and angry workers, who have been waiting for inadequate transport?

Healey, Thatcher, Du Cann and all the others talk about production as though wealth was produced by automatons – as though hospitals, and schools, houses, public transport were all extravagant luxuries which are not needed for production.

But wealth is produced by human beings – they need to travel, they get sick, they have children who require education, their fathers and mothers are old and need care. Wealth for them is schools and housing and public transport and hospitals – every bit as much as consumer goods or manufacturing machinery.

Any sensible system of society would plan all their resources in it together. There would be no bogus separation of ‘production’ and ‘non-production’. No ‘private sector’ and ‘public sector’. Goods in factories, machinery, schools, hospitals, housing, transport – all would be produced as part of a general plan, according to peoples’ needs.

Why, then, do Healey and Thatcher make this reactionary and offensive distinction?

Why does Roy Jenkins, Home Secretary in a Labour Government, join in the chorus by telling an enthusiastic audience of businessmen.

“I do not think you can push public expenditure above 60 percent and maintain the values of a plural society with adequate freedom of choice.”

Is he an imbecile? Does he really expect people to believe that ‘freedom of choice’ withers away if we spend ‘too much’ on hospitals, schools, and old age pensions? Is ‘freedom of choice’ increased by raising the price of school-meals?

Roy Jenkins is an arrogant, reactionary snob. But he is not an imbecile. There is a logic in his, Healey’s and Thatcher’s attacks on public spending. It is the ugly logic of profit.

Profit is made directly from the ‘private sector’ of the economy. It’s made directly from manufacturing industry which is privately-owned and privately-controlled; it’s made directly in privately-owned banks, investment trusts, insurance companies.

Naturally, therefore, the people who make profit want to preserve the size and power of this sector.

When capitalism is booming, they tolerate growing social services. After all, there are ways of making profit even out of hospitals. Shareholders in drug companies have been making a fortune out of the National Health Service for years. Textbook publishing companies have been making fortunes out of the schools.

Moneylenders and building contractors have been ripping off the local authorities. But these are all small flies in the capitalist swarm.

When capitalism contracts, its supporters instinctively seek to safeguard the ‘private sector’. So they demand cuts in public spending. They do so partly by propaganda in the Press and Tory Party; partly by squeezing the government in the money market. As the CIS Report on Cutting the Welfare State put it earlier this year:

“The City is reluctant to buy Gilt-Edged Securities, because its members don’t think that Chancellor Healey is cutting public expenditure enough. As a result, the government has to rely increasingly on Treasury Bills to finance the deficit. At the beginning of the year only about £100m a week had to be raised by this means. By August 1975, the figure had reached £400m a week. By the 30th September, some £11 billion in Treasury Bills was outstanding – about one fifth of the national debt”.

Translated into English, this means: The City men don’t like too much spending on the social services. So they lend at higher rates of interest until they break the government. Then they demand that the government cuts social service spending. Why? Because social service spending is not profitable to their class.

That’s the truth behind all their gobbledegook about ‘productive industry’ and ‘non-productive industry’. They don’t mean that at all. They mean ‘profitable’ industry and ‘non-profitable’ industry. They want to cut where they can’t make a profit, and expand where they can make a profit. If that causes chaos in working class communities, they couldn’t care less.

Mr Healey’s Pipe Dream

It follows from all this that the cuts won’t even begin to boost manufacturing industry or provide more jobs (as Healey pretends) – for several reasons.

First, because jobs in manufacturing industry are being cut back too.

Suppose a hospital porter in South Wales were to take Healey and Thatcher seriously. Suppose he accepts the sack from the (‘non-productive’) hospital – and applies for a job in the (‘productive’) South Wales steel industry. He finds that the Steel Corporation aims to sack 5,000 steelworkers in South Wales in the next two years alone. Suppose a teacher thinks that for the good of the country she should abandon her job and go and work in one of city s many engineering factories. She will find there isn’t a job to go to: that each engineering factory has had 30 inquiries for every vacancy. In all, manufacturing industry jobs are being cut. And even if production does increase, the bosses do not intend to increase the workforce.

Secondly, because, as we’ve seen already, there is no proof that the people in charge of industry will use any extra funds for investment. In 1973, in more favourable circumstances to investment, they wasted thousands of millions of available funds. When Healey cuts public spending and makes more available to industrialists, what proof has he that he won’t end up with another Cayman Islands orgy like 1973, with even more horrible effects?

Thirdly, crucially, public spending is not really being cut at all.

At least a third of public spending is of no direct benefit to working people . Of every pound you pay in tax,

All these items are going to be increased under Healey’s ‘levelling off’ plans.

Interest payments will grow most. Healey told the House of Commons on 9th March:

“The Burden of debt interest in 1978-9 is likely to be about £3000m higher than we envisaged a year ago.”

