The pro-Thatcher rhetoric of the Labour party leadership throughout the election campaign has blossomed into a strategy that will attempt to bring into UK law, a bill ensuring that democratic socialism can never make a comeback. To Starmer’s version of the Labour Party, there really is no alternative to neoliberalism.
In a stunning sleight of hand, Starmer’s fresh, bold government, swept into office by the electorate on a promise of “Change”, has set up the necessary fiscal obstructions to provide cover for an incoming failure to modify any aspect of the day to day life of ordinary people in the UK.
This section from early in this week’s King’s Speech makes the Labour Party’s intentions transparent.
“Stability will be the cornerstone of my Government’s economic policy and every decision will be consistent with its fiscal rules. It will legislate to ensure that all significant tax and spending changes are subject to an independent assessment by the Office for Budget Responsibility [Budget Responsibility Bill]. Bills will be brought forward to strengthen audit and corporate governance, alongside pension investment.”
The carefully crafted political verbiage sounds innocuous and could be mistaken for a government ticking all the boxes, employing independent experts to check the national homework. How could this be seen as anything but positive?
Change? What change is Labour Government offering?
Two promises in the statement are inserted simply to provide the excuses Starmer and Reeves will offer as impediments to the promised change.
The first is the unnecessary concept of “fiscal rules.” Instead of a sign of a financially responsible government ready to serve the people of the country, this is a sign of either incompetence or an ideological reticence to spend public money for the public good.
The second is the out-sourcing of financial decision-making to a non-elected private sector cabal. The Civil Service and Treasury officials, in partnership with the government of the day, have managed the UK national money system for centuries, building up a reputation (until the neoliberal era of the last 40 yrs), of competence that other administrations around the globe have sought to emulate.
The Treasury has always been the office of budget responsibility in the UK and the holder of the office Chancellor, shouldered that responsibility. The formation of the independent OBR is an abdication of that responsibility.
That old “household budget” fallacy
The fiscal rules are a fictitious straitjacketing of the power of the government to spend for public benefit. By suggesting that spending must be “fully funded” or that the “credit card is maxed out”, feeds the ubiquitous, but false, narrative that a currency-issuing government must act like a household in setting its budget. The deception that whatever the government spends, must be brought in as revenue in taxes beforehand.
The application of a little logic illuminates the nonsensical nature of such a statement. The UK government has a limitless capacity to create funds that could be used to provide society with the essentials of life.
There will be multiple versions of hand-wringing and woeful countenance acted by Rachel Reeves (perhaps even tears), as she or her Treasury ministers explain that English citizens can’t have what they desire because they haven’t worked hard enough to provide growth and pay taxes. The Labour government are primed and ready to implement infrastructure improvements, but, alas, the fiscal rules…
For example, in the case of private owned water companies, it is the systemic failure of the UK political system that allows the English water network to be on the brink of collapse due to 40 years or more of underinvestment and asset-stripped institutions.
Protest for Political Change
If the clamour from the public increases, perhaps even to the extent of taking to the streets and protesting outside water company offices for re-nationalisation, the government may be forced to relent. The government could propose legislation matching the public will. A victory (if a belated one) for democracy and the UK political system.
Ah! Not so fast! The Office for Budget Responsibility (OBR) must authorise the competence of the policy proposals. Cue a more business-like, cool, handwringing (no tears this time). Rhetoric along the lines of, “The markets will not countenance such a move”, “The pound will be attacked”, “We will be doomed”. The media will climb on board and ridicule the government for even thinking along these lines. Claims of the thin end of the communist wedge and lefties being lefty will scream from banner headlines.
Grudgingly, of course, (more hand-wringing, possibly more tears – it would certainly be reported as an ‘emotional’ statement) the government will climb down on their ‘radical’ proposals and provide the finance required for upgrading the system to the existing private companies. In return, a promise never to be such poor, incompetent, corporate executives ever again. Billions of pounds of profit will continue to pass from the public purse into the hedge funds and other holders of shares to reinstate the former market standing.
More UK financial assets will be transferred to Jersey and Cayman Island bank accounts, while people in the South start dropping from diseases only usually seen on the news in developing countries classed as impoverished. How could the once Great Britain have fallen so far?
Water is only one of many public services being hollowed-out by privatisation, each with its own issues from underinvestment and lack of fiscal support. The Chancellor will have plenty of opportunities to hone her fake persona and Thatcherite credentials
This could be viewed as morally corrupt, however, it is completely legal in the UK ‘free market’. It is not an accident, but the evolution of the neoliberal project. Poor quality services for the population, result in lower living standards, while shareholders and directors receive an income stream from the public purse. The Labour Party no longer aims to serve the people of the UK, but the corporate and individual oligarchs.
The final nail in the coffin of economic alternatives
The truth is that supporting OBR acceptance as mandatory on the passing of any UK government spending decisions negates the chance that a worker or people-based economy could ever arise. The Organisation has been formed to act as gatekeepers for the status quo and to provide an ‘independent’ justification for the austerity policies destroying communities and lives.
The OBR Executive Leadership have formidable CVs, all with experience in UK government or Bank of England, but interestingly also connections with the United States through the International Monetary Fund (IMF) or US commercial banks. It can be guaranteed that, whether they realise it or not, they are going to think and practice economics in a way that follows a corporate-friendly economic ideology.
Any nudge towards a climate-friendly, wellbeing economy will be blocked, as the direction of travel would be anti-growth, anti-exporter and anti global-capital. By having funded think tanks signing off on the decision-making process for national policy, the 99% will find it very difficult to influence parliamentary decisions. This is just a further diminution of public sovereignty.
Labour scenarios: embrace power or “Learned Helplessness”
The Labour party under Keir Starmer and Rachel Reeves are callously undermining UK democracy in an effort to curry favour with the markets. This submission to a weaker entity by those now in control of the UK economy is an example of what economist Stephanie Kelton calls “learned helplessness.”
The economic and financial power under the control of Starmer and Reeves is magnitudes larger, in UK terms, than can be wielded by any or all global corporate actors in the UK. The UK Treasury cannot be outspent in GBP and can never be forced into insolvency.
The markets are in no position to stop the UK public receiving acceptable services from utilities or public services. Polluted rivers and barely potable drinking water are a result of successive UK governments’ policy. Liz Truss’s leadership was controversially included as an example of economic incompetence in the King’s Speech. This in itself indicates complete ignorance on behalf of the new government or is a blatant attempt to gaslight the public.
Irrespective of whether the Truss economic plan was good for the UK or not, had the Prime Minister comprehended the power the office held, the markets could have been forced to back down. Instead she folded, in turn providing more ammunition for the fake narrative that the markets are in charge. The Labour leadership should take note.
There are two potential scenarios at play. Starmer and Reeves are ignorant of the power they hold, in which case, someone must enlighten them. The other is that they know very well how the UK money system works and are simply deceiving the public for the benefit of those holding the aforementioned offshore bank accounts.
More in politics
