“In all my years in parliament, I have never seen a budget fall apart as quickly as Kwasi Kwarteng’s ‘Growth Plan’.”
By Jon Trickett MP
Within a matter of days, the Truss government’s first economic intervention sent the pound crashing and markets into meltdown.
The Bank of England was forced to intervene by purchasing £65 billion of bonds to stem a crisis in government debt markets. What went wrong?
The new chancellor could not have been clearer about the direction in which he wants to take our economy.
Tax cuts for the highest earners and big corporations, the removal of the cap on bankers bonuses, combined with benefit cuts for the poorest and the removal of trade union rights for British workers.
Of course, this isn’t the first time we’ve seen policies like these – Thatcher, Major and Cameron all followed a similar script. But global markets are extremely volatile right now and the British economy is gripped by an inflationary crisis following over a decade of low-growth and productivity.
Kwarteng’s proposed tax cuts left a big hole in public finances that can only be filled by more savage cuts to public spending. The corporation tax cut will cost £18.7 billion, whilst Kwarteng has said that £18 billion in savings must be found from public services.
This is a direct redistribution of wealth from the public to corporations. Markets responded coldly because many financial institutions doubt the viability of a fresh wave of austerity.
Not only does it seem politically unachievable but after over a decade of Tory cuts it’s clear that austerity doesn’t work. It stagnates growth, damages productivity and reduces spending power. Austerity policies also drive inequality.
Between the banking crash and the start of Covid, the 1,000 richest people in our country increased their wealth by £538 billion. But over the same period the total income of the 33 million workers in our country went down by about £433bn.
Despite what the ‘free market’ zealots advising Truss and Kwarteng may say – wealth doesn’t trickle down, it’s hoovered up.
A new study from the University of Glasgow and the Glasgow Centre for Population Health has found that between 2012 and 2019 more than 330,000 excess deaths in Britain can be attributed to public spending cuts. Let me be clear – austerity kills.
The way to deal with Britain’s economic problems is by abandoning the austerity and ‘free-market’ policies that have created the current mess.
Instead we should pursue a large-scale programme of public investment in our ailing regions and nations; devolve power away from Westminster; and reform our tax system so that the wealth of the super-rich and big corporations is redistributed for the benefit of all.