British capitalism’s foundations crumbling
Four decades ago, Tory prime minister Maggie Thatcher declared that Britain was going to be a “home-owning democracy”, where support for capitalism would be underpinned by working-class people getting to own their own bricks and mortar. Today, 63% of households are homeowners, but the Tories are hated and support for the capitalist system they defend is in decline.
As interest rates soar, the average increase in mortgage costs for those coming off fixed-rate deals is an eye-watering £2,900 a year. Meanwhile, for the big majority of young people, homeownership is an increasingly impossible dream. The average first-time buyer is now in their late 30s, and before then young people are among those trapped in private-rented, insecure, and often substandard accommodation. Higher interest rates are also feeding through into higher rents. In Greater London, for example, rents have increased by an average of 17% in the first half of 2023.
Alongside the housing crisis, real wages have fallen more than at any time in half a century. In 2022 they fell by an average of 3%, with the real pay of nurses, for example, falling by an average of £1,800. While Tory prime minister Sunak and his wife have a combined wealth of £529 million, one-in-seven adults now regularly skip meals due to poverty.
In the 1930s, a famous photo of Eton school boys towering over much shorter working-class kids illustrated the depth of the class divide. Today, almost a century later, poverty can again be measured by children’s heights. On average, Britain’s five-year-olds are getting shorter – among the shortest in Europe, while the average ten-year-old boy in the most deprived areas is 1.3 cm shorter than in the richest areas.
The so-called ‘cost-of-living squeeze’, in reality brutal austerity, that this government is presiding over is the root cause of its huge unpopularity. As a result, this ‘home-owning democracy’ is going to give them a beating at the next general election. Of the 50 seats with the most mortgage holders, 48 are currently Tory, many with narrow majorities. Overall, this government’s ‘net satisfaction’ rate is now an almost unprecedented minus 68, only one point less than the record unpopularity achieved by Liz Truss.
Starmer on his way to Number 10
As a result Labour leader, Sir Keir Starmer, looks set to become the next prime minister. Millions will cheer to see the back of the Tories, but Starmer has been doing his utmost to lower expectations that an incoming Labour government will act in the interests of the working-class majority. From refusing to promise to meet the pay claims of any of the public sector workers currently in dispute, to ruling out free school meals for all primary school-age children, to reneging on the promised £28 billion Green Prosperity Plan, to rejecting kicking the blood-sucking profiteers out of the water industry via nationalisation: Starmer’s programme for government is a long list of things he won’t do, rather than positive proposals.
Nonetheless, hope springs eternal. It is inevitable – having finally got rid of the Tories after 14 years and five prime ministers – that there will be widespread anticipation of life under a Starmer government being better than under the Tories. Unfortunately however, under the next government, like now, the workers’ movement will have to fight every step of the way to defend, never mind improve, the lives of the majority.
Capitalist New Labour II
The fundamental reason that a Starmer government will not transform the lives of the majority is because it will be wedded to slavish defence of the capitalist system. Globally, capitalism is a system increasingly in crisis, with the working class and poor expected to bear the brunt of the consequences. British capitalism is, however, right at the bottom of the league table of major economies. It is the only one of the G7 economies that is still smaller than pre-pandemic and has the highest inflation.
For decades the capitalist class in Britain has led the world in only one thing – restoring profits by driving down wages. By 2020, the median household income per person, in real terms, was lower than the US, Canada, Australia, Germany or France, and was already falling markedly. According to the Institute of Fiscal Studies, real household disposal income is now a third less than the pre-2007 trend. While the majority suffered, the wealth of Britain’s richest 250 people increased by 5.3% in the course of 2022.
Measuring the success of an economy by the enrichment of a few, Britain might top a few leaderboards. It cannot be considered a success by other measurements, however. Levels of investment are at historic lows, and productivity growth is the worst in 250 years! Britain has the highest current account deficit – which shows by how much the total value of goods and services a country imports exceeds the amount it exports – of any of the G7 countries.
Meanwhile government debt has exceeded 100% of Gross Domestic Product (GDP) for the first time since 1961. Over the next few years, the scale of UK government debt means that the Treasury will need to sell an average of £240 billion of gilts (government bonds) each year for five years. That eclipses all previous records, other than the vast borrowing during the pandemic. At that stage, however, the Bank of England bought the majority of them as part of its quantitative easing programme. Now ‘quantitative tightening’ means the Bank of England is seeking selling them too!
When he was Governor of the Bank of England, Mark Carney described Britain’s government as being “reliant on the kindness of strangers” to finance its debt. At the time, in reality, the bank he headed was financing the bulk of it. Now however, his assessment is accurate, but the vultures of the bond markets are never ‘kind’, they are only interested in their own profits. So far, UK’s gilts are having to be sold at a bargain-basement price compared to others, reflecting the world financial markets’ lack of confidence in British capitalism.
Bowing down to the markets
The Tory government’s response to the crisis of their system is clear. Chancellor Jeremy Hunt has been giving interviews that promise yet more misery – a continued pay squeeze and no pre-election tax cuts. But Starmer’s Labour has also made clear that their overwhelming priority will be “financial stability” and that they will do nothing to risk upsetting the markets. As devastating climate change gathers pace, it would be “reckless”, according to shadow chancellor Rachel Reeves, to keep Labour’s promise of a £28 billion Green Property Plan, because it might upset the bond markets!
