The budget will exacerbate inequality

John McDonnell who wants to challenge Gordon Brown for the Labour leadership gives his reaction to t

Ten years in power affords any Government the opportunity of laying the foundations of the society it aspires to create. Ten Brown budgets have produced a society which is more unequal today than when New Labour was elected in 1997. Just look at the facts. In 1997 the richest 1% owned 25% of marketable wealth. By this year that had risen to 34%. Meanwhile the poorest 50% had gone from holding 6% of the nation’s wealth in 1997 to just 1% today.

Today’s budget will exacerbate the problem of inequality.

The Chancellor’s announcement to cut Corporation Taxes will fuel even more obscene City bonuses and will be paid for by the cuts announced in the wages and jobs of public sector workers over the next two years. As part of this attack on public sector wages, the Government has quietly started the process of introducing local pay rates for public sector workers based upon an assessment of the local labour market. Public sector workers undertaking the same work will be paid less in vast areas across the country if local pay rates are low.

Vying with the Tories on tax cuts as an electioneering stunt may appear as a morale boost in the short term but in the longer term will undermine any strategy to create a society capable and willing to fund the public services our community needs and tackle the inequality and poverty which so disfigures our society. In practice this budget is at best neutral in terms of wealth redistribution but I fear that cutting the basic rate of tax to 20p by abolishing the 10p rate will hit the poorest earners as many are unable to find their way through the complexities and inadequacies of the tax credit system.

The failure to restore the link between pensions and earnings, to increase the basic state pension and to increase child benefit sufficiently means that Britain will still have two million of its children and three million of its pensioners living in poverty. How can we find it acceptable that 25,000 of our pensioners died last winter from cold related conditions after 10 years of a Labour government?

Where the Chancellor has announced continued increases in public spending on health and education the scale of the public expenditure growth is significantly less than needed to maintain the pace of investment to meet growing demand and expectations. In comparison with other European countries which have had long periods of Social Democratic government public expenditure in the UK is still amongst the lowest: 45.4% in the UK in comparison with 57.1% in Sweden, and 53.85% in Denmark.

In addition on Monday Gordon Brown and Tony Blair published the New Labour’s policy documents committing the Government to more and extensive privatisation. Many fear therefore that any additional public investment will be laundered into private profits.

Where there has been a growing consensus on the key issue of climate change the Chancellor has taken a few small steps towards encouraging change in our polluting behaviour but these appear to many as mere tinkering at the edges. Much more radical change is needed in promoting a large scale programme of developing alternative energy sources and changing our polluting economy and lifestyles. How can we claim to be serious about tackling climate change when the Government is sanctioning the greatest expansion of airports in our history?

The budget is designed to raise the Chancellor’s electoral standing. In the short term there may be an immediate lift but within days as the detail is unpicked it is likely that there will be a reaction to what will be seen as electioneering spin. I worry that this will undermine our longer term project of convincing our community that creating decent public services and a fairer society requires a progressive redistribution of wealth.

More on the budget

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Tory A-lister Kwasi Kwarteng gives his response to Gordon Brown's final budget which he sees as rather austere


John McDonnell is Labour MP for Hayes and Harlington and has been shadow chancellor since September 2015. 

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The New Times: Brexit, globalisation, the crisis in Labour and the future of the left

With essays by David Miliband, Paul Mason, John Harris, Lisa Nandy, Vince Cable and more.

Once again the “new times” are associated with the ascendancy of the right. The financial crash of 2007-2008 – and the Great Recession and sovereign debt crises that were a consequence of it – were meant to have marked the end of an era of runaway “turbocapitalism”. It never came close to happening. The crash was a crisis of capitalism but not the crisis of capitalism. As Lenin observed, there is “no such thing as an absolutely hopeless situation” for capitalism, and so we discovered again. Instead, the greatest burden of the period of fiscal retrenchment that followed the crash was carried by the poorest in society, those most directly affected by austerity, and this in turn has contributed to a deepening distrust of elites and a wider crisis of governance.

Where are we now and in which direction are we heading?

Some of the contributors to this special issue believe that we have reached the end of the “neoliberal” era. I am more sceptical. In any event, the end of neoliberalism, however you define it, will not lead to a social-democratic revival: it looks as if, in many Western countries, we are entering an age in which centre-left parties cannot form ruling majorities, having leaked support to nationalists, populists and more radical alternatives.

Certainly the British Labour Party, riven by a war between its parliamentary representatives and much of its membership, is in a critical condition. At the same time, Jeremy Corbyn’s leadership has inspired a remarkable re-engagement with left-wing politics, even as his party slumps in the polls. His own views may seem frozen in time, but hundreds of thousands of people, many of them young graduates, have responded to his anti-austerity rhetoric, his candour and his shambolic, unspun style.

The EU referendum, in which as much as one-third of Labour supporters voted for Brexit, exposed another chasm in Labour – this time between educated metropolitan liberals and the more socially conservative white working class on whose loyalty the party has long depended. This no longer looks like a viable election-winning coalition, especially after the collapse of Labour in Scotland and the concomitant rise of nationalism in England.

In Marxism Today’s “New Times” issue of October 1988, Stuart Hall wrote: “The left seems not just displaced by Thatcherism, but disabled, flattened, becalmed by the very prospect of change; afraid of rooting itself in ‘the new’ and unable to make the leap of imagination required to engage the future.” Something similar could be said of the left today as it confronts Brexit, the disunities within the United Kingdom, and, in Theresa May, a prime minister who has indicated that she might be prepared to break with the orthodoxies of the past three decades.

The Labour leadership contest between Corbyn and Owen Smith was largely an exercise in nostalgia, both candidates seeking to revive policies that defined an era of mass production and working-class solidarity when Labour was strong. On matters such as immigration, digital disruption, the new gig economy or the power of networks, they had little to say. They proposed a politics of opposition – against austerity, against grammar schools. But what were they for? Neither man seemed capable of embracing the “leading edge of change” or of making the imaginative leap necessary to engage the future.

So is there a politics of the left that will allow us to ride with the currents of these turbulent “new times” and thus shape rather than be flattened by them? Over the next 34 pages 18 writers, offering many perspectives, attempt to answer this and related questions as they analyse the forces shaping a world in which power is shifting to the East, wars rage unchecked in the Middle East, refugees drown en masse in the Mediterranean, technology is outstripping our capacity to understand it, and globalisation begins to fragment.

— Jason Cowley, Editor 

Tom Kibasi on what the left fails to see

Philip Collins on why it's time for Labour to end its crisis

John Harris on why Labour is losing its heartland

Lisa Nandy on how Labour has been halted and hollowed out

David Runciman on networks and the digital revolution

John Gray on why the right, not the left, has grasped the new times

Mariana Mazzucato on why it's time for progressives to rethink capitalism

Robert Ford on why the left must reckon with the anger of those left behind

Ros Wynne-Jones on the people who need a Labour government most

Gary Gerstle on Corbyn, Sanders and the populist surge

Nick Pearce on why the left is haunted by the ghosts of the 1930s

Paul Mason on why the left must be ready to cause a commotion

Neal Lawson on what the new, 21st-century left needs now

Charles Leadbeater explains why we are all existentialists now

John Bew mourns the lost left

Marc Stears on why democracy is a long, hard, slow business

Vince Cable on how a financial crisis empowered the right

David Miliband on why the left needs to move forward, not back

This article first appeared in the 22 September 2016 issue of the New Statesman, The New Times