A British socialist government and five big things

A British socialist government and five big things

A British socialist government and five big things

I’ve been asked to consider what would happen if Britain woke up with a socialist government on the morning of 8 May after the general election; what would be the economic situation facing it?; what steps would the capitalists take?; what steps would this socialist government take? What reforms would the new government immediately take and what fundamental changes are necessary? Can we avoid the ‘mistakes’ of Syriza in Greece? How should the government handle foreign affairs and the issue of Britain’s relations with Europe and beyond?

Phew! In effect, I have been asked to write up a complete election manifesto and programme for a socialist government and explain how it can be implemented in the face of opposition from the vested interests of capital both at home and abroad. Well, I can tell you now that the contribution here won’t do that. It’s too big a task to cover everything or even develop a clear strategy for what is a hypothetical situation that is not going to arise on 8 May or any time in the near future. Anyway, such a task requires collaboration among the labour movement as a whole to work out and, of course, implement.

So what I am going to cover is a few basic things that this hypothetical socialist government should include on its platform and some analysis of how feasible these items are to implement, at least in economic terms, in the current situation for Britain.

Let’s put it this way. A socialist government should implement immediately action on five big things. The government needs to improve the lot of the majority of people in 1) providing jobs at a decent level of income; 2) providing decent homes for all at a reasonable cost; 3) ensuring that everybody gets a good education and can develop skills through training that will enable them to contribute productively to society and enrich their own lives; 4) constructing an integrated and broadly free transport system that allows people to get around the country for work, for leisure and above all to save time and 5) delivering decent incomes and support for those who should retire from full-time work, or even part-time work or who are unable to work because of illness, disability or because they need to care for others (and, of course, to ensure that everybody can get the best possible healthcare free at the point of delivery).

Those are my five big things. What does this mean in what we like to call ‘concrete terms’ in Britain in 2015?

Well, let’s take jobs. Although unemployment has fallen in the last few years in the UK, according to the official stats, it still remains higher than it did before the Great Recession, the biggest collapse in the capitalist mode of production since the Great Depression of the 1930s.

Moreover, much of the new employment ‘created’ under the outgoing coalition government of the Conservatives and Liberal Democrats are not proper jobs, but are low-paid (i.e. well below even the median average annual wage of £23,000 a year); do not have permanent status (you can be sacked without notice); are often only part-time and casual to the point of being on ‘zero-hours’ contracts; and increasingly are not employment at all but ‘self-employment’ (hundreds of thousands of new jobs are just people setting up websites or businesses on their own and touting for work that delivers incomes well below proper jobs).

So a socialist government must start at the bottom. It must aim at creating jobs for all who need them at a living wage. By a living wage, a £15 an hour minimum seems reasonable, or about £27,000 a year. That’s hardly a princely sum but it would mean that anybody working full-time (let’s say 35 hours a week with four weeks holiday a year) would earn more than the average annual wage now. This would end the situation where there are millions of households officially in poverty (i.e. at lower than 60% of average earnings).[1] The latest stats show that the majority of households defined as in poverty are working households, often with children. British capitalism allows and encourages the phenomenon of the ‘working poor’ contrary to the myth of the feckless and inadequate. It has been found by the Poverty and Social Exclusion project at Bristol University in 2014,[2] that the proportion of households lacking three items or activities deemed necessary for life in the UK at that time (as defined by a survey of the wider population) has increased from 14% in 1983 to 33% in 2012.

Because wages for many are so low, many millions of households are forced to take state benefits, housing benefits, child benefits, tax credit top-ups to supplement income from work,etc. This burden on government spending would end at a stroke if every working household had a decent income. A study by the University of California at Berkeley shows that nearly three-quarters of US benefit seekers come from families with at least one employed member. Another study estimates the cost to the US government of in-work benefits at $153bn a year. It’s same story in Britain.

A socialist government should first restore full rights for trade union representation in workplaces so that people in work and those getting jobs can ensure that they receive a living wage at the very least and that they can control the grotesque salaries and incomes of those at the top.[3] And the government should launch state-run apprenticeship and vocational schemes, work-based, so that young people (and older) can improve their skills and adapt to new technology that much be introduced to raise productivity.[4]

The biggest failure (among many others) of British capitalism has been the contraction in the productivity of the labour force[5].

