by Angela Eagle
The win for the hard right in the successful introduction of a universal basic income is that replacing all public payments and, over time, the provision of public services with a regular single payment would make it much harder to justify giving more specific support to particular individuals who may be in need, despite receiving their basic payment. The right would blame them for squandering their basic income and make the case against further, more specific support. Universal basic income is no substitution for a state tax and benefit system that is democratically accountable and decides how the social wage will be made up and at what level taxes will be levied and public services provided after consulting society as a whole in an election.
As French philosopher André Gorz observed in his book, Paths to Paradise, about the concept of an income for life detached from the requirement to work: ‘The guarantee of an income independent of a job will be emancipatory or repressive from the left or the right according to whether it opens up new spaces for individual or social activity or whether on the contrary it is only the social wage for compulsory passivity.’
Thus, Gorz points out that context and political motivation are all-important in assessing whether a universal basic income would even be a desirable aim. In order to finance something better than a social wage for compulsory passivity, the universal basic income would have to be set at a very generous level, which would make it very expensive to introduce and much harder to gain political consent for. Politically, arguing for more focused support for individuals in need on top of an existing basic income payment would be hard. And any increase in the universal benefit will be prohibitively expensive and by its nature hard to deliver. The UK has always relied upon a mix of universal payments, such as child benefit (universal until very recently), and more focused benefits for those who must qualify for them. This may be messy, but it is more politically sustainable and more likely to alleviate real hardship than a universal payment to everyone, which will either be too small to be meaningful or too expensive to introduce in practical terms. A particular problem with the concept of a universal basic income is that it severs the relationship between need and access to social security benefits completely. This separation dispenses with the contract implicit in the UK’s social security system since the Beveridge reforms that, collectively, society is committed to alleviating poverty and meeting the needs of all its citizens. This would be a major loss to the progressive character of the social settlement, which would be hard to replace once it had been dispensed with.
BLUE LABOUR
While the accelerationists rush head-long towards the future, however dystopian, Blue Labour looks backwards for its inspiration. Their response to the disruption caused by the rapid changes associated with ‘modernity’ is an urge to nostalgia and the invocation of a world long gone. We seriously doubt that this longed-for old world ever really existed, much like John Major’s nostalgic memories of the village cricket green, warm beer and the cycling spinster in his disastrous ‘Back to Basics’ relaunch. The Blue Labour cry of ‘family, faith and flag’ neatly encompasses their rose-tinted view of the halcyon days of the working class, where everyone was fixed in their place, where jobs, communities and religious beliefs were unchanging and socially conservative – and the issues of feminism, anti-racism and LGBT rights had yet to rear their disruptive and challenging heads. In short, Blue Labourites seek political accommodation within a mythical, socially conservative, working-class world view. As the children of working-class parents and immigrants, we just don’t recognise this lazy and insulting cartoon depiction. For one, the working classes have always contained as wide a range of views on social and religious issues as any other section of society. And not only are working-class people open to social change, their communities and their organisations were often at the forefront of it, as with the mining communities and unions support for LGBT rights in the 1980s. Aspirational working-class parents (like our families) were determined their children would use educational achievement to escape the narrow choices that had been their lot in life. Like everyone else, working-class communities want – even if they no longer expect – economic opportunities. They want fulfilling, well-paid work; they want opportunities to be available for them and their children. They are not a bastion of some kind of social reaction to be appeased or feared by Labour’s more urban voters. Solidarity and collective endeavour were at the heart of how they survived, often under severe economic pressure, and these values nurtured the labour and trade union movement. Indeed, they still form a basis for a more inclusive and diverse politics, rather than the backward-looking, socially conservative nostalgia being peddled by some.
It is instructive that the nostalgic vision Blue Labour invokes tends to be set in the 1950s, before the hippies and the Beatles and the feminists blew Macmillan’s tired repressive world of cosy conservative hypocrisy apart for good. That world is never coming back. We don’t want it back. We welcome our new more diverse society.
CHAPTER TWELVE
AUSTERITY IN THE UK
History will record that the global financial crash in 2008 marked the beginning of the end for Hayek’s market fundamentalist doctrines. The cause of the crash was readily apparent: failure of laissez-faire economics and the complexity of capital markets; the amorality of the globalised and greedy financial system and a lack of adequate regulation both domestic and internationally. As millions of Britons struggled with falling real wages ten years after the crash, the ILO global wage report for 2016/17 showed that the long-term decline of the share of national income taken by labour now lags behind growth and has resumed its thirty-year decline. Meanwhile, the Bloomberg Billionaires Index reveals that the richest 500 people in the world got $1 trillion richer in 2017 and now control wealth of $5.3 trillion – a quarter of the size of the US economy.
