On 17 November 2022, the ruling class opened a new round of the war against the working class with the Rishi Sunak government’s Autumn Statement. The Statement’s provisions will punish the mass of the working class with a record 7.1% fall in household disposable income over this year and the next. Overall, household income will return to its 2013 level, while real wages in 2027 will be no more than they were in 2008, prior to the financial crisis. Those on Universal Credit will have to survive the next four months of winter before benefiting from a promised uplift of 10.1% to the pittance they receive. The Financial Times headline the following day read ‘Hunt paves the way for years of pain’, while the Resolution Foundation spoke of Britain ‘getting poorer’, an opinion shared by the Institute for Fiscal Studies, which added ‘We are in for a long, hard, unpleasant journey; a journey that has been made more arduous than it might have been by a series of economic own goals.’ ROBERT CLOUGH reports.
The principal measures an-noun-ced by Chancellor Jeremy Hunt to address a claimed £55bn ‘black hole’ in government finances included:
- A freeze on income tax thresholds for the basic and middle rates from next year until 2027/28.
- A reduction in the income threshold for the top rate of income tax of 45% from £150,000pa to £125,140pa.
- A 10.1% uplift to benefits from April 2023 in line with inflation.
- The retention of the triple lock on the state pension also with an increase of 10.1% next year.
- An uplift to the Energy Price Guarantee from the current £2,500pa to £3,000pa from next April, which will however offset just 30% of the price rises expected over the next two years and will lead to an increase in the number of households in fuel poverty from an estimated 7 million this winter to 8.6 million next winter.
- An extra £3.3bn for the NHS for each of the next two years, less than half the £7bn needed.
- £1bn extra for social care in 2023/24 and £1.7bn in 2024/25; further funding to be found through a two-year delay in implementing the Dilnot reforms which raise the level of assets a person holds from £23,250 to £86,000 before they must pay the full cost of their care and by allowing local councils with social care responsibilities to increase council tax by 4.99% without a referendum rather than the current 2.99%. As Chair of the Health and Social Care Committee Hunt had acknowledged that social care needed £7bn a year extra just to stand still.
- An extra £2.3bn for education for the next two years; this will still mean that schools will have less funding in real terms than in 2015. There is no extra money for further education.
- A cap on social housing rent increases of 7% for 2023 rather than the normal increase of inflation plus 1%. The response of housing associations will be to cut support services and repairs.
- An extension to the windfall tax on energy companies which will include energy supply and renewable energy suppliers.
- In a particularly vindictive move, some 600,000 people not in work because of long-term sickness to be forced to meet with a ‘work coach’ in order to get them back into work. These will include many who are unable to work because they cannot get NHS treatment and others suffering from Long Covid.
- Severe cuts in state spending from 2025/26 after the next general election, devised to meet an invented fiscal target of falling government debt as a proportion of GDP at the end of a five-year budgetary cycle. The Resolution Foundation states that these will be undeliverable without holding public sector wages below those in the private sector.
- Public sector investment to be frozen in cash terms from 2025/26, a £15bn cut which will see it fall from 2.5% of GDP to 2.2% in 2027/28.
‘Difficult decisions’
Introducing the Statement, Chancellor Jeremy Hunt spoke of ‘difficult decisions’, a phrase always deployed as a smokescreen for an attack on the working class, and he repeated it nine times. Sanctimonious eulogies to ‘British compassion’ were all part of a pretence that the ruling class or its political representatives actually care about the condition of the poor. Their only concern is whether or not they push the working class so far that rebellion becomes its only option. Hence the concession that benefit levels will rise in line with inflation – although this will not happen until after the winter period. In the meantime, those on poverty pay and the 5.8 million households dependent on Universal Credit will have to negotiate the next four months when the rate of food inflation had reached 16.5% at the end of November.
Media focus has been on the ever-increasing level of taxation that will be the consequence of the Statement – 37.5% of GDP by 2024, a post-war record according to the Office for Budgetary Responsibility – and rising government debt – 97.3% of GDP by 2024/25, a marginal drop on the peak of 97.6% the previous year, but £440bn higher than today in cash terms. The principal concern of the ruling class however is the complete failure of the Tory government to solve the underlying crisis of British capitalism. GDP remains below its pre-pandemic level, alone among the G7 developed capitalist countries. Britain is now officially in recession, with the economy expected to contract by 1.4% this year. The Office for National Statistics reports that ‘The UK’s output per hour growth between 1997 and 2007 was the second fastest of the G7 countries, but between 2009 and 2019, it was the second slowest.’ In 2021, manufacturing output remained below its 2007 level, that is, before the financial crisis.
