A taxing budget for workers

A penny off petrol duty, paid for by a windfall tax on North Sea oil companies. A rise in the basic rate income tax allowance (i.e. a tax cut). A freeze in council tax. And a new tax on private jets. Has George Osborne suddenly taken the advice of the leftists and begun to change the balance of the tax burden?

The populist moves in the budget are no doubt an attempt to soften the pain of the previous emergency budget last year which unveiled a historic restructuring of the ‘social state’. It goes without saying that even were we to take the measures at face value, they really go nowhere to ameliorating the most brutal assault on workers’ living conditions since the Great Depression.

It’s already clear that the cut in petrol duty has had little effect on actual prices, which were raised even before the measure was announced. And the increase in the tax allowance allowed the government to disguise another measure around taxation: the annual increase in personal allowances will now be calculated from the CPI as opposed to the RPI. In the long-term, the CPI generally runs at 1 percentage point below the RPI, meaning that tax allowances will rise much more slowly relative to the cost of living. Some analysts have suggested that the package of measures, supposedly designed to benefit low-paid workers, will ultimately hit them the hardest.

But does the ‘tax the rich’ mantra recited by the left actually offer a real alternative? Don’t the bankers earn billions in bonuses? The left call upon the state to redistribute wealth through progressive taxation but this hides the real nature of the state, which is not a neutral organ but the ‘executive committee’ of the very ruling class the left call upon the state to tax. Armies of accountants stand ready to find loopholes for capitalists in the rules they set themselves.

Nor does the ‘tax the rich’ slogan take into account the nature of capitalism. The central motor of capitalist society is the drive to growth (or accumulation). Recessions, crises, etc. are the breakdown of that accumulation process. Fundamentally, accumulation depends on the ability of capital to exploit labour to a sufficient degree to ensure this growth. The official explanation for the credit crunch (reckless lending by the banks) is thus only partially true. At root, it meant lending to capitalists who then failed to milk a suitable amount of profit from their workers. In essence, workers were paid too much relative to the exploitative needs of capital.

The only response to the crisis is to drastically reduce workers’ real wages (both directly and the portion derived the social services provided by the state). And this is what we have seen through a combination of cuts in wages, social services and stealth cuts through inflation. Unfortunately for capital, these measures result in further shocks to demand because workers have to reduce their consumption, exacerbating the overproduction that is the classical expression of the capitalist crisis. The ‘debate’ about economic policy between right and left is how to reduce wages while stimulating demand.

The promises from the left are as empty as Osborne’s populist gestures. Even were they actually carried out, they would only exacerbate the crisis. Rather than succumbing to utopian dreams of reforming a dying system, workers need to launch struggles in defence of their living conditions and work towards ending this social system once and for all.  

Ishamael 1/4/11