My Socialist Response to Brown’s 2005 Budget
by Steve Wallis
Version 2, 26th March 2005
On the 16th of March, New Labour Chancellor Gordon Brown announced two supposedly huge give-aways for pensioners in the pre-election budget – a £200 reduction in council tax, plus free bus travel. He did not mention the small print in his budget speech in the House of Commons or his five minute speech shown on TV (which I saw after the BBC1 news), and analyses of the budget on news programmes (on BBC1 and Channel 5 at the very least) did not mention it either. However, scouring the papers on the following day, I noticed that the council tax reduction is only for one year (as is the Tories’ promised council tax reduction by the way) and the free bus travel only applies during off peak periods! One of the news programmes even featured a pensioner who paid about £200 a year on bus travel and said that she would be £400 a year better off as a result of the budget as a result of these two announcements.
Much of the media has promoted the budget as a huge give-away, and the massively pro-Labour Daily Mirror (but which often has very good articles nowadays and which tends to promote Brown over Blair despite the fact that there is very little difference between them in terms of the politics they put forward) was particularly guilty of this on the 17th of March, screaming “Mr Incredible” on its front page, trumpeting the give-aways to pensioners and a supposed £12.6 billion to schools and colleges (which is supposed to include £9.4 billion spent over five years to smarten up primary schools, by rebuilding or refurbishing 8,900 of them, according to Richard Garner in the Independent).
All money spent building schools and hospitals have to go through the Private Finance Initiative (PFI) or Public-Private Partnerships (PPPs). Contracts are negotiated locally, so the precise details will vary from school to school or hospital to hospital. However, my participation in the Hands Off Withington Hospital campaign, which my former revolutionary socialist organisation Militant Labour (formerly the Militant Tendency, now the Socialist Party) set up, armed me with the arguments to massively undermine New Labour Minister Keith Bradley when I hopefully stand as a candidate for the Greater Manchester Democratic Socialist Alliance (which has the discussion group http://groups.yahoo.com/group/gmdsa and the website http://www.gmdsa.org.uk) in Manchester Withington constituency at the general election. [Bradley built his career out of campaigning against the closure of that hospital when threatened by the Tories but later supported its closure, after we had kept it open long enough so that it was New Labour that closed it down.]
Basically, PFI and PPP are not about achieving efficiency savings, but about transferring money from the UK taxpayer to the private sector. The Maastricht criteria limit public spending to a certain percentage of Gross Domestic Product (GDP), forcing governments to fund building work by collaborating with industry (even if they don’t want to, which New Labour does). The European Union is a bosses’ club, and is very undemocratic with important decisions made by Ministers of capitalist countries or unelected bureaucrats – and the proposed European Constitution would make the situation worse by giving a lot of power to an unelected President to meddle in the affairs of an individual country perhaps against the wishes of their government.
For a start, knocking down school or hospital buildings in one part of a town or city to build new ones elsewhere or in their place is a waste of public money unless the buildings being knocked down are in a poor state of repair or were only intended as temporary buildings (as was the case with many buildings at my school in Penarth near Cardiff, until they were bribed by the Tories to “opt out” of local authority control). I’m sure that the policy of “centralising” healthcare into large hospitals, such as the closure of Withington Hospital to concentrate services at Wythenshawe, are a major reason for the escalating amounts of money spent on the NHS, which many analysts warn will not be affordable in the long term, although they prefer to talk about the ageing population as an excuse for saying that users will have to pay for healthcare (if capitalism continues of course). [Wythenshawe Hospital is very difficult to get to by bus, which is a major reason for the extreme unpopularity of Withington’s closure – this forces many visitors too poor or too environmentally conscious to own a car pay taxi fares to visit friends or relatives.]
When you collaborate with industry, companies have to take a cut, which naturally reduces efficiency. The idea that this is offset by privatisation is nonsense when you consider that staff are generally better motivated when they consider themselves to be doing something for the public good rather than private profit. It also costs more for private companies to borrow money on the financial markets than governments, because they are regarded as higher risks (due to the greater possibility of a company going bust than a revolution or a military coup taking place). Furthermore, in the case of the new buildings at Wythenshawe Hospital (and I have every reason to believe that this is a common trend) they will belong to the private consortium when the contract ends (25 years after it started in this case). Therefore, the NHS will be forced to pay money to that consortium to continue to use the buildings afterwards – unless a socialist revolution happens first, of course, which will be the case!
