As Britain deals with hunger, record temperatures and wildfires, Tory candidates bicker over tax cuts and borrowing

“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”
Buckminster Fuller

While the Tory leadership hopefuls have spent the last couple of weeks fighting like rats in a bag, vying for a move into Number 10, it has become clear that their priorities are less concerned with addressing the existential crisis humanity is facing, or proposing solutions to the vast inequalities in real wealth distribution, and are instead focused on other concerns. How fiscally disciplined, tax-cutting or inflation-busting they can be. Or who can get the economy back on track for more of the same uncontrolled growth, to keep the capitalist truck going, whilst ensuring at the same time that the fossil fuel producers remain unhindered in their objective to carry on polluting. We have also heard precious little about that fantasy known as levelling up, which so far has failed to get beyond Boris Johnson’s rhetoric and will probably be buried in yet another round of austerity.

Never mind the fact that our public and social infrastructure is in a state of absolute decay, or that the NHS is on its knees. Never mind either about the exponential growth in food banks, which it has been reported are beginning to struggle to meet demand as donations dry up, or that children are arriving at school hungry, tired, and anxious, with some sixth formers missing schooling to help their families, as the cost-of-living crisis continues to bite.

And then while the candidates battled it out, as we sweltered in exceptional temperatures, runways melted, and wildfires broke out across the country, there has been scarcely a mention of the climate crisis, which has slipped off the political agenda as the public finances became the only topic for discussion. Fiscal responsibility trumping the lives of citizens and a viable planet.

Heaven forbid too, that we get the opportunity to ask questions of those pitching for the leadership, about the origins of the crushing poverty and inequality that exists. It didn’t just happen all by itself.  If people really understood that their misery was down to a cruel, toxic, economic ideology, embraced by successive governments which have put satiating the god of the market before their economic health and well-being, who would vote for the Tories, or to be frank, any of the political parties that have held power over decades? Who would vote for them in the knowledge that their poverty was caused by political decisions which have allowed the increasingly inequitable distribution of real wealth and the enslavement of the majority, in the service of the equivalent of the warring feudal lords of old?

So, now, the last two standing after voting rounds are Liz Truss and Rishi Sunak, but whoever becomes the next Prime Minister in September, we can be sure of one thing if the candidates’ pitches can be relied on; not much will change, and the battles will still be fought around fiscal discipline and the narrative that government spending is constrained by its tax revenues, borrowing capacity or public debt.

In fact, as the Shadow Chief Secretary suggested ‘both Rishi Sunak and Liz Truss offer more of the same. ‘They are the continuity candidates’ he said. They are indeed the continuity candidates of a false narrative of public accounting, as in fact are Labour. We shall come back to that.

You can’t avoid these false constructions of how governments spend. They are the bread and butter not only of politicians but also a compliant media, spewing the daily household budget rhetoric to keep the foot soldiers in line. On the one hand, Sunak claims he wants, ‘a grown-up conversation’ about the economy, telling Truss that ‘borrowing [her] way out of inflation isn’t a plan, it’s a fairy tale’, whilst on the other, Truss maintains it’s perfectly ‘affordable’ and ‘we can start paying back debt within three years.’

The IFS also stepped into the fray, criticising Truss’s plans for tax cuts, claiming that regardless of how you rewrite fiscal rules, in the end, lower taxes mean lower spending. It suggested that ‘as things stand, unexpectedly high inflation is already set to lead to another dose of austerity for public services’ and that ‘whoever is in office will have to make a choice between topping up spending plans to shore up public services or requiring any additional costs to be met from within existing budgets.’ ‘The former, it said’ would eat into fiscal headroom available for tax cuts; the latter would mean a deterioration in the quality of public service provision’.

And then the think tank, the IPPR, felt obliged to add its penn’orth in support of the IFS about Truss’s plan saying that:

‘Perhaps most importantly, permanently cutting taxes has consequences – and would require a scaling back of the state.’

Although noting quite rightly that ‘The problem is, there is nothing left to hack back, following the decade of austerity that people, communities and services across Britain have endured.’

