Last week’s autumn statement was widely seen as the opening of the Tories’ general election campaign. rs21 member Jonas Marvin asks whether the Tories have a coherent economic strategy that can rescue them.
If you watched or listened to Jeremy Hunt’s autumn statement, you would be forgiven for thinking he lived in a country where things worked. To put a twist on an old Jewish joke, I ought not to read the socialist websites because they tell me I’m poor and oppressed. Instead, I’ll watch Tory speeches where they tell me my wages are rising, the country is better off and we’re all on the path to redemption. Much better to bask in the boosterism of Tory dystopianism, right?
Claiming that Conservative policy under his watch was responsible for halving inflation, Hunt was boisterous and braggadocious to a tee. Desperate to avoid electoral catastrophe, Hunt committed the Tories to raising the minimum wage by a pound and, despite a lot of the prior noise, protecting the ‘triple lock’ pension guarantee. In another act of Tory nostalgia, he also revived the spectre of ‘Tell Sid!’ by floating the idea of selling government shares in NatWest to the public.
Echoing the Chancellor of the Exchequer, Rishi Sunak could claim earlier in the week that ‘we can now move on to the next phase of our economic plan and turn our attention to cutting taxes.’ However, this implies the Tory Party has a plan. In actual fact, the Conservative tank has been running on empty as the party of order wildly vacillates between different approaches going into the next election, for which they regularly poll below 25%. Three key themes were clear coming out of the autumn statement, however.
Get back to work!
In the run-up to the autumn statement, there has been a series of panicky briefings by senior Conservatives over the state of the labour market. The British state, particularly through governor Andrew Bailey and the Bank of England’s Monetary Policy Committee, has sought to portray high inflation as the consequence of rising wages provoked by increasingly militant workers. Seeing this through the lens of monetarist orthodoxy, the Bank of England has responded by raising interest rates in order to strangle demand and increase unemployment, which they hope will increase slack in the labour market and so decrease workers’ bargaining power.
Setting to one side that this approach has little basis in reality – it isn’t high wages causing inflation but geopolitical and climate changed-induced shocks to global value chains – the British labour market has been tighter since the pandemic than at any time since the early 1970s. Relatedly, a large proportion of our ageing workforce have been suffering from the consequences of long-term ill-health on a far greater scale than previously predicted. Prior to the pandemic, the Office for National Statistics forecast that between 2019 and 2022, 40,000 workers would have become economically inactive due to long-term sickness. Yet, according to research carried out by the Phoenix Group, the situation is much worse. As they document:
…one thing that is so curious about this phenomenon, is that it’s pretty unique to the UK. Most other major economies have seen their employment rates bounce back after the pandemic, including for workers over 50.…16% of 50-64 year olds that have left work since 2019 give long-term sickness or disability as their main reason for being economically inactive. 57% of those in their late 50s say they are not looking for work because they are retired or looking after family. This rises to 68% among those in their early 60s.
This is why Jeremy Hunt and Department for Work and Pensions Secretary Mel Stride have been endlessly briefing about the need to shrink benefits and accelerate the punitive logic which underlies the state’s benefit sanctions regime. It’s not clear that they have any sense of the scale of this problem though – household responses to the ONS’ Labour Force Survey have shrunk to below 15%, showing that even basic statistical accuracy isn’t immune from Tory decay.
For these Tory class warriors, the more people competing in the labour market under injurious and precarious conditions, the less likely we are to see another strike wave. However, after 13 years of decimating the living conditions and infrastructure of the country, even Hunt’s Conservatives worry about spending even more political capital. Instead, they are brandishing carrots and sticks at the same time. They have agreed to increase benefit payments by 6.7%, despite rumours of a lower increase, while also introducing mandatory work experience for those who do not find work within 18 months, erecting tougher conditionalities for claimants, and forcing those with mental health problems and mobility issues to work from home.
While none of this will resolve Britain’s productivity paradox or its slippage into a stagflation nation, they offer the possibility that the Tories might reinforce the conditions of an oppressive, labour-intensive, low-income labour market.
If the trap fits, wear it
The centrepiece of Hunt’s statement was the announcement of tax cuts. The Tories have cut both employee and self-employed National Insurance contributions from 12% to 10%, and made permanent the ‘full expensing’ capital allowance regime. Underlying this move is what economists call a ‘fiscal drag’: by freezing tax thresholds rather than raising them in line with inflation, nominal wage rises place workers into higher tax brackets and therefore increase the government’s tax income. This neat little accounting trick has provided the government the opportunity to portray itself as cutting the expenses of workers whilst also freeing up fiscal space for itself.
In reality however, as the Resolution Foundation has highlighted, the richest 20% of the country will gain five times more than poorest fifth of the population, who will only be £200 better off. On top of this, on the government’s own terms, these tax cuts will make life worse for workers. As the Mirror reports, ‘this will be almost entirely wiped out by the freeze on personal tax thresholds’.
Ultimately however, by projecting day-to-day governmental spending to increase by just 0.9% from 2025, Hunt has thrown the gauntlet down to the likely incoming Labour government. Will Keir Starmer and Rachel Reeves increase taxes or will they implement spending cuts?
The bind confronting Labour is severe. Desperate to be seen as the responsible party of British capitalism, Shadow Chancellor Rachel Reeves has complicated their commitment to investing £28bn a year in green infrastructure by signing them up to the current government’s fiscal rules, whilst also refusing any suggestion that they would raise taxes on the top 5% of earners. Starmer and Reeves may find some wiggle room here or there, but as Labour administrations so often do, they have walked into a trap partly of their own making and will almost certainly be faced with the choice of either popular frustration by raising taxes or deep unpopularity by implementing austerity.
Gambling with your future
Another factor which took up a large share of Hunt’s Autumn statement is his commitment to pension reform. Labelled the ‘Mansion House reforms’, Hunt’s intention is to give workers the right to nominate the pension fund they want to contribute towards, with the intention that smaller pension pots will become less popular relative to larger pots. Hunt’s plan is to boost growth by encouraging smaller pots to consolidate into bigger ones and channel pension savings into private firms who will then invest in economy.
Portrayed as an attempt to democratise pension funds, in reality Hunt’s ‘reforms’ will shroud the pension industry in further secrecy, giving private pension firms greater freedom and liquidity to spend working-class people’s savings as they wish. These changes signal yet another step in the handing over of people’s futures to asset managers and rentiers. While this is unlikely to buck the trend in Britain’s low-growth, low-productivity political economy, it increases the possibility that this approach foreshadows how successive British governments – Labour or Tory – may try to avoid the taboos of raising taxes on the wealthy and increasing state investment.
As the autumn statement was being read out, protestors organised a sit-in in the House of Commons Gallery calling for an end to the Israeli genocide of the Palestinian people. This mass movement which has risen in solidarity with Palestine may not have been able to force our government into demanding a ceasefire and preventing the catastrophe being unleashed on Gaza, but it has injected new energy into radical, democratic and internationalist politics in this country, bringing down the violently racist and reactionary Home Secretary Suela Braverman in the process. A massive question which confronts this movement is whether it can construct ‘infrastructures of dissent’ which can accelerate the struggle for Palestinian freedom, and confront imperialist politicians like Jeremy Hunt, who also disempower us and demolish our living standards.