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THE latest Budget and Comprehensive Spending Review from the Chancellor provided a boost to certain parts of the economy. If you are a big polluter or fossil fuel producer, or a bank executive or shareholder, or an arms manufacturer — then this was a good spending round for you.
But for ordinary people the picture is once again very different. You are getting clobbered by a Tory Chancellor and a Tory Prime Minister who is only anxious to get the PR right and can definitely rely on the media on Budget day to deliver.
If this is reminiscent of Osborne and Cameron, or Hammond and May, it should be. They all belong in the rogues’ gallery of “reverse Robin Hoods.” They have all hammered ordinary working people with tax hikes and pay freezes while providing handouts and tax breaks for the rich, big business and the banks. This Budget was precisely in that mould.
Thankfully, we can rely on some objective analysis on the Budget from think tanks such as the Institute for Fiscal Studies (IFS), the Resolution Foundation and others.
They are very far from being left of centre. The Resolution Foundation is chaired by Tory Lord Willetts and the IFS probably would not object to being described as fiscal hawks.
In any event, they do provide detailed and non-partisan analysis of tax and spend policies — and their verdict is clear. They have simply made explicit what is contained in the projections of the Office for Budget responsibility (OBR) and the Treasury’s own documentation.
The key points include:
• falling real wages next year and no increase over the following two years
• a higher tax burden on ordinary people, up to £3,000 a year more for average households by 2027
• one of the biggest “savings” is from the government abandoning its manifesto pledge to keep the triple-lock on the state pension
• the “big increase in department spending” is primarily driven by the increase in financing for social care
• which is funded by a whopping increase in National Insurance Contributions (the most regressive tax on the books, clobbering the lowest paid while the highest paid are shielded)
• much of the remainder in spending is a sticking plaster for the NHS, which is under severe threat from the government’s Covid policy
• and just to make sure we understand their priorities clearly: a cut in taxes on the banks (the surcharge and the bank levy) which benefits shareholders and bank executives
This has nothing to do with “build back better,” “levelling up,” or all the other false claims made for current Tory economic policy. It is old-fashioned, dishonest austerity policy to take from ordinary people, people on middle incomes or below and to provide tax giveaways to big businesses, banks and the rich. Austerity has not been halted. It is being deepened.
One the eve of Cop26, the Budget also completely disregarded the climate emergency, which was not mentioned in the Budget speech and had pitifully low resources devoted to it. Cuts to air passenger duty for short haul flights and for fuel duty are a kick in the teeth for the entire environmental movement.
These are surely a political gesture on the Chancellor’s part. While Boris Johnson allows dumping of raw sewage in our waterways, as Cop26 host he must at least pretend he is interested in the issue of catastrophic climate change. But Rishi Sunak is signalling to Tory backbenchers that he shares their contempt for the issue, as part of his campaign to eventually replace his boss.
The terrible priorities of this government were also clearly on display in relation to the defence budget. While other departments remain below their real spending level in 2010 and the crisis in local government funding is so grave that local authorities are told to look for a £400 increase in council tax, the MoD continues to expand its arsenal of hardware.
While the MoD budget is projected to rise modestly in real terms overall, there is a huge increase in spending on the military capital budget. This means that there is likely to be a further shrinkage of military personnel and a very significant expansion on military hardware.
As CND points out, the unilateral increase in Britain’s nuclear warheads already announced is in breach of international law on non-proliferation, a treaty which the British government has signed.
The increase in spending on military hardware can now be widened in scope. The Treasury documentation describes this as “the largest sustained increase in defence spending since the Cold War, to safeguard the UK’s cutting-edge military, underlining the UK’s commitment to Nato.” So, people on universal credit must tighten their belts, but there are billions for the new Cold War.
All of this takes place against a backdrop of exceptionally weak growth in official projections over the medium term. The Chancellor neglected to mention that this country will have one of the weakest recoveries in the G7. This is mainly because we have also had one of the worst pandemic outcomes, which the OBR says “scars” the economy over the medium term, as well as inflicting a huge toll on public health.
According to the OBR, the combined effect of scarring on the economy from Johnson’s Brexit policy and his pandemic inaction is to lower growth by 6 per cent. But the Chancellor really had nothing to say about this prolonged stagnation and the crisis of productivity that underlies it. Unsurprising then that he has no measures to address it.
Johnson is literally presiding over death and destruction. Just as he has let disabled people, the elderly, ethnic minorities and working people bear the brunt of the Covid-19 death toll, so he is ensuring that the economic price of these barbaric policies is overwhelmingly paid by middle- and low-income earners.
Meanwhile, Sunak looks after his own in the banks, while polluters and arms manufacturers have also done well. For almost everyone else, this is even more austerity.
Diane Abbott is MP for Hackney North and Stoke Newington.
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