Cooking the Books: No such thing as a workers’ budget (2024)

The Cooking the Books column from the December 2024 issue of the Socialist Standard

‘What would be a workers’ Budget?’ the Trotskyist Workers’ Liberty asked on Budget Day. With graffiti on a wall saying ‘Tax the Rich’ as an illustration, the article expounded:

‘A workers’ budget would tax the rich heavily’. ‘A workers’ budget would rebuild public services and restore real wages and benefits’. ‘Increase corporation tax’. ‘No easing of the rules can square the circle and win the resources needed to rebuild public services and real wages without taking from the millionaires’.

Taxing the rich to increase wages and benefits and provide better public services is fantasy politics. It’s not going to happen and, if it was tried, would precipitate a massive economic crisis.

The article cites a calculation that ‘a wealth tax, increased capital gains tax, and a few other items could raise £50 billion a year’, but that’s only 6.25 percent of the £800 billion currently spent on health, education, and pensions and other benefits. So the bulk of the money ‘to rebuild public services and real wages’ would have to come from taxing profits. The article mentions doubling corporation tax to over 50 percent of profits (but even that wouldn’t raise enough). This would reduce both the incentive and the amount for private corporations to re-invest in maintaining and expanding production. Hence, the reduction in production and a massive increase in unemployment.

The slogan ‘Tax the Rich’ assumes the continued existence of the rich, the continued division of society into the rich and the rest, into a class which owns the means of production and lives off an unearned property income (profit, interest or rent) and a class which, excluded from such ownership, depends on working for an employer for a wage or salary.

The assumption is that the rich should continue to exploit the workers but that part (most) of their income should be taxed away to pay for higher wages and better public services for the rest. It is the fantasy of capitalism being made to serve the interests of the non-capitalist majority.

The absurdity, let alone the infeasibility, of such a social arrangement — the capitalist as capitalist for the benefit of the working class — is obvious.

Some naive leftwingers might believe in this but we doubt if the leaders of Trotskyist groups do. For them, proposals for a ‘workers’ budget’ will be an application of the cynical tactic of proposing something to attract worker support but which they know won’t work, in the expectation that, when it doesn’t, the disillusioned workers who fell for it will turn to them for leadership in an assault on the capitalist state.

Real socialists are honest. We say that under capitalism there can be no such thing as a ‘workers’ budget’ as this implies that capitalism could be made to operate in the interest of the majority class of wage and salary workers and their dependants. But experience has repeatedly shown that it can’t. The only budget that there can be is a capitalists’ budget.

What the Chancellor of the Exchequer, Rachel Reeves, set out on 30 October was what the British capitalist state plans to spend in the next tax year (which in the UK, for some odd historical reason, starts in April) and how it intends to pay for it.

The various measures she announced were based on the supposition that the government can bring about growth. But it can’t. The most it can do is to create conditions that could encourage business investment. This in fact is what all budgets have to try to do and why they must all be capitalists’ budgets. There can be no such thing as a workers’ budget.

Blogger's Note:

A leading member of the Alliance for Workers' Liberty, Martin Thomas, replied to this column on their website.

Editorial: Taxing Capital Gains (1962)

Editorial from the May 1962 issue of the Socialist Standard

Lots of speeches have been made and articles written about the "unfairness" of stock exchange and property speculators having been able to buy shares or land or buildings, hold them for a while, and sell at a profit without paying tax on it. The people who see this as “unfair” do not think it “unfair” that the wealth the workers produce should belong to someone else.

Now the short-term speculators will have to pay tax, and we are being assured that this is a small step towards making the rich less rich and the poor less poor. Of course, it will have no such effect. America, which has for years had taxation of capital gains, has seen no lessening of the concentration of wealth. On the contrary, the inequality is as great as, or even greater than, it has ever been, and in nine years the owners of five million dollars or more have multiplied from 2,113 to about 10,000.

Wealth-ownership in Britain sheds even more light on the success of the propertied class in holding on to their own, for here, in the past 100 years, there have been many promises and campaigns to reduce inequality with no result whatever.

One of the advocates of a wealth tax, Mr. Samuel Brittan, writing in the Observer (April 8th, 1962). rejected in advance the idea of a mere capital gains tax. as one that “deserves to be laughed out of court," and stated his case for something much more drastic. He based it on what he described as the “fantastically unequal distribution of wealth” in this country, and urged that there should be a regular annual tax on accumulated wealth itself, not just on the increase of it. He pointed out how easy it would be to collect such a tax because it need be levied only on the 800,000 people who own £20.000 or more and possess between them nearly half of the total personal wealth. (He also thought that the total of personal wealth and the inequality of ownership are probably even greater than the official figures show).

Each time someone like Mr. Brittan comes along to advocate a new scheme for reducing inequality he has to explain why earlier schemes failed. Mr. Brittan recalls the death duties, which in their day were supposed to do the trick, and tells us. what is indeed common knowledge, that death duties “have become a farce." He quotes one example, the Ellerman fortune, but does not tell its interesting history.

In 1933 death duties reduced the fortune from £40 million to £18 million. By 1937 it had increased to the original £40 million and it is now reported to be about £100 million!

Other nostrums for dealing with inequality have included taxation of land values (in the Liberal Programme in 1892), supertax and surtax and taxation of company profits. There was, too, the movement for a “capital levy” after the first world war, favoured by Liberals. Tories, and the Labour Party, but dropped on grounds of administrative difficulties and probable disturbing financial effects.

If it had been imposed it would merely have been a transfer of wealth among wealthy persons, not a reduction of the wealth and income of the propertied class. And nationalisation in some muddled way was supposed by the Labour Party to have the effect of lessening inequality.

After all those years and all these “cures” capitalism exhibits just the same “two nations" that the Tory Disraeli described over a century ago.

One man who saw capitalism as it really is was the banker R. H. Brand (later Lord Brand) who in 1923, in a booklet "Why I am not a Socialist" wrote: “There has always been and there will always be inequality of wealth . . .  nothing like equality can be attained without the abolition of the whole present system of wealth, ownership and production.”

As a wealthy man who prospered under capitalism his attitude was understandable. By the same token the working class should give up following futile schemes for achieving the impossible dream of an equalitarian capitalism. Their interest lies in establishing Socialism,