Hundreds of thousands of young people from depressed Europe and further have flooded into Britain to do many of poorest paid jobs in services. But these jobs are of low productivity. They do not contribute much extra revenue that can provide jobs, incomes and services for others. British companies prefer to employ more of this cheap labour than invest in new technology and open new operations that could really raise productivity. If a socialist government can launch proper training of ‘human capital’ with new skills to combine with net technology brought in by public investment replacing the failure of capitalist investment, then the extra production generated will pay for higher wages, more jobs and better conditions and services in a virtuous circle of growth and employment.

Part of the strategy to improve productivity and ‘human capital’ would be to provide a fully comprehensive and free education service for all. That means no selection and no exams to separate young people; school places by locality or need and no desperate competition for the ‘best schools’; free tertiary education up to graduation (and a living grant, no loans, for students). A socialist government would immediately end private fee-paying schools and so-called ‘free schools and academies (these kids would go to state schools); and of course, the ‘charitable status’ of these schools.

Revenues for all this can also be found by a redistribution of income and wealth in British society. It is often claimed that if you tax the very rich (the 1%) more it raises too little to redistribute across the remaining 99% that it makes little or no difference. Well, first a socialist government should end the simple moral injustice that some should be billionaires living in mansions and avoiding and evading tax because they are lucky or criminal enough to inherit wealth or accumulate by insider trading on the financial casino, while others working hard at clearing rubbish, running our buses, ensuring our electricity flows etc earn a pittance.

But anyway, apart from that, the redistribution of income and wealth from rich to not so rich that is done by government taxation and then investment would make a difference. A socialist government would stop all tax evasion and avoidance (non-doms; inheritance exemptions; offshore accounts, transfer pricing etc). It is estimated that these evasions and refusals to pay even the existing tax requirements by companies and individuals costs the British government more than £100bn a year – way more than the current deficit on the annual budget that apparently is the most important thing for a government elected on 7 May to sort out[6]. And then if the government introduced progressive income and wealth tax systems i.e. a gradual tax rate rise from the bottom to the top (something that was applied with success back in the immediate post-war period in the US and the UK), then more revenue would be collected on a fairer basis.

A socialist government should not just fix the inequities of the income tax system. Income tax is not the only tax. Taxes on spending like VAT are just as large revenue contributors and they are much more ‘regressive’ i.e. poorer people pay more as a share of their income when they shop because of this tax than richer people. Also, there are taxes on company profits and national insurance contributions (social security) which are supposedly to contribute to state pension schemes, but increasingly put into the overall pot for spending. These taxes are hugely regressive too. British companies, as the government boasts, pay the lowest corporation tax rates of the major capitalist economies and we now know that many pay hardly anything at all by using various avoidance loopholes provided by the government in cahoots with the top accounting firms (often the same people in a game of musical chairs for jobs). A socialist government must immediately raise corporation tax and ensure that all companies pay it without loopholes; it should cut VAT and NI contributions for employees and small companies.

Apart from more progressive income and wealth taxes and higher company taxes to pay for reductions in regressive taxes and for spending on government investment projects, training and wage increases, a socialist government can also find money for its priorities from cutting back on capitalist priorities. One of these is the huge subsidies and exemptions for capitalist companies that the current government provides at taxpayers’ expense. Kevin Farnsworth, a senior lecturer in social policy at the University of York, has totted up the subsidies and grants paid directly to businesses. They amount to over £14bn – that is, almost three times the £5bn paid out that year in income-based jobseeker’s allowance. Add to that the corporate tax benefits, the value of the cheap credit made available to banks and other business, the insurance schemes run by the government to protect exporters, the marketing for British business laid on by Vince Cable’s ministry, the public procurement from the private sector and Farnsworth calculates that direct ‘corporate welfare’ costs British taxpayers just shy of £85bn a year.[7]

Again successive governments have wasted billions and will do so in the future, unless it is stopped, in outsourcing services from local governments, the NHS and schools and universities, along with making the public sector borrow at exorbitant loan rates for projects through so-called private finance initiatives (PFIs), which have put hospitals, local authorities and universities in hock to hedge funds and private equity firms for the next 50 years, driving some to bankruptcy. The private finance initiative introduced by both the Conservatives and Labour, where schools, hospitals and prisons are built with private funds guaranteed by the government, is now estimated to have cost £25bn more than it would have done if the government had just issued its own bonds to fund these investments. Then there is the £1.2bn of public money lost every year because of rail privatisation. Ending and reversing these schemes could save up 1% of GDP a year.

