Hot air to conceal more austerity measures - Darling is taxing our patience

15 December 2009

Darling's pre-budget report was an attempt at creating some kind of a "feel-good" climate among Labour voters ahead of the coming general election, against the backdrop of a crisis which is hitting their jobs and living conditions relentlessly.

Hence the headline "super-tax" on bankers' bonuses, so heavily advertised by the media, which concealed so conveniently a host of austerity measures aimed at imposing a disproportionate share of the burden from the crisis, on the working-class majority of the population.

Super-tax or super-con?

At first glance, taking 50% out of the bonuses that city high-flyers award themselves, seems like a good idea. Isn't it about time the vultures who triggered this crisis should be made to pay some of its cost? Especially as the growing profits made by the banks over the past few months, have been largely, if not entirely, funded by state money.

Except that, in fact, this tax will not be paid by the recipients of the bonuses themselves, but by their employers. And since the banks' losses are, to a very large extent, guaranteed by the various taxpayer-funded schemes introduced by Darling, what does it really matter to them?

Nor are all financial institutions, or even all of the banks' departments, targeted by this tax. Since Darling's statement last week, two large categories of high-earning City boys have already been exempted - share traders and those managing the assets of the super-rich! And the odds are that there are more exemptions to come.

What is more, this "super-tax" will not affect bonuses which have been decided before December 9th. In fact, it will only concern bonuses which are decided and paid between December 9th and April 6th next year. So, at best, it is just an inducement for the banks to defer their bonuses by 6 months. Not much to write home about!

Above all, this song and dance is only about cash bonuses: there is no plan to "super-tax" bonuses which are paid in shares, despite the fact that they represent, by very far, the bulk of City bonuses! No wonder Darling had to admit that he only expects his "super-tax" to generate £550m of receipts - a mere drop in the ocean of billions lavished on bankers and shareholders!

But then this government's intention was never to "tax the bankers" as retribution for their reckless profiteering - let alone to tax banking profits. Even Thatcher was bolder than Darling, when she imposed a windfall tax on banking profits, in 1981, at a time when the top rate of income tax for City high-earners was 60% and not 40% as it is now. As to the Tories, they do not dare to protest too openly against Darling's minimal pricking of bonuses, but their opposition is obvious.

Racketeering the working class

Comparing the £550m income expected by Darling from his tax on bonuses to the £7bn receipts expected on the 1% rise in National Insurance contributions, tells the real story.

This 1% rise will be paid by the vast majority of wage-earners across the country and only by them, since income from financial gains, housing speculation and other dividends do not incur NI contributions. What is more, this increase will be born disproportionately by the lowest earners, since the NI contribution rate shrinks from 11% to 1% on the part of the wages over and above £844/week!

This is one of the long-standing aberrations of the so-called "welfare system" - whereby most of the cost of the welfare system falls on the shoulders of the worst-off. As if the better-off never used NHS hospital and other facilities paid for by NI contributions! And even for those who don't, what difference should it make? It may be their choice to go private, because they can afford it, but that does not mean to say that they should not contribute to society in proportion to their resources, like the rest of us do! For all the myths surrounding the welfare state, it was always funded by the organised racketeering of the low-income majority.

The fact that Darling chose to increase NI contributions as they stand, instead of, for instance, expanding their scope to every form of income, including dividends and financial profits, at the same rate for everyone, is a social choice. It is yet another way of making the poorest pay for the crisis caused by the system of the wealthy.

The question is whether we, the working class majority, who produce all the real wealth (as opposed to the fool's gold of the City) in this society, will allow our jobs and conditions to go on being savaged by the capitalists and our incomes to be reduced even further by their politicians. The answer must be no - and the sooner we say so, the better!