04.11.2021

Give a little and take a lot

Though there was nothing, not a thing, on the environment. Rishi Sunak’s ‘big state, high tax’ budget had a distinctly populist feel, writes Eddie Ford

In some respects, the budget revealed by Rishi Sunak on October 27 was an attempt to please enough of the people that Brexit was the right thing to have done and that despite the Covid-19 pandemic good times are just around the corner. The overall emphasis was on spending now, with tax cuts in the near future - meaning in the run-up to the next general election, which doubtlessly will be highly coordinated with a bubbly and optimistic Boris Johnson.

Bringing some good cheer, Rishi told us that forecasts from the Office for Budget Responsibility show the economy will grow by 6.5% this year, having previously predicted 4% for this year after a plunge of 9.9% in 2020 - the worst recession for 300 years. The only way is up from such a low. Therefore, according to the OBR, gross domestic product will rise by 2.1% in 2023, 1.3% in 2024, 1.6% in 2025, and 1.7% in 2026. Hardly impressive.

Estimates for long-term scarring for the economy have been revised down from 3% to 2% and unemployment is forecast to peak at 5.2% in the fourth quarter of 2021 - not the 12% feared due to the ending of the furlough scheme. The major note of caution was that inflation looks set to rise to 4% or more next year.

Nonetheless, all of this means that Sunak has more money in hand than expected - an extra £51 billion, to be exact. Hence he proudly announced that departmental spending in this parliament will rise by £150 billion, the “largest increase this century”: ie, spending will grow in real terms by 3.8% a year. Also, there will be grant funding for local government of £4.8 billion - the “largest increase in core funding for over a decade” - and overseas aid will return to 0.7% of GDP by the end of the parliament after the controversial cut to 0.5% last year. Furthermore, Sunak said there would be £1.7 billion of funding in the first grants from the treasury’s ‘Levelling Up Fund’ for towns and cities, including Stoke-on-Trent, Leeds, Doncaster and Leicester - that is meant to keep the ‘red wall’ seats won by the Tories in 2019 onside in 2023 or whenever.

Part of the real-term rise in allowances for government departments is likely to be used for increases in spending on pay for public-sector workers, whose pay will be marginally increased, and to cover the rise in the national living wage for those over 23. This will rise from £8.91 to £9.50 an hour from April 2022 - hardly a king’s ransom. As planned (or feared), the ‘emergency’ extra of £20 was cut from universal credit, but immediately softened by reducing the taper from 63% to 55% - coming into effect no later than December 1, but people on UC who are not working will not benefit at all.

What this means is that workers in work will probably be worse off, while workers out of work definitely face a massive decrease in their already below-subsistence living standards. Inflation as well as a £20 benefit cut will see to that. Pensioners will lose out too due to the breaking of the election pledge about the ‘triple lock’.

Headlines

Perhaps the most headline-grabbing announcement in the budget is the biggest shake-up of alcohol duty for 140 years - a system that is full of historical anomalies and nonsensical contradictions. Essentially, the UK’s main rates will be cut from 15% to 6% and as a result the cost of a pint of beer will be cut by three pence (wow). Champagne, Prosecco, Cava and English sparkling wines will be cheaper too - by around 83p a bottle. Good news for English producers, whose sales have already been soaring in recent years … and women (who proportionately drink wine). Price cuts that Sunak portrayed as a “Brexit dividend”! On the other hand, there will, of course, be losers: drinkers of strong cider, whisky and other spirits will have to pay more. A Brexit punishment?

On the flip-side, at least if you are a Tory true Thatcherite believer, taxes are heading for the highest level since 1950 and the government plans to go into the next election with public spending accounting for 2.5% more of the economy than in 2019-20. Tax revenues are set to reach 36% of national income in 2024-25, compared to the pre-pandemic levels of 32.9%.

This has led to various sections of the media comparing Rishi Sunak to Gordon Brown and contrasting him to George Osborne. But context is all. There has been a near global financial meltdown and not a few years later the Covid-19 pandemic. What is particularly notable about Sunak’s budget, though, is that he appears to have converged with Boris Johnson. The main thing is not balancing the books, but winning the next election. That counts above everything.

So, despite the UK government hosting Cop26 in Glasgow, there was the complete absence of any funding measures to deal with climate change. Instead fuel duty is frozen - yet again. And, to make matters even worse, the chancellor announced more money for roads and even a tax cut for internal airflights. It amounts to two fingers up to climate protesters. But, maybe the calculation is that they are not natural Tory voters. Either way, hardly clever politics. As with Owen Paterson, there will be a price to pay … Keir Starmer will hope to extract it.

Whist on the subject of taxation, it is worthwhile mentioning the recent G20 summit in Rome and its “historic” commitment to a global 15% minimum corporation tax - drawn from proposals originally put forward by the OECD. In reality, this deal means a redistribution of revenue from Ireland, Luxemburg, Lichtenstein, etc to the UK, France, Germany, Japan and above all the US. Indeed, as the Wall Street Journal explains, for the US the additional money generated by this minimum corporate tax will be 15 times greater than that in China - and the total boost for 52 so-called developing countries is estimated to be about $1.5-$2 billion a year. Peanuts. Even then there are plenty of loopholes - easy meat for the armies of very clever lawyers and accountants hired by big companies.

However, for a group that never seems to adapt or change with society, look no further than the Socialist Workers Party. Its reaction to Sunak’s budget was utterly predictable and totally stupid. Hence the headline - ‘Budget gives rich cheaper champagne, as workers face wage and benefit cuts’ (October 27).

Firstly, the budget was not a blatant attempt to steal from employed workers - making the headline factually inaccurate.

Secondly, Socialist Worker’s staff writers have a very peculiar view of how the masses really live. It has been a long time since drinking champagne/sparkling wine has been regarded as the preserve of an aristocratic or nouveau riche elite: these days Champagne, Cava or Prosecco is found at just about every party, wedding or festive occasion. You cannot help but wonder how SWP members socialise at Christmas.

Dickensian

The idea that only toffs can afford sparkling wine is risible, almost as if we live in Victorian times. Bob Cratchit might have only managed to feed his disabled son, Tiny Tim, with stale bread and thin gruel and could not afford to buy the poor kid any kind of Christmas present because of the greed of Ebenezer Scrooge, his heartless employer. But, nowadays, because of unions, political struggle and organisation, we have managed to raise our living standards somewhat. Foreign holidays, running a car, Christmas presents and even being able to afford a bottle or two of Cava are the norm.

As with their odd view of football, it could easily lead you to believe that the SWP inhabits a different world than the rest of us. Actually, I do not think that is the case, but they do - well, their leaders do - at least in their political imaginations. It is the world of Charles Dickens, A Christmas carol, Pickwick papers and David Copperfield … a world of endearing pickpockets, honest cockneys, poor waifs, sadistic teachers, upper class cads and over-fed middle class gentlemen. Not a very useful guide to the politics of the 21st century.

eddie.ford@weeklyworker.co.uk