Wednesday 22 April 2009

The Budget '09: A Socialist Response

Tony Blair once boasted of feeling the hand of history on his shoulder. For Alistair Darling and the government, it's less a hand and more a bucket of bricks. Forget smeargate and the drip-drip of expenses scandals, the decisions the government made today not only bear upon their electoral fortunes over the next 12 months, they will decisively influence how history remembers New Labour. This in mind, was it an epoch-making budget? No, of course it wasn't. But does it constitute a final break with neoliberalism? Are they determined to make the working class pay for the crisis? Does it offer political openings for the left?

If there was a surprise in this year's budget, it lay in Darling's forecasts.

They are:

* The economy to shrink by 3.5% by the end of this year.
* A return to growth by the final quarter of 2009(!)
* The economy will grow by 1.25% in 2010.
* From 2011 growth will accelerate to around 3.5% and remain at that level.
* Inflation will continue to decrease - 1% by the end of this year.
* Thanks to projected economic growth, the yawning chasm of the budget deficit will fall by half by 2013.

Very optimistic to say the least.

So what were the measures announced?

* Unemployment Darling claimed the money already gone in has halved the turn around time between jobs compared with the previous recession. He therefore announced a further £1.7bn for Jobcentre Plus. Also, keen to avoid the persistent youth unemployment that was a chronic feature of the Tory recessions, under 25s unemployed for a year or more will have to choose between a job or further training. For this the government will work with business to create an extra 250,00 jobs. They will also make available £260m of training/subsidy money for sectors with "strong future demand". £250m this year and £400m next year will go to secure extra places in further education.

* Housing The chancellor pledged to work with the banks to make an extra £20bn of mortgages available. This would be secured by a government-backed mortgage guarantee scheme, but there was no mention of projected cost. To try and revive the housing market (mortgage lending may have risen 16% last month, but it is still around half the figures of this time last year), the holiday on stamp duty on properties worth up to £175,000 remains until the end of 2009. £500m is to be made available to restart stalled housing projects, and £100m will go to local authorities to build energy efficient homes.

* Business Loss-making businesses crippled by the collapse in credit can reclaim taxes on profits for the last three years. The much-vaunted car scrappage scheme that's exercised much media commentary in recent days was announced. Hand in a car 10 years old or over and you will receive £2,000 toward the cost of a new one. This is for a limited time only and runs out in March next year. Unsurprisingly Darling remained committed to maintaining Britain's position as the centre of world finance and previewed a package of regulations. These would cover corporate governance, remuneration, accountancy rules, transparency and saver and investor support. Also more would be spent on North Sea exploration to exploit the estimated two billion barrels remaining in "uneconomical" oil fields as well as transforming it into a site for gas storage, offshore wind power, and carbon capture. Furthermore money will be used to support advanced manufacturing, green business and communications technologies.

* The Green Economy Further announcements were served up with a dose of greenwash. £1bn would be invested in green collar jobs. £525m is to be ploughed into offshore wind farms over the next couple of years, which will apparently provide enough electricity to power three million homes. A further £435m will go into energy savings in the public, private and domestic sectors. The European Investment Bank will also make £4bn of capital available for green technology projects and business. There would be tax relief on up to four demonstrative carbon capture projects.

* Benefits From next year, child tax credit will go up £20 - it will be more if the child is registered as disabled. Statutory redundancy pay will be increased and for grandparents who are of working age but care for their children's children, this care will count towards state pension entitlement. To help counteract the declining interest rate, the threshold for pension credit is raised to £10,000. The winter fuel allowance is increased to £250 for over 60s and £400 for the over 80s.

* Taxation This might warm the cockles of Old Labour hearts out there. The one per cent of the population who receive salaries of £150,000+ will now pay the new 50% top rate of income tax. For those who earn in excess of £100,000 all forms of tax allowances are now withdrawn. Income tax remains frozen for the rest of us. Darling also pledged more action on closing tax loopholes. Measures identified by the Treasury will realise an extra £1bn tax revenue over the next three years. Lastly tobacco and alcohol are hit with a two per cent rise in duty, effective from 6pm and midnight tonight. Taken together these will raise an expected £6bn by 2012.

* Public Sector Rumours and expectations abounded of an axe falling on public spending. The chancellor conceded borrowing would grow to £175bn this year, then £173bn, £140bn, £118bn and £97bn for the years after. However he was very clever to avoid the c-word: cut. Instead the emphasis is on "making savings". This kind of action, he claims, has saved some £26.5bn in "efficiencies" since 2004. He is looking to make £9bn more every year until 2013. This will be back up by £60bn in asset and property sales by 2012.

He concluded with a sharp barb for the Tories: that Britain will grow out of recession, not cut its way out.

The budget is certainly a mixed bag. There is a pale green-social democratic colouring to it. While those of us on the left would certainly agree the taxation, benefits, green industries, education and support for manufacturing do not go far enough, they could be viewed as a step in the right direction. All of these provide avenues on which the left can campaign and build upon.

