The Institute for Fiscal Studies (IFS) yesterday issued a blunt warning that Labour Chancellor John Healey’s budget, due on October 28, will be a ‘work of fiction’ if he doesn’t come up with concrete plans to slash £35 billion of government spending.
The IFS reported that Healey faces a £35 billion shortfall saying: ‘A choice to leave spending totals unchanged would implicitly be a choice to cut some budgets and allow the quality and/or quantity of some public services to fall. On the other hand, increasing spending to avoid cuts to budgets and fund higher defence spending could require tax rises or benefit cuts of around £35 billion.’
It added: ‘The Chancellor must decide where to land on that spectrum.’
Helen Miller, the director of the IFS, warned that ‘a “steady-as-she-goes” budget is not an option available to the Chancellor.’
Putting off any ‘tough decisions’ until next year’s spending review in the desperate hope that the massive international capitalist crisis will miraculously disappear is not an option for Healey.
The IFS said the rapid escalation of inflation, driven by the unprovoked and illegal US/Israeli war on Iran, meant that the budgets of all government departments would have to be cut in order to meet Labour’s spending commitments.
Leading Labour’s spending commitments is the pledge made by Andy Burnham, and backed by Healey, to increase defence spending to 3% of the UK’s GDP (total wealth) alongside a long-term NATO commitment to reach 3.5% by 2035.
The IFS report made it clear that to meet this and other spending commitments while at the same time cutting the UK’s massive national debt of £3 trillion means that Labour must either dramatically increase taxes or slash spending on benefits and the entire welfare state.
Labour showed where it stands on increasing taxes for the wealthy when at the weekend it ruled out plans to extend the ‘mansion tax’ (an annual surcharge on high-value homes) to include those valued at £1.5 million.
The IFS came out against increasing taxes with Miller warning: ‘Raising more taxes will drag on growth, but the extent of that will hinge crucially on which taxes are raised.’
She said: ‘The risk of having taken the big taxes off the table is that you end up fiddling with smaller, more damaging taxes and therefore doing more damage than you would need to do.’
In other words, ruling out taxes on banks, large businesses and the wealthy leaves only the middle and working class to be taxed into the ground and this holds serious risks for the ruling class.
While owners of £1.5 million homes may be shielded by the Labour government, the tens of millions of workers and their families facing a day-to-day struggle to feed and house themselves will not sit back and accept this as a necessary ‘sacrifice’ to keep a bankrupt British capitalist system from collapse.
The option for Healey and Burnham is to take a chainsaw to the welfare state with brutal austerity cuts to benefits, the NHS and all other public services to make up the £35 billion gap – a gap that is increasing by the day as the full effects of US imperialism’s failed war on Iran drives up inflation in the UK and across the world.
Healey, in his speech at the recent Labour Party conference, proclaimed that Labour had a ‘moral duty’ to cut benefits to bring down the national debt.
He gave a cast-iron promise to the international bankers and hedge funds who ‘own’ the UK’s debt that the Labour government will carry out a brutal austerity war against workers and youth in a desperate attempt to rescue the British economy from crashing into recession.
The time has come for the working class to force the TUC to take action by calling a general strike to bring down the Labour government and go forward to a workers government that will expropriate the bosses and bankers, building a socialist planned economy.
This is the way forward.
