Cooking the Books: The best laid schemes (2026)

The Cooking the Books column from the January 2026 issue of the Socialist Standard

Before the budget on 26 November speculation was rife as to what might be in it. In opposition Rachel Reeves, as Shadow Chancellor, had promised that the priority of a future Labour government would be growth, growth, growth.

But what is ‘growth’? She seems to mean a growth in Gross Domestic Product which is a measure of the inflation-adjusted price of all the goods and services produced in a year. The trouble is that this is not something that a government can bring about. As she herself pointed out in her budget speech, ‘private investment is the lifeblood of economic growth’. So, her plan is to create the best conditions for private investment for profit, one of which in her view is government investment in infrastructure projects. This, however, has to be paid for. As she doesn’t want to rely too much on borrowing she has had to increase taxes. Not that increased government investment will necessarily encourage more private investment; it might for a short while but in the end the only encouragement is the prospect of making a profit.

Capitalism is a system of production for profit where the aim is not growth as such but making profits which, when reinvested, bring about an increase in the production of wealth. It is a result of what Marx called ‘the accumulation of capital’.

Marx himself pointed out that, when it occurs, the more rapid the accumulation of capital, the more jobs there are and the higher are wages due to employers competing for workers. These days, it would also mean an increase in tax income for governments. Reeves seemed to be making the same point when she described ‘economic growth’ as ‘the best means to improve wages, create jobs, and support public services’.

But there is a difference. Marx never expected the accumulation of capital to be continuously onwards and upwards. He saw the process of capital accumulation as ‘a series of periods of moderate activity, prosperity, over-production, crisis and stagnation’ (Capital, vol 1, ch. 15, section 7). Despite all the evidence to the contrary, Reeves believes — and not only her but all the parties that aspire to manage capitalism — that, if the government gets it right, there can be a permanent boom.

A government might be lucky and be in office during the ‘prosperity’ phase of the cycle but not even the government’s own advisers at the Office for Budgetary Responsibility are predicting that. They are currently estimating that ‘growth’ over the next four or five years will be only 1.5 percent a year. Which is slow by previous capitalist standards and won’t bring about many more jobs or higher wages or enough tax revenue to honour Labour’s promises to improve public services.

In any event, the OBR forecasts are little more than a guess. The fact is that economic forecasts, especially over a longer period, are hardly worth the paper they are printed on as nobody can foretell how the capitalist economy will move. If they turn out to be correct, it will have been a lucky guess.

What will happen in practice over the next few years is that the government will merely react to whatever the workings of capitalism present it with. They will just be muddling through, or, to use the nautical language governments do when they seek to explain their failure by having to ‘face strong headwinds’ or being ‘blown off course’, they will just be navigating by sight.

Classic Reprint: Income tax and the wage struggle (2026)

A Classic Reprint from the January 2026 issue of the Socialist Standard

Given the recent budget from Rachel Reeves and the debate about income tax rates and thresholds, we reprint this article as it will have some resonance.

It is popularly supposed to be a virtue in a government not to impose income tax on low-wage workers. So each government tries to claim credit for having made alterations in the income tax which have the effect of freeing some workers from tax liability entirely, or at least of reducing the amount of it. This claim was made by the Labour Party following its six years in office after 1945 and was repeated by the Conservatives at the 1959 election.

Both the claims are so framed as to be distinctly disingenuous.

It was quite true, as the Conservatives claimed, that the raising of the tax allowance exempted millions of people from tax, but it was equally easy to see that, as wages rise, the exempted millions came into tax range again. And when the Labour Party Handbook 1951 claimed that a youth earning £3 a week in 1951 was paying less income tax than would have been levied on a wage of £3 in 1938 it would have been appropriate to point out that £3 in 1951 would buy only about half what it would have bought before the war.

And both governments refrained from stressing the fact that since the war income tax (Pay As You Earn) has been brought down to lower pay levels to take in millions more wage and salary earners than before the war. The number of people paying tax was under four million in 1938, 12 million in 1945, over sixteen million at the end of Labour’s term of office, and up to nearly twenty million in 1961-2. The Tory budget of 1963 removed nearly four million from liability but with every wage increase some will be coming into the range again.

So if it is a merit not to make workers pay income tax neither the Labour Party nor the Tories can match up to the performance of the National Government in 1938; and none of them can compare with the governments in the nineteenth century which exempted practically the whole of the industrial workers and clerks from liability. An article in the summer number of Public Administration, by Mrs. Olive Anderson, shows that in the middle of the century the minimum level of pay liable to tax was about £3 a week, while the wages of even the most highly skilled craftsmen were under 30s. a week, and clerks’ wages were under 40s. a week.

Interest attaches to the comparison because during the Crimean War tax reformers campaigned to get the taxable level brought down so that the mass of workers would be brought in, one suggestion being to make the tax payable on all wages of 6s. a week and over. One of the arguments was that as it was the town workers who were so keen on the war, why shouldn’t they help to pay for it through income tax?

The proposed changes were not adopted, chiefly because of the difficulty and cost of collecting small amounts of tax from millions of individuals, many of whom often changed their jobs and moved to different towns. Below a certain level the tax costs more to collect than the yield to the government.

Later on tax collection became more efficient and more and more people were brought into tax liability by the twofold movement of the lowering of the exemption limit (from £160 in 1899 to £130 in 1915) and the upward movement of prices and wages.)

But what is there in the common belief that the working class as a whole gain from a lowering of income tax and would gain still more if they were entirely exempt? The answer is, nothing at all! The condition of the working class, apart from possible short term effects when changes are introduced, is not the result of taxation whether in the form of income tax or the so-called indirect taxes, Purchase Tax, etc.

To start with, were the working class better off in 1938 when most of them were exempt from income tax and the rate was only five shillings (1s. 8d. on the first £135), than they have been since the war when nearly all of them are within the tax range and tax is at a higher rate? The evidence points to the fact that as a class they were rather worse off in 1938. And to go further back, were they better off in 1900 or 1850 when they paid no tax at all? Again, the answer is No!

In the latest year for which figures are available there were about 23 million wage and salary earners (including company directors) whose total income was about £14,000 million and who paid a tax of £1,200 million. If we take the industrial workers and shop assistants only, with a total wage bill of about £9,000 million a year, the amount of tax might perhaps be in the region of £300 million to £400 million a year.