But, and this is a very big but, it shows the New Labour leopard cannot change its neoliberal spots. Darling may have avoided mentioning cuts but they are there, and they're substantial. As Chris Dillow demonstrates, measures aimed at eliminating public sector waste are extremely problematic. As any civil servant will tell you, government efficiency savings have come at the price of attacks on pensions, redundancies, increasing workloads and management authoritarianism. The overall result? A lower level of service provision. And then there is the £60bn sell off of remaining assets. These will necessarily include Royal Mail, the Royal Mint, recently acquired interests in the banks, outsourcing and privatisation of more local authority services. The list goes on and on.

In short Darling has presented a Frankenstein's Monster of a budget. The twitching corpse of neoliberalism has been stitched together with the cadaverous remains of disinterred Keynesianism. The application of a weak current of traditional labourism and green wash has jolted the creature into life. And now it stands, determined to make the working class pay a massively disproportionate share for a crisis not of its making. And it will succeed, unless our movement draws on the experiences of this year's wildcat strikes and workplace occupations.

Sorry, Mr Darling. You say: we pay. We say: no way.

Edit: Press releases from various unions in the comments box.


Phil said...

Press release:

Unite's reaction to the Budget

22 April 2009

Unite's joint general secretary, Derek Simpson said: "Alistair Darling had to deliver the toughest budget in decades but he has positioned Labour as the party for jobs and social justice while exposing the Tories for being the party of cuts and inequality.

"The Chancellor’s announcements on tax, the scrappage scheme and employment puts Labour back on the side of working families. Borrowing to shorten the recession is the right action to protect our economy and our members' jobs.

"We welcome the government's action but manufacturing workers need more support now because once those jobs go they will go for good."

Unite's joint general secretary, Tony Woodley said: "We welcome Alistair Darling's decision to introduce a scrappage scheme but we are urging him to think again on keeping skilled workers in employment. Any scheme to stimulate demand for cars is welcome, but the UK can not afford to lose the workers who build them.

"Those on the right who believe it is the time for cuts are simply wrong. If they are allowed to have their way we will come out of this recession with a manufacturing base not fit for purpose."

Phil said...

UCU on the budget:

UCU today (Wednesday) welcomed increased investment in further education in the budget. However, the union said the government needed to recognise that quality training to even more students could not be delivered without proper investment in staff and buildings.
It also expressed concerns that the Chancellor did not take the opportunity to offer more for the higher education sector, which the union said will also play a crucial role in helping the country and individuals through the tough economic climate. Key budget announcements for further education: * Job or training guarantee for all long-term unemployed people under 25 * More than £260m in new money for training and subsidies * £300m for college building projects * An extra £250m in 2009-10 and £400m in 2010-11 to provide an extra 54,000 places in sixth form and further education colleges next year. UCU general secretary, Sally Hunt, said: 'Colleges can play a key role in helping to train people, especially those made redundant or unable to find work, but they need proper infrastructure and support. We welcome the additional funds to try and resolve the recent college buildings fiasco. However, this in no way compensates the money already spent by colleges on approved building projects, which will seriously undermine those colleges’ efforts to deliver government priorities. Most importantly, additional training for even more students simply cannot be delivered by an already overstretched staff. Further education lecturers work some of the longest hours in the UK and without an increase in staff the quality of education and training will be seriously compromised. 'Access to education will be vital in helping individuals and the country get through the current tough economic climate and this afternoon the Chancellor should have offered more for higher education. We believe the budget was an excellent opportunity for the government to reverse its decision on funding cuts for people wishing to reskill at degree level* as now, more than ever, people need support for a second chance.' * The funding cut for ELQs has been described as this government’s least popular education policy following widespread criticism from unions, universities and the other political parties. ELQs are qualifications that are equivalent to, or lower than, one that a person has already achieved.

Vengeance and Fashion said...

Good dissection, and thanks for the mention on here and Socialist Unity.

There will no doubt be those with continuing fantasies about the Labour Party who will clutch at the 50% tax rate and green money, but the Green projects funding is utterly laughable. Nowhere near the level it needs to be to make a difference in terms of jobs or the environment.

Phil said...


“I am glad that the Chancellor has stated that he remains committed to spending in schools and hospitals. Slashing investment in public services would have been counter- productive, feeding inequality and poverty.

“Fairness must remain at the heart of the Government’s agenda, with the Chancellor keeping his eye on the long-term goal of social justice despite the poor financial situation.

“The additional funding for 16-17 year olds is welcome. The prospect of up to 50,000 teenagers left with no sixth form or college place this September was wholly unacceptable.

"All political parties need to understand that protecting investment in health and education is something which the general public wants and needs. Gordon Brown must not forget the commitment he has made to match state school funding with funding in private schools, or to end child poverty.

