Yesterday’s budget revealed what we already knew. The ruling class are out of ideas. The Tories are caught between wanting to buy people’s votes with tax cuts and an economic dogma that means they can’t. Labour’s response is to tell us how bad the Tories are without actually telling us a single positive thing that they will do instead.

The headline news was a 2p cut in National Insurance. You may recall it was cut in the Autumn Statement from 12 to 10%. According to the Resolution Foundation, the cuts in NI announced in the Autumn Statement and yesterday’s budget will be offset by the freezing of thresholds, the rate at which you start paying these taxes. If you earn less than £16,000 a year, the Resolution Foundation estimate you will be £500 a year worse off.  

But not making the headlines was a detail which will affect all of us. Reductions in public spending. On the face of it, the decision to increase public spending by 1% above inflation looks generous — but this has to be tempered with the fact that, since 2010, public spending has been reduced in real terms. UNISON general secretary, Christina McAnea, points out: “Public services can barely cope as it is. Proper investment is what’s needed, not another dose of callous austerity, or telling nurses, teaching assistants and care staff to work harder.” Unite General Secretary Sharon Graham added: “The real issue is the crisis of under-investment in our industries and public services.”

The reality is that even a 1% above inflation rise in public spending will not meet growing demand for social care or other council services. Since 2010 council budgets have been cut by £15 billion in real terms. In real terms spending on youth services has reduced by 74% in that period. Between 2010 and 2019, total public spending on education across the UK fell by £10bn, or 8 per cent in real terms, according to the Institute for Fiscal Studies. Almost a fifth of local libraries have closed as councils are forced to decide how to spend ever shrinking budgets.

In fact public spending is shrouded in policies that Richard Hughes, the head of the Office For Budget Responsibility has called worse than “a work of fiction”. Given that the government cannot deliver on most of its promises, and that its attempt to increase growth is entirely out of its control, we can expect more public sector job losses and worse services for people who need them most. The same people who will be £500 worse off.

Even the predictions that form so much of the background to the budget are based on a set of beliefs that do not hold water. Hunt claimed: “Conservatives know lower tax means higher growth. And higher growth means more opportunity and more prosperity.” As the Tax Justice Network have said, “Cutting taxes does not boost economic growth nor lead to more taxes being collected. The notion that it does, known as the Laffer Curve hypothesis, has been widely discredited.”

Much of the budget speech consisted of Hunt joking with his Labour friends on the other benches. Of course, behind the bonhomie of those jokes, Hunt was clearly laying traps for a future Labour government. One of Labour’s policies was to abolish non-dom tax status to fund improvements in the NHS. Unfortunately, Hunt just used that money elsewhere. This was not a budget for you and me. This was a budget for the political elite to trade pre-election jibes at our expense. When Hunt accuses Rachel Reeves of acting like a Tory he is not wrong, as even a casual glance at their policies show.

Keir Starmer and Rachel Reeves have made it clear that achieving growth is a pre-condition for any reforms being proposed by the incoming government. Their commitment (at least this week) is to make Britain’s economy the fastest growing in the G7. It is currently fifth. It is like saying Spurs will win the Premier League this year from their current position of fifth. How is this miracle to be achieved? Most people don’t think it will.

The budget will, in reality, make little change to the majority of families who will continue to struggle to make ends meet. The problem is not this or that policy, but the overarching belief that what matters, and the only thing that really matters, is the interests of international capital. All else is simply background noise. 

If the Tories or Labour, or any other government, really wanted to alleviate poverty and inequality, they would be honest and admit that to do so means abandoning the so-called fiscal rules and simply making a commitment to, for example, ensuring that people had homes to live in which were properly heated against the cold or that children had enough food to eat. These are not financial problems nor moral ones. They are political issues. 

Economist Ian Wright sums it up: “The fundamental social architecture of capitalism is the main cause of economic inequality. We can’t have capitalism without inequality: it’s an inescapable and necessary consequence of the economic rules of the game.”

If international capital requires massive inequality, then it matters not what the Chancellor of a small country with an over-inflated ego does. If you bow to the demands of international capital the room for manoeuvre is virtually zero. Until we change that system, budgets will come and go and life will continue pretty much as is. Which is great for the rich, comfortable but nervous for the middle, and devastating for the growing number of poor.


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