On 26 March the Chancellor of the Exchequer, Rachel Reeves, confirmed sharp cuts in state spending to placate the financial markets. There will be less spending on the unemployed or to support workers with serious health challenges. Instead the money will be cynically redirected towards the immediate interests of capital: industry infrastructure and armaments spending. To ensure this, the state will continue openly to attack the political and economic rights of the working class. JAMES MARTIN reports.
FRFI has always stressed that ‘capital’s systemic compulsion to accumulate is a coercive force that traps the actors – the company owner-directors, and the workers – in its unforgiving grip’.1 Capital is a social force that compels its owners to its never ending self-expansion. The Labour government was sharply reminded of this fact in January, when international financiers demanded the highest return on 30-year government bonds since 1998 if it did not cut borrowing, already having taken £105.2bn this year.
Prime Minister Keir Starmer has responded with the same determination as his Tory predecessors David Cameron and George Osborne, with their ‘austerity drive’ in 2010, but now with a more desperate twist. This time spending on social services and aid for the global poor will be taken to pay for an expansion in the production of war materials. The government’s Defence and Security Industrial Strategy expects that artificial intelligence, autonomous systems, combat air, cyber, missiles, nuclear submarines, quantum, shipbuilding design and space all have ‘the highest growth potential’. Defence Secretary John Healey insists the rise in defence spending will be ‘the driver of economic growth in this country’.
More than a century of imperialist wars over the world’s resources and markets has long confirmed Lenin’s assessment of the fratricidal nature of capitalism. The EU’s massive 4 March arms spending announcement – ReArm Europe – responds to US President Trump’s threats to withdraw the US from NATO, his tactical manoeuvrings with Ukraine and Russia, his tariff war against a widening range of countries, and his speculative territorial claims against Denmark/Greenland, Canada and Panama. These moves and countermoves confirm the essence of imperialism as a struggle to redivide world resources.
Desperate to accumulate capital
British imperialism’s very poor rate of capital accumulation after 2016 – near zero ‘growth’ with its economy contracting by 0.1% in January 2025 – means that tougher state action is needed to freeze or reduce further the average standard of living of the working class to stimulate profit-making nationally and internationally.
In February Starmer announced that ‘defence and security’ spending will increase to 2.6% of gross domestic product (GDP) by 2027, and to 3% thereafter. To finance arms production to sustain Britain’s imperialist position Overseas Development Assistance (ODA) has been further reduced to 0.3% of Gross National Income, from 0.7% in 2020 and 0.5% in 2021, hitting the poorest in the world. The government stresses that remaining ODA funding focuses on reducing unauthorised immigration.
Since February 2022, Britain has pledged £12.8bn for Ukraine (£7.8bn in military assistance and £5bn in loan guarantees and reconstruction assistance).This current financial year alone, Reeves must make the working class bear £4.5bn of Britain’s military support to Ukraine. £3bn a year is now promised to Ukraine until 2031. In November the 2024-25 ‘defence’ budget received £56.9bn. In 2025-26 it will increase by another £2.2bn. These increases are made to ensure that Ukrainians can fight on behalf of British capital’s material interests.
In January 2025 the 2020 UK-Ukraine political, free trade and strategic partnership agreement was converted into a One Hundred Year partnership. Britain is now a preferred partner for Ukraine’s energy sector, critical minerals strategy and green steel production. In October 2024 Britain provided £2.26bn as a loan. UK Export Finance has committed £3.5bn for critical reconstruction. A £50m fund for small business is promoting Ukraine’s interest in British business goods and services.
This all increases Ukrainian debts to Britain, and extends business opportunities both there and elsewhere in Eastern Europe. Britain relies on interest, profits, dividends from overseas, and sales of associated business services to offset a large part of its permanent visible international trade deficit. Britain cannot afford to be shouldered out of Ukraine.
Funding ‘stability’
On 13 March, Starmer and the Health Secretary, Wes Streeting, separately announced that NHS England was to be abolished in three stages within two years. 10,000 jobs will be lost, rising to more than double that when 42 Integrated Care Boards cut their costs by 50%. This follows a 20% cut in the last budget round. The 220 Hospital Trusts are ordered to cut staffing in ‘corporate’ services. All decisions previously made by NHS England will now be concentrated in the hands of the Department of Health and Social Care. This is to reduce a currently estimated NHS £6.6bn ‘overspend’ for 2025-6. It reflects the failure of the then Health Minister Andrew Lansley’s disastrous 2012 creation of NHS England, designed to deliver fast NHS privatisation. Indeed, it pushed private provision up from 5% in 2012 to 9% in 2017 and 10% of elective (non-emergency) care by January 2025. Purchases of non-NHS health bodies by NHS Commissioners from 2019 rose faster than their spending on the rest of the service. Lansley’s reward in 2015 was a life peerage as Baron Orwell. However, this privatisation rate is simply not enough for Streeting, who wants more and faster. Alan Milburn, Health Secretary to Tony Blair, after lucrative years consulting on health care with private health companies, will again push forward Labour’s privatisation plans more vigorously as Streeting’s chief advisor.
