‘Who do politicians’ choices serve?’

Recently the government made two major policy interventions. One was a proposed attack on workers: “new tough laws” against the right to strike, while refusing to negotiate with NHS workers. The other was a gift to the City: uncapping bankers’ bonuses and looking to remove safeguards brought in to tame markets after the 2008 crash.

This was all framed as being somehow inevitable. But it is a choice to adopt arbitrary constraints, not a law of nature. In fact, if the government’s accountancy rules had not been changed 18 months ago, this particular deficit would not even exist.

What the whole Truss mini-budget debacle did prove was just how much power the financial markets hold within our global system. For any who continue with a view of the world where the state alone that holds all the cards, this was a timely and undeniable riposte

The fact that globalisation and the growth of capitalism has given the City greater sway in our world doesn’t mean we have no power to stand up and act. But our political class, and in particular the government, is choosing to shore up the power of markets over our economy, our public spending and our lives – rather than challenging it.

It is a choice to focus economic policy on the interests of investment banks at a time of record bonuses and rocketing profits. And it is a choice to make working people pay the price for the crisis. There are alternatives, and there can be a different way – if there is the political will.

A 10 per cent increase to total spending on NHS staff would cost £6.25bn. Of course, in reality the cost to the Treasury would be much less – for starters, it would get about a third of that back in tax.

There are various ways a government could find that money – even within a fiscal straitjacket. One such way would be real, not artificial, windfall taxes on energy profits. Leaked Treasury estimates show energy companies may make “excess” profits of £170bn in the next two years. The current energy taxes, with generous get-outs, don’t even touch the sides.

Why can’t we demand £50bn more of that windfall? We could pay off a £40 bn “black hole”, offer a decent pay settlement for the NHS and still have lots of cash left over.

Or what about a contribution from the banks? The UK’s biggest four alone are on target for profits of £33bn this year. Yet the chancellor has slashed its tax surcharge on the sector from 8 per cent to 3 per cent. Yet another positive choice could be to address ballooning wealth inequality. As the former boss of Greggs points out, there are now 177 billionaires in the UK, up from 29 in 2010. Between them they own £653bn. The Tax Justice Network has estimated that equalising capital gains tax with income tax could raise £14bn a year – that’s enough to give every public sector worker an inflation-beating pay rise. And why don’t we even consider going further with progressive taxation on income?

Since early 2020 we have been living in crisis. At every stage, politicians have made choices. But who have those choices served? The collective interest or vested interests?

At the height of pandemic, with key workers being rightly lauded as heroes, the government and Bank of England intervened to support the economy through lockdown and furlough. But it has become increasingly apparent that large sums of public money went to support corporate profits, not working people. In 2020, billions of pounds’ worth of Covid contracts were handed to the private sector, which often failed to deliver. The government bypassed the usual competitive tendering process and in some cases handed contracts to its own business contacts.

Then we were hit by the cost of living crisis. Inflation was triggered by a triple hit of “external shocks”: post-pandemic supply snags; the ecological crisis of global droughts; then the Ukraine war in 2022.

But all these were compounded by a “second round” of profit-driven inflation. As Unite research showed, FTSE 350 profit margins were 73% higher in 2021 than in 2019. Energy companies like BP, Shell or Centrica are the best known examples. But Unite research demonstrates that profiteering is rife across multiple sectors.

Profiteering means taking advantage of a crisis to increase profits above previous levels. And, in many cases, this was enabled by systemic failures: a sign, if ever there was one, of a broken economy. The energy giants, for instance, argue that they didn’t seek to create a grotesque cash cow – instead, huge windfalls just fell into their laps, thanks to pricing mechanisms “beyond their control”. This is disingenuous, of course, because none of them will lobby to reform a market that delivers such gold-plated returns and asks for so little for them.

Others made use of government-gifted monopolies – North Sea licences, electricity grids, water or train concessions – or private sector oligopolies to which failing regulators turn a blind eye.

Now the banks lead the latest wave of crisis profits, benefiting from interest rate hikes. As workers go through the greatest real wage squeeze in decades, finance sector bonuses hit record highs – even before Hunt lifts the cap. The picture of our economy is one of systemic failure.

While Rishi Sunak seeks to distance himself from his predecessor, the pro-elite and anti-worker policies are the constant. His government has pursued Kwasi Kwarteng’s “big bang 2” for the City, and anti-union legislation, without a pause.

The profiteering crisis, widening wealth and income gulfs: these are the defining characteristics of our broken economy. And the government isn’t just choosing to ignore these issues – it’s doing all it can to open the cracks even wider.

By Sharon Graham, Unite general secretary, @UniteSharon

This comment piece first appeared in the Guardian, December 23, 2022