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MATHEMATICALLY, it was impressive stuff. Chancellor Rishi Sunak stood at the House of Commons dispatch box and reeled off a series of bountiful spending statistics.
For this year and next, he pledged an extra £65bn support for the economy in the face of the coronavirus crisis. The furlough job subsidy scheme will be extended until the end of September (£7bn) along with aid for the self-employed (£11bn net); reducing VAT will save the hospitality and leisure sectors almost £5bn; and businesses will benefit from higher capital investment allowances (£25bn), a rates freeze (£7bn) and many other grants and tax breaks.
Extending the £20 a week uplift in universal credit to the end of September will cost the Treasury just over £2bn and paying £500 to some working tax credit recipients about £765m.
All this in addition to last year’s Spending Review and Budget announcements means that £407bn has now been pledged to rescue the British economy from a Covid-induced collapse last year and this.
Over the past 12 months, the government has foregone £44bn in VAT deferral and business rate holidays and disbursed £54bn in furlough support, another £118bn in loans and grants to small, medium and large enterprises, £14bn to transport services and £20bn to the self-employed.
The government’s capital spending in response to the coronavirus crisis will total £9bn by next March.
This amounts to the biggest peace-time bailout in British history, although more money was made available if required — over £1,100 billion — to survive the great financial crash of 2008-09.
Not that these bailouts are any reflection on the ability of the free market, free enterprise system to meet the needs of a modern society. Oh no.
Extraordinary times call for extraordinary measures, we are told. The neoliberal nostrums that state intervention in the free market economy is bad, that public funds should not subsidise lame ducks, and that public spending should be severely restrained because it saps the spirit of enterprise, have been put into hock.
Limits on government fiscal deficits and state debt have been thrown to the winds. Last year, government borrowing peaked at 17 per cent of GDP, five times Britain’s post-war average and the EU’s precious — and nonsensical — stability pact norm. It is scheduled to fall this year to around 11 per cent.
The National Debt has now soared north of 100 per cent of GDP, well above the EU’s precious 60 per cent.
However, as Chancellor Sunak was at pains to reassure us, everything would return to normal in just a few years. Any notion that capitalism itself has again been found wanting in the most dramatic way never entered his head.
After all, international financial crashes happen infrequently. Global pandemics are as rare as dinosaur droppings. The blame for them cannot be laid at capitalism’s door, surely.
And yet. The 2008 crash was preceded by more than a decade of turbo-charged deregulation of financial markets in which every kind of contract was spun out into complex derivatives to be rebundled for trading over and under the counter.
The earth-shaking consequences would have been foreseen by Karl Marx, except he thought that not even the traders in fictitious capital would be so stupid, short-sighted, greedy and corrupt as not to find a way to avoid them eventually.
There will be more.
Rampant capitalism’s destruction of the natural world, new and unregulated interactions between human beings and the animal kingdom, and the industrialised mass slaughter of animals for processing, shipment, marketing and human consumption, have combined to increase the transmission of viruses to homo sapiens. In overcrowded and insanitary conditions, these spread and mutate at a speed and on a scale made possible by the modern means of global travel.
Knowing these dangers, has capitalism invested in the scientific research, regulation, hygiene, healthcare, medical equipment, vaccines, anti-virals and civil emergency services necessary to combat epidemics and pandemics — not only nationally but internationally?
To the extent this occurs, it is often on the basis of state intervention, public institutions and public and voluntary sector funding.
To the extent it does not occur, we see 116 million Covid infections worldwide and more than two million fatalities in the pandemic so far.
Pandemics will recur.
But to return to the issue that Sunak knows best. Money.
Before entering the Westminster Parliament, he used his public-school education and Oxford University degree in politics, philosophy and economics in the service of Goldman Sachs. Then it was a stint at the misnamed Children’s Investment Fund, a City hedge fund whose holding company is based in the Cayman Islands tax haven under British jurisdiction.
The CI Fund prides itself on its charity donations, although the biggest single recipient appears to be billionaire chief executive Sir Chris Hohn. His wholly owned tax-dodging company banked his salary of £343m last year.
One more hedge fund and billionaire boss later, Sunak is now one of the richest millionaires in the House of Commons.
That may be why much of his Covid-19 rescue package goes straight into the coffers of business, big and small.
Public services have been allocated a little over £208bn extra in Covid-related current spending for last year and this. This includes the test-and-trace budget of £22bn, half of which had been wasted on private contractors before the NHS, local councils and volunteers stepped in.
What was not widely reported from last week’s Budget was that public services and the NHS, especially, received almost nothing extra to cope with the post-Covid fall-out. Ominously, though, another £1bn was earmarked for DWP investment in “compliance” from 2022.
The Chancellor could have granted NHS workers an emergency pay bonus and unveiled extra support for local authorities to prevent inflation-busting rises in council tax. He could have used our new-found freedom from EU directives to slash and selectively abolish VAT.
A massive investment programme in health, social care, council housing and the civil emergency services could have been funded from immediate increases in corporation tax and capital gains tax, the introduction of a financial transactions tax and the imposition of a windfall tax on financial institutions and the social media giants.
Instead, Sunak’s strategy is to reduce the government’s spending deficit in three main ways.
Firstly, through additional tax revenues as the product of future economic growth. This would normally make sense, except that the Office for Budget Responsibility has now cut its economic growth forecasts for every year from now until the end of 2025 except the next one.
After a rapid recovery, the OBR sees growth slowing to below 2 per cent from 2023. The Chancellor’s extra 21p a week in the full National Living Wage is unlikely to boost demand and reverse this decline.
Nor are his belated and unambitious plans for a UK Infrastructure Bank and town and city funds bold enough to have the necessary impact, while free ports will offer yet more subsidies to business at the expense of other areas.
Secondly, corporation tax on company profits is set to rise from 19 per cent to 25 per cent in 2023. This allows enough time for big companies to conceal or transfer profits and minimise their tax liability.
Thirdly, income tax allowances will be frozen at their current band levels. Here, the burden will fall on the mass of ordinary people. We can expect this source to become the major one — together with big increases in regressive indirect taxes — over the coming years.
This Budget did nothing to abolish poverty for those front-line workers who have kept us afloat over the past 12 months. Nor will it halt the resurgence in child poverty.
Rishi Sunak’s budget was for the profits of the few rather than the wellbeing of the many.
Robert Griffiths is general secretary of the Communist Party.
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