After weeks of electioneering, following an outcome that surprised even the pollsters and that left three party leaders dead in the water, working class people in Britain are now confronted by exactly the same questions about the future that they faced at the start. Regardless of who has topped the polls and whose career has ended, none of the leading parties was willing or able to represent the interests of the working class and the poor. The electoral game was fashioned to provide only one outcome: a government to serve the interests of British imperialism while perpetuating the illusion that we live in a democracy which is capable of benefiting the working class. No political party would be allowed to take power that did not defend the interests of British imperialism and the City of London. The media set the parameters of debate, and ensured that they governed all the hours of phoney interviews with politicians on radio and television. That is why we called for no vote at this pantomime election.
The purpose of a general election is to allow the ruling class to select the government that will best represent its interests, and at the same time to perpetuate the illusion that we live in a democracy which is capable of benefitting the working class. Yet it is evident that the major parties, the Tories, the LibDems, Labour and the SNP, will run the economy in the interests of British imperialism and the City of London, and that whatever combination forms the next government, it will ensure the working class continues to pay for the crisis. Those who claim to stand on an anti-austerity platform are lending credibility to a fraudulent process. There is no possibility of a positive outcome for the working class: the election is a distraction from the real task of defeating the ruling class offensive. Robert Clough reports.
The Tories have set out their stall:
Tax cuts will be on offer for the better-off, as will financial support for housebuyers, together with bribes for pensioners to buy their homes or cash in their annuities.
Labour’s five pledges
At the top of Labour’s list of five pledges for the general election is a commitment to a ‘strong economic foundation’. That involves a commitment to the Coalition’s spending plans for 2015/16 which include the latest round of council cuts. It also means that it will not roll back any of the cuts of the last five years. Its other pledges are:
Labour: ‘aggressively pro-business’
At best only crumbs are on offer, but the Labour leadership has bigger fish to fry. Shadow Chancellor Ed Balls has spoken of his determination ‘that the City of London remains one of the world’s most successful financial centres’, and has sought to reassure City of London leaders by telling them in February that ‘you might hear anti-City sentiment from Ed Miliband but you’ll never hear it from me.’ According to the Financial Times (3 February 2015) ‘A number of senior figures express confidence in private that the likes of Mr Balls and Mr Umunna [Shadow Business Secretary] understand the importance of the City in terms of jobs and tax revenue.’ More crudely, Shadow Education Secretary Tristram Hunt, in dismissing Tory claims that Labour is anti-business, has said ‘I’m enormously enthusiastic about businessmen and women making money, about delivering shareholder return, about making a profit ... We are a furiously, passionately, aggressively pro-business party.’
Claimants not wanted
It is certainly not a furiously, passionately, aggressively pro-state welfare party. The repeal of the bedroom tax is a concession that Labour can afford to make because the tax is unworkable, but this will not herald any change in its punitive attitude towards state welfare. As Shadow Work and Pensions Secretary Rachel Reeves told The Guardian (17 March 2015): ‘We are not the party of people on benefits. We don’t want to be seen, and we’re not, the party to represent those out of work.’ Emphasising her support for benefit sanctions, she said that under a Labour government, ‘There will still be sanctions. If it is clear that someone is deliberately trying to avoid work then they shouldn’t be getting benefits.’
Pandering to the prejudice that the unemployed are unemployed because they are work-shy is seen by Labour as a vote-winner. It underpins a commitment to workfare represented by its Compulsory Job Guarantee whereby anyone over 25 who has been out of work for more than two years will have to take a job working 25 hours a week on the minimum wage or lose their benefits. On top of this they will have to undergo 10 hours a week unpaid ‘training and development’. Under-25s will be forced into work after one year. The employer will not have to pay anything as the government will bear the cost. Given that most of the jobs will be unskilled, the 10 hours of unpaid training will turn into 10 hours of unpaid work and the claimant will end up being paid less than the minimum wage. It will allow employers to undermine working conditions even further. Reeves says the Guarantee ‘is in stark contrast to the current rules which allow unemployed people to spend a lifetime claiming JSA without being offered or required to take a day’s paid work.’ Reeves thinks ‘shirker’ even if she never uses the term.
Fewer houses than the 1930s
With housing campaigns in London making the headlines, Labour will try to make something of its pledge to build 200,000 houses a year although this is only a target to be met by 2020. It is way short of the estimated 250,000 houses a year required to meet current demand and does not include any commitment to a council house building programme. Shadow Housing Minister Jack Dromey has ruled out ending Right to Buy which will further reduce council housing stock. And to put the pledge in a historical context: during the 1930s there was only one year when fewer than 200,000 houses were built (1931, 185,000); the annual average for the decade was over 300,000. With increasing housing shortages Labour’s proposed rent controls will have no effect – in conditions where demand continues to outstrip supply, private landlords will continue to have the whip hand.
