More and less than meets the eye in Healey’s Budget

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GIVEN the build-up, there was a lot less to Chancellor John Healey’s first Budget than met the eye. On the big day itself, there was much more.

It was intended to be a radical Budget, introduced last Wednesday as one for working people, although he quickly included business as among the beneficiaries.

But in the final analysis, the Chancellor did the bond market’s bidding. He did little to close the deficit in Britain’s public finances, which after all provides a gilt-edged source of profits to stockholders, while also signalling his government’s readiness to keep it under control.

Over the next two or three years, public expenditure in areas which do not immediately boost big business profits will be reduced in real terms. But hidden from public view on Budget Day was the scale of these cuts in social and welfare programmes.

This will be scoped in the NEET Review headed by Healey’s fellow New Labourite and former far leftist, Alan Milburn. He is already on record as calling for less welfare spending which, he and Tory leader Kemi Badenoch claim, is necessary to shift up to one million 18-24 year olds from idleness into employment or education, although such claimants already outnumber vacancies by more than 2:1.

Milburn’s final report is due in time to inform the Chancellor’s spending review in the spring, where the details of real-terms cuts in key areas of public sector current and capital spending should be set out.

The overriding priority for former Defence Secretary Healey and “continuity Starmer” (so far) Prime Minister Andy Burnham is clearly the planned increase in British military spending to 3 per cent of GDP by 2030 (the last Tory government aimed for 2.5) and 3.5 per cent by 2035. The current share stands at around 2.6 per cent.

To these ends, the Chancellor’s Budget instructed all government departments to chop their capital budgets by 1 per cent this year.

However, according to Nato’s own figures, all its members including Britain (but not the USA) have increased the military’s share of their country’s economic output since 2014. This, of course, contradicts the wall-to-wall picture of reckless disarmament painted daily by our political and mass media establishment.

Altogether, in contrast to the final Tory Budget in 2024, the Burnham “old New Labour” government will be spending more than £62 billion extra on the military over the coming four years. “This,” the Defence Investment Plan explains, “will move the UK towards warfighting readiness, modernising military capability to fight the wars of the future and drive economic growth.”

But if it’s cake for the arms corporations, last week’s Budget distributed crumbs to working class and small-business people.

The extra £100 energy bill handout and the extended VAT cut will cost the Treasury less than £3bn and increase average household income by £1.84 a week. That’s almost enough to buy a litre of milk at Tesco.Gas standing charges will be abolished at the end of 2027, at the earliest, and the cost to the companies will be added to the unit prices. No change to the North Sea oil and gas super-profits levy indicates that windfall profits will escape heavier taxation until 2030 or later. This year, Shell and BP are on course to quadruple their profits to more than £40bn.

The main rate of corporation tax (CT) on company profits and the top rate of income tax (both halved since the early 1980s) remain unchanged.

The banking CT super-profits surcharge is to be doubled from 3 per cent to 6 per cent, bringing less than £2bn more into Treasury coffers. Yet City of London analysts were expecting a rise to 8 per cent, not least as the Big Four banks are busy trebling and quadrupling their £40bn profits made last year.

No wonder their shares rose after Healey sat down.

Next to these figures, his extra spending on social and affordable housing (£1bn extra over 10 years) and ending rough sleeping (£432m) are small beer indeed.

One-third of the state retirement pension “triple lock” is still likely to disappear in 2030, hitting millions of poor pensioners. The national minimum wage discrimination against young workers aged 18-20 continues.But it could all have been so different. A more radical Budget could have:

These measures would still have left Chancellor Healey with a fiscal “headroom” of more than the £15bn announced in his Budget and the £14bn demanded by City analysts. In a real Labour government backed by a solid majority of left and social-democratic MPs, he could have gone further and:

Certainly, any such programme would encounter a host of obstacles should Britain rejoin the EU and its single market, thereby subjecting economic and financial policy to the neoliberal treaties and rules that Andy Burnham affects to abhor.

But it would give millions of electors something to vote for in the next general election.

Rob Griffiths is convener of the Communist Party’s political economy commission.

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