By Gray Allan, Falkirk Labour Party member
In the days and weeks leading up to Wednesday’s budget statement, the media was awash with speculation on how the Rishi Sunak, Chancellor of the Exchequer, was going to repay the pandemic borrowing, which is at record levels. There was also a drip feed of leaks from No. 11 Downing Street, notably on the changes to the minimum wage and public sector wages, which earned him a rebuke from the Speaker of the House of Commons
The past twenty months or so of the COVID pandemic took the Tory Government completely by surprise. They were unprepared and complacent, despite warnings by virologists dating back years which said that a global pandemics occurred roughly once every hundred years and that one was overdue.
Boris Johnson and his gang were slow to react and slow to implement measures to protect the UK. That intervention, when it at last was delivered, came in the shape of massive state intervention. Spending on personal protective equipment, albeit with many contracts going to Tory cronies via dodgy deals, track and trace systems (failed), ‘Nightingale Hospitals’ with no extra medical personnel to staff them, the furlough scheme, universal benefit uplift, business rate relief and other support for private businesses. Many of these brought forth howls of horror from the right wing of the Tory Party as they as they were diametrically opposed to their basic political instincts.
Rishi Sunak, the workers friend?
Cometh the hour cometh the man? The former Chancellor Sajid Javid, thrown under a bus by Dominic Cummings, was reputed to be on the more liberal wing of the Tories. His replacement Rishi Sunak was thought to be much ‘drier’ monetarist Tory. As the pandemic deepened the measures were rolled out, we had “Eat Out to Help Out” and pictures of Sunak serving burgers in a fast food joint.
We had the furlough scheme, with Sunak preaching ‘protection’ hard-working people, the Universal Credit £20 uplift, with Sunak was portrayed as some kind of workers’ friend. Nothing could be further from the truth. He is one of the so-called ‘Masters of the Universe’, a privately-educated multi-millionaire hedge fund banker, which no doubt accounts for his £4bn cut in the tax on banks. He has fiscal austerity written all through him like a stick of Blackpool Rock.
So what has happened to Rishi this week? Has he and the entire Tory Cabinet had a Damascene moment? Have they seen the light? Are they all now tax-and-spend state interventionists, sitting comfortably in the social democratic centre? Hardly, but the first reactions to the Budget have all been on the expenditure plans and none on cuts. Yet the implications of some of the announcements can only mean more austerity.
Even more significant is that the Tory budget is an edifice erected on a quicksand. It all hinges on the Office for Budgetary Responsibility predictions of the economy. This shows the economy bouncing back from COVID more strongly than expected, giving the Government slightly more tax income to spend. However there is not one whisper of Brexit. The British economic recovery might be stronger than anticipated, but it is ‘bouncing back’ from a weak position, having seen the deepest recession of any G7 country.
The same OBR has already warned that the impact of Brexit on the economy will be far worse than COVID and longer-lasting. Ten per cent of UK car manufacturers are already laying off workers or restructuring, due to the semiconductor supply crisis.
End of the pay freeze is an illusion
The announced ending of the public sector pay freeze is nothing but smoke and mirrors. It is an old story. Ending a pay freeze is meaningless unless Government departments, the NHS and local government are given the extra funding to allow them to meet demands for higher pay. Kevin Courtenay, joint General Secretary of the National Education Union said; “… the hint of a pay rise may still prove to be a con. If the Chancellor expects to meet a pay rise through existing budgets, then we will see further cuts…”
Nor does the Budget have anything for the millions in low pay jobs or those unemployed who will be hit by the large increases in gas and electricity bills that are now on the way. The heartless claw-back of the Universal Credit uplift has been replaced by a reduction in the amount of benefit lost if a worker on universal credit takes a job. But again it is nothing but an illusion. Six million have been affected by the cut in Universal Credit, but less than two million will benefit from the 8% cut in the so called taper from 63% to 55%. It still means that those on Universal Credit will only get 45p for every extra £1 they earn and this great ‘benefit’ is only of any use to a third of those on benefit, excluding all of those not in work or unable to work due to ill-health or disability.
And then there is the Tory pittance, the miserable increases to the Living Wage, which goes up by 59p to £9.50 per hour with the minimum wage rising to £9.18. This now makes the Labour Party leaderships’ position of a minimum wage of £10 look frankly ridiculous. Party Conference however overwhelmingly supported the £15 per hour rate.
Ring fencing threat to Council spending
Optimistic economic forecasts and real growth can come with a sting in the tail. Interest rates, set by the Bank of England, are historically low. If these go up there will be an immediate hit on workers burdened with mortgages. Many are already at their limits due to the big rises in house prices in the past period. Even a modest rise in rates will push some over the edge and repossessions will increase.
The reform of business rates and the discounts of up to 50% for the retail hospitality and leisure sectors will have an immediate impact on local councils to whom the business rates go. With no specific mention of local government it would be right to be concerned that any extra funding will be ring-fenced and targeted at the issues Sunak covered in his address, housing, schools funding, the “Start for Life” parenting programme and the £150m for early years childcare.
The background to this, of course, is that local authorities have had tens of billions of their financing taken away in the last ten years, with the result that many local government services are cut to the bone. There is nothing in the Sunak budget that even hints at a recovery of this lost financing.
Scotland, Wales and Northern Ireland have their block grant increased through the Barnet Formula. Within that, they are free to decide how it should be spent on the functions devolved to them. In Scotland, the SNP Government has a history of withholding money from local government, leading to disproportionately heavier cuts to services. With backlogs in the NHS, it is unlikely this budget round will be any different.
Boris’s supposed ‘levelling up’ plan is looking decidedly threadbare. Past promises to match lost EU funding of £4.5bn to tackle inequality and deprivation are being replaced with a £2.6bn fund to improve numeracy skills. The loss and failure to replace the £1.9bn of EU Structural Funding will provoke anger in the “Red Wall” areas or in Scotland and Wales who received big payments in the past.
Environmental measures missing from the Budget
You could be forgiven for expecting that there would have been some mention of measures to reduce climate change! COP26, is after all, about to start in Glasgow, but not one word was there to be seen in Rishi Sunak’s budget. On the contrary, the Chancellor has cut air passenger duty on domestic flights “to make Britain better connected”, thereby promoting the least environmentally-friendly form of travel.
In fact, there are already more environmentally sustainable ways of travelling between different areas of the UK. Electrified rail links between Edinburgh and London are on average 49% more expensive than the equivalent kerosene guzzling flight, which is a complete nonsense. In any case lifeline air routes such as to Orkney Shetland and the Western Isles are already exempt from air passenger duty.
This was a budget statement full of illusions. Sunak boasting that he was boosting the funding to the NHS and to Education where the amount he announced was only a third of what the Government’s own “Catch Up Tsar”, Sir Kevin Collins, said was necessary to repair the damage caused by COVID. Even more fanciful were his boasts on wages and support for workers.
While a few workers may have seen a pay increase by 3.4% in real terms, millions of workers in the public services, in the gig economy and in low-paid part-time work have not. This Tory budget has nothing for them.
No bold alternative from the Labour front bench
Rachel Reeve’s reply to the Tory Budget has been praised in some quarters, notably by Paul Mason who called it “energised and clear”. She was far better than Starmer would have been had he not been isolating with COVID, but no clear alternative was set out. Now is the time for a clear socialist alternative that protects public services and workers standards of living while making the wealthiest in our unequal society carry the burden
Because despite Sunak’s spending commitments, many of which don’t take effect for up to three years, this was a Budget that will not protect workers from the approaching cost of living crisis. If the Tories think workers will forgive them all of this because they have cut the price of beer, they are sadly mistaken!