Political instability
The chronic weakness of British capitalism and its deepening crisis have created conditions of political instability epitomised by the state of the Tory Party. Dominated by right wing Brexiteers possessed by the fantasy of Britain as a global power unfettered by the shackles of EU membership, in government the Tories have become a loose cannon for the ruling class. The last six years have seen five prime ministers, three of them in 2022 when there have also been four budgets or equivalent, five Chancellors of the Exchequer and some 70 cabinet ministers.
This chaos was most evident in the short life of the Truss government (see p8) whose £45bn tax-cutting mini-Budget on 23 September precipitated a crisis which threatened within days the collapse of pension funds holding government bonds as collateral for their borrowings. As it was, the sudden leap in interest rates on these bonds to above 4.3% sent annual interest payments on government debt soaring, and together with the extra borrowing to pay for domestic energy support added £64bn to overall government borrowing this year.
The departure of former Chancellor Kwasi Kwarteng on 14 October in the wake of the mini-budget fiasco gave space to the ruling class to demand that he be replaced by someone it would regard as a safe pair of hands. His replacement, Jeremy Hunt, a Remainer, was so unpopular with his peers that only 18 Tory MPs supported him in the leadership election that followed Johnson’s eviction, falling at the first hurdle. But Truss had no choice but to appoint him as Chancellor, and Sunak to retain him as the one person in the Tory Party who could reassure the financial markets and salvage some credibility.
Hunt’s first steps on 17 October were to undo the 1% cut in the basic rate of income tax set out in Kwarteng’s mini-budget, reduce the duration of the government’s energy price cap from two years to six months, remove the cut in corporation tax and reinstate the 45% top rate on incomes of over £150,000. These measures reduced the tax cuts by £32bn. But he did not restore Johnson’s Health and Social Care levy, the 1.25% rise in National Insurance (NI) rates passed in September 2021; the temporary rise in NI for 2022/23 will come to an end in April 2023. Nor did he bring back the bankers’ bonus cap that Kwarteng had provocatively abolished – either in October or in the Autumn Statement.
Hammering the working class
The net result of the overall crisis is that Britain remains the most income unequal of 11 major European countries (Resolution Foundation); the think-tank also estimated that the consequence of the 19-year lag in wage recovery will be a loss of annual income, on average amounting to £15,000. 500,000 people will lose their jobs by the end of 2023. Economic stagnation will remain the order of the day with government spending at 43.4% of GDP in 2027/28. Such figures show that it is increasingly difficult for British capitalism to sustain the conditions of the better-off sections of the working class. The poorest sections have already been hammered by a combination of service cuts and precarious conditions of work, but most of all by the constant real-term reduction in out-of-work benefits. They remain the lowest by far among the developed OECD countries, on average 16% of previous income in employment after six months out of work, compared with 65% across the OECD, with Russia the next lowest at 27%.
Sustaining the state welfare system involves a taxation regime which in essence transfers money from the better-off sections of the working class to the poorest sections. The Autumn Statement shows that capitalism can no longer continue that process without undermining both the conditions of those better-off sections and the quality and scope of state welfare. The only other option is to cut state welfare to such an extent that it drives millions of working class people from poverty into destitution, and the ruling class judges that this is not as yet politically possible. Hence the reappearance of the notion of the ‘squeezed middle’ – the better-off sections of the working class especially in the public sector who are going to suffer real-term wage cuts and ever more oppressive work conditions especially in the health, social care and education sectors. They are to be punished alongside those who are already in poverty. Pay for teachers has fallen by 20% in real terms between 2010 and 2021, that for nurses by 8% and for social workers by around 15%. The plans set out in the Autumn Statement will continue this process.
Labour accepts the capitalist rules
While the Labour Party in parliament has criticised the more obvious points where the Autumn Statement protected the wealthy – the continued exemption of wealthy non-domiciliary residents from taxation, the refusal to re-impose the bankers’ bonus cap – the reality is that leader Sir Keir Starmer and Shadow Chancellor Rachel Reeves accept Treasury fiscal rules. This means that a Labour government would impose the savage cuts that are projected for post-2024 to ensure the miniscule reduction in the government debt-to-GDP ratio that Hunt has promised at the end of the five-year cycle. Unite General Secretary Sharon Graham underestimated Labour’s preparedness to run a crisis-ridden British capitalism when she commented that Labour ‘appear[s] to have accepted the economic premise of the black hole rather than challenge it’.
The truth is that Labour will only be allowed to govern if it commits to keeping British capitalism on the road and at the same time containing serious social unrest. With Labour councils now preparing to implement billions of pounds in service and job cuts for 2023/24 no one can have any doubt that a Labour government will promise jam for a tomorrow that will never come while redoubling the attack on the poor. Resistance is the only option: the current wave of strikes, although heavily controlled by the trade union leadership, is a welcome step forward. However, a much broader struggle is required, one which openly challenges the reactionary Labour Party and builds a movement which represents the interests of the working class against the capitalist system.
Fight Racism! Fight Imperialism! No 291, December 2022/January 2023
