Blue Labour's Budget

Blue Labour's budget lived up to everything I expected from a party that is now characterised by the domination of its ideology by reactionary, petty-bourgeois nationalism and populism/sovereigntism, under Starmer and the influence of the likes of Glasman, and his allies from Spiked. Like its Tory equivalent, under Liz Truss, it is characterised by measures that seek to bolster its support amongst that reactionary petty-bourgeois, nationalist milieu, and its attendant layers within the lumpen proletariat. But, some of the responses to it, from both the Left, and sections of the media are also an indication of their own bankruptcy, repeating tropes that assume that Labour is the same old conservative social-democratic (neoliberal) party of the past, but, also, framed as though the conditions of today are the same as those that prevailed over the last 40 years, which they are not.

The Budget, however, was a more rational offering than its equivalent in 2022, by Truss/Kwarteng, which is why the financial markets did not immediately attack the Pound or Gilts, as they did in 2022. During the Budget Speech, UK Gilts actually strengthened, though they weakened later. But, that weakening, and rise in Gilt yields, contrary to the attempts of the media to make it into some kind of drama, was minimal, and came at a time when US Treasury yields, and the yields on other global bonds are rising again. That has more to do with the fact that, after several months of global disinflation, that seems to have plateaued, and started to rise, and global debt is also rising, leading to generally higher rates of interest. Reeves and Starmer, at least, seem to understand the reality that Truss and her likely successors in the Tory Party do not, that there is no such thing as “taking back control” of the national economy, because real control resides with the global ruling class, and the global financial markets. Its why their persistence with the idiocy of Brexit is so inconsistent with it.

Most of the measures fit into the category of rubber-stamping what is already economic reality. As with the settlement of the hospital doctors and rail workers pay disputes, the increases proposed in the Minimum Wage, and Living Wage, only reflect the fact that, we are in different conditions to those that existed during the 1980's, and 90's, when there was a large surplus of available labour-power, pressing down on wages in general. The increases in percentage terms are barely higher than the average increase in hourly wages in the private sector over the last year. But, in absolute terms, because average private sector wages, are much higher than the Minimum Wage, or Living Wage, the increase is significantly smaller, a fact that is also omitted when increases in state pensions are discussed. Workers and pensioners, of course, have to pay their bills with actual amounts of money, and not with percentages.

In conditions of relative labour shortages, such as now, it is those in unskilled jobs that can move to other unskilled jobs most easily, which is why it is in those jobs that the last couple of years have seen the greatest amount of churn. So, the increase in the Minimums, only rubber stamps an economic reality, whilst giving Blue Labour, an easy win, amongst those low paid sections of society it seeks to woo, often concentrated in those decayed urban areas referred to as the Red Wall, and amongst the more backward, unorganised sections of the working-class. In fact, with Blue Labour continuing the freeze in Income Tax thresholds, it will, also, claw back a large part of that rise in income tax, via fiscal drag, again, showing the dishonesty of a “Minimum” Wage, that is, then reduced below the minimum as a result of tax, let alone the usual cliff edge of the idiocy of individually targeted benefits such as Housing Benefit, and so on.! As I have pointed out before, if the Minimum Wage was to be effective, it would, first be much higher, but would also be at least a weekly, rather than hourly rate, but, secondly, it would be combined with a basic income tax threshold, set above it. It would be set high enough that all of the bureaucratic nonsense, and cost of benefits such as Child Benefit, Housing Benefit and so on, could simply be scrapped.

The media, and some sections of the reformist/Keynesian Left have complained that the increase in employers National Insurance contributions, breaks Blue Labour's promise not to raise taxes on “working people”. Nonsense. If they hadn't noticed, its an increase in the employer's contribution, not that of the workers. Their argument is that the employers will recoup this increased cost, by either lowering wages, or else reducing employment. In essence, this is the same fallacious argument that Weston proposed, and which Marx demolished in “Value, Price and Profit”.

If it were true, it would mean that workers share of the new value they create can never rise, only ever fall. As Marx, sets out, in the long-run, that is true, but it is certainly not true, in the short-run, in conditions where there are relative labour shortages, and so where the market price of labour-power can rise, and capital has to just suck it up, via a lower profit share. It also mistakes the idea set out by Marx, in relation to the average rate of profit, that capital will move towards areas where the annual rate of profit is highest, and away from where it is lowest, for the idea, specifically denied by Marx, that capital will stop being invested, in total, as a result of a fall in the average rate of profit itself.

