Rachel Reeves has spoken. Three weeks before her latest budget, she trotted out all the usual banalities about hard choices and so on. Those had choices, of course, are never hard at all in their effects on the politicians that make them, but always for the least affluent and poorest in society that pay for them. But what is most surreal in the present conditions is that the “hard choices” that Reeves claims have to be made, are entirely ones that she and Starmer have inflicted, by their own previous choices, and the solution is quite simple and obvious.
Ever since Starmer became Labour Leader in 2019, he has been a staunch supporter of Brexit, despite being a champion of Remain, and of a second referendum when Corbyn was Leader. Indeed, not only has Starmer been in the vanguard of support for that reactionary and disastrous Brexit decision, and the ridiculous idea that it could somehow be turned to advantage, but he has embroidered it with the adoption of ever more extreme and extravagant trappings of reactionary nationalism, sovereigntism and inevitably the attendant xenophobia and racism. So much is that the case that he made it impossible for his Blue Labour government to attack the Tories, and their metamorphosed form – Reform – on the basis of the catastrophe that their Brexit had wreaked. Much as with Blue Labour's support for the Zionist genocide in Palestine, their hands were already too “steeped in blood”.
Starmer and Reeves have, now, begun to attack Brexit and the damage it has inflicted on Britain, but only in the most mealy mouthed terms. How could they do other, given their own support for it over the last six years? And, their mealy-mouthed attacks, now, on Brexit, are not really an attack on Brexit itself, but on the Tories and Reform for the Brexit they imposed, in effect, trying to claim that Blue Labour could have implemented a better Brexit. That is just a version of Farage's claim that Brexit could have worked if he rather than Johnson, Truss et al, had been in charge. It is the fantasy that Brexit could ever have been beneficial. Starmer and Reeves need that narrative, because what they seek to do is to divert attention from the disaster that their own political-economic policies have imposed, and to blame the Tories and Reform, instead, whilst not actually dealing with the underlying inadequacy of their own economic strategy, a central part of which is their failure to address the question of Brexit.
It was obvious prior to the election that Reeves economic plan was full of holes, that anyone who cared to look could see the £20 billion “black-hole” that Reeves claims she only became aware of, after they entered government. Closing their eyes to the existence of that deficit was central to making their sums add up prior to the election, and, thereby, to deny the need to raise taxes. Reeves decision to leave only £10 billion of “headroom”, rather than the usual £20-30 billion, was also part of that duplicitous strategy, and was, always, going to fall apart around them. Now, as Reeves has had to come back yet again to try to fill those holes, she is forced to raise taxes, which she said in Blue Labour's Manifesto, they would not do. It will not work.
This is a return to the same policies of austerity that the Tories introduced after 2010, and which acted, to worsen the problem, by slowing growth even further. What happened in Greece was an example of the problem on a larger scale. Austerity caused the economy to slow, which reduced tax revenues, whilst the need to fund welfare and benefits grew. Instead of the debt burden being lightened, it grew worse. In Greece, eventually, after various manoeuvres had shifted the risk from private hands into public hands, including pension funds, bond holders had to accept a haircut on what they could get back. The problems facing Reeves are already causing jitters in the bond markets, as yields on UK Gilts have continued to rise over the last year.
The narrative being given now by Blue Labour to whip the PLP into line, is not entirely, therefore, baseless.
The truth is that globally, interest rates are set to rise, as a new global debt crisis develops. Across the globe, governments are needing to borrow to finance necessary infrastructure spending as the last 20 years of austerity, and attempts to balance the books by deferring capital spending come back to bite them. That is without the increased spending they propose on re-armanent as they prepare for WWIII. Then there is all the borrowing being done by companies, who are spending large amounts on creating data centres and all of the associated power generation and distribution that goes with it. Whether that spending is funded from retained profits that, then, do not flow into capital markets, or whether its funded by actual borrowing in those capital markets, the result is the same, the demand for money-capital rises, relative to its supply, and so interest rates rise.
Some of that is also down to the policies previously pursued. Blue Labour attack the rise in interest rates that occurred under Johnson and Truss, but that was also a result of a) Brexit and b) lockdowns. When Starmer became Leader, he ceased opposing Brexit, and, also, became a critic of Johnson's lockdowns only on the basis that they should have been introduced sooner and more extensively. As I noted at the time, and as is now clearly apparent, the introduction of lockdowns was a crazy policy. It inevitably failed to prevent large numbers of deaths of elderly people, who were the only ones at any serious risk from COVID, whilst cratering the economy, by around 20-30%, as well as causing millions of young people to lose nearly two years of their education. The introduction of the various furlough payments to offset the effects on household incomes of lockdowns, caused borrowing to soar, pushing interest rates higher, and the attendant liquidity injection – at a time when liquidity should have been reduced in line with the reduction in economic activity – caused the high levels of inflation I had again predicted at the time.
Britain has continued to suffer from higher levels of inflation, and higher interest rates, as well as lower per capita growth, ever since, and one major contributor to that is the effect of Brexit. The “hard choices” that Reeves and Blue Labour claim are required, are only the result of their own previous choices and policies, and the constraints they have placed on themselves. Had they been actively opposing Brexit over the last 6 years, they would have been in a position to have included a commitment to re-join the EU in the 2024 General Election Manifesto. Negotiations with Brussels, prior to then, would have meant that we could, now, be well on the way to EU membership, an all the benefits that brings. For a start, it would create the economic growth that Reeves claims is central to her strategy. It would also provide £40 billion a year in additional tax revenues from that growth, and so more than fill the fiscal holes she faces.
The solution is simple and obvious. Rejoin the EU, but Blue Labour cannot commit to it, because to do so would mean admitting their egregious mistake over the last six years as they have tied themselves to the interests of the reactionary, nationalist petty-bourgeoisie which they saw as the basis of their electoral support. At the very least, it means removing Starmer, and admitting the errors of the last six years. Nor is Reeves likely to follow the advice of Gary Stevension and others to introduce a Wealth Tax, instead the burden will again fall on workers, and pensioners. But, as I set out recently, the truth is that a Wealth Tax would not be the cure-all that is being promoted. Businesses have been leaving Britain, as a result of Brexit. Increased taxes will accelerate that, as also, Mamdani will face in New York, as happened in the past, narrowing the tax base.
The answer to that itself depends on escaping the limitations of the nation state. An EU fiscal union makes it much harder for companies to avoid taxes. But, also, as I have set out, it is the control over companies by shareholders that is the real problem. Those shareholders have no legitimate right to control companies, having simply loaned money to them. Control of companies should reside with the workers within them, and, those workers obviously would have no interest in shifting their operations elsewhere, only in forging alliances with their fellow workers in other regions and countries to expand their activities. But, Reeves and Blue Labour certainly are not going to offer that solution, which is also why we need to build a rel alternative to them, a mass communist, workers' party.
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