A Budget For An Early Election

The Tories described this week's Budget as a budget for growth, and so on, but the actual purpose of the Budget was to prepare for an early General Election. My last year's prediction of an Autumn election, clearly, is not going to be fulfilled, but the likelihood of a Winter 2023/2024 or Spring 2024, election, now looks probable. Suggestions are for a May election, but I suspect the Tories may go before that.

Nearly all of the reasons I set out, before, for an Autumn 2023 election continue to hold, but its just deferred for several months. I doubt the Tories will be planning a further give away budget in Spring, as some have suggested, in the hope of sparking an inflationary boom, to give them a poll boost later in 2024. I have also heard some people talk about the Tories engaging in a scorched Earth policy of wrecking everything, knowing they are going to lose. That seems to say more about those suggesting that possibility, and a failure to understand the role of the Tories. The Tories hope to return to government, and such a mindless, scorched Earth tantrum, is no way to achieve that. However, the Tories have almost certainly realised that the next election is lost, and are preparing for the one after.

The Budget was geared to that, and is reminiscent of the kind of strategic budgets of Osborne, designed to lay traps for Labour, prior to elections, and goes along with the return of Cameron to government, and the defeat of the petty-bourgeois wing of the Tory party, destroyed, in practice, by Truss, and buried by Braverman. In fact, the idiocy and tailism of Starmer's Blue Labour has made that strategy easy for the Tories. In some ways its a repeat of the experience of Blairism and New Labour.

The seeds of the global financial crash in 2008, were actually laid by the policies of Thatcher and Reagan in the 1980's. It was during that time that the conditions for the blowing up of huge asset price bubbles were created, and economies were switched over to the idea that wealth could be created out of thin air, simply by the inflation of such asset prices, confusing that paper wealth, with real wealth, created by the expansion of capital. That increase of real wealth, increasingly occurred in China, and other parts of the industrialising world. It was compounded when the delusion of this paper wealth, and the contradictions it entailed, was shattered by the global crash of 1987, which then led central banks to begin the process of liquidity injections to push asset prices back up, each time requiring a larger injection of liquidity, like a junkie requiring ever larger, more frequent fixes.

But, New Labour, as with Clinton's Democrats, simply adopted that same model, in the mid and late 90's, even though global material conditions were changing, and the underlying contradiction of that model was there for all to see, if only they looked. New Labour, like the Clinton Democrats, of course, represented the interests of the ruling class, a ruling class that now owns its wealth in the form of that fictitious capital (shares, bonds, property and their derivatives), rather than in the form of real capital, and which had become addicted to the capital gains arising from annual speculative rises in asset prices. Governments, too, saw it as free money, on the basis of the ability to continually expand credit, collateralised on ever rising asset prices. Forget about funding elderly social care, you can just fund it from your massively inflated house price, for example! Sheer delusion, as was, if you considered it, apparent, and later became apparent, even to those that had done their best not to consider it.

Those asset price bubbles, inflated from the 1980's, pumped up via the removal of credit controls, in 1986, and financial deregulation, were the work of Tories and Republicans, but the likes of Clinton and Blair were culpable for continuing with them, in the late 90's, and early 2000's, leading up to the crash of 2008. In Britain, that meant that the Tories, in 2010, could lyingly blame Labour profligacy for the effects of that global crash on the British economy. The last Budget is creating the conditions for a repeat performance, and Blue Labour has created an open goal for them to do so.

The last time around, Blair and New Labour were guilty, not just of continuing with the Tory delusion of paper wealth created from thin air, as a result of asset price inflation – an identical delusion to that presented by MMT, of being able to create “money” or wealth, by simply printing money tokens and throwing them into circulation - but of the usual tailism of social-democracy, which left them being timid in their policies, which, then, left them pursuing policies that were no longer relevant to changed conditions.

In the changed conditions of long wave expansion, after 1999, the secular fall in global interest rates of the previous 20 years, could not continue. The demand for money-capital, globally, would rise, relative to its supply, causing interest rates to rise. Rising interest rates would cause asset prices to fall, making the model of that previous 20 years, based on continual inflation of asset prices, doomed. That was proved by the 2008 global crash. It required policies more like those of the 1950's, and 60's, embracing those higher interest rates, as a consequence of a rise in growth and capital accumulation. But, New Labour continued to see the world through the lens of the previous twenty years, and the needs of the ruling class for those inflated asset prices. Indeed, as it sought to win the votes of the chimerical “centre-ground” of middle-class voters, who had seen their house prices rise, astronomically, from the 1980's, they saw the electoral attractions of continuing that “wealth effect”, as an alternative to wage rises, too.

