The new government’s economic policies, touted as opening a new era for Britain, are in fact the opposite. They are a continuation of what’s been served up for decades by all governments – belief in capitalism as the only possible economic system, whose periodic crises must be paid for by the people of Britain.
The new Chancellor of the Exchequer, Kwasi Kwarteng, announced wholesale tax cuts on 23 September. He claimed these measures would stimulate the British economy. But few people believe that.
Decline
Instead Liz Truss, the incoming prime minister, and her government seem to be playing for time ahead of the next general election. They are attempting to manage decline, hoping that the economy does not implode.
They ignore soaring inflation, the energy supply crisis and rising interest rates – which will ramp up the cost of government borrowing needed to bridge the gap in tax revenue. Slashing spending on public services is a given, but even that won’t be enough.
‘This isn't government, it's dereliction.’
This isn't government, it's dereliction. There is no coherent plan for economic growth – tax cuts, whether for individuals or companies, don’t achieve that without making other changes.
There is nothing about skilling up, except more immigration to fill the gaps. And there are no signs of ways of assisting new industries, or using the state for development rather than plugging holes in response to crises.
We’ve been here before with the 1980s Thatcher government (and most of the US administrations from Reagan onwards). The idea that low taxes, a lack of regulation and free trade will lead to greater production, lower prices and increased employment were – and remain – an article of pure faith.
No choice
At its heart this consists of a belief that high taxes and “big government” make people choose not to work or not to be productive. Few workers have the luxury of deciding not to work – quite the opposite. Many are forced to work long hours instead of having time with their young children. That will get worse.
Workers do not control the investment and other decisions of companies or organisations where they work. And for the most part there is little choice involved about their productivity – although many could tell their bosses where things are going wrong, given a chance.
The prospect of a few hundred pounds a year less tax when prices are skyrocketing is naturally welcome to many. But most people realise that this has consequences for the future – more tax or fewer public services, or both.
Threats
On the other hand the government is not keen on workers taking action to secure real, meaningful pay rises. The threats to undermine strike action make that quite clear as does the restriction (again) on public sector pay.
Low corporation tax in the UK since the 2007-2008 financial crisis has not increased investment. The UK has by far the lowest rates among comparable countries – members of G7. And yet private sector investment in Britain is the lowest in the G7.
The tax rate on companies was due to rise before Kwarteng cancelled it, so it’s disingenuous to claim his action will be a stimulus. The truth is that we’ve seen a free trade in many successful British companies, sold to overseas owners, hollowed out financially and stripped of expertise.
Stopping that process, developing a real industrial strategy and stepping in to prevent the sale of key companies would be a start. The signs so far are that this government, like the last, is looking the other way – and seeking to sell Britain wholesale.
‘The idea of leaving was not to trade the EU for dependency on international capitalism.’
The point of leaving the EU was not to break free of a malevolent organisation and then trade that for dependency on market forces and international capitalism. This Budget and all the policy announcements from the new government signal that they do not want Britain to exist as a sovereign and independent nation.
When it comes to the core of their economic policies, all that governments of any denomination have to offer is blind faith in what they call the “free” market, which of course is not free. This has reduced Britain to its present state and will take us down further unless there is change.
Pretence
And even more than their predecessors, this government is heading to drop even the pretence of parliamentary democracy. The tax changes were widely trailed beforehand and Kwarteng bypassed the usual scrutiny for fiscal announcements, as this was not a “real” Budget.
The government and the global capitalists they represent are prepared to mortgage our future with massive debt – to be paid by workers – to prop the market up. This is not taking control: it’s relinquishing it to market forces.
The Bank of England has raised interest rates again – other central banks are doing the same. Capitalist economists would tell us that makes the value of sterling rise – but the opposite happened, in response to Kwarteng’s announcements the following day.
No control
There might be some economic advantage in lower exchange rates – though it’s hard to see why right now with energy priced in US dollars. But the rapid drop in sterling exchange rates in the days since the tax changes were announced isn’t in the government’s control.
The talk now is of a financial crisis which will require the Bank of England to intervene. That’s British workers’ money used to prop up markets, with no benefit to them or the nation.
And this in turn sets the scene for overseas “investors” to buy UK government debt at a low price – with higher interest rates for them and a fire sale of British assets. That’s the tyranny of market forces.
Reset
Capitalism is trying to reset the clock with a return to the economic policies of 45 years ago, which sowed the seeds of the 2007-2008 financial crisis. Those polices did not work then, and they will not work now.
The question for British workers is whether we go along with the fantasy of capitalism reinventing itself. Resisting cuts to pay and worse conditions is happening – and will continue. But even if well conducted and successful, this struggle buys only a temporary reprieve.
Our interests
What’s required is a challenge to the government to make economic decisions demonstrably in the interests of Britain and production here. Instead of innumerable strategies that are instantly forgotten, the demand is to harness and develop our natural skills and production – economic activity to meet our needs.
Yes, there are questions about who decides what the needs and priorities of Britain should be. But until there’s a pressure to answer those questions, the government will believe it can continue unchallenged on the course it has set itself.
Only the working class in Britain has an interest in making those demands. Those who claim to speak for us and who call for all out strikes or see only the "fat cat giveaway” in this Budget are no use to us – in the end they too can’t see beyond capitalism and the rule of market forces.