Andrew Fisher of LEAP Economics looks at the choice facing us at the General Election – and what we can do.
WE HAVE TO BUST THE MYTH THAT THERE IS “LESS MONEY AROUND” and the next Labour government “will have to govern with less money around”, as Ed Balls is fond of saying. There is no less money around, it’s just in the wrong place.
There is no austerity in corporate Britain. Last month, official figures showed that UK company profits are at a record high.
So a Labour government will fail to challenge the fundamentals of austerity which, starkly put, means we have to pay for the crisis the rich created by cutting the jobs, pay and public services of the rest of us.
Nevertheless, Labour offers a concretely less severe form of austerity than the Conservatives propose. According to analysis by the Resolution Foundation, Labour austerity would mean £4 billion in annual cuts, compared to £37 billion implied by Conservative plans. The Institute of Fiscal Studies says Tory plans mean a 6.7% cut to departmental spending, whereas Labour’s plans mean a 2.4% cut.
While those differences are significant, how Labour addresses the fundamental structures of our economy is more important. The economy is in crisis because it has been built to generate inequality through the privatisation and deregulation that institutionalises profiteering, our dysfunctional housing system, regressive tax system, exploitative labour market, and through the financialisation of our economy.
Does Labour have a plan to fundamentally change this? No. But we have to acknowledge that Labour has identified the right issues and has some proposals to at least ameliorate these problems. Let’s look at each area in turn:
On privatisation and deregulation, Labour has pledged to freeze energy prices and regulate the sector more aggressively. It will also allow the public sector to bid for rail franchises (and drops hints it may go further), representing a departure from New Labour by intervening in oligopolistic markets.
The proposal to build 200,000 homes a year is important. We know that if we invest (and Ed Balls has dropped his silly announcement at Labour Party Conference that there would be no extra capital spending), it creates decent skilled jobs and apprenticeships – and we need homes for people to live in. The timid proposed regulations on landlords on tenancies and rent increases, and on letting agency fees, are at least steps in the right direction. In the labour market, Labour proposes to raise the minimum wage to at least £8 a year by 2020 – the minimum wage has lost value in real terms in recent years due to successive below inflation rises. LEAP analysis last year found that for a worker on the minimum wage this be would be around 60p real terms increase an hour. If they worked full-time, it would mean being over £1,000 a year better off than would otherwise be the case. There will also be tax breaks for companies that pay the living wage.
On taxation, Labour has pledged to restore the 50% tax rate at £150,000 and, perhaps more significantly, introduce a mansion tax. This is a welcome incursion into taxing wealth. Corporation tax will also rise to 21% from its April 2015 rate of 20%. Miliband has also threatened sanctions against the tax havens that are UK overseas territories – and perhaps there is a chance that the perennial tough talk (from whoever is in government) could actually translate into meaningful action.On financialisation, Labour is proposing to restore the bank bonus tax (to fund the ‘workfare-lite’ compulsory jobs guarantee) and increase the bank levy. It will also create a British investment bank to help fund a new industrial strategy.
While they may do little to set the pulse racing for socialists, these reforms do put some clear red water between Labour and the turbo-charged Thatcherism that Cameron and Osborne would impose if re-elected. These largely modest reforms, however, do correctly identify the problems in the economy, and seek redress. For socialists in the Party, this is a narrative base on which to build, push further and ensure that there is not any backsliding on even these measures.
Ultimately though these policies are ameliorative rather than transformative, so the issue of systematic inequality will remain. When that reality intrudes, we must have the answers and campaigns to push for the policies to build a more equal and democratic economy.
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