The vast majority of the Tory leadership candidates are running on pledges to cut taxes, but this is financially illiterate and blatant bribery to get them into the top job – no better than the man we’ve just gotten out of there.
How did we get into this mess?
The dire situation that this country has found itself in has been brewing for the past fifteen years, with no-one righting the ship. At the end of the noughties, the Mortgage Crash essentially threw the world economy into a spin, where banks could not reclaim the half-baked loans they’d signed off on. These were so-called subprime loans (usually in the form of mortgages) that were made to poor or desperate people at high interest rates, which made them especially risky. For the banks, this wasn’t a big issue at the time, because they’d sell the loan on at a cut price to someone else, who could later make a claim for the full cost. But when the bad loans built up and up, the bubble eventually burst, and the missing loan payments squeezed banks dry.
With banks unable to finance businesses, it fell onto governments to save them. Ones like the USA and the UK used what is called “quantitative easing”, which essentially gave banks money that they could then use to loan back into the economy. But the money didn’t come from nowhere, and needed to be paid back. The Tory government under David Cameron in 2010, with George Osbourne as Chancellor, introduced austerity politics which vastly cut funding to public spending. The idea was that with lower expenditure, the money could be repaid without having to raise taxes on people.
Needless to say: it didn’t work. Austerity was a very harmful policy that we are still recovering from today.
The UK began to come out of austerity measures in about 2017, once Cameron had left and Theresa May was Prime Minister. Things were beginning to look stable, if not still a little bleak. Unfortunately, the double-shock of Brexit and Covid in 2020 took focus away from rebuilding public institutions, and instead the Tory party became a government of fire-fighters: putting out the next crisis just in time for another one to pop up. Boris Johnson was no different, really. Even ignoring the Brexit and Covid calamities, his promises of “levelling up” and building hospitals were all hot-air, and his legacy will forever be that of a liar and a fraud.
The final body-blow to the economy was the Russian invasion of Ukraine. With Russia badly failing in its “special operations” of cultural genocide, it has routinely withheld oil, gas, and Ukrainian grains, holding the world as hostage to try and force Ukraine to surrender.
The Cost of Living Crisis
What all of this means, is that you now have companies that lost money during the Covid crisis through furlough and lost stocks that are trying to fill their coffers again. You’ve got a country that has been stuck in austerity for the last twelve years, and as such working and living conditions are far worse than they should be: the NHS is stripped bare, minimum wages and workers rights and guarantees have not kept up with the shifting economy, and there is a poorly regulated housing market that punishes the poorest and most vulnerable. And finally, you have the Ukrainian conflict, which is providing the fatal shock to an economy built on pig-shit foundations.
Let’s say that you are a supermarket, trying to buy bread made in Ukraine. Usually, you pay £20 for a lorry of it (number pulled out of my arse), but costs are rising. Ukraine is a war-zone, so drivers demand more money to travel there. Russia is withholding oil, so fuel for the truck is more expensive. Ukrainian farmers might’ve now become soldiers, so there are fewer there to help, making them more expensive too. That £20 lorry might’ve now become £25. Only, it isn’t one lorry. That might be a hundred a day, or thousands in a month. That would be a rise of 25% to the price of this one, and this is what inflation is.
Inflation right now is hanging at about 10%: so while some things might be 25% more expensive, others might only be 2% more, and it averages out. However, while things might’ve increased year-on-year by 10%, wages have not. Wages have been more stagnant, rising about 4.2%, according to ONS figures.
So to put it another way, inflation is caused by one of two things: either through supply-side scarcity (a lack of food or fuel, etc), or through demand scarcity (not enough money to pay the rising prices). When inflation happens, people are spending more of their money and are made poorer. Because they now have less money, the economy shrinks (because there is less money in the system). When the economy shrinks too much, we enter a recession, which will lead to services being cut, jobs lost and even more misery. And, remember: there is less money in the system because when people pay for essentials, the companies then pocket the profit to make up for their shortfall, which only fuels the spiral.
Finally… let’s talk about the Tories.
Having said all that, we need to come back to the Tory Leadership contest. Practically all of the Tory candidates are scrambling over each other to cut taxes if they enter office, because that is “The Tory Way”. Some of this might work, but there are good tax cuts and bad tax cuts, right now. Cutting business and corporate taxes, like Jeremy Hunt, Sajid Javid, Nadhim Zahawi and Liz Truss have promised, isn’t going to do it. It is a bare-faced bribe to Tory business owners who might be voting for them. When corporate taxes are cut, the money is almost never invested back into the company or economy, and instead goes out in investor dividends and bonuses.
The measure of public spending, and indeed taxes and tax cuts, is not: how much are you spending, but rather: are you spending it on the right things? And that is the same with tax cuts: Are you cutting and collecting from the right places?
There are a few candidates that have explicitly mentioned cutting National Insurance hikes: Javid again, Grant Schapps, Truss again, and Tom Tugendhat; and VAT, namely Suella Braverman. These would be smarter cuts. If a poor person pays less National Insurance and VAT, then they are going to have more money to spend on groceries. Therefore, that is money that is going back into the economy, rather than being invested or hoarded. NI and VAT disproportionately affect poorer people, because of the rate-of-pay thresholds involved. Moreover, business rate cuts are not going to matter to a cleaner who is only on £18k a year, looking after two young kids.
However, we are ignoring one thing here: VAT and NI cuts are not sexy. They will not win you votes in the Tory party. And instead, we are left with a race to the bottom. Rishi Sunak has been cautious, not suggesting any cuts until the economy improves, but besides him, candidates are willing to whore themselves out to upper- and middle-class Tory party members over who can cut the most taxes and increase on defence instead, rather than actually helping real issues in this country.
One Geo Under A Groove 