To describe the emergency budget as a casino-style gamble, using the whole economy as a stake, is only half the story. Make no mistake, Liz Truss and Kwasi Kwarteng have launched a war on the people, a class war on living conditions, jobs, public services and the ecosystem – all at once.
The package of emergency measures from chancellor Kwarteng is a wild, uncontrollable, extreme neoliberal capitalist experiment with other people’s lives not seen perhaps since the one imposed on Chile by the fascist dictator Pinochet in the mid-1970s.
We should heed warnings from history because while the UK remains – just – a parliamentary democracy, the Truss regime is well on the way to dictatorial rule. When the economy sinks deeper into the mire and social resistance grows, there’s no telling what the unelected PM could do next.
She has little support among Tory MPs, especially those who won their seats when the so-called Red Wall collapsed in 2019. Levelling Up, which was always more fiction than fact, replaced by Levelling Down.
Tax cuts for corporations and the already rich, are supposed to encourage investment in an economy likely already in recession, according to the Bank of England. And almost half of the personal tax cuts will go to the richest 5%.
There are guaranteed subsidies for the profits of fossil fuel companies and other corporations but a doubling of the cost of energy for the entire population and a return to fracking. Get used to local earthquakes, said the arrogant business secretary Jacob Rees-Mogg.
People’s Universal Credit payments will be under threat if they “don’t fulfil their job search commitments”, presumably if they don’t take up the option of employment in a Wild-West network of 40 low-tax, low-regulation investment zones which will make working for Amazon look like a tea party.
But if you’re a banker – the sky’s the limit because the cap on bonuses is removed at a stroke.
Becca Lyon, head of child poverty at Save the Children, summed up the budget as “tax cuts to help the richest and a hammer-blow to low-income families”.
The plan to make all-out rail strikes illegal is only the start of a concerted assault on the few remaining trade union rights.
Immediately following Truss’s election as leader, the deepening economic crisis forced the new government to choose a path of major conflict – firstly with the civil service by sacking Tom Scholar, up till then the ‘permanent’ secretary to the Treasury, described by his predecessor as “the best civil servant of his generation”. The sacking freed Kwarteng to revert to a style of neoliberal orthodoxy that goes beyond Thatcherism.
As Kwarteng was speaking, investors in the money markets scrambled to sell off low-yield government bonds and interest on new loans is rising sharply. So, the cost – to the government and to be passed on to us – of borrowing the huge sums needed to offset the loss to government income from tax cuts is to set to soar. The value of the pound, measured against the US dollar, slumped to its lowest level in 37 years, adding to the cost of imported goods.
Unsustainable, contradictory pressures are at work both within the UK and in the wider global capitalist economy. Actions designed to stimulate growth, like tax cuts, are simply incompatible with reducing inflation.
Whilst triggered and intensified by global events – not least the pandemic and the war in Ukraine, soaring inflation has its roots in five decades of ballooning credit created to offset the decline in corporate profitability worldwide. That’s now in reverse, the balloon has burst.
In a direct challenge to the government’s loudly proclaimed push for growth, the Bank of England preempted the budget by raising the base interest rate by 0.5% to 2.25% as it pursues its impossible mission of reducing inflation from 10% per year back to the target of 2%.
In line with Central Banks struggling to control soaring prices around the world the BoE is expected to keep on raising its base rate to and beyond 4.5%, pushing up the cost of borrowing for everyone. As the giant global corporations further consolidate their control, hundreds of thousands of companies will cease trading. As economic historian Adam Tooze says “It’s the single most dramatic simultaneous tightening of monetary policy ever.”
The Truss-Kwarteng hunt for economic “growth” is largely mythological because there’s been none since before the financial collapse of 2008. That isn’t stopping right-wing Labour leaders from making “growth” their priority too. They all place their faith in the restorative powers of capitalism. But it isn’t working – anywhere – and the state systems that keep capitalism in place are also failing.
System change – to one where growth and profit are replaced as the drivers of the economy by well-being and co-operation – is the response we should develop right away because there’s little or no time to lose.