Three billion pounds higher! The entire spending cuts are four billion pounds – and three quarters of this will go to moneylenders!

All the other spending items – on armaments, on police, on Northern Ireland, and subsidies to private industry – all these are not touched by the cuts. Healey told the Commons on March 9:

‘We have actually increased last year’s programmes for industry and trade by £600m.’

So the cuts – to pay for these increases – will be entirely in the areas which benefit working people, in education, health, transport, food and post subsidies, and social security.

Shouldn’t the Government say to the moneylenders, the generals, the admirals, the police chiefs: ‘Look Britain is in a terrible crisis. We’re going to have to make drastic cuts. We’re making them in old peoples’ homes and day nurseries. You must take your share.’

Well, the government did say that to the generals and admirals. There followed a mighty howl of rage from press lords, industrialists and Tories. ‘Our safety is being imperilled’ they cried. The Government collapsed and defence spending is to rise. Suppose they tried to cut subsidies to private industry. They’d be told: ‘You’re ruining the seed corn of the country: industrial investment’. Suppose they went to the moneylenders and said: ‘I’m sorry, boys, but you can’t get all your interest.’ They would be accused of bringing the whole system to a halt, and all Britain’s reserves would flow out of the country the next day.

The class which makes profit wants public spending on a strong armed force which will protect them form their competitors overseas; they want a strong police force to enforce ‘law and order’, they want freedom to make money for nothing in interest.

So it is not public spending in itself which the Tories and their class oppose. It’s public spending on services which benefit the working class – like education, health, transport, cheap food, electricity and postal services, old peoples’ care.

The Government has agreed to all of this. Public spending on behalf of the class which has property is to rise.

Public spending on behalf of the class which doesn’t have property -and which elected the Labour Government – is to be cut.

Even with the vast resources wasted in unemployed workers and unused machinery, even with the chaos which capitalism has created in the economy, we can still afford not to cut our public services. The consumption of the rich upper middle class has not decreased in the crisis. Huge luxury spending still continues in almost every area of ‘private enterprise’. And the state still spends more on subsidies for this class than it takes in cuts in social service spending.

For instance, as Healey admits at the start of this chapter, private companies now pay no tax at all. His stock relief schemes have insured that. For years, businessmen argued that they were ‘entitled’ to massive state handouts in investment grants because of the thousands of millions they paid in corporation tax. Now they are getting more handouts – and paying no tax at all.

John Garrett, Labour MP for Norwich South, put it well in the House of Commons cuts debate on March 9.

“Indirect taxation in Britain is very much lower than in other European countries and has been falling relatively over the last few years. Employers’ social security contributions are much lower here. Stock relief on taxation to companies will be worth £1,200m. Capital allowances to companies will be worth £1,800m. We are pouring buckets of money over the corporate sector without any appreciable return in terms of industrial performance or any means of monitoring that performance. Tax relief to people with mortgages cost nearly £1,000m. Tax reliefs on life assurance to individuals cost £250m. We are nowhere near our taxable capacity, and yet to avoid raising taxes and to make this mythical improvement in manufacturing industry, we cut the proposed growth in education spending by £680m. I think the Government has got its priorities completely wrong.”

John Garrett then voted for the Government, which says something about his priorities.

But the point was made. ‘Buckets of money’ for the parasites of society. Deep cuts in the living standards of the working people. And this process was carried on by Healey’s April Budget – which extended the stock relief scheme for two years in which no profits tax will be paid; which halved businessmen’s death duties; and which even permitted a ‘detaxation’ in the already pathetic price controls.

In Conclusion

1) We can afford to maintain our public services, and drastically improve them. There is more capacity to produce wealth in this country than ever before. If all our machinery and skill were put to useful production, our services could be made twice and three times better than they are now without the loss of a single job, or a single manufactured good.

2) We are producing less because two million people who want work can’t get it. This is the result of a crisis caused by the people in charge of industry and finance – people who squandered the fruits of the 1973 boom, and deliberately cut production to safeguard their profit.

3) These people are demanding cuts in social services as a solution to the crisis which they caused. They pretend that the cuts will allow them to invest more and create more jobs in manufacturing industry, and so provide more jobs.

4) The 1973 example shows that there is no guarantee that they will use extra funds for anything except their own profit orgies in the Cayman Islands and elsewhere.

5) They are not demanding public spending cuts. They are only demanding cuts in the areas which benefit working people. In total, public spending and taxation will go up to pay for more subsidies, higher interest and bigger armies.

6) The public service cuts will not solve the crisis. They will not make more money for investment or for job creation. They serve nothing but the crude self-interest of the class with property. If they are accepted, there will be no increase in jobs available for the workers – and the cuts in the public services will never be restored.



The question is, how to resist. The Labour Party promised they would resist – Now they’re in government they’re pushing the cuts through. Why?


Last updated on 24 July 2018