“When people live in a fair, caring society, where everyone has equal access to social goods, they don’t have to spend their time worrying about how to cover their basic needs day to day – they can enjoy the art of living. And instead of feeling they are in constant competition with their neighbours, they can build bonds of social solidarity.”
Jason Hickel – Less is More.
According to the Telegraph this week, the Treasury has ‘raked in more tax than ever before’, thus putting the UK, it says, on course to have the ‘highest tax burden since the aftermath of the second world war’. The Chancellor, still counting his beans, was not in the slightest bit apologetic, making clear his assertion that he had no other option but to get the public finances back on track after the vast amount of public money that had been spent during the pandemic. Keeping the £12,570 personal allowance for income tax at its current level would, the author of the Telegraph article indicated, generate an extra £20bn for the Treasury over the next five years, thus reinforcing, yet again, the plainly wrong idea that government relies on tax to spend, or balance the public accounts. A government spokesperson called on for comment, said, wiping a tear away, that it had been forced to make ‘tough decisions’, but not to worry, in 2024 we can expect a tax cut bonanza just before the next election.
The Guardian took another tack, not taxes, but borrowing. In an article by Larry Elliott entitled, ‘UK government borrowing halves but is still close to record high’, he quotes figures from the ONS which reported that the gap between the state’s revenues and its spending was down on the previous year, but that despite the improvement over the year, the total deficit for 2021/22 was more than £20bn higher than forecast by the OBR. All as if borrowing figures were a sound measure of the government’s management of the economy. The Chancellor, trying yet again to sell his agenda of fiscal discipline, was quoted by Elliott, reiterating yet again, that ‘Public debt is at the highest levels since the 1960s and rising inflation is pushing up our debt interest costs, which means we must manage public finances sustainably to avoid saddling future generations with further debt’.
They are all at it! Whether it’s former or current Chancellors of the Exchequer, journalists or orthodox economists, they all have one thing in common: their addiction to the false narrative of household budgets. The idea that governments are limited in their spending policies by how much tax they collect or what they can borrow. The false corollary of all that, is that without careful management of the public accounts, either we face the prospect of the UK going bankrupt, as former Chancellor George Osborne suggested to the public, or future generations will pay the price in higher taxes. All nonsense, of course, but it keeps the public in their place, meaning acceptance without question, that the government has limited fiscal capacity, and the message that government has no option but to impose belt-tightening policies, completely ignoring the fact that a government deficit represents a private sector surplus, in layman’s terms, the money in our pockets. Taxing away more doesn’t give the government more to spend, or to pay down public debt as is implied, and it certainly doesn’t help an economy to navigate difficult times.
We are now witnessing in the most distressing way, the terrible consequences of those narratives which are having a direct effect on the economy, or more precisely, the people who do the work to keep it functioning. Not just the effects of the last 2 years on people’s lives but the ongoing consequences of decades of successive government spending policies. Policies which have ranked fiscal discipline over economic health and public well-being, seen wealth distribution skewed to favour ever fewer people and overseen the selling off or privatisation of key public assets with vast amounts of public money syphoned off for private profit, along with the underfunding of vital publicly run and paid for public infrastructure which has left it in a state of ongoing decay. We have paid a heavy price as a nation for the economic ideology which prevails and dictates policy and spending.
From every corner, the warning signals have been ringing loudly. Last month, Martin Lewis, the Money Saving Expert, said that he was running out of tools to help people manage the cost-of-living crisis. He said that ‘it’s not something money management can fix, it’s not something that for those on the lowest incomes telling them to cut their belts will work, we need political intervention.’
Phil Andrew, the CEO of the StepChange Debt Charity, echoing Lewis, said that their advisers had been taking increasing numbers of calls from people who fear they won’t be able to keep up their debt repayments. With eleven million households facing Covid-related debt, and four million using credit to pay for essentials, he was clear:
‘For these households, rises in energy bills and the increasing cost of essentials are not things that make the difference between being able to afford luxuries or not. They are the things that genuinely make the difference between heating and eating.’
The Trussell Trust, which runs more than half of UK food banks, says it is witnessing an accelerating crisis across the UK as more and more people are unable to afford the absolute essentials necessary to eat, stay warm and dry, and clean. Figures released this week show that the Trust’s network provided more than 2.1 million parcels to people facing financial hardship from 1st April 2021 to 31st March 2022, which represents a 14% increase over 2019/20 – before the pandemic. And more than 830,000 parcels were provided for children, which represents a 15% increase from 2019/20, when 720,000 were provided. The Trust, again echoing Martin Lewis, said that there is still time for politicians to turn this situation around, saying that, ‘governments at all levels must use their powers and take urgent action now to strengthen our social security system so it keeps up with the true cost of living and helps prevent hundreds of thousands more families being forced through the doors of food banks.’
