The National Insurance Hike is Class Warfare. Why Won’t Labour Say So?

Starmer doesn't need to declare himself literally a communist – just to make clear whose side he's on.

by James Meadway

8 September 2021

Labour Party leader Keir Starmer laughs with deputy party leader Angela Rayner whilst on the election campaign trail in Birmingham.
Stefan Rousseau/Reuters

The ongoing row over social care will be the first of many. As we exit the first phase of the pandemic, the question of how we fairly distribute society’s resources is coming back with a vengeance – and with it, real class politics. Workers in key industries have started to realise their bargaining power, winning the biggest pay rises for decades and threatening strikes. Though disguised by some last-minute tweaks – like asking working OAPs to contribute – the Tories’ NICs hike makes it clear whose side they’re on.

Yesterday, the Conservatives broke their 2019 manifesto promise not to raise national insurance contributions (NICs), while proposing a cap of £86,000 on the amount that individuals can be expected to make towards their social care from their own wealth and assets. In practice, this will mean that those with the most assets will be the most protected from potential social care costs, those with little wealth, the least protected. By one estimate, this tax hike, along with the proposed Universal Credit cut, will deprive some 2.5 million of the poorest families of £1,290 a year. Income from renting property, meanwhile, remains untouched. It’s a deeply regressive outcome.

Moreover, it’s an ineffective one. Of the £36bn expected to be raised by the tax rise over its first three years, the vast majority will go to the NHS, only £5.4bn to social care. That’s still seriously short of the £12bn needed to resolve immediate funding issues, and laughably distant from the £28bn needed to approach levels of expenditure in Norway, a gold standard of care provision.

Nor is the plan going to put in place the thorough overhaul the care system needs alongside more funding: no proper integration with health services, no squeezing out of the private sector vultures now flocking to the system, certainly no provision for an NHS-style National Care Service, free at the point of need. Social care experts are, understandably, dismayed.

The Tories had left an open goal. But whilst gesturing towards it, the Labour party – despite convincing arguments from Manchester mayor Andy Burnham, among others – has not presented the developed alternative to the Tory cuts that would have clinched the argument. Keir Starmer was right to say that the move protects landlords at the expense of most workers. Labour has correctly also said they want those with the richest to pay more. But without offering some clear alternatives – raising capital gains tax, paid overwhelmingly by the richest, to the same rate as income tax, for example – it has been too easy for the Tories to throw the attack back (as Boris Johnson did at Prime Ministers’ Questions today) and simply ask what Labour would do instead. The party has been left flapping.

This risks being a huge missed opportunity.

For years now, the idea that the Conservatives are the workers’ party – a claim not remotely borne out by reality – has become a settled political fact, one with real consequences for a left trying to rebuild in working-class communities. In their proposed NI hike, the Tories have created a chance for Labour to dispel this myth with a simple message: the Tories take money from poor working people to protect wealthy property owners; Labour will do the opposite.

To make this case, the left must drop a certain Fabian squeamishness around arguing for low taxes for workers. After a decade in which most people have seen their pay either stagnate or even fall relative to price rises, of course we should not be arguing to increase their tax bill. Tax the rich – the slender section of the population who have done well since 2010 and shockingly well during the pandemic – instead.

Let’s also drop the related silliness about taxes “not being needed” that is sometimes heard from people influenced by Modern Monetary Theory. Taxes are needed, for three reasons. First, because right now we have to tie a Tory government’s hands to the provision of public services; don’t give them any excuses to use the deficit as an opportunity to make cuts – tie them to a fair tax rise. Second, we want to ensure that social care (like other public services) is funded fairly; taxes on the wealthiest do this. Third, the sheer scale of the social care crisis will require us to shift resources around the economy, not haphazardly via the government borrowing or printing money (in which real resources get redistributed through the mechanisms of the wider financial system), but purposefully; taxes do this.

After a decade of wage stagnation in which the richest still got richer, the argument for taxation is clear, simple and popular. Let’s make it.

What Labour needs more of, in other words, are some good old-fashioned class politics. More talk of “the knife-and-fork question, the bread-and-cheese question”, as the Chartist leader Joseph Rayner Stephens called them. High wages and quality public services, taxing the wealthy not the workers to pay for them.

These aren’t arguments that can afford to be saved for the next election. With glimmers of an industrial revival – union membership rising, strikes mobilising, talk of labour shortages and big pay rises across the economy – now is the time for Labour to side with those who work against those who exploit them. Starmer needn’t go full Baron Noir, rocking up to the Mother of Parliaments in a boiler suit to declare his solidarity with the sons and daughters of toil. What he needs is to spend less time waving Union Jacks and more time waving pay packets. He doesn’t need to be literally a communist – though some ouvriériste flair wouldn’t go amiss.

James Meadway is an economist and Novara Media columnist.

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