However vindictive and brutal Tory election proposals for the working class are, Labour is equally determined to defend a system which leeches off the rest of the world and which cannot meet the basic needs of ordinary people. The ruling class will continue to call the shots regardless of the outcome of this general election. The call ‘kick out the Tories’ has one purpose: to sow illusions in Labour and in parliamentary politics. It will not put an end to five years of capitulation. That requires people organised in campaigns of direct action outside the official Labour and trade union movement. The housing campaigns in London are showing the way: our job is to build on their achievements.
Fight Racism! Fight Imperialism! 244 April/May 2015
Britain is ‘walking tall again’ claimed the Conservative Chancellor, George Osborne, in opening what was a blatantly political Budget speech.1 It was aimed at blunting the Labour Party’s attack on the coalition government’s economic and social policies in the few weeks left before the 7 May general election. Britain, he said, ‘is growing, creating jobs and paying its way. We took difficult decisions in the teeth of opposition and it worked’. He taunted Labour throughout the speech: ‘The sun is starting to shine – and we are fixing the roof’; ‘Out of the red and into the black – Britain is back paying its way in the world’; and ‘Living standards on the rise. Britain on the rise … The Comeback Country’. The speech was littered with election slogans interspersed with carefully selected economic data. DAVID YAFFE reports.
The most remarkable reversal of policy in this Budget from last December’s Autumn Statement (just over three months ago) was the decision to cut the planned budget surplus in 2019-20 from £23bn to £7bn. It was conjured up in an attempt to undermine Labour’s contention that the Conservatives were intent on reducing the state sector to levels last experienced in the 1930s. The new target will now see state spending as a percentage of GDP at the level of the year 2000, when Gordon Brown was Labour Chancellor.
Public debt under control?
Osborne claims that public debt is now under control. The deficit, he says, is half that which the coalition government inherited. This is the kind of half-truth that runs throughout his Budget statement. It will fall from £153bn in 2009-10 to a forecast £90.2bn in the current tax year. It is only down by half as a share of GDP, from 10% to 5%. The intention of the coalition government, however, was to ‘eliminate’ the deficit by the end of this parliament. In this it failed, despite the brutal austerity measures imposed on the vast majority of working people. It is only the sales of some £18bn of assets acquired during the banking crisis – a large number of mortgages that the government has owned since the bank bailouts and a new batch of Lloyds bank shares – that has allowed Osborne to opportunistically announce a fall in public debt as a share of GDP from 80.4% in 2014-15 to 80.2% in 2015-16. In the long run such sales will make no difference to the size of public debt, they are capital transactions, and the state will lose out from mortgage repayments and dividend income it would otherwise receive.
The deficit, Osborne moralises, is nevertheless still far too high and must come down. He plans massive spending cuts to reduce it. The deficit is to fall to 4% of GDP in 2015-16; then down to 2% the following year; and down again to 0.6% the year after that. In 2018-19, Britain will have a budget surplus of 0.2%; followed by a surplus of 0.3% in 2019-20. Public debt, on these plans, will fall from 80.4% of GDP in 2014-15 to 71.6% of GDP in 2019-20, a somewhat limited achievement, given the devastation and upheaval of the policies needed to achieve it.
These plans require the Chancellor in the new parliament to find additional spending cuts of around £30bn by 2017-18. Then it is intended to take off the brakes and deliver what the Office of Budget Responsibility (OBR) has called ‘the biggest increase in real spending for a decade in 2019-20’. Its chairman, Robert Chote, annoyed the Treasury on Budget day when he called this a ‘rollercoaster’ profile of public spending. The Conservative Party has eyes on the next but one general election. Osborne says he is ‘clear exactly how that £30bn can be achieved’. £13bn is to come from government department spending cuts, £12bn from welfare savings, and £5bn from clamping down on tax avoidance. The plans require a scale of spending cuts in 2016-17 and 2017-18 far greater than the coalition government has achieved so far. Given the damage the austerity policies have already caused to public services, these future plans are not politically and socially credible.
Labour’s public spending target of only reaching current account balance by 2019-20 gives it a fiscal leeway of about £32bn over the Conservatives. It can avoid cutting welfare and departmental spending as fast and as deep as the Conservatives. No party has so far spelled out how the vast majority of new spending cuts will be implemented or whether they would raise taxes. They want to avoid doing this until after the election. The division between departmental spending cuts, welfare cuts and increased borrowing over the next parliament is something the main pro-austerity parties – Conservatives, Labour and Lib Dems – are very reluctant to reveal. According to emails recently leaked to the BBC, taxing disability benefits, limiting child benefits to two children and restricting the carer’s allowance to those on universal credit are among the vicious measures being drawn up by Conservative officials to meet planned welfare cuts. The Conservative Party says that it is still to decide where the axe will fall.
Bribes for critical voters
The OBR believes that the government policy decisions in this Budget are unlikely to have any material effect on the economy. The rhetoric and sloganeering in the Budget speech are hardly convincing. That is why Osborne had to use what minimal resources were available to appeal to traditional Conservative supporters and wavering voters. A leaked Conservative £1m inheritance tax give-away was not in the Budget as it was blocked by the LibDems.