Also, the British government still spends 2.5% of annual GDP on ‘defence’, to run an armed force used to intervene around the world as a junior back-up to American interventions and to fund a nuclear missile system. Indeed, the plan is to spend £100bn on a renewed Trident system over the next decade or so. All this could be dispensed with and the jobs that it ‘creates’ in shipyards and arms factories could be diverted to other projects.

A socialist government would end Britain’s involvement in imperialist wars, which apart from being wages against poor people around the world in the interests of global capital, costs the British people billions each year. For example, the British army’s operation in Helmand province, Afghanistan has cost £40bn, or £2000 per taxpaying British – and all for nothing as the Taliban reclaim the area now the troops have withdrawn.[8]

What other projects? Well, there is the next big thing: a home for all. We all know that decent housing at reasonable cost for everybody does not exist in Britain. Young people have to stay with their parents or live in crowded and expensive private rented accommodation, while landlords rake in huge rental income. Successive governments have sold off the state housing built by previous generations and have left new house building to capitalist construction firms who have signally failed to build anywhere near enough new homes and certainly none that can be afforded by most who need them. The rate of new-home construction is around 150,000 a year, the lowest since the 1920s. But annual demand for new residences is an estimated 250,000. The laws of supply and demand dictate rising prices.

A government-led house building programme stands out as a major priority of a socialist government. Funds diverted from arms spending and ‘corporate welfare’ could go to setting up a state construction company to build homes where they are needed and at rents that people on a ‘living wage’ can afford. Instead of subsidising private banks and mortgage lenders to loan money to people to buy property (and thus drive up prices even more), a socialist government could take over the major banks, removing their grotesquely overpaid executives and stopping their endless speculative investment and laundering of rich people’s ill-gotten gains. They it could direct state banks to fund housing construction and transport schemes for the majority.

Indeed, really the first task of a socialist government would be to nationalise the banking system. Britain’s big five banks have £6trn in deposits and funds, but they lend less 3% of that for investment in the productive sectors of the economy[9]. The rest goes in mortgage lending; corporate finance; overseas loans and speculative activity on the stock market, foreign exchanges and bond markets. Yet banks should be a public service that provides credit for small businesses and households and funds for government-led projects for the people. The banks triggered a global financial crash in the first place (something completely forgotten in the election campaign). A socialist government would ensure that such a financial crash would never happen again and banks would be integrated into a national plan for investment and growth.

A national plan for transport, energy and climate change is desperately needed. People need to travel by train, bus or plane at reasonable prices in safety and with punctuality; they need essential services in gas, electricity, water and telecoms. We must reduce pollution and control carbon emissions that are killing people by the day and threatening our very future. To get such national action would mean bringing back into public ownership the rail industry (which currently charges the highest prices in Europe with the slowest trains and now wastes billions on subsidising private franchise owners and employing tens of thousands of accountants and managers to work out internal market pricing); and returning bus services to local authority ownership and control.

A socialist government should renationalise British Airways (and take over Virgin); it should return Royal Mail (and put controls on prices) and British Telecom to public ownership and control (and stop the huge expenditure of money on BT Sport rather than fast speed broadband to every household and free in municipal areas).

The socialist government must restore essential utilities to public control. Britain faces an energy supply shortage forcing the nation to import electricity and gas from abroad, while our private energy and water companies (mostly owned by foreign state companies!) refuse to invest enough in future capacity while charging the highest rates in Europe. A socialist government would nationalise British Aerospace and other arms companies and convert that capacity into peaceful production of transport equipment, alternative energy products and new technology.

The fifth big thing is pensions. Nobody should have to work until they drop. But increasingly, that is what those of us who reached a ripened age are being asked to do. We can’t afford pensions, we are told because everybody is getting older, living longer and there are not enough young people in work to pay for our pensions in taxes. So instead, we must stay at work, pay higher contribution and get less pension payouts if and when we do stop. Of course, none of this applies to the top earners who rake in huge pension pots and get excessive tax relief on them too.

