Into the abyss
Simon Hewitt analyses the Chancellor’s autumn statement
Tory politics is nothing if not over-confident. When he made his autumn statement on 23rd November, Chancellor Jeremy Hunt claimed that under the Tories the British economy was “back on track.”
He at least partly had inflation in mind. The headline figure was shown earlier in the month to have slowed significantly to 4.6%. There are still reasons to worry about inflation, not least because of volatile energy costs in the light of the conflicts in the Middle East and Ukraine. However, the real cracks in Hunt’s optimistic narrative lie elsewhere.
It is one thing pronouncing that things are “back on track”. The reality is, for millions of working class people, living standards have fallen over the past few years of Tory rule. Rachel Reeves was quite correct when she said to the Today Programme, “This is the first Parliament ever where real disposable incomes will be lower at the end of the Parliament than they were at the beginning.”
To be precise, think-tank The Resolution Foundation predicts that UK households will be on average £1,900 poorer in January 2025, compared to December 2019. “This is the only Parliament in 70 years to oversee a decline in household living standards,” notes the Resolution Foundation’s report.
Reeves is undoubtedly right to draw attention to this. The question is whether she is prepared to apply the kind of radical policies which would make a difference to the situation. More on that below.
Some of the fall in living standards can be attributed to the Covid pandemic, of course. But even this does not let the Tories off the hook. There were, after all, political and economic decisions made about how to respond to the pandemic, and equivalent economies to the UK’s have bounced back more quickly. In any case, the whole of the fall in living standards can hardly be attributed to the pandemic. What we are looking at in the figures around living standards is a reflection on the state of British capitalism, and of its management under successive Tory front benches.
Jeremy Hunt announced a significant cut in National Insurance (NI), from 12% to 10% on the involuntary contributions paid by workers. The effect of this will be offset in many cases by the earlier-announced freezing of income tax thresholds until 2028. The poorest workers will be hit in particular.
However modest the NI change might be in its impact on working people, it is likely to not play well with key institutions of British capitalism. Numerous economists have predicted that the cuts in NI will mean that the Bank of England will not cut interest rates until summer 2024.
One worry many will have about this concerns the effect of high interest rates on growth. In the third quarter of 2023, growth flatlined, and it is quite possible that growth in the final quarter will turn out to have been negative: the economy will have shrunk. Moving into 2024 with high interest rates lasting for a good few months will not help growth in the new year.
Neither, for that matter, will public spending cuts. Ideologically driven, these amount to £19 billion in real terms. In many respects, then, Hunt’s statement sounded classical post-Thatcher Tory themes: lowering taxes, cutting back public services, effecting in the process a redistribution of wealth from the poor to the rich.
But there is more going on in this statement than pure Tory ideology. In part we see the desperate electioneering of a government facing catastrophic defeat in 2024, hence the headline-grabbing NI cut. Also, however, the statement reflected a government out of its depth on the unstable seas of contemporary capitalism, beset by inflation, struggling to secure growth.
There are limits to what governments can do about capitalism. It is a chaotic, irrational, system which evades precise control. That is why we ultimately need to replace it with socialism. That is not on the cards from Rachel Reeves. To say, though, that there are limits in governments’ ability to manage capitalism does not mean that they can do nothing. Radical measures designed to boost growth in an ecologically sustainable fashion, such as the Green New Deal promoted in Labour’s 2019 manifesto could make a real difference.
As it is, the Labour front bench are talking a lot about a future Labour government securing ‘growth’ but saying little about how that growth will be secured. Similarly absent are any proposals to regulate energy prices, a counter-inflationary measure that would help millions of people, and especially the poorest.
I began by saying that Tory politics is over-confident. In fact it has the over-confidence of someone throwing themselves knowingly into an abyss. The current Tory government will soon be over. It remains to be seen whether the Labour leadership has the radicalism to do what is needed on the economy. Things, however, are not looking hopeful.
Simon Hewitt is a member of Shipley CLP and the University and College Union.
LABOURHUB NOVEMBER 26, 2023
Jeremy Hunt
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The sector warns an increase in national living wage will contribute to the rising costs for early years providers
CHANCELLOR JEREMY HUNT GAVE HIS AUTUMN STATEMENT ON WEDNESDAY
PA WIRE
Early years organisations have called out Jeremy Hunt for ignoring the sector in his autumn statement on Wednesday.
The National Day Nurseries Association (NDNA), a charity representing nurseries in the UK, accused the Government of caring more about “pubs and shops" than "our children’s future."
Purnima Tanuku, CEO of NDNA, said: "In his Autumn Statement , the Chancellor announced 110 growth measures to support businesses but not a single one will help the early education and care sector which is at crisis point. The Government seems to care more about pubs, shops and the technology sector than our children’s futures."
Mr Hunt announced the national living wage will increase to £11.44 per hour. Nearly three million "low-paid workers” will benefit and see an increase of 1,800 in their wages.
The national minimum wage will also rise from £8.60 an hour to £11.11 for those aged between 18 and 20.
The NDNA argued, since the national living wage was introduced, it has risen by 52-62 percent but the funding rate for early years providers has remained at 21 per cent.
According to Early Alliance, the early years education charity, 3000 nurseries were closed down by Ofsted last year due to financial pressures with many facing increased energy, food and staffing costs struggle to operate. The NDNA also reported a 50 per cent increase in nursery closures between 2022-23.
London Early Years Foundation CEO, June O'Sullivan, said while he welcomes the increase in the living wage, it will “only be effective if funding and provision are adequate as part of the Government's ambition to create the 'biggest expansion of childcare in history.”
She added: "If the sector is to survive, then Mr Hunt must keep his Spring Budget promise to parents and address the urgent workforce crises at this crucial time when every decision and every penny counts."
The Spring Budget will introduce a 30-hour free childcare scheme for parents with children aged between nine months and three years in 2025, but childcare providers are skeptical this will resolve the issue, especially at the current rate of funding.
Charlie Rosier, founder of Babbu, an early years education app for parent said: "Without any increased funding mentioned, this increase in overheads will put many more nurseries, already struggling, underwater."
The rise in the minimum wage might significantly impact providers as the staff wages account for around 75 percent of their costs.
Nadia Hewston, a retired teacher with 25 years of experience, said the increase in wages will "help the profession in terms of recruitment and retention of early years staff," but without funding, it will lead to a bigger issue.
She said: "In short the Government is seemingly responding to what school leaders are saying but school leaders are being left with an equally challenging conundrum."
"It’s not real investment. Early years leaders and staff are leaving in droves and this may be the final straw for many more."
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