IT IS daily becoming clearer that the Labour government is intent on a new round of austerity.
The softening-up process, which began during the election campaign, is in full swing. “Black holes” in public finance are looking ever deeper, debt figures are being selected and presented to buttress the case and the airwaves are clogged with ministers doing the “woe, woe and thrice woe” routine.
Already 10 million pensioners are to have their winter fuel payments removed; while the two-child benefit cap, responsible for so much childhood poverty, remains firmly in place. Infrastructure projects have been cut back.
Now we learn that social housing rents are to be allowed to rise by 1 per cent more than inflation, a fresh squeeze on working people’s income.
Further cuts are slated for Chancellor Rachel Reeves’s October Budget.
So Labour’s election campaign promise that there would be no return to austerity looks like falling by the wayside straight away.
The Tory media are already denouncing this as Labour hypocrisy. The truth is of course more complicated.
It rests on two factors. One is that British capitalism remains in deep trouble — by most metrics it has barely recovered from the crash of 2008, which hit Britain particularly hard because of its hypertrophied financial sector, prioritised by neoliberalism at the expense of a more balanced economy and a strong manufacturing sector.
The 16 years since have been mainly about the Tories trying to put the system that failed so spectacularly back on its feet again. For them — or most of them — that was the purpose of Brexit with its promise of still greater deregulation and tax-cutting.
Yet the patient has failed to respond to the proffered cure. Renewed growth remains elusive. And the City of London is under global pressure.
To take one example, the City has been the financial centre of the global mining industry since the days of empire. Yet London has now fallen behind New York, Toronto and Sydney as the preferred venue for share listings in the sector.
And as the City falls back in historic centres of influence, it is an also-ran in competition for new high-tech listings.
This is attributed to a lack of liquidity in London — speedy access to cash — and of course, in the words of one mining executive, “regulatory overkill.”
The new government has hurried to meet this spurious objection by emphasising its commitment to competition-focused regulation, designed to make the City a more attractive place for investors around the world. We have all seen how that movie ends.
This attitude highlights the second factor pushing towards more austerity — the incapacity or unwillingness of Labour ministers to think outside the conventional box, which means accepting the parameters of economic policy laid down by the City and the Treasury.
That is not because Reeves and her colleagues are stupid or sadistic. Their fealty to the precepts of the leading sections of the bourgeoisie rather reflects the structural commitment of social democracy to the capitalist system.
That can only be broken by the most powerful mass campaigning. Fear of mass struggle has already produced the one substantive deviation from a fresh austerity under Starmer — the settlement of several major public-sector pay claims.
The death grip of zombie neoliberalism on the imagination of Labour’s right wing can be released if the movement — trade unions and community campaigners alike — make it clear that a new austerity will be challenged every step of the way.
That seven Labour MPs rebelled over the benefit cap in the government’s first weeks shows that such extra-parliamentary pressure can shift the political tectonic plates.
