What is the mantra of ‘growth, growth, growth’ – without any structural changes or interventions to reconfigure the basic operations of the economy – but a new variant of the same old ‘trickle down’ dogma? No rising tide will lift all boats when capital is owned by the few not the many.
Joe Guinan on Twitter
‘At last, a true Tory budget’, trumpets the headline in a rag of a mainstream newspaper after Kwasi Kwarteng’s mini budget on Friday. You don’t have to look too far to understand why, and it’s not at all complimentary. Across the board, the opinion is that this is a shameless budget for the rich with a few crumbs from the table for the rest.
This is a budget that will only add to existing inequality and poverty which has its roots in decades of neoliberal narratives that have focused on the primacy of markets and challenged the notion that a government’s role is to serve public purpose and not its own interests, or those of big business. This is not a ‘failed experiment’ as John McDonnell, the former Labour shadow Chancellor, tweeted this week. It has done everything it said it would on the tin.
The last 12 years have been part of a continuing and deliberate, decades-long effort to shift wealth upwards and transfer public assets into private profit for which the nation has paid a heavy price. Even during the pandemic, as the government stepped in, as only it could, to support the economy, it has been clear who the main beneficiaries of that spending have been. The last 40 years and more have demonstrated plainly that a rising tide does not lift all boats. It has been a sham that has served the corporate estate with the full support of the government whose politicians have benefited through the revolving door.
Whilst Kwarteng has signified ‘a new direction for the economy,’ it is anything but. It is predicated on more of the same ideology that has already done so much damage. That the rich are the wealth creators, and the State must do everything it can to remove any impediments to growth, through tax breaks and deregulation. This budget stands as a beacon for the status quo, however it is being presented.
Whether it is reversing the cap on bankers’ bonuses (yes, the same people who crashed the economy in 2008/9), backtracking on corporation tax and National Insurance (which for the latter will scarcely make any difference to the incomes of the poorest), or the grossly unfair changes to tax rates which will favour the wealthiest, it signifies no change in economic policy.
How can it be fair or right that the incomes of the richest will be boosted by £54,000 while the pay of working people will be cut in real terms? As rising prices of food and energy continue to impact incomes and the wrong-headed decision by the central bank to increase interest rates yet again this week, the paltry support being offered by the government will do nothing to help people navigate a crisis which is happening right now.
And let us not forget that the planned cut in stamp duty will also benefit the wealthier, whilst doing nothing to help young people struggling to get on the housing ladder. Furthermore, without measures to increase the housing supply, it is likely to fuel an inflationary bubble in the property market. As Lewis Shaw, the founder of Shaw Financial Services noted:
‘If someone asked me how to drive an already overheated property market into a dangerous bubble territory and make things worse for everyone, this policy would be it.’
Perversely and predictably, the reports of the cut sent a signal to the stock market and shares rose between 3% and 6% on the FTSE. This is everything that’s wrong with the prevailing economic system. In the words of a famous song by Abba, ‘money, money, money… in a rich man’s world.’
In the light of the current global economic uncertainty, and with no assurances as to how the future will pan out as the collective west, through the imposition of sanctions against Russia, creates vast economic uncertainty for their citizens, combined with the tectonic shifts in global power which are taking place, basing one’s economic plans on growth at all costs (a problem in itself given the climate crisis) might seem a little premature.
The freshly coined word ‘Trussonomics’ which suggests a departure from the Treasury orthodoxy, and which has driven spending policy, is a sham. It is just the same old economics dressed up in sheep’s clothing. Predicated on Truss’s claimed rejection of Thatcherite ‘tax and spend’ and emphasising growth instead as the economic saviour that will lead us to prosperity, her claim is still rooted in household budget terms. That although the government will fund its tax cuts with vast borrowing, the growth target set by the government will ultimately ‘secure sustainable funding for public services and improving living standards’ and enable it to reduce its deficit and debt as economic conditions improve.
Yet again it dupes the public into believing that the debt is a real thing of substance and not just part of the smoke and mirrors which aims to keep people chained to the belief in monetary affordability which, if not dealt with, threatens the prosperity of future generations.
So much for the revolution in thinking.
It was predictable that these plans would bring the borrowing and national debt doomsters, rigorously ringing their alarm bells, out in force. Paul Johnson, Director of the Institute of Fiscal Studies (IFS), which is grounded in economic orthodoxy, remarked:
‘Today, the chancellor announced the biggest package of tax cuts in 50 years without even a semblance of an effort to make the public finance numbers add up.’
