Budget 2021: Regressive Or Progressive?

Rishi Sunak’s budget was certainly different from most Tory budgets we’ve seen since they took power in 2010. It shows us 2020 wasn’t an aberration, and a new approach to borrowing, taxes and spending is incoming from a Tory administration more than happy to compromise on the core principles it’s sworn are its own for the last 11 years in order to secure a decade or more of political hegemony.

Politically, this budget has been a rip-roaring success for the government, and it’ll almost certainly send Sunak’s approval ratings rocketing up through the stratosphere yet further, with his personal brand emboldened and a future leadership bid strengthened. Polling indicates the public views this as a fairest budget for years, and even only a minority of Labour voters view it negatively. On a glance, the public is satisfied, the pundits are satisfied, and the opposition have been rendered irrelevant since most of their policies have been co-opted by a big spending Tory government.

The question remains, even though the bare bones of some progressive ideas (like increasing corporation tax) are in this budget, and there are no glaringly obvious austerity cuts, is this budget actually progressive? When you dissect it, who wins and who looses, and who’s interests does Rishi Sunak’s budget actually serve? These are the sort of questions totally absent from the national conversation and the pundit circuit, and here I aim to uncover them from the heady diet of pro-Sunak propaganda most of the press and broadcasters have been shamelessly churning out since Budget 2021.

Let’s start with the corporation tax increase to 25%. This is only a percentage point off the 26% Jeremy Corbyn wanted to raise it to in government, and is a very blatant admission from the Tories that the Cameron-Osborne approach was wrong, and a final return from the caverns of rightwing economic illiteracy we’ve been subjected to through the austerity years. It’s such a basic thing, but it is absolutely so, so welcome, and will bring in more money, with another McDonnell policy of keeping the 19% rate for smaller enterprises.

There was a lot of concern the govt would water this all down to 22% or 23%, so the 25% is excellent and has zero downsides, but Sunak is letting those that have done well profits wise during the pandemic off the hook by not hitting them with the higher rate this year or next, and leaving it until they’ve taken in all those profits, and even possibly leaving the door open to reneging on the rise for some reason or other by 2023; something the public and the opposition must push back against any suggestion of.

Talk of those with the broadest shoulders paying most is new and a huge tone shift from a Tory chancellor, once again vindicating the arguments won by Corbyn and McDonnell; they absolutely shattered the post-2010 austerity consensus and have turned a hard right Tory administration under Cameron to something resembling a New Labour administration under Johnson.

But the govt copped out by acquiescing to their wealthy donors and failing to bring in either a windfall profits tax or a wealth tax; however unsurprising this is, the fact the opposition have rejected calls for these ideas is such a flagrant rejection of a bread and butter progressive demand that it in many ways totally defies all belief, pitting Labour to the right of the Lib Dems and many Democrats in the States. This is where Labour stops being “liberal” or “progressive” and starts being overtly rightwing on fiscal matters.

Another worrying thing from Sunak (and unchallenged by the opposition) is the fact we hear the rhetoric of paying for the crisis, and any taxation changes being to pay for the debt accrued by pandemic borrowing. This is fiscally illiterate, and any tax changes should go towards rebalancing the economy, paying for further capital investment to grow the economy, and addressing inequality, NOT to paying for an unpayable debt that poses no real threat to us, and will simply melt away with growth over decades as after the war.

There may be no direct threat of the harshest forms of austerity, but like under Miliband Labour is paving the way to very regressive talk from the Tories on how the economy and govt debt works that will lead to things like cuts or regressive tax rises being politically salient, going entirely unchallenged.

The govt is hitting the most vulnerable where it hurts in this budget, but they don’t care, because they have the veneer of economic populism and 45% on side, all set to deliver a 90 seat majority, bugger the rest of the population. The lowest income individuals are to be hit with a regressive “bracket creep” tax increase, sucking money out of the economy that they’d have spent, while allowing the wealthy who won’t spend to sit upon billions of pandemic savings.

This approach harms the economic recovery, we need to be getting money into people’s pockets to spend, and we know that low and middle income individuals (particularly low income) are more likely to spend money they make in the local economy, whereas the wealthy have 100s of billions saved, and will spend 2–5% of it; a wealth tax or a 55% top income tax rate won’t harm growth, bracket creep for the poorest will. Rishi Sunak is bringing in a toxic Tory tax rise on the most vulnerable, almost a form of tax austerity for which we’ll all pay the price, and Labour are actually shamefully endorsing it.

Another excess is the shameful public sector pay freeze and real terms pay cut to nurses, with spending on the Health Department going forward out of the pandemic, when the spending boost needs to absolutely be maintained and increased. What actually is the point of Labour during all of this? They’re still framing themselves as a alternative party of capital if the Tories go too progressive on taxation, they have no courage, they refuse to speak up for literally anything, and they seem to be content ceding all the political territory to the Tories, and turning a blind eye to the most regressive provisions of the budget.

We can’t close without mentioning the race to the bottom of free ports, the multi-billion giveaway to big businesses that would have invested anyway, and the continual pumping of the housing bubble. Labour are silent on all of this. The Tories can do what they want, and Labour are fighting old battles over austerity against the Cameron-Osborne government.

So is this budget regressive or progressive? At its core, despite progressive veneers and absolute improvement on prior Tory budgets, this budget kicks the can down the road on many of the vital support schemes people need maintaining (such as the tapered end to UC uplift that’ll plunge many into direct poverty), it hits the most vulnerable where it hurts, and it contains giveaways to big business; it’s a regressive Tory budget, and the left need to build on the welcome steps such as an investment bank, and such as green bonds, and present a genuinely progressive alternative.

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Toby Lipatti-Mesme

Toby Lipatti-Mesme

Insightful and innovative UK journalism and commentary, from Toby Lipatti-Mesme.