When I was a teenager I sometimes watched the salesmen (they were all men) working the crowds on the Golden Mile on Blackpool’s prom. They would be selling kitchen gadgets or other goods that looked impressive if you did not look closely. These guys were terrific communicators and would have made good political agitators. One of their best tricks was in the last phase of their spiel they would add in a whole number of extra products – another peeler or an apron and so on. So it looked like you were getting a real bargain. The stuff was still mostly tat and I suppose Temu has now replaced them.

Healey in his budget is carrying out a similar operation. Labour has called it ‘ready fixes’.  They are a whole series of real changes that marginally address the high cost of living people really experience. Some are better than others – the previously announced £2 bus fare cap is a good example. However others such as cutting VAT on energy bills, the extra £100 or scrapping standing charges on gas are very small tweaks in the light of the 25% increase in the bills coming in January. £100 will be eaten up within 3 months. So to say that people will ‘save’ on their energy bills going forward is as bad as the Blackpool hawker suggesting his goods will last and have a guarantee.

Shop price inflation still soaring

When we shop we are all suckers for the buying stuff that is even 5% or 10% off. We do not always check that the past selling price has been massaged up. These ‘ready fixes’ work in the same way. They blind us to the reality that this budget is preaching resilience but it is the majority of people without assets who have to be resilient. We have to put up with below inflation wage and benefit rises or to swallow the still soaring shop inflation which is running above official inflation rates. People on average and below average incomes spend a higher percentage of their income on food, energy and other basics. Talking about resilience for everybody is meaningless.  Invoking growth as a solution is also mistaken.

The budget is unusual is that there a lot of measures (98!) but most only involve sums of around one billion. Some pundits have called it a dull, steady as you go budget. Certainly you do not change much with these numbers.

“Shop price inflation has risen to the highest level in two and a half years, according to the British Retail Consortium, which warned that “the dam is starting to break” when it comes to retailers trying to limit price rises for customers.

The lobby group said shop price inflation was 2.1% year on year in October, a sharp rise compared with 1.4% in September, and an indication that retailers were beginning to pass on the rising costs of energy and food ingredients since the Middle East conflict broke out.

It said food inflation, which has remained low during the past year, increased this month to 2.9% year on year – against a 2.5% rise in September”

(Guardian 27 October)

Myth that Britain has high taxes

The better off who buy and sell assets still benefit from a lower tax rate on capital gains than they pay on their income. A capital gains tax could bring in around £19 billion.  Despite demands from within the Labour Party and its MPs for a wealth tax that is supported by a majority in all polls. Healey has rejected it. Even Burnham during his leadership bid openly considered it. Labour leadership propagandists dismiss it as ‘snake oil economics’. Despite the fact that in other European countries there are more progressive rates of tax on high earners. 

Labour has swallowed the myth that Britain has high tax rates and has tied itself down with the no tax increase lines in its manifesto. Funny how other manifesto commitments on redistribution or the environment get discreetly dropped but anything that bows down before the fiscal rules and the bond markets is proclaimed and defended to the death.

Certainly the ‘ready fixes’ strategy is a more  intelligent approach that the doom and gloom of the Reeves’ budget that emphasized the dire economic situation and that nothing at all could really be done about the cost of living until growth kicked in down the line. The other clever bit with Healey is that he puts the opposition on the back foot. You might make jokes about reducing import duties on gherkins but most people are not going to say no to even a small bargain. Are the Tories or Reform really going to argue for reversing the bus fare cap or for making business drivers pay more tax on their mileage allowances?

Outline of key measures

Let us outline some of the key measures of this budget and comment on them:

