The budget presented this week by the new chancellor of the exchequer, Rishi Sunak, looks like it spells the end of austerity, at least on the surface. Current spending, which covers day-to-day expenses like health, education and welfare, will be increasing by £30bn. On top of this, Sunak has announced a whopping £600bn package of infrastructure investment, which will be spent on transport, energy and housing over the next five years. All told, borrowing will be increasing by more than at any time over the last 30 years.
The response from a dispirited left has been largely pessimistic. Some are complaining about Tory hypocrisy: the party has delivered the biggest increase in spending since the 1950s after an entire election campaign spent decrying the unaffordability of Labour’s spending plans. While some see it as evidence that Jeremy Corbyn won key arguments, others are worried that the apparent end of austerity also spells the end of the relevance of the left. In many ways, the anti-austerity movement was the foundation of Corbynism – if austerity is over, then how are socialists meant to develop a populist critique of the government?
Both reactions are ill-founded. Firstly, this budget does not represent the end of austerity in its entirety. Welfare spending remains woefully inadequate and, as a whole, the budget is extremely regressive in its distribution of costs and benefits. There is no money for our collapsing social care system, and £5bn will not be enough to for the NHS, given it was already stretched to breaking point before the arrival of coronavirus. Teachers, local authority leaders and legal aid lawyers have all raised serious concerns with the way the budget will affect already strained funding for schools, local government and the justice system.
Secondly, given the wider economic context, Sunak’s spending commitments represent the bare minimum required to avoid total economic ruin. The global economy has been inching closer towards another downturn for several years and the panic over Covid-19 will tip many large economies into recession in the first half of 2020. Most have yet to understand quite how severe the virus’s impact on the economy is likely to be. Rising infrastructure spending might just correct for several decades of inadequate public investment, but it will not absorb the impact of a coronavirus-induced collapse in incomes that could translate into another global debt crisis.
Thirdly, the budget contains no significant measures to deal with climate breakdown. The only explicitly environmentalist measures in the budget are the scrapping of red diesel and the introduction of a tax on plastics. Fuel duty will remain frozen – recent analysis from Carbon Brief suggests that the freeze has increased UK carbon emissions by at least 5%. Meanwhile, a large portion of the £600bn package of infrastructure investment will be devoted towards roads.
Sunak’s budget may represent a break with Osbornism, but it will not substantively improve the lives of most people in the country, who are facing the combined threats of climate breakdown, a deep recession and a global pandemic after a decade of wage stagnation, rising private debt and the evisceration of the UK’s public services. In fact, Sunak’s budget is more about protecting the interests of the Conservative party and its capitalist backers than it is about improving lives.
Given the shifting nature of the Tory electoral coalition, this budget was always likely to contain some increases in public spending. But these increases have been ruthlessly targeted towards supporting the Conservative’s electoral base: older homeowners. Sunak has prioritised investment in health, crime and transport – areas of the public realm that older homeowners are more likely to interact with than the education, welfare or justice systems. The lack of action on both housing and the climate can also be explained with reference to the Conservative base – older voters are less concerned about climate breakdown and falling house prices would reduce their wealth.
With the UK economy on the brink of recession, many of the measures in the budget are designed to protect businesses, banks and investors from the coming downturn. Infrastructure investment will provide a shot in the arm to the private corporations likely to undertake most of the construction work, as well as a boost for the economy as a whole. Financial markets, which have been thrown into a panic worse than any since the 18th century, are hanging on tenterhooks waiting for governments to announce further stimulus, liquidity for the financial system and corporate debt relief.
In this sense, this fairly generous budget results less from the Conservatives suddenly seeing the light on public investment and more from the imperatives associated with supporting their new electoral coalition and steering the economy through a recession that could be as severe as that induced by the financial crisis of 2008. As long as the virus is spreading, markets are falling and the economy is contracting, state capitalism will become the new normal.
The opportunity this presents to socialists is huge: suddenly, strong public services, a generous welfare state and greater public investment have all become common sense. But there are risks too. The far right will use this crisis – a crisis of globalisation – to make the case for nationalism. It is up to socialists to show that we are all in this together, and that the only things that will protect us are compassion, mutual aid and solidarity.
Grace Blakeley is an economics commentator and author of Stolen: How to save the world from financialisation.