Lord Hutton of Furness has produced his interim report on public sector pensions. This is the important thing you need to grasp: the main reforms are proposed with a specific aim of squeezing revenue out of public sector workers so that the Treasury can pay off the bankers. This is not about fairness, much less about "gold-plated" public sector pensions. It is a simple raid on the future wages of the lowest paid workers for the benefit of the rich. Secondly: this transfer of wealth to the rich is part of an ideologically-driven class-motivated attack on the welfare state. We know the background. There is no urgent need to pay off the deficit. Most of the debt doesn't mature in less than three years, and the cost fo borrowing is still low for the UK. There is also no particular need to pay off the deficit by attacking the public sector. Higher taxes on those who bear most direct responsibility for this crisis could easily pay off the deficit. Alternatively, a redistribution and stimulus-based growth strategy would produce the revenues needed to pay it off. So, these are elective measures reflecting the class interests and the ideological priorities of those driving the policies. And Cameron has made it clear that he intends to make these cuts permanent.

Some context. One of the most shameful things about the last government was the way they proceeded to attack the fundamentals of the pension system without ever consulting the public. In their last term especially, they planned a wide-ranging series of neoliberal reforms as the Blairites became impatient to make their mark in a lasting way. At bottom was New Labour's determination that the burden of pensions should shift from state provision through taxation to private sector provision, based on financialised packages. Peter Mandelson had been very impressed on a 1996 visit to Chile with the privatised pension system set up under Generel Pinochet. He in turn impressed the incoming Blair government with his findings. This aspect of New Labour thinking arose as private sector employers were attacking their own defined benefits and final salary pension schemes, as part of their drive to raise shareholder value and reduce the cost of employment. So, just as the private sector pensions system was falling to pieces, the government saw fit to attack state provision, and a tripartite consensus evolved on this issue. One of the few things restraining the government's blows was that pensioner poverty was a hot political issue. The government found this out to its cost when a political backlash engulfed it over a miserly 90p rise in state pensions in one budget. This was at a time when public sector spending was being deliberately slashed by the government, and the spending as a proportion of GDP sank well below the levels of the Major administration. They could get away with deep, though temporary, cuts in spending on health and education, but on pensions they were forced to retreat. So, the conundrum for the government was how to reduce the amount of state provision in a politically acceptable way. In its last term, with Blairites like James Purnell and John Hutton itching to make their mark, New Labour contracted the services of the princes of capital, such as Lord Turner and David Freud to fundamentally reform the whole benefits and pensions system, with the aim of qualitatively reducing state provision. This involved, among other things, raising the retirement age to levels over and above the age to which many working class people can expect to live.

Now, amid a uniquely devastating global crisis, the government has sought to shift the burden of the crisis from the banks to the Treasury, and ultimately onto the working class. A gold-plated government of millionaires has appointed a gold-plated New Labour Lord, John Hutton, to draft a report justifying attacks on what the Deputy Prime Minister Nick Clegg calls "gold-plated public sector pensions". The result so far is this, Hutton's interim report pending a final report in two years' time. In a nutshell, Lord Hutton - former work and pensions secretary under New Labour - advises the government to increase employee contributions to the pensions, as the most effective short-term way of raising funds for the Treasury. This is specifically cast in terms of raising revenue in the short-term. The government is also urged to increase the retirement age in the public sector, though this is more of a long-term measure as it is considered an unlikely candidate for the immediate fiscal gains the Treasury seeks, and reflects the wider commitment to reducing the scope of the welfare state. Bear in mind that new entrants to most public sector occupations already retire at the age of 65, with the only exceptions being the police, the fire service and the armed forces, who retire at 60 due to the physical demanding nature of their jobs. Hutton also advises the government to look for ways to end the final salary pension system, which he judges is "inherently unfair". Instead, he urges shifting to a pension scheme based on some sort of "career average".

