Labour’s first budget for 13 years is built on sand, just like the government’s super majority won at the July election on a 34% share of the vote, while corporate investors are set to benefit at the expense of the working class.
Raising employers’ national insurance contributions is certain to drive down wages while the government’s spending plans are a fiction, as the Institute for Fiscal Studies has pointed out.
Those already in poverty will get no significant help. The bus fare cap has gone up 50% to £3 while rail fares are going to rise by above inflation 4.6% next year. An estimated 300,000 children could have been taken out of poverty by ending the Tory-imposed two-child benefit cap. Chancellor Rachel Reeves ignored them.
The Resolution Foundation’s James Smith said that even if the national insurance increases doesn’t “show up in pay packets from day one, it will eventually feed through to lower wages”, and: “This is definitely a tax on working people, let’s be very clear about that.”
Even Reeves admitted as much, saying: “It will mean that businesses will have to absorb some of this through profits and it is likely to mean that wage increases might be slightly less than they otherwise would have been.”
Income tax thresholds, the point at which you start paying tax, were frozen for three years, meaning more low-paid workers will be affected. Increased borrowing will result in the state having to find at least £100 billion a year in interest payments to the money markets, who have upped their rates since the budget.
The spending figures in Reeves’ budget are themselves fantasy, adding to the shifting sands that underlies this government’s actions. The IFS’s Paul Johnson points out that spending on day-to-day public services will rise by a “miserable” 1.3% in 2025, which is a recipe for major cuts in departmental budgets.
Reeves’ first budget completes the rebranding of the party of labour as the party of big capital. Her statement was not so much an account of public finances intended for local consumption, rather than a prospectus to corporations offering the UK and its workforce as a place to invest in the global race for jobs.
Starmer’s entire programme is founded upon restarting growth at all costs, and that’s code for returning the capitalist economy to profitability. In addition to the measures announced in the budget he’s got more up his sleeve, including loosening planning constraints, eliminating red tape and reducing or removing regulation of business.
Making the UK economy attractive as a place to do business is what the Budget is all about. Offering big subsidies to tempt Elon Musk and his capitalist cronies to set up gigafactories generating profits to hide away in off-shore accounts. Giving the millionaire Blairite neoliberal prince of privatisation Alan Milburn the job turning the NHS into an “engine of growth”.
Pharmaceutical companies, medical equipment manufacturers, and IT suppliers are rubbing their hands in anticipation.
Though receiving only the merest, passing, mention in the Budget itself the Government’s ‘independent’ National Wealth Fund alongside its revamped Office for Investment, is set to manage and regularise its subordinate relationship with global investors.
Those who remember the way in which Labour’s now discredited Private Finance Initiative and Public Private Partnerships set up multiple decades-long contracts still to this day siphoning vast sums from RAAC-infested schools, hospitals and transport infrastructure to private investors, will look in horror at Reeves’ proposals to go much further.
She says: “The NWF will have a broader mandate than just infrastructure and will test ‘blended’ finance solutions with private capital to allow government departments to take on additional risk.” To begin with it is hoped to ‘catalyse’ around £70 billion of investment funding from the likes of BlackRock and Goldman Sachs – in exchange, of course, for an attractive rate of return.
As economist Sahil Jai Dutta points out, many corporations Labour seeks to attract have “shunned investment for the past three decades, while ramping up dividends, buybacks and executive pay”. He adds: “Rather than confront why, Labour’s priority seems to be sweetening investors and developers with more money available on better terms… If the budget is a window into where power lies in the country, this shows how far Labour has to go.”
The budget essentially confirms that the economic system is broken and Labour’s attempt to fix that will intensify the exploitation of people who actually do the work, who struggle to keep public services going while their living standards continue to fall.
Neither capitalism nor the political system that sustains it is working. An assemblies-based democratic system will have to create a sustainable, collectively-owned, run and managed economy in its place. With the far right lurking in the wings, the alternative doesn’t bear thinking about.