From reading the left-wing capitalist press that is more serious than the Mirror, i.e. the Independent and Guardian, it seems that the education money had already been promised before the budget, bearing in mind that the estimated overall handout only came to about £1.4 billion according to Independent Economics Correspondent Philip Thornton, and a handout of only £2 billion according to the front page article in the Guardian (written by Michael White and Larry Elliott), which they said was cancelled out by raising “the same amount through closing tax loopholes, removing tax breaks and bringing forward payments from North Sea Oil companies”. [Closing all tax loopholes, which of course New Labour will not do being the main party of big business, is a vital demand that I will be putting forward in my election manifesto. The rich should pay the tax that the government has decided they should and the expensive accountants who find the loopholes for them should be put out of a job! Seriously trying to implement this policy would bring the walls of capitalism crashing down – hence it is the best “transitional demand” that the Militant Tendency never had. Closing all tax loopholes was one of Kerry’s pledges, as well as taxing the rich, that he made in the second live TV debate with Bush in the US Presidential election campaign (see http://groups.yahoo.com/group/us-electoral-fraud about the fraud perpetrated by the Republicans to pretend that Bush won that election).]
Obviously, analyses of the budget will differ, partly due to genuine mistakes including misreading of the small print and partly due to deliberate distortions by journalists due to their political viewpoints, and there is a discrepancy between those two articles but the overall point that Brown gave relatively little away, despite the headlines to the contrary, is clear. None of those newspapers (nor the Daily Mail, which I bought to get a right-wing viewpoint) went into sufficient detail about the money for education for me to come to a firm viewpoint at the moment, but further information about it will doubtless be revealed in due course.
The Guardian front page article called it “one of the tightest pre-election packages in living memory” and pointed out that Brown “impressed the City with his restraint” (backed up by Digby Jones, Director General of the Confederation of British Industry, making that point on Question Time and warmly welcoming the Budget). New Labour is now the main party of big business in Britain, and Brown’s budget was largely aimed at satisfying them (but he used the word “enterprise” rather than “business” in his speech as usual, to be more voter-friendly).
The Independent is nowadays more left-wing than the Guardian, and more reliable as far as getting the facts straight. I’m sure that I improved that situation by starting to email Independent columnists in the week before the budget. I have since started emailing columnists and journalists from other newspapers – the Guardian now includes email addresses for most of its columnists and the Mirror has many email addresses for journalists throughout the paper. [I sometimes write political messages about more off-beat subjects (sometimes about football and one of my next will be about racism and mind control in Comic Relief’s version of Fame Academy) so I will not limit sending my messages to journalists concerned with political issues.]
The Indpendent’s budget supplement provides some excellent material, including sketch-writer Simon Carr quoting “Charlie” Kennedy as saying that “the poorest 20 per cent of families pay more tax, proportionately than the better-off 80 per cent”. They also had a graphic showing that an estimated £487 billion will be raised in the next financial year, compared to £519 billion spent – i.e. New Labour will need to borrow about £32 billion. So much for an economy doing well!
It is basic Marxist economic theory that capitalism goes in cycles of booms and busts. [Karl Marx’s short pamphlet entitled “Wage Labour and Capital” is my recommended reading for capitalist economics. Obviously, some things are out of date because he wrote it in the 19th Century, in particular the fact that Marx did not consider the effect of advertising; additionally capitalists plan much better nowadays so crises of overcapacity usually result rather than overproduction.] Recessions have occurred elsewhere in the world, so the idea that Britain is somehow immune is completely false, despite the fact that (as Brown pointed out in his speech) there have been 50 consecutive quarters of economic growth. I’m not an expert on economics, and analysts (including Marxist ones) have often predicted recessions occurring much sooner than they have occurred, but you cannot continue borrowing and spending. Sooner or later, you need to make big cuts to public spending, and this will act as a trigger for a recession. The Tories borrowed a lot of money during their 18 years of misrule, and their cuts to public spending as well as their attacks on manufacturing industry (the motive for which was to break the power of the trade unions) was undoubtedly a major factor for the recessions that occurred during their time in government.
