Socialist Worker

A budget for the rich

As Britain slides further into recession, Simon Basketter looks at what last week’s budget will mean for ordinary people

Issue No. 2149

The Daily Telegraph declared it the budget of “class war”. But for all the right wing media’s frothing at the mouth and claims that the budget will hit the wealthy, the real losers will be ordinary people.

The budget presumes that the British economy will recover later this year.

Chancellor Alistair Darling predicts that the value of goods and services produced in Britain will fall by 3.5 percent this year but will grow by 1.5 percent next year.

There isn’t an economic analyst on the left or the right who thinks him anything other than delusional.

But even if such a recovery were to take place it would rely on stinging attacks on workers and the public sector.

The amount the government has invested, loaned, or pledged to the banks is now equal to Britain’s gross domestic product (GDP), or £22,800 per person.

To pay off its debts the government will push through swingeing public spending cuts. The worst of these will come after the next general election but some will start straight away.


For all their complaining, the bosses did OK out of the budget. For instance, loss-making companies will be able to claim back taxes they paid on profits in the last three years.

The budget also introduced a tax exemption for foreign dividends – which is essentially a scam that enables companies to pay less tax by declaring profits “offshore”. Multinationals have lobbied for this measure for many years.

Chris Morgan – boss of the KPMG accountancy firm which is presiding over the shut down of the Visteon plants – said, “The announcement shows that [the government] has been listening to business.”

The chancellor introduced a credit insurance scheme for businesses. Companies that can’t get insurance because they might go bust will get subsidised cover from the government.

A new Strategic Investment Fund containing £750 million will be set up to help “innovative” industries.

A tax scam called the “business capital allowance rate” doubles the amount companies can write-off against tax if they invest in building or machinery.

Public sector

While business interests are being well protected, the public sector is to be cut to within an inch of its life.

Public spending is set to fall from the current 48 percent of national income, to 39 percent in 2017-18 – a level not seen since the dark days of Margaret Thatcher’s Tory government.

The figures amount to the most sustained attack on public spending in decades.

For all Labour’s talk of investment in infrastructure, public sector capital investment will be halved from £44 billion this year to £22 billion in 2013-14.

Departments that fund the NHS, education, and local government will see their budgets slashed by 2.3 percent in real terms.

Such a cut will signal the worst period of departmental spending since 1977-9 – the period immediately after the then Labour government sought a loan from the International Monetary Fund.

NHS capital spending has already been reduced by £1.3 billion next year, and the £1.8 billion surplus that the NHS generated in recent years has simply been removed from the books.

The department of health is now expected to make £10.5 billion in cuts. It is to save £500 million a year by cutting the amount of time people spend in hospital. More private sector involvement is supposed to save £100 million a year in the NHS.

In local government, “efficiency” savings of £5.5 billion are planned. The government’s example of best practice is Essex County Council’s attempt to privatise all its services – “saving” £26 million.


The government has talked up plans to build more council houses. Yet it turns out its proposals will see just 900 new council homes built over two years. This is at a time when there are five million people on local authority housing lists.

The government admits that an extra 240,000 homes are needed every year until 2016 to meet the demand. Just 70,000 are expected to be built this year.

The HomeBuy Direct scheme was given an extra £80 million in the budget – on top of the £300 million paid to set it up in September 2008.

The scheme was created to help 10,000 first-time house buyers. Yet according to government figures it has so far failed to help anyone.

Back to the 1980s

This was supposed to be the “jobs budget” and Labour did unveil a job creation scheme. The announcement came as the unemployment total reached 2.1 million, exceeding the level it was at when Labour came to power in 1997. Almost 40 percent of unemployed people are under 25.

Under the scheme, voluntary groups will be able to bid for £6,700 a head to employ young people for gardening, loft insulation or social care.

This “training” will be compulsory for all unemployed people under 25s.

The scheme is a rehashed version of Thatcher’s “Community Programme”, which forced people into pointless work to help keep the unemployment figures down.

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Tue 28 Apr 2009, 19:01 BST
Issue No. 2149
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