A rise in the tax-free allowance in 2016-7 and 2017-18 for both basic and higher rate (40%) taxpayers will benefit better-off voters but will do nothing for low earners and most part-time workers with earnings below the basic tax free allowance of £10,600. Further gains for some 17 million savers, including pensioners with substantial savings, were given in the form of a £1,000 tax-free allowance for basic rate taxpayers and £500 for higher rate (40%) taxpayers. Many will benefit from the change in rules for ISAs (tax-free savings accounts) from the autumn when savers will be able to withdraw and replace money held in their ISA without eroding the annual subscription limit, which in 2015-16 will be £15,240. All these measures are designed to appeal to traditional Conservative voters.
First-time buyers will get up to £3,000 to help them get on the housing ladder through a Help-to-Buy ISA. It represents a 25% subsidy to first-time buyers. A maximum initial deposit of £1,000 can be made with a maximum monthly contribution of £200. It will take four and a half years to build up £15,000, or a 10% deposit on an average-priced British home. This latest housing subsidy can only fuel further increases in house prices and could make it even more difficult for first-time buyers to afford a house by the time they have saved an adequate deposit. Good propaganda but it makes little economic sense. Cutting the deficit plays second fiddle to winning the election.
There were additional measures designed to use funds targeted by the Labour Party for policies it had already announced, such as the cut in student tuition fees and financing social care, should it win the election. The lifetime pension allowance is to be reduced from April 2016 from £1.25m to £1m, saving around £600m. The bank levy is to be increased from 0.156% to 0.21% of Banks’ balance sheets from 1 April 2015. This will raise an extra £900m a year and be used by the Conservatives to finance their own tax giveaways.
Budgeting to win an election
Most of the Budget attempted to emphasise what the Conservatives regard as their important achievements, which would be undone if other parties were to defeat them. In doing this Osborne constantly overplays his hand. Osborne claims that by the end of 2015 ‘living standards will be higher than when we came to office’. That all depends on how you measure them. Osborne chooses to use Real Household Disposable Income per capita. On this measure, however, it will only be true at the end of 2015 and only with a 3.1% increase in living standards this year. The Resolution Foundation argues that this measure is flawed as it includes items that are not usually considered as income ‘such as imputed rents, as well as incomes of universities and trade unions’. Its own analysis suggests that average household incomes remain 4% below their pre-downturn peak and still some way below their 2010 level. The Institute for Fiscal Studies (IFS) said living standards are still more than 2% below the 2009-10 level (The Guardian 19 March 2015). Finally Ed Balls, Labour’s Shadow Chancellor, says that on the usual measure, the ONS household income survey, households are now on average £1,127 worse off than in 2010 (Financial Times 19 March 2015) .
Osborne smugly informs us that with 2.6% growth, Britain grew faster than any other major advanced economy in the world last year. ‘That is 50% faster than Germany, three times faster than the eurozone – and seven times faster than France.’ But there was no mention of the fact that the level of GDP is nearly 5% lower today than the OBR’s initial forecast in 2010, or that Britain’s growth in the last quarter of 2014 was behind that of Germany and Spain. The OBR says that the modest upgrade in its forecast for growth announced in the Budget has nothing to do with the government’s economic management or falling oil prices, but was due to higher than expected immigration.
Osborne proclaims that Britain has the highest rate of employment in its history and there are a record number of people in work. He fails to tell us that 4.6 million people are self-employed, accounting for 15% of those in work, the highest figure for 40 years. Millions of workers are in insecure jobs. Two-thirds of those who found work are taking jobs for less than the living wage.
As has been argued in previous issues of FRFI, Britain’s sham recovery has been driven by debt-fuelled consumer spending and inflated house prices. Claims of ‘rebalancing’ the British economy, away from consumption towards exports and investment, have no substance. The economy is still around a sixth smaller than what it would have been if pre-crisis trends had been sustained. The employment performance has come at the expense of a collapse of productivity growth. The UK’s real GDP per head is 32% below that of the US and well below that of Germany and France. The average British worker produces less in five days than the French worker produces in four. Unsurprisingly the word ‘productivity’ found no place in the Budget speech.
This Budget, says Osborne, ‘takes another step to move Britain from a country built on debt, to a country built on savings and investment’. This is fantasy. In the third quarter of 2014, Britain’s balance of payments deficit reached a record level of £27bn or 6% of GDP. Net trade, according to the OBR, will make no positive contribution to growth in any of the next five years. The ratio of household debt to household income is expected to reach a record level of 171% by 2019, higher than the pre-crisis peak of 168% in 2008. Infrastructure investment has fallen 8.5% since 2010, and capital spending, which includes new projects and maintenance, has shrunk by a third since the coalition came to power in 2010. Business investment fell in the last three months of 2014. Finally, public sector investment has halved as a share of GDP since 2008-09. What Britain is in fact facing is a permanent low-pay, low productivity and debt-fuelled economic ‘recovery’.2 These are the characteristics of a decaying capitalism. Whichever party wins the election, they are not going to change this.
Fight Racism! Fight Imperialism! 244 April/May 2015