Not only will the Tory budget promote Britain to a pole position as the most unequal country in Europe, but it will also accelerate the existing crises of the cost of living, of the Tory party itself, and British capitalism [Editorial of the Socialist (issue 1196), weekly paper of the Socialist Party (CWI England & Wales)].
Former US Treasury Secretary Larry Summers said: “I think the UK is behaving a bit like an emerging market, turning itself into a submerging market.” And that’s how the capitalist finance markets reacted, markets whose freedom to wreak havoc is fully supported by Tory and New Labour ideology, fervently so by the new Truss leadership.
Sterling fell to its lowest value against the dollar since the dollar was created in 1792, and against other currencies. The government’s borrowing costs jumped as well. The context is an estimation that the budget measures – including the energy support packages for households and businesses – would involve an extra £411 billion of borrowing over five years. This is not the end of the grim drama.
The so-called mini-budget is an orgy of unbridled redistribution – upwards: from the working class and poorest to the already obscenely wealthy. “You won’t like this package if you care more about the poor” was how Mark Littlewood, director of the Thatcherite Institute for Economic Affairs think tank, put it. Quite.
The false claims to ‘national unity’ and ‘levelling up’ were killed and buried on 23 September and a declaration of class war was issued. The wealthiest 10% of the population will receive almost half of the gains from the budget – including every cabinet member. The gloves are off.
Kwarteng reduced the top rate of income tax, from 45p to 40p. If it had been in place when BP boss Bernard Looney pocketed his most recent pay deal, it would be worth £215,500 to him. Read across for the bosses of Royal Mail, the train operating companies, privateer port bosses in Felixstowe and Liverpool, and all of the fat cats trying to impose below-inflation pay rises on workers. Not to mention scrapping the cap on bankers’ bonuses and all sorts of bungs to billionaires.
‘Kwasi’s boost for families’ read the Daily Mail on Monday 26 September. Some families, yes. Your family, no. Estimates of the net effect of the budget on someone earning £1 million range from a £40,000 a year gain to £55,220. Either way, it’s more than the £25,971 median average salary in the UK. Millionaires are being given our wages.
This budget and its neo-Thatcherite authors will hasten and deepen the understanding of the rottenness of capitalism. The urgency of organising and fighting for a socialist alternative based on democratic planning of the economy by the working class will grow.
A mass working-class response must be organised to defend living standards and get the Tories out. That starts with real concrete steps to coordinate and escalate the strikes, preparing to defeat the implementation of the new anti-trade union laws headlined by Kwarteng and aimed at preventing strikes at all. The biggest coordinated strikes of this wave taking place on 1 October, backed up with local protests, show what’s possible and what needs to be built.
Kwarteng’s goal of a consistent level of 2.5% growth is a fantasy given the multiple crises within the capitalist system – which this budget will worsen. But lack of wealth accumulation at the top is not a problem. The FTSE 100 biggest corporations and banks are on track to return record amounts of cash to their shareholders in 2022. Dividend payouts are heading for £85 billion. £46 billion of share buy-backs have already been announced or implemented.
Despite many specific major attacks on the working class in the budget, it’s likely the indirect effects of the budget could have an even greater impact on making the poor poorer. Given the reliance on imports in Britain, with manufacturing forming only a tenth of the economy, the falling pound will increase the cost of basic foods, clothes, and other essentials. Spending on these things forms a higher proportion of working-class household budgets.
With inflation teetering on the edge of 10%, the average household disposable income had already dropped 16.5% in August. The number of goods bought had fallen by 1.6%. This budget will massively exacerbate this galloping erosion of living standards and the consequent fall in workers’ purchasing power, and therefore the problems for British capitalism.
The Bank of England’s response to the budget has been to raise interest rates – currently at 2.25% – with 6% mooted as necessary to ‘restore confidence’. Interest rate rises feed into mortgage payments which could, for example, go from £800 to £1,400 a month. Mortgage companies and banks are already cutting back on what they offer – and the housing market system means rents will rise. Kwarteng raising the stamp duty threshold on house purchases doesn’t help workers who can’t even get a mortgage.
The cancellation of the 1.25p in the pound rise in National Insurance from 6 November would “save 28 million people an average of £330”, according to Kwarteng. Who’s going to turn that down? But £330 will quickly disappear without a trace in the deepening black hole of October’s new energy bills, mortgage repayments and rent hikes. And the benefits of the NI cut do not fall evenly: the 24% of households where no one earns more than £12,570 a year won’t benefit at all from the change. If you earn £20,000, you will save £93 a year, less than £8 a month. Those on £60,000 will save £500 a year more than that.
Those part-time workers, including those with caring responsibilities, claiming Universal Credit will face sanctions – ie non-payment and consequent hunger, inability to pay bills, and suffering – for not working 15 hours a week, up from the current cut-off level of 12. Before these changes, it had been projected that 593,000 people would be sanctioned this financial year. This situation cannot hold.
These multiple crises and the clear perspective for things to deteriorate contain all the ingredients for the already split Tory party to implode. The Economist reports that the Labour Party treasury team has had about 250 meetings with CEOs of major companies, who are now so eager to talk to the opposition that tickets sold out for a business meeting with the shadow cabinet. How many Tory MPs will leave their sinking ship, and when they’ll jump, is not yet clear, but the Starmer lifeboats are at the ready. Steps towards building a new mass workers’ party with a socialist programme that defends working-class interests must be part of the response to this budget.