In the proposals put forward by Labour and Tories, its clear that they both contain huge fiscal black holes of around £20 billion, to begin with, even before their miserly plans for additional spending are added, which, without additional taxes or borrowing, means more austerity, more cuts to spending, more real wage cuts for workers. Already, Starmer has made a point of saying that he will not pay doctors the 35% wage rise needed just to get them back to where they were in 2008! That is an indication of the attacks that workers can expect from a Blue Labour government, from day one, and is why workers need to organise now, in the workplace, in the unions, to resist the attacks of Starmer and Blue Labour. The unions should start, now, not only preparing for that industrial struggle, but also engage in the political struggle, inside the Labour Party, to get shut of the Tories like Starmer, Streeting and co.
The NHS is in a state of collapse, and what Starmer's refusal to pay doctors means is a willingness for it to collapse even faster, as those doctors move into the private sector, or overseas. That is no problem for Blue Labour whose leading members like Streeting have bragged about privatising large parts of the health service, but others of whom are already openly connected to those private companies set to profit hugely from that privatisation. The corruption in the Tory party, as seen with the provision of contracts during Covid, will be nothing compared to that in Blue Labour, as these careerists and parasites force their snouts into the trough.
So, rather than the economy getting the kind of fiscal stimulus that the US has had in the last few years, the UK looks set for further significant austerity, taking demand out of the economy, and slowing it even further. However, there are contradictions, here, too, as I have set out before. For statists, the privatisation of the NHS, and other areas of state capitalism is significant, in its own right. However, the reality, in recent times, has been not only that such state capitalism failed to deliver for workers as consumers, but it was also even more oppressive and exploitative of them as employees, too. Despite the continued high levels of unionisation, it was in the state sector that governments used their power to hold down wages, and to impose cuts in pension provision and so on, whilst, in the private sector, rising demand, and consequent demand for workers led to rising wages and better conditions.
Blue Labour may well carry out its privatisation plans, but, its in those private companies that competition between them will, be intense for workers, more easily facilitating workers to get higher wages and so on, compared to Starmer's declaration of war on them in the NHS. This is not the 1980's, 90's, or even early 2000's, when governments could simply count on a working-class, on its knees to accept what was thrown at them without response.
Blue Labour has said it will not raise Income Tax, NI, or VAT, the biggest sources of tax revenues. Income Tax thresholds have already lagged way behind inflation, drawing millions of low paid workers into paying more tax, as a result of fiscal drag, so the scope for Blue Labour to raise tax by that method is also limited. It should be raising those thresholds to around £20,000 a year, so that no one on the Minimum Wage pays Income Tax or National Insurance.
Not raising VAT is defensible, because it is a regressive tax. Indeed, it should be reduced, not only for that reason, but for the reason that Marx set out in his programme for the First International. However, it produces so much revenue that to cut it would require significant tax rises elsewhere, or else a big reduction in state spending. The latter, of course, was the consequence that Marx sought, preferring that workers, collectively, organised their own social insurance and welfare, as part of the development of workers' self government. But, given where we are, any such immediate reduction would be imposed at workers' expense, without that workers' alternative being in place.
The point is that Blue Labour, indeed any government, is not a free agent in raising these taxes, particularly Corporation Tax, or various forms of Wealth Tax, or taxes on assets and capital gains. This was part of the fallacy of Brexit/Lexit that leaving the EU restored national sovereignty and independence. It is the lie behind all forms of nationalism and talk of national self-determination, in the age of imperialism.
Blue Labour talk about raising tax revenues by removing VAT exemption on private school fees. This measure, even on Blue Labour's estimates, raises pitifully little extra tax to fund the hole, even in current budgets. Its so little as to be essentially an accounting error. The global ruling class, likewise, would not be put off sending its kids to the top private schools by such an increase in costs, which, to them, would amount to pocket change. Indeed, by making those schools more exclusive, they would become even more attractive to the ruling class. However, those that will be deterred, and already are being deterred, are those sections of the middle-class, and even working-class, that send their kids to the less renowned private schools, in the hope of securing a better education for them.
Around 16-20% of current private students are estimated to be deterred, as a result of the increase in costs, with a consequent reduction in the estimates of how much tax will actually be raised. In fact, as those students then enter the state sector, the capitation means that the state will have to find additional sums to cover school budgets, leaving little net benefit. It would have been far better and more principled, to have just banned private schools, but that would really have meant, even on a tiny scale, taking on the ruling class, and its sources of power in society.
This small example of the limited scope of national governments, when it comes to taxation, is nothing, compared to the limitation when it come to the more significant forms of taxation on unearned income, and wealth taxes. The ruling class have always sent their children abroad to the best schools, to gain the benefit of access to foreign culture, and to network with the children of the ruling class of other countries, solidifying their common class interest against the working-class still mired in the idiocy of national life, culture and its limitations. Membership of the EU opened up that possibility for the children of the working-class too. Brexit, and the ending of free movement put an end to that as well, for British workers and their kids.
If Starmer wants to raise significant amounts of tax, even to finance his timid spending plans, ending VAT exemption of school fees will not cut it, and having ruled out Income Tax and VAT, that leaves, basically, Corporation Tax. But, if Blue Labour wants to grow the economy, it needs additional capital investment by corporations, not less. Increasing Corporation Tax means less profits available for reinvestment. Moreover, it will drive multinational corporations to move their activities out of Britain, and into the EU at an even faster pace than they have already been doing, as a result of Brexit.
The EU can get away with higher rates of Corporation Tax than Britain, because it is a much bigger market for those companies to operate in, and the other costs of that operation are much lower. The EU economy is seven times bigger than the UK, and so companies can operate on a larger scale, enjoying the economies of scale. Moreover, they do not face all the costs and frictions operating in that market that Britain faces outside it. So, the mass of profit and rate of profit is higher. Even with a higher rate of tax on that profit their mass of profit and rate of profit is higher than in the UK. That gives an incentive for companies to locate their production in the EU.
Even so, national governments inside the EU have been tempted to try to gain national advantage by introducing low rates of Corporation Tax. The Irish Republic did so, and successfully gained large-scale investment from tech companies like Apple. If allowed to continue, such beggar-thy-neighbour policies undermine the foundation of the single market. That is why the EU, as a single market that must increasingly move to a single fiscal policy as well as monetary policy – necessitating ever closer political union – intervened to stop that practice by Ireland.
Multinational companies can move capital from one national economy to another to obtain tax or other benefits, but they can't move capital out of the EU as a whole, because it is simply too big a market, too important to their profits to do so.
Consequently, if Starmer and Blue Labour, and this applies even more to the more ambitious plans of the Greens, just as it did to Corbyn's Labour, seeks to raise the tax revenues by increasing Corporation Tax, it will face an immediate capital strike, as well as an increased movement of capital from Britain to the EU, with a consequent slowing of the economy. Incidentally, this kind of social-democracy in one country approach also led to the failure of the Mitterrand government, in France, in the 1980's. As with the reactionary notion of Socialism In One Country, it shows that no progressive solutions are now possible on a purely national basis, and hence, again, why Brexit and re-joining the EU is central.
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