Thu 18 Jul 2024

 

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Make no mistake: Labour’s manifesto is a return to austerity

It is a political and pernicious choice

A Labour manifesto that brings the railways into public ownership, strengthens workers’ rights and removes tax exemptions for private schools (all policies from 2017 and 2019 manifestos) should be universally welcomed.

But what lies beneath is far more sinister. The 2024 Labour manifesto bakes in austerity for our public services. By ruling out redistributive taxation, it de facto accepts existing spending plans that the Institute for Fiscal Studies (IFS) says mean cuts to unprotected departments of between 1.9 per cent and 3.5 per cent per year. Austerity baked in.

It’s a far cry from the Keir Starmer in 2020 who said of Jeremy Corbyn: “He made us the party of anti-austerity – and he was right to do so.”

The IFS has said there is a “conspiracy of silence” between the two major parties about the scale of cuts that is baked into the current economic plans. The Resolution Foundation estimates that implies upwards of £19bn of cuts in non-protected departments.

Nothing in Labour’s manifesto changes that analysis. The tax changes Labour has announced (mostly reforming non-dom status and removing tax breaks for private schools) amount to around £7bn in extra revenue – and that has already been earmarked for additional spending on things like free breakfast clubs, mental health counselling in schools, 6,500 extra teachers and more NHS staff training places. Those are all good policies, but they do not address core funding deficits across public services.

Across the public sector, from nursing to care workers, from teachers to junior doctors, there is a recruitment and retention crisis. Unless you restore public sector pay, you will not solve those staffing shortages, or tackle the NHS backlogs. It’s also not clear from the manifesto where any additional funding would come from to fund the private sector operations that shadow Health Secretary Wes Streeting has promised, leaving the worrying conclusion that they may come out of existing NHS budgets.

Councils around the country are going bankrupt, many are closing libraries, axing youth clubs, and rationing social care to stay afloat. Universities across England teeter on the brink of bankruptcy too – something that will only be exacerbated by restrictions on overseas students’ visas. Both councils and universities need an injection of cash, or we will all lose out. The courts have massive backlogs and child poverty has risen to 4.3 million due to decades of benefit cuts – none of which are being reversed by Labour’s new manifesto.

If Labour simply raised corporation tax to the level it was when the party left office in 2010, that would raise upwards of £5bn (and still be a lower rate than most G7 countries). One could equalise capital gains tax rates with income tax rates – raising at least £15bn (more if you equalised with national insurance rates too). This is something Nigel Lawson, Thatcher’s chancellor, did in the 1988 Budget, so it should hardly be seen as radical socialism.

Another option would be to increase income tax for the top 5 per cent of earners. Starmer should be familiar with that one, since it was the first of his 10 pledges in 2020, “based on the moral case for socialism”. Today that tax hike on the very highest earners would raise about £12bn for public services. Starmer himself admitted, in his interview with Sky’s Beth Rigby last night, that he could afford to pay more tax on his current £128,000 salary.

But as Labour has become ever more reliant on wealthy and corporate donors, so it seems their tax policy has been diluted. He who pays the piper calls the tune.

If you want a snappy summary of Keir Starmer’s “changed Labour Party”, it was pithily provided by Kay Burley earlier this year: “Labour’s happy to cap child benefit, but not bankers’ bonuses”.

Look at the record profits of UK banks or the ballooning wealth on The Sunday Times Rich List – the money is there. Austerity is a political and pernicious choice.

The polls show that frustration with the state of public services is driving dislike of the Tories. If Labour don’t provide extra funding, that public frustration will rapidly transfer onto a Labour government, which has chosen to protect the rich and big business at the expense of public services and child poverty.

Andrew Fisher is a former executive director of policy for the Labour Party

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