UK Autumn Statement is appalling and ties the hands of Labour – the voters face a Hobson’s choice

Last Wednesday (November 22, 2023), the Tory government in Britain released their fiscal update known as the – Autumn Statement 2023 – which basically sets the course of fiscal policy in the UK for the period ahead. The Tories continue their appalling record. But they have also locked Labor into an austerity mindset. Meanwhile, neither party resonates with the sentiments expressed by the people if the latest Ipsos survey is representative of that sentiment. The British people face a Hobson’s choice!

Background

Some background is provided by the recent – Ipsos Political Monitor – November 2023 – which canvassed voting intentions and shows that the Tory vote is at 25 per cent in November 2023, while the Labour Party is at 46 per cent.

Interestingly, since Sunak became PM the Labour vote, initially rose but has been falling since (and is about static).

The Tory vote is static and they are in an unwinnable position.

The smaller parties (Greens and Reform UK) have gained considerably in the recent months, seemingly at the expense of Labour.

Sunak is very unpopular (66 per cent dissatisfied and rising), but Starmer is also unpopular with on 29 per cent satisfied with his leadership and 50 per cent dissatisfied.

The dissatisfication with the government as a whole stands at 80 per cent and declining.

When Starmer took the reins off Corbyn, 20 per cent of votes were dissatisfied.

Now it is 50 per cent.

Among Labour voters, that shift was 10 per cent in June 2020 to 34 per cent in November 2023.

In terms of the satisfaction with Opposition leaders since 1980, Starmer is no more popular than Corbyn at a similar period into his leadership.

The most interesting part of the survey responses for me was the attitudes to Public Services.

When asked the question: “Would you support or oppose each of the following options for public spending, taxes and borrowing?”:

1. 41 per cent opposed increased taxes to increase spending on public services (43 per cent supported).

2. 50 per cent opposed increased taxes to reduce public debt (27 per cent supported).

3. 66 opposed cutting spending to reduce taxes (18 per cent supported).

4. 64 per cent opposed cutting public debt (16 per cent supported).

While the frame these people were responding within was clearly mainstream (that is, the fiction that the government faces a financial constraint and has to tax and borrow in order to spend), the answers given within that frame were clearly anti-austerity and anti cutting public services.

Imagine what the results would have been had the respondents truly understood the fiscal capacity of the British government as the currency issuer.

The other interesting aspect was about the sentiments about the quality of public services between 2012 to 2023 – so effectively the Tory period after George Osborne changed fiscal course (a bit) as Britain wallowed in recession.

1. In November 2012, 40 per cent of respondents said that the quality of public services in Britain had deteriorated (15 per cent said they were better).

2. By November 2023, 78 per cent worse, only 5 better. This is an amazing degree of homogeneity given the dominant two-party type system in Britain.

3. The shift in opinion accelerated around 2016.

In terms of specifics since March 2002:

1. Policing – 22 per cent worse now 42 per cent.

2. Educational quality – 22 per cent worse now 44 per cent.

3. NHS – 36 per cent worse now 64 per cent.

4. Opportunities for youth – 34 per cent worse now 52 per cent.

5. Quality of environment – 38 per cent worse now 47 per cent.

6. Public transport – 39 per cent worse now 44 per cent.

When asked the question: “In the long term, this government’s policies will improve the state of Britain’s public services” – in June 2001 (under Labour) 31 per cent said disagree and by the end of their term in 2010 that figure was 46 per cent (about).

By November 2023, 75 per cent disagree.

The years of neoliberal governments of both sides have thus seen a dramatic negative shift in the public’s faith that government policy will provide better public services.

50 per cent disagreed that Labour would improve the economy (on 37 per cent agreed), while 39 per cent disagreed that Labour would improve public services (50 per cent agreed).

While 23 per cent said they would be better off under a Labour government in September 2013, only 29 per cent now thought that.

22 per cent said they would be better off under a Conservative government in September 2013 and only 16 per cent now thought that.

While this data suggests that Labour will win next year’s general election rather easily, it also indicates a negativity towards Labour.

They are only going to win because people have had enough of the Tories rather than because the voters are excited about the prospects that a Labour government will bring.

Unfortunately, the embrace of neoliberalism by the Labour/Social Democratic parties around the world over the last three decades has provided progressive voters with a – Hobson’s choice – “the necessity of accepting one of two or more equally objectionable alternatives.”

And the consequence of this failure by progressive parties to provide a realistic alternative is why people like Geert Wilders can gain the most seats in last weekend’s Dutch election.

He gave voice to the people that have been devastated by neoliberalism and added his nasty cocktail of anti-immigration and anti-climate action to the mix.

It is also the reason why we are now seeing articles such as today’s report in the New Daily (November 26, 2023) – Labor in vain: Gen Z anger apparent as PM risks alienating these future voters – which recounts the growing dissatisfaction with the Australian Labor government among younger voters.

They feel let down by the multiple failures of Labor since they were elected in May 2022.

The article notes that:

For nine years Labor was able to sell itself to young voters as the alternative to the Coalition’s inaction on the climate, the cost of living, housing affordability and generational inequality. But 18 months into a Labor government, it feels as if little has changed.

The pursuit of fiscal surpluses, the failure to properly regulate key privatised public service providers (power, transport etc), the continued approval of new coal mines and gas fields, and the continued intention to provide massive tax cuts to the highest income earners, is evidenced as typifying these failures.

And more recently, the tide of fury against the government for its support for the Israeli slaughter of innocent Palestinian, has accelerated the dissatisfaction.

Which brings us to the British Autumn Statement

It is clear that the Tories are now completely out of step with the vast majority of British people.

