Labour has announced its first budget since coming to power in July this year, with Rachel Reeves (Chancellor) claiming that “there won’t be a return to austerity” and Keir Starmer (Prime Minister) talking about tough choices in advance of the budget.
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The term austerity has been used effectively by successive Conservative governments to attempt to hide their role in what was a concerted attack on living standards, mainly via wage freezes and local services cuts. Reeves’s claims to be ending austerity. This is an abstraction because in reality austerity will continue as wages are unlikely to rise as quickly as they might otherwise have done because of a 6% increase in National Insurance contributions by employers. National Insurance is used mainly to support the unemployed, people with disabilities and the state pension. It is not used to fund the National Health Service NHS, which comes out of general taxation. Predictably, employers are already queuing up to claim that the hike in NI will lead to wages being pegged and to increased outsourcing overseas.
Leading into the budget the government showed poor examples of ending austerity by retaining the two child benefit cap, which limits benefits to only two children from one family and introducing the means testing of the Winter Fuel Allowance as well as increasing the basic bus fare from £2 to £3 – a 50% rise. This means most pensioners will no longer receive the Winter Fuel Allowance, leading, according to government sources, to an estimated increase in winter deaths amongst the elderly, of over 4,000. These measures, show a contempt for the elderly, the poor and people having more than two children, who are often characterised in the mainstream media as not worthy of support. The increase in bus fares shows another act of contempt for the poor to the benefit of private bus companies and will disincentive people from travelling by bus – flying in the face of the government’s so-called Green Agenda.
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The budget itself did contain a few benefits for ordinary people with a modest increase in funding to regions and local authorities and an above inflation increase for the NHS – 4.7% this year but less in future years. However, these are hardly sufficient to even begin to cancel out the years of austerity and one suspects that large percentages could fall into the hands of private companies both in councils and the NHS. The government continues to court the private sector’s infiltration into the NHS and the waste of public money that leads to. It is also true (according to the Institute of Fiscal Studies) that many of the boosts in spending, such as for the NHS are front-loaded and will not be maintained.
On the other hand Reeves has refused to increase general taxation on the super-rich and although there have been some measures to extract more from the rich, such as the increase in profits from selling shares from 10% to 18% for the basic rate, with the high rate rising from 20% to 24%, this still means that the basic rate of capital gains tax is lower than the basic rate of income tax, which remains at 20% and still the lowest rate in any of the G7 countries.
The cost of renting properties is likely to rise because social housing providers will be allowed to increase rents above the rate of inflation. This measure disproportionally affects the poor. There have also been increases in stamp duty on the purchase of houses which will lead to buying a house being more expensive and these additional costs are likely to affect the private rental sector negatively because increased costs get passed onto the renter.
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Reeves was censured in the House of Commons earlier this week for trailing a plan to increase the ability of the government to borrow. Increase borrowing was a tactic used by the previous Labour government under Tony Blair to put a respectable veneer on capitalism. What it led to was naive councils and other public bodies being ripped off under the Private Finance Initiative PFI scheme. It was a scheme that emphasises spending now and paying exhorbitantly to the hedge funds and banks at a later date. Will Reeves and Starmer repeat the costly strategical moves made by the Blair administration? This remains to be seen.
The basic minimum wage has increased by 6.7% to £12.21, but remains at too low a level to maintain a decent standard of living, which according to the conservative think-tank, Living Wages Foundation, should stand at £12.60 per hour.
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Some trade union leaders have welcomed the budget with Paul Novak, General Secretary of Trades Union Council claiming that, “Today’s budget is a vital first step towards the growth, jobs and living standards working people desperately need.” Other union leaders, such as Sharon Graham from UNITE have said that, “The chancellor’s continued failure to ensure the super-rich pay their fair share is a misstep. The 50 richest families in Britain are worth £500 billion. A 1 percent tax on the richest one per cent would create £25 billion.”
However, the lack of clear and categorical criticism of Labour’s budget from the leaders of the big trade unions shows once again a wait and see response. The writing is on the wall for British workers. This budget is far more positively disposed to the captains of industry, especially the super rich, than it is to the rest of the British people. The chancellor has used smoke and mirrors to attempt to disguise the true neo-liberal agenda of the current budget. The pathetically spineless approach to increasing taxes on the rich is the clearest example of this but the continued promises of increased work for the private sector in the NHS and other government institutions is another example.
As the budget is being enacted, many ordinary British people and trade unionists will not be fooled. They know that the current Labour government is not a government of and for the people but a government for big business and bankers. Any government who really had the interests of the masses of working people at heart, would not hide behind the mantra used by Starmer of “tough choices”. Tough choices should be made but these should aim to wrest the wealth from the super-rich and revitalise the economy by putting spending power into the hands of the people as well as increasing spending on worn-out infrastructure and industry.
Of course under capitalism this is a project that will be fought tooth and nail by the big business. But if such measures were to be taken, they would open up a discussion inside the working class about the character of the system and the need for socialism. This is a prospect that is views with open hostility by Starmer and his business brand. So, the struggle continues and the resentment towards the Starmer government will grow as the front-loading of the increases in spending see further problems for the NHS and the nation as a whole become more and more apparent. Successive budgets will hit hard at the quality of life of the British people and blaming the previous government will sound like just so much corporate-speak, which is the only kind of language Starmer and his minions seem to understand.
