Watching some of the reaction of the specialist journalists to Rachel Reeves’ budget you would have thought for a moment that Jeremy Corbyn was back in the leadership of the Labour party. Beth Rigby on Sky was beside herself that Labour had the temerity to draw up one of biggest tax raising budgets in history while not giving the details in its election manifesto. She seems to think that the main political fallout will be the controversy over whether deception was involved or whether the black hole the Tories had left the economy had been hyped. These so called experts barely discuss whether the state of our public services needed a lot more spending that these taxes would finance. Even the Labour leadership kept repeating before the election that they were not going to tax and spend. Blair accepted the low tax narrative that Thatcher had established in the 1980s and abandoned the historic social democratic notion that taxes help you invest and redistribute in favour of working people in order to create a fairer society. Labour’s failure to be bolder and more explicit in the election campaign is coming back to bite the party now in the reaction to the budget.
Construction of an anti-taxation narrative
Since Thatcher’s time in particular the corporate mass media have collaborated in celebrating this narrative against taxation as a social good. They also flogged to death the idea that private ownership is more efficient than common ownership. This of course had nothing to do with fact that promoting such policies boosted the fortunes of these owners. Hence we see the outcry against a budget that is raising over £40 billion in taxes, borrowing billions more and spending £70 billon. Only Norman Lamont in 1993 came anywhere near this after the Black Wednesday crisis.
I only heard one throwaway comment in the panel discussions that actually Britain remains one of the lowest taxed European nations even after this budget. Indeed Reeves boasted how by not increasing Corporation tax this kept Britain as a country with one of the most competitive (i.e. lowest) rates of tax for big business. Small business was hit with as much extra tax as the big companies with the increase in Employer National Insurance Contributions.
When Blair won power in 1997, he and Brown both kept steadfastly to Tory spending plans for the first two years in government – resulting in cutting benefits for single parents. Public services had not been so severely run down as they are today but today still represents a significant difference to the Blair period. Starmer and Reeves dare not link this budget to any sort of redistribution from the few to the many. Instead they justify it almost entirely on the Tory mismanagement of the economy and the need to ‘fix the foundations’.
The Growth delusion
Growth is the keyword in their strategy, not redistribution. They believe in trickledown economics. Public investment, in partnership with big business (especially big tech) will lead to growth and higher tax receipts that will guarantee better public services like schools and the NHS. As James Meadway has pointed out on Novara Media today every point of extra growth roughly delivers £24 billion in tax receipts. He estimates that to really restore public services and infrastructure in the context of an ageing population you need about £140 billion a year up to 2030. Given that the latest OBR growth forecasts barely reach 2% growth in the coming years then there is a massive contradiction at the heart of Labour’s plans.
Some positive measures
No socialist is against the extra money going to:
- cut NHS waiting times
- raise the minimum wage (but still below the national living wage)
- increase the number of teachers or breakfast clubs
- rebuild or repair crumbling schools
- provide an extra £1billion for Special Educational Needs
- grant another £300 billion to Higher Education
- finance rail transport improvements such as the Transpennine route upgrade
- provide extra resources to local government (£1.3 billion extra plus £600 million for social care)
- contribute to building affordable and social housing
- reduce right to buy discounts and allow councils to retain earnings from housing sales
- end the stealth tax of freezing the tax thresholds (but only in 2028)
- increase the levy on unhealthy sugary drinks
- hike the tax on tobacco and vapes by 2% above the retail price index
- fund Great British Energy and allocate money (£3.4 billion)for the warm homes plan
- raise spending on government departments (against predictions) by 1.5% in real terms
- put up the tax on economy flying and significantly more on private jet travel
Socialists would also agree about taxing the better off with the increases in inheritance tax, capital gains, on private equity bosses’ deferred interest and on the non-doms. We support the increase and extension of the oil profits levy.
Reeves attacks other benefits and fails environment
On the other hand all these measures do not add up to what a previous Labour manifesto called an ‘irreversible shift in resources to working people’. There are a number of policy decisions which directly attack the people’s living standards and the needs of the environment:
- refusing to end the two child benefit cap
- ending the winter fuel allowance for most pensioners
- hiking the bus ticket cap by 50% to £3, which does not just take from the poorest people but attacks an ecological form of transport
- shamefully continuing the attack on long term sick or disabled people by continuing the Tory tightening up of the Work Capability Accessment
- keeping fuel duty unchanged
- backing down from the policy of obliging all new houses to have solar panels
Does it change much for workers from Thursday?
So the day after the budget we still have more foodbanks than there are McDonalds’ outlets. Homelessness and spiralling number of people in emergency accommodation will not significantly change as the housing programme takes some time. Asylum seekers will still not be allowed to work. The rise in the minimum wage (which does not actually cost the government anything) will not necessarily impact on ‘self-contractors’ like the riders or people in the unregulated economy. Despite richer people paying a percent or two more in tax Britain’s position at the top of the inequality league alongside the US will stay unchanged. Welfare benefits have not been raised to make foodbanks redundant. High rents and dizzying house prices have not changed and how many council houses will be actually built and by when is an open question. Corporate taxation is still lower than elsewhere in Europe.
Nearly all the moderate benefits the £70 billion spending injection includes will take time to have an effect such as the cut in NHS waiting times. The number of extra teachers does not mean every school will get one. The extra money for SEND or social care hardly scratches the surface of the growing demand for support.
However this is not a Tory budget. Sunak’s spending plans were significantly below Labour’s. Could you imagine him even moderately taxing the rich in the way Labour has done? In parliament his response was to reject the whole package. Comrades on the left who said there is no difference between a Tory government and a Labour one must find it hard to analyse what has just happened.
Why it is not a budget the left would propose
Nevertheless this is not our budget. The growth strategy at its centre is essentially a junior partnership with those sectors of capital that think that the state of infrastructure, education, training and health services left by the Tories is not helpful for capitalist investment or profit making. The Tories have become too tied up with the hedge funds and certain financial sectors who are not interested in paying a bit more tax in order to improve transport or skills training. Of course these businesses Labour is in bed with have not become any less capitalist. For example their support for increased NHS spending is not really a concern for improving people’s wellbeing but rather on how the huge numbers of people unavailable work is affected the supply of labour. They are eagerly anticipating making profits from colonising services in the public sector as part of this partnership. Any time Starmer or Streeting mentioning how digital tech will improve and economise delivery you know who is going to benefit – big tech. Let’s just remember Horizon and the Post Office.
Even in its limitations however the budget does indicate that the state can intervene, it can tax the rich or big business and implement progressive policies. The problem is that Reeves just slightly opens the door to a beautiful room that we are not allowed to really enter. If the spending dries up under pressure from their partners or if its impact is negligible because the sunny uplands of growth are never reached then anger and frustration could grow and people could turn not to a fractured Tory party but to Reform and the hard right.
We need to say we can tax and spend for fairness. We should also control more of Britain’s resources like water and energy so that any surplus goes not to shareholders but to the common good. The Labour party has set strict limits on how far its tax and spend can go. One initiative launched by Labour dissident MP Richard Burgon is to campaign for a real wealth tax – see details here. We can also support the November 3rd demonstration on our right to clean and affordable water. Water should return to common ownership. It may be hard today to take up such campaigns in a locked down Starmerite party but there is an audience inside the trade unions for more radical policies as we saw in the trade union supported motion adopted at Labour Party conference against the leadership line.
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