Workers' Weekly On-Line
Volume 52 Number 7, April 2, 2022 ARCHIVE HOME JBCENTRE SUBSCRIBE

Sunak's Spring Statement and the Need for a New Authority and New Direction

Paying-the-Rich but Increasing Austerity for the People Is Not A Solution to "Cost of Living Crisis"

Chancellor Rishi Sunak presented his Spring Statement to Parliament on March 23 [1]. It was widely promoted in the media as a "mini budget", as it made significant announcements. On same day, the Office for Budget Responsibility (OBR) gave its economic forecast.

The Chancellor presented his Statement in the context of rising inflation, particularly affecting the prices of fuel, energy and food. It was also made in a war context.

The OBR now expects inflation to reach 8.7% by the end of the year, as measured by the consumer prices index. It already reached the thirty-year high of 6.2% in February. It is almost needless to say that this is well above expected growth in average incomes.

Martin Wolf, Chief Economics Commentator for the Financial Times, points out [2] that "aggregate real household disposable incomes will decline by 2.2% in real terms between 2021-22 and 2022-23," according to the OBR. "This would be the steepest annual decline in at least 66 years. Gross domestic product per head is forecast to rise by 1.5% from 2022 to 2023," he writes.

Sunak posed the issue as being the result of external influences: the pandemic and other "global factors" now exacerbated by the war in Ukraine. "The OBR have not accounted for the full impacts of the war in Ukraine and we should be prepared for the economy and public finances to worsen - potentially significantly," he said; its "most significant impact domestically is on the cost of living."

"Covid and global factors meant goods and energy prices were already high: statistics published this morning show that inflation in February was 6.2% lower than the US and broadly in line with the Euro area. Disruptions to global supply chains and energy markets combined with the economic response to Putin's aggression mean the OBR expect inflation to rise further, averaging 7.4% this year."

Sunak of course made no reference to imperialist wars and proxies such as in Syria, Yemen and Libya. He made no reference to trade wars as precursors of hot war, particularly against China. He made no reference to embargoes and sanctions on many countries other than Russia. He also did not reference the price-fixing cartels. All these unmentioned factors take more out of the economy than is put in.

According to Wolf, things are not as they seem even on capital-centric logic: the higher-than-expected inflation gave Sunak "money to play with", he argues. "The story of this Spring Statement is how he used it."

"The actions we have taken to sanction Putin's regime are not cost-free for us at home. The invasion of Ukraine presents a risk to our recovery as it does to countries around the world," said Sunak. The outlook: to enable war, the recovery of the market dominance by the oligopoly interests he represents, increasing their profits. And the cost? From the capital-centred perspective, to eliminate the so-called "cost" of the people: the workers, pensioners, the unemployed, underemployed, migrant workers, disabled, refugees from war and other crises.

As one commentary put it: "Using the war in Ukraine to set the tone for the statement looks like the beginning of an election strategy to at least partly attribute the pain of the cost of living to the war, as a way of swerving political blame for the growth slowdown which was predicted well before Russia invaded." [3]

Under the gloomy outlook, Sunak effectively announced a programme of continuing austerity, using the well-overused language of debt and deficit:

"That's why, Mr Speaker, we have already taken difficult decisions with the public finances. And that's why we will continue to weigh carefully calls for additional public spending. More borrowing is not cost or risk free. I said it last autumn, and I say it again today: borrowing down; debt down."

The chancellor said debt service costs to the banks would rise to £83bn in the next fiscal year, the highest level on record. Public sector net debt was forecast to be 95.6% of GDP in 2021-22, and then to fall gradually to 83.1% of GDP by 2026-27.

Wolf summarises: "Cumulative borrowing from 2021-22 to 2025-26 is now forecast to be £72bn lower than in October 2021, with almost 80% of this improvement in 2021-22 alone. Public sector net debt is also forecast to fall from 96% of GDP in 2021-22 to 86% of GDP in 2025-26. In sum, Sunak plans to spend remarkably little of his windfall in the coming years: the direct effects of the government's decisions will be to raise cumulative borrowing by just £15bn over the next four financial years."

Tax changes

Despite the coverage given to Sunak's so-called tax cuts for which he sought applause, some commentators have pointed out that taxes when considered in total will actually rise.

"In order to repair the public finances after Covid and meet pressures for higher public spending, the government took policy measures that, according to the OBR, would have raised tax by 2.4% of GDP between 2019-20 and 2026-27 (0.9% via corporation tax, 0.6% via freezes on income tax thresholds, 0.6% via the 'health and social care levy', and the rest from other measures)," explains Wolf. "Sunak has now announced offsetting cuts of just 0.5% of GDP (0.1% via the freeze on fuel duties, 0.2% via the planned cut of 1p in the pound in the basic rate of income tax and 0.2% via the rise in thresholds on employees' national insurance contributions). Sunak, it is clear, is still a tax-raising chancellor."

Note also that the NI and tax personal allowance thresholds will remain fixed until April 2026, so will significantly reduce in real terms given the rate of inflation. (These levels usually rise with inflation annually.)

In addition, the Chancellor announced a 5-year removal of VAT on solar panels, wind and water turbines, and other energy-saving devices.

