City of London Skyline. Photo: Wikimedia commons City of London Skyline. Photo: Wikimedia commons

This vindictive class-war budget will worsen inequality while doing nothing to stem the problems of British capitalism, argues Dominic Alexander  

Is today’s ‘fiscal event’ a demented plunge into ideological fantasy, or an act of desperation to preserve neoliberal economics? It is both. After over a decade of repeated crisis and stagnation in capitalism globally, and for Britain particularly, the economic model which has prioritised the interests of capital over labour since the 1980s has been exhausted.

Thatcherite and Blairite policy has resulted in the hollowing out of Britain’s manufacturing base, and left the economy dependent upon the financial sector concentrated in the City of London. Britain was therefore particularly exposed to the crash of 2007-8, and the austerity economics which has ruled since then has done nothing to rejuvenate the economy while gutting social infrastructure.

A change of direction is desperately needed to reverse this course of economic decline, but instead, Truss’s government has doubled down on precisely the policy elements which have been doing the most damage. Tax cuts had been promised, but the abolition of the top rate on incomes over £150,000 is an act of social vandalism. The Financial Times, no less, notes that, combined with the cut to the basic rate, those on an income of £20,000 will gain £218, while those on £200,000 will gain £4,333. The inequality gap rises with other measures, such as the reverse in the rise of national insurance. Bloomberg’s graph notes that the poorest 10% of society gain nothing from the budget, while the wealthiest top 10% gain over £90 a week. It is the serious capitalist press that is highlighting these outrages.

Tax cuts for the already wealthy and for the corporations will not lead to growth. For over 20 years, Britain has had a lower rate of corporation tax than the other six countries in the G7 (US, Canada, Germany, Italy, France and Japan). This has not made Britain ‘competitive’ with its rivals in a way that has led to faster economic growth, although it has resulted in soaring inequality between classes and regions. To he that hath, to him shall be given, and he that hath not, shall be taken away, as the Gospel of Mark has it.

So-called ‘trickle-down’ economics has been shown to fail through decades of experience across the world. The government imagines that a boost to consumer spending will come from the give-away to the top 10% of earners. However, it is a basic fact that the affluent are less likely to spend any extra money they earn than those on smaller incomes, and more likely simply to hoard it.

Moreover, what extra consumer spending will be forthcoming will be slanted towards luxuries and imports. The effect will be more likely to unbalance trade, rather than act as a stimulus to industry and businesses based in Britain. The cuts to stamp duty will only exacerbate this tendency, since they make speculative investment in housing only more attractive. The ‘stimulus’ to the economy through these measures will therefore stoke unproductive investment of various kinds, including in house prices, making that desperate social crisis worse. No benefit to productive economic growth, even in narrow capitalist terms, will accrue.

Other parts of the government’s agenda, such as the ‘investment zones’, which promise to slash building, planning, environmental and labour regulations, are clearly designed to create pockets of low-wage, precarious hells for workers. Even if these do attract the international investment the government is hoping for, much of that will be from the kinds of corporations that are adept at hiding their profits in tax havens. Exploitation will be super-charged, the bulk of the population will lose, not gain, in affluence, to the marginal benefit of higher earners only. This is what ‘unleashing the power of the private sector’ will mean in practice.

Capitalism has not reacted well to today’s measures. The FTSE share index is currently down about 150 points, a sizeable drop in a day, while the pound has fallen even further against the US dollar. The cost of government long-term borrowing has surged ‘in one of the biggest weekly increases on record’. This investor-described ‘radical economic gamble’ is currently leading to a loss of confidence on the part of capital in investing in the British economy, not the hoped-for bonanza. This situation seems unlikely to improve in the long term.

The government’s package has turned out to be even more extreme than leaks and briefing have suggested it would be. It seems almost nihilistic in its contempt for ordinary people’s lives, and the suffering many are enduring now, and fearing for in the coming winter. It is coupled with extraordinarily vindictive measures against trade unionism, showing that the government is preparing for a class war to ram home its desperate gamble.

This not just economic stupidity produced by ideology, but a crisis borne of an impasse in British capitalism, and betrays weakness and disarray within the ruling class. We need massive mobilisations against the whole package right away. It is the government’s very extremity which gives us a real opportunity to win the fight.

Dominic Alexander

Dominic Alexander is a member of Counterfire, for which he is the book review editor. He is a longstanding activist in north London. He is a historian whose work includes the book Saints and Animals in the Middle Ages (2008), a social history of medieval wonder tales, and articles on London’s first revolutionary, William Longbeard, and the revolt of 1196, in Viator 48:3 (2017), and Science and Society 84:3 (July 2020). He is also the author of the Counterfire books, The Limits of Keynesianism (2018) and Trotsky in the Bronze Age (2020).

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