On 8 July, Chancellor of the Exchequer Rishi Sunak declared himself ‘unencumbered by dogma’ as he announced a further £30bn of government spending to manage the economic fallout of the Covid-19 pandemic. It is the latest step by the government to shore up decaying British capitalism; this time by slowing down the enormous wave of job losses which the crisis will inevitably unleash on the working class. Séamus Padraic reports.
Since March, there are 600,000 fewer workers on company payrolls, and two million more new claims for unemployment benefits. Nine million furloughed workers, who since March have been paid 80% of their wages through the ‘jobs retention scheme’, face a cliff-edge drop into unemployment when the scheme ends. The Organisation for Economic Co-operation and Development (OECD) predicts a rise in unemployment from April’s 3.9% (which masks significant underemployment) to 15%. This is even higher than the 11.9% rate at the height of the Thatcher era in 1984. Thus, on the day of the budget, Sunak told BBC Breakfast that ‘if you’re asking me “can I protect every single job?”, of course the answer is no. Is unemployment going to rise, are people going to lose their jobs? Yes, and the scale of this is significant.’ Sunak insisted the furlough scheme will end as planned in October. However, the government is mobilising resources to temporarily limit the scale of the jobs collapse: Sunak announced a ‘job retention bonus’ to augment the ‘job retention scheme’. Employers will be paid £1,000 per worker brought out of furlough and back into work.
Young people are being hit particularly hard. In the first two months of lockdown, the number of 18-24-year-olds claiming Universal Credit doubled to 500,000. This summer will see 700,000 school and university leavers enter the job market. Young people are also concentrated in some of the worst-hit sectors; especially hospitality which employs 1.8m people, around one third of whom are under 25. Hence, Sunak also announced a £2bn ‘kickstart’ job creation scheme targeted at young people. From August, the government will pay the minimum wage for 25 hours a week for up to 300,000 people aged 16-24. They will be deployed as free labour for companies, raising the spectre of a return to the workfare scheme. Until January, the Treasury will also pay employers £2,000 per new apprentice under 25, and £1,500 per apprentice aged 25 plus.
These measures are likely to have a limited impact. With most companies experiencing cash flow problems, and three quarters reporting a lack of demand, companies are likely to be keener to shed workers than to re-employ them and pay wages that their revenues cannot cover. The ‘jobs retention bonus’ and the youth job creation scheme will only run until January. The value of the schemes to the government lies less in their economic impact than in their effect of spreading the wave of job losses across a nine month period from March 2020 to the end of the ‘jobs retention bonus’ and the youth job creation programme in January 2021.
Idle hands
The government understands the social and political consequences of a sudden massive rise in unemployment. Its concerns were summed up by Tom King, who was employment secretary under Margaret Thatcher in 1983 when unemployment levels surpassed 3 million. In 1985, King was moved to the Northern Ireland Office. In the occupied Six Counties unemployment was 20% and concentrated among the Irish Catholic population. King told The Guardian on 7 July 2020 that ‘one of the factors that underpinned the sectarianism and terrorism then was the level of unemployment. […] There was no question that idle hands are too easily recruited into terrorism or crime of one sort or another.’ Millions of young people thrown out of work all at once is a sure recipe for social unrest, which may turn into political revolt.
This is especially true as millions of young people dreaming of a middle-class future face being thrown into the ranks of the working class. The OECD has already observed an acceleration in companies replacing white-collar office workers with IT: in its report on UK unemployment, it observed that ‘new online job postings for middle-skill occupations contracted twice as much between February and April 2020 as for low-skill occupations, and 40% more than for high-skill occupations. These results point to the possibility that the Covid-19 shock will reinforce the existing trend of employment polarisation.’ Much concern has been voiced about how the ‘youth job creation scheme’ will limit young people to the bottom rung of the jobs ladder.
Boris Johnson is ‘not a communist’
In FRFI 276, we described the scale of the crisis facing British capitalism, and the inevitable drive towards state monopoly capitalism, ‘a stage of development of monopoly capitalism, in which the fusion of the power of the monopolies with the power of the imperialist state becomes the mode of existence for imperialism.’* The additional £30bn in the ‘mini-budget’ brings the total cost of the coronavirus economic support measures to £189bn. The budget deficit, according to the Financial Times, is likely to reach £361.5bn: 18% of GDP, the largest since 1944/5, and almost twice the 10% peak in the aftermath of the 2008 crash. This spending spree has irked some Conservative MPs, with Sir Edward Leigh asking in the House of Commons on 7 July ‘Can we hear from the chancellor less about high-spending lefties like President Roosevelt [to whom Johnson had just compared himself] and more about good conservatives like Ronald Reagan and Margaret Thatcher – less about subsidies and more about tax cuts and tax simplification?’ Others, however, understand the extraordinary times facing British capitalism and the Conservative Party.
On 30 June, Johnson assured listeners that despite increased state spending, he is ‘not a communist’ and that it is ‘the job of government to create the conditions for free market enterprise. And yes of course we clap for our NHS – but under this government we also applaud those who make our NHS possible – our innovators, our wealth creators, our capitalists, our financiers.’ Johnson’s comments underline the fact that the ‘mini-budget’ is designed, like the state’s other interventions into the economy in response to coronavirus, to shore up British capitalism. All this talk of social democracy and communism is a smokescreen: state monopoly capitalism cannot be reformed to serve the needs of the working class and the aspirations of its better-off sections. In a few short months, with the end of the employment support schemes, it promises unemployment on a scale not seen since the Great Depression of the 1930s. The only adequate response is, in fact, to be communists and to build a movement to replace this rotten system.
David Yaffe, ‘State mobilises to save capitalism’ in FRFI 276, June/July 2020.
FIGHT RACISM! FIGHT IMPERIALISM! 277 August/September 2020
