In a number of speeches in the run-up to the Tory government’s Budget on 22 November, shadow Chancellor John McDonnell has rightly indicted the Tories’ record since George Osborne began their cuts program back in 2010.
• A 30% increase in food bank usage in areas where Universal Credit has been rolled out, as the six-week delay in making the payment pushes thousands into destitution.
• The NHS so cash-strapped that even its top bosses say it will crumble without a big boost. Cuts in per-student finance for state schools for the first time since the 1990s.
• The percentage of children in relative poverty at its highest since records began in 1961.
• Homelessness up 50% since 2010.
• Frozen public sector pay, stagnant wages for all except some of the highest-paid, and under-30s’ pay down by almost 10% since 2010.
In one of McDonnell’s speeches, refreshingly, he geared his economic message around the need to win environmental sustainability. That, he said rightly, “requires concerted, public action on a scale that meets the challenge... market-led approaches... have failed to deliver”.
He set out five demands:
• Pause and fix Universal Credit
• New funding to lift the public sector pay cap
• Funding for infrastructure
• “Properly fund” health, education, and local government
• A large public house-building program.
So far, so good. However, much of the economic content that won support for Labour’s manifesto for the June general election has been missing from McDonnell’s prospectus.
The core of the manifesto was a pledge to take some tens of billions of pounds — John McDonnell estimated £50-odd billion — by taxing more heavily the £1,000 billion a year which currently goes to the rich and the very well-off, or to enterprises under their control. Labour would put those resources into:
• More than £6 billion extra per year for the NHS
• £8 billion extra for social care
• Reversal of the Tory school cuts
• Reversal of the Tory benefit cuts, including the bedroom tax and cuts to disability benefits
• Restoring student grants, and scrapping university tuition fees
• Ending the 1% freeze on pay rises for health and education workers
The manifesto also pledged public ownership of rail and mail, and of some parts of the energy industry.
In the new version, the pledge to tax the rich has been dissolved into criticism of the Tories for (probably) cutting corporate tax rates, and not sufficiently fixing tax evasion. Public ownership has faded away.
In their place we have some new gee-whiz technocrat ideas, derived from wonks in some Whitehall office rather than any debate at the Labour Party conference less than two months ago.
“Today [14 November] we have committed to establishing a Strategic Investment Board... This Board will bring together the Chancellor, the Secretary of State for Business, and the Governor of the Bank of England plus representatives from the National Investment Bank and business. It will be charged with delivering a major increase in productive investment across the whole country, focused on technology”.
The indictment of the Tories as serving the rich against the rest of us — as they do — has segued into an indictment of them as managing capitalism incompetently.
“Everyone else just gets on with it, whether it is Japan’s new Robotics Strategy, or the huge support given by the German government to promote the ‘industrial internet’... we are... an outlier amongst the developed nations”. McDonnell indicted Tory chancellor Philip Hammond as failing to follow the advice “even [of] colleagues in his own Cabinet”.
Candid scrutiny of capitalist policy in Japan and Germany — or France, or other countries where governments claim to excel at “strategic investment” — shows that it is producing similar ills to British capitalism’s. Not exactly the same, worse in some ways, not-so-bad in others, but similar.
The world-wide depression, increased inequalities, and erosion of social provision since 2008 is a phenomenon of capitalism, not of the Tories departing from general capitalist wisdom.
Redistribution requires serious taxation of the rich. Re-gearing economic life requires a shift in control, from the plutocrats who currently rule (and would dominate the mooted “Strategic Investment Board”), to workers and communities.
Changing the trajectory of investment requires public ownership and democratic control of the banks and other institution of high finance, and their integration into a publicly-run banking, insurance, and pension service.
It requires democratic control of where wealth is deployed and invested, rather than technocratic nudges.