Rachel Reeves’ incoming budget is shaping up to be bleak. Labour’s economic record is underwhelming – inflation at double its 2 per cent target, growth slowing – while the public finances are growing ever shakier, leaving the Chancellor, as the Institute for Government claims, at the “mercy of events.”
Talk of tax rises abounds, as do suggestions to scrap the government’s fiscal rules. The Chancellor is in a tight spot, with few levers to pull and fewer without consequence. But the government has far too myopic an approach, dancing delicately with the prospects of modest improvements to the public sector, while far grander reforms are needed to a decaying British society – problems they have made few moves to address.
Firstly, the fiscal rules are here to stay, after the government dug its heels in, arguing they are imperative to avoid a Liz Truss-style economic collapse, while Andy Burnham seemed to tout his leadership ambitions. Keir Starmer praised the economic stability they manifest, and the Manchester mayor’s regicidal manoeuvres were all but dead in the water by the Labour conference. Many will note the political, not just economic, salience of a strong-and-stable line on the economy, meaning scrapping the rules is for the birds.
Tax rises are similarly tricky. Labour has already hit ordinary people indirectly through the rise in employers’ national insurance payments, which likely contributed to the economy’s contraction in April, and underwhelming growth since. Another hit on working people’s wallets will leave them with less to spend, meaning less growth and less revenue for the Exchequer.
An alternative wealth tax on the super-rich could be considered, but it risks stifling growth, shrinking tax revenue, and encouraging capital flight. Research from the Tax Foundation has evidenced the impact of asset taxes on growth, making them a tricky move.
Gary Stephenson, at the forefront of the wealth tax movement, argues that wealth inequality stifles growth through rising prices for the poorest, and the revenue from a wealth tax should be disseminated among the most vulnerable, increasing their purchasing power to spur growth. Incisive analysis. But the nation’s fiscal instability means the government might simply hoover up any revenue to balance the books, meaning no counter-balance to any negative impact.
The broader question is why the government needs the money. Keir Starmer’s government seems to think that the disgruntlement present in British society can be countered by making things, principally public services, work better. How naive. People’s outrage cuts far deeper than that.
Economic growth and improving people’s lives are linked, but not inextricably. Ask an out-of-work miner if the late 1980s’ economic growth benefitted their bank balance. To be sure, it’s a good thing if goods are cheaper, or people’s wages increase, but these benefits are a small respite from the ruination ofthe community, the destruction of the high street, or the decline of the local pub.
Often, growth spurs such destruction – Amazon’s success, and its effect on small businesses, proves an instructive example. The nation has fallen into apathy characterised by alienation and ennui, which a floundering public sector compounds, but is instigated by an economic model prioritising wealth over community. Improved public services can soften the edges of such a decline, but are unable to reverse it.
The vote to “take back control” through Brexit speaks to the agony of a waning society — back control requires the acceptance of the notion that others have taken it in the first instance. Anecdotally, the growing number of people I know describing themselves as variations of “politically homeless” seems to correspond to an increasing outrage at the dire state of British communities, the boarded-up buildings, the broken bus shelters. “Managed decline” is the phrase of the day, as people begin to grieve the loss of a better society they feel has slipped away. Or, rather, has been taken.
This government is wedded to an economic model which has ruptured core tenets of our nation. Shops are closing; socialising is exorbitantly priced. The likes of Gary Stephenson are responding, but the government lacks the tact and vision to implement their ideas coherently. The inability to, say, get a GP appointment in a reasonable time has not sparked the sense of a country in tatters and a broken social contract. It only piles further weight on the backs of those already disaffected by the collapse of centres of community into desolate and dilapidated zones of uninterest.
So, to simply raise taxes and offer people crumbs of support hardly touches the sides. We all hope for a successful NHS or education system, but until the revival of the vibrancy of local communities, which in turn requires a turn away from the present political model, Labour are fiddling while Rome burns. Keir Starmer says that Britain isn’t broken. He’s wrong. There are very deep cracks throughout the UK. The problem is they’re covered by the price tag.
“Labour Party” by A nosa disco necesítanos is licensed under CC BY-SA 2.0.