It is nonsense that a modern economy like Britain cannot provide pensions for all who retire at a reasonable cost[10]. The key to funding pensions is to raise the productivity of an economy. Studies show that just a 1% rise in average productivity growth over a generation would ensure good state pensions with retirement sufficiently early to allow people time to enjoy life without toil and not just for a few years (the future higher retirement age is now higher than average life expectancy in Glasgow!).

Healthcare is a key part of any decent existence. But that has a wider meaning than just doctors and hospitals and medicines. Prevention is better than cure. A socialist government must set the benchmark for preventative healthcare. Smoking has been banned from public places and advertising has been curtailed despite the interests of the tobacco monopolies. But little has been done to end obesity due to massive intakes of sugar, salt and processed and fast food that food companies and supermarkets stick us with. A socialist government would launch measures to end this major threat to our health. Apart better incomes making it possible for families to buy healthier food, the supermarket monopolies and major food manufacturers should be taken over and brought into a cooperatively organised food industry that produces food for nutrition not profit. In this respect, too, the government should end the subsidies to large agro companies and aristocratic landlords who own and control the bulk of farmland, forests and city centre property and produce nothing. EU and other government subsidies should go to small farmers to produce good agricultural produce and reduce the large carbon footprint impressed by food imports. And the government should restore state marketing boards and encourage cooperative farming to establish fair prices for farmers and consumers alike.

And yes, the government would need to increase funding for the NHS immediately, end the outsourcing and the wasteful and corrupting internal market imposed on a basic public need by successive governments.[11]

Now the cry goes up: how can all this ‘largesse’ be paid for? Well, I have already shown that redirecting the priorities in government spending and tax collection would enable much of the nation’s resources and revenues to be directed towards public need (particularly the five basic things). Let’s measure it in percentage of UK GDP. The health service needs at about 1-2% points more of GDP (after inflation) annually than at present to provide a good service; education needs another 1% point more; transport may need another 1% point more; and pensions similar. A housing programme run by the state would probably cost about 2-3% points of GDP year. Now that’s about 7% of GDP a year more. However, the government can raise extra revenues from cutting defence (2% points); more taxes on rich and companies and reducing subsidies to them (2% points); ending PFI payments (1% point) and there’s more.

So just reorganising the public sector and controlling sections of the capitalist sector would fund the bulk of what is immediately needed. But longer term, the key to meeting people’s needs is to raise productivity. If the British economy grew at 4% a year instead of 2% a year in real terms (as it will only manage under an economy dominated by a capitalist sector), then that would be sufficient to transform lives for the bulk of the population. A 2% point increase in real GDP growth over a generation would make an economy 60% richer than it otherwise would be. And this is a modest target for an economy that combines the efforts of people and technology in a planned and democratic way.

In the hypothetical scenario, we started with, we assumed a socialist government was in control on 8 May. That implies that the bulk of the British people had backed a party or movement that advocated polices along the lines that I have outlined. That sounds crazy – but it is not really. What polling evidence we have confirms that a majority would back such policies if they were advocated clearly and positively. Indeed, despite media campaigns, despite the lies and chicanery of the parties of Capital, despite the weak-willed failure of the past and current leaders of the British labour movement, the majority of the British people opposed Thatcherism and ‘neoliberalism’. In every poll, when asked, the majority of Britons opposed the selling-off of council houses and every single measure of privatisation in the last 30 years or more. Indeed, in a recent poll, they made it abundantly clear that they wanted key sectors of the British economy returned to public ownership and control and to keep remaining public services ‘public’.

In a recent YouGov poll for the Sunday Times, only 27% of those asked reckoned that cuts in public spending was a priority in economic policy; while only 25% thought reducing the deficit through higher taxes was the priority. A whopping 48% thought that the next government should not prioritise balancing the books but spend more on better public services and on growth.

