Cooking the Books 1 – Pocket money
At the end of August Starmer proclaimed that ‘things will get worse’ but that later they will ‘get better’. There is, he said, ‘a budget coming in October, and it’s going to be painful’, adding ‘we have no other choice’ (tinyurl.com/yc3tt3u3). By now we will know how painful and in what way.
Only as recently as May the Labour Party was promising to deliver ‘more money in people’s pockets [their emphasis in bold], improving living standards everywhere and helping working people keep more of the wealth that they create’ (tinyurl.com/2yz4j8se).
Some 40 percent or so of the adult population in the UK get a part of their money income from the government such as child benefit, state pension or universal credit. The government can also increase the minimum wage, and it can reduce income tax rates resulting in take-home pay going up. So it does have some power to literally put ‘more money in people’s pockets’.
It also has the power to take money out of people’s pockets. We already knew that the present government has the will to do this as one of the first things it did on entering office was to cut most pensioners’ income by £300. So when this government says it will make things get worse, that’s one politician’s pledge that we can be sure will be honoured.
This doesn’t necessarily have to take the form of reducing the nominal amount of money paid to people. It could also take the form of not increasing this more than the rise in the price level. Otherwise, how else could workers get to ‘keep more of the wealth that they create’?
What Starmer was implying was that the Labour government was going to inflict pain on people by reneging on its promise to put more money in their pockets. He is claiming that this is needed as a condition for things to get better later. ‘To accept short term pain for long term good’, as he put it. It’s a line that workers have often being sold — you’ll get jam tomorrow if you tighten your belts today.
The jam tomorrow is presented as a growing economy that will bring the government more in tax revenue and so enable it to ‘put more money in people’s pockets’ by increasing benefits or reducing income tax as well as to spend more to improve education, the health service and social amenities generally. But while the government does have the power to make things worse in the short term, it doesn’t have the power to create a growing economy. That, therefore, is essentially nothing more than a hope.
It is possible that the economy will grow a little faster but this would not be as a consequence of what the government may do. The capitalist economy moves through a never-ending series of boom-slump cycles and the Starmer government could be lucky and still be in office when it enters a boom phase. This won’t last of course since sooner or later the economic downturn phase will follow. And then workers will again be asked to tighten their belts in the hope of jam tomorrow.