Alastair Darling’s Budget attempted an impossible balance, playing up to deep-seated popular anger with the bankers and the City, whilst keeping the City entirely on board with the promise of public spending cuts.
A delicate balancing act that, true to form, Darling played safe. Borrowing figures turned out better than his last forecast, giving him just enough room to dish out a few small goodies. The Budget as a whole is faintly expansionary, pumping £1.4bn extra into the economy over the next year.
Additional borrowing leeway with the City also allowed him to sneak through some faint redistributive measures.
Some of these measures might be broadly welcomed.
20,000 extra university places will be funded. The “job guarantee” for 18-24 year olds will be extended to 2012.
Darling made much of his claim that the top 5% of earners will be paying 60% of tax increases.
The tax haven of Belize - actual residency of tax dodging Tory donor, Lord Ashcroft - is being made less inviting for the super-rich.
Those wealthy enough to afford homes over £1m will now have to pay more stamp duty when buying their mansions. The removal of income tax personal allowances for those earning £100,000 or more will continue.
Smoke and mirrors
But this was a smoke-and-mirrors Budget, a politically clever conjuring trick.
Darling, Brown and Mandelson know full well that they need to shore up their core Labour vote. The recent turnaround in Labour fortunes has been driven by the realisation amongst Labour support of just how vile a David Cameron government will be.
To capitalise on that sentiment, New Labour has to dress Old.
New Labour's leadership, like the smarter bits of British capitalism, also know that the City can no longer drive the entire British economy. Mandelson has spoken of the need to “rebalance” the economy away from financial services.
But the City of London is still immensely powerful, as the bailouts showed. Darling has no serious desire to take it on.
The mansion tax will raise just £90m. The lucrative bonus tax left as a one-off gesture.
The rich were bashed, but with foam-rubber mallets.
Additional university places sound good, until the £270m spending is set against the £600m cuts already being pushed through higher education.
“Rebalancing” the economy amounts largely to a £1bn “Green Investment Bank” and a £2.5bn package for small businesses. Not, by itself, insignificant, but peanuts compared to £130bn the bank bailout cost last year.
And the entire Budget was premised on the supposed necessity of spending cuts.
Darling's first cut may not be the deepest
This sting in the tail was saved for after Darling returned to his seat. It was left to individual government departments to later announce the first round of cuts for next year - £11bn in total, delivered in a series of salami slices carefully designed to minimise opposition.
Some of these “efficiency savings” could even be welcomed. There will be few tears shed for the overpaid consultants now being turned away in the Foreign Office and the Department for International Development, for instance.
But this is pretty small change.
£4.3bn is to be taken from the Department of Health. £555m of that will be taken from reducing “staff sickness and absence” in the NHS. That means pushing overworked doctors, nurses, and cleaners harder.
The Home Office is looking to close 20 magistrates court in an already over-stretched criminal justice system.
The Department for Children, Schools and Families is cutting £1.1bn.
And to meet the government's stated debt target, further cuts will be required - even if the economy miraculously rebounds as Darling claims it will. If it does not, the situation is still more grim.
One "funding priority" not being cut
The Ministry of Defence has been promised its £4bn cash for the war in Afghanistan.
But here is a quick, easy, and popular way to save money.
Get the troops out of Iraq and Afghanistan. Spend the £4bn a year on public services people actually want, rather than a war and occupation Iraqis, Afghans and British in their great majorities oppose.
But none of the main parties will do it. The entire political mainstream wants to prop up the US' failed “war on terror”.
On the economy, those parties are even worse. All the main parties believe that spending cuts are inevitable as a result of the financial crisis.
Labour is at least unenthusiastic. Darling's optimistic growth forecasts for the following years allowed him to downplay the scale of cuts in future years. Nonetheless, they amount to £38bn (and £19bn additional tax) by 2013-14 - the biggest assualt on public spending since the war.
The Tories are positively salivating at the prospect of wielding the axe. If shadow business secretary Ken Clarke is to be believed, their attempts to reduce the EU-defined “Treaty Deficit” down to 3 per cent amount to additional £20bn in cuts.
Most insidious of all, however, are the Lib Dems, who want to institutionalise the mainstream consenus in a cross-party “Council for Fiscal Responsibility”. Like the independent Bank of England setting interest rates, this will remove responsibility for setting tax and spending plans from the elected government.
And the Thatcherite Lib Dems' want to reduce the deficit entirely through spending cuts, with no tax increases - putting them well to the right of the Tories on the question.
The entire mainstream political class, in other words, is lining up to squeeze ordinary people to pay for the bankers' crisis.
Against the consensus
It doesn't have to be like this. The need for swingeing cuts is overstated.
But ensuring the rest of us don't bear the brunt of the crisis will require a government determined to act on City greed and give up on imperial pretensions.
Cancelling Trident would save at least £70bn. Withdrawing the troops from foreign occupations billions more.
And then we can start making those that got us into this mess begin to pay for it. Hit the bankers and the financiers. End the non-doms' tax privileges, and institute a serious wealth tax.
Start closing the City’s tax loopholes. Prof Prem Sikka, of Essex University, has suggested that a staggering £80bn in tax is ducked by major corporations every year.
Darling's announcement of an extra £94bn in lending from the semi-nationalised banks showed that government can compel finance to behave as it wishes. But why stop there?
Even the IMF now accepts that capital controls can be a useful policy tool. End the speculation and ban the increasingly ludicrous derivatives the speculators rely on.
We might then be in a position to begin to rebuild the economy in the interests of working people. The cuts should be resisted, as striking PCS members showed yesterday.
But we need a broad campaign for a political alternative to the bankers' consenus.
Radical economist James Meadway has been an important critic of austerity economics and at the forefront of efforts to promulgate an alternative. James is co-author of Crisis in the Eurozone (2012) and Marx for Today (2014).