Labour's Keir Starmer and Rachel Reeves. Photo: Labour Party/CC
Labour's Keir Starmer and Rachel Reeves. Photo: Labour Party/CC

What we think

In an unusual move, the International Monetary Fund (IMF) publicly praised Rachel Reeves’s first Budget speech as ‘sustainable’. Meanwhile, the editorial of the main newspaper of British capitalism, the Financial Times, welcomed it as having “begun to fix the foundations of Britain’s economy from a difficult starting point”. When sources like this praise a Budget, working-class people can be certain it is not looking after them, but rather the capitalist elite.

For many, the experience of Labour’s first four months in office will already have been enough to tell them that this government does not represent the interests of the working-class majority. As the first woman Chancellor of the Exchequer, Reeves started her speech emphasising there should be “no ceiling” on the ‘ambition’, ‘hopes’ and ‘dreams’ of girls and young women. Tell that to the million girls living in dire poverty because of Reeves’s maintenance of the two-child benefit cap. Pensioners will have fumed at the endless repetition of the need for ‘tough decisions’, when it is them who will have to make the ‘tough decisions’ about whether to eat or heat their homes this winter. Such decisions are a million miles from the experience of government ministers. Reeves herself gets a wage of £163,000, while her husband – a top civil servant – is on £200,000, putting them both in the top 1% of Britain’s earners.

Nonetheless, others will have seen the Budget headlines and hoped that, maybe, things are going to get a tiny bit better than they were under the Tories. State pensions are going up slightly, yet will remain among the lowest of any economically developed country. For workers on the minimum wage there will also be an increase – from £11.44 now to £12.21 an hour from April 2025. But that still falls far short of the TUC’s demand for the immediate introduction of a £15 an hour minimum wage as the very least required for the basic necessities of life. It certainly doesn’t justify the claim of the TUC general secretary, Paul Nowak, that  Reeves “acted decisively to deliver an economy that works for working people”, especially when it was combined with a pledge to continue and extend the Tories’ planned attacks on benefit claimants, many of whom are also low-paid workers. Disgracefully, disabled people and those too ill to work, which make up some of the poorest sections of the working class, are particularly in the government’s firing line. Those measures plus others, including increasing the bus fare cap to £3 a journey and increasing train fares by 4.6%, have resulted in the Joseph Rowntree Foundation calculating that the average family is going to be £770 a year worse off under this government, with 100,000 more children pushed into poverty. In other words – even after fourteen years of brutal Tory austerity – things will continue to get worse under Labour’s plans.

Smoke and mirrors

Nor is the reality of the public spending announcements the positive news that is being spun. Reeves claimed the £22.6 billion extra pledged for the NHS would make a significant difference. In reality, however, as even The Economist pointed out, that works out as a 3.4% rise over this year and the next, which only returns NHS spending to “the historical norm”. NHS funding has increased by an average of 3.6% a year in real terms since 1955. Under New Labour Mark One it increased by an average of 5.5% a year, compared to 2.8% under the last two Tory governments. With waiting lists now at a record 7.5 million, nudging expenditure up by 0.6% for two years before – according to Reeves’s Budget – falling again, is not even going to make a small dent in the crisis in the NHS.

The same can be said of schools, the other area highlighted for supposedly more generous treatment. The Budget claims to promise a 19% increase in capital investment in schools, to £6.7 billion. Daniel Kebede, general secretary of the National Education Union, was right when he said that this is just “a small dent in the £40 billion cumulative cut to school capital expenditure since 2010”. And the 19% claim is, at best, sleight of hand, based on the increase from the exceptionally low level this year. Even according to their own figures, it is only an increase of 2.2% a year from 2023-24 to 2025-26.

The whole Budget – as is always the case with capitalist politicians – is full of this kind of smoke and mirrors. The £300 million extra for Further Education, for example, is £100 million less than what the sector needs to stand still, so in reality will mean further cuts. This is true on an even bigger scale for local authorities. According to the public sector union Unison, councils face a £4.3 billion shortfall next year. The £1.3 billion extra trumpeted by Reeves is not going to stop the big majority of devastating closures of council services coming down the track. Meanwhile, the target for ‘affordable’ housing, most of which is completely unaffordable, was to build “up to 5,000 additional affordable homes”. To call this peanuts is to exaggerate its significance. The only pledge on council housing was to reduce discounts on Right to Buy and allow councils to keep the receipts. That might help stock shrinking further but will contribute nothing towards the mass council housebuilding programme that is needed.

Just as important are the things Reeves didn’t mention. This Budget claimed to ‘set the envelope’, meaning the overall spending levels for different parts of the public sector before a comprehensive spending review in the spring of 2025 goes into more detail. Not one penny extra was pledged for teaching costs in Higher Education, at a time when growing numbers of universities are facing bankruptcy, and cuts are taking place at most campuses. As a result, those cuts will continue. At the same time, not mentioned in the Budget but tucked away in a separate paper, the government announced that they will be legislating for reform of the student fee system next year, raising the prospect of an increase in what students are forced to pay.

When this Budget is looked back on, it will be seen as the start of New Labour’s version of austerity, rather than of a new era of improving public services. Reeves, like Thatcher before her, will not go down as a woman that helped girls and young women meet their aspirations, but rather as one who attacked the living conditions of the whole working class. Unfortunately, many trade union leaders are currently praising the Budget to the skies. Instead, what is needed is to face up to reality and prepare for the battles that are going to be needed, under this government as under the last, to defend workers’ jobs and living standards.