The truth is the industrialised world had been here before. After the market catastrophe of the Wall Street Crash in 1929, the foolish pursuit of orthodox economic policies by President Hoover had caused slump and depression, nearly destroying the entire world economic system. As the Great Depression set in and unemployment and destitution soared in the USA and then spread to the industrialised world, it took the election of F. D. Roosevelt to avert total disaster. His New Deal saved American capitalism by transforming it. He instituted huge investment in public work schemes partly financed by a significant increase in progressive taxation imposed on the highest incomes. The 1933 Banking Act (the Glass–Steagall Act) legislated for the separation of commercial from investment banking, stopping in its tracks the reckless speculation which had brought down the banking system and ‘liquidated’ many jobs and businesses. Strict banking regulation, progressive taxation and Keynesian stimulus steadied the ship. The rise of fascism and war in Europe demonstrated the real dangers of tolerating economic collapse because of wrong-headed economic orthodoxy.
There was déjà vu in 2008, therefore, when the banking system once more teetered on the brink of disaster and Lehman Brothers was allowed to fail by a US administration ideologically reluctant to shore it up. The resulting shock hit already fragile levels of trust in the highly leveraged and over-extended but closely interconnected global banking system. All interbank lending froze, causing an immediate ‘liquidity’ problem for banks, threatening their solvency and as a result their very existence. This sudden unavailability of money and credit would have destroyed the real economy if it had been allowed to continue unaddressed by government action. As it was, governments across the world were forced to put unimaginably vast sums of money into their banking systems to prevent them from collapsing. Some banks were nationalised, others recapitalised, and governments guaranteed interbank lending as well as giving protections to depositors so that the system could continue to operate. Without this action, the banks, which constitute the entire financial plumbing system of any modern economy, would have been destroyed, leading to an economic cataclysm with incalculable political consequences. The G20 meetings in 2008 an
d 2009 announced ambitious stimulus programmes to try to get the world economy moving again. A global depression was avoided, but the worst recession in eighty years resulted in a decade of lost growth and suppressed living standards in the UK. We were especially badly hit because of our oversized banking sector. Thus was the globalised banking system rescued from the consequences of its own greed and folly by the determined action of states around the world. It seemed as if market fundamentalism would never recover its dominance since it had been revealed to the world that its dogmas and doctrines were not only actively dangerous, but plain wrong. It was a bit like realising that the extreme anti-state author of Atlas Shrugged, Ayn Rand, ended her life relying on the very US state welfare programmes she denounced and abhorred in her vainglorious fascistic writings. This realisation, coupled with her own breathtaking hypocrisy, should have been enough to make her a laughing stock. Many now expected that the global financial crash would make a laughing stock out of market fundamentalism too. Unfortunately, logic has not prevailed over faith, Ayn Rand is still worshipped by extreme libertarians and market fundamentalism is still alive and kicking.
Within two short years, right-wing politicians across the globe were blaming governments for causing the crisis by ‘overspending’. These fake assertions were being cheered on by the very same market fundamentalist shock troops whose greed and folly had caused the global financial meltdown in the first place. Governments took on the burden of rescuing the banks to save the economy, but now the debts that this essential rescue had generated were used as an excuse to demand huge cuts in the size of public spending and the state itself. This audacious pivot which blamed those who rescued the situation for causing the crisis was ultimately successful as a political ploy. And those of us on the other side of the argument need to understand why.
The rich and powerful vested interests enjoy superior narrative firepower because they pay for it. It was in their direct financial interests that market fundamentalist doctrines continue their dominance. The lesson for us on the left is that we rely far too much on the belief that the logic and truth of an argument can prevail over bare-faced but well-resourced lying. In other words, emotion and a good narrative beat logic and truth every time. The costs of the rescue now led the right to demand the implementation of a policy forged in the fires of market fundamentalist ideology. And we all got what they demanded: austerity.
In his ludicrously named ‘Emergency Budget’, staged in June 2010, George Osborne, the Chancellor in the Conservative– Lib Dem coalition government, deliberately stoked the politics of fear and alarm for his own partisan political ends. Even though Angela, who was then on the opposition Treasury front bench, thought June was a bit early for the pantomime season, the Chancellor announced for no obvious economic reason that eliminating the UK’s post-2008-crisis borrowing deficit would be the new government’s primary aim. He also stated that a current budget surplus would be achieved in five years, after which the sunlit uplands would beckon. He issued blood-curdling warnings about the awful fate that would await Britain if his ‘fiscal consolidation’ was not achieved in the five-year timescale he had set out. Labour’s plan to complete the task in ten years and go for growth in order to shrink the deficit by investing and aiming for a larger economy was so dangerous it was like driving a crashed car straight into a brick wall! The country needed cuts and more cuts! Without his plan, he said, the UK would lose its triple ‘A’ credit rating, we would come to resemble the stricken Greek economy (trapped in the euro, unlike Britain), unable to finance its debts. In any case, what did we expect when Labour had maxed out the country’s credit card with all that wasteful public spending?
Amidst all this political theatre, the Chancellor made another controversial ideological choice in that first Budget. He announced that 80 per cent of the fall in borrowing which would eliminate the deficit would come from public expenditure cuts, and that only 20 per cent would come from tax increases. Outrageously copying the inclusive social democratic rhetoric which had accompanied a Swedish example of fiscal consolidation following a banking failure there, he then announced that though the times ahead would be tough, we’d be ‘all in this together’. He was implying to the country that the ‘tough but necessary’ choices he had settled on would at least be implemented fairly. He made ‘austerity’ sound like an unpleasant but necessary diet which would have to be endured and completed if the country were not to end up in A&E. After five years though, he promised, everything would return to normal. Recovery from the largest global financial crisis the world had experienced since the Wall Street Crash in 1929 would be straightforward, and the sooner it was done the better.
