George Osborne’s latest austerity budget has shocked even hardened pro-imperialist financial commentators with the callousness of its attack on the elderly, who will lose no less than £1bn a year, coupled as this is with a reduction of the 50 percent tax rate for those earning over £100,000 a year to 45 percent and of corporation tax from an already-low 26 percent to a mere 24 percent (aiming in the not-too-distant future to lower the rate to 20 percent – the holy grail).
This budget forms part of a strategy to eliminate Britain’s balance of payments deficit altogether over the next seven years, on the principle that as long as it is necessary to borrow in order to maintain government spending, Britain is being rendered uncompetitive in the world market because its costs of production are being artificially raised through the obligation to pay interest to financiers.
However, relatively speaking, the amounts being contributed to paying off the deficit by those with massive surplus incomes is minimal compared to what has to be paid by the less well off. To ‘attract investment’ to this country and ‘create jobs’, the wealthy must apparently be treated with kid gloves.
Tricky this, because, as last summer’s uprisings show, if the poorest in society feel society is victimising them, the damage they can cause by their resistance can itself reduce profits and scare away investors. Therefore, some 2 million poorer workers have these uprisings to thank for a budget concession raising personal allowances to £9,205 from £8,105.
However, the limit at which people start paying 40 percent tax on their income as opposed to 25 percent is to be lowered, “dragging up to 2 million not particularly wealthy workers into the 40 percent tax band by 2015” (‘Budget 2012: sadly, George Osborne hasn’t changed the big picture’ by Liam Halligan, Daily Telegraph, 25 March 2012)
However, if the poor are receiving some slight tax relief, it is they who will be worst affected by the fact that £10bn is to be wiped off the welfare budget over the next four years, including £500,000,000 from the NHS.
To be sure, there are some measures in the budget aimed at the filthy rich: houses costing over £2m now bear stamp duty at 7 percent; and all schemes routinely exempting the rich from paying any tax at all will be subject to a requirement that all income over and above recognised allowances is taxed at 25 percent minimum.
If all these measures restored a capitalist economy to financial health, in the same way that an individual might restore his solvency by tightening his belt and paying off his credit cards, then, the exercise might have some merit. However, the increased sacrifices being made in the hope that they will help to double British exports to £1tr a year by 2020 are being matched by Britain’s competitors, who are also frantically belt-tightening.
All this is reducing the purchasing power of both governments and individuals, shrinking demand for even the cheaper products. So all the sacrifices are likely to have been in vain, as the cases of Ireland and Greece show only too well.
“[T]he Irish have accepted major doses of really tough fiscal medicine. The government has enacted a fiscal squeeze amounting to 16 percent of GDP; civil servants have had their pay cut by 9 percent for juniors and more than 23 percent for seniors; and welfare payments have been reduced.
“… The recovery of the Irish economy at the start of last year was driven mainly by exports.
“Then came last week’s news. In the final quarter of 2011, Irish GDP contracted, following an earlier contraction in Q3. So Ireland is back in recession. Moreover, even after all the pain, the budget deficit is running at about 10 percent of GDP, and unemployment is pushing 15 percent.
“This is bad news for Greece and the other troubled countries. With sclerotic [ie, rigid and unresponsive] labour markets, they are struggling to embrace price deflation to boost competitiveness and escape depression. But the Irish example shows that, even if you achieve deflation, you may still not escape. ” (‘Ireland dutifully gulped down the nasty medicine but is still in pain’ by Roger Bootle, Daily Telegraph, 26 March 2012)
Manifestly, it is capitalism that is the ‘failed system’!