Bankers 'must pay' for their mistakes

18th June 2010

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Gail Cartmail, assistant general secretary of Unite, writes for ePolitix.com ahead of the Budget.

The Con-Lib coalition has been trailing this week's emergency Budget with talk of economic doom and gloom and the need for a policy of slash and burn.

Unite takes a much different view and argues that there is a case for an alternative three-point strategy to restore the economy to health.

Firstly, Unite believes that public spending must be maintained to generate economic activity. Recent TUC research showed that 29 per cent of public expenditure goes directly to the private sector; therefore, a 10 per cent cut would mean a loss of £16.9bn to the private sector, and 200,000 jobs.

We only have to look across the Irish Sea to get a peep into the future of the UK economy. There the cuts agenda has been administered with a dogmatic vigour – and the adverse effects are clearly visible through higher unemployment, poorer living standards and reduced public services. It is a salutary reminder of what could be in store for us. There have been big cuts to public sector pay and pensions. The result has been a shrinking economy and rising unemployment accompanied by falling tax revenues. The deficit has not improved.

Here ministers look to Canada for inspiration. Their austerity model is being applauded as one to be followed in the UK. Canada stands out among OECD countries for reducing deficits and debts through deep and permanent cuts to social programmes and public services, albeit at great cost to working families. The burden of Canadian deficit-reduction fell on the lower end of the income scale, and this was a significant factor behind the pronounced increase in Canadian income inequality throughout the 1990s.

To follow the Irish and Canadian routes in the UK would result in the most vulnerable and disadvantaged in society bearing the brunt of these cuts. According to the Nation Equality Panel report published earlier this year, An Anatomy of Economic Inequality in the UK, Britain is already an unequal country, more so than many other industrial countries, and more so than a generation ago.

Secondly, taxes must bear a heavier proportion of the burden. Unite has advocated a 'Robin Hood tax' on banks, hedge funds and other financial institutions which would raise billions to tackle poverty and climate change, at home and abroad.

The people of Britain, who have paid their taxes on time, should not now have to face cuts to their schools and Health Service, while the banks – which contributed so greatly to the present financial problems – continue to make billions in profits and hand out ridiculously high bonuses to top executives.

The public sector did not cause the financial crisis. The bankers, the so-called 'Masters of the Universe', did – and they should now be called to account and made to pay for their monumental mistakes.

Thirdly, the TUC has made the point that the current rigid timetable to reduce the deficit by half by 2014 is to too tight, and an element of flexibility needs to be introduced. It is ironic that the public did not vote for early and deep public spending cuts, as both Labour and the Lib Dems in the general election campaign opposed severe and immediate austerity measures, warning that the consequence may be a 'double dip' recession.

Last Thursday's announcements of the government's review of the previous government's spending commitments made post-1st January 2010 illustrates the retraction of economic and industrial impetus so desperately needed to deliver the economic growth for the future. The withdrawal of £80m of loans to Sheffield Forgemasters will cost an immediate 180 skilled jobs and will see much-needed future manufacturing orders going abroad, because we do not have the resources in the UK to contribute to the nuclear energy building programme.

The removal of additional funding for the Future Jobs Fund will mean that the 205,000 jobs that would have been provided has been reduced to 110,000 – losing 94,000 job opportunities for young people at a stroke.

Unite is calling on the government to act responsibly and to secure an economic recovery on the basis of growth, not austerity. The lessons are there to be learnt – we cannot afford for them to be ignored.