In fact, far from profligacy, New Labour was typically guilty of that tailism and timidity. As I pointed out at the time, the average budget deficit under New Labour, up to the financial crash, was half that of the Thatcher/Major years. Indeed, New Labour ran budget surpluses in four of those years, whereas Thatcher/Major had only managed a surplus in just two years, out of their total 18 years in government. But, it was Labour that was in government when the crash happened, and, despite the facts, the Tories were able to pin the blame on it, and to use it to spin all of these other lies, setting up the ground for them to win the 2010 General Election, and repeat the trick in 2015. Now, they are set up to do it again.

It is the Tories, racked for the last 30 years by the contradiction resulting from its petty-bourgeois base, and its need to address the needs of the ruling-class that collapsed into domination by the former, at the expense of the latter, as it embarked on the lunacy of Brexit. Ever since 1987, Labour had escaped its own economic nationalist lunacy, in that regard, as it embraced the limited progressive internationalism of the EU. So, it is unfathomable, other than recognising the usual tailism and opportunism of Labourism, why Starmer, the arch-Remainer, in 2015 through 2019, should, now, at the moment that Brexit nationalism is collapsing, has made it the centre piece of his agenda!

Recognising the history of such opportunism and tailism, it then becomes obvious why Starmer has done so, as, rather than providing any kind of leadership, undertaking any kind of analysis of conditions, he continues to look backwards for inspiration, and to a narrow electoralist search for the votes of those that previously pushed through the Brexit idiocy, even as those voters themselves abandon it. Starmer is, now, tied to his reactionary nationalist agenda. But, even in the red wall seats, a clear majority of Labour's 2017 voters voted Remain, and, as the failure of Brexit becomes even more recognised those that didn't are increasingly switching.

It was never a crucial issue to begin with, as the repeated failure of UKIP in general elections showed. It was only significant to the Tories, because, the ability of UKIP to snap at their heels, taking away members and voters, was enough to facilitate Labour winning elections.

For the Tories, it was a dilemma, because although it sought to accommodate those reactionary petty-bourgeois core elements of its membership, and voter base, it, in like fashion, not only alienated it from the ruling class, but also from another component of its core membership and voter base, the professional middle-class, as witnessed in its loss of Blue Wall seats to the Liberals and so on. The electoral calculus for the Tories has changed. If you are challenging for government, the loss of several thousand core votes to UKIP, in marginal seats, may cost you the seat and a majority. If you know you have little chance of obtaining a majority, then, focusing on losing marginal votes to Reform, loses out to a focus on losing core votes to the Liberals and Greens, or simply apathy. In short, the Tories are set up to drop Brexit and distance themselves from its failure, leaving an incoming, jingoistic and Brexity Blue Labour to be associated with its failure, and so blamed for it come the following election.

The Tories made various promises of tax cuts, which did not appear in the Budget, for example, a proposal for halving Inheritance Tax rates. They have upgraded benefits in line with inflation, and pensions in line with the Triple Lock. As commentators have pointed out, the £19 billion cut in National Insurance, does not even restore the earlier £80 billion of tax rises, implemented by Hunt to deal with the crisis following the idiocy of the Truss government, in 2022. The OBR has also pointed out that it will have little effect on growth, and, indeed, the projections for all future years have been revised down. Moreover, the £19 billion of tax cuts is about the same as the real terms cuts in public spending, and with some spending protected, that would mean much bigger cuts in other departments.

The reality is that those cuts are never likely to occur, or be possible. But, if the Tories hold an election some time between January and April (when they would be expected to have a Spring Budget), they can avoid discussing that, and present Blue Labour with a problem. The fact that Hunt is bringing in the National Insurance cut in January, rather than waiting till the start of the new tax year, in April, reinforces that idea. Holding an election before any new Budget means that voters will have been teased with an existing tax cut, and the promise of more, in the way of cuts in Inheritance Tax, Income Tax and so on. The lure will be, vote for us and get these tax cuts, or vote for Labour and get tax rises.