Of course those who now have tax deducted would find their take home pay correspondingly increased when the deduction was reduced or ceased, and would for a while be better off; but in the general struggle between workers and employers over wages, this reduction of tax would be a factor in stiffening the attitude of the employers. In the situation of recent years, with fairly continuous low unemployment and increasing prices, such a reduction of tax would operate like any slackening in the rise of prices, it would make it that much more difficult for wage claims to make headway against the employers’ resistance.

Conversely, changes which have brought more and more workers into the tax range, or have increased their rate of tax. had consequences similar to rises in the cost of living: they have stiffened the pressure of the workers for higher wages especially when unemployment has been low. In other words now that millions of workers have tax deducted they have come to think in terms of ”take home pay” and to struggle for the maintenance or increase of that, rather than to look at the wage before deduction.

Mrs. Anderson, whose article has already been referred to, has found that a similar situation may have existed during the Crimean War. One of the reasons why income tax was not then extended to take in wage earners was that with the shortage of labour caused by the war it was feared that to whatever extent tax was levied on the workers the employers would be forced to raise wages to keep take home pay at its former level.

In short, struggling to raise wages is in line with working class interests, campaigning over taxation is not.

H. (November, 1963)

Yes in My Back Yard (2025)

Book Review from the November 2025 issue of the Socialist Standard

Abundance: How We Build A Better World. By Ezra Klein and Derek Thompson. ISBN 9781805226055

This book has caused quite a stir. It has even made Chancellor Reeves’ summer reading list, and been cited – in passing – by Robert Peston. It is part of the YIMBY (Yes In My Back Yard) trend. Its central theme is that government regulation is choking the capacity for effective action to generate wealth, and that instead the liberal left has been concentrating on the parcelling out of scarcity, rather than trying to improve the overall material wealth of society.

The authors mention the expensive failure to build a high-speed railway in California, citing environmental laws and litigation as the reason: alongside the excessive bureaucracy to plan the route. They also note California has higher rates of homelessness than comparable cities in Texas, and attribute the blame to zoning and to authorities loading environmental, building and labour standards into permissions, making building uneconomic for developers.

In their narrative, they do discuss the nature of landholding and the fact that residents’ houses are also financial assets, only to skip blithely over them to discuss bureaucratic complexity again. In so doing, and returning to their theme that it was the failure of efforts to restrict the power of public authorities that is to blame, they ignore the role of private property.

The state is restricted in order to secure the power of private property. The litigation is there to protect property rights. It’s there to protect economic interests (and some firms do benefit from regulation). The complex funding arrangements and financial regulations are there precisely to keep the interests of wealth superior to state power. This is a political choice, and one that those who fund the political parties will continue to demand.

At points, the authors seem to indicate that it would be better to allow constructors to build slum housing than to continue allowing homelessness. They also suggest reducing quality controls and demands on construction: in essence, they are allowing that the working class cannot afford decent housing. Although their ‘lens’, as they say, is increasing supply, they ignore the lack of effective demand for the majority.

They find time in their conclusion to reference Marx and Engels in The Communist Manifesto talking about unfettering productive forces to produce abundance. But they ignore what those fetters of capitalist society are: the law of no profit – no production, and the law of no profit – no employment. The growth of income streams alongside the capacity to produce so much that profit margins would be reduced to zero.

Absent an understanding of the role of private property and the class struggle from their narrative, they are reduced to a simple call for de-regulation coupled with bold state action. They do not see that the litigiousness they decry is meant to exclude a thorough-going democratic control that includes all voices. The abundance they seek can only come from the common ownership and democratic control of productive wealth.

Pik Smeet

Cooking the Books: The spending revue (2025)

The Cooking The Books column from the July 2025 issue of the Socialist Standard

Governments can’t control the way that the capitalist economy works. They can, however, decide how they are going to spend the money that they have or plan to have. This is the annual budget. From time to time, in Britain, the government takes a longer view and sets out their spending plans over a period of three or four years.

One such event occurred on 11 June when the Chancellor of the Exchequer Rachel Reeves stood up in the House of Commons and delivered a ‘spending review’, a ‘comprehensive’ one, no less, as it was broken down by government department. For weeks before, the media had been speculating which departments would be favoured and which would suffer cuts.

She announced that the total amount to be spent over the next three years or so was to be £2.2 trillion, a figure that the Times (12 June) commented ‘may be so large as to be meaningless’. Yes, what is a trillion? A million million? A thousand billion? Anyone know off-hand?

It’s the same every time. The Chancellor’s statement is followed by the Shadow Chancellor getting up and accusing the government of double counting or complaining that not enough is being spent on this or too much on that. And asking where’s the money coming from (a good question). From time to time MPs join in, cheering or booing.

A spending review, as its name suggests, only covers spending not where the money to spend is going to come from. Since governments as such don’t generate any income or wealth, their income has to come from elsewhere, the two sources being taxation and borrowing. This is where the workings of the capitalist economy come in.

Taxes ultimately fall on profits and profits are what drive the capitalist economy. This places limits on what the government can raise without provoking an economic downturn. Governments borrow from capitalist financial organisations at home and abroad and are competing with other capitalist states for loans from these speculators. Any hint that the government may be planning to spend money without credible funding from taxation is seen as increasing, however slightly, the risk of the speculators not getting their money back. This leads to an increase in the rate of interest they charge a government for lending it money. This, in turn, will mean that the government has to allocate more of the money it raises in taxes towards paying the higher interest payments. Another restriction on how much a government can spend.

Reeves is always tweeting that she is ‘fighting to put more money in the pockets of working people’ (though not of non-working people; she wants to stop money going into the pocket of many of them). She seems to mean increasing take-home pay.

Nothing in her spending review does this. That’s because it’s not from the government that she expects the money to come but from employers once the economy is growing. There is an element of truth in this in that, as Marx pointed out at the end of Wage Labour and Capital, ‘the rapid growth of capital is the most favourable condition for wage labour’ as the employers’ increased demand for labour power bids up its price. The trouble for Reeves is that the rapid growth of capital is not something that a government can engineer. It is just something that happens from time to time as capitalism moves through its regular boom-slump cycle.

