ARGUABLY the most damning indictment of Labour Chancellor Rachel Reeves’ budget on Wednesday was the glowing endorsement the International Monetary Fund (IMF) greeted it with.
The IMF, the capitalist world ‘banker of last resort’, hailed Reeves’s ‘sustainable’ tax rises with its spokesperson saying the IMF welcomes the government’s ‘focus on boosting growth’ through a needed increase in public investment while addressing urgent pressures on public services.
The IMF is notorious for demanding the most brutal austerity attacks on workers throughout the world to pay down the vast national debts that have swamped entire countries.
In recent years, however, the fund had tempered its demands for austerity with warnings that austerity has driven the working class into confrontation with the capitalist class, with all the revolutionary implications this holds for world capitalism.
The IMF is now calling for a more tactical approach to try and convince workers that pain would be shared by all classes, while underneath assuring the bosses and bankers that their profits would be assured at all costs.
Reeves’s budget met that criteria with its claim that it would inevitably lead to growth in the economy and that workers would be shielded from paying the cost.
This would be achieved by a record £40 billion ‘tax raid’ on employers to ‘rebuild Britain’.
The main plank of this tax increase was an increase in employers’ National Insurance (NI) contributions that would raise £25 billion along with the £50 billion Reeves intends to borrow from the international financial markets.
The Office for Budget Responsibility (OBR) said the increase in NI would raise about £800 a year for every employee. This will, of course, be passed on to workers through cuts to both wages and jobs as the employers off-load the increase onto their workers.
The OBR estimates that at least 80% of this increase will be dumped on workers with the lowest paid bearing the biggest cost, as Reeves has reduced the wage levels at which employers become liable to pay NI, cut from £9,100 pa to £5,000 pa.
In an attempt to stave off UK capitalism from bankruptcy Reeves unveiled the biggest borrowing binge in decades – even bigger that the one Liz Truss embarked on in 2022 and which came within a hair’s breadth of collapsing the British economy.
Reeves has pledged to borrow up to £50 billion by selling government bonds on the international financial markets under the cover that this vast sum would be used for ‘public spending and investment’.
Investors who buy up government bonds registered their fears that the budget was plunging the UK even further into bankruptcy by increasing the amount of interest they charge.
Richard Hughes, chairman of the OBR, said: ‘The interest costs on this debt are also higher and are now forecast to exceed £100 billion in each year for the next five years.’ Increased debt repayments to the international bankers and hedge fund speculators will completely wipe out all empty promises from Reeves to put more money into the NHS and public services.
Already the OBR is forecasting that it will inevitably lead to an increase in inflation while workers’ wages fall.
Like previous Tory governments, Labour has no way out of the economic crisis except through massive debt – debt that workers will be expected to pay for through brutal austerity as UK capitalism dives off the cliff into economic recession.
TUC general secretary Paul Nowak hailed the Labour budget as a ‘vital first step towards repairing and rebuilding Britain’ in a desperate attempt to convince workers that it was not a declaration of class war on the trade unions and working class from a Labour ‘business friendly’ government determined to make them pick up the bill for capitalist crisis.
Trade unions that were forced by the membership to take action against Tory austerity are immediately coming into conflict with Starmer’s government.
Leaders like Nowak who are tied to the Labour government must be removed and replaced with a leadership prepared to call a general strike to kick out Labour and bring in a workers government that will expropriate the bosses and bankers and build a socialist planned economy.
Join the WRP and Young Socialist to build up the leadership required for the victory of the British Socialist Revolution – there is no time to lose.