In fact, the existing tax cuts, let alone the promised ones are not sustainable, because the corresponding spending cuts they entail are not feasible. If the Tories won the election, they would have to accept that reality, and face either raising taxes themselves, or increasing borrowing, at a time of rising global interest rates that are already increasing debt servicing costs, substantially. But, voters will not see that, or follow the intricacies of government financing. They will see an existing tax cut, and promise of more to come. Not enough to enable the Tories to pull off some miraculous escape from the jaws of defeat, but enough to minimise the damage done to them in their core Blue Wall constituencies.

It will, again, be Labour that has to deal with the reality, and clean up the mess, as has happened on so many occasions in the past. Blue Labour and Starmer can be counted on to do that by attacking their own core support amongst the working-class, as Blair did, in much more favourable conditions, Wilson and Callaghan did in the 1960's, and 70's, and as Starmer is already doing with his hostility to strikes, and his adoption of Brexit jingoism. Blue Labour has boxed itself in. It has said it will not raise taxes, but even to get public spending back to 2010 levels requires an additional £150 billion. It can't get that money by chattering on about its “values”, or promises about using tax from “non-doms”, or removing charitable status from private schools. Nor, given its commitment to continuing the Brexit idiocy is it going to be able to rely on higher rates of growth to finance it.

In fact, that same Brexit idiocy creates further problems. The “non-doms” proposals, and, indeed, any other proposals for tax rises, assumes that those subject to those taxes, do not respond accordingly. With Britain having become at the forefront of seizing the assets of foreigners, many of them will increasingly view it as a dangerous location.

Non-doms can simply do what many others have already done, and move to the EU, or simply to one of the many British tax havens, such as the Channel Islands, Isle of Man etc. Rather than increasing tax revenues, it could result in a fall. Brexit Britain is already losing out competitively to the much larger EU, and worsening that competitive position by higher taxes, decaying infrastructure and so on will only compound the problem, and accelerate British decline.

By championing a clearly disastrous Brexit, and promoting the old cakist nonsense about Labour “renegotiating” a better Brexit deal, Blue Labour is taking responsibility, and, thereby, blame for that Brexit failure, at the time that everyone recognises that failure, and the Tories are escaping from it. At every step, as the election campaign proceeds in the coming months, the Tories will simply challenge Blue Labour to say whether they will reverse the tax cuts implemented, and whether they would introduce those the Tories are promising. Blue Labour with its timid and tailist politics, not to mention its constriction inside the box of its “fiscal responsibility”, will have to jump, feet first, into that trap. Either tax cuts, or spending cuts. The Blue Labour spokespeople have repeatedly failed to spell out their tax and spending plans on the basis of arguing that an election is a year away. If, in January, the Tories call an election for March, that, in itself, would wrong-foot Labour, requiring them to hurriedly draw up those tax and spend policies.

But, given the timid and tailist nature of Blue Labour, and its commitment to the disaster of Brexit, winning the election is only the start of its problems. From day one, it will be a series of failures and reversals. The promised Brexit “renegotiation” is impossible, other than negotiating for an even more subservient relation. The only sensible negotiation would be to re-join the EU, but Starmer has boxed himself in on that score. There is one obvious solution to that. Ditch Starmer as Leader! But, even a casual look around Brexit Britain shows the deep state of decay it is suffering. Its not just the collapse of the NHS, the concrete in schools, and public buildings, the lack of any decent social housing, the collapse of the road system and so on. The town and city centres are in terminal decay, because, for years governments have tried to sustain them with subsidies and schemes, which meant subsidising a dead model that was appropriate to the twentieth century, but irrelevant to the 21st century age of the Internet.

All of that, together with the fact that, from the 1980's on, conservative policies facilitated the growth of the petty-bourgeois, self-employed and so on, which is the basis of under-employment, and low levels of productivity, requiring a wholesale restructuring of the economy, which requires huge amounts of actual investment – as opposed to the speculation in stock and bond markets – way in excess even of what McDonnell and Corbyn's Labour was proposing. Brexit will continue to fail, and Blue Labour will carry the can for it; the economy will continue to deteriorate; taxes will rise, and spending continue to be constrained; the promised “renegotiation” is impossible, and so will also fail.

As with Biden in the US, Hollande, and now, Macron in France, Scholtz in Germany and so on, the timidity and tailism will lead to disaster, and electoral defeat. The Tories, with voters taste for Brexit having been soured, will stand ready to offer them a return to sweetness and light in 2028/9.