These figures are a shocking indictment of a government that does have the fiscal tools to put in place solutions to mitigate the economic shock of Covid (although imperfect, already demonstrated), the effects of the war in Ukraine and last but not least to address a climate crisis which threatens humanity, but which seems to have been put on the back burner even as the planet’s life support systems continue to degrade and the social injustices intensify globally.
Our government has the legislative and fiscal tools, should it choose to use them, not only to mitigate this economic crisis in the short term, but also to challenge the market-driven ideology of decades. An ideology which has led to an increasing divide between the rich and the poor, with an ever-increasing share of wealth going into fewer hands, as wages have stagnated. A pernicious ideology that has created increasing reliance on an unfair social security system which punishes people rather than supporting them, whilst it has made the concept of real full employment a dirty word and allowed the corporate sector to get away with murder by paying low wages and setting working people against each other in the dash for a job and a modicum of security.
We may, as the Trussell Trust says, need a fairer social security system for those who cannot work, or who are caught in economic straits not of their making, but we also need a government with the political will to implement a Job Guarantee, not just to provide the vital cyclical economic automatic stabiliser at such times as these, but also to reverse the unfair advantage capital has had for decades over labour, which has been responsible for wages being driven down in a fight for competitive supremacy with all that entails in human deprivation.
However, apparently, the government is right out of tools, out of ideas, out of everything except perhaps its propaganda machine, which is working just fine. This week’s Cabinet ‘blue sky thinking’ exercise left many scratching their heads as Boris Johnson was reported as asking for proposals for tackling the cost-of-living crisis without actually spending public money. Ministers have been ordered to find new ‘non-fiscal’ solutions. Grant Shapps suggested making the MOT test biennial instead of annual. Is that a joke? If so, it’s in the worst possible taste, ignoring as it does the very real effects of higher energy and food costs on families across the country. Their problems won’t be solved by such crass intervention. And Johnson is said to have revived the Liz Truss proposal to cut childcare costs by lowering England’s legal limit on adult supervision for nursery children, even though such a move could well endanger the safety of these children. As we said – right out of ideas, well at least sensible ones like using fiscal policy to address the current crisis and indeed future ones. Meaning, spending newly created money as only a currency-issuing government can do.
Even Torsten Bell from the Resolution Foundation think tank, which has its roots in orthodox economic thinking, commented that he thought the government had ‘lost the plot’, if it believed that such ideas would improve people’s lives substantially.
It is quite shocking and disingenuous of a Chancellor who can afford a £600 pair of trainers, has an extensive property portfolio and will think nothing of spending £13,000 a year on heating a swimming pool, to tell listeners on Mumsnet this week, that it would be ‘silly’ at this moment in time to give poor families any further help with rising bills, when people are already feeling the pinch from record rises in energy price and steep increases in the cost of food and essentials. Sunak’s Spring Statement and previous budgets have been a kick in the teeth for ordinary people who have paid the price in living standards and rising private debt, caused by inadequate spending, not just by Sunak but also by previous Chancellors wedded to economic orthodoxy, and the lie that government spending is just like our own household budgets. People who have already been subjected to government policies which have driven growing poverty and inequality and decimated the public and social infrastructure over the decades which preceded the current emergency. They need help now, not later, when things are likely to be infinitely worse.
The Chancellor has at his disposal the fiscal tools he needs to address the current cost-of-living crisis and create a fairer and more sustainable society. But while he adheres to his fiscal discipline message that puts the household budget narrative of tax and spend, paying down debt, reducing public deficits or the objective of achieving balanced budgets or surpluses at the top of his agenda, regardless of the economic conditions that prevail, the lives of ordinary people can only get worse, and recession will be just over the hill. We are not all in this together under this regime.
There is an alternative. It’s just that we don’t have a government or other political parties willing to challenge the economic orthodoxy which drives spending and legislative decisions. The system has been corrupted to serve global corporations, whilst politicians have been bought, as a result, by benefiting through the revolving door. At the same time, the media plays out the narrative like a broken record, to keep the illusions going that governments are powerless to intervene when economic instability threatens, hamstrung as they are by scarce monetary resources, when the reverse is actually true.
What hinders government is not scarcity of money, but the recognition that it must align its spending to the available resources and the productive capacity of the nation, and make the political decisions about who gets the pie based on that. That is the real balancing act and the real starting point for a true understanding of what governments can do, with the political will, to create the sort of society which benefits everyone, by serving public purpose instead of corporate greed.
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Dates are wrong for food bank usages. You put
“people facing financial hardship from 1st April 2020 to 31st March 2022,”
If should be 1st April 2021
Corrected, thanks!