[Militant No. 401, 14th April 1978, p. 2]
By Lynn Walsh
The labour movement will welcome the positive points in Denis Healey’s budget, which have already brought a torrent of criticism and denunciation from the Tories and big business.
Most workers will be slightly better off as a result of the tax cuts. Low-income families with children, in particular, have been helped by the cuts in the basic tax rate, the increase in child allowance (though mainly taken out of personal tax allowances), and the restoration of free school milk for the under-11s.
On the negative side, however, the budget does practically nothing to restore spending cuts, little to reduce unemployment, and overall holds out the promise of only a very modest general rise in workers’ living standards.
Overall, the budget has put back about £2,500 million into the economy, half a million less than the CBI were demanding and just over half of the £4,000 million reflation demanded by the TUC.
Above all, it does nothing to reverse the economic strategy of the government, which still aims at breathing life into a diseased British capitalism fighting for its life in an adverse – and now worsening – world economic climate.
Tax cuts
The labour movement will certainly welcome Healey’s decision – strongly criticised by the Tories – to raise personal allowances (favouring lower incomes) rather than simply cutting the basic and higher rates (which would favour high incomes more). Taking the budget changes together with last October’s tax cuts, a married couple with two children under 11, on £70 a week will be £3.37 a week better off this year. The 360,000 low paid workers who will not now have to pay tax, however, have been little more than rescued from dire poverty.
But it is inevitably the rich who, in personal terms, get the lion’s portion. Whereas a single man on £1,000 a year will save £14.95, anyone on £25,000 or over will save an unbelievable £270.70.
Nor do the chancellor’s tax cuts appear generous when it is seen that they have been almost entirely financed from so-called “fiscal drag” – the tendency of tax revenue (up 13% this year) to rise faster than the national income because of inflation.
While the Tories are screaming about Healey’s failure to cut tax rates for the rich surtax payers, moreover, the City financiers are drawing quiet satisfaction from the budget’s confirmation that company corporation tax deferred from 1973/4 and 1974/5 will be written off for good. Big business is estimated to have saved a colossal £4,500 million through deferred tax between 1974 and 1978!
Apart from this, the main beneficiaries of the latest tax cut measures will be small businessmen, farmers, and middle managers.
Pensions
Retirement and other pensions are increased 11½%, the single retirement pension going up from £17.50 to £19.50 and the married couple’s from £28 to £31.20.
These, however, are still virtually starvation rates, and pensioners feel the effects of price rises of basic goods more than anyone else. Electricty bills, for instance, will be going up 18% on 1st April, and the clothing and footwear retail index jumped 2.1% in February alone.
Public spending
Any restoration of public spending cuts is to be welcomed. But the budget has done very, very little in this direction. Employment subsidies will continue. An unspecified extra amount will be spent on “law and order”.
But the two significant increases, £50m for health and £40m for education, are derisory compared to the need that exists. Most of the £50m for the NHS, for example, will be used to open already-built hospitals now lacking staff and equipment.
The restoration of free school milk for juniors will be paid for by the EEC, and the postponement of a further 10p increase in school dinners will probably just halt the decline in numbers able to afford them.
The total increase in spending will probably be less than £550 million. This will be financed out of the “contingency fund” that already exists. In any case, it is nothing compared to the “underspending” of up to £4,000m imposed by the Treasury in 1977/8 – quite apart from the £3,000m or £4,000m cuts already planned by the government in white papers.
Quite apart from the enormous job losses involved, the effects of social spending cuts, especially for lower-paid workers and their families, is far greater than will ever be compensated for by small tax cuts.
The labour movement must therefore continue to demand a programme of useful public works, both to create employment and to provide the essential health, welfare and educational services still urgently required by workers.
Unemployment
In his speech, Healey said that a major aim of the budget was to get unemployment heading in a downward direction. In spite of this, however, his measures will, at best, do no more than prevent unemployment going up. The 3% growth of gross national product (at 1970 prices) which Healey now predicts would leave us with 1½ million on the dole. But there is no guarantee that 3% growth will be achieved, and in any case many firms, like Spillers and Thorn’s this week, will be “rationalising” thus putting more on the dole.
Living standards
Healey’s package – if his predictions work out – will mean a slight easing of the heavy economic burdens of the last few years. “Taking the man on £75 a week, if his earnings rise by 10 per cent in accordance with the government’s guideline, his standard of living will rise by nearly 6 per cent in real terms between August 1977 and August 1978 as a result of last October’s measures and those I have just described.”
But it is far from certain that the budget projections will be borne out. Healey assumes and inflation rate below 9%, but international factors could easily send it up before next August. On the other hand, wage settlements are currently running at about 14%, whereas Healey assumes 10% – and several times mentions that he hopes pay rises will be substantially lower in 1978/9 than at present.
“I do not in this budget make any call for sacrifice,” reassured Healey. But in spite of the rise in living standards he predicts, of course, the working class as a whole cannot forget the 1½ million unemployed and the previous savage cut in living standards under the Labour government – which will not be restored by these measures.
Dubious prospects
Denis Healey himself struck a string cautionary note when he referred to the vanishing “mirage” of a world economic recovery, and alluded several times to the underlying weakness of British capitalism.
“…unless British industry can produce and sell the goods required to meet the demand created by any budget stimulus, that increase in demand will be met by imports and set inflation going again.”
The chancellor exhorted British capitalists to invest, modernise and improve their management. But, if the comments in the serious financial press are anything to go by, there will be no big rush by the capitalists to oblige.
The economic editor of ‘The Times’ put it bluntly: “The truth exposed by the latest forecasts is that whatever else may have been achieved by the sacrifices of the past four years, we still do not have a platform for steady growth free from worries about inflation and the balance of payments.”
He feared that Healey’s growth target would not be achieved, that imports would increase (Probably producing a trade deficit), and that inflation will again accelerate.
Alternative
Whatever the limited benefits for workers, these budget measures can be no substitute for socialist economic policies. In the short term, Labour may hold votes with tax handouts. But in the longer run, workers will draw up a balance sheet based on their own experiences.
The immediate rejection by trade union leaders of Healey’s hint at further pay restraint reflects the string pressure within the ranks for improved pay now that things are getting better, as Healey claims.
Healey himself admitted, several times in his long and detailed speech, that his plans could be completely undermined by world recession and the failure of the bosses in Britain to respond to his strategy.
For the active workers, this will reinforce the conclusion, endorsed time and again by Labour Party and trade union conferences, that only public ownership and socialist planning can guarantee the development of productive resources to eliminate unemployment, provide social services and assure every worker of a reasonable and secure standard of living.
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