Or the Resolution Foundation, equally orthodox in outlook, suggesting that Sunak’s fiscal headroom would be blown and drive a borrowing surge to the tune of tens of millions of pounds that will break the fiscal rules.
Finally, The Telegraph, quoting the IFS, claimed that ‘Liz Truss’s plan to slash taxes to boost growth […] would put Britain’s debt pile on an ‘unsustainable path’ which would force future governments ‘into a renewed period of austerity to control the UK’s debt mountain.’
These are narratives which invite the public to home in on the fiscal responsibility of successive governments rather than their actual economic record. What did it do to improve the public and social infrastructure which supports a modern economy? Who were the beneficiaries of its spending and legislative policies? And how well did it do to keep the economy balanced through the economic cycle in terms of matching spending with available resources to avoid inflationary pressures and support citizens during good times and bad? These are the real questions of consequence.
Banking on growth to get you out of a fix in an uncertain world is, as a Guardian journalist suggested this week, ‘casino faith-based economics.’ Nothing new there then.
On that basis, it is shameful that the mainstream media does not hold politicians or economists to account or question the clear contradictions when talking about government spending. They hold fast and without exception to Thatcher’s household budget economics. But surely it should be glaringly evident by now that a government makes ideologically driven, political choices not based on an available pot of tax money when it bails out banks with not a taxpayer in sight, pours vast sums into supporting the economy during the pandemic (a lot of which ended up in private profit), chooses to wind up the magic money tree to send military and other aid to Ukraine to the tune of £2.3bn (and counting), or helps profiteering energy companies out of a fix.
This challenges the notion that public services are unaffordable or that there is no alternative to austerity, claims that will surely be resurrected if and when Truss’s growth plan fails to deliver. A sound public and social infrastructure that provides strong foundations for a thriving economy is not dependent on growth and subsequent tax revenues as Truss and Kwarteng would have us believe. It is dependent on a government with public purpose objectives and such foundations must come first to ensure an economy that can manage the ups and downs of the economic cycle, and indeed the crisis we find ourselves in. The evidence of what happens when governments fail to deliver stands before us.
Instead, we have a government determined to pull the rug out from under the feet of the very poorest people through its policies. Analysis by the Women’s Budget Group has shown that at the same time as benefiting the wealthiest (mainly men) they will take money from the purses of part-time workers who are mainly women.
Furthermore, plans to cut the benefits of low earners if they are unable to increase their working hours will hit women with caring responsibilities, ill health, or disability. As the Women’s Budget Group pointed out, instead of vital investment in care services, flexible working and working to change employer attitudes, this government has chosen punitive policies which will create further suffering.
In the same week as the mini budget, which has done little to alleviate the growing crisis in public services, Tory council leaders have warned that adult social care faces a £3.7bn funding gap, a problem which is compounded by growing staff shortages, fewer care beds and higher costs, which has brought many local care providers to the edge of collapse. The fragile state of social care is not however a new problem. It, like the NHS and other publicly delivered services, has suffered at the hand of neoliberal ideology which has promoted markets and privatisation as efficient solutions to driving down government expenditure. If only that were true!
This cumulation of policies introduced by successive governments has ironically put huge pressure on local government and the very private providers who were supposed to provide solutions. Cuts to government expenditures have seen to that. A race to the bottom, in so many words.
It, therefore, beggars belief to learn this week that the new health secretary Thérèse Coffey thinks that a £500m fund will be sufficient by itself to support recovering patients either in their own homes or in residential care, following discharge from hospital. Without dealing with the structural problems faced by those delivering social care services which result from the policies of successive governments, it will do little to alleviate the situation and will be a drop in the ocean compared to the levels of funding that will be needed to prevent complete collapse.
Also, to believe that money by itself is a solution, however paltry this offering is, is to fail to acknowledge that without more staff, beds and facilities, aka real resources, this money can do little to provide better outcomes for patients. It will not provide an immediate solution or mitigate potential problems the NHS may face this winter, and the question remains about where this £500m will come from. Will it be new money, or instead taken from existing NHS budgets as is feared? As usual, the devil will be in the detail to the detriments of patients and those trying desperately to deliver services on a shoestring. As Mike Padgham, the chair of the Independent Care Group, noted:
‘This is a sticking plaster put on a gaping wound by a doctor that doesn’t see how sick the patient is.’