Cooking the Books: Did Marx respect the rich? (2025)

The Cooking The Books column from the July 2025 issue of the Socialist Standard

‘Even Marx respected the rich more than Reeves’ was the headline of an article by Sunday Telegraph columnist Michael Mosbacher (18 May). He accused Reeves of putting up taxes on the rich because she believes it immoral to be too rich. And quoted Marx as having written in the Communist Manifesto of 1848 that ‘the bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together’.

It is true that Marx did regard capitalism as historically necessary and, for a while, progressive. He respected – if that’s the word – the bourgeoisie not because they were rich (their opponents, the landed aristocracy, were too, even more so in fact) but for when they had played a revolutionary role. Capitalism has long since fulfilled its role of developing the material basis for a world socialist society, so capitalists are no longer revolutionary or necessary.

More generally in his analysis of capitalism, Marx regarded capitalists as essentially personifications of capital whose role was to accumulate more and more capital for re-investment and from which their life of luxury was a deviation. As he put in the Preface to the first German edition of Das Kapital:

‘I paint the capitalist and the landlord in no sense couleur de rose. But here individuals are dealt with only in so far as they are the personifications of economic categories, embodiments of particular class-relations and class-interests’.

Mosbacher went on to say about Marx:

‘Marx believed that capitalism’s overthrow would come about through its own success. The market – and this is where old Charlie got it spectacularly wrong – would eventually satiate all bourgeois demand. Overproduction, and counter-intuitively mechanisation (he was also quite wrong about this), would reduce the capitalists’ profits. Marx’s adoption of the labour theory of value – the idea that the worth of any good is determined by the amount of work put into it (…) – meant that the bourgeoisie would only have one option to maintain their riches. And that is scalping a larger share of what the workers’ labour has produced. The eventual result of the proletariat’s consequent immiseration would be world revolution’.

Did ‘Old Charlie’ hold that ‘the market… would satiate all bourgeois demand’? Mosbacher is not expressing himself very clearly here. He probably meant that production will eventually exceed what can be sold under capitalist conditions, whether to workers or capitalists, and so capitalism comes to suffer a permanent crisis of overproduction.

Marx never held that capitalism would end up in that situation. He did, however, hold that capitalism would overproduce in relation to market demand from time to time, though not for the reason Mosbacher gives. It was because, when the market was expanding, competing capitalists all plan to benefit from it and end up by producing in total more than the market can absorb. But this would not bring capitalism to an impasse, just to a temporary slump in production, which would eventually create the conditions for a recovery. It was cyclical not terminal.

Did Marx say that ‘mechanisation … would reduce the capitalists’ profits’? Here Mosbacher seems to be referring to what Marx called the tendency of the rate of profit to fall. This was connected to mechanisation insofar as mechanisation resulted in proportionately more capital being invested in machinery than in employing wage labour. This would tend to reduce the rate of profit as only the part of the capital invested in wage-labour yielded a surplus value whereas the rate of profit was calculated on total capital.

Marx called this a ‘tendency’ because there were also counter-tendencies which might prove stronger at times and pointed out that a fall in the rate of profit did not necessarily mean a fall in the amount of profits. It wasn’t the iron law that Mosbacher makes it. Capitalism is not going to break down from lack of profits any more than from lack of markets.

Socialist Sonnet: No.188 Financial Statement (2025)

From the Socialism or Your Money Back blog

Financial Statement

 

The chancellor stands to address the House,

Facing the vehemently disinclined,

Self-righteous, ambitious critics behind,

Knowing this financial statement must douse

Any ambition that needs might be met,

The reform fallacy will be laid bare,

Once again, the money is just not there,

No matter the targets set and reset.

Then some rogue state prepares to hinder trade,

Profits and growth begin to be expunged

And around the world stock markets have plunged,

Negating any financial plans made.

The chancellor, the statement completed,

Sits down again, utterly defeated.

D. A.

Cooking the Books: A fuss about NICs (2025)

The Cooking the Books column from the January 2025 issue of the Socialist Standard

In the week before the budget last October the i paper carried an article headlined ‘Reeves warned NI business tax will hit workers’ pay’ with the subheading ‘Experts say the comments by the Office for Budget Responsibility show increasing employer NI is a tax on “working people”’.

In the event Chancellor Rachel Reeves did increase employer National Insurance Contributions (NICs), which led the media and opposition parties to claim that the government had reneged on its promise not to increase taxes on ‘working people’ (defined, in the end, as those in employment). We are far — very far — from holding a brief for the government, but the claim that the increase in employer NICs will push down wages doesn’t hold water.

In its comments for Reeves’s budget, the OBR repeated:

‘The specific changes to employer NICs increase the costs of employment for firms which is mainly assumed to be passed on to employees through lower real wages, and which also reduces employment.’

So, they weren’t actually saying that the increase would lead to this but that, in their calculations, they had assumed that it would. However, they didn’t explain why they assumed this.

As a measure that increases labour costs, it could be expected to have some effect on employment, but the assumption that it would lower ‘real wages’ (the amount wages can buy in relation to prices) is unwarranted. The OBR seems to have meant that it would result in employers increasing the price of what they are selling, resulting in workers being able to buy less with their wages. But this assumes that, faced with an increase in costs, employers can simply pass this on to consumers through increasing the price of their product, which is not the case.

The TUC understood the situation better. Employers, they pointed out, will:

‘have a range of options on how they can cover these increases. They can absorb the costs and many will choose this option. They could also raise productivity by investing in their business, raise the prices they charge customers, or seek to suppress wage growth in their organisation. It can be difficult to predict what balance of these approaches employers will opt for and it will vary greatly between firms and industries.

‘Workers will be particularly interested in the extent to which employers seek to shift the burden onto them by holding down wages. One thing is for certain – there is no automatic link between business tax and worker wages (…) how the costs are shared will depend on the growth trajectory of the business and economy and on the bargaining power of workers.’

This is substantially correct, although they could have also pointed out that the price increase option would only be open if any increase was ‘what the market will bear’.

It’s not true that a tax that increases employer labour costs would inevitably lead to lower pay. You can see this where labour costs are increased through workers obtaining a wage increase.