To believe that public sector pensions are "gold-plated", you'd have to be living most of your waking life in the comment pages of the Daily Telegraph. The average public sector pension is worth £7800. In local government, it's £4000, dropping to £2800 for women. For this pension, public sector workers contribute over 6% of their wages throughout their working lives. Hutton, in his report, acknowledges as much, dismissing talk of gold-plated pensions as "mistaken" since for "the most part", these pensions are "fairly modest by any standard". If they seem generous to some, he says, it is because the private sector pensions system has been so degraded over the years. But given such an acknowledgement, the standard of justification required for an attack on such "modest" provision becomes all the higher.

Hutton's approach in that regard is standard Blairite 'modernising' talk. People live to a grand old age these days, we are informed, and the buggers cost more to feed and clothe. Some people, Hutton points out, spend 40% of their lives in retirement. But this is not the case for the vast majority of public sector workers, who are among the lowest paid skilled workers in our society, and many of whom work until the physical nature of their jobs means they can no longer do it. They do not have the option to work longer. Meanwhile, some of the features of some public sector pensions go back years, and years. For example, the final salary principle has been in place in the civil service, in different ways, since 1859 - though the system has been through numerous reforms since then, the basic principle has remained intact. Which obviously means that there must be smething wrong with it. No surprises there - Hutton was once part of a government that thought it high time to abolish rights established in the Magna Carta, such was its modernising zeal.

Further, Hutton notes, provision in the state sector is increasing overall, while defined benefit pension schemes in the private sector are diminishing in value. Thus: "around 85 per cent of public sector employees have some form of employer sponsored pension provision compared to around 35 per cent in the private sector." By the standard perverse logic of 'modernising' reforms, the failure of the private sector is used as an excuse to attack the public sector. Last example: Hutton argues that there is an "imbalance" between employer and employee contributions to pension schemes. It's a vacuous claim. What "balance" is appropriate is surely a value judgment, and the implied assumption that there is an "imbalance" which favours employees is not an explanation in itself - rather it demands explanation. For the sake of context, recent reforms have already capped employer contributions to public sector pensions schemes, leaving employees to foot the bill for any shortfall.

Overall, the claim is that changing demographics mean that a system with characteristics developed in the 19th and 20th centuries is no longer suited to the task, and must be reformed in order to reduce the cost of pensions to the taxpayer. But the cost of public sector pensions is not huge. The value of the main unfunded public sector schemes is approximately 1.7% of GDP, and it is projected by the National Audit Office not to have increased at all in 50 years time. The net public sector pension cost, defined as the difference between present employee contributions and present costs, is much lower, closer to 0.3% of GDP this fiscal year. It can vary depending on the rate of inflation, but it is still eminently affordable. According to Diane Abbott, who has been an active participant in debates emerging from the Work and Pensions Committee's proposed reforms, the Treasury spends twice as much on tax relief for private pensions as it does on public sector pensions. Repeat and underline: raising employee contributions is just a way of squeezing revenue out of public sector workers to enable the government to pay off the bankers. It has nothing to do with fairness, or affordability.

The unions are warning of anger, as well they might. Unison is "adamant" that replacing final salary pension schemes with career-based schemes will sharply reduce the incomes of public sector workers in their retirement, which is in fact the purpose of such reforms. Unite points out that this attack on pensions will hit women the hardest, as 70% of public sector workers are women. The unions uniformly point out that public sector workers are already living with pay freezes and de facto pay cuts. Changes to the calculation of pensions, using the Consumer Price Index on inflation instead of the Retail Price Index, has already wiped billions of the value of public sector pensions.

Noticeably, however, the tone of the responses from Brendan Barber and Dave Prentis, and the GMB, including a cautious welcome of some of the interim report's points, suggests that the larger unions are breathing a sigh of relief that it wasn't much worse, and are themselves unlikely to mobilise over this issue. If anything they want to use Hutton's report as leverage to resist some of the more aggressive Tory plans. In truth, as anyone looking at the right-wing press coverage could detect instantly, the Tories didn't need Hutton to endorse the most slash-and-burn approach. It endorses the basic idea that public sector pensions are unaffordable, which is crap, and encourages the government to undertake both short and long-term reforms to dramatically reduce the cost to the Treasury of those pensions. That's all they needed. Unless the unions do begin to mobilise far more quickly than they have been ready to so far, the Tories will use every opportunity to cut deeper than anyone expected.

