Shall we begin with the official reason? This was outlined by Lisa Nandy on Politics Live Thursday lunch time. She suggested the time wasn't right for raising taxes, despite business enjoying the lowest corporation tax in the G7. She went on "this is a real concern among businesses in my constituency because they just simply can’t afford it at the moment." A straightforward managerialist observation, you might think. Corporation tax rises, which falls on all profits, isn't a good idea for business restarts as the Covid restrictions are relaxed. Seems sensible, is utterly ludicrous. To dust off jolly old Keynes, getting economies moving isn't dependent on fiddling with the tax rate but putting money in people's pockets. Boris Johnson's Tories are showing an instinctive affinity to right wing Labour's former guru just as the Starmerist front bench have rediscovered obsolescent Hayekism. What makes Lisa's positioning even worse is the fact business remains on investment strike long before the pandemic, and the neoliberal schlock forecasting an investment boom if taxes were low was debunked by the real world. In other words, the Tories now have a better position on economic growth than Labour does.
So much for the foibles of the formal politics, what about the real reason? Believe it or not, there are strategic considerations in play here. This has nothing to do with the so-called red wall voters, who our Blue Labour gurus tell us are socially conservative but economically radical. Saving Amazon tens of millions isn't about to set the 1950s-were-so-much-better-than-today Facebook groups alight. And as for winning over Tories who like small state dogmatism because it means the undeserving poor get the punitive treatment they deserve, they aren't about to find themselves converted to Starmerism off the back of opposition to tax rises three years away from a general election.
Consider Labour's record. The party has consistently offered pro-business manifestos. Even under Jeremy Corbyn. In office, Labour has never once threatened the rule of capital. Not even in 1945. In more recent years, Tony Blair, following his predecessors, marketised the public sector and offered business guaranteed markets and handed them juicy procurement and outsourcing contracts. He also helped his bourgeois friends by disassembling and disaggregating Labour's position in wider society, pushing atomisation further and making matters next to impossible for workplace collectivism. And then we had Gordon Brown, whose efforts ensured he saved capital from a 1929-style cataclysm, but as Blair's chancellor helped exacerbate the crisis tendencies that exploded in 2007-8. Yet Labour's commitment to business is always questionned, and whose past proposals for modest regulation were made to sound like the liquidation of the Kulaks. Tacking to the right of the Tories on corporation tax certainly makes these media-driven narratives harder to sustain. But even then, Labour's positioning isn't about thwarting the right wing press either.
This is about business. It is a direct message from the Labour leader to big business that they have nothing to fear from a Labour government. There won't be any experiments with economic democracy nor the enforcement of alternative forms of ownership. Labour will protect their privileges, power, and say over how the country is run, and Dear Keir's occasional mention of social security, inequality, and scrapping tuition fees won't ever place additional responsibilities on business. This is different to Blairism because we're in a different age, but preserves its explicit embrace of big capital (which, in the UK, always means commerical and finance capital). Keir Starmer has wound the Labour clock back and we find the party in the position it occupied before Ed Miliband's predators vs producers speech. Coincidentally, perhaps this pitch to business might win over a few wealthy donors now members are leaving and taking their subs elsewhere.
The reason why Labour has to continually demonstrate and protstrate its fealty to business is because fundamentally, structurally the party is an unreliable partner. It plays the Westminster game. It offered light touch regulation, stuffed contractors' mouths with PFI gold, cut social security and held wages down. Policy-wise it can be and often is as throughly bourgeois as the Tories, the Liberal Democrats and, yes, the SNP, but what makes Labour always suspect are its institutional links with the labour movement. Its class basis can never be fully integrated into capitalist realism, though this will never stop most Labour politicians (and not a few trade unionists) from trying to reconcile the irreconcilable. Underscoring this is how, seemingly in the blink of an eye, the party went from pale pink social democracy with neoliberal characteristics to an anti-austerity insurgency, resulting in a mass explosion of socialist and (shudder) communist ideas and politics. Dear Keir's rubbish sloganising is ultimately the Labour right pleading with their bourgeois betters for another chance, and their seriousness of intent is demonstrated by the recrudescence of egregious stitching, happiness to shed tens of thousands of members, the suspension of Jeremy Corbyn, and refusing to back unions on issues of major national import.
It's not going to work. With the Tories having won the framing battles of Coronavirus, which Dear Keir didn't even bother contesting, as Johnson sets out to win the future with high spending, infrastructural investment, and the (usual) promises around levelling up and sorting the regions out, Labour are stuck defending Dave and Osborne's corporate tax regime. Labour voters can always go elsewhere, or they can stay at home. And Keir Starmer, the "grown up in the room" who's serious about winning elections appears entirely fine with that.
Two days ago out beloved Finance Minister Mboweni, late of Goldman Sachs, cut our corporate tax rate to 28%, claiming that this would help reduce our budget deficit of 14%.(I see yours is 19%)
ReplyDeleteYour Mr Starmer has a long way to go before he reaches the level of depravity of our government, but all credit to him, he's doing his best.
Labour should push a big rise in taxes on dividends and capital gains. Opposing rises in Corporation tax, i.e. on profits is sensible, because what we need is those profits going into an accumulation of capital so that more workers are employed.
ReplyDeleteA big rise in taxes on dividends and capital Gains is the way to achieve that whereas a rise in Corporation Tax acts against it. In the 1970's as Andy Haldane has pointed out, dividends accounted for around 10% of profits, whereas today they account for around 70%, as dividend yields fell as share prices were inflated along with other assets as a result of continual money printing and asset buying by central banks.
That also encouraged speculators to gamble on getting large capital gains rather than revenues from assets. That's seen with shares - e.g. Gamestop - property - landlords leaving new properties empty as they are more concerned with rising prices than getting rents - as well as in bonds - negative yields - not to mention the idiotic gambling on Bitcoin which is worse than the Tulipmania, as at least Tulips have some value, whereas Bitcoin has none.
Labour should want to end that gambling on asset prices by heavily taxing capital gains from it, as well as ending the continual draining of profits into dividends when that money should be going to real capital accumulation.
But, the better way of doing the latter would be to end the unjustified ability of shareholders to control capital they do not own. Control of companies should be vested with the collective owners of those companies, i.e. the workers and managers within them. They would then ensure that profits were invested for the long-term, because they have a clear incentive to do so as its their future that is dependent on it. They would only pay out a market rate of interest to anyone they borrowed money from, be it a shareholder, bondholder, or a bank, and they would end the stealing of those profits by the back door methods of making transfers of capital to shareholders, share options for Directors and so on.
I put my faith in workers to make those decisions far more than I do in either shareholders or government bureaucrats, and politicians.
We did not hear leadership from Keir regarding Coronavirus and the very high death rate in the UK, and in general alas he has not made an impact. I hope that will change, he should be winning by now against Boris and the Tories. Speak up and out we cannot hear you.
ReplyDeleteIs he playing the long game while people die? Opposition needs to challenge and the public needs to hear that.
ReplyDeleteWe all know Boris is rubbish but well why is Keir just not that good? Is he waiting for something...or...
ReplyDeleteDespite appearances this is difficult internally for the Tories. Who knows where Johnson is ideologically - only power hungry. Whereas he has filled his cabinet with ultra Thatcherites (way to the right of Thatcher, and not as pragmatic). Sunak is a Thatcherite supporter of balancing the books and austerity. Public spending and tax rises do not naturally come to these people. This has potential for interesting (and perhaps damaging) splits inside the Tories in the future. It needs someone from Labour to exploit these very significant differences.
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