Margaret Thatcher. What fun, and what a fillip to the left. Folks were radicalized in the 80s when Thee Faction last toured. Thatcher, by selling out her gender in favour of her class and doing Denis’ bidding, destroyed the north, destroyed manufacturing and reduced taxes for the rich. She was just so damn unlikable and so easy to satirise. She shackled the TUC, imposed “market forces” onto the private sector and turned the country toward a classic laissez-faire capitalist model. As you would expect from any decent self-made Tory. Job done.
BUT (despite their worst intentions) Maggie and her successor John Major DID NOT make the radical cuts in public spending the current Con-Lib cabal will. In 1996-97 the Conservative Government devoted almost the same share of national income to the main welfare services as its Labour predecessor had twenty years before. Universal and means-tested state benefits, which had been achieved gradually since the late 19th Century was left in place, pretty much.
OK, this is what is going to happen now. Pay attention now, here comes the science-y bit.
There will be four prongs to the assault on the welfare state:
1. Massive reductions in public services.
2. An assault on the pay and conditions, notably the pension schemes, of those who manage to retain their jobs in the public sector.
3. The knackering of state-funded services through “privatization” (or, as we in Thee Faction prefer to call it, marketization) as exemplified by (a) the plan to break up the local planning structures of the NHS and force GPs to use private firms to buy hospital treatment and other specialist services on behalf of their patients and (b) by the plan to take money away from state schools and hand it over to privately-owned schools that will be subsidised by the state.
4. The class-war attacks on (a) the principle of universal provision council-house tenants to be evicted from their homes if they earn above a poverty-line income, (b) toddlers of any income stream prevented from attending the Surestart children’s centres, (c) child benefit and the pensioners’ winter fuel allowance to be means-tested.
So, off we go then: To ghettoised services; the state to deliver a third class rump provision only for the destitute or semi-destitute. Fend for-yourselves, Britons. The Tories are beating us over the head with semantics as usual – the “better off” should not be subsidised via the state, it’s a “big society” we’re all “in it together” … If they are emboldened by success in implementing their current proposals, why not, a means test for using the NHS or sending your kids to state schools?
It’s a triumph of chutzpah. The worst economic crisis since the 1930s was caused by the de-regulated growth of the capitalist private sector. The major thing that prevented total economic meltdown was/is the public sector and massive state interventions – as we’ve since in the past – and now it’s presented that it is the public sector and “big government” which was and is the problem; a problem which must be solved by the slashing of state provision. What the fuck?
So, not only were hundreds of billions of pounds of the debt of the capitalist financial system transferred to the public sector in order to avert the catastrophe engendered by the market, the BLAME for the economic casino and its financial consequences has also been transferred to the PUBLIC SECTOR. You gots to hand it to them. Genius. And by that bloody miracle, the free market right-wing, who desire the fruition of Thatcher’s project for a return to full-blooded capitalism, unencumbered by the “welfare state”, have been delivered their marvellous opportunity.
The public sector has been the main rescuer of the UK economy. It plays a major role in preventing the crisis from becoming a meltdown and not merely through the nationalisations and bailouts which saved the banks from bankruptcy. Because private sector economic activity is driven by markets, it plunged downwards in the wake of the “credit crunch”.Of a total decline in Britain’s GDP of £80bn, personal consumption has fallen by £29.5bn and fixed investment has fallen by £45.9bn. In fact, the fall in investment accounts for a little under 60% of the aggregate decline in GDP. (Manufacturing investment is down 37.5% from its peak, construction down 54.3%, engineering and vehicles down 37.8%, transport down 29.8%.)
When Surrey starts protesting, you know the Tories have a problem
The rise of 800,000 in the numbers of people unemployed was also a private sector phenomenon, caused by firms laying off staff and ceasing to take on new workers.
Between June 2008 and August 2009 private sector employment fell by 3.3% while public sector employment increased by 2.4% (excluding the impact of financial sector interventions).
The stabilising effect of the public sector has actually been considerably greater than these figures indicate, because public sector expenditure is not merely used to employ public sector workers- much of it goes to privately owned companies which are either contracted to carry out work for the state or are dependent on supplying products to the public sector. So there.
Across the whole of the UK, half of the economy depends on public spending, while in Wales (which we in Thee Faction have an unhealthy obsession with) it’s almost three-quarters. Nowhere in mainland Britain, however, comes close to Northern Ireland, where the state is responsible for 77.6% of spending, despite the supposed resurgence of the economy after the end of “the Troubles”. While production and investment that was dependent on private market activity was crashing downwards, it was this “Soviet” aspect of Britain that kept the economy going. The public sector accounted for around 40% of all new work in 2009 – compared to around 25% in 2006/07.
Thus in the aftermath of the credit crunch, the welfare state has protected not just the population, but to a great extent the capitalist economic system itself, from the consequences of its own excesses. Read that sentence again. Write it down.
So where do we get the money from? DURRRRRRRR how about plugging TAXATION EVASION?
Thee Faction accept there is a large fiscal deficit, currently at about 11% of GDP.
But this by no means shows that too much was being spent on public services by Blair and Brown. Thee Faction feel too little was being raised through taxation.