Osborne's budget is an attack on consumption, and a bonus for capital. It is a redistribution of wealth from the poorest to the wealthiest, on the assumption that it is the wealthy who will drive economic growth. VAT, a notoriously regressive tax, is to rise by two and half percentage points to 20% - Osborne had promised in opposition that he would not need to increase VAT, knowing how unpopular this would be. Housing benefits will be cut, disability benefits cut, child benefits frozen, and other benefits such as job seekers allowance will rise in line with CPI rather than RPI. The total annual reduction in spending on benefits will reach £11bn by 2014.

Most public sector workers will have a pay freeze for three years, meaning a de facto pay cut by whatever the rate of inflation is (currently 3.5%). Average real term spending cuts will amount to 25% except in ringfenced spending in health and international aid. 25% is a huge reduction, even bigger than anticipated, or advertised. There are a few off-setting measures that would in theory protect the poorest - linking pensions to earnings, increasing child tax credits - but the net effect will be a severe squeeze on working class consumption.

For capital, it's a different story. Government largesse flows in abundance - not for them the age of austerity. Corporation tax is to be reduced to 24% within four years. Capital gains tax will be increased for a very small minority of wealth-holders, but there will be a higher relief threshold for "entrepreneurs", such that the first £5m gained from the disposal of all or part of a business, or in the course of running a business, will be entitled to relief, reducing their tax to 10%. Small business tax will be cut to 20%, and employers contributions to National Insurance will be cut. A small bank levy will take back £2bn a year, but again it's a relatively trivial offset to a very large golden hello from the Tories and Liberals to their business friends.

The logic, insofar as logic is the correct term, is that such measures will encourage investment. Osborne complained in his budget that the state made up almost half of all income in society which was "unsustainable", and the Tories have long insisted that growth had to be stimulated in the private sector. But, as economists as diverse as Paul Krugman, Martin Wolf and Samuel Brittan point out, this is nonsense. The net effect of such measures will be to exert a serious downward pressure on demand, thus on growth and thus on investment. It will increase unemployment and reduce taxable income, which will tend to increase the deficit. David Blanchflower argued that previously announced austerity measures are likely to add a quarter of a million to the ranks of unemployed young people. And, although the media and the government have worked hard to scare people over this, repeating the mantra that there is no money, it needs to be repeated and underlined that there is no need to do this. Most of Britain's debt matures in more than a decade from now.

Politics is rarely pure, and never simple - but this is class war, pure and simple. That being the case, Bob Crow is surely right to call on the TUC to convene an emergency conference to plan and coordinate actions to defend working class living standards. He calls the cuts Thatcherite. Thatcher wishes she'd accomplished anything like this.

Polls are now consistently showing a reduction in the poll lead enjoyed by the Tories from double digits to single digits, now at about 7%. That's still a big lead, but the assumption of the newspaper headline writers is that the Tories need a bigger swing to win an outright majority. Thus, the spectre of a 'hung parliament' has been raised. Martin Wolf of the FT would be happy to see a coalition government, perhaps styled on Germany's recent experience with the 'Grand Alliance'. One can certainly see why: it would enable the political class to consolidate their minority consensus in favour of some form of fiscal contraction, thus edging out all signs of popular dissensus on the question. But it isn't going to happen, and here's why.

Labour's recovery is based substantially on the germinal economic recovery, which is the number one issue concerning voters - 56% say it's one of their top three issues (see figures). But issue number two is - disgracefully, and entirely New Labour's fault - asylum and immigration, with 43% saying it's a top three issue. That issue will almost certaily be prominently pushed in the marginals, where it might actually trump the economy with some middle class voters. And the marginal constituencies are where the Tories need to make gains, not in Labour 'heartlands' where its support is slightly hardening in response to the naked class aggression in Tory policies. The reactionary think-tank MigrationWatch UK got Yougov to carry out a push-poll in the key marginals for Labour and Liberals in the coming election, and it basically found that most of those voters are hysterical over the issue of immigration, trust the Tories most to handle the issue, and would be more likely to vote for any party that promised severe crackdowns. We will undoubtedly see cack-handed attempts by Liberals and Labour to pander to such bigotry, but only the right-wing parties can benefit from this game, and in the marginals the beneficiaries will be the Tories.