But who are the bond markets? They are not some kind of independent arbiters of sensible financial policies; they are driven by the gambling of super-wealthy speculators and managers of financial institutions across the world, interested only in their own profits.
Capitalism has created enormous wealth, and incredibly powerful science and technology, but it is increasingly incapable of harnessing it to meet the needs of the majority. A New Labour government that is driven by defending that system will inevitably continue the Tories attacks on the working-class majority, albeit with some details changing. This will be far more the case today than under New Labour Mark I, when stronger economic growth meant the effect of Blair’s policies to open up public services to private hands was obscured by the increased spending going into them, the NHS in particular.
Strengthen the fightback
So what is the way forward for workers and young people in Britain? Firstly we need to build on the experiences of the last year. The highest level of strike action in three decades has enabled a new generation to see the importance of collective working-class action in fighting to defend and improve our living conditions. Struggling to increase the fighting capacity of our movement – increasing the number of workplace reps, democratising and transforming unions into fighting bodies – will be a vital task to prepare for the struggles that are coming under the next government.
We also, however, need to start building a political voice for the workers’ movement which does not accept the tyranny of the markets, but instead puts forward socialist policies. We need a party that is prepared to take measures to end the housing crisis, unlike Starmer’s New Labour. The first draft of its policy forum platform for the general election only says that they will “build more high-quality homes across the country and ensure more of these are genuinely affordable” – a promise so vague as to be meaningless.
Contrast that with the policies in Jeremy Corbyn’s 2019 manifesto which pledged that every year, 100,000 homes would be “built by councils for social rent in the biggest council-house building programme in more than a generation.” In addition they promised to introduce a “new zero-carbon homes standard for all new homes, and upgrading millions of existing homes to make them more energy efficient”. These proposals were too modest. Between 1949 and 1954 an average of 230,000 council houses a year were built – under Labour and Tory governments! Nonetheless, Labour under Jeremy Corbyn did propose measures which, if implemented, would have begun to overcome the housing crisis. Other pledges on housing that Starmer has ditched include the introduction of rent controls for private renters.
The shadow ‘levelling-up’ secretary Lisa Nandy tried to justify these retreats because Starmer’s Labour allegedly has a focus on homeowners. Yet Starmer has actually proposed nothing that would deal with the current crisis facing mortgage holders, only telling them “there is no quick fix” and promising to tell banks to allow “flexibility” with repayments.
This is barely distinguishable from the Tories meeting with the banks to get agreement to delay repossessions. What is needed is not just ‘flexibility’ and delays to the pain, but the protection of people’s right to keep their home on an affordable and secure basis.
A starting point to achieving this would be to nationalise the banks. Actually, New Labour Mark I showed nationalisation of the banks is possible when it effectively stepped in and nationalised NatWest during the 2008 financial crisis. They did so, however, in order to prop up the capitalist system rather than to meet the needs of the majority.
What is needed is nationalisation of all the banks, with compensation paid only to those who are in genuine need, and on the basis of democratic public ownership – run by representatives of banking workers, trade unions, and the wider working class, as well as the government. That would immediately allow the provision of cheap loans and mortgages for all who need them. It would also require measures to be taken to enforce the protection of the rights of tenants in buy-to-let properties including, if necessary, councils taking over the mortgages in order to allow secure tenancies and fair rents, a policy that Labour-led local authorities could implement now.
This is only one element of the policies that a new party – founded by the trade unions – should fight for. It gives a glimpse, however, of the possibilities to meet the needs of humanity by adopting socialist policies. Others include living wages and pensions, for all. It is true of course that ‘the markets’ would scream blue murder if a government came to power and implemented such policies. For any left government to implement its programme it would therefore require extra-parliamentary action, that is, the mobilisation of the working class in support of the government’s policies. This could win important victories. However, as long as the levers of power remain in the hands of the capitalists, policies implemented under that mass pressure would face sabotage by the capitalist class.
Fight for socialism
That is why the Socialist Party stands for not just the nationalisation of a few companies, but the major monopolies and banks that dominate the economy; around 150 in the case of Britain, with compensation paid only on the basis of proven need. This would be vital to breaking the power of the capitalist class, and laying the basis for the development of a socialist plan of production, which could really meet the needs of humanity while protecting the planet.
A socialist plan would create the basis to transform people’s existence. Hunger and poverty would quickly become a thing of the past. The science and technique created by capitalism could be harnessed and developed to meet the needs of all.
The experience of capitalism over the last 15 years, and even more the last two, is already leading to a widespread questioning of the existing order in Britain, and worldwide. Traditionally, people are expected to become more right wing as they get older, but today’s 40 year olds are more left wing now than they were at 20, because of what they have lived through. There is no possibility of Starmer’s Labour demonstrating that capitalism can deliver for the majority, and thereby reversing the conclusions that have already been drawn. On the contrary, it is going to drive home that capitalist governments, no matter what the colour of their rosettes, offer no way forward for the majority.
There will therefore be greater opportunities to win mass support for socialist ideas, but the Socialist Party is doing vital preparatory work for that now. We are campaigning for the transformation of the trade unions into fighting, democratic bodies and we are arguing for, at least, a workers’ list standing on socialist policies in the general election. If you agree – join us!
