In January, before the coronavirus had had any impact, the UK economy posted GDP growth of 0.0%. Attempting to head off what the government hoped would be a mild recession, on 11 March the Chancellor of the Exchequer, Rishi Sunak, delivered a budget billed by the Financial Times as ‘the largest loosening of fiscal policy since 1992’. The Budget contained £30bn of extra spending. It would, according to the Office for Budget Responsibility, see the public debt reach £2 trillion for the first time in British history. Government spending in cash terms would, after 10 years of decline, surpass 2009/10 levels in 2024/5. Measured per capita, however, day-to-day departmental spending would remain 8% below 2009/10 levels.
The budget also contained £12bn of emergency funds for dealing with coronavirus and its economic impact. This included £5bn for the NHS and a number of measures designed to allow businesses to continue to function in the face of staff shortages at a time when the government was still planning to allow the disease to rip through the population.
Taking care of business
The Budget was, however, almost immediately blown out of the water by the realisation that the fallout from the escalating coronavirus pandemic could see a massive wave of businesses going under, their revenues drying up as customers stopped spending. This in turn would mean the banks and financial institutions which finance those companies would be unable to secure loan repayments from them and would end up at risk of collapse themselves. The ‘expansionist’ budget was bulldozed by the real expansion needed to prevent catastrophic consequences for British capitalism.
On 17 March Sunak committed to spending a further £350bn (over 10 times more than new spending in the budget and 15% of GDP). £330bn of this is loan guarantees for businesses, including a £200bn scheme under which the Bank of England (BoE) will underwrite the loans of businesses. The aim is to guarantee short-term financing to allow companies to stay in operation through what the government still hopes will be a limited recession, thus avoiding the massive economic dislocation that could provoke widespread social unrest.
On 19 March the BoE lowered the base interest rate to 0.1%, the lowest in British history, in a further attempt to encourage businesses to borrow in order to stay afloat. To encourage banks and financial corporations to lend, the BoE announced on the same day that it would print an additional £200bn to buy UK government bonds. In essence, the BoE is handing £200bn to the banks to ensure that they continue lending, and, according to BoE Governor Andrew Bailey, to avoid a massive and desperate sell-off of sterling and sterling-denominated assets which risked undermining Britain’s entire financial infrastructure.
When it comes to safeguarding British capitalism, it seems the government can find more than that elusive ‘magic money tree’ – the lack of which then-Prime Minister Theresa May used in 2017 to justify why nurses had not had a pay rise in eight years: they appear to have conjured up a whole magic money forest. This newfound largesse is a slap in the face to the millions condemned to poverty by a decade of austerity; the health workers and patients whose lives are being put at risk by the chronic under-resourcing of the NHS and the millions of older people left to fend for themselves without adequate universal social care provision.
So what is the government offering the working class? Too little, it seems, and much too late.
- On 17 March, the Chancellor announced a three-month ‘mortgage holiday’ for homeowners. There are few such protections for those renting; the freeze on housing benefits has been lifted, but even the promise to ban evictions during the pandemic has been reneged on, simply extending the notice period from two to three months. We have already witnessed the first wave of evictions. Housing charity Shelter reported on one landlord threatening to evict NHS workers from his property over coronavirus fears, saying if a cure was not found ‘in the next few weeks’ they would all have to go. On 25 March, the budget hotel chain Travelodge turfed hundreds of residents onto the street, including homeless families.
- On 20 March – and only after taking steps to ensure the stability of banks and big businesses – the Chancellor announced that government grants will cover 80% of the salary of workers who are unable to work because of the crisis but remain on the payroll. This will not help the thousands of workers laid off as companies react to plummeting revenues, particularly in the hospitality and entertainment business, who will have to claim benefits.
- It was not until 26 March, and only under mounting pressure, that the government attempted to address the fate of the country’s more than five million self-employed people, many of them in precarious work in the gig economy. It announced it would pay 80% of profits over a three month period in a lump sum – but the money won’t be forthcoming until June and the scheme will apply only to those able to show tax returns up to April 2019. Anyone setting up by themselves after that date, or freelancers on short-term contracts who were paid through PAYE, but now have no more work will be treated as unemployed and have to apply for Universal Credit in an already overwhelmed and inadequate benefit system.
- By 26 March, half a million new would-be claimants had attempted to register for Universal Credit, only to find themselves held in a queue of thousands, unable to get through on any phoneline or to access any help whatsoever from a chaotic system. Even those who do manage to apply will face the standard five-week wait for a first payment. Hunger, destitution and debt are going to soar. The food banks on which many in receipt of Universal Credit rely are already experiencing a drop-off in donations. The bleak reality of the benefit system experienced by many working class claimants for years will prove a rude awakening for hundreds of thousands who previously found themselves financially secure.
The government hopes the steps it has taken will allow enough people to get by to limit the size and scope of the resistance to this crisis which must inevitably emerge. Meanwhile, the Labour Party – while claiming an ideological victory over the state’s economic intervention – has in reality done little more than rubber-stamp the government’s plans, offering only the mildest of criticism.
Despite the illusions of much of the British left that the government’s intervention demonstrates that a Corbyn government would have had little trouble lavishing gifts on the working class, the truth is that this massive expansion of spending has been allowed only because of whose interests it serves – those of a ruling class desperate to defend its own position.
Who will pay?
The government has been clear that these economic measures are intended to be temporary. In 2008, faced with the threat of a depression, financial institutions were bailed out to the tune of £500bn. The working class was forced to pay for this bailout by a decade of brutal austerity. It must be prepared to fight to ensure that it does not carry the can for the billions being paid out to shore up capitalism this time round.
FRFI is clear: the economic programme laid out by the government has as its sole aim to defend the wealth and power of the ruling class. Our task must be to fight for a solution which prioritises public health over profits, defends the interests of the working class, and collaborates internationally for a rational response to the pandemic. That solution is socialism.
Séamus Padraic
Fight Racism! Fight Imperialism! No 275, March/April 2020
