Taking to the parliamentary podium today to present her government’s first Budget, Chancellor Rachel Reeves pledged that Labour would “restore economic stability”, “put more pounds in people’s pockets”, and “rebuild Britain once again”.
Unfortunately for the Labour leaders, however, such pie-in-the-sky promises are not theirs to make or keep.
After a century of decline and decay, and a decade-and-a-half of crisis and austerity, British capitalism lies in pieces.
And just like Humpty Dumpty, all the King’s knights and men – in this case, ‘Sir’ Keir Starmer and his sidekicks – are not going to be able to stitch the UK economy back together again.
Investors alarmed
The main motif of Reeves’ speech was to blame the Tories for leaving behind an economic mess for Labour to clean up.
An NHS on the brink. Crumbling schools and hospitals. Pothole-ridden roads, dilapidated infrastructure, and creaking transport networks.
Addressing these burning issues and “repairing the fabric of British society” would be Labour’s priority, Reeves stated. And that can only be achieved, she concluded, by taking “tough decisions”; by raising taxes, increasing government borrowing, and investing in public services.
After paying lip service to “supporting working people”, with a promise to raise the minimum wage by 6.7 percent, the Chancellor went to great lengths to emphasise her Budget’s benefits for big business.
“Healthy businesses need a healthy NHS” and “a strong economy requires stable foundations”, she stressed, in justification for Labour’s interventionist proposals to tax, borrow, and spend.
These include: £40 billion per year in tax increases, including £25 billion from a rise in employers’ national insurance contributions; a debt-fuelled £100 billion in additional capital investment over the next five years, with a focus on fixing the country’s public healthcare and education systems; and £22.6 billion extra for day-to-day NHS spending.
Investors were not fully convinced, however. Despite reassurances about fully-costed spending plans and independently-audited accounts, UK borrowing costs surged in the wake of Reeves’ Budget announcement.
Labour may have avoided a repeat of Liz Truss’ infamous kamikaze mini-budget episode from September 2022. Nevertheless, it is clear that the capitalists have not greeted the Chancellor’s statement warmly. And sooner or later, they will demand their pound of flesh.
Pessimistic predictions
Reeves asserted that, with this Budget, Labour “will turn the page” on 14 years of Tory chaos.
It is true that a new chapter is opening up for British capitalism. But the story that plays out in the months and years ahead is not going to be the fairytale that Labour imagines. Instead, Starmer and his government are set to preside over a nightmare for workers and capitalists alike.
In their accompanying economic forecasts to the Treasury’s plans, the Office for Budget Responsibility (OBR) predicted that UK GDP would only see real-terms growth of 1.1 percent this year. And after peaking at 2 percent in 2025, subsequent years would see annual growth dwindling back to an anaemic 1.5 percent.
And this from a Budget that was heralded by the Labour leaders as a programme designed to kick-start economic dynamism across Britain.
At the same time, the OBR suggested that living standards – in terms of household disposable income – will be 1.25 percent lower by the start of 2029 than was previously estimated in projections from earlier this year.
This was backed up by modelling from the Institute for Fiscal Studies, which suggested that this measure of living standards will rise by just 0.4 percent per year over the course of this parliament. If realised, this dire performance would be the second worst on record – only just ahead of that overseen by recent Tory governments.
The last parliament, including a pandemic and cost of living crisis, saw per capita disposable household income rise by just 0.3% per year.
But the forecast for the current parliament suggests that it will be the second worst on record for household incomes.#Budget2024 pic.twitter.com/pCur6GpGYs
— Institute for Fiscal Studies (@TheIFS) October 30, 2024
These pessimistic predictions are shared by the general public, who know how dire the situation really is for working-class communities.
In a recent survey by More in Common, over two-thirds of Britons polled said that they felt gloomy about their economic prospects. The top words used by ordinary people to describe their feelings towards the impending Budget, meanwhile, were “worried”, “nervous”, “scared”, and “anxious”.
The working class is not stupid. Despite Reeves’ soothing words about there being “no return to austerity” under this Labour government, workers can see what lies in store for them and their families: further cuts and attacks – as hungry children, shivering pensioners, and bankrupt councils are already experiencing.
Stormy waters
The most important feature of Reeves’ speech, in this respect, was what was not stated. A giant elephant was sitting in the House of Commons today. And nobody dared to mention it.
The capitalist system – in Britain and internationally – is in a deep crisis. Instability stalks the Earth at every level: economically, environmentally, diplomatically, socially, and politically. And this turbulence and turmoil is only set to intensify.
From the escalating conflagration in the Middle East, to the prospect of a second Trump term in the USA: there is no shortage of potential shocks that could knock the global and British economies sideways in the coming period, disrupting all the best laid plans of the Labour leaders.
Starmer and Reeves can therefore talk all they like about “restoring stability” and “fixing the foundations” of the UK economy. But the reality is that British capitalism is heading into stormy waters; on course to be buffeted by tempests like those not seen for generations.
In the process, this supposedly “pro-business and pro-worker” Labour government will be forced to launch an onslaught against workers, the poor, and the youth. The class struggle will sharpen. And all the accumulated anger and discontent in society will burst to the surface.
This is the perspective that the communists in Britain are preparing for: one of revolutionary explosions and upheavals. It’s time to get organised.
