Wednesday, January 17, 2007

The cost of living (and dying).

Simon Basketter has an interesting report in this week's Socialist Worker on the hidden rate of inflation. Two key facts are juxtaposed: the drastic increase in the cost of essential goods, and the declining share of income for labour. Typically, the government's way of handling inflation is to reduce labour's share further by demanding that public sector workers accept wage increases of a mere 2%, which is a real terms cut - the British state's tacit incomes policy has always been effected through suppressed wages for public sector workers. The other means it uses is to increase the cost of borrowing, another burden for workers surviving on debt. (Incidentally, the banks are making a fortune out of our parlous financial condition, last year picking up £4.5bn on declined direct debits and bounced cheques alone). This inflation isn't driven by those "inflation-busting pay rises" that BBC anchors are always complaining about: rather it is driven by rising global energy prices, the stupendously overvalued housing market, spiralling public transport costs (which result from a variety of factors including privatisation and previous chronic underinvestment), and the increased burden of indirect taxation, the logical corrolary of reducing direct taxation on profits, inheritance and upper income brackets.

Further, as the report describes, pensioners face the worst of this, with real terms inflation as high as 9% in a situation of already dire poverty for many of them. Now, this makes what the government is planning for pensions particularly vile. As you know, we are not only to be asked to work longer (far longer than many of us can expect to live, actually), but we are to rely increasingly on compulsory savings schemes, perhaps floated on the stock market. You have to understand: pensions are by far the largest part of any social security budget, and they are the biggest prize for capital in rolling back the welfare state. In Eastern Europe after the collapse of the Soviet Union, it was pensions that the World Bank pushed hardest on, since a privatised pension system would be the lynchpin of stock market capitalism. In Chile, the world's laboratory for crackpot neoliberal schemes, the Chicago Boys helped General Pinochet to secure precisely this set-up, in which employed workers contribute at least 10% of their incomes to savings schemes (and unemployed workers contribute and receive nothing). This system, by the way, has now been tested by the first generation of workers to retire under this scheme, and the result is a resounding failure - at least it is if you're concerned about the income of the pensioners and not the profits of the pension companies. Which is bad news for us, because New Labour rather admires the Chilean model. As early as 1996, a delegation of New Labour MPs under the despicable "Christian socialist" Frank Field were sent to Santiago to study the system and 'think the unthinkable': the only unthinkable turned out to be whether it would be necessary to have a coup in order to impose these measures.

New Labour's way into this is to set the tone with a decisive victory in local government. Last December, our more than usually vacant local government minister, Phil Woolas, intervened in the ongoing pensions battle with a circular to local governments. In it, he detailed a number of regressive proposals including increasing employees contributions to pension schemes, decreasing employers' contributions (in this case, the employer is the government) and increasing the minimum retirement age. The drive is on to push for an industrial action ballot in the unions, and if you value the contents of your trouser pocket, then you'd better hope it wins big.