Once again the Tories are blind to what is going on around them and pushing ahead to give tax cuts, which will favour the higher income earners – presumably to those who are most likely to remain in their dwindling support base.

And, they are running the tired narrative that to pay for these allegedly necessary tax cuts, further harsh spending cuts are required to public services.

Think about those Ipsos results summarised above.

The interesting aspect of this statement is that the Chancellor has set the trap for Starmer and Reeves.

I listened to the latest Political Currency podcast episode that was released after the Autumn Statement (November 24, 2023) – Losing control of migration?.

This is a conversation that former Labour shadow Chancellor (Ed Balls) and former Tory Chancellor (George Osborne) where they pretend they know what they are talking about.

They don’t but they do recognise political reality more than the current crop of politicians on either side.

George Osborne said:

The government sets the baseline … if the Opposition wants to challenge that … they have to show the world how they are going to pay for it … People will start to look through it and say, my God, they’re actually going to cut the arts budget, the environment budget, the justice budget, which is the prisons … But for Labour, they’ve basically got to go along with these numbers, haven’t they?

Ed Balls replied:

That is the reality. Because if they say we are going to spend more. Well, then the question is which tax is going to rise to pay for that.

These two are considered highly erudite, expert commentators within the media

And the likes of Starmer and Reeves operate on the same logic and are petrified of stepping outside of it.

Which is why there has been only a small rise in sentiment among voters indicating they think Labour will do a better job.

Meanwhile the on-going austerity has impacted the factors that determine long-term prosperity – education, public infrastructure.

There is such a large and growing infrastructure gap with many aspects of the current available infrastructure in various states of degeneration and serviceability.

When that collapses then it will be very hard to find a way back for either political party.

I haven’t read all the documents accompanying the Autumn Statement yet, but there are some interesting claims against fact.

The Chancellor claimed that they are meeting one of their fiscal rules – “that public sector borrowing must be below 3% of GDP – not just by the final year, but in almost every year of the forecast” – in part, because of “higher tax receipts from a stronger economy”.

Yet, when one does the calculations, the higher tax receipts (nominal terms) are mostly due to the high inflation that Britain has endured in the past few years, rather than any real growth.

And the latest data from the Office of National Statistics (released November 10, 2023) – GDP first quarterly estimate, UK: July to September 2023 – shows that:

UK gross domestic product (GDP) is estimated to have shown no growth in Quarter 3 (July to Sept) 2023, following an increase of 0.2% in the previous quarter.

Another trick in the Autumn Statement is that the Chancellor made big of the cuts to the National Insurance premium for workers, but failed to acknowledge that the tax creep has pushed workers in to higher taxing brackets.

A rough calculation suggests that the higher tax burdens as the threshold is frozen in nominal terms will more than offset the gains workers will make from the low premia.

So while the Chancellor attempted to mollify the rabid tax cutters in his ranks, the reality is that the tax creep will deliver higher taxes.

I saw an estimate that the tax burden will be the highest since the end of World War 2.

The Chancellor said they were reducing the debt to GDP ratio down towards 90 per cent, whereas ONS data (released July 21, 2023) – Public sector finances, UK: June 2023 – shows that:

Public sector net borrowing excluding public sector banks (PSNB ex) in June 2023 was £18.5 billion, £0.4 billion less than in June 2022, and the third-highest June borrowing since monthly records began in 1993; higher tax receipts and a substantial fall in debt interest payable compared with June 2022, were largely offset by increased benefit payments and other costs.

The ONS also estimated public sector net debt to be 100.8 percent in June 2023, “continuing at levels last seen in the early 1950s”.

The trick was that the figures quoted by the Chancellor were ‘excluding the Bank of England’.

But of course, all the claims about debt ratios etc are largely irrelevant anyway.

And while the tax breaks announced in the Autumn Statement were made possible by the illusory nominal gains in revenue arising from inflation, they also will be accompanied by a nasty sting.

Given his flawed logic, he also announced rather sharp cuts in departmental spending on public services.

Politically, some of the spending areas are being deemed ‘protected’ – Defence, NHS etc.

Which means that the other ‘unprotected’ areas the cuts will be severe.

The Resolution Foundation estimated that:

the tax cuts and benefit rises were underpinned by an “implausible” squeeze on public services over the next five years that amounted to a 15% budget reduction in real terms for unprotected departments such as justice and transport.

Scrutiny of the figures shows that (Source):

Living standards, measured by real household disposable income (RHDI) per person, are forecast to be 3.5% lower in 2024/25 than their pre-pandemic level … the OBR says it still “represents the largest reduction in real living standards since ONS records began in the 1950s”.

This translates into an outcome where the “average household would be £1,900 poorer by January 2025 than they were in December 2019” (Source).

In the face of sluggish wages growth, the government, over the course of this electoral term, will have reduced real household income on average.

Moreover, Public sector net investment as a per cent of GDP is forecast to fall in the coming years – even if Labor is elected – which reflects the myopic mentality of neoliberalism.

In the decade of 2010 that ratio was 2.1 per cent, whereas the government forecasts it will drop to 1.8 per cent by 2027-28.

It is politically easy to starve public infrastructure because the deterioration takes time (spanning multiple political cycles) before it becomes an electoral liability.

In the meantime, exploiting the public’s ignorance, politicians tout ‘favourable’ fiscal trends – and the public swallow it.

Eventually they work out the public transport is overcrowded and unreliable, and the rest of it.

But then the damage is done.

Conclusion

The Tories continue their appalling record.

But they have also locked Labor into an austerity mindset.

Meanwhile, neither party resonates with the sentiments expressed by the people if the latest Ipsos survey is representative of that sentiment.

A Hobson’s Choice!

That is enough for today!

(c) Copyright 2023 William Mitchell. All Rights Reserved.