By Peter Main
At first sight, Kwasi Kwarteng’s “mini-budget” looks like nothing more than pandering to the Tory members who voted for Liz Truss. Anyone who seriously thinks that forcing part-time workers on Universal Credit to find a few more hours of work each week is going to have the slightest effect on the national economy, is clearly blinded by prejudice.
Other measures are equally clearly just hand-outs to the already rich. We are supposed to be impressed by the reduction of income tax by one penny in the pound. For someone on £20,000 a year, that will be a gain of £167, someone on £200,000, however, will get £5220.
Dropping the proposed increase in National Insurance means the worker on £20,000 has an extra £93, those on £100,000 will get £1,093. Scrapping the top rate of income tax altogether will give a cool £3,000 a year for those on £200,000. Kwarteng’s real priorities are revealed by LSE researcher Andy Summers, “£1 billion in gains will go to just 2,500 individuals who each have an income in excess of £3.5 million”.
There is, however, more to Truss and Kwarteng’s policies than just big bungs to their friends. Their elevation to the leadership of the Tory party was a victory for the European Research Group and the Brexit strategists behind the Leave campaign. Their objective has always been to “free” British capital from the various forms of protective legislation, Health and Safety laws, environmental norms, trade union rights, controls on finance and so on that the very different circumstances of European capital had found necessary.
The very fact that they refused to call Kwarteng’s announcement of his plans a Budget, which would have required an “independent” assessment of their likely economic consequences, was a signal that they do not think the normal rules apply to them. They knew perfectly well that any such assessment would draw attention to the huge budget deficit that their tax cuts would produce, contrary to the supposed fiscal rules of previous Tory Chancellors.
They could not, however, escape the verdicts of the markets. Within minutes, the pound had begun dropping in value against the dollar. Within hours it was at its lowest point in decades, just $1.09 to the pound. By Monday it had reached $1.035. Kwarteng brushed this aside, remarking that markets always go up and down and the important thing is the long term. In the long term, that drop in the value of the pound will make it easier for the Brexiteers’ US backers to buy up assets, for example, parts of the NHS, here.
Oddly enough, bankers, financiers and even economists are also aware of the long term and the great majority immediately concluded that, long term, Kwarteng’s policies were more likely to drive the British economy into a ditch than achieve the 2.5% annual growth rate that he predicts.
That they are almost certainly right, should be no comfort to socialists. Kwarteng already gave notice in his speech of even more anti-union laws; a requirement to maintain essential services during strikes, compulsory ballots in response to any offer made by an employer.
The inflationary effects of the tax cuts will quickly erode any marginal gains they may bring workers. The growing budget deficit will no doubt be used at some point to justify another round of public spending cuts and privatisations. We can certainly expect a raft of reactionary measures in the course of the next few months as other ministers unveil their plans.
The immediate danger is that the trades unions, having failed to mount any effective fight against the last 12 years of austerity, cuts and privatisation, will now fail to go beyond their preferred strategy of limited strike action and long drawn out negotiations.
In the longer term, there is another danger, that the Labour Party under Keir Starmer will identify with the mainstream economists and, for that matter, many on the Tory backbenches, when they call for a return to economic orthodoxy, balanced budgets and “responsible government”. This would be preparation for throwing overboard even the limited plans outlined at this week’s party conference, and perhaps a behind the scenes deal with the Lib Dems and/or the SNP for the next general election.
What is needed, by very sharp contrast, is an immediate and unrelenting fight against the inflation workers are already facing, co-ordinated strikes for settlements that not only compensate for losses already suffered but protection from future inflation, 1% for 1%. Any move towards new anti-union laws should be met with strike action the moment they are tabled in parliament.
Likewise, any attempt by the government, employers or their judges to use the existing laws to declare strikes unlawful or to impose re-balloting, breaking the momentum of industrial action, must be met by solidarity action from all sections of the labour movement. We need to be clear that this right wing government is capable of just such sabotage and we need to respond to it with solidarity strike action up to and including its ultimate expression, a general strike.
Many commentators are already drawing parallels between Kwarteng’s non-budget and that brought in by Anthony Barber in the early Seventies which produced the “Barber boom” and then the mid-decade bust. That was also when Tories introduced the notorious Industrial Relations Act which was met by strikes and mass demonstrations but was only effectively defeated by the prospect of a general strike after the jailing of the Pentonville Five.
Under Thatcher, the Tories passed ever more draconian anti-union laws that still shackle us today. Union leaders refused to break these unjust laws, even though they made effective union action unlawful. That was a major factor in the decline of union membership which is now half what it was then. The lessons, positive and negative, of those decades need to be learnt if we are not to suffer a further collapse.
One key lesson is that, in every strike or balloting process, at every meeting of Enough is Enough, we need to propose organising the rank and file in the workplaces, to elect strike committees, to draw around them local campaigns and social movements like Acorn, into local councils of action with delegates from all these bodies. These can ensure that the movement we need to defeat Kwarteng and Truss is not derailed by our own national union leaders.