• The bank surcharge or windfall tax will be raised by 3 percentage points
  • Obviously this is a good but limited measure. The Banks made £31 billion profit this year and tax payers bailed banks out with £23 billion after the 2008 crash. They make easy profits from their trades with the Bank of England with quantitative easing and tightening. They have benefited from high interest rates which does not really require any expertise or productive input from them. The surcharge increase of 3% does not even take us back to the level the Tories had previously set it and less than that predicted by Labour loyalist journalists like Polly Toynbee. It will only raise £1.5 billion over 15 months – a very small part of the budget. Even the pundits are remarking on how it is less than expected. Only Ireland’s taxes banks less in Europe than we do. There is scope for higher taxes permanently and of course as socialists we argue for the state to take over the big banks so that the economy can be democratically controlled.
• 3.9% increase to minimum wage will be less for under 21 year olds
  • This is U turn on a manifesto commitment to equalize minimum/national living wages for all workers. The under 21 worker will usually be doing the same amount of work., This is a gift to bosses who can hire younger workers for less wages. The government argues this will provide more jobs for young people.  There is little if any evidence of this and it is the same argument the bosses used whenever improved conditions or wages are proposed such as the shorter working week
• Standing charges on Gas to be scrapped and previously announced cut VAT on energy extended to July. Another billion for the Warm Homes Discount, an extra £100 to the existing £150. Council tax payers bands A to D will all get a £100 payment this year
  • Healey put more money into this headline issue as he understands what a big concern this is. The standing charge change will benefit some lower income households who use less gas. But not all, such as large families in bigger houses or disabled/sick people who need more heat. What about pensioners living in big houses who need more heat? The £100 is poorly targeted and will still miss one-in-eight of the poorest half of families (1.4 million households) who live in higher band homes according to the Resolution Foundation. All these measures, including the £100 ‘surprise’ payment, are small beer compared to the 25% increase in energy bills coming in January (average of £40 a month). The energy companies have been making super profits, they could have been surcharged.  Taking them under public control has been Labour policy historically and Burnham has floated the idea of increased public control but not necessarily state control. State control would allow social tariffs  so inequality in energy could be reduced. Any attempt at a fair energy transition requires democratic control of the energy sector.
• Help to buy scheme for first term buyers which gives a 20% equity loan and an interest free period. £40 billion for council social and affordable housing
  • This scheme does help some people who can afford to buy a home but still places the emphasis on building new homes on the private sector. The welcome increase In money for council built social/affordable housing hides the fact that the actual number of council houses for social rent is still far below what is needed to end homelessness and families being forced into temporary accommodation.
• Devolution to regional mayors of business rates and some of income tax raised in their areas
  • Here we are talking of future plans but there are real risks that this could produce inequality between regions with higher tax takes – how will this be implemented fairly. We will analyse this further in the months ahead.
• Covenants with datacentre capitalists to support their construction
  • Government funds and support will be available to big tech so that datacentres can be built everywhere. The companies will just have to make some verbal commitments to local communities. This ignores all the ecological implications such as water cooling needs and the increase in heat generated.  Whatever big tech asks it gets, including he right to generate their own energy in these sites.
• Taxes on online seller sellers like Amazon.VAT imposed will be used to raise the threshold for business rates on small high street shops to £18,000
  • How far will this really level the playing field between physical shops and online ones.  Amazon and others already are paying far less tax than they should by locating their businesses in the most favourable tax jurisdictions.
• Changes to pension tax allowance if that is sole income
  • the April increase In the state pension takes most pensioners beyond their tax free allowance, it is correct to do this but the government should also accept that those people who only have a state pension are on very low income. Billions of pension benefit to top up  pensioner income is not claimed so much more could be done to further increase the pension and end pensioner poverty
• New taper for carers who receive carers allowance
  • This means carers no longer have a cliff edge where if they earn just a penny more that the allowed threshold they lose the right to the allowance. The taper means this is now proportional . But of course the actual level of carer’s allowance is still ridiculously low and means the dedicated relatives or friends are super exploited and are saving the billions of pounds that would be required if the state had to take responsibility for their care
• New mileage tax rates will mean £120 a year in additional tax savings for a worker doing 6,000 business miles, with someone driving 15,000 business miles receiving up to £300 in additional tax savings.
  • According to Unison this is a positive move since 3 million workers have to use their cars for work. From an ecological viewpoint the government should be looking at ways to reduce the amount of car travel for business. Keeping the freeze on tax duty does nothing reduce private car use.
• Reduction  to 20% of the tax relief on pension contributions – removing an adantage that higher tax employees  enjoyed
  • A progressive move that removes an obvious unfairness, high income individuals will still end up with comfortable pensions
• The removal of import tariffs on over 100 products
  • sounds better than it is since it is estimated that this represents  only £25 annually unless you eat an awful lot of gherkins.
• Parental pay will be extended to the self employed and others who had missed out
  • A positive measure affecting 150,000 parents but horrific inequality and poverty means children in poor households receive inadequate support so this is a minor tweak. There is nothing much in the budget that provides for significant redistribution.

image from Global campaign on military spending

Warfare increases and welfare is cut

The budget also takes place In the context of the government increasing warfare spending to approach the 3% of the GDP that NATO is demanding. The mass media generally are pushing the idea that the welfare budget is out of control and has to be cut back. Already Burnham has proposed reducing the triple lock to a dual one in the next parliament. Consequently we see the increasing attack on welfare payments to young people and for people with sickness or health issues. Healey and Milburn are talking about switching resources from cash payments to young people to support for them to get into work.

The Labour apologists are using slogans like changing welfare support from cash to support. However if  you are a young person you will notice your income being cut and whatever extra help you have from the local employment services or any jobs/apprenticeship scheme you will still have less to live on. Unless this support means an actual job with more pay than your welfare payments you will be worse off. Even if you did get a job as a result of the support this could take some time – meanwhile you are worse off.