Keynsian economists and others point out that the UK’s current public debt level is not particularly high by historical and international comparisons, and also that it is a good thing for countries to run deficit budgets and increase their national debt during a recession because that will allow the economy to grow rapidly. But the present deficit rate is unsustainable in the long term, and even were the country’s GDP to return quite soon to pre-crisis levels, the budget gap following this recovery would be wider than it was in 2007 because of the daft interest and repayments on the debt.
This government’s decision to narrow the deficit by cutting public services and welfare benefits rather than by raising taxes on those with high incomes is precisely that – a decision, made for reasons of ideology and the financial interests of the rich and the very rich
. Cameron, Osborne and Clegg are going to rely on spending cuts for 80% of “the squeeze” with only 20% to be raised by tax increases. 20%!
Our present levels of taxation on big companies, wealthy people and those on high incomes are ridiculously low when compared with with the rates that were applied before the Thatcher era. Under the government that was in office in Britain from 1971 to 1974, the main rate of Corporation Tax was set at 52%; Estate Duty (now called Inheritance Tax) had a top rate of 75%; Income Tax rose by several graduated bands to 75%, with an added 15% surcharge on unearned income including share dividends, resulting in a potential top marginal income tax rate of 90%.
These taxes were considered quite normal, and did not need to be justified by any declarations of fiscal emergency. The prime minister at the time was not a man who modelled himself on Karl Marx. He was Tory Edward Heath.
But in Britain nowadays, the main rate of Corporation Tax is 28% and by decision of the current government will be reduced to 24%. Inheritance Tax has a single maximum rate of 40%. The new highest rate of Income Tax, set by the previous Labour government at a mere 50%, applies only to 1% of the population.
Alistair Darling described individuals who earn up to £100,000 as “people on middle or modest incomes” and felt his tax thresholds were “fair”. The median average salary of a full-time worker is just above £25,000. 75% of workers earn less than £32,000 per year.
Cameron and Osborne have raised the rate of VAT despite their bullshit about “fairness”, this, along with the other main measures announced in the budget, will hit the poor and those on medium incomes hardest. The scope for improving the revenues of the government sufficiently avoid slashing the welfare state is abundantly clear from the stats. Due to the steep rise in inequality during the Thatcher/Major/Blair period, the share of the country’s income (exclusive of taxes and state benefits) which goes to the top 20% of households has risen from 43% to 51%. After changes in the tax regime are taken into account, the proportion of all income received by the top one-fifth has risen by 22% since 1978. And within that top one fifth, it is the people on the very highest incomes who have gained the most.
In the past capitalist governments have raised revenue by levying taxes on the rich. In the USA for example, the top rate of income tax was raised to 94% during World War Two; and in the period of huge military spending during the early part of the Cold War, the US government exacted top tax rates (between the years 1951 and 1963) of 92 and 91%.
Thee Faction say close the loopholes, employ more inspectors, prosecute wealthy offenders and increase the minimum and maximum prison sentences for the guilty. That, after all, is how our society demonstrates its lack of tolerance of crime, isn’t it?
The nation’s tax enforcement department Her Majesty’s Revenue and Customs (HMRC) are pussies who totally rolled over to Vodaphone and let them tickle their tummies. Don’t know this story? Look it up dum-dum. Get angry.
Tax expert Richard Murphy, who helps the TUC, says
The tax gap has three parts. The first is tax avoidance, which I estimate to be about £25bn a year. This arises from the exploitation of loopholes in UK tax law and between UK tax law and that of other states – especially tax havens. The second part is tax evasion – that is breaking the law. I estimate this to be £70bn a year. HM Revenue & Customs claims it is much less, but their methodology for estimating anything but VAT evasion is very weak. Last, there is unpaid and late-paid tax – currently evaluated by HMRC to be at least £26bn.
Put these figures together and they come to more than £120bn. Enough, at least in principle, to close the whole current government deficit. Of course, no one will ever collect all tax theoretically owed – that’s just not possible. Serious measures could be taken to tackle the tax gap, and yet there is no evidence that the coalition government is adopting any.
This government is continuing the policy of cutting staff at HMRC. Almost 26,000 jobs have gone since 2005. Last year 5,000 frontline staff went and more still are to go. Ridiculous: each frontline member of staff brings in on average 30 times in tax what it costs to employ them. Stone me.The result is that tax that is so badly needed to keep services going is being given away.
The objection that some rich individuals and corporations would take their wealth out of the country if faced by higher taxes usually crops up at this juncture; but the UK government doesn’t have a role in shaping the policy of the other wealthy countries. Instead, the Con-Libs has decided to lead the downward spiral, thinking there’s some sort of race on to see who can be the most tax-friendly to “business”, by announcing the cut in Corporation Tax. The G20 meeting in March 2009 agreed some modest measures to restrict the activities of international tax havens. The present British government is showing no interest in following up and improving on these measures.
Back to the future
So massive cuts then. Here’s what’ll happen folks.
Deprived of the buffer of the welfare state against the depredations of the capitalist system, society will revert – though on a higher technological basis – towards the 19th Century model. In its insecurity, the ever-widening gulf between rich and poor, and the lack of a social safety net, our experience will increasingly resemble the world as described by Charles Dickens and analysed by Karl Marx.
Britain will be a low-tax, low-wage, low-growth, low-skill and low-investment economy.
Thee Faction hope that we learn not only how to suffer, but also how to struggle.