Cooking the Books 2 – Budget for business as usual
This year 15 March was budget day, the day the government announces its money-raising and spending plans for the financial year that begins in April. Jeremy Hunt went on about ‘growth’; the Labour Shadow Chancellor sounded like she was Liz Truss, accusing Hunt of not being ambitious enough (in effect of not making wilder promises). But no government has the power to bring about growth.
‘Growth’ is an increase in the amount of marketable wealth produced in one year compared with the previous year. The only people who can organise this are those in charge of the profit-seeking businesses that produce such wealth.
But even they don’t have a free hand; they have to take account of market conditions, which are outside of their control, and only increase production if they judge these offer a prospect of making a profit. It is this business investment for profit that drives the economy. The most any government can do is to try to ensure conditions that allow and encourage this. In fact, if they don’t they will provoke an economic downturn.
Capitalist firms and their owners accept that there must be a government, if only to protect private property rights, keep law and order, and maintain armed forces, though these days governments do much more for them than this; they pay, for instance, for the workers’ education and health to create a more productive workforce for business. All this costs money and has to be paid for.
The main direct tax on businesses is corporation tax, a tax on their profits (the main indirect tax is income tax on wages). Rishi Sunak, when Chancellor, announced in the 2021 budget that this would go up from 19 percent to 23 percent from 1 April 2023. Hunt confirmed that this was to go ahead. However, there are generous exemptions. For the next three years businesses will not have to pay corporation tax on any profits that are invested in the full cost of new machinery, plant or IT systems. In other words, not on profits that are directly re-invested in accumulating capital; which in fact is the main aim of capitalist production.
The government’s aim is to encourage business investment, the driver of growth. Whether it will work remains to be seen. Businesses won’t invest just to avoid taxes but only if the investment will be profitable.
At the moment, Britain has a ‘labour supply problem’. Another way of putting this is that there is a shortage of wealth producers since there is no other way that wealth can be produced other than by the application of human labour to materials that originally came from nature. Which is what workers do. No workers, no wealth and no capitalist share of wealth as profits.
This shortage is partly the result of previous government policy, albeit one endorsed by a referendum, to withdraw from the EU and stop the free movement of workers from the rest of Europe. To deal with the shortage, Hunt announced three measures. The first was to allow those with a pension pot of £1 million — not your ordinary worker, then, but someone on the way to becoming a capitalist — to accumulate more without having to pay tax on it. The second was to improve nursery facilities for families with both parents working. The third was to cut the payments to the unemployed, to in effect starve them back to work. The hope is that this will encourage more, especially mothers, to join the wealth (and profit) producing force. Again, a measure aimed at helping profit-seeking business make more profits. But there is no guarantee that it will work either.