The Tory government staggers on, its MPs deeply divided over Brexit and the Irish protocol, taxation levels, relations with China, membership of the European Court of Human Rights, the future of former Prime Minister Boris Johnson, bullying allegations against Deputy Prime Minister Dominic Raab and ministerial bullying in general. Above all, the government has failed to find any solution to the deep crisis of British capitalism. Annual growth rates since the accession of the ConDem coalition in 2010 remain less than half those prior to the 2008 financial crisis. Narrowly avoiding recession in 2023 was presented almost as a triumph for government policy when Chancellor Jeremy Hunt presented the Budget on 15 March. ROBERT CLOUGH reports.
Falling living standards
What mattered about the Budget was the report from the Office of Budget Responsibility (OBR). This showed that real household disposable income per person – a measure of real living standards – is expected to fall by a cumulative 5.7% over the two financial years 2022-23 and 2023-24. It will be the largest two-year fall since records began in 1956-57. Citing IMF data, the Financial Times on 14 March said that ‘If the UK’s gross domestic product per person had grown as rapidly in the 15 years after 2007 as it did in the 27 years since 1980, every person in the UK would be £10,600 or 31% a year better off in real terms versus the £33,700 of GDP per head that the UK achieved in 2022.’ The article adds that while the US Federal Reserve and European Central Bank expect the US and Eurozone economies to be between 7% and 10% larger respectively at the end of 2025 than they were before coronavirus struck, the Bank of England does not expect the UK’s economy to have grown at all in that period. UK Business investment in 2022 Quarter 4 is no higher than it was in 2019 Quarter 4, just before the pandemic, or at the time of the Brexit referendum in June 2016.
Meanwhile the Resolution Foundation calculates that ‘In the period running up to the financial crisis, German households were better off than British households by £500 per year, but that has since increased to £4,000’ and that ‘the toxic combination of low growth and high inequality mean that poorer households in Britain are most exposed to this stagnation – while typical households in the UK are 9% poorer than their equivalents in France, low-income households are now 22% poorer.’ The Budget offers no relief: by extending the freeze on income tax thresholds by a further two years to six, a further 3.2 million workers will be drawn into paying the basic rate of income tax by 2027/28, and 1.2 million into the higher 40% rate.
Something for the rich
Other measures in the Budget included a three-month extension of the existing Energy Support Scheme and the scrapping of the lifetime cap on tax-free pension savings of £1.07m. The latter was supposedly an attempt to limit the numbers of NHS senior consultants threatening to retire when they reached that point. Previously it was taxed at 55%. In addition, the threshold for taxing pension contributions was raised from £40,000pa to £60,000pa. Both measures will benefit the top 1% of earners – some 15,000 people, it is estimated, at a £2.75bn cost. It also allows the wealthy to escape inheritance tax on their pension pots when they die, helped by the fact that the number of HMRC staff dealing with the wealthy fell by more than 10% between 2016-17 and 2021-22. By contrast, the Budget said nothing about public sector pay, despite the strikes that were taking place at the time.
A further measure was a commitment to provide £4bn for an extra 30 hours a week childcare during term time to parents of children from the age of nine months to two years, matching that nominally available for three- and four-year-olds. This will not be in full effect until at least September 2025. Yet there is no measure of available childcare capacity – only 15% of local authorities collect information on the proportion of parents able to get the childcare they need, and the Confederation of British Industry estimates that fully funding the existing schemes for three- to four-year-olds and expanding the scheme to one- and two-year-olds would cost £8.9bn. Furthermore there has been a 19% decline in the number of providers since 2017.
Forcing people into work
Prior to the Budget, Hunt had spoken of the need to get people ‘off the golf course’ and back into work. This was the aim of extending the availability of childcare. Yet the decline in the numbers in work has nothing to do with early retirement – there are fewer early retirees now than before the pandemic. The main source is a rise of 350,000 in the number of people with long-term sickness especially among the over-50s. While the appalling Work Capability Assessments are to be abolished, elements of the benefit sanctions process will be automated to heap additional pressure on claimants who do not look for or take up employment or seek extra hours.
The stagnant state of the British capitalist economy is further evidenced by the fact that taxation is at its highest level since the end of World War 2 (43.4% of GDP) and the record level of the balance of payment deficit (over £100bn for the first three quarters of 2022). Allowing businesses to offset 100% of UK investments against their profits to bring down tax bills for a three-year period, and thereby mitigate the effect of a rise in corporation tax from 19% to 25%, is a forlorn attempt to reassure the ruling class. It will not be impressed by the boast that the government will meet its priority of halving the inflation rate: the forecast decrease from 10.2% per annum to 2.9% is due overwhelmingly to falling energy prices. The Budget does no more than paper over the grim prospects for British capitalism and will not ease the pressure on the Tory government.
FIGHT RACISM! FIGHT IMPERIALISM! 293 April/May 2023
