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HACKNEY OR BUENOS ARIES?

Hoxton St | 01.11.2001 20:57


Each have the same thing in common in that they are both paying the penalty for massive debts, accumulated from past loans. Whereas the International Monetary Fund and the World Bank are imposing massive austerity measures on Argentina, it is Whitehall that is forcing Hackney to push through crippling cuts to our services around the borough. It may seem wrong to equate suffering in Hackney with that of a third world nation, but real hardship has and is occurring in Hackney, with its root cause being the debt crisis.




We’re constantly being told about Hackney’s financial crisis. In order to balance the budget local services and community groups are facing death by a thousand cuts. Yet every year Hackney hands over £70m in interest repayments to service its £750 debt. Max Caller, Hackney’s chief executive tells us the current budget of £240m per annum, has to be reduced by £75m over the next three years, which will have a devastating effect on the local community. Workers, have borne the brunt, with some loosing up to £1500 per year as well as redundancies, 150 voluntary groups have had their funding removed or halved. Now nurseries and libraries are earmarked for closure. Whilst Caller takes a handsome salary of £150 000 per year recently, three deputy directors positions were advertised at £70 000 each per year. There are even stories going around that the council had been told by Whitehall that they will not have to meet their statutory obligations as a local service provider. Even after all of this, Hackney is projected to have a deficit of between £13-21m, this financial year making the borough technically bankrupt and may need government permission to borrow another £20m to stave off bankruptcy.


How did we get into this mess anyway? To list all the reasons for the current situation would take too long, but here is a major one: Like many local authorities around the country, Hackney borrowed money from central government to finance council house building projects in the 1960’s & 1970’s. At this time Hackney had dire housing needs, thus the simple solution was to throw up massive estates. These were badly built to begin with. As time wore on the social problems of vandalism, repairs to shoddy buildings along with Hackney’s miserable record of corruption and mismanagement meant that the upkeep of large estates such as Holly Road became so great that their cheap sale, demolition and rebuild under housing association ownership was seen as the only option. Because of these problems, Hackney were unable to sell council homes to tenants, to recoup money to pay off the original loans unlike most other local authorities.


Then we had IT Net, the private contractor who were brought in to ‘run’ the housing benefit service. They were stopped from running the service after the government forced the council to kick them out. For six months they failed to pay anyone housing benefit, leading to evictions and hardships of all kinds; whilst leaving millions of council tax revenue uncollected. The council has taken the service over again. However familiar stories are beginning to emerge, that it is impossible to get anyone to answer the phone…


Finally there is the New Deal for Shoreditch Trust. This is a residents lead initiative where they, not the council decide how £56m of government money should be spent on environmental improvements. But because those pesky tenants want their estates improved and won’t do as the government wants: estates demolished and ‘low mortgage’ housing for key workers built, so they are threatening to withhold £20m. Nothing to do with the close proximity to the city and gentrification then.


Thus we have three examples, one each from the public, private and central government of how local and central government and the private sector has failed the people of Hackney. Forget the ‘loony left’ days of the 1980’s, that was just one of several periods of huge waste and inefficiency.


So who loaned this money to the government in the first place? The government has to borrow money from banks and other financial institutions in order to fund spending on local government, education and the health service. What we contribute from taxation and income from other areas will not cover this. Therefore the government issues bonds to these financial institutions, so the debt can be paid back long-term. Because of the years of corruption and mismanagement in Hackney, the money loaned to not has not been repaid and the interest is piling up. These financial institutions are asking the government, via the Public Works Lending Board, a department of the Treasury in Whitehall to call in the debts accumulated. That is why these savage cuts have been implemented.


Now we can turn to Argentina. It will pay some $30 bn in interest and foreign debt service this year, more than half the national budget and many times over what they will spend on education and healthcare. In Hackney, 150 voluntary groups have had their funding removed or halved, in one of Britain’s poorest councils. As well as nurseries and libraries earmarked for closure. The Argentinian debt largely originated in loans taken out by the military junta responsible for the torture and disappearance of more than 30 000 Argentinians during the 1970’s and 1980’s. The rich bankers of the western nations are continuing to oppress Argentinians by forcing them to pay back their loans made to a murderous junta.


During September last year whilst Argentina was already on the edge of a deep recession, the IMF required Argentina to cut its budget deficit from $5.3 bn to $4.1 bn and asked for a 12% cut in civil servants salaries. The ‘reward’ was a $26bn emergency loan package. However the IMF also forced Argentina to peg its currency to the dollar, which meant that Argentina was at the mercy of banks and speculators and ended paying a 16% risk premium above normal in return for the dollars needed for this scheme. Argentina’s people don’t get one penny. Little of the bailout money escapes New York where it lingers to pay interest to creditors such as Citibank. What’s more, the peg causes the Peso to remain overvalued, making it very hard for Argentina to export its way out of recession. This disaster was created by IMF policies, which transformed a mild recession into a depression and an international crisis. The worst nightmare for the IMF is a devaluation of the Peso, then Argentina defaults on, and has to re-negotiate its foreign debt.


With the failure of the Hackney to meet its cuts target this year, the re-negotiation of its debt may be the only path the government leaves open to the council. The response from Argentinian government was serious austerity measures. The response from the people was a general strike last June when 7 million workers went on strike, the brutal repression of this led to numerous beatings and the murder of three workers by security forces. In Hackney there have three one-day strikes, with library workers, estate cleaners bus drivers balloting for action over overtime payment cuts. Since the summer the Argentinian government lost power to a more liberal regime, but has been forced by Washington to reschedule its debt and has been loaned more money in order to stem the tide of discontent, just like Hackney in the past, until the next time…


The whole Latin American experiment of ‘neoliberalismo’ could go down the drain. For 20 years they have followed economic advice from Washington, slashed tariffs, swallowed IMF austerity measures, and sold of billions of dollars worth of state assets to foreigners. Similarly Hackney is the first council to be pushed to the verge of bankruptcy, with the current climate of ‘sell everything’ including buildings at auction for a fast buck, next to go is playgrounds on estates. When there are no assets left to be sold how will the council continue to pay back its debts? With the schools to be run by a non-profit trust, an ‘arms length’ management of housing and the financial sector to be privatised, any semblance of local accountability is now lost to the private sector and government agencies. According to John Page, Hackney UNISON convenor: ‘Council workers have been bullied and lied to, residents have seen services plummet and the voluntary sector is being destroyed. The people who live and work in Hackney cannot endure what amounts to a vast social experiment. The government has no idea of the consequences of its policies, except that it will leave the poor and dispossessed in Hackney with even less hope in future’


With the failure of the government, the private sector and the council to solve the problems of Hackney, what the people here need is the end of mediation, interference and rule by politicians and bureaucrats from both Whitehall and Mare St, as well as the spectre of the private sector. It is not beyond the skills, ability and enthusiasm of Hackney people to run their own affairs on a community-by-community basis, by ourselves, for ourselves. This can only happen if the government writes off this crippling debt and allows us a clean slate to go forward with in the future. Hackney people have shown that we can organise ourselves. The former Atherden nursery was closed down by the council, squatted, and re-opened by parents. After they had been lied to, with the promise of a reprieve, other locals squatted the building and used it as a community centre until they too were evicted by the council. The building was recently sold at auction.


Hoxton St
- e-mail: hackneynot4sale@yahoo.com

Comments

Display the following 2 comments

  1. light years away! — jose arriola
  2. other way round — Roo