Of course, a lot can happen between now and election day. The Greek general strikes may presage a broader European labour insurgency against austerity measures being pushed through by mainstream parties, as the Indie claims today. Anything that pushes the economy and public opposition to spending cuts to the top of the agenda can damage the Tories - unless, of course, that 'thing' is a speculative attack or a new lurch into negative growth. But at the moment, the figures still point to a Tory majority come 6 May.

As a certain amount of contrived hysteria over the coming national postal strike circulates, there are two questions of absolute importance to bear in mind. What does Royal Mail's management want? And what does the government want? One part of the answer to these questions was furnished by BBC Newsnight last week (see report here), after an internal Royal Mail document was leaked to the programme. Entitled 'Dispute: Strategic Overview', the document lays out the plan for forcing the union to accept Royal Mail's terms for 'modernisation'. If the union did not accept Royal Mail's terms, management would just proceed to implement them regardless. The upshot of a complete success by Royal Mail management in this dispute would be the effective de-recognition of the union: forcing through major changes without negotiation with the workforce is exactly what companies without union representation are able to at liberty. This strategy, the document reveals, had the government's approval.

So, this is the first point: when you hear government ministers urge the CWU to 'return to the negotiating table', the reality is that Royal Mail management are the ones refusing to negotiate, with government backing. The business secretary and prince of the Brighton prom, Lord Mandelson, has already tacitly acknowledged the existence of the document, and ruled out the use of ACAS to arbitrate the dispute. The CWU has made repeated overtures, which have been rebuffed. This tendency on the part of Royal Mail's management to ignore conciliation and adopt bullying tactics is one reason why the vote for strike action was so overwhelming: 76% voted 'yes' for strike action.

In this connection, bear in mind what a future in Royal Mail without strong union representation would mean for a postal worker. It has been announced that Royal Mail has scrapped its anti-bullying week. The reason why this measure, among others, was introduced in the first place was because Royal Mail's management culture is one of the most retrograde in the whole of UK industry. Not only is the use of bully-boy management typical of the way Royal Mail handles disputes. It has long been part of the culture of management at sorting offices and depots across the country.

In 2001, an inquiry into Royal Mail's industrial relations by Lord Sawyer, Nicholas Underhill QC, and Ian Borkett of the TUC, was initiated by both the CWU and Royal Mail management to find ways to reduce the frequency of conflict (you can read the full pdf document here). This was after a series of unofficial actions brought sections of Royal Mail to a standstill - 95% of work days lost in 2000-1 were due to unofficial strikes beginning locally and then spreading through wildcat action. The report started from the assumption that workers' militancy was the problem to be averted, expressed disapproval of excessive worker involvement in managerial tasks, and was sympathetic to Royal Mail's 'modernisation' project. Yet, its findings highlighted an abysmal "authoritarian" culture in Royal Mail management, with managers insisting that workers ask for permission just to go for a slash or get a drink of water. Management knew how to apply punitive measures, even where they were inappropriate, but not much else. More senior managers, they found, were of a similar mentality. They refused to punish or confront "unacceptable behaviour" by frontline managers, evidently because they didn't find such behaviour to be "unacceptable".

What kind of behaviour might be hinted at in this cool terminology? Well, in 2003, it was disclosed that some 20% of staff had suffered bullying in the form of physical and mental abuse. Sometimes the abuse has taken on racist dimensions. In 2002, management had to make an unprecedented pay out of £100,000 to the family of a black postal worker who was driven to suicide after racist bullying by a group of managers. In another significant case, Mahmood Siddiqi was awarded almost £180,000 after it was revealed that he had been the subject of racist bullying for years that was condoned by managers on at least ten occasions when they might have acted to prevent it. Consider what might happen, with that sort of management culture operating without the constraints of a strong union. And think about that whenever you hear about 'union bullies', as you surely will.

