Alan Simpson…neoliberalism’s unstoppable implosion
Don’t be distracted by the pantomime of Liz Truss’ resignation. A bigger game is in play; the complete implosion of the Conservative Party. Ever since the days of Margaret Thatcher, the Tory Party has been embroiled in an internal war between competing ideologies. Now the gloves are off.
Neoliberal outriders stalked John Major’s government, squeezing One- Nation Tories out of their parliamentary seats and replacing them with free-market zealots. Truss was to have been their finest hour. It barely lasted much longer.
Right wing fundamentalists drafted Truss’ mini-Budget and were sharpening their knives to sell off public services and environmental safeguards in a corporate car-boot sale. But the very markets they paid homage to recoiled in horror at the infantile economics driving the project. When everything hit the fan the Tufton St Taliban went into hiding, leaving the rest of society to pay the price.
In one sense, the Left should welcome the arrival of Jeremy Hunt. The new Chancellor is not the answer to the crisis but he has moved the goalposts. In dumping the Kwarteng budget, Hunt threw ‘Trussonomics’ under a bus. The Right are incandescent
Nigel Farage branded it as a ‘Remainers’ coup, claiming that Hunt had been seen arriving in London on a Eurostar train (no doubt with covert instructions straight from the EU!). For him, it is the beginning of the Great Brexit Rowback.
Chance would be a fine thing. Brexit may be a political and economic disaster but it is no longer the central issue.
Crisis meets crisis meets crisis
We are at a point where the Cost of Living Crisis meets the Climate Crisis, meets the Democracy Crisis. Only a fundamental change in political thinking will get us out of this mess. To do so the whole debate must be re-defined –
This is not Covid Mk2. Covid was deflationary. The State needed to borrow money at near-zero interest rates just to keep the economy (and people) alive. Post-Covid food shortages, and the war on Ukraine, have created inflationary spirals in food and fuel prices. The Kwarteng (unfunded) budget then crashed the pound and forced interest rate hikes that bite hard into mortgages and business finance. None of this was caused by workers.
Climate Crisis events are running amok. Not a single part of the planet has escaped ‘wild weather’ events. Lives and livelihoods are being trashed by events much bigger than us. What we can do is stop making things worse, repair more than we damage, and put ‘security’ at the heart of prosperity. The central plank is probably the most challenging. If we are to survive, economic policy decisions must
deliver an annual 10% cut in carbon emissions. Politics needs to understand that physics makes this non-negotiable. It requires a complete re-write of economics, not just a change of government.
Resuscitate Democracy. Britain’s current crisis has its roots in the corporate takeover of political life. Dark money drives divisive policies that enrich the rich and impoverish the rest. In doing so, democratic rights, democratic accountability and equitable distribution have gone out of the window. Democracy must be re-founded, combining national/social entitlements with maximum levels of devolved accountability and control. An inclusive, participative democracy will be the only one that lasts.
Eye-watering indifference
When the Chancellor warns of ‘eye-wateringly difficult choices’ ahead, what he means is ‘austerity’. But this isn’t our only choice. Paying workers less is not a precondition of productivity increases or growth. It has actually been a front for transferring wealth upwards. As Professor (Lord) Prem Sikka pointed out –
“In 1975, workers share of GDP, in the form of wages and salaries, was 65.1%. By mid-2022, it was less than 50%. Since the mid-1970’s … there has been a huge transfer of wealth from labour to capital.”
None of this wealth transfer boosted Treasury incomes. And, whilst wages tend to be banked, taxed and spent within the UK, payments to capital increasingly move into offshore havens and tax avoidance. As successive governments facilitated this shift in favour of capital, so the politics of taxation became focussed on how much tax workers could afford. Silently, ‘growth’ in the economy then went into the pockets of capital, as the gap between real wages and real GDP steadily widened.
So if the Chancellor is looking a unifying place to start, it should begin with the taxation of capital: an attractive list beckons –
- cancel all tax allowances to oil and gas extractive industries would help the Exchequer as much as the planet,
- make the payment of bonuses conditional on the company/institution (demonstrably) delivering a 10% annual cut in carbon emissions
- put a 50% tax on corporate share buy-back schemes
- a Tobin Tax on speculative currency transactions is long overdue, and a specific tax on short-selling and hedging should be one of the immediate lessons from the Kwarteng budget debacle
- follow Italy’s example, by offering 105% tax allowances against all energy efficiency and home/work renewable energy installations
- give every qualified driver/vehicle owner a (decreasing) annual carbon allowance to be used for fuel purchases or traded in as part of a switch to EVs, public transport passes or cycles
- make landlords responsible for the energy bills in all rented properties below energy efficiency Band C
- replace the government energy price guarantee with a re-structured energy market: separating gas and electricity; setting a unit maximum price in each based on average market pricing (not marginal pricing),
- place a carbon tax on aviation and shipping, and
- use the tax system to drive a return to the 1975 position, where 65% of GDP goes into wages or salaries.
Inflationary times
Britain’s inflation rate has just hit 10%. Some of this can be put down to the government trashing the exchange value of the pound. Some can be blamed on Putin. None has been driven by inflationary wage demands. But food price inflation is also driven by the wild weather events that we continue to pretend have nothing to do with us.
Heat waves trash olive and grain harvests, floods wash away crops and whole farms, unrelenting rain makes it impossible to retrieve anything from the soil – these are parts of the roller coaster we have created. For Britain, it also exposes the extent to which we rely on others to supply all that we choose not to produce ourselves.
By chasing cheapness around the world, Britain made itself reliant on imported everything. Climate, economic and democratic stability requires the opposite. The energy crisis offers the moment to do so.
Clean heat: lessons from Germany
Decoupling gas and electricity pricing is a necessary first step in tackling the energy crisis. A windfall tax on gas and oil companies is the second. But the third requires a fundamental rethink of heating strategies. Clean electricity would only account for 17% of UK
energy consumption. By far the biggest slice – 51% – comes as heating and cooling. To work out how to make radical reductions in this sector, Britain must look elsewhere.
Prior to the Ukraine war, Germany began installing heat pumps to replace gas. Last year they installed 150,000 units, but the war provoked a step change. In August 2022 alone, Germany had 148,000 installation applications. The climate advantages are massive. So too are the employment and economic ones.
All the skills, all the jobs and all the wages are directed into the German domestic economy rather than into global, fossil fuel consumption.
In theory, Britain is on the same page. The UK government target is 600,000 heat pump installations/year by 2028. In practice, however, Britain has installed less than 5,000 heat pumps/year over the last decade. Even by Boris Johnson standards the target is a fib too far.
The Chancellor could make this the centrepiece of his own next Budget…but he won’t. The Tory civil war won’t allow it. Right-wing MPs insist that deregulation, and the decimation of public services, is the answer. John Redwood MP has already called for the public sector to pay the price of Tory incompetence:
“…use less energy in the public sector, sell off surplus property, stop Councils buying property portfolios, stop the illegal migrants, charge foreign visitors for using the NHS, reduce rail subsidies.”
None of this makes any sense, but it is where today’s battle lines in the Conservative Party are being drawn.
‘One Nation’ Tories recognise that saving the nation may be the only way to save their own seats. The radical Right will have none of it. Whether Truss survived or not was a side show in this internal struggle. Few recognise that neoliberalism (not socialism) has sounded the death-knell for the Conservative Party. All the Kings horses and all the Kings men, cannot put Humpty together again.
The Labour Party and the Labour movement can not put Humpty together again either…and should not attempt to. In the real world, the challenge is to write a different script. As someone famously once said, “If not now, when?
Alan Simpson
Oct 2022
