Sunday, 23 July 2017

We can afford a decent pay rise for public sector workers

Politics has recently become all about what we 'can afford' to do as a nation. This is a political agenda pushed by the Tory Party and its neoliberal friends in the media. And what we 'can afford' we are told has to be paid for by taxpayers with tax increases but the reality is that much of government spending pays for itself. Lets have a look at some examples of what we can and can't afford to spend money on:

What we can afford -
  • renewing Trident = £200 billion
  • Hinkley C = £37 billion
  • HS2 = £52 billion
Total = £289 billion

What we can't afford - 
Total = £11.3 billion

The figures for what we can afford are ones the Tory government has already committed to and though the cost will be spread over a number of years they are likely to be underestimates. The real total is likely to be greater than £300 billion. The figures for what we can't afford are annual costs.

It can be argued that the 'affordable' expenditure is for vital defence/energy/transport infrastructure but it can equally be argued that all those three 'projects' are a complete waste of money.

What we 'can't afford' to do is spend much smaller amounts of money on the public sector i.e. the NHS from which will we all benefit; more police from which we all benefit and a much needed pay rise for 5.5 million public sector workers from which we will also all benefit - because it will boost our economy.

The reality is that these are political choices that have nothing to do with whether the items are 'affordable' or not. 'Affordability' is the smokescreen behind which these choices are hidden and a 'reason' to continue austerity which again is a political choice not an economic necessity.

But lets look at the 'unaffordable' expenditure in a bit more detail. The reality is that the public sector pay rise will largely pay for itself. How? Because we pay 39% tax and 39% will return to the government. In fact, most of that £4.5 billion will return to the government in taxes anyway as it is spent and circulates around the economy - its called the fiscal multiplier

For a fuller explanation of the public sector pay rise see Richard J Murphy's account here. The key point that Murphy makes is that we can afford to pay for a decent pay rise for public sector workers without having to raise taxes.

To re-iterate this whole debate is really about political choices and to say that we 'can't afford' to fund the public sector properly is essentially dishonest. The Tories priorities are tax cuts for the rich and corporations, and privatisation - which can be promoted by running down the public sector. Austerity is and was always a means of furthering this agenda based on the lie that Labour, rather than the banks, got us into debt in 2008, and that we need to 'balance the books' and have a budget surplus - which is economic nonsense.