Cutting welfare, sickness or disability payments is not yet a done deal among Labour MPs.  Details of the changes are not revealed in this budget as we await the Milburn and Timms’ reviews.  The battle on this has been kicked down the road, at least until the spending review.  It is reported many Labour MPs are concerned and memories of the opposition to Starmer’s reforms are still fresh. Organised opposition throughout the labour movement and by campaigns could still be effective.

It is interesting that although the More in Common survey recently showed 57 per cent of Britons support cutting welfare spending to increase defence funding, while 43 per cent are opposed. However when asked  about specific elements of the welfare budget, ”such as unemployment benefits, PIP – those numbers are much closer or even reverse entirely”. Once people see how welfare cuts will affect themselves or people close to them the general majority evaporates.

Burnham’s strategic turn

After 100 days Burnham has his biggest polling lead so far that projects a small a parliamentary majority if an election were held now. We will see what effect the budget has but clearly the Burnham bounce is alive and well despite some on the left thinking that Burnham is just a continuation of the Starmer strategy. Reform is down to 20% whereas for around a year before it was up to 10 percentage points ahead of Labour.

 Clearly his electoral project aims to reconstruct a social liberal coalition that can attract Liberal Democrat and Green voters to Labour.  It hopes to win back Reform voters with its cost of living measures and its ‘big picture’ reforms like the national care plan but it will not out-reform reform.  All the recent talk about a new arrangement with the EU that could include free movement confirms this approach. Starmer did not dare talking about Brexit for fear of antagonizing  Reform voters. His support for PR and devolution is also designed to forge this coalition.

When we go into our local shops we all remember how prices have gone up in the last few years There is an epidemic of shop lifting and even cheap goods have security tags. People are buying stolen basic necessities in pubs. After two years of a Labour government food banks are still expanding. There are more funds allocated in the budget to end rough sleepers. Good. But street begging is everywhere and it will take much more money to end rough sleeping than provided today. 

Still partnering with capital

This budget preaches resilience for all but not very much is required from the bosses and the wealthy. Despite some tweaks it does little to ease the cost of living crisis and even less to change the structures that produce such poverty in one of the most unequal advanced capitalist societies in the world. Instead Healey exaggerated the slight increased growth compared to other G7 countries. These growth figures are still historically very low and are projected to remain so.He ignores what that growth means both for the environment and for ordinary people. Growth can go up by 1% but living standards for workers can decline. The Office for Budget Responsibility (OBR) has calculated that read disposable income is only rising by 0.1 % a decade which is much lower than the growth rates. Signing off drilling in the Jackdaw gasfield is supposed to provide over £2 billion in growth (but on what time scale?) but the ecological costs are not taken into account.

The OBR also estimates that mortgage costs will remain high rising from 4% this year to 5% IN 2031. Housing costs still take up a disproportionate amount of our disposable income. No real earnings growth is predicted for 2027. Nothing in the budget affects any of this. Its budget analyses summarizes: “ “the UK’s economic and fiscal position remains very challenging”.

Healey’s general tone and summary focused on Labour providing the best conditions for enterprise and partnership with capital. Founders of successful companies will now benefit from only a 10% tax rate up to £10 million on  lifetime earnings.  Bosses need handout to be productive but apparently higher wages and decent welfare payments do not function in the same way for workers.

Not a Green budget

All the rhetoric about net zero, the green transition and sustainable energy was largely absent.  Even Reeves seemed to mention the environment more.  He made little reference to criticizing ’40 years of neo-liberalism’. Government spending would support defence industries in creating jobs rather than in green transition or education, health or social care. Arms industries generate much fewer.  Just like with North Sea drilling the Chancellor exaggerates the potential job growth.

Even within the Labour Party there are credible proposals to raise the money needed to make significant structural changes that could shift wealth in favour of working people. Lord Prem Sikka’s article in the Socialist Campaign group’s new pamphlet outlines some:

“The Socialist Policies we need shows how this programme could be paid for. By taxing capital gains at the same rates as wages, around £12bn – £14bn could be raised. Bringing dividend taxes in line with income tax rates could raise £6 billion. A 2% tax on wealth above £10m could raise £24bn a year. A windfall tax on the 2026 profits of the UK’s four biggest banks could raise £19bn. And he has fifteen further suggestions for raising revenue in ways that would not hit ordinary people. Chancellor John Healey should take note“. 

(Labour Hub)

Healy claimed it was a budget for working people but although some palliative measures were taken to slightly temper the worse effects of the cost of living crisis the major allocations favoured capitalist business. Oh and bond prices are up after the budget so John you have certainly bowed down enough to the markets.