The British Labour budget
Less tax and spend, more tax and starve
11 November 2024
UK chancellor Rachel Reeves.
The Starmer - Reeves Labour budget has been lambasted as a traditional tax, spend and borrow budget in the tradition of old Labour. That’s not true. Old Labour budgets were based on Keynesian ideas of high levels of government spending to stimulate the economy and on the high levels of profit drawn into Britain through imperialist exploitation.
This budget is based on the economically illiterate Thatcherite model of comparing the economy to a household budget and using “balancing the books” as the grounds for widespread attacks on the working class in the hope that a moribund British capitalism will revive.
Starmer and Reeves support a pump prime model. Relatively small amounts of government spending will encourage big capital to invest and the British economy will recover. Part of the settlement agreed with the majority of unions, involves a provisional promise of workers’ rights which is largely undefined. The other is the removal of Tory plans for further austerity and settlement of a public sector pay dispute. The other major plan is for capital investment in public services, with a big payment going to the NHS.
There will also be public investment bodies to directly invest in capitalist firms. A public energy company will arrange grants for private firms. The water services have been retained by the private companies on the grounds that it would cost too much to buy them out, even though their entire history has been asset stripping and failure to maintain the system and the government would be perfectly entitled to seize their assets.
The paws of the trade union bureaucracy are all over this deal. It settles the growing conflict over public sector pay and produces a deal and ongoing influence in government. There are a number of major weaknesses within the deal.
Firstly, despite taxing and borrowing, not enough money has been invested. A rise in basic pay has been offset by a 50% increase in a bus fare cap. Support for rent payments for those on benefits has been frozen, wiping out any gains in income. The NHS gets substantial funds, but given years of deprivation, the most that this will do is pay new wage settlements and get it through the annual winter crisis.
Other public services will get smaller increases that will mean that at most they will tread water in a current state of disrepair. The clear aim is privatisation of services. Health Secretary Wes Streeting has already boasted of investment from Ely Lily. This would increase profits while reducing demand for funds from the government, but in the process public health services will quietly decline.
The pump priming model is not effective. The British economy is heavily financialised. Less than 20% is in manufacturing capital and in the City of London the financiers will simply take the money and run. An example of this is a promise of £20 billion to be invested in carbon capture, a dubious technology that serves as cover for the continued unrestrained exploitation of fossil fuels.
Furthermore, we should not ignore Starmer’s inability to restore the European market or the commitment to military spending – £3 billion for the armed forces and £3 billion a year for Ukraine. So, within Britain the budget will fail as a reform offering real improvements for the working class.
The Office for Budget Responsibility, in its report, indicates that it will not reinvigorate capitalism either. The low levels of growth will remain low throughout the lifetime of the government. These are dangerous times. A failing Starmer government will move to the right itself and, through its failure, prepare the way for a growing far right racist movement.
A resistance movement will need to face up to the reality of Brexit, look towards the European working class and stop advancing a reformist “tax the rich” programme that will not be enacted in a period of decaying capitalism.