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Editorial of the Socialist
Budget for the 1% must be fought
The blatantly pro-rich budget of Chancellor George Osborne was met by a wave of outrage. There was incredulity that the top 1% had been made significantly better off, while pushing on with austerity for everyone else. Even some of the right-wing newspapers were incensed that the income of pensioners was attacked.
Inflaming anger further, Osborne had tried outright trickery, framing the changes in the guise of 'simplifying' tax for pensioners, removing a 'pointless' 50% tax on the rich and pretending to introduce more punitive measures against them.
Another attempt to con was his 'generosity' in raising the income tax starting threshold to £9,205 in April 2013. This was condemned as an "empty gesture" by the head of Citizens Advice, whose organisation estimated that poorer working families would only be £33 a year better off after their benefits are reduced to take into account the slightly higher net income. £33 certainly won't cover the increased cost of petrol, fares, household bills, and so on. And what about the millions of people whose income is already below the present tax threshold?
At the same time, someone 'earning' £500,000 a year gains at least £17,000 a year from the reduction in the top rate of income tax. In addition, shareholders and directors of large companies were whooping with delight at the extra cut in corporation tax.
Other attacks included ending universal child benefit; forcing 300,000 more workers into the 40p tax band from April 2013; reducing planning regulations; and starting a path to regional public sector pay bargaining and increasing further the retirement age.
The biggest initial backlash however was over the shocking withdrawal of tax allowances for pensioners, adding to the anger already burning among public sector workers at being forced to pay more, work longer and receive less pension. Osborne insultingly boasted that pensioners would though receive the "biggest cash increase in the state pension ever" - a miserable £5.30 a week.
Naked class interests
"Cowardly" for giving into the interests of the rich, said some commentators about the budget. But Osborne isn't trying to be an independent arbitrator between the classes in society; he's overtly looking after his own. Tory and Lib Dem front benchers sat stony faced when Labour leader Ed Miliband demanded to know if they would personally gain from the abolition of the 50p tax band, as many of them will, including Cameron.
Have these millionaire ministers gone too far for the Tories' own good? Their tax gifts for the rich, attack on pensioners, threats of a further £10 billion in benefit cuts and other policies have led to speculation on the electoral damage being done to the coalition parties.
"Osborne has re-toxified the Tory brand" assessed John Rentoul in the Independent on Sunday, who went on to say that now, only one-fifth of the way into the spending cuts, "cannot be the time to announce" the ditching of the 50p tax rate.
Times writer Philip Collins summarised a view of many capitalist economists when he dismissed as "absurd" the "idea that an income tax cut from 50p to 45p is a stimulus package ... especially so because Mr Osborne bragged that his budget meant that the super-rich will pay five times more tax than before"
The corporation tax cut will ensure Britain has one of the lowest rates of this tax in the G20; but low tax rates don't automatically attract investment. For instance, Britain's top companies are estimated to have over £700 billion in cash reserves sitting idle, which isn't being used productively because of lack of a strong consumer market, not because of the rate of tax.
Reducing corporation tax and the top rate of income tax cuts the spending power of consumers further, by raising less money for the public sector and so fuelling the Con- Dems' crazy driving down of public sector wages and other public spending.
In February public sector net borrowing was a record high for a February; cuts and more cuts are not digging a way out of the crisis. Regionally imposed pay freezes would cut consumer spending further, as would the threatened 880,000 public sector job losses by 2017. For the 2.8 million unemployed, a million of them young, there was nothing in the budget, and no prospect of economic recovery in sight.
It is not that there were no other options; far from it. Even some of the articles by procapitalist commentators suggested measures that could seriously raise money from the rich to use to boost the public sector and the economy as a whole.
For instance, rather than increased oneoff stamp duty when a £2 million property is bought, how about an annual council tax charge on such properties that better reflects the proportion of income paid in council tax by the poorest in society? Or ending more of the tax avoidance loopholes that the rich use? Or helping small businesses to secure the loans they need?
And how about a levy on the piles of cash lying idle in company coffers?
The Socialist advocates going much further in order to fully transform the lives of the 99% - including nationalisation, under democratic workers' control and management, of the key sectors of the economy with compensation paid on the basis of proven need.
But even a cursory look at some of the limited measures that could be taken shows that workers don't have to tolerate the austerity being imposed.
Pressure will inevitably build up again on the trade union leaders - as it did last year - to mobilise the strength of the millions-strong workers' movement to fight back.