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Britain is Burning and Labour’s Tired Fiscal Policy Offers no Hope
Rachel Reeves’ incoming budget is shaping up to be bleak. Labour’s economic record is underwhelming – inflation at double its 2 per cent target, growth slowing – while the public finances are growing ever shakier, leaving the Chancellor, as the Institute for Government claims, at the “mercy of events.”
Talk of tax rises abounds, as do suggestions to scrap the government’s fiscal rules. The Chancellor is in a tight spot, with few levers to pull and fewer without consequence. But the government has far too myopic an approach, dancing delicately with the prospects of modest improvements to the public sector, while far grander reforms are needed to a decaying British society – problems they have made few moves to address.
Firstly, the fiscal rules are here to stay, after the government dug its heels in, arguing they are imperative to avoid a Liz Truss-style economic collapse, while Andy Burnham seemed to tout his leadership ambitions. Keir Starmer praised the economic stability they manifest, and the Manchester mayor’s regicidal manoeuvres were all but dead in the water by the Labour conference. Many will note the political, not just economic, salience of a strong-and-stable line on the economy, meaning scrapping the rules is for the birds.
Tax rises are similarly tricky. Labour has already hit ordinary people indirectly through the rise in employers’ national insurance payments, which likely contributed to the economy’s contraction in April, and underwhelming growth since. Another hit on working people’s wallets will leave them with less to spend, meaning less growth and less revenue for the Exchequer.
An alternative wealth tax on the super-rich could be considered, but it risks stifling growth, shrinking tax revenue, and encouraging capital flight. Research from the Tax Foundation has evidenced the impact of asset taxes on growth, making them a tricky move.
Gary Stephenson, at the forefront of the wealth tax movement, argues that wealth inequality stifles growth through rising prices for the poorest, and the revenue from a wealth tax should be disseminated among the most vulnerable, increasing their purchasing power to spur growth. Incisive analysis. But the nation’s fiscal instability means the government might simply hoover up any revenue to balance the books, meaning no counter-balance to any negative impact.
The broader question is why the government needs the money. Keir Starmer’s government seems to think that the disgruntlement present in British society can be countered by making things, principally public services, work better. How naive. People’s outrage cuts far deeper than that.
Economic growth and improving people’s lives are linked, but not inextricably. Ask an out-of-work miner if the late 1980s’ economic growth benefitted their bank balance. To be sure, it’s a good thing if goods are cheaper, or people’s wages increase, but these benefits are a small respite from the ruination ofthe community, the destruction of the high street, or the decline of the local pub.
Often, growth spurs such destruction – Amazon’s success, and its effect on small businesses, proves an instructive example. The nation has fallen into apathy characterised by alienation and ennui, which a floundering public sector compounds, but is instigated by an economic model prioritising wealth over community. Improved public services can soften the edges of such a decline, but are unable to reverse it.
The vote to “take back control” through Brexit speaks to the agony of a waning society — back control requires the acceptance of the notion that others have taken it in the first instance. Anecdotally, the growing number of people I know describing themselves as variations of “politically homeless” seems to correspond to an increasing outrage at the dire state of British communities, the boarded-up buildings, the broken bus shelters. “Managed decline” is the phrase of the day, as people begin to grieve the loss of a better society they feel has slipped away. Or, rather, has been taken.
This government is wedded to an economic model which has ruptured core tenets of our nation. Shops are closing; socialising is exorbitantly priced. The likes of Gary Stephenson are responding, but the government lacks the tact and vision to implement their ideas coherently. The inability to, say, get a GP appointment in a reasonable time has not sparked the sense of a country in tatters and a broken social contract. It only piles further weight on the backs of those already disaffected by the collapse of centres of community into desolate and dilapidated zones of uninterest.
So, to simply raise taxes and offer people crumbs of support hardly touches the sides. We all hope for a successful NHS or education system, but until the revival of the vibrancy of local communities, which in turn requires a turn away from the present political model, Labour are fiddling while Rome burns. Keir Starmer says that Britain isn’t broken. He’s wrong. There are very deep cracks throughout the UK. The problem is they’re covered by the price tag.
“Labour Party” by A nosa disco necesítanos is licensed under CC BY-SA 2.0.
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