It is not our intention to discuss here the claimed merits or otherwise of proposed tax cuts but to focus on challenging the narratives of how the government spends which persist on the left and right of the political spectrum.

Using the household budget model of the public accounts, what a choice that presents. Tax cuts or a deterioration in quality public service provision? How much worse could they make it on that basis? But then, on the other hand, it also provides the perfect opportunity for further degradation or perhaps obliteration of public service provision. We have been here before.

It’s never either/or. And does not require having to rob Peter’s departmental budget to pay Paul’s or cut departmental spending to find savings. These arguments are everything that is wrong with this debate. They are fairy tales in themselves. Fairy tales that have so far not led to a happy ending and will not do so, ever.

The narrative always follows the same false language trajectory when reported on by the mainstream media, quoting experts and politicians, and is designed to keep people compliant with the idea that governments spend like our own household budgets or operate like businesses with a profit and loss sheet.

“Liz Truss tax cuts would cost UK economy £40bn, fuel inflation and push interest rates up, experts say” – i Newspaper

“Treasury accused of pocketing £5bn state pension savings” – The Telegraph

John Redwood MP tweets that Rishi Sunak “authorised printing far too much money which gave us inflation“.

Kemi Badenoch claims that for public sector workers to get a 5-10% pay rise “we need to create an economy that can fund it” – The Mirror

Rishi Sunak condemns Truss’s ‘unfunded tax cuts’ saying ‘it’s one thing to borrow for long-term investment.  But it’s a whole other thing to put the day-to-day bills on the country’s credit card – The Scotsman

Liz Truss told Sunak in the 17th July debate that “raising taxes at this moment will choke off economic growth; it will prevent us getting the revenue we need to pay off the debt.”

Mrs Thatcher lives on in these words which continue to be touted to justify the government’s tax and spending policies. The idea that government has coffers where it stores tax revenues, that when it borrows, it has to tax more or cut public spending to pay the debt incurred, that it puts tax money aside to pay for pensions or that the country’s public finances can be compared to a credit card, creating a burden on future generations, are, frankly, the real stuff of Sunak’s fairy tales. They in no way reflect monetary reality.

As for inflation, it wasn’t caused by Rishi Sunak ‘printing too much money’ as the media likes to present it, or as Iain Duncan Smith claimed this week by suggesting that he had allowed that naughty old Bank of England to ramp it up during the Covid pandemic. It has been caused, as explained in previous GIMMS blogs, by external supply issues resulting from the pandemic, the conflict in Ukraine and the profit gouging by companies shamelessly boarding the disaster capitalism gravy train.

On that subject, one can only reiterate that Rishi Sunak had no option but to spend that money into the economy if it wasn’t to take a nosedive and cause huge distress to those affected. That pandemic spending has not caused this inflationary episode. And the issue is not that he did it, but where much of the money ended up, that is in the hands of the corporations and the friends of politicians with zero mechanism to provide proper accountability or oversight.

Equally, the idea that our public services are dependent on a healthy economy which, in turn, brings in higher tax revenues to pay for them, as Badenoch, one of the candidates suggested, allows governments to claim falsely that there is no money for what, in reality, constitutes the foundations of a healthy economy. To allow people to believe that we are dependent on tax revenues, particularly of the excessively wealthy, to provide essential infrastructure, which is a stance often promoted by the left wing, is partly responsible for the societal division we see today. Rich against poor and old against young.

Such distortions of the truth about monetary reality have allowed successive neoliberal governments serving a toxic economic ideology to cut public services or privatise them, and cause distress to the sick, vulnerable, and unemployed, through reforms to social security benefits. It has nothing to do with affordability as is suggested. But it is a handy motif for driving through ideological change.

To bring some clarity, the fundamental question revolves around the role of the state in creating a healthy, functioning economy. A hands-off, market-led approach, as we have seen over the last few decades, has created the infrastructure wasteland we are currently experiencing. People have died as a result.

Spending on public infrastructure such as education, health and social care, public transport networks and local government must come first, not second, to nurture that healthy economy. These are not ‘nice to have’ luxuries, only available if tax revenues are sufficient to afford them. What does this say about those same successive governments whose economic dogma has led us down the austerity road on the basis of this lie, thus destroying any hope of creating the healthy economy that politicians promise? It’s always jam tomorrow.