“The Government is unlikely now to meet its own target to halve child poverty by 2010 which means children across the UK will continue to face the costs of social disadvantage, exclusion, poor health and nutrition.

“At a time of economic difficulty investment in education and training is central to the economic and social well-being of the nation”

Phil said...


PCS branded the efficiency savings announced in today's budget as spending cuts which would damage services and lead to job cuts.

Civil and public services have already been hit by spending cuts in real terms and ‘efficiency savings’ which have lead to over 80,000 job loses and hundreds of office closures.

Key areas such a tax, jobcentres and justice have all been affected. 25,000 jobs are to go and 200 offices to close in Her Majesty’s Revenue and Customs (HMRC) by 2011.

500 jobcentres and benefit offices have closed over the last 5 years hampering the government’s ability to respond to recession and the justice system is in danger of delays and backlogs as the Ministry of Justice faces a year on year cut to its budget in real terms.

Commenting, Mark Serwotka, PCS general secretary, said: "With this budget the government have conveniently forgotten their promise that going further than the Gershon efficiency review in 2004 would put the delivery of frontline services at risk.

"The efficiency savings announced today, like the others before them, are spending cuts which will result in job cuts and poorer services.

"The Chancellor’s claim that the government won’t cut their way out of recession will ring hollow with 4,000 people working in the Land Registry who are in danger of loosing their jobs.

"The Chancellor had the opportunity to spell out how he would chase the £21.5 billion worth of uncollected tax and £25 billion lost through tax evasion as well as stopping the billions wasted on consultants and failed PFI projects.

"Instead he gave the green light to a sell off of the family silver by accepting recommendations from Margaret Thatcher’s privatisation guru.

"We have seen the impact of botched privatisations and IT outsourcing with Rail Track, the Criminal records Bureau and Tax Credits. The result has seen the government bailing out the private sector at a cost of millions to the taxpayer.

"Whilst the extra £1.7 billion for Jobcentres is a welcome step in the right direction, we shouldn’t forget that over 500 jobcentres and benefit offices have closed over the last five years due to ‘efficiency savings’.

"Also that the extra staff already promised for Jobcentres will only take staffing levels to where they were in 2005.

"As the recession bites deeper and more and more people become reliant on public services, the government should be investing in public services rather cutting them.

"Demand in the economy needs to be boosted through increased spending and investment rather than spending cuts.”

Phil said...


(22/04/09) UNISON general secretary Dave Prentis responded to Alistair Darling's budget today, saying that it "revealed the extent of the damage done to the economy and public finances by the greed and irresponsibility of the under-regulated financial sector."

And he noted: "Future spending plans have been revised down again and the government's best ambitions of reducing child poverty and building world class public services now look in doubt.

"It would be a big mistake to make our essential public services – schools, hospitals and the care of the vulnerable in our society – the whipping boys for private failures, or to pay the price for the excesses of greedy bankers and speculators."

He added that the union "will look for assurances that public service workers, who have gone through 18 re-organisations in as many years to improve those services, will not be made to pay the price for the failures of others."

Mr Prentis said: "The Chancellor is moving in the right direction with tax rises for the super-rich who have not been paying their fair share," but he noted that Mr Darling "will need to do more to go after the rich tax avoiders who cost us more than £25 billion every year."

And he attacked the myth of over-staffed public services, saying that public sector workers "have made well in excess of 3% efficiency savings called for by the government over each of the past three years. Independent studies have shown that you cannot extract any more without damaging services for the public."

Phil said...


22 Apr 2009
Paul Kenny, GMB General Secretary said, “UK citizens are paying the price for an unregulated market dominated by a greedy and unaccountable cabal which has given us this ‘Banksters Recession’. We will all be paying the price for sometime yet as this morning’s rise in unemployment shows.

GMB consider that the tax increase for those earning over £150,000 is necessary as the tax burden needs to be evenly distributed. We would have gone further with a higher rate for those earning over half a million a year. We would also have closed down the tax havens and tax avoidance loopholes.

GMB consider that they Chancellor should not have increased the duty on beer. Instead he should have gone after the pubcos that are charging their tied landlords 80 pence per pint more than they would pay in the wholesale market for beer.”

Robert said...

I think what we are seeing is a leader who believed his own spin of no more boom and bust, no more boom and bust we do not need job centers. Last month my job center placed adverts in the local papers for staff they had sacked to come back urgently. Yesterday the BBC Wales news stated the Government is to sell off the Royal Mint with Dela Rue at the font to buy it, according to New Labour it will safe guard jobs, how the hell does selling it safe guard jobs.

This budget I think in honesty is the last gasp of a New labour government who lived off the back of Thatcherism, which has finally broken down, the government did not have an answer for this except to try and save it, restart it and pray it would be short lived.

I cannot in all honesty see Labour winning the next election even if as Darling says it will get better next year too many have been affected by this. I can understand now why we have the Welfare reforms it's obvious to all this government is running out of money fast.