The Limits of Tory Spending

The new Tory government is increasing public spending to shore up its cross-class coalition – how Labour responds to their bigger state will define the next few years.

Tax-and-spend is back: or, more accurately so far at least: spend.

How did we get to a situation where Rishi Sunak is the most popular politician in the country for spending three times as much in his first year than Labour were mocked for promising in December?

We’re in the middle of an emergency, of course, but no more of one than the climate emergency which could render our planet uninhabitable without radical and costly action.

It’s also true that Sunak hasn’t announced any tax rises or spending cuts to ‘pay for it’ yet, and his popularity might suffer if he does.

But the shift from Osbornomics is dramatic and, as many have pointed out, if the Labour frontbench focus is simply on demanding more spending they may soon find little distance between them and the Conservative government.

Following Labour’s hapless election campaign, in which announcements were sprayed around with no unifying strategy or narrative, some had already begun to talk of how Labour should drop the tax-and-spend in favour of ‘ownership and control’: a truer socialist agenda. Andrew Murray rightly pointed out in Tribune in February that socialism “isn’t tax-and-spend, even on an imposing scale.”

A turn to ownership and control has been long overdue. From the 1990s until Jeremy Corbyn’s leadership, policies about ownership meant privatisation and “public sector reform,” successful or attempted: private finance initiative, the NHS supply chain, the Post Office, Tote and air control among the continuing transfer of collectively-owned assets to private ownership.

For New Labour, economic policy was redistributing the gains of a healthily-growing (until it suddenly wasn’t) an increasingly financialised economy through spending on public services and tax credits.

Under Ed Miliband there was a mild institutional turn with the unfortunately named ‘predistribution’ agenda. Though still sharing with the Blair era a focus on distributional outcomes rather than arguments for structural change, it was an attempt to bring back questions of ownership and power in a mild form, so that the market itself might deliver less unequal outcomes rather than government simply redistributing. The electorate were clearly unconvinced.

But it was only under Jeremy Corbyn that ‘who owns the economy’ returned to being a major political issue. When the 2017 election manifesto leaked to them, both the Mirror and the Telegraph led with Corbyn’s new policies to bring key utilities into public ownership.

Meanwhile, John McDonnell and Rebecca Long-Bailey’s report (and 2018 conference) on ‘alternative models of ownership’ argued for a renewed focus on nationalisation, municipalisation, co-operatives and community wealth building initiatives, and did so more on a basis of structural and fundamental questions than distributional ones: questions which no left alternative to neoliberalism can manage without. Whether the centrality of democratic public ownership remains in the economic agenda of the new leadership remains to be seen.

But does that mean Labour can stop thinking and talking about taxation or public spending?

Some argue this is just a simple question of tactics: yes, we need to reverse the damage austerity has done to local government, social care, public health or wherever, but taxes aren’t vote-winners: keep quiet and focus on other questions, and quietly repair the damage of austerity by sleight of hand when elected.

This naively or disingenuously imagines that Labour can get away without committing to a tax policy ahead of a general election, or that it can deploy unexpected spending plans after the election without parliamentary or public opposition. Vague hand-waving alternatives to taxation are sometimes floated, like somehow bringing an enormous sovereign wealth fund into existence, but it’s rarely spelled out how that might happen or why a public body speculating in shares, property and foreign bonds is a better and more sustainable source of revenue than taxes.

Others may genuinely think that more public spending – disguised or otherwise – isn’t the right agenda for Labour. But that leaves an even bigger political gap to fill: who or what is going to fund our firefighters, social services, health and social care, education and refuse collection? How are they going to be paid for in a way which doesn’t put a disproportionate burden on areas that have high need but few resources? Should we all “own” local health co-operatives to replace an NHS funded by compulsory taxation?

It’s not just about the cuts of the last few years: more utopian agendas such as calls for minimum income guarantees, universal basic income or universal basic services all rely on the state and its powers over general taxation.

Which brings us to the question of what “ownership and control” is supposed to be for, if it isn’t just an opportunist excuse to avoid difficult conversations about tax. Ownership and control are, after all, different things: high trade union density can give workers a significant degree of control without a grain of ownership, while employee share ownership (individual or collectively) sees workers become used to receiving annual dividends but with no more control over the running of the firm than any other minor shareholder (no doubt one reason why Ronald Reagan was so enthusiastic).

Full ownership and control, with production decisions not subject to the market, can only be achieved through public ownership. The day-to-day reality of nationalised industries on the 1940s model designed by Herbert Morrison meant that their bureaucratic and undemocratic shortcomings – though exaggerated by opponents – were used to effect by advocates of privatisation in the 1980s.

When the Conservatives came to get rid of municipal bus companies, they handed some over to “employee partnerships”: rapidly they disappeared, unable to swim for long with sharks like Stagecoach and Arriva around. And the retreat of local government from providing social care – an important element in the lethally fragmented and unaccountable mess we have today – has, as Allyson Pollock and others described in the last Tribune, partly been made possible by the voluntary sector.

By bringing these issues together with questions of tax-and-spend, public ownership doesn’t suddenly catapult us into a utopia but it gives us a glimpse of a better world by linking up questions of decommodified production with those of decommodified consumption.

Should taxpayers subsidise bus and train fares? Should taxpayers get the financial returns from industries which it subsidises? Should the essential infrastructure of the Covid present and the interconnected future – full-fibre broadband – be paid for through taxation rather than subscription, and can that be delivered fairly and efficiently across all parts of the UK without public ownership?

None of these are an end in themselves but they allow us to think about how things could be done differently and better. Responding to the Conservatives’ opportunist embrace of public spending on certain items by playing down the importance of the question doesn’t help us answer difficult questions about the democratic deficit or corporate capture of the state, it simply runs away from them.

Raising our horizons means taking all those questions on and fighting for the kind of state we need, not imagining that we can create a healthy, happy and fulfilled life for everyone in society by avoiding it.