Worried prime minister, Liz Truss. (Picture: Simon Dawson)
The Tories are in such a shattering political crisis that at the start of this week it was impossible to be sure who would be the chancellor—or even the prime minister—at the end of it. On Monday new chancellor Jeremy Hunt torched all the tax measures in the disastrous mini-budget on 23 September—apart from a £13 billion cut to national insurance and £1.5 billion in stamp duty changes.
In normal times no prime minister could survive such a war on her own measures announced weeks before. Liz Truss has trampled on all the policies that she had described as absolutely necessary for success.
But Truss has tried to hang on. The disarray at the top of the government should encourage everyone fighting back over wages and jobs, but also climate chaos and against racism. Accelerating the fightback can force out Truss and all the Tories.
Liz Truss sacked chancellor Kwasi Kwarteng on Friday of last week. His 38 days in office was the second shortest time in the post in almost two centuries, beaten only by a politician who died of a heart attack.
Britain has now had four chancellors since July, in the middle of a social emergency of rampant price increases and soaring poverty. Truss knifed Kwarteng in an effort to save her own skin by bowing to the financial markets.
After the mini-budget on 23 September, bankers and financiers demanded the Tories change policy. Public spending was set to be much higher than state income, with the gap filled by borrowing.
Truss and Kwarteng claimed that exuberant capitalist growth would speedily make up the shortfall, but the bankers were not convinced. They don’t lend money if there is a risk they won’t get their money back or rampant inflation will devalue what they collect.
They made clear, by selling the pound and putting up interest rates, that the government had to abandon its proposed tax cuts, or it had to implement massive cuts. And the bankers weren’t convinced that the Tories could get such cuts through parliament or impose them on an outraged population.
The Bank of England added to the pressure by announcing that a bond-buying programme designed to shore up the markets would end on Friday of last week. That gave a time limit for Truss, and she duly delivered. As Kwarteng went, Truss said the government would push ahead with a rise in corporation tax that previous chancellor Rishi Sunak had scheduled.
Kwarteng had wanted to remove this as a sign of goodwill to bosses. But those same bosses thought the overall package of unfunded tax cuts was too destabilising. Then Truss appointed Jeremy Hunt as the new chancellor.
These moves briefly steadied the value of sterling and the price of government bonds—known as gilts. But then Truss held a disastrous press conference lasting less than nine minutes, which led to widespread derision.
As she stopped speaking, gilt markets saw a fresh sell-off. Financiers said the £18 billion that would eventually be raised by the corporation tax increase was not enough.
Analysts at investment bank Goldman Sachs said the U-turn had only a “modest impact on government borrowing”. So Hunt had to go further on Monday. The markets have disciplined a government, limited its policies and decided who should fill key roles.
And the tumult at the top is also partly because our side is starting to fight. The Tories could ram through tax cuts for the rich if the opposition was weak. Our class is no longer just soaking up the punishment.
Hunt is infamous for repeated assaults on NHS workers and confronting the striking junior doctors when he was health secretary from 2012 to 2018. In 2012 the Leveson inquiry heard how Hunt and his department had worked to smooth the attempt by the Murdoch media empire to grab even more control.
He has twice run for Tory leader, but now says his hopes of the top job have been “clinically excised from me”. In his 2019 bid for the top job, he proposed reducing corporation tax to 12.5 percent, far below the rate which caused such an outcry recently.
He opposed Brexit and eventually backed Sunak for prime minister, and was therefore an unlikely choice for Truss. But she hopes he will be a reassuring face. Hunt is not some cuddly figure. He is now going to return to making workers pay for the crisis. He warned that Whitehall departments would have to find further “efficiency savings”.
The Institute for Fiscal Studies think tank estimated before Monday’s retreat that £60 billion of tax increases or cuts will be needed to calm the markets. The Tories’ Energy Price Guarantee scheme was supposed to limit yearly gas and electricity bills to an average of £2,500 for 28 million households for two years from 1 October.
But Hunt now says the scheme will last only six months before a “Treasury review”. There is precious little left of public services that can now be cut.
The NHS is already on its knees. A record 7 million people were waiting for hospital treatment in England, according to the latest NHS figures. And people on benefits are barely surviving, with spreading hunger, illness and early deaths.
There’s no sign of interest rates dropping to the level before the mini-budget. So more than 5 million households in Britain are set to see their annual mortgage payments increase by an average of £5,100 a year—£100 a week—by the end of 2024.
More than 1 million households with a variable‑rate mortgages already face higher repayments after the chancellor’s fiscal statement last month. But the figure is set to rise to 1.7 million by the end of this year, as people on fixed-rate offers move on to new deals.Landlords facing mortgage rises will pass the increases on to renters, fuelling an epidemic of poverty and evictions.
