By Tom O’Leary
There are widespread claims that the government is ending austerity. The reality is that it is engaged in a pre-election spending spree, just as Osborne and Cameron did in 2014. Subsequently, it should be clear that the small-state right-wing ideologues in Johnson’s Cabinet intend to use a No Deal Brexit as a platform for another huge assault on living standards, workers’ rights and the public sector. They also have no intention of tackling the climate crisis. It is only the Labour Party of Jeremy Corbyn which has a plan to end austerity, with clear commitments to increase public investment, restore public services and tackle climate change.
What are the Tories promising?
The government and their faithful supporters in the press are touting the real terms increase in both current spending and in public investment. Current spending is set to rise by 2.0% in real terms and public investment set to rise 5.6% on the same basis.
But the first point to note is that this is a promise almost certainly for the next parliament as an election now seems inevitable. If the Tories win the new government will not be bound by the promise of the last one. It is also a one-year promise, to get through an election. The widespread consensus is the government departments and all their agencies require a minimum of three years funding so that they can plan ahead.
Claims that this is the biggest spending spree for decades are false. This plan is similar to the Osborne/Cameron one in 2014/15. Under them public sector gross investment was increased 8.7% in real terms in 2014/15 compared to the previous financial year, in time for the 2015 general election. The rise in public sector current spending was far more modest, perhaps because Osborne understood the importance of investment to spur growth. But if we take the whole of increased government outlays together, both consumption and investment in Total Managed Expenditure, the current plan is to raise TME by 2.4% in real terms, while Osborne/Cameron increased TME by 2.3% on the same basis.
The cynicism of the Tories was such that these totals were actually cut in real terms once they had won the 2015 election. There is no reason to suppose that the current Tory Cabinet, which occupies a political position even further to the right, will be any different.
What are the Tories going to do?
The current Cabinet is packed with right wing ideologues. The Health Secretary, who claims to be more moderate than his colleagues, argues for the accelerated privatisation of the NHS, and is putting that into practice. Academisation is the main weapon in the privatising of secondary education. The teaching union the NEU has highlighted the UK’s role in the privatisation of education globally, including through the aid budget (pdf). Boris Johnson is himself an advocate of privatisation and his Chancellor claims to be an avid fan of the neoliberal guru Ayn Rand.
But the Tory perspective is not determined by the outlook of its key members. It is the objective conditions that will determine their choices. The British economy remains in a crisis. The austerity project has failed it its own terms – which is the transfer of incomes from workers and the poor to business and the rich in order to revive a business-led expansion of the economy.
The transfer of income has been real, and real wages have fallen and the social surplus has been redirected from social security to tax cuts. But the profit share has not risen. In 2008 the Gross Operating Surplus of firms was 39.3% of GDP. In 2018 it had fallen to 37.9% of GDP. Profitability has not revived.
As a result, investment has not revived either. In 2008 it was plummeting and accounted for just 17.2% of GDP. In 2018 it was 16.9%.
For a sustainable business-led expansion, a decisive defeat of the working class and its allies is required. That has not been achieved. Now, the extremists in the Tory Cabinet, orchestrated by the Trump administration, believe that crashing out with a No Deal Brexit is the opportunity they need to impose that decisive defeat.
This will entail not just a fall in living standards, and loss of well-paid jobs in advanced manufacturing sectors such as cars and pharmaceuticals. But, as British-based businesses will be obliged to compete more directly with US rivals, they will in turn demand far lower union rights, health and safety standards, lower pensions and other entitlements. There will be an Americanisation of the British working conditions.
The Corbyn alternative
The scope of the Corbyn-McDonnell project makes the Tories’ pre-election bribe look like the chicken feed it is. Using the same TME measure, which combines both government current spending and public investment, the Labour plan increases it by 3.4% of GDP. Crucially, this is not a one-off, but a sustained increase over each and every year of the next 5-year parliament.
This is about 7 times what Johnson’s Cabinet promises. And it does not include the additional effects of the National Investment Bank on raising investment, nor does it include the probability of some businesses being obliged to increase their own investment, to provide the inputs for the increased investment from the public sector.
The Corbyn-McDonnell plan is a sustained effort to raise the growth rate of the economy, contribute to the global effort to tackling climate change and genuinely ending austerity.
What the Tories plan is not an end of austerity. Instead they plan a whole new attack on workers and the poor.