The Truss government has been swept away by the financial sector. Her chancellor, Kwasi Kwarteng, was humiliated by the bankers in the USA and sent back to the UK with orders to fall on his sword. He was immediately sacked by Truss in a futile attempt to save herself. It’s been revealed by the governor of the Bank of England, Andrew Bailey, that the UK was hours away from a financial melt-down as the finance sector had lost faith in the Truss government and its un-costed spending plans. He also took issue with the Truss administration’s refusal to take advice from the Monetary Policy Committee, of which Andrew Bailey is also chair.
Kwarteng and Truss’s mini-budget proposed to cut corporation tax from 25% to 19% and the base rate of income tax from 20% to 19%. The top rate of income tax was to be reduced from 45% to 40% and the cap on bankers’ bonuses was removed. But the main problem for markets was the promise Truss made to support energy bills and to go for a growth economy by extensive further borrowing along-side the massive tax cuts. This led to a budget shortfall of £45 billion which couldn’t be accounted for. As everybody knows, the UK economy went into massive turbulence during this period with the pound falling against the dollar and other major currencies, inflation rising to over 10% and the base rate (the rate of interest which the Bank of England charges on its loans and advances to the commercial banks) also rising to 3%. There was an increase in the 30-year government bond rate from 4% to 5%.
There was panic in the housing market, with prospective buyers finding that mortgages were being withdrawn or the rates being increased by over 50%. House prices are now on the slide with fewer houses coming onto the market. Landlords are also using the situation to increase rents.
With the base rate set by the Bank of England at 3%, massively lower than inflation, the rate at which savings decline in value is very fast. Ever since 2008, the banks have plundered people’s savings to find the money to support their rotten system, but this is now happening at unprecedented levels. The idea of saving and your money being protected is ancient history. The banks are stealing savers money.
Pensions have also been threatened with the triple lock guarantee for state pensions coming under review. The triple lock represents the highest of three indicators: annual inflation in September, annual earnings growth in July or 2.5%. As can be seen, with inflation at 10% this should be the level of pension increase.
Poverty levels are increasing with 14.5 million living below the poverty line. This includes, 4.3 million children (up from 2 million in 2019). More and more workers are being forced to use food banks. Inflation is high but is highest of all in essentials such as bread, tea and fuel.
The budget is due later this month. It remains to be seen what the rise in pensions will be. Incidentally, UK pensions are one of the lowest compared to GDP in Europe. The rush to appoint Sunak as PM seems to have been over-stated. It was a clear device to get Sunak into the PM position alongside chancellor Jeremy Hunt, who had already calmed the markets be undoing virtually all the measure the Truss administration enacted, except the one on removing the cap on bankers’ bonuses.
Austerity is firmly back on the agenda and this places the Conservative government as well as the Labour Party in a difficult position. The Conservatives will claim that they will increase taxes as well as cut spending, but cut spending they will. At the present time they are looking at cutting spending on capital projects, including a rumour of cutting spending on the Sizewell nuclear power station. At the same time, they are allowing a free for all in the increase in the mining of fossil fuels in spite of COP 26 pledges. Local authorities will be expected to make even further cuts and Labour will be in the position of enforcing these cuts, a massive issue in creating the anti-Labour sentiment in the so-called red wall seats in the North of England.
Labour holds an average lead of 20% over the Conservatives according to politics.co.uk. However this has reduced from 25% in the last week of the Truss administration. This is a massive lead, but so far Rishi Sunak is seeming relatively popular against Keir Starmer. A recent poll by Redfield and Wilton Strategies, put Sunak ahead of Starmer in terms of who people would see as the best Prime Minister, but put Labour ahead of the Conservatives by 50% to 27%. The Lib Dems stand at 9%. The above polls show a clear shift in UK politics, especially in England with the Labour Party being seen as the party of government. This is a sad indictment of the weakness of the Left and the refusal of Corbyn or the trades unions to offer an alternative. The prospect of a Labour government may seem appealing to Labour Party activists, who are enthused by the prospect of governing, but there is no reason to think that a Starmer government would offer much more to working people than the Sunak one would. Labour’s desperate calls for a general election will not be answered in any event and Sunak can hold on for another two years, in which time the landscape could change once more, even move to the left.
The coming winter will be a difficult time for the British people. Inflation and rising prices undermine wages, especially in the public sector. According to Statista, wage rises are well behind inflation. The average wage rise is just over 5% but in the public sector is around 2%. Workers in the public sector are being asked to keep wage rises to 2% with inflation over 10%. At the time of writing there is a suggestion that a windfall tax on oil companies that are making massive profits may be introduced but it remains certain that the government will put the vast majority of the burden on the poor and average worker again. Sunak and Hunt say that nothing is off the table, but a real effort to increase taxes on the rich seems unlikely.
There are numerous strikes taking place. The RMT and TSSA transport unions, are in detailed negotiations with employers as a result of strikes, but the prospect of winning a much better deal that is acceptable to the members still seems unlikely. Other unions, including health, teachers, civil servants, local authority workers etc are balloting for strike action. The nurses from the Royal College of Nurses (RCN) have for the first time in over one hundred years, voted for strike action in most NHS trusts. PCS (civil service union) has also voted for strike action. The vote of RCN nurses to strike is hugely symbolic and will influence workers and nurses in other unions to take strike action. Encouragingly, Liverpool dockers have won an above inflation pay deal following strike action. Barristers also won a 17% pay increase following strike action. This shows how strike action can win above inflation wage increases. There is a mood towards unity and workers have to begin to strike in unison and to build towards a general strike because so many unions are moving into struggle. The idea of a general strike is not, however coming from the tops of the unions at this point in time.