And if you think that things couldn’t get worse, over the last week the government has demonstrated its true colours in respect to the greatest existential threat that humanity has ever faced. As Jacob Rees-Mogg tells a staff meeting that Britain ‘must get every cubic inch of gas out of the North Sea’, that it is greener to produce our own fossil-based fuels rather than import it over thousands of miles, and that the ‘public needs to be persuaded that fossil fuels are the answer’, it demonstrates beyond all doubt that the government’s commitment to addressing climate change has not, and will not go beyond the rhetoric of COP 26. With plans to reverse the ban on fracking, even though as the founder of Cuadrilla pointed out this week, it will be impossible at any meaningful scale and will not help with the energy price crisis, the government is marching backwards on its intentions.
As Rebecca Newsom from Greenpeace said:
‘Jacob Rees Mogg wants to drag [government] back in time, turning it into a political arm of the fossil fuel industry. And so, we have laughable greenwash about fossil fuels being green, taken seriously at the heart of government. If the government sticks to this wrong turn we are all going to be worse off, except for fossil fuel giants already profiteering from this crisis.’
Scientists have already warned that licensing new North Sea oil and gas fields is incompatible with existing climate commitments to limit warming to 1.5°C above pre-industrial levels. Rees-Mogg, a climate change denier is set to compound the problem.
The current global crises in energy and food will, it seems, provide the perfect cover for climate change deniers to push their agenda and for the likes of Rees-Mogg to claim that he had no other option. A complete gift to those in the Tory party who deny climate science. As WalesOnline reported prior to her election;
“Truss herself has close ties to the IEA which has a long history of opposing government environmental policy and has taken funding from British Petroleum. During a trip to the United States in 2018 while she was chief secretary to the Treasury, Truss met with several Koch-funded libertarian think tanks and lobby groups with a history of climate science denial, including the Cato Institute, the American Enterprise Institute, and the Heritage Foundation.
As environment secretary between 2014-2016 she cut subsidies for solar farms, calling them “a blight on the landscape”, and claimed they were harming food production. Truss is one of the authors of an influential 2012 book by members of the Conservative Free Enterprise Group, Britannia Unchained, which argued for a low-tax, deregulated economy and took a swipe at “government-subsidised green technology”.
The fact that instead of supporting citizens directly, she is going to pour vast sums of public money into energy companies shows conclusively what her priorities are. These are politicians bought and paid for to serve the corporations in a world in which democracy has ceased to mean anything.
If you combine this with the government’s promise for the ‘most ambitious environmental programme of any country on earth’ and their subsequent proposals to revoke 570 environmental laws which cover water quality, sewage pollution, clean air, habitat protection and the use of pesticides, along with the plan to create 38 investment zones across Britain which environmental organisations such as the RSPB are suggesting will represent an ‘unprecedented attack on nature, you get a sense of the direction of travel.
A country where the government is a lackey to the corporations who dictate the rules, and who provide the legal frameworks for them to do so. A country which is a slave to an economic system which thrives on corporate control and the never-ending quest for profits.
As Ruth Chambers, a senior fellow at Greener UK tweeted this week, ‘The government is hurtling towards a deregulatory free-for-all’ where vital environmental protections will be ripped up and public health put at risk.’
Taking government policies as a whole, and the likely impact of this mini budget, they show complete contempt for ordinary working people and the planet which provides the means for our existence. Growth at any cost is the mantra which prevails. And yet, as government abandons any pretence of creating a fairer and environmentally sustainable economy, humanity is still hurtling ever faster toward a potentially shocking future.
As the Australian National University Emeritus Professor, Will Steffen, noted in 2020, there was already a chance that we have triggered ‘a global tipping cascade’ that would take us to a less habitable ‘Hothouse Earth’ climate.’ It is therefore imperative that humanity uses its time constructively to reduce at least the worst effects of such an outcome.
We can only hope that, sooner rather than later, it will become clear to people that successive governments have chosen this path which is not based on monetary reality but serves instead a distorted economic system which puts growth and profit as the holy grail of success and is proving itself an existential threat to existence. Learning how governments really spend is the first step towards understanding that it doesn’t have to be like this and challenging the status quo.
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