The Cooking the Books column from the July 2010 issue of the Socialist Standard
“‘Voters must agree on cuts or the nation will be hit with £70bn a year interest bill,’ says Cameron”, reported the London Times (8 June). It’s part of a government propaganda drive (gleefully supported by the media) to soften us up for the ‘new Age of Austerity’ and ‘years of pain’ capitalism is forcing them to implement.
Cameron said that “on current trends, Britain would be paying by 2015 £70 billion a year in interest on the national debt – more than the present budgets for schools, climate change and transport put together.”
This calculation is based on nothing being done to cut the present budget deficit – the excess of government spending over income – and covering it by more borrowing, i.e. by increasing the so-called “national” debt (which is more properly called the Government Debt). It’s being bandied about to try to get workers to accept that the budget deficit should be reduced mainly by cutting government spending on benefits and services workers have come to accept as part of their standard of living.
Cameron, Clegg, Osborne, Cable and the others are saying we must all make sacrifices to reduce the deficit. But not quite all. Not those capitalists, national and foreign, who lend the government money. Paying interest to them is part of government spending, but servicing the Government Debt is obviously the frontest of “front line services” since the government has no intention of even thinking about cutting these payments.
Payment of interest on the Government Debt is, like welfare benefits, a “transfer payment”, that is, a transfer via the government of income generated from production to some other group who don’t or can’t participate in production. The beneficiaries in this case are those who have lent the government money, mainly various capitalist institutions and corporations. The money transferred to them comes from “the taxpayer” who, in the end, are the recipients of profits and other property incomes.
The income of the holders of the Government Debt is sacrosanct because it’s part of a contract that can’t be broken without dire consequences. A government can renege on its debts but the “international community”, i.e. the rest of the international capitalist class, will never forget. They won’t lend the government money in future except under more onerous conditions (notably at a higher than normal rate of interest). And they won’t forget the debt. So, repudiating paying the contracted rate of interest on the Government Debt either totally or partially or even slightly is just not an option, given the way the world capitalist economy works.
The government could in theory reduce the deficit by increases taxes. However, given that these ultimately fall on profits and that profits are what makes the capitalist economy go round, their margin of manoeuvre here isn’t much wider than over interest payments on the national debt.
What’s left then? Only cutting government expenditure. What in Gladstone’s day was called “retrenchment” (the Liberals have gone back to their 19th century roots). This can be on anything including preparations for war (“defence”) and subsidies for particular capitalist industries, but the obvious target will be the total bill for the salaries and pensions the government pays its employees and various payments that are made to other people or to provide services for them.
What a future capitalism has to offer workers: struggles to try to slow down things getting worse in a world that it technically capable of providing plenty for all.