When you base your entire economic policy on a false accounting model of the public finances, there can be only one outcome. The place where we find ourselves today. Government, by formulating their tax and spending policies on the basis of the state of the public accounts instead of the prevailing economic conditions, have created an economic desert, the implications of which for the lives of working people and their families, and the public infrastructure which supports them, are all too evident.

And we cannot let Labour off the hook. A recent speech by Rachel Reeves, the Shadow Chancellor, attempting to draw a line between Tory leadership candidates’ promised billions of pounds in tax cuts, pledged the party to ‘iron clad discipline’ with the public finances. She promised to manage Britain’s debt burden by binding any future Labour government to strict borrowing limits and claimed, in her fantasy faraway land of household budgets, that it would allow it to lay the foundations for a growing economy.

She said:

“The level of unfunded tax cuts being bandied about this week would blow a massive hole in the public finances. […] Because responsible management of our public finances is the only route to providing the strong foundations we need to reboot our economy, revitalise our public services and re-energise our communities. [We will] make sure every pound of taxpayers’ money is treated with the respect it deserves”

Aside from the lie that tax cuts would, ‘blow a massive hole in the public finances’, since taxes don’t actually fund anything at all, frankly, the idea that fiscal responsibility can go hand in hand with laying the foundations for rebooting the economy, revitalising public services and re-energising communities is laughable. Basically, it’s just more of the same old nonsense being espoused by those still firmly in the hands of their masters, the City and the Corporations.

Reeve’s speech makes a mockery of her ‘serious plan’ […] ‘built on the strong foundations provided by our fiscal rules’. They are mutually exclusive propositions. A recipe for more of the same at a critical juncture in history.

And, given Labour’s attachment in the Blair years to serving the corporate world, it is not surprising to hear her talk about ‘building partnerships between government and business.’ What’s changed? Tony Blair began the rot in that department in 1997, the Tories went further, and now Reeves intends to continue along that path. The role of the state is not as a cosy partner to business, but as a rule maker, through providing the tax and legislative operating frameworks for business to function effectively and the economy to thrive through good times and bad.

The whole political, institutional and media establishment is blinded by neoliberal dogma which has already done huge damage and seems intent on carrying on as we are.

In the 1990s, Francis Fukyama in his book, claimed that we were at ‘the end of history’, and that with the rise of liberal democracy globally we had reached ‘the endpoint of mankind’s ideological evolution and the universalisation of Western liberal democracy as the final form of human government.’ Nothing could have been further from the truth, and the statement reveals astonishing hubris given where we find ourselves today.

In 2008, the Global Financial Crash upset those nice tidy paradigms we had been taught, and yet since then we still seem to have learned nothing about the complex and uncertain nature of human existence which the pandemic and the conflict in Ukraine have cruelly emphasised.  That which has been built up, can come crashing down as it did in 2008, and as now when external powers challenge the globalist project and the current status quo spearheaded by the United States and its obedient allies waving their flags for the sham of freedom and democracy.

The restoration of the old order is not a certainty, any more than it was immediately after the second world war, and yet those in the driving seat are intent upon further destruction regardless of the human cost. Fundamentally, it rests upon an economic system underpinned by a state-funded industrial military complex which knows no bounds, which will, if it continues, deny us the possibility of creating a sustainable planet for humanity and the whole fabric of life.

To be blunt, whilst we have political parties of all stripes reducing the future to the state of a set of public accounts and putting fiscal discipline above grappling with the pressing issues we face, the future will not be the one we would wish to bequeath to our children and their children.

There is still time, but it seems that despite the urgency, politicians at home and abroad do not have the political will to deliver a just, green transition to a sustainable world. Changing our direction is the biggest challenge of all, and it starts with creating a news media that holds power to account, rather than reinforcing the current paradigm. Within that, it also asks us to challenge the public understanding of how government spends to bring clarity and reveal possibilities. Creating a future depends upon it.

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