Another YouGov survey last year found huge opposition to private sector involvement in the public services, with an overwhelming 12 to 1 against the NHS being run by the private sector; 67% in favour of Royal Mail being kept in the public sector; 66% backing nationalisation of  railway companies; and 68% in favour of nationalising the energy companies[12]. Three-fifths of the public wants the government to be “tougher on big business”. [13]

The opposition to socialist measures i.e transforming the UK economy from one dominated by large capitalist companies and banks to one where the ‘commanding heights’ are publicly owned and controlled, so that common need rules over private profit, will come not from working people but from the owners of capital, both domestic and foreign.

A socialist government that came into office on 8 May would already face a massive attack on its policies from the media. The owners of the major companies and the rich would be withdrawing their capital from the country. The socialist government would have to introduce capital controls to stop capital flight, open up the books of the major companies for inspection and encourage workers in these companies to block any attempt by top executives to spirit money away. The government would face an economic blockade in credit and funding by other pro-capitalist governments in Europe and North America. The value of British government bonds would plummet, driving up servicing costs. The government would need a public owned and labour movement controlled banking system to support government borrowing for investment, while the government refused to pay high interest on its borrowing to hedge funds and foreign speculators. The pound sterling would also need such defences.

Ultimately, the only way a British socialist government could succeed in implementing its programme and achieving the desired outcomes on the ‘five big things’ would be if there is international support. Indeed, other socialist governments in Europe and beyond would have to appear over time. Britain ‘could go it alone’ for quite some time, just as capitalist Britain did against Hitler’s Germany between 1940-42, because it had the backing of the people to defend the country against invasion. But it could not do so forever, just as if Britain had remained on its own in Europe; it may well have lost the war.

That’s a lesson for the Syriza government in Greece. This government is not planning to implement a programme to end capitalist domination of the Greek economy. And even if it did implement a takeover of Greek banks and industry, Greek ‘socialism’ would be surrounded by European capital. Leaving the Eurozone or the EU would not change that equation. Ultimately, Greek socialism would only succeed within European socialism at the very least.

 

[1] In 2014, a report by Institute for Fiscal Studies said that 23.2% of Britons were now in relative poverty, the highest since 2001. http://www.dailyrecord.co.uk/news/politics/one-four-britons-now-living-3861508; ;data published in 2014 by New Policy Institute and Trust for London found in the three years to 2012/13, 2.2 million people were in poverty in London after housing costs. This figure represents 28% of London’s population, 8 percentage points higher than the rest of England.

[2] http://www.poverty.ac.uk/pse-research/going-backwards-1983-2012

[3] I am reminded of the recent extraordinary case of Dan Price, CEO of Seattle-based payment processing company, Gravity Payments, who announced that he was taking a 90% pay cut to raise the minimum wage of his employees to $70,000 a year, or four times the US national minimum wage of $17,000 a year (£11,000). For Price, the decision to slash his own pay and increase that of his employees was heavily influenced by a study by Nobel Prize-winning psychologist Daniel Kahneman and Scottish economist Angus Deaton. Their analysis of polling data on more than 450,000 Americans showed that peoples’ everyday happiness continued to improve as incomes rose to around $75,000. Beyond that threshold further income increases had little or no effect on happiness.

[4] The decline of apprenticeship training in Britain Industrial Relations Journal 02/1995; 26(1):32 – 44. DOI: 10.1111/j.1468-2338.1995.tb00721.x

[5] http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q201.pdf

[6] http://www.taxresearch.org.uk/Documents/PCSTaxGap2014.pdf

[7] https://www.york.ac.uk/spsw/staff/kevin-farnsworth/#tab-3

[8] Frank Ledwidge (Investment in Blood: The True Cost of Britain’s Afghan War)

[9] Fire Brigades Union, Time to take over the banks, https://thenextrecession.files.wordpress.com/2012/11/s-time-to-take-over-the-bankslr.pdf

[10] https://thenextrecession.wordpress.com/2011/12/03/the-pensions-myth-part-one/ and https://thenextrecession.wordpress.com/2011/12/04/the-pensions-myth-part-two/

[11] http://classonline.org.uk/docs/election_2015-NHS.pdf

[12] https://thenextrecession.wordpress.com/2013/11/05/oh-dear-what-are-the-british-people-thinking-of/

[13] http://www.populus.co.uk/wp-content/uploads/2014/05/FT-business-risk-poll-23-27-April-2014.pdf

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