Economy

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Conference
2008 National Delegate Conference
Date
25 February 2008
Decision
Carried as Amended

Conference notes that fall out from the crisis in the financial sector, internationally and domestically, is leading to reduced predictions of economic growth this year and a possible increase in unemployment. Conference notes that this may put further pressure on public services as tax revenues available for investment are reduced and spending on social security benefits increases.

Conference also notes that the Comprehensive Spending Review laying out expenditure plans to 2010-11 foresees a sharp decline in the rate of public spending growth bringing the share of national income devoted to public services to its lowest level in eight years. Conference notes the negative consequences this is already having for service delivery, including a pay policy that amounts to a real terms cut for millions of public servants, so-called “efficiency” targets that are resulting in job cuts and overloading of remaining staff, and mounting pressure to outsource services to private contractors offering services on the cheap by evading public sector standards of quality, accountability, and fair employment. Conference also notes the judgement of the Institute of Fiscal Studies that the limits placed on public spending over the coming period calls into question the government’s ability to fulfil its ambitions for world class public services (including health, education and those provided by local government) and a halving of child poverty.

Conference notes the assessment of the Chartered Institute for Personnel Development that the effects of spending cuts, job losses and pay restraint in the public sector may be to exacerbate the risks of an economic slowdown at the same time as rendering its impacts on low paid and disadvantaged individuals, families and communities more severe.

Conference believes that any slowdown in the economy resulting from the crisis in the financial sector makes it more imperative, not less, that we invest in public services and the staff who deliver them.

The government has claimed that its public sector pay policy is necessary in order to restrain inflation and keep public spending at affordable levels. But independent economists have challenged this argument, noting that pay negotiations follow, but do not cause, increases in the cost of living, and that the overall amounts saved for the Treasury as a result of the pay policy are small, though the impact on individuals and their families is severe. As a result of this policy low paid public servants are facing real cuts in their standards of living as their pay fails to keep up with increases in the cost of necessary goods such as fuel and housing.

At the same time the gap between rich and poor is widening as City bonuses and directors’ pay climb to historically unprecedented levels. Rates of taxation faced by wealthy or highly paid individuals are lower than they were in the late 1980s, with the taxation system as a whole remaining regressive, and corporation tax rates will be at an all time low after the reductions in April 2008. Moreover many companies and wealthy individuals avoid the payment of tax altogether. The TUC has recently estimated that as much as £25 billion a year is lost to the Treasury every year as a result of such avoidance.

Conference expresses deep concern at the abolition of the 10% tax band in the 2007/2008 budgets. This is reducing the net income of millions of young and/or childless low paid workers and women pensioners aged between 60 and 64 who are not eligible to claim tax credits and who do not earn enough to gain from the cut in the basic rate from 22p to 20p in the pound. While welcoming the extra allowances in the budget for children and most pensioners, conference believes that these should be funded by those most able to pay, including wealthy non-domiciled individuals and higher-rate tax payers, and not by those who are themselves among the poorest in society.

The government is also under increasing pressure to restrain public spending in order to minimise public borrowing. But Conference notes that the Treasury’s support for Northern Rock and the ONS reclassification of PFI liabilities have already undermined the credibility of the Sustainable Investment Rule, which restricts total public sector debt to 40 per cent of national income. Conference also notes that mainstream commentators such as the Chief Economist at Morgan Stanley, and the National Institute of Social and Economic Research have argued that the government’s fiscal rules make little economic sense and may prevent necessary borrowing for investment.

Conference therefore believes that investment in quality public services must be sustained and if necessary increased, for the sake of both economic prosperity and social justice, and that revenues for this investment should be raised through progressive taxation that ensures all in society pay their fair share and, if necessary, through government borrowing if that is needed to sustain economic growth.

Conference therefore calls on the National Executive Council to vigorously campaign to:

1) ensure adequate funding of public services needed to sustain growth, employment and prosperity and build a stronger, fairer society;

2) continue a united campaign across the union and other public service unions to oppose the government’s unjust and unjustifiable policy on public sector pay;

3)promote a system of taxation that ensures all in society pay their fair share, including;

a) more progressive taxation for individuals with high incomes or personal wealth, in particular a new 50% tax rate for those with incomes over £100,000 a year;

b) protection for all those on below average incomes who are losing from abolition of the 10% tax band, either by retaining the band or by efficient safety net mechanisms which at the very least maintain their net income without the need to complete lenghty and complex forms.

c)closing of loop-holes exploited by non-domiciled individuals;

d) fair taxation of capital gains;

e) new principles of anti-avoidance as recommended by the Trades Union Congress;

f) an end to staff cuts in customs and revenue and a crackdown on tax avoidance.

g)calling on the government to increase Corporation Tax.