The employer would have the same options that the TUC mentions. If, as the OBR assumes, an increase in labour costs leads to ‘lower real wages’, then so should such an increase due to higher wages. It amounts to the old fallacy that an increase in wages is pointless as it merely leads to an increase in prices which nullifies it, a fallacy exposed by Marx in 1865 in his lecture to British trade unionists, later published as Value, Price and Profit.

Slicing the pork barrel thin (2024)

From the December 2024 issue of the Socialist Standard

The Labour Party’s new autumn budget, presented by Chancellor Rachel Reeves, has made notable changes to universal credit and other benefits. However, these updates have raised concerns for vulnerable communities.

We’ve been speaking with people currently on benefits, universal credit, and Personal Independence Payments (PIP) about their experiences in the UK today.

Claire, 35, who transitioned from ESA to universal credit and works part-time in administration in Sheffield, is disabled due to genetic and autoimmune conditions. She also receives PIP. Claire says ‘The job centre is horrible; it’s not set up to support disabled people properly. They lack time, resources, and training.’

Toni, 44, is self-employed in events management in London, but her part-time universal credit isn’t enough. ‘I was fine when I worked in Europe; my business thrived for nearly a decade. But since Brexit, the cost of living crisis, and COVID, my business has tanked. Event venues are closing, and there are no opportunities for those without access to Europe. I have no options unless I retrain at my age!’

Starting in April 2025, benefits including universal credit will rise by just 1.7 percent. This means only a few extra pounds per month for claimants who have been struggling to make ends meet from one capitalist crisis to the next.

Claire believes the support is inadequate for disabled individuals wanting to work, saying it falls short of previous options like disabled tax credits, which provided more effective assistance.

Reeves announced a cap on universal credit deductions for debt repayments, lowering it from 25 percent to 15 percent of the standard allowance. This aims to ease financial pressure for over a million households, potentially saving them around £420 a year.

‘It’s disheartening,’ Claire reflects, on her feeling of alienation from society. When asked about the impact on her mental health, she added, ‘Yes, the challenges of universal credit deepen my sense of isolation.’

Toni feels society has abandoned her: ‘I worked hard for years and paid into the system, but when COVID hit, my business got no help. I was dumped on the dole and left to fend for myself, which only makes me feel more alienated’.

Claire adds ‘They’re just continuing the previous government’s policies. I didn’t agree with them then, and I still don’t. The system doesn’t support disabled people or consider different levels of disability.’

They’re also concerned about the new measure allowing the DWP direct access to bank accounts. This approach to combating fraud feels like a surveillance tactic that will erode trust among unemployed workers. What they feel they need are real job opportunities, not increased government intrusion into their lives.

Labour will uphold the Conservatives’ reforms to the work capability assessment, making it harder for disabled workers to qualify for the highest level of incapacity benefits. This could affect over 420,000 people, resulting in a loss of about £5,000 in annual support for many.

A new £240 million ‘Get Britain Working’ initiative aims to provide work, skills, and health support for people with disabilities and long-term health conditions. This includes the already controversial idea of sending job coaches into mental health wards to push the severely ill back into work.

The earnings threshold for carer’s allowance will rise to £10,000 a year, allowing more unpaid carers to qualify for support. However, we note that the broader social care system remains underfunded and profit-driven.

Labour has also decided to keep the two-child limit on benefits, which denies extra support for families with more than two children and pushes many deeper into poverty.

Claire expressed her concerns about no longer receiving cost of living payments and the reduced eligibility for the Warm Home Discount, making it harder for her to heat her home amid rising costs.

The budget fails to adequately address the financial strain on the UK’s most vulnerable. Small increases, targeting the working poor with threats of prosecution and debt recovery measures, don’t meet the real needs of those struggling, especially when many families rely on food banks or multiple jobs just to get by.

Claire remarked, ‘We will struggle even more than before.’ She envisions a truly socialist society prioritising adequate material support and holistic health care for everyone.

Neither the Labour Party nor the Tories can solve these issues. The current government may offer minor increases, but they remain trapped in a system that prioritises market whims over people’s needs. ‘The market giveth, and the market taketh away.’

Names have been changed to avoid potential targeting or sanctions.

A.T.

Cooking the Books: Another reformist dreamer (2024)

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

In a speech last year, Rachel Reeves name-checked Mariana Mazzucato who, she said, had long argued that ‘the state’s role is not simply to correct the failures and redress the negative externalities of free markets… Success has always rested upon a partnership between the market and the state’ (tinyurl.com/3m78s2mx).

Although Mazzucato is seen as a radical thinker she has nothing against capitalism as such. Nothing against the private ownership of productive resources. Nothing against production for sale on a market with a view to profit. What she is against is the present ‘dysfunctional form of capitalism’ characterised by ‘the excessive financialization of companies and remorseless pursuit of shareholder value’. As she quotes on her website she is on ‘a mission to save capitalism from itself’. She wants to ‘change’ capitalism, as she put it in her 2020 book Mission Economy: A Moonshot Guide to Changing Capitalism, by ‘restructuring business so that private profits are reinvested back into the economy rather than being used for short-term financialized purposes’. In other words, she is a theorist of reformism. Hence her attraction for the Labour Party. Even under Corbyn, John McDonnell went around echoing her call for an ‘entrepreneurial state’.

Mazzucato’s reform to capitalism is for the state to play a pro-active role in the economy by setting an aim to be achieved — a social or economic problem to be solved — and then mobilising the help of private capitalist corporations to achieve it by ‘shaping’ markets for them. Hence the title of her book which argues that the US government’s 1962 mission to get a man on the Moon within ten years is the example to follow.

There are indeed occasions when capitalism’s spontaneous aim of profit maximisation is set aside. When a country is at war, the ‘mission’ becomes to win ‘whatever it costs’ and the state mobilises resources to achieve this. It is instructive that the only successful example of her ‘change’ to capitalism that she can bring forward had a military dimension. The United States government did not want to get a man on the Moon for scientific reasons but to gain superiority over Russia in rocketry.

Mazzucato herself notes this and asks why a state could not similarly mobilise resources to achieve some peaceful aim such as solving the housing problem or creating a good health and care service. The same question was put by reformists to those who in the 1950s and 60s argued that capitalism had been saved from supposed collapse by providing markets through becoming a ‘permanent arms economy’. Why, the reformists asked, couldn’t capitalism become a ‘permanent welfare state economy’; why couldn’t the state provide extra markets by spending instead on social reforms?