If employers could simply reduce the wages of their workers to compensate themselves for higher costs, be it from National Insurance, or anything else, they would already have reduced those wages, in order to have boosted their profits! That is particularly true of the small businesses that are the most avaricious, and keen to screw their largely, unorganised workers, which is one reason it was amongst that petty-bourgeoisie that there was the greatest support for Brexit, in order to get rid of the EU's minimum standards and regulations.

The problem they face, in conditions where the economy is still growing, albeit not at the rate it was following the lifting of lockdowns, is that competition drives them to have to try to grab their share of that expanding market. That requires them to employ workers, and if they try to cut the wages of those workers, many of them, now, can simply, move to another job. Its why, the average pay increase for moving jobs, has been around 14%.  Alternatively, many of them, are, increasingly, also, recognising their strengthening position, and joining unions to resist any such reduction of their wages. That is also what happened in similar conditions in the 1950's, and 60's.

The other argument put is that, faced with a reduction in their profits, as they have to pay this higher level of National Insurance, employers will reduce employment. For the reasons set out above that is, also, nonsense. They have the choice of making, possibly, a bit less profit, and paying the higher premiums, or reducing the size of their business, and so making even less profit, let alone going out of business, and making no profit at all!

In the latter case, for the small businesses, that would mean the employer having to get a job themselves as a wage worker. For small businesses, its usually not even the case that they can shut up shop, here, and move to somewhere else, where they can employ cheaper labour. For one thing, where would be the most obvious place to move? The EU, but those small businesses were the vanguard of Brexit, precisely because they wanted to escape the minimum standards of the EU. Moreover, if you run a corner shop, a back street garage, or are a window cleaner, and so on, in Stoke, you can hardly move your business to France, and expect your customers to come to you!

Some of the small businesses, probably, will not be able to survive, as a result of the reduction in their profits, but that shows just how unsustainable those businesses were to begin with, only surviving on the basis of an increased exploitation of their workers, and the conditions of the last 40 years that allowed that petty-bourgeoisie to grow by 50%.

Its why, productivity has been so low in the UK economy, in particular. But, this is, then, only a return to the conditions that have existed within capitalism for the whole of its existence, whereby, the inefficient small businesses close down, and capital becomes more concentrated.

The result of some inefficient, small businesses closing, in an area, in current conditions, is that others will snap up their customers, and be able to increase their own businesses, employing additional workers, probably those that worked for the ones that closed down. That would be an accidentally progressive result of the actions of Blue Labour, and the Budget.

As for the large companies, who could move their business elsewhere, as they produce for a global rather than national, or local market, the rise in National Insurance contributions is relatively insignificant. Far more significant to these larger companies is the huge burdens placed on the UK economy by Brexit, and Britain's separation from its largest and closest trading partner in the EU. Its those larger and medium sized companies that have been abandoning Brexit Britain for the EU, and will be more inclined to do so, as the effects of Brexit accumulate. 

Indeed, this is the idiocy of Blue Labour, trapped by its desire to assuage the reactionary petty-bourgeois nationalists, because, the simplest way to have raised the £40 billion, it has raised in the Budget from tax hikes, would, instead, have been to scrap Brexit, and re-join the EU. That would not only have raised £40 billion in tax revenues, each and every year, but, unlike the measures adopted by Blue Labour, would also have provided the economic growth they claim to seek, as required to implement the rest of their agenda.

The other ephemera in their budget are of a similar ilk. There is the usual reactionary attacks on larger-scale capital, such as with the extension of current windfall taxes, and with further taxes imposed on the new, more efficient forms of online business, so as to try to protect the old 20th century forms of retail businesses, based in the decaying high streets. In the end, as Lenin set out, in relation to the petty-bourgeois agenda of the Narodniks, more than a century ago, these reactionary measures designed, superficially, to slow down the pace of change, and growth of larger scale capital, end up being just superficial, and ineffective in their purpose, much as were also the “anti-trust” measures pursued in the US, and elsewhere, towards the end of the 19th century, and early 20th century. For Blue Labour, they, similarly, fulfil its requirement to make its populist appeal to that, section of the petty-bourgeoisie, and its associated reactionary layers of society.