To a certain extent, the borrowing deficit can be plugged by the “stealth taxes” which the Tories keep going on about (and almost certainly overestimate) but (according to the Guardian front page article) “most analysts [who] were last night predicting that taxes would have to rise by up to £10bn next year”. Since £10 billion is less than a third of the estimated level of borrowing, this would clearly not solve the underlying problems of capitalism.
So why has Brown been able to maintain growth for so long, at a time when most of the world has fallen into recession. Mainly it has been due to the large fall in unemployment, which has both led to reduced benefit payments and increased tax revenues. Additionally, there are still large proceeds from North Sea Oil, which make the UK a net exporter of oil – getting significant tax revenues (although the massive profits made by the oil companies underline the need for a world socialist revolution, as well as highlighting the significance of that resource for which the war on Iraq was fought). Another very important factor is that English is our first language – after the decimation of manufacturing industry by the Tories we rely on service industries to a great extent, and services are usually carried out in English.
New Labour had gone so far to the right that the Tories were stuck in a very small niche between them and the United Kingdom Independence Party. [The Liberal Democrats are to the left of Labour on most issues nowadays but they too are a party of big business and hence do not campaign effectively, if at all, on the issues for which they have the best policies – a local income tax to replace the council tax and proportional representation. See my pages on taxes and the Campaign for Democracy in the UK for more information.] They were 9% behind New Labour in opinion polls and in desperation adopted policies to the left of Labour on terrorism, ID cards and reductions in council tax for pensioners. This reduced Labour’s lead to 3%, which caused Labour to finally shift Labour to the left, including announcing a significant increase in the minimum wage. A poll shortly before the budget showed the lead at 5%.
Due to the peculiar way people vote across Britain, it has been estimated that the Tories need to win a 5% greater share of the overall vote than Labour to avoid Labour having an overall majority! The nightmare scenario for big business would be New Labour winning the election, but getting fewer votes than the Tories, especially with me as the instigator of and the Campaign for Democracy in the UK as an MP for Manchester Withington. It would then be possible to launch a mass campaign for proportional representation by Single Transferable Vote, with a reasonably large number of MPs elected per constituency unlike the Liberal Democrats’ proposal for the Scottish parliamentary elections. I found a web page of theirs suggesting that between 4 and 7 candidates would be elected – which would mean that a party would need to gain of the order of between 100/7 and 100/4 per cent of the votes after transfers to get any seats (roughly between 14% and 25%), obviously helping them much more than socialists.
The Tories’ claims that they can make £35 billion of cuts without affecting frontline services are clearly ridiculous if you expose them to serious scrutiny. In Michael Howard’s five minute TV Budget Response, he pointed out a couple of examples of waste amounting to a small number of millions of pounds. There is an order of a thousand different between a million and a billion, and he was trying to pull the wool over voters’ eyes.
Besides, there is a huge amount of hypocrisy in the Tories’ claims to be interested in reducing waste, bearing in mind the huge number of managers introduced into the NHS by them and the huge increase in the number of quangos (which have increased under New Labour).
The Tories stand no real chance of getting elected in the general election, largely due to their record when they were in power, under the leadership of Margaret Thatcher and then John Major. Socialists should concentrate our efforts in solid working class areas, which have traditionally been Labour strongholds, including in Scotland where the Scottish Socialist Party is planning to stand everywhere, and we can hopefully get several MPs elected despite the unfair electoral system. We must avoid putting forward too wishy-washy politics, because we would then not get taken seriously enough.
I had promoted the idea that the “Socialist Unity” conference, organised by the Socialist Alliance Democracy Platform (SADP) and held on the 12th of March, should establish a Democratic Socialist Alliance (DSA) as a national organisation. That has unfortunately not happened, but the SADP did register the DSA as a party name for the last local elections (for Socialist Alliance candidates who did not want to stand as Respect candidates, in defiance of the Socialist Workers Party leadership) so we should be able to stand under that name in Greater Manchester.