The permanent arms economy theorists struggled to find a coherent answer. In the end, life itself settled the matter — excessive spending on arms turned out to undermine a capitalist state’s international competitiveness by increasing the tax burden on its capitalist enterprises and diverting profits that might otherwise have been invested in cost-cutting innovations. Which explained why in the 1960s Germany and Japan, which weren’t allowed to spend so much on arms, did better on world markets. Excessive arms spending wasn’t saving capitalism but was a burden on the states that practised this. The answer to the reformists was that excessive spending on the welfare state and other social reforms was not practicable because it, too, would be a burden on any capitalist state that tried, undermining its competitiveness.

The same applies to Mazzucato’s reformist project. If, outside of war, the state were to set a purpose for the capitalist economy other than profit maximisation and taxed capitalist corporations to pay for it, this would inhibit, not encourage, growth. In seeking to maximise profits capitalism is not being dysfunctional. It is being itself and can’t be changed to function in any other way.

Cooking the Books: ‘The markets’ before people (2024)

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

It was always a bit of a mystery why Rachel Reeves was so insistent on presenting the Labour Party as the ‘Party of Business’ and emphasising that, if she became Chancellor of the Exchequer, she would enforce stringent government spending rules with a rod of iron.

This can’t have been aimed at catching votes; that would be too much like asking for turkeys to vote for Christmas. Nor even to reassure British business; these would know from past experience that a Labour government would be a safe pair of hands as far as looking after their interests was concerned. It seemed that the only explanation could be to reassure ‘the markets’ so as to avoid the fate of the unfortunate Truss government; to reassure, in other words, the international speculators who buy and sell currencies and who lend money to governments by buying the bonds they issue.

That this may well have been the reason was revealed on Sunday 1 September by the member of the Cabinet sent out that day to tour the radio and TV studios to defend the Labour government’s decision to take away the winter fuel allowance from most pensioners. Newspaper headlines the following day reflected what Lucy Powell, the Leader of the House of Commons, had said:

‘WINTER FUEL PAYMENT CUT HELPED STOP “RUN ON THE POUND” SAYS LUCY POWELL. “We would have seen the markets losing confidence”, Leader of the Commons said’ (iNews).

‘UK FACED ECONOMIC CRASH IF WINTER FUEL PAYMENT WAS NOT AXED, POWELL SAYS. The Commons Leader says Rachel Reeves’s decision to cut the payment was a “difficult decision” with “no alternative”’ (Belfast-based Irish News).

Her exact words, as recorded by these newspapers, were, respectively:

‘ . . . why we had to do that was because if we didn’t, we would have seen the markets losing confidence, potentially a run on the pound, the economy crashing . . . ’ (inews)

and

‘If we hadn’t taken some of these tough decisions we could have seen a run on the pound, interest rates going up and crashing the economy. It’s something we were left with no alternative but to do’ (tinyurl.com/yhs7t6se).

What she meant couldn’t have been clearer: that to retain the confidence of the international speculators and investors who trade in currencies and government bonds, the new Labour government had no alternative but to cut government spending.

Some might question whether the situation was that drastic. But that’s not the point. The government considered that it was and, in their role as guardian of the general interest of the British capitalist class as a whole, took the required action to maintain the confidence of ‘the markets’ by cutting its spending. In theory they could have cut something else — so-called defence spending, for instance — but, presumably to convince the markets how serious they were, deliberately chose to cut some social benefits, in this case those for pensioners.

In any event, the markets were satisfied. Under the headline INVESTORS DEFY ECONOMIC GLOOM WITH SCRAMBLE FOR UK BONDS, the Times (4 September) reported:

‘The record demand for gilts suggests that financial markets are shrugging off worries about the UK’s fiscal sustainability for now, after the government said it needed to carry out immediate spending cuts to prevent a collapse in the pound.’

Labour's capitalist wealth fund (2024)

Tony Crosland

From the October 2024 issue of the Socialist Standard

The Labour Party used to believe that if the government controlled the ‘commanding heights of the economy’ — such as the central bank, coal, electricity, steel, railways — it would be able to control the way the capitalist economy worked as it would make state capital investment rather than private capital investment the driving force. If private capital investment faltered then the state could step in and invest instead.

The 1945 Labour government did implement widespread nationalisation but things didn’t work out as planned. The theory was premised on the state industries making sufficient profits. In practice, while they did make a profit most of time, it wasn’t enough and they themselves had to borrow money. As they were providing a monopoly service to the private sector there were pressures not to charge too much so as not to undermine the competitiveness of private capitalist firms on export markets. They were also burdened by having to pay interest on the compensation bonds paid to the former owners. Then, after Labour was voted out of office in 1951, oil — in private hands — began to outcompete coal as a means of generating power for industry and the transport of goods, undermining any ‘commanding’ position the government was supposed to have.

In opposition, as Patrick Maguire pointed out in an article before the election in the Times (21 June), some Labour strategists began to question the commanding heights theory and to suggest that there were other ways of controlling the economy such as monetary and tax policy without needing to take industry out of private hands. This view was put forward by Labour politician Anthony Crosland in 1956 in his book The Future of Socialism. According to Maguire:

‘Crosland said something heretical. Profits were not only a precondition of rapid growth but something that socialists must “logically applaud” as a driver of industrial expansion and investment’.

The view of the current Labour leadership, Maguire went on, is basically the same:

‘That a Labour government that wishes to transform public services needs to encourage private investment and, yes, profit’.

Something, of course, that the Conservatives and Liberals had always accepted.

Actually, Crosland questioned whether capitalism was still capitalism and whether what had evolved in its place was still dominated by the profit motive, but it is revealing that, when his book was republished on its fiftieth anniversary in 2006, he was perceived by Labour leaders as saying that the economy was driven by private capitalist firms seeking to make a profit and that this must be applauded and encouraged. But this was a lesson the Labour Party had learned in the meantime from its experience in office in the 1960s and 70s.

Maguire’s article was entitled ‘Reeves’s plan for growth is built on private cash’. What she is setting up is a ‘National Wealth Fund’ to mobilise private capital to invest in the transition to a low-carbon economy in the expectation that this will stimulate growth in the rest of the capitalist economy (‘boost growth and unlock investment’ as the government press release put it – tinyurl.com/59ckdkdv).

