British Perspectives 2022 takes the form of two statements agreed at the Socialist Party National Congress on the 14-16 May 2022. The first is the National Committee statement on British Perspectives, dated 15 January 2022 and reproduced here as amended by Congress. The second is an EC addendum dated 26 April 2022, entitled The consequences of the Ukraine conflict for Britain presented as agreed by Congress.
National Committee statement on British Perspectives, 15 January 2022
This brief statement should be read in conjunction with the What We Stand For pamphlet, the World Congress documents, and the array of material in the Socialist and Socialism Today.
Our 2022 national congress will be taking place two years after the start of the global pandemic. In every country the pandemic has thrown all aspects of society into flux. It has created enormous economic uncertainty and increased tensions between nation states, different sections of ruling elites and, above all, between classes. At the start of the pandemic, governments were generally able to temporarily increase their support under the banner of ‘national unity’ against the virus, this has now turned into its opposite, nowhere more so than in Britain, where Johnson hangs by a thread. The new period we are going into will be one of growing instability and class conflict, with the current turmoil in the Tory Party a signaler of the events that lie ahead. It will also create opportunities for us to take significant steps forward. This brief perspectives statement does not deal with every issue, but aims to draw out some of the main economic and political processes, in order to help orientate our party and to prepare us for the stormy events ahead.
The pandemic is not over. The current Omicron surge, and likely future surges in infection rates as new variants emerge, will continue for a period to be a huge source of stress on individuals and effect the functioning of society, adding to economic and political uncertainty. While it seems probable that Omicron, and perhaps future variants, could prove to be milder at least in the vaccinated, with Covid becoming over time an endemic disease, this does not mean that there will be any abrupt ‘end’ of the pandemic. Instead, Covid will be an ongoing factor in events for some time. Nonetheless, the build-up of tensions and class anger that has accumulated during the pandemic, the expression of which was also partially temporarily supressed by the pandemic, will burst forth in the next period, fuelled by the escalating attacks on the living standards of the working class and substantial sections of the middle class.
Economic instability
Globally, there is absolutely no prospect of a sustained ‘post-pandemic’ economic upswing, still less in Britain. Inevitably, after the shutting of swathes of the world economy in 2020, there was a rebound in 2021. However, this was very uneven. Of the major capitalist countries, Britain had a relatively weak recovery; with only Spain, Thailand and Indonesia further below their expected pre-pandemic path. Growth stuttered quickly, slowing to virtually nothing (0.1%) in October 2021. Despite a small increase in November before Omicron hit, the British economy, at the end of 2021, had barely reached its pre-pandemic size. However, that was, as the Financial Times put it in their predictions for 2022, “the easy part”, which is now over. A more difficult and uncertain period is ahead. The looming problems which could trigger a new economic crisis are numerous and intractable globally, and particularly acute in Britain. No capitalist policy can successfully postpone a new crisis indefinitely, and the very rapid development of a new deep recession is possible. For the working class, and for our party, however, it would be better if the next phase of acute economic crisis is delayed longer. Even if that is the case, British capitalism is facing a period of instability and the living standards of the working class – regardless of the formal growth figures – are going to be under the cosh. This will come on top of two decades of squeezed living standards. The Institute of Fiscal Studies estimates that, on the basis of current trends, in 2026 average household incomes will be 42% lower than would have been the case if wages had risen at pre-2008 financial crisis rates.
In the pre-pandemic era capitalism was already lurching towards a new crisis. Levels of debt in the world economy had reached gigantic levels. Back in 2019 the IMF estimated that the levels of debt in eight major economies, including Britain, were such that a recession half as deep as 2007-08 would lead to 40% of businesses facing bankruptcy. To avoid such a scenario, and the mass revolt that would have resulted, the Tory government – like the governments of all other major economies – had no choice but to implement massive state-aid packages when faced with the deepest recession in three centuries. Sunak’s packages have totalled around £400 billion, combined with continued quantitative easing and ultra-low interest rates.