The reality was that he had taken advantage of the aftermath of the global financial crisis to pursue a specifically Conservative ideological plan to shrink the size of the state in Britain, successfully disguising it as an absolute economic requirement. This plan was sustained and put into effect by the support of the Liberal Democrats in government and in Parliament. The Chancellor’s ‘analysis’ of the causes of the crash was not serious or remotely accurate. But it was a highly effective political narrative designed to divert the blame from the bankers and financiers, whose greed and recklessness had caused the crash, onto the Labour government which had been in office when it struck. Apparently, Labour spending money on building schools and hospitals had caused a recession in sixty-five countries! Of course, the 2008 financial crisis was not caused by Labour spending too much public money on schools and hospitals, but by greed and lack of effective regulation in the American subprime mortgage market and by incredibly risky behaviour in the global banking and finance sectors. This should have been but was not picked up by policy-makers, regulators and governments the world over, who had come to trust in their own complacent belief that globalised capital markets spread risk when the crisis demonstrated that they actually spread the contagion.
The 2010 Budget and the shift in economic policy that it signalled provided an opportunity to test the market fundamentalist dogma that spending cuts (and tax cuts) create recovery. And the experiment has been a resounding failure in its own terms. This is not a surprise. A recent study by the politically impartial US Congressional Research Service has looked at sixty-five years of US data and noted that cutting taxes does not lead to economic growth. It does, however, help the already-well-off increase their share of the economic pie at everyone else’s expense.
Seven years after George Osborne’s first Budget, the UK is experiencing the slowest recovery from recession since the Napoleonic War and the longest squeeze in living standards since Victorian times. And it gets worse. Our trend growth rate has halved to an anaemic 1.5 per cent a year, productivity continues to flatline and the million fewer public-sector workers who remain to run essential services are working harder for less. They have not had a real pay rise since the crisis. Those who rely on social security payments – be they disabled, ill or unemployed – have been hit very hard indeed. There has been a huge explosion in food-bank use as many are left short by benefit sanctions or delays in payment in a system that has been deliberately reengineered to be more punitive and humiliating. The speed of the plans to cut spending announced in the ‘Emergency Budget’ and the fervent warnings about Britain’s parlous Greek-style economic peril combined to create a double-dip recession with a triple dip being only narrowly avoided.9 The completion of the Conservative–Lib Dem five-year plan for eliminating the deficit and achieving a budget surplus has turned into public expenditure ‘austerity’ with no end in sight. The result is a devastated public realm of huge local government cuts aimed most at the poorest areas; growing unmet need in social services as the population ages; soaring levels of homelessness; the NHS and education sector experiencing real-terms cuts and increasingly struggling to meet genuine need; the smallest army since the Boer War; a new aircraft carrier without any aircraft to go on it; police and fire service cuts in personnel pay and equipment; a dangerous prisons system; and a dysfunct
ional courts system where many are now left to represent themselves and justice can scarcely even be seen to be done. There are soaring rail fares and virtually no roads without a pothole. Thirteen more years of public spending cuts on the scale expected are simply unsustainable if we are to maintain the NHS and free education, let alone aspire to recreate decent pension provision and a social security system we can all rely on as our population ages.
And yet, if the primary aim of the Conservative government was to achieve a budget surplus, they could have done so by 2018, achieving a surplus of £5 billion, if they had not decided to cut taxes. Instead, they made a political choice to maintain the current account deficit because they prefer to keep the minimal state ‘austerity’ drive, which leads to deep cuts in government spending, going until the end of this parliament and beyond. A closer look at the out-turn for public spending and taxes in the 2010–15 parliament reveals an astonishing truth. In the event, public spending cuts bore not 80 per cent of the cost of deficit reduction as George Osborne announced they would in his first Budget. As the Resolution Foundation work shows, tax receipts actually added to borrowing by 0.1 per cent of GDP, which means that public spending cuts bore 100 per cent of the cost of getting the deficit down. Even maintaining taxes at their previous level would have contributed to attaining a budget surplus in the current parliament, but the temptation to cut taxes, especially the 50p rate, handing a bonanza to Conservative Party donors, was just too great. Analysis from the Resolution Foundation shows that the cost of tax cuts in the last parliament was £40 billion: £21 billion on increases to the personal income tax allowance, which helps the better off; £12 billion on cuts to corporation tax; and £6 billion on the suspension of the fuel duty escalator. If the Conservative manifesto pledge to continue increasing the personal tax allowance and the higher rate threshold in income tax is fulfilled, that will cost a further £2 billion – nearly half of which would go to the top 10 per cent. This leaves those who are poorer and on low incomes to bear the brunt of the cuts to public services and benefits while receiving little of the extra money distributed in tax cuts.