The idea is that, for a particular project, the state will put up a quarter of the amount needed as long as private investors put up the rest, with any profits to be shared pro rata. To work, the project will need to be profitable; otherwise no private capitalist firm will be interested. As one of those involved in the scheme told the Times (15 July):

‘This is going to sink or swim based on its return generation. If this loses money it’ll be in trouble. It’s absolutely critical that it makes money’.

For the private capitalist investors of course, not just the government.

The government is banking that putting up a quarter of the money will attract private capital that otherwise wouldn’t be interested as the risk of not generating enough profit was too high. This might indeed attract some private capital. But, as Mehreen Kahn, the Economics Editor of the Times has pointed out:

‘Labour has made a virtue of “derisking” private sector investment. The danger is a state that will end up underwriting corporate profits while nationalising losses in the rush to fix a longstanding investment gap by throwing money at private finance’ (16 July).

In any event, the commanding heights of the economy remain occupied by private capitalist enterprises and so the economy will be driven by how much these decide to invest, which in turn will depend on how much profit they judge they can make. That means that whether or not there is the growth that the Labour government wants (to pay for promised improvements in public services) will be up to those deciding on private capital investment. To have any chance of succeeding, the government will have to pander to private capitalist industry and serve its interests.

This they already pledged to do when they proclaimed themselves the Party of Business. During — and for — the elections they added that they were pro-worker too. But it is not possible to be both pro-business and pro-worker as there is an irreconcilable conflict of interests between the capitalists and the workers arising from the fact that profits originate from the difference between what workers produce and what they get paid. Any party that takes office under capitalism is forced to give priority to profit-making as this is what drives the capitalist economy and so has to be pro-business, even if it might want to be pro-worker and even if initially it brings in some pro-worker measures. This is the experience not just of all previous Labour governments but of similar governments everywhere. The newly-elected Starmer Labour government won’t be — can’t be — any different. As will become evident.

As we said, capitalism was the problem, not the Tories. It still is.

Adam Buick

Cooking the Books: The blame game (2024)

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

According to the media, the main issue in the election has been the state of the economy. The Labour Party has made it the central point in their campaign, seeking to blame the outgoing Conservative government for slow growth and stagnating living standards. In a typical example of their (rather overblown) propaganda Rachel Reeves, the would-be Chancellor of the Exchequer, stated:

‘The Tories have had 14 years to fix the nation’s roof. Instead, they smashed the windows, kicked the door in and burnt the house down. Here’s the honest truth about Rishi Sunak’s record in power in ten words: our country is poorer and working people are worse off’ (fundraising email to Labour supporters, 25 May).

This is to put the blame for the current state of the economy entirely on the government. It is to assume that a government can control the way the economy works. This is an assumption made not just by the Labour Party but shared by the Tories themselves and by other groups of politicians who aspire to be the government such as the Lib-Dems and the Greens. But it is mistaken.

The economy is driven by the quest for profits by private and state enterprises competing to sell the goods and services that they employ workers to produce or provide. This gives rise to impersonal economic forces which determine the level of production and employment.

Governments can only react to the economy as it goes through its never-ending cycles of expansion and contraction. They can’t control this. As far as the operation of the economy is concerned, governments just preside over what is happening; they are in office but not in power. The power that they do have to intervene in the economy, through taxation, subsidies and spending, is limited by the state the economy is in at any particular time and the permanent need to give priority to profit-making and conditions for this. It is this that leads them, when the economy is not growing, to cut spending on public services and social benefits.

In the political game played by parties competing to stay in or come into office, the ploy of the Outs, when a government is forced to cut back its spending, is to blame the Ins for what the operation of capitalism has forced them to do, which in this election the Labour Party has been playing for all its worth. On the other hand, when capitalism is in a period of expansion which a government happens to be presiding over, the ploy of the Ins is to claim credit for this even though this has nothing to do with what they have done.

While the economic policy a government pursues can’t make things better it can make them worse. The short-lived Truss government is a case in point. A government which tried to spend its way out of a period of contraction or stagnation would be another.

The Labour Party has learned this since the end of the 1970s and its current policy is based entirely on trying to encourage economic growth. It’s a gamble. They could be lucky, as the Blair government was for a time, and be in office when the capitalist economy spontaneously expands, but it doesn’t look like it. A government can no more bring about growth than it can spend its way out of a period of slow or no growth.

A Starmer government won’t be able fix the roof either. On the other hand, when the windows get smashed and the door kicked in, they won’t be to blame; capitalism will be.

Cooking the Books: More pro-business than thou (2024)

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

Chancellor-in-waiting Rachel Reeves’s commitment to private capitalist business knows no bounds. ‘We will be the most pro-business government ever, vows Reeves’ was the headline of an interview with her in the Times (25 April). For the record — to remember when someone asks you to vote Labour in the coming general election — her exact words were:

‘If I become chancellor, the next Labour government is going to be most pro-business the country has ever seen’.

That’s quite an ambition. To be more pro-capitalist than Gladstone’s Liberals in the 19th century, the Tory governments of the 1920s, and the Thatcher government of the 1980s!

But why is she saying this? It can’t be to catch votes since big business hasn’t a particularly good reputation amongst the general public. It can’t really be, either, to convince business that Labour is fit to govern in their interest as business has been convinced of that since the first Labour government a hundred year ago. It is more likely to assure ‘the markets’ so they don’t do to her what they did to Truss.

After all, like Truss, she has a plan to try to artificially stimulate ‘growth’. She put it this way:

‘I genuinely believe the way to improve living standards and to achieve our potential is by unlocking private business investment’.

Truss wouldn’t disagree. The difference is that Truss planned to do this by reducing direct taxes on profits while Reeves plans to do so by bribing capitalist firms with contracts and subsidies. Both hoping that the resulting growth would avoid the government having to cut spending (too much).

Reeves explained that under her plan:

‘the government would provide state support to give business the confidence to invest in expensive and risky technologies … To get people to invest to produce green hydrogen they need to know that at the end they can sell it … So the role of government in the sector might be to say, “You produce it and we will guarantee that it is purchased. We will be the backstop to that”’.