Another part of the picture is that management want to reduce the cost of labour, to enhance the company's capacity as a profit-making institution. The inquiry led by Lord Sawyer acknowleged that aside from working in an unpleasant environment, postal workers traditionally suffer from low pay. The CWU points out that the average pay for a postal worker is much less than the average for skilled workers, even though managers enjoy lavish pay settlements with bonuses rivalling some of those bestowed on the oligarchs of the City. Royal Mail management would like to reduce workers' pay even further if they can, with proposed pay caps costing some workers £180 a week. This issue has been fuelling strikes across the country recently. (Royal Mail managers have responded to the strikes by scabbing). So, aside from job cuts, Royal Mail's current strategy involves forcing through a pay freeze, which is a de facto pay cut, while insisting on compulsory - but free! - overtime.

The next part of the story has to do with what the government intends to do with the postal service. Had Mandelson had his way, part of the Royal Mail would already be privatised. That had to be shelved last year, in part because of opposition from the backbenches. The major source of opposition to the privatization programme, though, is the organised Royal Mail workforce itself. So, in preparation for a renewed privatization drive, the government wants to decisively beat the union. Now, Mandelson has been very clear that this part-privatization proposal is just the first step toward full privatization. As Blair's secretary for trade and industry, he had always wanted Royal Mail "to be progressively private, even if if initially part of the company stayed in the Government's hands".

Already, the introduction of private competition has allowed companies like TNT and Citypost to bid for Royal Mail's more profitable contracts, while still using the Royal Mail's socialised infrastructure to actually deliver the mail. That has clearly been done in such a way as to make Royal Mail uncompetitive, and to blackmail its workforce into accepting changes that may not be for either their good or that of customers. Thus, in respect of the current strikes, The Guardian has reported - falsely, as it turned out - that the Royal Mail had lost a major postal contract for Amazon. The moral is clear, and cited by government ministers everywhere: strike, and people will just find other ways to get their mail delivered. Royal Mail managers have also claimed that the amount of mail being handled has declined, and that this in itself justifies substantial job losses in adaptation to a changing market. But postal workers have spotted the ruse behind this:

These myths - about union intransigence, about the economic necessity of job losses, about the superior efficiency of private competitors, etc. - are being deployed for the purposes of turning a low-cost public service provider into a marketplace of competing providers in accordance with the extraordinarily resilient neoliberal orthodoxy. This brings with it the usual problems - soaring costs, as companies seek to make a profit, duplication of capacity as they fight for market share, and poorer service as low paid, casualised and de-unionised workers are less committed to the job, and less likely to have the time and training necessary to develop their skills. Royal Mail, for all its faults, is one of the last bargains in town. Less than forty pence for a first class letter to anywhere in the UK is nothing. What else would you spend that money on? You couldn't even buy a pint of milk or a Mars bar with that money. Additionally, as much as businesses might whine when there is a strike on, capital makes a big efficiency gain with Royal Mail, especially if they use the metered mail service which gives them a further discount. Admittedly, the Royal Mail is not as cheap as America's socialised mail service, where a first class letter can cost as little as $0.44 (£0.27). But we can't all be as communistic as the yanks.

Cutting the debt is not even particularly good for profits. Chris Dillow argues that the budget deficit is, in fact, what is sustaining healthy profits despite the slump for the service industries. The former Monetary Policy Committee member David Blanchflower warns of dire consequences if spending is cut:

The time for cutting public spending is not now, not next year and not the year after… Unemployment is going to continue to rise this year and may keep on rising … If spending cuts are made too early and the monetary and fiscal stimuli are withdrawn, unemployment could easily reach four million If large numbers of public sector workers, perhaps as many as a million, are made redundant and there are substantial cuts in public spending in 2010, as proposed by some in the Conservative Party, five million unemployed or more is not inconceivable. They could be our lost generation...

