INEQUALITY is a word that did not feature once in Rachel Reeves’s lengthy Budget presentation this week. That is not likely to be accidental.
The reason is surely that she is gambling on capitalism and capitalists to get Britain out of the hole they have themselves dug, with an assist from the Tories. And equality is really not a word they like to hear.
In fact, Reeves went out of her way to appease the rich and big business in her first Budget. Take the taxation of private equity, the speculators interested only in making the fastest possible buck.
Despite having previously and quite accurately, branded them as “asset-strippers,” Reeves barely inconvenienced them with her tax measures.
Private equity bosses call their profits “carried interest.” Sometimes they speculate with their own money, more often with that of investors. This is effectively income, yet it has been taxed at just 28 per cent.
If it were classed as ordinary income, it would fall into the 45 per cent tax bracket. It is this anomaly, to use too gentle a word, that led one mogul to say that the system left him “paying less tax than a cleaning lady.”
Yet far from closing the loophole on Wednesday, Reeves merely tickled the tax rate up to 32 per cent. Cue popping champagne corks across Mayfair and the City.
The private equity lobbyists had convinced the Chancellor that “international competitiveness” mandated retaining the scam, by which they meant keeping Britain a warm and welcoming venue for big capital and its omnivorous accumulation.
That is but one example. The absence of a wealth tax, which would both raise much-needed revenue and address burgeoning social inequality, is another.
And, of course, the government has recommitted to keeping corporation tax at its present modest rate for the next five years, likewise leaving the top rate of income tax unchanged.
Also note that the all-powerful bond markets, finely tuned to sniff out any radicalism, have taken the Budget more or less in their stride.
Yet will this cringing before the rich man’s frown actually lead to the higher rate of growth the Starmer team claims is the north star it steers by? The medium-term official projections accompanying the statement suggest not.
Still less likely is an end to the income stagnation that has settled as a damp blanket over the economy for the last 15 years. As this column forecast, it looks like Reeves’s headline move — raising employers’ National Insurance contributions will mean lower pay rises for workers as bosses recoup the costs out of labour rather than profit.
Furthermore, the prestigious Institute for Fiscal Studies forecasts that this parliament will see real household incomes increase by just 0.4 per cent per year, worse than any parliament except the one just ended, which was marked by the pandemic.
So any expectations that private capital is going to ride to the rescue of living standards, as Starmer tried to suggest with his overhyped “investment summit,” are doomed to be dashed.
At most, the private sector will invest where the government is guaranteeing a fat profit, in infrastructure projects, for example.
It is a strategy foredoomed to failure. For all the “old Labour” trappings of some of Reeves’s announcements, her plan remains firmly within the failed neoliberal framework.
Working-class incomes will be squeezed. Real wages will generally flat-line, except where trade unions are strong enough to make a real difference. And the rich will continue to have free rein.
Starmer promised that when the Budget would ensure the “broadest shoulders bear the burden.” On Wednesday, those shoulders simply shrugged.
