Austerity – Back to the Workhouse?


By Mike Gold

Most media and economic commentators either support debt reduction and the resultant austerity, or demand a bit less austerity and a bit more Keynesian state intervention. There is no Plan B, scream the critics of George Osborne and Seamus Milne1 goes further and calls Osborne an economic disaster.

The truth is far more frightening since Cameron, Osborne and Clegg are not economic illiterates. Far from it, they understand exactly what they are doing; it is just that they are rather coy about telling the public. They do want to reduce sovereign debt – but that can be done later, when they have reduced public expenditure and priced the 99% into work.

If the sole aim of Government policy was to reduce sovereign debt, then the easy way is to increase tax revenues by reducing tax avoidance and tax evasion. The Government’s own figures state that £35 billion of tax was avoided or evaded in 20102 , while the Tax Justice Network3  says the figure is double £70 billion. Even an additional £35 billion a year would make austerity totally unnecessary, but there is no political will to collect tax from any of the three parties.

On the other hand, there is the political will to price people into work, and when this government’s policy is looked at holistically, it is apparent that there are three separate strands coming together to achieve this end. Firstly there is the cutting of social security payments, secondly the relaxing employment law, and lastly, the on-going negotiation over the right of Bulgarian and Romanian nationals to work in the UK from 2014.

The use of the American term welfare stigmatises people as lazy, as shirkers, yet most of the people affected by the cuts have paid their tax and national insurance all through their working lives. Many of those finding their social security benefits being cut are, perversely, still employed. Their wages are so low that they qualify for tax credits or housing benefit or both, and these are being cut.

The estimated cost of all benefits for 2011/12 was £200 billion4 and the government intends to reduce this by approximately 10% by the end of this parliament in 2015.

The relaxation of employment regulation has been going on for many years, and sub-contracting, which was a rarity for main stream jobs before 1979, is now the norm. Construction sites, road and rail maintenance, office services, office cleaning, road cleansing, waste collection etc are now routinely sub-contracted or contracted out. In one swoop the main contractor, often a government department or local authority, has rid themselves of any responsibility for the employment conditions of the people actually doing the work.

When jobs are contracted out or privatised, European legislation is supposed to protect workers, guaranteeing the continuation of their employment on the same terms and conditions. However, there are many ways for companies to circumvent the law, legally. One of the most popular is to review the grading structure soon after taking over – and surprise, surprise, offer staff a lower grade and a lower wage or redundancy!

As staff leave, new staff are employed on worse conditions, and the winner in the race to the bottom is the zero-hours contract, where there is no guarantee of any work. People wait for a phone call or text to find out if they have a day’s work. This casualisation of labour is a return to the worst days of workers turning up at building sites, mines, docks or factories, and standing in a queue to be picked for a day’s work. Only now the misery of not getting a day’s work is out of the public eye, a misery that cannot even be shared with fellow workers not chosen, and it makes protest impossible.

Many of the companies supplying the new labour for the contactors are nothing more than gangmasters, recruiting staff from the poorer countries of the EU in Eastern Europe. The low rates of pay, and often bad living conditions, are still better than in their home countries, and even allow most of them to remit money back to their families. These low rates of pay have, up to now, been unacceptable to British workers and their families.

Initially, when the cheaper EU labour arrived, there were better-paid jobs for the locals. Then when the wage rates started being driven down, tax and child credits allied to housing benefit allowed survival. The reality was that private enterprise was being subsidised by the taxpayer!!

Now, in an effort to reduce the subsidy, the government is introducing a Universal Credit, which will reduce benefits, and workers will have to pick up 100% of that reduction.

The threat of leaving the European Union should ensure a successful renegotiation with the European Union on the rights of Bulgarian and Romanian citizens to work in Britain. The Government’s thinking is that this will free up lots of low paid jobs for locals, but will it, or have the lunatics taken over the asylum?!!

Economics is very inexact, and for Government policy to work, it is relying on stopping new EU arrivals from Bulgaria and Romania, and vastly reducing the number of EU nationals already living and working in Britain. It is likely that the reduction in EU nationals will be far less than the Government predicts/hopes for, and austerity itself will also drive down the number of jobs available; just look at the carnage on the High Street.

If there is not a net increase in jobs, then it is likely that the benefit bill will rise, not fall, and what will the Government do then? Blocks of flats in assorted city centres could be used for accommodation, and why have individual families cooking? Put in a large kitchen, find a beadle, give the inmates some terrible work as idleness is sinful and the workhouse is back!!

Mike Gold has just started a blog at








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