The Need for a Pro-Social Direction for the Economy Is an Election Issue
Chancellor George Osborne presented the government’s final budget before the general election on Wednesday, March 18. This was a political act of disinformation aimed at manipulating the electorate, and represented a firm commitment to further austerity.
It was, as described by Newsnight’s Evan Davis, an exercise in “expectation management”. The fact is that the planned deep cuts are an open secret and have been widely exposed, and this has been doing the Conservatives damage in the pre-election polls. The Chancellor therefore announced that £30bn of cuts would be made, and it was supposed to be some relief that £12bn of this would come from a reduction in spending on welfare, notwithstanding that this is itself an anti-social cut and part of the austerity agenda.
The attempt to mislead has been widely commented upon, including by the Institute of Fiscal Studies, who called on Osborne to specify what exactly will be cut from welfare and pointed out that the poorest had been worst affected by the cuts. This budget announcement was an attempt to give the impression that things are improving, that the “sun was starting to shine again”, thanks to austerity (though even in this, the Chancellor had to resort to trickery, such as the inclusion of one-off asset sales such as that of Northern Rock in meeting their targets).
Also widely condemned was the lack of any mention of the NHS, a silence which speaks for itself.
In overall terms, the budget thoroughly represents the continuing austerity agenda, and as such reflects the sharpening contradictions over how the government should raise its revenue, in the context of an election being fought over the issue of austerity and the rights of all. It hardly merits consideration as a serious attempt at managing and setting an aim for the economy.
A breakdown of the sources of government revenue according to the budget is illustrated below 1:
At this level, the budget contains no significant deviations at all from the austerity programme. The Whole of Government Accounts for 2012-13, for example, closely match the above figures. 2
Total revenue comes to £670bn. (For comparison, the gross domestic product is approximately £2tn, or three times total government revenue). Corporate taxes form less than 7% of this total. The figures reveal the major role played by personal income tax, national insurance and sales taxes in raising revenue.
An important issue posed for the developing Workers’ Opposition by the current budget is to examine the sources of government revenue. An alternative to the focus on personal income tax, national insurance and sales taxes in raising revenue is a key component of changing the direction of the economy in favour of the working people and small businesses.
Two issues that are urgently required to be taken up in elaborating this alternative are:
- That the government must claim revenue directly from the economy.
- That the monopolies must pay for the value they receive from public services and infrastructure.
Budget revenue figures
We present a more detailed summary of the government revenue figures presented in the budget, in order of size. Classifying the figures under headings is made difficult due to the roundabout nature of collecting revenue – ultimately claims on the value added by the working class in the socialised economy – and the methods of accounting in which there is no measure of work-time, value added and transferred, and so on that are essential for organising a modern pro-social economy.
Personal income tax and National Insurance: £284bn
£171bn of this figure is income tax, mainly out of workers’ wages. The remaining £113bn is National Insurance, which is effectively a fee, taken at the point of earnings on certain state benefits such as the state pension.
Sales taxes: £193bn
Sales taxes mainly consist of VAT (£128bn), fuel duties (£27bn) and duties on tobacco and alcoholic drinks (£19bn). We also include stamp duty on property sales (£10bn), air passenger duty (£3bn), insurance premium tax (£3bn) and stamp taxes on shares (£3bn). This is paid indiscriminately by the population as a whole, mainly on paying for the necessities of modern life, including work and leisure.
Property taxes: £56bn
We have included council tax (£28bn) and business rates (£28bn). We have not included inheritance tax and capital gains tax, though a large portion of these relates to property.
Taxes on corporations: £46bn
Corporate taxes consist mainly of corporation tax (£42bn), which, rather than a direct claim on added value, is a tax on equity profit, plus a contribution from the bank levy (£4bn).
Revenue from public enterprises and infrastructure: £46bn
The government quotes a gross operating surplus (£40bn), which includes its revenue from public enterprises in the form of sale of goods and services. We have included vehicle excise duty, or road tax, here (£6bn). Various fees for public services, such as university tuition fees (which alone amount to £13bn for home, EU and non-EU students combined 3 ) are not included in government revenue.
Miscellaneous taxes: £36bn
This includes emission and carbon levies (£8bn), which affects the energy companies, for example, capital gains tax (£7bn), inheritance tax (£4bn), license fee receipts (£3bn) and other taxes (£14bn).
Other revenue: £9bn
This includes revenue from interest, dividends and receipts not covered by the above.