What the likely next government is promising to do is raise the retirement age, so that people aged 65 have to work for another year, or claim benefits at a rate well below what their pension entitlement would have provided. This brings forward plans already outlined by New Labour, which weren't supposed to come into effect for a decade. More people on incapacity benefits will be forced onto Job Seekers Allowance too, thus costing them £25 a week. Companies will be paid to 'employ' people on benefits, though they will not be expected to pay them a wage - again, a Tory version of something New Labour has already contemplated. And public sector workers can expect pay freezes which, in real terms, amount to pay cuts. In general, if Brittan's analysis of the statistics holds, then we're talking about an average of 3% cuts across all departments on the basis of current Tory plans. That's probably going to involve a lot of privatization, with Royal Mail in the frontline. The cumulative effect of all this will be to reduce aggregate demand at a time when the economy is still weak and susceptible to sudden collapse; reduce employment at a time when unemployment is already soaring; and, ironically, probably increase the cost of labour in the long-term by driving up the costs of previously cheap, socialised services. In a particular light, this doesn't even work by capitalist standards. Even the CBI is deeply dubious about this whole business of rapid, savage cuts, not least because the public sector is one of the big customers for the private sector.

So, what is going on? The centre-left criticisms rightly focus on the threat of the Tories, but they are just the most aggressive exponents of the slash-and-burn doctrine. What accounts for this extraordinary cross-party consensus on spending cuts and privatization? The answer can only be that the deficit is a pretext for other priorities. All three parties are committed to removing whatever blockages there are for capital accumulation in the UK, to make it more competitive and more powerful in the world system. The growth formula to which they still cleave says that a low-tax, low-wage economy produces more investment, more jobs, higher growth and ultimately more revenues for the state. That means a shared commitment to reducing spending on pensions and welfare, for which purpose successful businessmen like David Freud have been recruited. It means a shared belief that the private sector should take on as any of the traditional roles of the public sector as possible - and, indeed, such accumulation-by-dispossession does provide opportunities for profitable investment. It matters less what the parties' ultimate goals are in this respect than that they are all committed to a healthy capitalist economy, and all accept the received wisdom of neoliberalism.

Take the issue of industrial relations. We are about to hear a lot of moral blackmail on this question, as the postal workers' strike will be used to show that strong trade unions frustrate necessary reforms, and cause businesses to retain outmoded and inefficient practises. We will be told that unions erode price competitiveness and discourage investment, and that if the more recalcitrant elements of the labour movement can be broken, then the more 'sensible' trade unions can be integrated into a new model in which they help facilitate reforms and increased labour productivity, smoothing out differences between workers and management rather than waging class struggle. That, the Tories will say, should lead to resumed growth with low inflation and more foreign direct investment. (This isn't actually true, of course - see David Coates' Models of Capitalism for a survey of the evidence). All of the terrifying stories about 'bankrupt Britain' give this neoliberal narrative some much needed support. Even if big business is alarmed by the speed and savagery of proposed spending cuts, moreover, the overall approach is one which they applaud, as is evidenced by the CBI's demand that students should have to pay more to fund the education system. And perhaps there is an attempt to set the bar too high as far as cuts and rollbacks are concerned, so that there is less resistance and perhaps even some relief when the cuts turn out to be less immediately savage than was promised.

How to respond to such a serenade? Even as his colleague Jack Straw is busily pandering to our primitive passion for punishment, and while Blears is patronising the 'white working class', Chancellor Darling promises he will cut taxes for the poor and raise them for the rich. VAT will supposedly be cut from 17.5% to 15% and income tax on those earning £150k or more will be raised from 40% to 45%. These are not huge shifts, but I must advise the Chancellor that he risks being associated with the dread word, 'redistribution'. It is, as Nick Robinson of the BBC says, of "huge symbolic importance". Listen to me, Darling. New Labour's pact with the rich was that it would not touch their property. For a decade, it has stuck with that promise, freezing higher rate incomes taxes, slashing corporation taxes and cutting inheritance taxes. It has contained trade union pressure and implemented a public sector pay freeze. It threw tens of billions at Northern Rock in a desperate bid to maintain the institution as the private property of rich investors. Even when the government nationalised the bank, it appointed business managers to run it down, cut jobs and prepare it to be returned to the private sector. And now you tell us that you intend to cast prudence aside and embrace a minimal meliorist agenda comparable to that of, say, the Liberal Democrats or Barack Obama. What could possibly be motivating this minute shift away from kapitalist realism?

