In his pre-budget report (PBR), British Chancellor Alistair Darling announced a "fiscal stimulus package" consisting of an extra £21 billion of government borrowing, predicting that it (new borrowing added to the national debt) would rise to £118 billion in the next financial year.

 

The PBR was astute politics from Labour, clearly positioning the party to the left of the Tories and Liberal Democrats. Without the fiscal stimulus package, there would be £97 billion of borrowing, so the Tory "do-nothing" proposal is hardly a solution!

 

The dire state of the British economy is largely due to the Tories, with it now mainly dependent on financial services in the City of London (rather a problem with the weak pound and the City's credibility undermined after the nationalisation of Northern Rock). The  Tories closed down virtually all the mines, leaving perfectly good coal in the ground, due to the militancy of the National Union of Mineworkers which had brought down a previous Tory government. They decimated manufacturing industry, also motivated by their desire to smash the trade unions.

 

Many products can be produced far more cheaply than in Britain by a low-skilled low-waged workforce in countries like China. The Tories rejected the high-skilled manufacturing industry option, by undermining wages of researchers and lecturers in universities; this led to the so-called "brain drain" whereby many educated people emigrated to countries like the USA motivated by much higher wages in that country.

 

One point that could be made in the Tories' favour, however, is the increased level of collaboration between universities and industry; without it, discoveries made by university researchers in the UK would be more likely to be utilised by overseas companies. Personally, I'm in favour of "blue sky research" (without an end product in mind) and free open source software, but the artificial intelligence/simulation language SDML that I implemented and helped design at Manchester Metropolitan University may not have been developed (as well or at all) if it hadn't been for collaboration with industry. [See www.socialiststeve.me.uk/sdml.htm; software soon available at www.sdml.org.uk.]

 

New Labour's strategy is largely based on spin and public relations. Caroline Lucas MEP pointed out (in the Independent and Guardian) what I thought was obvious, that cutting VAT from 17.5% to 15%, at a cost of £12.5bn, would mainly ship money overseas rather than helping the British economy since most consumer goods on which it is levied are imported. In fact, the pound has fallen considerably against other currencies since the PBR, due to the dire state of our economy, so goods will become more expensive rather than cheaper! Nevertheless, the success or failure of this package will largely be judged on sales figures of the shops before and after Christmas, and those figures will either be judged good or not as bad as they would have been without the VAT reduction.

 

The way Labour say they will pay for this package with tax rises after the next general election is astute too. Increasing income tax for those earning over £150,000 a year (from 40% to 45%) has wrongfooted the Tories, who want to avoid being seen as the party  of the rich.

 

According to the Treasury's own figures, this would only raise £1.5 billion, and some commentators suggest it would raise nothing at all due to wealthy people employing accountants to avoid paying the tax that they should. The 0.5% increase in national insurance contributions is just about the minimum that they could suggest for ordinary people, with Labour saying that only those earning over £40,000 would pay more due to changes in allowances; it will raise a mere £5 billion which is chicken feed compared to what is required!

 

Darling's claim that the books can be balanced by 2015 is laughable, without some sort of massive reorganisation of the world's economy, on a capitalist if not socialist basis. If us socialists don't get our act together, there may be a capitalist solution involving nationalisation of all the banks, closure of tax havens and an international agreement on harmonisation of tax rates (for the rich). I believe Hyman Minsky (who predicted the current economic crisis) proposed something on those lines. Some rich individuals including Bill Gates and Duncan Ballantyne (of "Dragon's Den" fame) have suggested they will give all or most of their fortunes to charity, which could enable such an ethical capitalist solution to work!

 

A recent opinion poll has put Labour just 1% behind the Tories, which would give them a 20-seat overall majority in the House of Commons (rather undermining the argument that we are living in a democratic country methinks). I'd prefer a hung parliament, with the Liberal Democrats insisting on proportional representation (preferably by single transferable vote) to get their cooperation.

 

The New Labour agenda of enshrining capitalism forever by curtailing civil liberties has not ended, as can be seen by them going ahead with ID cards and by home secretary Jacqui Smith's dismay at a European court ruling against keeping the DNA of people not convicted of a crime. There is still a battle to be won within the Labour Party, however, and its lurch to the left will give  socialists inside the party renewed hope. It'd be naive to expect to transform Labour into a socialist party, but we should try our best in that regard with a sizeable split-off party uniting with far left parties and non-aligned socialists as a more likely outcome.