Why the Budget does not Matter (1936)

Editorial from the June 1936 issue of the Socialist Standard

If the Cabinet is the instrument of the ruling class, what of the Budget, for which the Cabinet, through the Chancellor of the Exchequer, is responsible? Those who do not know the secret will tell you that the Budget is of vital concern to every man and woman in the country. That is the message delivered to you from the platforms of Conservatives and Liberals, Communists and Labourites. Yet again it is not true. The Budget is and must be, under capitalism, a capitalist question. The Cabinet’s function is to protect the property of their masters. The Budget is the method by which the necessary armed and civil forces are financed. The merit of the Budget system in this country is, from the capitalist standpoint, that it is closely surrounded by constitutional checks and safeguards, so that there is now no longer any danger of the Monarchy, the House of Lords, the Army, or any section of the capitalist class itself, usurping the powers exercised for the ruling class as a whole.

In modern times the Budget expenditure has included a growing amount of money which is not devoted to maintaining the armed and civil forces, but to what are called social services, the old-age pensions, unemployment pay, and so on. It is here that one source of confusion about the Budget easily arises. Another source of confusion lies in the fact that much of the money raised for the Budget appears to be a burden on the workers. Hence, we have the Labour Party, the Liberals, and Tories warning you that you have an interest in the nature and amount of taxation, and in the purposes to which Government expenditure is devoted. In an immediate sense there is a grain of truth in this statement. If (which is by no means necessarily the case) the removal of a tax on some article leads to a reduction of price, and if wages remain unchanged, then the workers are at the moment that much in pocket. If, therefore, wages were something fixed and constant, we could say, as the Labour Party does, that lower prices, the removal of taxes on foodstuffs, rents restricted by law, and greater Government expenditure on social reforms are the way to transfer wealth from the rich to the poor, and thus raise the standard of living of the latter. Yet you know yourselves that all the social reforms, the death duties on big fortunes, the surtax and other levies on the rich have not made any noticeable alteration in your position in the past 50 years. The Labour Party is mystified at this failure of events to follow the course it expected them to follow.

Yet a little thought would have shown the Labour Party that its theory was wrong, and that wages are not fixed and constant. Wages follow prices more or less closely and quickly. Thus, in 1921-22, when the cost of living fell by about one-third, so did wages. Wages have been rising lately after a rise of prices. The workers do not benefit, nor have they benefited in the main, by the Government’s expenditure on social services, which appear to relieve the workers of certain expenses. In the first place, it must be remembered that the workers suffered heavy loss since the war owing to the bigger volume of unemployment. The employers' and the Government’s contributions towards unemployment pay have only partly covered this loss. We also see that, to a great extent, the grant of health-insurance, pensions at 65, war pensions, etc., has merely resulted in corresponding amounts being knocked off the standard rates of pay of the individuals concerned.

So that, in effect, the bigger Government expenditure on these things is, in the main, merely a way of restoring to the workers a part of what was lost to them through the aggravated unemployment since the war.

It is true that the workers' standard of living is itself not unalterably fixed. It is possible, in certain favourable circumstances, for the workers to win for themselves, through organised struggle, a higher standard of living. On the other hand it is possible for the standard to be beaten down to lower levels as, for example, appears to have occurred in the U.S.A. in the past 10 years or so. It must, however, be observed that any such raising or lowering represents a certain change in the relative strengths of the capitalists and workers, and is, therefore, not to be confused with the Labour Party notion that mere lower prices or lower taxes on foodstuffs, or the expenditure of Government money on social reforms, represent a corresponding gain to the workers. Unless the bargaining position of the workers has been improved for other reasons, these surface changes are followed by wage reductions which leave the workers where they were.

Let us now put the Budget into proper perspective, in relation to the capitalist class and the working class.

Not Your Fight: Keep Out

The capitalists do not live by engaging in wealth production themselves, but by living on the backs of the wealth producers. And they do this not by dishonest merchanting and shopkeeping, but by appropriating the proceeds of the workers' labour at the point of production. It has been officially estimated that in this country the workers in manufacture and mines produce each year goods to a value which (after allowing for all the expenses of production, raw materials, wages, etc.) leaves in the hands of the capitalists a surplus of about £100 per worker per annum, nearly £2 a week in respect of each worker employed. It is out of the fund formed in this way that the whole capitalist class lives—industrialists, landlords, and bankers. It is out of this fund that they have to provide the cost of the Government, which protects their property and their economic system.

The cost of the central Government is, roughly, £750 millions a year, with a further £250 millions for local Government, but a large part of this total of £1,000 millions (about one-third of it) is quite illusory. It is made up of interest on the National Debt and Local Government debts. In other words, the Government and local authorities collect from the capitalists in the form of rates and taxes money which flows back again to the capitalists (though not necessarily to the same individuals) in the form of interest on war loan, and Local Government loans.

Of the remaining expenditure something like £150 millions is spent on armaments to protect capitalist property and £100 millions on educating the workers in the knowledge required in capitalist industry. Other millions go to the Civil Service, the police and prison services.

The remaining expenditure, on war pensions, old-age pensions, poor relief, housing, health insurance, etc., is necessitated by the war-time and peace-time destruction of the workers' health and earning capacity, or is required to prevent destitution and consequent acute discontent and agitation inconvenient to the ruling class.

On the income side the Budget is a burden on the capitalists only, even if, to a superficial view, parts of some taxes appear to be a burden on the workers. Without pressing the point unduly in the case of a few exceptionally placed individual workers, whose position is, or appears to be, an exception to this rule, the working class as a whole are not affected by the amount or nature of taxation. What the workers get out of capitalism— the amount and quantity of their food, clothing, accommodation, leisure, amusements, etc.—is determined not by prices or taxes but by capitalist pressure as a whole and the workers' powers of organised resistance to it. No juggling with taxes or prices or social reforms will alter the main position—that of a subject class trying to defend itself against a dominant class—or will free the workers from poverty and insecurity. Don't be misled by the movements to alter the amount or nature of taxes and Budget expenditure. The aim, or at any rate, the effect, is merely to remove a burden from one section of the capitalists and place it on another. It is a capitalist fight, so keep out. Concentrate, instead, on abolishing capitalism.

This is our Budget secret. Master it and you will be on the way to understanding the futility of reformism.