Meanwhile, the widely-criticised social care levy remains in place, which will add 1.25 percentage points to NI contributions.

Sunak also increased the small business employment allowance from £4,000 to £5,000. This was the first step in a raft of schemes demanded by business surrounding the issue of "productivity".

The government and the private interests it represents are obsessed with failure to "win" in the global markets - ultimately, the generally falling rate of return. Sunak focused a sizeable portion of his Statement on Britain's "productivity gap", which poses Britain in competition with other major economies in the global race, but which really reflects the demand of competing sections of big business to have the resources provided to them in Britain to achieve a higher return, albeit temporarily, through technological development.

In this regard, the OBR projected that the GDP would grow by 3.8% this year, 1.8% in 2023, 2.1% in 2024, 1.8% in 2025, and 1.7% in 2026. In context, it grew by 7.5% in 2021, following the historic fall of 9.4% in 2020.

Sunak therefore announced a focus on what he called "people" (meaning training and skills - "We lag international peers in adult technical skills"), "ideas" (technological innovation - "the amount businesses spend on R&D as a percentage of GDP is less than half the OECD average"), and "capital" ("Capital investment by UK businesses is considerably lower than the OECD average of 14%"). To this end, he declared that the Autumn budget will contain various tax cuts for business and other pay-the-rich schemes.

"Cost of living"

Sunak refers to the global capitalist attack on peoples' living as a "cost of living" crisis. It is nothing but open theft by the financial oligarchy, the big business elite, of which Sunak himself is one. The price-fixing cartels have boosted their multiple claims on the social product, seizing yet more of the value created by working people in the socialised economy. In doing so they eradicate the public right to a decent standard of living.

Just consider the phrase "cost of living". Any outlook that considers life a cost is profoundly anti-human. The capital-centred outlook is led to this view as an extension of its notion that work is a cost. This outlook views the capitalist as the indispensable source of wealth through their investment; work is required but the distinctive character of human labour as that which creates new value is denied. Wouldn't it be great if employees needed no pay, benefits or pensions, says the employer? The human-centred outlook recognises the source of value, and the necessary claim of the majority of the people on the value they create: the reproduced value, which is both individual and social, spanning wages, benefits, pensions, social programmes, culture, and other necessities of modern human life.

This individual and social claim on the value that working people create, the reproduced value - that which is required to maintain and reproduce this all-important human productive force - is what is relegated to the "cost of living". To call living a cost blames people for their own reduction in standards. Life is not a cost; it is social in character; it builds civilisation, the productive forces, creating all of the wealth and enhancing culture.

It is the global rich who are a "cost to living" by becoming a fetter on society. They not only directly profit from exploitation at the point of production but go on to claim over and again from people's income by price-fixing and adding to the people's burdens in the form of energy and food prices, exploiting their hard-earned and hard-fought incomes, pensions and benefits.

In reality, Sunak's mini-budget props up the falling rate of return of the super-rich by enhancing their claim on the social product, while living standards are on course to fall at the fastest rate since the mid-1950s. It offers no help from the state but is fully in line with the outlook of making people pay. It offers no assistance to the poor, the unemployed, or people who rely on Universal Credit to boost income or provide welfare benefits.

Who decides? That is crucial. Where is discussion in the polity about the need for a new direction for the economy? How can it be that one man representing private interests gets to dictate economic measures which intensify the crisis and increase austerity for working people?

Rather than appreciating the necessity for an alternative, the Spring Statement upheld that the established method of decision-making and control was the guarantor of freedom and liberty. Yet it is precisely this form of authority that has been completely taken over by private interests. The alternative begins with the aim of ensuring the society's and people's material and cultural needs are met. This requires a profound change in the direction of the economy, encapsulated in the calls to Stop Paying the Rich and Invest in Social Programmes and For An Anti-War Government.

Concretely, a new public authority is required that has control over wholesale prices. Its authority would be to enforce prices based on allowing a rate of return that does not cause havoc in the economy and violate the claim of the people to a decent standard of living. The monopoly right to inflate prices while suppressing what working people can claim as individual and social reproduced value would be blocked by such an authority and other such concrete arrangements of decision-making and control in the people's favour, over which they exercise direct authority.

Notes
1. For the full text of the speech, see https://www.gov.uk/government/speeches/spring-statement-2022-speech
We have also used:
Daniel Harari, Lorna Booth, Matthew Keep, "Spring Statement 2022. A summary", Research Briefing, March 24, 2022
https://commonslibrary.parliament.uk/research-briefings/cbp-9505
"Spring statement, highlights of Rishi Sunak's mini budget", The Week, March 23, 2022
https://www.theweek.co.uk/news/economy/956183/spring-statement-highlights
2.Martin Wolf, "Rishi Sunak fails to address the hit to living standards", Financial Times, March 23, 2022
https://www.ft.com/content/c1f556de-b8e9-400f-a557-c9e8f32461b5
3. Richard Partington and Jessica Elgot, "Spring statement 2022: key points at a glance", The Guardian, March 23, 2022
https://www.theguardian.com/uk-news/2022/mar/23/spring-statement-2022-key-points-rishi-sunak-budget


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