The government is going to do this by offering to put up a quarter of the cost (of in this case providing places where motor vehicles can fill up with hydrogen), by borrowing it from ‘the markets’, as long as private capitalist business invests the remaining three-quarters. There are two uncertainties here. First, private capitalist business won’t put up the money unless they expect to get the going ‘rate of return’ on their investment and, second, will the rate of interest that the speculators who lend the government money charge for their loan be less than the rate of return the government expects to get from investing in the project?

Neither is guaranteed. Nor can be. In other words, whether or not Reeves’s plan works depends entirely on decisions taken by profit-seeking private enterprises and international speculators. No wonder she is insisting the next Labour government will be so pro-business. Mind you, there is a certain perverse logic to her position. If you accept capitalism more or less as it is (as she and Labour do) you accept that the economy is driven by business investment for profit, therefore you must encourage this and kowtow to business. But she doesn’t need to be quite so obsequious.

Labour and ‘the lower-working-class’ (2024)

From the April 2024 issue of the Socialist Standard

The upper class desire to remain so, the middle class wish to overthrow the upper class, and the lower class want a classless system.’ (George Orwell)

In his 1937 book, The Road to Wigan Pier, George Orwell, describes what it was like to be born into a family that saw itself as of a superior class to that of the working class ‘I was born into what you might describe as the lower-upper-middle class… In the kind of shabby-genteel family that I am talking about there is far more consciousness of poverty than in any working-class family above the level of the dole.’

Back in 1966 class differences were much more obvious to everyone. In a television programme of that year, The Frost Report, John Cleese, Ronnie Barker and Ronnie Corbett acted out a class sketch. Utilising the differences in their heights, Cleese was upper class, Barker middle and Corbett lower. Lines include ‘middle class’ saying, I look up to him because he is upper class, but I look down on him because he is lower class.” Ronnie Corbett: “I know my place.” After describing the advantages of their two ‘superior’ classes, Corbett, looking upwards at both ends the sketch with, ‘I get a pain in the back of my neck.’

Speaking of pain, Labour are at pains to persuade UK capitalism that it need have no qualms about a Labour government. Labour will indeed do its utmost to carry on from the Tories the position of government as the executive committee for managing the common affairs of the whole bourgeoisie.

At Davos in January, the Labour shadow chancellor Rachel Reeves let it be known that, ‘With Labour, Britain will be open to business. We will restore stability and security into our economy. We will restore Britain’s reputation as a place to do business. And we will be a trusted partner with business in delivering the change our country and our economy needs’ (Guardian, 16 January).

A few months on, they are letting it be known that they are going to be sorting out those pesky proles who can’t or won’t be active wage slaves. Social welfare costs the capitalist class as a whole money that they would much rather benefit from themselves rather than subsidise the – in their eyes – undeserving poor, scroungers and economically useless.

Labour’s shadow work and pensions secretary Liz Kendall has laid out their intentions:

‘Under a Labour government there would be “no option of a life on benefits”, the Party has said, as it set out plans to reduce the number of young people not in work, education or training.’

‘Under our changed Labour party, if you can work there will be no option of a life on benefits,’ she said in a speech to the centre-left Demos think-tank in London, where she sought to outline Labour’s commitment on “investing” in young people’ (Guardian, 4 March).

Ten years ago Channel Four aired a series of five programmes which looked at the lives of people living in Winson Green, Birmingham. The programmes were titled Benefits Street. The programmes have been called ‘poverty porn’ as they portrayed those featured in the worst possible light. Allegedly ninety percent of the street’s inhabitants were on benefits.

The Socialist Standard, February 2014, carried a TV review of Benefits Street.

‘Benefits Street (Channel 4): yet another tawdry docusoap which reveals how some people just leech off others. The real parasites here are, of course, the programme-makers – feeding off the lives of the people they film… The producers of Benefits Street have maintained that the programme is ‘fair and balanced’, but in reality it’s as fair and balanced as a broken see-saw. The editing, title and format of the show aim to exploit, rather than express the participants’ struggles. The producers have been taken in by the prevailing mood among the elite to demonise those victimised most by capitalism’.

The Labour Party appear now to have the same detestation and contempt for those in society on benefits as did the Channel Four producers of Benefits Street. You won’t hear it from them but the only solution to capitalism’s ills is its replacement by socialism.

Dave Coggan

The Party of Business (2024)

"My Red Flag is in the wash."

From the March 2024 issue of the Socialist Standard

Fifty years ago on 28 February 1974, there was a general election. The Labour Party’s election manifesto included a pledge to:

‘Bring about a fundamental and irreversible shift in the balance of power and wealth in favour of working people and their families’.

During the election campaign, Denis Healey made his famous promise to squeeze (some of) the rich until the pips squeaked. It was only to be property speculators not all the rich but he did say that a future Labour government would increase income tax on those with the highest incomes.

Labour won that election and a second one in October the same year.

Alongside nationalisation, the redistribution of wealth from the rich to the working class was the Labour Party’s claimed path to a more equal society. That was how reformism was going to gradually bring about ‘socialism’.

The Labour Party was originally set up as the parliamentary wing of the trade union movement. Hence its name. It was supposed to be the party of labour, the party that was to press for legislation to improve the conditions of workers. In 1918 it did adopt a constitution which proclaimed full-scale nationalisation, which it called socialism (but was actually state capitalism) as its long-term aim, but in practice it sought working- class support on the basis of promising to improve things for workers within the capitalist system.

When in office the Labour Party has always had to govern in the interest of business. That capitalism is an economic system that runs on profits made by businesses is an economic reality which all governments have to recognise on pain of causing an economic slowdown or even downturn. Whatever they might have promised so as to get elected or might have wanted, all Labour governments ended up recognising this and accepting the need for profits to be allowed to be made. Labour MP Harold (later Lord) Lever put it very clearly shortly after Labour won the 1966 General Election in terms as relevant today as they were then:

‘Labour’s economic plans are not in any way geared to nationalisation; they are directed towards increased production on the basis of the continued existence of a large private sector. Within the terms of a profit system it is not possible, in the long run, to achieve sustained increases in output without an adequate flow of profit to promote and finance them. The Labour leadership knows as well as any businessman that an engine which runs on profit cannot be made to move faster without extra fuel. So, though profits may be squeezed temporarily by taxation and Government price policy, they must and will, over a longer period, increase significantly even if not proportionately to increased production’ (Observer, 3 April 1966).

