Low-paid, zero hours jobs won’t close Osborne’s deficit

If George Osborne’s proposed legislation to make budget deficits ‘illev2-osbornegal’ goes ahead,  then public services will no longer be able to be expanded as a way of stimulating future economic growth and activity. Or at least, it will be up to the Office for Budget Responsibility (OBR) to decide whether ‘exceptional circumstances’ allow this to happen.  It isn’t clear whether Osborne would be able to legally bind a future administrations to a future course of action and his actions can be seen as more about pushing Labour ‘Blairite’ leadership candidates to accept even tighter restrictions over economic policy –here he seems to have already been successful.

Ironically, the last Chancellor to run a budget surplus  was Gordon Brown at the end of the 1990s –then,  the City boomed,  consumer credit expanded at alarming rates and it was declared there’d be ‘no more return to boom and bust’.  Osborne’s main line of attack has been to argue that subsequently,  Labour  spent too much, leaving no money aside to cover the cost of a future  recession  (even though going into the 2010 election the Tories committed themselves to maintaining Labour’s  spending levels).   This was then outrageously   ‘spun’ to mean that Labour was at least partly responsible for the downturn –an accusation  Miliband’s team appeared incapable of  seriously challenging in the election campaign.

Deficit reduction has continued to focus on the need to make  spending cuts – but it has been the loss of taxation revenue that has been the main reason why Osborne has continued to have difficulties reducing the deficit and why, as some commentators predict, he may still not have cleared it by the end of his second term – the OBR has already revised its forecasts downwards.  While Osborne brags about creating a thousand new jobs a day,  some estimates put the  annual loss of income tax at over £25 billion (over a quarter of the current deficit and more than twice the amount of the  latest round of welfare cuts).

This is because a large majority of new jobs have been low-paid, irregular/zero-hours  and unable to generate this tax revenue.   Output has been increased by drawing on a ‘reserve army ’of labour, rather than increasing productivity. With technological changes also wiping out many skilled jobs,  there’s  every  reason to think that this situation will continue, especially as  the public sector and in particular, public sector investment  continue to decline, a consequence of Osborne’s  main  political objective – reducing  state activity to a level not seen  since the 1930s.

Campaigns against austerity can be combined with positive proposals for reforming the labour market. Not only  raising the minimum, but also the ‘living wage’, limiting pay differentials between those at the top and the bottom,  guaranteeing hours and security of tenure. Also, ensuring pay levels not only reflect increases in the cost of living but also keep up with increases in profits.

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