On public sector pay, in order to try and prevent further strikes, the government offered pay deals slightly above current inflation this year, although that was calculated on the capitalists’ preferred CPI measure, which underestimates real cost-of-living increases. That didn’t make up for the huge cuts in real public sector wages over the last decade, but most workers saw it as a tiny step in the right direction. The Budget makes clear, however, that any future positive steps will have to be fought for by the trade union movement. It says that “in the medium term above-inflation pay rises are only affordable if they can be funded from improved productivity”. The whole Budget is crammed with references to improving public sector productivity and efficiency savings. That would be welcome if it meant providing new equipment and technology that aided work, and putting the running of public services under democratic workers’ control, rather than highly paid managers who often know little or nothing about the services they are paid fat salaries to oversee. Unfortunately, however, this government has already made it clear that it means more of the same old Tory policies – demanding more intensification of work from public sector workers already stretched past breaking point and privatising public services. Health secretary Wes Streeting immediately showed his intentions when he signed Wiltshire’s Community Health Services over to a subsidiary of Virgin for £1.3 billion. After fourteen years of the Tories, this government sees privatisation, not nationalisation, as the way forward.

Governing for the capitalists

Keir Starmer has said clearly that his Labour Party will govern as ‘changed Labour’, meaning a complete abandonment of the anti-austerity policies of Labour under Jeremy Corbyn. This Budget totally confirms that. Its character was inevitable, given that Starmer’s Labour is a loyal and reliable representative of British capitalism, a system which is incapable of taking society forward. According to the IMF, in 2024 UK Gross Domestic Product per head will be 29% below where it would have been without the 2007-08 Great Recession. No capitalist country is healthy, but that is the worst position of any G7 economy. Ultimately, that is what makes Britain particularly vulnerable to the ‘bond vigilantes’ of the financial markets.

Reeves and Starmer consider themselves more competent capitalist managers than the Tories. Given this assessment, it is not credible that they ‘discovered’ a black hole, as it was completely obvious before the election, given the state of the British economy –  and the traps set by the outgoing Tory government –  that cuts, tax rises and increased borrowing would all be necessary for any incoming capitalist government. Nor will this Budget fix any of the problems. On the contrary, they will become more acute. The (so far) small jitters on the markets, which have further nudged up the cost of UK government debt, mainly reflect a realisation that further increases in cuts, borrowing and tax lie ahead.

This government is utterly unwilling to make the super-rich pay. It has brushed aside the proposal of Corbyn and other MPs to raise £24 billion by a 2% tax on wealth above £10 million. The City cheered the extremely minimal increases in costs the fund managers faced in the Budget. Meanwhile, Reeves has pledged Corporation Tax is to stay at only 25%. In order to ‘keep the show on the road’ and to limit the scale of borrowing, Reeves had no choice but to increase some taxes on business, so chose to increase employers’ national insurance contributions. No doubt the bosses will try and pass on even that to their workforces, which will have to be fought by the trade union movement.

How to fight back

At the TUC Congress in September it was agreed that, if Labour had not introduced legislation in the first 100 days to implement in full the ‘New Deal for Working People’, a special congress should be called to discuss the next steps. That was passed as a result of an amendment from the PCS civil servants’ union, initiated by Socialist Party members. Clearly, the majority of trade union leaders, given their rosy assessment of the Budget, will currently argue that such a congress is unnecessary. But such a congress is needed – to draw a balance sheet of the inadequate Employment Rights Bill, the long and unnecessary delay in the repeal of any anti-union laws – with many anti-union laws remaining – and now this spending straitjacket of a Budget. Above all it could draw up a plan of action. Immediately it could support unions that haven’t settled this year’s pay claims and draw up a list of demands for what public services really need ahead of next year’s pay rounds and the spring comprehensive spending review. It could agree to prepare for co-ordinated strikes if those demands are not met.

It could also draw up trade union amendments to the Budget and Employment Rights Bill, based on TUC policy, including the immediate repeal of the Minimum Service Legislation and the 2016 Trade Union Act, the immediate introduction of a £15 an hour minimum wage, reinstatement of the Winter Fuel Allowance, and much more. Every trade union-sponsored MP, including Corbyn and the independent and suspended Labour MPs, should be approached to support such measures, with a meeting called of those that are prepared to do so to plan moving the amendments in parliament. Back in 1906, the Labour Representation Committee, precursor of the Labour Party, only had 29 MPs, but it was still an important factor in putting pressure on the Liberal government to carry out some reforms and remove anti-trade union rulings, including moving the legislation the Liberal government was forced to adopt under pressure from below. Better to establish a group of MPs who are prepared to fight for workers’ interests than rely on fictional Labour ‘allies’ who vote for anti-worker policies.

This points towards what is needed. Many national trade union leaders are trying to act as a shield for Starmer’s Labour, disguising its anti-working class character. However, on the basis of experiencing the reality of Austerity Mark II, workers will draw different conclusions and demand action. Socialist Party members across the trade union movement will campaign for every step in that direction. Under the last government the working class in Britain began to re-enter the scene of history in the biggest strike wave since the 1980s. That will need to be built on in the coming period. At the same time, it is also clear that the workers’ movement will need a political voice, arguing in the interests of our class in Westminster.

The Socialist Party will argue for such a party to fight for the socialist transformation of society: for the nationalisation, under democratic workers’ control, of the major monopolies and banks that dominate the economy, with compensation paid only on the basis of proven need. This is a vital step towards breaking the stranglehold of the capitalist class, and laying the basis for the development of a socialist plan of production, where all the science and technique created by capitalism could be harnessed and developed to meet the needs of all. Only on this basis will the endless rounds of austerity be permanently ended.