Household incomes are set to fall by a record 4.3% this year. Prices have risen rapidly, with food inflation reaching a near-record level of 19.1% in April. The result is a drastic reduction in the standard of living for increasing sections of the working class. Meanwhile, despite rising taxes, public services are being butchered in the face of a deepening crisis of the capitalist system. This means the British ruling class is no longer willing to provide a safety net for the poor. The grim consequences are all around us: lengthening queues at food banks, a housing crisis that has forced 100,000 households in England into temporary accommodation, a National Health Service on the verge of collapse.
Taxes rise as living standards fall
Public spending is paid for out of taxes, first and foremost income tax, which in the coming year will amount to 41% of national income, an average £37,000 per household. According to HM Revenue & Customs, around £786.6bn was collected in taxes in 2022-23 – an increase of 9.9% on the year before. Following Chancellor Jeremy Hunt’s Budget decision to freeze income tax thresholds for five years, Britain’s tax burden is set to be the highest since the end of the Second World War – 37.7% of GDP by 2027-28, at which point the government will be raking in an additional £29.3bn a year in income tax. This is the equivalent of nearly £4,200 extra for every household compared to 2019-20. The Institute for Fiscal Studies has called this the single biggest tax raising measure since VAT was doubled in 1979. Rising wages will push an additional 2.1 million people into the higher 40% rate tax band, bringing the total to 7.8 million – 20% of all taxpayers, compared to around 8% in 2020-21. This band now includes more than one in eight nurses, and one in four teachers. Taken alongside the rising cost of living, the tax rise represents a further erosion of the living standards of better-off sections of the working class.
However, we should be clear that the overall tax burden in Britain is overwhelmingly borne by those on the lowest incomes. The poorest fifth in society already pay, proportionately, far more tax (23% of income) than the richest fifth (9% of income), through regressive indirect taxes, in particular VAT (Office for National Statistics, 2022). Now 3.2 million of the poorest people, who previously earned too little to pay any income tax at all (less than £12,570pa), will be bounced into the 20% tax band; someone earning £15,000 pa will see their tax bill rise a whopping 106%. This comes at a time when Universal Credit and other benefits have completely failed to keep pace with the rising cost of food, fuel and housing. This is the state-sponsored pauperisation of millions of people, with one in five people in Britain now officially living in poverty. This includes more than four million children.
Four in ten people claiming Universal Credit are in work. In April, the Resolution Foundation found that there are 1.6 million workers earning less than £123 per week. Workers with hourly pay in the bottom quintile are four times as likely to be working fewer hours than they would like as workers in the highest quintile – a figure that increases disproportionately for black workers. The number of people not working due to long-term sickness has risen to a record 2.5 million. Statutory sick pay works out at just £43.76 for a week off work, just 11% of a full-time, minimum wage. Across the OECD, the average rate of statutory sick pay for a private sector worker on average pay is 64%.
The falling real value of benefits and low pay are driving hunger on a mass scale. In 2022/2023, 2,986,203 people were forced to use a food bank – up 37% on the previous year; the biggest increase, 54%, was in the northeast. One in five people using food banks are in work. Many others report going hungry as they skip meals or cut down on how much they eat. The Resolution Foundation has shown that the increase in food bills by the summer (£28bn in total, averaging £1,000 per household) will be larger than that for energy (around £25bn or £900 per household).
Death by a thousand cuts
Meanwhile, a smaller and smaller proportion of state revenue is actually being spent on the working class. Cutting the cuts, a report by the Resolution Foundation and the Centre for Economic Performance (March 2023) shows that Britain has been in the bottom 10% of OECD countries in terms of investment in public services in all but two years since 2000. As a direct consequence, Britain has fewer hospital beds per person than all but one OECD country; fewer MRI machines than all but four and a stock of affordable homes relative to the number of families that has fallen by around 40% since the 1980s.
Cuts to public spending are being paid for directly with the lives of the poorest. We are all too familiar with an underfunded, understaffed national health service, with the latest data showing that 23,000 people died in A&E last year – a rise of 40% since 2020. Social care is in complete disarray. People are sicker and hungrier and struggling to put food on the table and keep a roof over their heads.
A hard Pill to swallow
Yet the prime minister, Rishi Sunak, claimed in May that household incomes were ‘hugely outperforming’ despite the cost-of-living crisis. This, from Britain’s richest ever leader who barely noticed when his family’s net worth diminished by £500,000 a day! This brazen ruling class arrogance, its total indifference to the needs of the poor, was shared by the chief economist of the Bank of England, Huw Pill (salary £190,000) who in April suggested that rather than demand pay rises, workers should ‘accept that, yes, we’re all worse off, and we all have to take our share.’ The working class is being forced to pay for a capitalist crisis that is not of its making. It is completely unsustainable and the only solution is to fight back.
Mark Moncada
FIGHT RACISM! FIGHT IMPERIALISM! 294 June/July 2023
