An historic shift in economic policy heralds a Tory frontal assault on the working class.
After she was elected Tory leader – and therefore Prime Minister – it was reasonable to consider the possibility that Liz Truss was simply angling for the votes of party members in the narrow electorate of a Conservative leadership battle when she promised to introduce a suite of tax cuts and to get tough on the trade unions. Some imagined she would abandon all of this as soon as she got elected and instead try to cut some sort of deal with the postal workers to isolate the rail workers, while allocating huge sums to prevent millions of people falling into even deeper poverty this winter through some sort of bail out.
Any such thoughts must now be consigned to the status of historical curiosities, or even – dare we say it – wishful thinking.
Because what is now clear is that Truss and her close friend and political confidant Kwasi Kwarteng meant every word of it and are launching a programme of massive tax cuts to benefit the very richest, alongside an outright offensive against the trade unions and the working class, including the poorest layers of the working class on Universal Credit.
Regressive taxation
The abolition of the 45 per cent tax rate on earnings above an eye-watering £150,000 a year affects only about 350,000 people in the whole of the UK. That segment earn an average of £160,600 a year, with a much smaller number earning vastly in excess of this. They will be the ones to reap the real benefits of their tax rate being reduced by 5 per cent. Somebody on £160,600 a year will receive an extra £10,000 a year as a result of this tax cut, money that they surely barely need. But it is people on £300,000, £500,000, £900,000 or £1 million and above per year who will really reap the benefits of this unashamedly regressive tax cut. Ponies, sports cars, luxury holidays, school fees and digging down to build another cinema in the basement: it is that boost to luxury spending that Truss and Kwarteng believe is going to keep the British economy afloat.
It’s certainly not spending on wage goods that they think is going to expand. They have done absolutely nothing to help ordinary workers. The National Insurance cut again disproportionately benefits very high earners and will make next to no difference to low and average paid workers in the public or private sectors.
Red wall may bleed
The 1 per cent cut in the general rate of income tax is due next April and will certainly not make enough difference to have an effect on the economy, though clearly Truss hopes it will be enough to get her a few more votes in the Red Wall. However, as even the Labour front bench have managed to point out, lifting the cap on bankers’ bonuses and tax cuts for the rich are hardly going to reinforce anyone’s perceptions that the Tories are the natural party of the Northern working-class, let alone suggest that they plan to level anything up beyond the luxury lifestyles of the richest.
Then of course there are the changes to Stamp Duty. These are designed to help first time buyers getting flats or small houses outside of London, and of course existing homeowners who are buying or selling homes. A mobile housing market is the dirty secret of British capitalism, based as it is on the tawdry reality of housing undersupply. Historically that has underpinned the relative stability of the conservative bloc of the upper layers of the working class with the lower to middle layers of the middle class that returns the Tories in suburbs and shires across Britain.
But that stable layer of Tory-supporting homeowners, key to Tory strategy since Thatcher, is now at risk of unwinding as a result of the new Tory tax cutting strategy.
Tory homeowners join the firing line
Truss and Kwarteng’s tax cuts for the rich will be paid for with a massive increase in government borrowing. This undermines the creditworthiness of the British state. This in turn discourages institutional investors and foreign governments from buying British sovereign debt. The price of that debt therefore plummets and the yields on that debt (the interest that the British government has to pay to the buyers of sterling denominated bonds) rise correspondingly. This creates an upward spiral of debt and debt servicing costs.
That is why sterling has plunged against the dollar as foreign exchange traders bet against the British economy. As well they might, because the bond yield spike and the Bank of England’s interest rate rise both raise the risk of loan defaults for people on tracker mortgages and a massive tranche of defaults in one or two years’ time, as people on fixed-rate mortgages have to buy another fix at much higher prices. That is 40 percent of people with mortgages.
Capitalists nervous
When Thatcher axed the 60 per cent higher rate of income tax in the 1980s, there were insolent cheers on the London Stock Exchange. Today the FTSE index plunged. Certainly, the brokers and analysts will be delighted by the bonus to their after-tax income, never mind by the actual bonuses that the mini budget portends. But they are also looking at the impact of the budget on the British economy, and to put it mildly they do not like what they see.
Rising interest rates will exacerbate the crisis of corporate debt, acting in a procyclical manner to speed up the collapse of inefficient, overburdened and unprofitable capital and enterprises. That – or so right-wing economists like Sir Patrick Minford hope – will help to shake out the labour market, loosening the labour shortage, reducing the upward pressure on pay and helping the bosses to discipline workers through the reintroduction of a bit more of a reserve army of labour over the coming years.
Tories throw down the gauntlet
All of this means that the Tories have decided that there is nothing to be gained by trying to postpone the reckoning. Either they think they have already lost the 2024 election and might as well enrich their friends while they are in power, or the more farsighted of them understand that regardless of how popular or unpopular they are, they can get re-elected anyway if they inflict a humiliating defeat on the labour movement over the next 18 months, in particular a humiliating defeat of the trade unions that have shown renewed confidence in struggles over pay this year.
This is what explains the surprisingly bold move of Royal Mail this week to rip up all agreements with the CWU. That was not a step consistent with a government that intends to buy postal workers off. On the contrary, the Tories’ announcement that they are bringing in legislation to compel trade unions to put any offer advanced by employers in negotiations to a ballot of their members is an outright provocation to every trade union in the land.
The mind can sometimes try to avoid confronting a threat and start trying to negotiate with reality instead of facing it squarely. But there is neither room nor time for weak psychological reactions of that sort, nor for political versions of such individual reactions.
Hic Rhodus, Hic Salta. The ruling class has declared they’re going into battle headlong against the labour movement. We have no alternative but to accept battle, and to accelerate our own plans and preparations.
