There is an Alternative to Austerity
After a tumultuous couple of months in British politics, the Chancellor announced the government’s plans to deal with the country’s economic crisis. As expected, there were significant tax rises and public spending cuts announced. Yet again, the Conservatives have plunged the country into another round of austerity.
Prime Minister Sunak’s solution to the economic crisis is principally unjust. It is insulting for one of the wealthiest individuals in Britain to condemn the working classes to fix the economic chaos that his party has caused. There is a false belief that cutting public expenditure and increasing taxes on low and medium earners will solve the UK’s economic problems. Amidst a cost-of-living crisis, an energy crisis, and spiralling inflation (which has peaked at over 11%), these plans will not alleviate Britain’s problems.
An alternative must be supported. The working classes should not be paying the bill of Conservative incompetence. Austerity has been tried in this country before, and it failed catastrophically. When the Conservative party came into government with their Liberal Democrat allies, they imposed some of the largest public spending cuts in generations. Austerity has dismantled our public services and led to further privatisation in the tradition of Thatcher’s neoliberal experiment. It is wrong to suggest that further cuts (albeit postponed until after 2024), can solve the current crisis.
The narrative of the apparent necessity of spending cuts and increased taxation on the vast majority of the public, which has become common within political discourse, must be challenged. The narrative must be challenged by the Labour Party.
The party does already have a strong set of economic policies aimed at producing a fairer economy. Such policies include abolishing the non-dom status (raising £3.2 billion), abolishing the tax exemption for private schools (raising £1.6 billion) and extending the windfall tax on oil and gas companies (potentially raising up to £50 billion). There are also other significant proposals, such as the creation of a British-owned energy producer (which would help reduce energy bills) and the re-nationalisation of the railways (which would reduce the cost of rail travel). Yet, if the economic and social problems of this country are to be tackled, the party must go further.
Labour should more firmly commit to shifting the tax burden to those who are extremely wealthy. The government’s autumn statement announced that more people will be included in the higher income tax bracket, which is a positive step forward. However, the top rate of income tax remains at 45%. Labour should advocate a reimposition of the 50% top rate of income tax. Then, the second highest income tax bracket (currently taxed at 40%) should be increased to 45%. These reforms would only affect the wealthiest 5% of the population and could raise up to £6 billion a year.
Next, the party needs to support the imposition of a range of wealth taxes. A basic wealth tax of only 1.1% on those with wealth of over £10 million could raise up to £10 billion every year. This would only target the extremely wealthy – just 0.04% of the UK population.
Other proposals, as advocated for by the organisation Tax Justice, should include equalising capital gains with income tax rates, applying national insurance to investment income and ending inheritance tax loopholes. According to Tax Justice, these proposals could raise up to £24 billion.
This article has highlighted just a few alternative economic policies that can shift the tax burden from the working classes to the wealthy.
It is not economic impossibility that prevents the government from supporting this shift; it is a calculated political choice that does so. The Conservative Party would never introduce such reforms due to their staunch commitment to capitalist economics. Therefore, it must be the Labour Party that takes these ideas and proposes an alternative to austerity.
Under the Conservatives the UK is entering a recession while there is predicted to be the sharpest fall in living standards in generations. Tax rises on the working classes and public spending cuts in the years ahead will not solve these crises. Only a fairer alternative, based on the redistribution of wealth and the protection of our public services, will be able to challenge the current austerity proposals. Labour has made a good start in offering an alternative, but it is time to go further.
Cover image: Flickr
