The prospects of Sunaknomics

Submitted by martin on 14 December, 2020 - 8:29 Author: Martin Thomas
food bank

1. The Tories plan for government debt as a percentage of national income to increase through to 2024-5. They plan for public sector net investment to average 2.9% over the next five years, where it averaged 2.0% from 2010 to 2019. They project £55 billion public-service spending on Covid in 2021-2: public spending on Covid is estimated at £280 billion in 2020-1, of which £113 billion is public-service spending and the rest spending on furloughs, business support, and loans.

2. In broad terms, the Tories are still on the track of running budget deficits to sustain capitalism. In addition, they plan to raise military spending.

3. The particular way the Tories plan to run high public spending, though, will drive increased social inequality. Notably:
• They still plan to remove the temporary £20 per week increase in Universal Credit from 1 April 2020. That move will hit six million households.
• The Local Housing Allowance, the ceiling for housing benefit payments, has been allowed to rise to the level of the 30th-highest rent out of 100 for comparable homes in each area. It is to be frozen in cash terms from 2021-2, however much actual rents rise.
• The major tax rise they plan is through council tax, by licensing councils with social care responsibilities to raise council tax by 5% without a local referendum. Council tax has already doubled in real terms since 1993-4. Council tax is a regressive tax.
• The Tories' allocations for local government imply serious though uneven cuts in council services spending, which has already fallen 23% since 2009.
• If vaccine roll-out goes well, unemployment may peak at less than the 10% or 11% projected some months back. But 18-25 year olds, and near-retirement-age workers, are likely to see high unemployment levels.

4. Like many other governments, the British government has been able to borrow hugely at very low interest rates. Even capitalistically-less-developed countries have less severe debt problems from the pandemic, so far, than looked likely in the spring. Share prices have done eerily well since dropping sharply just before the March lockdown. Banks have done less well than in 2019, but are far from crashing. Capitalists and financiers are expecting a fairly rapid upturn as the pandemic ebbs. They may be right about that. The ebbing of the pandemic will bring onto the market a lot of consumer demand from better-off workers who have been spending much less on commuting, on food and drink outside the home, and on holidays and outings, and the economic capacity is there to meet that demand without severe inflation. Each wave of the 1918-20 Spanish flu pandemic was followed by a quick capitalist revival. The precedent is partial because lockdowns then were lighter than now (no "work-from-home"), but it may still have validity. In the nature of the capitalist system, the risk of a spiralling collapse of the huge accumulation of debt during 2020 remains live, but it is a risk rather than a certainty.

Some bourgeois economists also point to the risk of inflation exploding. The stock of money in the economy - not just notes and coins, but bank accounts, etc. - has been pumped up hugely in 2020, but better-off people have mostly been at home, hindered from spending their income on outings. As the pandemic fades, they will start to spend more, pushing up demand and (so the argument goes) maybe quicker than supply can match. On the whole a long and sober discussion of this in the Economist magazine (12/12/20) looks right: probably not. A lot of the "supply" lost in the lockdowns can be restored very fast.

5. Even if there is a slight boom as the pandemic fades, though, inequality has increased during the pandemic and is set to increase further.

6. The public sector pay freeze exempts NHS workers and workers on less than £24k, so the "saving" from it is estimated at some £1 or £2 billion, less than the margin of error in the government's other estimates. But that pay freeze alongside probable booms for many private-sector capitalists is another driver of inequality.

7. Cuts in government allocations to local councils had largely been stopped for 2019-20 and 2020-1. But councils have paid out some £5.4 billion in extra pandemic spending, and lost some £2.8 billion in incomes reduced by the pandemic. The government has made some special allocations to councils to offset these figures (£5.3 billion in payouts, £1.8 billion in other forms of help), but a big shortfall will hit 2021-2 budgets. The impact will be very uneven. For example, Luton council has lost heavily because it relied on income from Luton airport; Croydon council, because it relied on income from commercial property.

8. The pandemic has seen many small-scale and usually wildcat disputes, often victorious, but the postponement or burying of large-scale union disputes. Those larger disputes are beginning to come back onto the scene. In many areas workers' distrust of the government and of bosses will have been sharpened by experiences in the pandemic.
We will continue to press for public ownership and conversion of large enterprises which cut jobs, for increased public-service staffing and pay, and for shorter standard work-weeks.
Pandemic-related demands will include:
• Maintenance of isolation-pay concessions made during the pandemic, and extension where necessary to cover sick pay for all ailments
• Maintenance of the £20 extra on Universal Credit, no restoration of "conditionality", a ban on evictions for pandemic-related rent arrears, rent holidays
• Increased regular staffing and funds for extra precautions in schools, care homes, etc.

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