On 18 March Work and Pensions Secretary Liz Kendall announced a cut of £5bn per year in government spending on social services (see p4), ‘coincidentally’ just what is needed to pay for the weapons support to Ukraine announced by Starmer in July 2024.
Spending Review 26 March
In the Autumn Budget 2024 Reeves raised taxes by £40bn on employers and spent another £30bn on top simply to prevent the collapse of state health, education, and local government services. However, the government then ordered cuts of £5.5bn in its departmental budgets in 2024-25 (rising to £8.1bn by 2025-26) making it clear that this is ‘just the first step’ while it ‘identifies further savings’. Her Spring statement announces these savings for Phase 2. Having rejected raising key taxes, and warned against greater borrowing by capital markets, the only option was cuts to state welfare. All this ‘to secure Britain’s future… [because] the threat facing our continent was transformed when Putin invaded Ukraine’.
More workers needed
Reeves’ job is to save a failing capitalism, faced with an increasingly expensive welfare burden due to its sick and undernourished working class, with 2.8 million people out of work due to ill-health, its low growth, and a million young people without work or training. In Labour’s Plan for Change (5 December 2024) this crisis is painted as a failure of policy preventing an ideal capitalism happily employing everyone, yet prescribes forcing more low paid work from the working class, with new capital investments and armaments production.
The White Paper of November 2024, Get Britain working, presents a strategy for pushing more people into work. The long-term target is to get the working-age employment rate from its current 74.8%, to 80%, a level never previously reached. This is essential with Britain’s present immense difficulty in raising the rate of exploitation of labour. Real productivity increases – currently stagnant – arise when new techniques cheapen the goods that workers need, so lowering the money wage required to maintain their existing real standard of living. Capitalism then keeps proportionally more of the total value produced, as a relative surplus to that already produced. Weapons however cannot be consumed by workers. So, however cheaply produced, arms production never contributes to the creation of such relative surplus value. It can only produce that surplus value which is obtained by employing more workers, and/or labour working longer and/or more intensely at the current or lower real wages.
More workers must include more working women, so Reeves poses women’s rights as the right to be exploited by capitalism in work as well as at home. ‘Equalising women’s participation rates in the workforce with those of men would bring an extra 1.3 million people of working age into the economy. And, if women started and scaled new businesses at the same rate as men, it could provide a £250 billion boost to the UK economy’.2 This happy band will of course be led by female entrepreneurs from the £250m subsidised Women’s Business Council.
The central theme of Plan for Change is ‘kickstarting economic growth’, clearly meaning kicking workers to extract more output and so profit, and so it hopes, the faster accumulation of capital. It stresses national security, secure borders, and economic stability, achieved by ‘investment, far-reaching public service reform, and a relentless focus on the priorities of working people… a profound cultural shift away from a declinist mentality’; put simply, more cuts and more work.
In its long struggle with capitalism the working class has forced the state to return some of the surplus value extracted from it at work as welfare payments, a limited relief from capitalism’s anarchic periodic unemployment, sickness and premature ageing. A class of state paupers was created which will now be forced to seek work at the lowest rates. These welfare payments disguise capitalism’s real rule – those who don’t work receive no pay. In a show of complete contempt for the working class, and in a determination to split it with this ‘pro-work welfare system,’3 those unable to work are now dubbed ‘unwilling’ to work. Those willing to work and still aided by personal income payments, must now work with much less or no support. As Reeves made clear in her Review speech ‘if you can work, you should work’. The ‘reforms’ to benefits previously announced by Liz Kendall on 18 March are now projected to save £4.8bn a year by 2030. Kendall said: ‘Millions of people who could work are trapped on benefits, denied the income, hope, dignity and self-respect that we know that good work brings’. She means that stripping benefits and forcing the unemployed to work at the minimum wage, whatever their conditions of health, will supply this urgently needed extra mass of labourers, and supposedly improve their moral condition!
These are the biggest cuts to disability benefits on record, penalising disabled people and increasing the number in poverty. This money will be spent on immediately profitable weapons production which, ironically, destroy other factors of production. The point is that such products support British capitalism’s capacity to protect its global interests, in a period in which inter-imperialist rivalries intensify. This March Review presages further attacks on the working class in the coming June Spending Review and Autumn Budget, by which time the rapidly deteriorating global economic picture threatens greater dangers of war and increased taxes, guaranteeing a continued attack on the living standards of more sections of the working class.
Organise and fight back!
Notes:
- ‘Dangerous dreams of class conciliation’, FRFI 296 October/November 2023.
- Rachel Reeves LinkedIn profile
- Spring Statement 2025