Many Tory MPs believe it is only a matter of time before Truss is pushed out. Ex-chancellor Kwasi Kwarteng has privately told friends he believes Truss will last in her post only a week.
Senior Tory MP and chair of the education committee Robert Halfon told Sky News on Sunday that recent weeks have seen “one horror story after another”. He said, “Over the past few weeks, the government has looked like libertarian jihadists and treated the whole country as a kind of laboratory mice in which to carry out ultra free market experiments.
Halfon explained that in his constituency this weekend following recent events, “one person after another expressed dismay, but one or two people actually said to me that they were frightened.” Crispin Blunt, Tory MP for Reigate, said, “I think the game is up, and it’s now a question as to how the succession is managed.”
The government’s record low in polls increases the pressure. In one survey the Conservatives have fallen to 19 percent, with Labour 34 points ahead. John Curtice, a leading pollster, says Truss is now as unpopular as former prime minister John Major was in the aftermath of the Black Wednesday currency crisis in 1992.
It took the Tories 18 years to win another election. By Monday only three Tory MPs had called openly for Truss to go.
But many others are said to have submitted letters demanding she quits. It’s not impossible that the Tories will ditch Truss quickly.
If they don’t they risk protracted agony, but if they do they will look like a retreating rabble. And they will have to find a way to avoid a Tory members’ vote on the successor because they can’t be trusted to come to the “correct” verdict.
None of this rules out that the cornered regime will unleash vicious assaults—anti-union laws, scapegoating of refugees, attacks on strikers and cuts aimed at what they see as “scroungers on benefits”.
The last two weeks have shown the power of financial markets to break a government. The unelected power of money has decided the Tories’ policy had to be reversed—and the bankers won. And this is a Tory government, supposedly the sort that bankers prefer.
The treatment of even a mildly reforming left government could be much harsher. It’s a brutal example that power doesn’t lie in parliament. In the end it’s the corporate executives, the bankers and the financial institutions that shape capitalist power.
In the 1990s US president Bill Clinton’s adviser James Carville quipped, “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a top baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”
The financial markets and the European financial institutions destroyed the anti-austerity Syriza party after it was elected in Greece in 2015. They also removed right winger Silvio Berlusconi in November 2011 during the Eurozone crisis.
Almost every Labour government in Britain has faced repeated assaults from the markets—and they have given in. One way to deal with this is to not challenge the markets from the start. New Labour gave independence to the Bank of England in 1997. It was a bid to convince the markets that interest rates would be set to fit in with the profit-taking of international speculators and businesses.
Governments imposed vast numbers of self-imposed “rules” reflecting the submission to the bankers. This guarantees dancing to the capitalists’ tune.
Governments aren’t powerless. They can put up taxes on the rich and renationalise industries, for example. But that will lead to frenzied opposition similar to the last fortnight.
Timid resistance will indeed be crushed by the markets. The movement centred on Jeremy Corbyn never really faced up to the likely response if genuine reforms had been tried.
The only way to buck the market is to base resistance on the workplaces and the streets, and to mobilise millions to take over the central levers of economic power. Democratic public ownership of the banks, industries and international workers’ cooperation can seize control from the bankers and the bosses.
Labour leader Keir Starmer is posing as a reliable guarantor of capitalist stability. His pitch is that the Tories are bad for business and he can bring calm.
It’s having some effect. Shadow chancellor Rachel Reeves was feted at a swanky party of elite corporate figures last week hosted by the US businessman Michael Bloomberg.
A top Tesco supermarket boss, chair John Allan, has said Labour is putting forward “plausible” and “attractive” proposals. He said there is now “only one team on the field”. More generally, according to the Telegraph newspaper, Deborah Mattinson, Labour’s head of strategy, is zeroing in on a particular group. “Labour’s ‘Hero Voter’, as they are known to staff across the party, is a white, middle aged Northerner who voted for the Conservatives in 2019 but could be won back next time.”
We can guarantee he will be miscast as hostile to immigration, nervous about trans rights and fiercely nationalistic. He will have to be charmed with much Union Jack waving and plans to be tough on asylum seekers.
If Starmer makes it to Number 10, he will face the same economic conditions as the Tories. His approach won’t be exactly the same. But because he won’t take on the bosses or back strikers, he won’t be fundamentally different. That means Labour too will attack working class people.
Strikers are demanding an unallocated €1.6 billion go towards workers' pay rise
London march on 27 October
Another day of mass resistance
Plus: 500 on Leeds unity march
