Whenever I go to London I always call in on a small radical bookstore called Housmans on the lookout for interesting finds.
This time, amongst the various books I took away, was a short monograph with a catchy title, “Labour’s extreme neoliberalism” by Jamie Gough.
The author is introduced as deploying a “a Marxist approach”. But much of his work is “concerned with the tension between neoliberalism and Keynesianism and the relations between capital and labour”. Indeed, the economic discussion in this book is entirely mainstream and not Marxist at all. The aim of the pamphlet is narrow and focussed on assessing “the actions of the Labour government in Britain since its election in July 2024 up until January 2025”, with a particular study of the fiscal policies of recent chancellors of the exchequer up to and including Rachel Reeves. The contention is that the Labour Party has “moved from social democracy to extreme neoliberalism”, and in moving to the right represents a continuation of Conservative policy. He points out that during the election campaign, “Labour’s one and only criticism of the Tories was that they were incompetent”. The author concedes that there have been some modest increases in spending on public services, but that these are not enough. So nothing really new here. However, he makes some interesting points. Here is a sample of some of them.
Corbyn’s “tax and spend policies” were popular
“Corbyn’s fiscal policy, a key part of his call for an end to austerity, played a major role in the extraordinary success of the Labour Party in the 2017 general election.”
Starmer’s purge
“Facilitated by the lockdown, Starmer’s activity was largely confined to purging the party of Corbynites through expulsions and deselections. While the intention was clear to junk Corbyn’s programme, it was dressed up as a campaign against antisemitism.”
The multiplier effect
“Since the 1930s, social-democratic and broadly Keynesian commentators have pointed out that state spending cannot be adequately evaluated by considering only its cost to the Treasury. Most state spending results in multiplier effects, benefits to firms and households other than the direct beneficiaries, and often also to increased income and decreased costs to the state. Starmer and Reeves have no understanding of this point. A salient example is the two-child limit on child benefit. Labour says that to abolish this limit ‘cannot be afforded’. But poverty has negative impacts on children’s health, mental health and cognitive abilities, and their social and technical skills. These impacts will last for their lives. The latter create additional costs to the state over decades, for example in the NHS and policing; and by lowering the skills of the labour force they create costs to the economy”.
“The costs of borrowing (interest, capital repayment) are often more than covered by the stimulus to economic output and increased tax revenue (in addition to the capital repayment typically devalued by inflation)”
These arguments are very familiar. The author’s quibble seems to be one of degree rather than any fundamental disagreement with Labour policy. Surely the author is not advocating an unlimited budget for all such spending?
Effective tax rates for the rich
“Since neoliberalism’s advent in the 1970s, in most high-income countries, rates of tax on capital and the rich have been reduced while those on the general population (income tax, VAT) have increased.”
“Many people working in the City of London receive their income as a capital gain, the profit from buying and selling an asset, rather than as a wage. Capital gains are taxed at only 20%, compared with the top rate of income tax of 45%.”
Taxing the rich
“It is widely thought, and reiterated by the Right, that contemporary ‘globalisation’ makes taxing corporations and the rich impossible. This is false. Regarding the rich, most of the incomes they receive are internal to Britain and therefore cannot be avoided: profits from the sale of land and property, most capital gains, legacies. These are not avoidable even if the recipient moved abroad.”
“Taxes on wealth, that is, the value of an individual’s net assets, can reap large sums. Prem Sikka has calculated that a tax of 2% on wealth over £10m would raise £22b a year. Inheritance Tax has a high threshold and thus falls only on the richest 1%. But the rate is low and is dodged by the richest through trusts and gifts. The government could raise the rate and prevent avoidance. “
Why Labour supports a hard Brexit
A “constellation of capitalist interests” explains why Starmer has rejected moves to rejoin the Customs Union and the Single Market.
Firstly there’s the international capital (“ex-Soviet, Gulf, Chinese, oligarchical, kleptocratic, mafia”) using London to launder money. It’s not made clear how these voices make themselves heard by Labour policymakers. The author points to two further sectors of capital in favour of the low taxes and regulations that Brexit would be expected to supply:
“A large proportion of British-headquartered capital operates entirely outside the EU: the major construction companies building cities in the Middle and Far East; the imperial mining, oil, food and tobacco corporations; some manufacturers such as Dyson. Their interest was in preserving the low effective rates of corporate taxation in Britain.”
“70% of British GDP consists of firms selling services within Britain: the utilities, rail and bus companies, construction, hospitality, leisure and retail, and consumer finance. These do not trade with the EU. All have an interest in continued low effective corporation tax. Most have an interest in avoiding EU environmental and labour market regulations, which have been generally more stringent than indigenous British regulation. “
This book is very much of its time and will be too narrow to attract general interest, but it’s great that such books can be written and published so easily on Amazon and that such bookshops exist to promote them!