One thing this government appears to have lacked for the last year was the elemental instinct for survival. It seemed there was not a challenge it could not fluff, not a 'heartland' it could not lose, and no limit to its prevarication and deer-caught-in-the-headlights inaction in response to the economic crisis. Yet, of late, it has been rising in the polls. Labour appears to have recovered at least 5% of its vote since the Summer, and the Tory lead is no longer in double figures [pdf]. Compared to September, when the Tory lead was a whopping 24%, today's 5% looks manageable (see tracker poll [pdf]). In a recent poll taken just before Cameron abandoned his promise to match Labour's spending commitments, Mori put the Tories just 3 points ahead. Brown's personal rating has increased from 17% in May to 41% today [pdf]. And they managed to retain Glenrothes, in part because the collapse of Scottish banks necessitated a bail-out for London, which rather undermined Salmond's claim that Scotland could be part of an arc of prosperity alongside (whoops) Iceland. The government's psephological advisors have presumably recognised that the economic crisis that was killing the them last year is now redounding to their benefit. The hopeless flailing that characterised the initial response to the crisis, and the desperate clinging to neoliberal orthodoxies that even a right-wing Republican administration discarded without hesitation, were replaced after the collapse of Lehman Brothers by what looked like a far more decisive set of interventions including part-nationalisations and some curbs on the City's extravagant pay and bonuses. These were still basically pro-business policies, and they still transferred money from the public sector to the rich, but it looked far better than the Northern Jelly episode. And unlike in the US bail-out, the government insisted on voting rights in exchange for the money invested. Meanwhile, David Cameron's promises of tax cuts for businesses and big public spending cuts are probably not resonating far beyond the rabid Tory base.

Whatever is announced today is unlikely to be equal to the crisis. It will be a heavily politicised budget, however, sending out signals in advance of a 2009/10 election. A few tax cuts targeted at the poor will not substantially improve consumer spending ahead of Christmas, and the tax increases proposed for the wealthy will not raise much money, but an overall package of moderate wealth redistribution means that Darling is betting on a political realignment. And that is an interesting story in itself: it shows that the government, in its weakened state, is highly susceptible to public pressure. It shows that now is no time to relent on struggles for decent public sector pay, for better pensions, for an emergency house-building and debt-relief programe, and for public investment to protect jobs. Now is the time to push aggressively and confidently for a radical alternative programme.

Are they really starting to believe it? Last week, a union official is reported to have said: "We own Labour". Such a brag, if it was uttered, is staggeringly misplaced. This was in the context of an investigation of trade union power and militancy, although in fact the union leaders interviewed did everything they could to avoid the appearance of militancy. It may be the case that employers are genuinely worried about a revival in working class militancy over pay, but it certainly isn't because the bulk of union leaders are asserting a vice-like grip on the party of government. Today, in a similar spirit, it is reported that unions are pushing for a wave of reforms to be included in the 2009/10 manifesto. This is presented as if the unions have the party over a barrell due to its weak financial position and are really taking it for a ride. In fact, the current round of negotiations is no different from those preceding previous election deals, and the policies so far proposed are in fact extremely moderate, probably more so than the late Warwick Agreement. So far there is nothing on pay, nothing on privatization, nothing on trade union rights. And anything they do try to 'force' on Labour as part of a manifesto is sure to go down with the government come the election (and all the while, the Tories will be babbling about how the Labour Party is beholden to the dinosaurs of trade unionism etc). In reality, the position of the unions vis-a-vis the Labour Party remains weak to the extent that they refuse to confront the government in a sustained way through industrial action. It seems obvious to me that the union leaders don't want to do that, by and large. They would probably prefer to see any strike action as a limited sequence of brief stoppages, the basis for enhanced bargaining power in negotiations rather than the basis for resisting the government's austerity policies wholesale. But then, they don't get to dictate the pace at which workers develop and express militancy. And that will have a far more significant impact on the attitude of New Labour than the current spate of negotiations.