What is enough?
Yes, on 1 October there will be many strikes and demonstrations and protests all over Britain. Rallies called by Enough Is Enough have had enormous attendance and tremendous militancy. Some 500,000 people have signed up to Enough Is Enough, and this shows us not just that the half a million people that rallied to the Labour party when it had a left-wing leader have not simply disappeared. It shows also that there are hundreds of thousands more, workers who never joined the Labour party and the younger generation who are just coming into battle now.
Already the organised gloom of the Royal Funeral feels like a million years ago, and it is hard to see how the new monarch could possibly do anything to intervene without massively undermining the position of the ruling class. But the Labour leadership is (of course) completely useless, and its decision to instruct MPs not to attend picket lines demonstrated to millions which side it is on in the rash of industrial disputes right now.
So, we look to industrial action. But the TUC’s conference was postponed during the period of the state mourning, and there is now no formal mechanism within the rules of the labour movement to coordinate a national day of strike action, let alone a general strike. That means two things.
Tactical considerations
First, it means that all of the trade unions should bring forward their pay claims, taking advantage of the revulsion and anger that workers feel at the tax cuts for the rich and the lifting of the cap on bankers’ bonuses (alongside the cruel further measures against certain Universal Credit claimants). Bring forward the ballots, win massive majorities for strike action, and all strike on the same day or days to maximise the impact.
Second, it means that single days or even a series of single days of action are no longer enough. Like the dockers in Liverpool and in the south of England, multiple days of strike action are needed. Ultimately, as with the criminal law barristers, an indefinite strike is needed, set to continue until the bosses back down.
This in turn raises the question of the anti-trade union laws. The Tories and the judges will bend over backwards to find a myriad of technical reasons to rule even the most carefully lawful actions unlawful. But ultimately they have made all of these disputes political and the labour movement simply has to respond politically, especially against the threat of further anti-trade union legislative measures. The only way we can do that is for an unlawful political general strike.
And the TUC is the only body authorised to call such a strike. It has only ever done so once, and when it did, 96 years ago, it called it off after nine days even though the strike was growing in strength.
We simply cannot allow that to happen again, because if we do the labour movement will once again be broken for a generation. Not only will the Tories be likely to capitalise on their victory electorally (because unfortunately people respect strength and back winners whilst despising weakness and losers), but also the Tories would then have a free hand not only to force down wages still further and inflict further cruel and punitive measures on unemployed workers as the economy is shaken out ready for the next boom, but also to strip away environmental protections.
We know that Truss wants to respond to the geopolitical threat from Russia to British imperialism by switching energy supplies not to sustainable forms of energy but to drill and frack the remaining oil and gas out of the Earth, at untold cost to ecological stability and the lives of the next generation.
So we can’t afford to lose. That means we have to have urgent and very clear discussions right across the labour movement in Britain starting right now. The growth of Enough Is Enough shows that there is a basis for coordinating councils of action in every town and city across the country. But rallies are quite simply not enough, because a rally cannot discuss, debate and set a strategy let alone change a strategy. New local organisations – like the Miners’ Support Committees in 1984, or the Anti-Poll-Tax Unions that were so effective in 1988 to 1990 – need to be genuinely democratic, open to the entire working-class and labour movement, and able to set their own agenda and to conduct their own action.
Only then will we be able to mount action on the scale of the early 1970s, when coordinated strikes forced a Tory government to back down, and ultimately brought it down.
The Tories calculate that if they can win the coming class battle, they will be go into the next election as Thatcher: we have to make sure that they lose it, so that they go into it as Heath.
A strategic priority
At the same time no movements, not even relatively successful ones, leave anything sustainable behind unless they assume a solid political-institutional form. The British working class needs to fight for political power. That is the only way we can change anything in a lasting way, let alone change the economic system. For that reason, we need a new party.
A party is quite simply an organisation that aims to take political power, and by definition no class has ever taken power without such an organisation.
The path of taking over the Labour party has quite obviously been shut off. The peremptory removal and suspension of elected NEC member Naomi Wimborne-Idrissi only underscores that fact. The Left, gathering now on the fringes of the Labour Party conference in Liverpool, will have to confront that fact.
They will have to confront another fact too: that the alternative to trying to take over the Labour party cannot be yet another fiasco of trying to build sects around this or that leader with a Chris Williamson, an Arthur Scargill or one of the existing fragments of socialist sectarianism that the old Communist Party of Great Britain and its Trotskyist offshoots have spun off and left us with – Henry Hyndman’s children, clustered into ever smaller and ever less relevant grouplets.
Path to new party is not the path of the sect
No, the answer is to take the path that the German and Russian Marxists adopted when they successfully built mass parties from the 1870s to the early years of the 20th century. They did not build sects, and nor did they vainly attempt to take over bourgeois institutions. Instead they advocated that the existing labour movement, the fighting workers, whether organised in trade unions, broad working-class political unions, socialist sects and other initiatives, should combine together in a mass party of the independent working class.
That must be the focus of Marxists in Britain today: to advocate to local Enough is Enough, Don’t Pay, People’s Assembly, Unite Community, RMT, CWU, NEU and other organisations, including Acorn, tenants’ unions, foodbank organisers and – yes – the socialist sects, a credible process to bring them all together in discussion about what a new party could look like, what it could do, how it could be formed.
While this process should not be conducted in such haste that serious forces are excluded, and while any process would need to be co-designed by its participants so that everybody can take part and shape the new organisation, nevertheless we cannot take forever.
Time is pressing and the journey needs to start now. There are many Marxists in Britain that know this, and they need to organise.