There are popular movements, such as Enough is Enough and Peoples Assembly as well as NHS and climate campaigns that are trying to mobilise in opposition to the Tory government. These will not succeed (as People’s Assembly and others have failed to do in the past) if they are perceived as fronts for the Labour Party. It is sad that the criticism of Labour is missing from their meetings so far and it is up to voices on the left to shake things up and call for radical policies and a new worker’s party. The Left however remains in disarray. Even the union tops are failing to speak with one voice, with Sharron Graham failing to endorse Enough is Enough and People’s Assembly hosting separate events from Enough is Enough.
It was encouraging that the Enough is Enough meeting in Halifax on November 10th had a People’s Assembly speaker although the remaining speakers were mainly from the Labour Party or trades unionists who are Labour Party members. It was disappointing that this meeting did not open up to allow speakers from the floor. This is very undemocratic approach, typical of the Labour Party. Richard Burgon, a Labour MP and darling of the left in Labour spoke of increasing taxes in order to cover the £45 billion hole in the government’s finances. These mainly involved increased taxes on the rich. The people in the room responded positively to his ideas, but a Labour government under Starmer would refuse to follow such an approach and so Burgon’s ideas were just empty words. This is dangerous because he is sowing illusions in the ability of the left in Labour to influence policy. Burgon is a side-show, as was Tony Benn during the previous era. He acts as a voice that allows Labour Party activists to stay in the party, but with the forlorn hope that they can move the party towards socialist ideas. Burgon claims to be a socialist but in reality, his policies are social democratic at best, probably closer to those of the British Liberal Party of the 1970s. There is a view emerging on the left that Enough is Enough is not an organisation that is truly open to political debate, as was the case with Peoples’ Assembly and XR. Let’s hope that the new movements do not sap the energies of new people coming into struggle as they have in the past because of the lack of political discussion and democratic debate. Joining the Labour Party with the hope of winning socialist policies from it is now a pipe dream.
Through all of this, the war in Ukraine continues and the UK government is content to allow it to drag on at whatever the cost to the British people. Northern Ireland is a constant sore in the side of UK politics and there is no prospect of an election there before Xmas.
The climate catastrophe builds, with as mentioned above, the UK government abandoning pledges made at COP 26 and at the same time seeking to demonise protestors and increase police powers still further. Demonstrators from Just Stop Oil have been active in closing the M25 motorway in recent weeks, managing to close sections of it on several occasions. They are demanding an end to the increase in oil and gas extraction. There have been 677 arrests so far and most of the media and state are demonising these protestors as fanatics. Just Stop Oil has agreed to suspend its action for a period and wait for the government to change its policies on increasing the exploitation of carbon fuels. This is not likely to happen and so the action will be back. Environmental groups, such as XR are also uniting with Just Stop Oil in building for future protests.
We need mass industrial action as well as protests. Climate groups and unions could work together with a broad approach to demands, as climate activists are often workers too. This approach to unity is complicated because some unions are defensive around the use of carbon fuels. The National Union of Mineworkers for example supports the opening of a new coal mine in Lancashire and Unite has a complex approach to the continued use of wood as a fuel for generating electricity at the huge Drax power station, which receives government subsidies of £700 million per year. Drax is an example where climate activists and workers have disagreed in the past; the workers wanting jobs and the climate activists wanting the end to the use of fossil fuels. The argument that jobs in the renewables sector can replace those depending on carbon-based fuels can be won, but not under the current government. There are also issues around the use of nuclear power as well as the arms industry, which is hugely significant in the UK. The unions hold the key, but can be strengthened by working with climate groups and other left activists as was happening during the climate strikes prior to Covid. Trades Councils and other trades unionists did show solid support to young strikers. Climate strikes could come back onto the agenda alongside other strikes. Any discussion of a general strike should include demands around climate change alongside a range of other demands that can make it clear that any generalised strike action will have a political as well as an industrial dimension irrespective of UK laws.
Increasing opposition to this government and its policies as well as the increase in austerity across the winter and into the spring is likely to lead to more strikes and other actions, not fewer. Events are the drivers of change and if the crisis continues then events could build. We are already being warned by the Bank of England that Britain is entering a period of recession for up to two years. The excuse, that these things are global and beyond the control of the UK government does sound persuasive, but we are where we are because successive governments and for the last 12 years Conservative governments have managed the economy poorly. The British people were hoodwinked by the government during the Covid crisis period and this proved to be an excellent weapon for social control and for making the Conservatives, especially Sunak, look compassionate and capable when they were in fact callous and incompetent. Labour collaborated with the Conservatives throughout. Labour is now favoured by many industrialists as less flaky under Starmer than the Conservatives. The Liberal Democrats are largely kept out of the picture by the media. Meanwhile Boris Johnson waits in the wings for a slip up from Sunak.
Although the Left in the UK is weak, the British people as well as the people of other nations may decide that enough really is enough and get behind ideas that can really change things. If in the UK they get behind the Labour Party, then we may get a new government but it will be business as usual for the capitalists.