Labour openly embraces capitalism

In 1995 Tony Blair got the party, in opposition since 1979, to drop Clause 4 of its constitution with its socialist-sounding wording. In 1998, Peter Mandelson, a cabinet minister in the Labour government that had come into office the previous year, famously stated the government was ‘intensely relaxed about people getting filthy rich as long as they pay their taxes’.

This was the ‘New Labour’ that replaced Old Reformist Labour. Starmer is in the same tradition, only he has gone further by declaring Labour to be ‘the Party of Business’. Not only that, he accepts that this involves pursuing, when in office, a policy of ‘fiscal conservatism’ (tinyurl.com/58xynpda):

‘It was “a big mistake” for the left to equate spending money with radicalism as he insisted that fiscal discipline was fundamental to winning power’ (Times, 19 July).

He told last year’s Labour Conference that a Labour government would not be ‘a cheque-book state’ and in a speech last December declared that ‘anyone who expects an incoming Labour government to quickly turn on the spending taps is going to be disappointed’ (tinyurl.com/bddbhuxu ).

Starmer and his would-be Chancellor Rachel Reeves began 2024, the year they both hope to move into Downing Street, by stepping up their appeal to business leaders. Reeves went to Davos to meet the world’s political and business elite at their annual jamboree in Switzerland. She said she was going there to try to convince them that Labour not the Tories ‘are now the pro-business party’ (Times, 18 January).

A couple of weeks later the Labour Party organised its own meeting for business leaders, sponsored by HSBC. The headlines in the business press reporting what went on tell it all:

‘Labour Is The Party Of Business,’ UK’s Starmer Tells Corporate Bigwigs (Barrons, the American business weekly).

Labour is now ‘pro-business’, vows Rachel Reeves (Financial Times).

Reeves unambiguously committed the Labour Party to supporting capitalism:

‘This Labour Party sees profit not as something to be disdained but as a mark of business succeeding’.

‘Be in no doubt, we will campaign as a pro-business party — and we will govern as a pro-business party’ (tinyurl.com/bdubeuak).

So, what has the New Business Party been offering Business?

‘We will cap the headline rate of corporation tax at its current rate of 25 per cent for the next parliament.’

‘The shadow chancellor has told the BBC Labour would not reinstate a bankers’ bonus cap that was scrapped last year by the Conservative government’ (tinyurl.com/dsymw2zn).

‘Labour rules out wealth tax if party wins next election. Ms Reeves confirmed Labour would not target expensive houses, increase capital gains tax or put up the top rate of income tax’ (tinyurl.com/eyftrjdu).

‘Party amends plan to bolster protections for gig economy as it boasts of ‘pro-business’ credentials’ (tinyurl.com/ypxfaz48).

In her speech to the business leaders, Reeves declared that, whatever happens, ‘I will not waiver from iron-clad fiscal rules’. Labour is banking on being able to conjure up growth, but what if this doesn’t happen, as it might well not as governments don’t have the power to bring about growth?

No or slow growth would mean less tax revenue. Under its ‘iron-clad’ rules and given its promise not to increase corporation or other taxes on business, the Labour government would have to cut back on its spending and impose austerity, putting the defence of profits and profit-making first, before social spending and before public sector wages. It would, as Reeves put it, ‘govern as a pro-business party’. All governments always end up having to do this anyway but never has a party announced so clearly in advance that this is what they will do.

Adam Buick

Cooking the Books: No magic wand (2023)

The Cooking the Books column from the November 2023 issue of the Socialist Standard

At last month’s Labour Party Conference Starmer’s rhetoric went so far as to promise that a future Labour government would be ‘totally focussed on the interests of working people’. A Labour government, he said, would remove what ‘the age of insecurity [had] loaded onto the backs of working people’ but that it was going to take ten years to do this as ‘there’s no magic wand here’.

How would Labour do this? Certainly not by any direct payments to ‘working people’ as he also said that under Labour there would not be ‘a cheque-book state’ and that ‘fiscal responsibility is non-negotiable’.

So how? By increasing investment: ‘We’ll set up a National Wealth Fund. Work hand in glove with the private sector to rebuild this country’. The day before, the would-be next Chancellor of the Exchequer, Rachel Reeves, declared:

‘Labour will aim to restore investment as a share of GDP to the level it was under the last Labour government, to bring us in line with our peers. Adding an additional £50 billion to our GDP every single year. Worth £1,700 for every household in Britain’.

So we are all going to get an extra £1,700 a year over the next years, are we? Not exactly. This is just a statistic calculated by dividing £50 billion by the number of households in the UK (28.2 million in 2002). It doesn’t mean that each household would receive that amount of cash. In any event, since it would be investment it would by definition be spent on buying producer goods and so not available to improve individual consumption. As someone once said, there are lies, damned lies and statistics.

It is not clear either where the figure of £50 billion comes from. It seems to be the money the government will borrow to put into the National Wealth Fund plus the amount that it is anticipated private capitalist enterprises will invest in its projects.

Reeves talked about ‘catalytic investment’ by which she meant government investment designed to attract additional private investment for some project. ‘For every pound of investment we put in,’ she said, ‘we will leverage in three times as much private investment’. In other words, a project would not go ahead unless, for every £1 the government puts up, the private sector puts up a further £3. But there is no guarantee that this will always happen. Whether or not it does will depend on how capitalist enterprises judge the prospect of making a profit at the going rate or more from doing so. If they won’t get a sufficiently high return they won’t put up the money.

A future Labour government is going to be completely dependent on the investment plans of profit-seeking private capital. Starmer said as much when he stated that Labour understood that ‘private enterprise is the only way this country pays its way in the world’. This contradicts his earlier rhetoric about a future Labour government being ‘totally focussed on the interests of working people’. It means that it would have to be ‘totally focussed’ on those of private capital.

True, growth (as measured by an increase in GDP) is driven by investment but private enterprises only invest if there’s a prospect of making profits, and the government – without raising taxes – can only invest money that it borrows. So the growth that Labour (and the Tories and the LibDems) are promising depends on the prospects for private profit-making. Such prospects, however, are not something any government can control; they depend on which stage of the business cycle the capitalist economy is going through.

Labour will find that there is no magic wand either to conjure up business investment.