While they staved off economic disaster Britain’s state aid did not prevent a further increase in corporate debt. According to a House of Lords report, 757,000 small and medium enterprises (out of the approximately 2m that have UK bank accounts), now have some debt, compared to 305,000 before Covid. As they point out, many “may not have previously met banks’ lending criteria, i.e. may be less creditworthy and therefore less able to repay the loans.” An estimated 20% of UK businesses are now ‘zombies’, only able to meet debt interest payments from their profits. Even a relatively small rise in interest rates and/or a new slowdown could tip them over the brink.
The danger of increasing interest rates also applies to government debt, which is now at the highest level since 1963, with no realistic prospect of it coming down significantly in the near future. The capitalist class has no choice but to cope with this situation, but that does not mean that British capitalism can afford to allow the debt to continue increasing without limits. Britain is still the fifth-largest economy in the world, and has far more room to manoeuvre than many smaller weaker economies. It is also true that the average length it takes British government bonds to mature is longer than many other economically developed countries, which means that interest rate rises would affect the size of debt repayments relatively slowly, but this is partially undermined by the effect of Quantitative Easing – which has involved large purchases of government bonds by the Bank of England – and is expected to bring the median maturity of public sector debt down to less than one year by March of this year.
Therefore, Tory chancellor Rishi Sunak’s refusal to take any significant measures to lessen the cost-of-living crisis facing the working class is not, as is reported in the capitalist media, only a result of his ‘ideological’ stance, but reflects real limits faced by capitalist governments in Britain. The long-term decline of British capitalism, the unreliability of its political representatives, and its isolation from the capitalist bloc of the EU, all make it potentially more at risk of attack by the markets if its debts were to spiral up further. The government’s own Office for Budget Responsibility (OBR) recognised the potential for serious crisis when they explained that, while moderate inflation could be ‘benign’ against the background of strong economic growth, allowing the real value of government debt to decrease, “malign scenarios are possible too. If interest rates rise because investors demand a higher risk premium for some reason, this would be more than likely be accompanied by a deteriorating economic and fiscal position, resulting is a vicious fiscal circle. In such circumstances governments can find it difficult to make the spending cuts and tax rises necessary to restore the debt trajectory to a sustainable path.” They did not add that the reason it would be ‘difficult’ would be because of mass working-class opposition to spending cuts and tax rises against the background – as it would be – of higher interest rates making mortgage and credit card debt unsustainable for millions, while a likely fall in the value of Sterling also raised the cost of buying any goods imported from outside Britain, with all the knock-on consequences.
Of course it is not only because of the fear of the potential economic consequences that the Tories are anxious to avoid state interventions that further increase the debt, but also of the political ones, both in accelerating the developing splits in the Tory party and, more importantly, raising the possibility of state intervention and therefore increasing the confidence of the working class to refuse to accept the ‘logic’ of capitalism. They are right to fear this. The fundamental reason for the broad growth in support for ‘socialistic’ ideas is the experience of capitalism combined with, as Engels described it, “the invading socialistic society”, as the capitalists are forced to increase the role of the state in order to shore up their ailing system. It is still not excluded, however, despite all the reasons they don’t want to, that the Tories could be forced under mass pressure into introducing some new measures, or retreating on some regressive ones, as the anger over falling living standards bursts out. But these would be the actions of a weak government, not one confident in its social base of support.
State intervention during the pandemic went further and was on a bigger scale than the response to the 2007-08 Great Recession. Many of the consequences have been similar, however. For the richest in society, wealth has again increased rapidly as the financial markets have soared, while the poorest have been further squeezed. Overall levels of wealth in Britain increased during the pandemic, but it was entirely concentrated in the pockets of the richest. The richest 1% now has an average wealth of £3.6 million, while the bottom 10% has £15,400 or less. The increased billions held by the capitalist class have not, however, resulted in any increase in investment in the development of industry, science and technique. On the contrary, as the Financial Times put it (6.12.21), “It is difficult to overestimate the lack of UK capital expenditure growth, compared with the wider economy, its historical trend or other countries.” The Financial Times cheers itself up by predicting this will change in 2022, as a result of Sunak’s ‘super-deduction’ bribe to encourage businesses to invest. However, even if that happens, the OBR predicts it will fall again into negative territory by 2024.
