JUST a week ago Boris Johnson’s fledgling Chancellor abandoned a large part of the Treasury orthodoxy that has informed economic policy for most of this century.
Where last week Rishi Sunak thought £12 billion sufficient to deal with the economic fallout from the coronavirus epidemic, on Tuesday he argued that an extra £20 billion was needed, and he mixed in another £330bn in government loan guarantees if the banks do what they usually do and put their narrow institutional interest before the common good.
The significant pressure on the government comes from business, especially after French President Emmanuel Macron, who is almost bereft of allies outside of big business and the banks, pledged up to €300bn to head off business failures in France.
To get Sunak’s figures into perspective, £330bn is a very large wedge. According to the Office for National Statistics, Britain’s gross domestic product in 2019 was £2.21 trillion.
Clearly the government’s priorities are the banks and big business. This will come as a shock to the owners of many smaller and medium-sized enterprises who labour under the misapprehension that the Tory Party is the party of the entrepreneurial classes.
The £25,000 offered to firms in this sector (and a more miserly £10,000 available to the minnows) will barely meet a month’s payroll costs for even the most modest enterprise.
Even so, overall these are gigantic sums of money and they throw into relief the hypocrisy of the Tories.
During the election campaign last November, the Tories proposed a £2.9bn increase in day-to-day spending and another £8.1bn in investment or infrastructure spending.
Sunak, who was then chief secretary to the Treasury, said: “‘I think what you’ll see in our manifesto is it will be fully costed and in that you will see, as you would expect from a Conservative government, responsible economic management.”
Sharp criticism was aimed at Labour for its “unrealistic and irresponsible” pledges to spend an extra £97bn on routine expenditure and £55bn on investment.
And the Institute for Fiscal Studies (IFS) said: “The general election spending pledges of the Tories and Labour are not deliverable.”
Fast forward to this week and the institute’s Paul Johnson says of the Chancellor’s new measures: “He will have to come up with more.”
We need not attach too much credibility to the IFS. It was formed in response to Labour chancellor’s James Callaghan’s modest 1986 bid to institute new corporation and capital-gains taxes and evolved to effect a fusion of right-wing Labour and Tory economic orthodoxy.
What is significant is that a consensus lies in shattered pieces. When Donald Trump proposes giving every one in the US a $1,000 cheque it is clear that even the holy rollers of unbridled capitalism are in retreat.
It is clear that the new orthodoxy across the capitalist world is keen for a deep reorientation of economic policy that allows for state intervention and public finances to support big capital and the banks, while measures to mitigate the effects of the crisis on working people remain outside the consensus.
It may be masked by a miasma of mendacious rhetoric, but it remains their class against our class.
A Tory government will not throw aside the deep-rooted economic interests of big business and the banks.
Already many million minds are opening to ideas that subvert private ownership, the monopoly over government policy exercised by big business and the inviolability of markets.
This is why Labour’s package of proposals needs to backed up by as much action and mobilisation as circumstance allow and a vigorous challenge in Parliament.
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