Cost of living soars, English council tax up 4% – signs that the Third Way is over

As the Beeb reports:

Council tax bills in England are going up by an average of 4% in the coming financial year. […]

The Local Government Association chairman, Sir Simon Milton, said councils would struggle to keep within their budgets.

Budget squeeze

“Councils have been under a real financial squeeze during the annual struggle to keep bills down,” he said.

“The stark reality is that low council tax rises have come at a cost and many councils have had to make tough decisions on spending,” he added.

Most dwellings in England, nearly two-thirds, are in bands A to C for council tax.

But the tax is based on the number of band D dwellings in each area, and the charge for band D homes is used as a benchmark to calculate the charge for the other bands.

This year band D dwellings will see an average 4% rise in their bills, going up from £1,321 to £1,374 a year.

Nine years ago, in 1999-00, the average band D charge in England was just £798.

Now, consider this:

The number of mortgages approved for new house purchases has shrunk by almost a third since last February, according to new figures from the British Banker’s Association.

Fewer than 44,000 new home loans were approved last month, as the credit crunch and the slowing housing market took their toll.

At the same time, people are repaying more than they are borrowing on credit cards. Spending was £7.3bn in Feb, and Repayments were £7.7bn. The difference is 0.4bn – double what it was last month. A sign, perhaps, that the credit card spending boom is slowing down.

But as spending slows, the cost of living is rising – putting even more financial pressure on some already stretched households.

The average family is earning more – but paying more – as figures show the cost of living has risen over the past year.

The findings show that households are typically seven pounds a week worse off because they’re paying more for food, transport and fuel.

Feeling the pinch
Analysis for the Asda supermarket by the Centre for Economics and Business Research looked at the cost of individual items. It found:

* Food and drinks have risen 5.6 per cent. Milk, cheese and eggs are up 17.6 per cent.
* The cost of petrol rose 20.4 per cent and water supplies rose 6.2 per cent.
* The government has announced the lowest council tax rises in a decade today – but at 4 per cent, they’re still higher than inflation.
*Despite rising costs of essential items, the headline inflation figure has been kept down by falls in less essential items – clothing fell 4.6 per cent and telecommunications fell 3.9 per cent.

All of this reminds me of an article that appeared in the Star a few weeks ago:

The third way falls apart
(Friday 14 March 2008)
Left Economics Advisory Panel co-ordinator ANDREW FISHER draws a few conclusions from this year’s budget.

NEW Labour is entering the rockiest economic period of its years in office. Brown has constructed his political persona around economic stability and prudence, but, after 11 years in power of sustained economic growth and relatively high employment levels, the British economy is now looking decidedly unstable.The theoretical underpinning of new Labour was the “third way” that professed to unite sound economic management with social justice, with acolytes insisting that there was no contradiction.

While Britain has greater inequality than at any time in three generations, new Labour has so far successfully avoided economic issues making it onto the political agenda at election time.

Instead, Gordon Brown has pointed to the beneficial social effects on this economic success – record employment, reduced child poverty and a minimum wage.

However, these modest achievements have occurred in the economic good times. But the looming question over Darling’s first budget was, will further social gains be sacrificed as the economy tightens?

There were already some indications that the Brown government would act much like that of Callaghan, cutting public-sector pay, tightening government expenditure, privatising public functions and cutting taxes for corporations and the rich.

If it follows this path, it will be with similar consequences economically, industrially and, ultimately, politically.

This budget was therefore new Labour’s moment of truth. Would it kowtow to the demands of the CBI or would it choose social justice and strengthen its social gains?

On child poverty, the government has admitted defeat. In 1999, Blair committed Labour to halving child poverty by 2010, taking 1.7 million children out of poverty. To date, it has missed its targets and only removed 600,000 children from poverty.

The measures announced in the budget will only remove a further 250,000 by 2010. Therefore, we will leave over 2.5 million children in poverty in 2010, which will be nearer 3.5 million once housing costs are included.

The economic times have also hit the government’s other flagship policies on social justice. The minimum wage will increase by just 21p to £5.73. At 3.8 per cent, that’s below the current inflation rate of 4.1 per cent, meaning a real-terms cut for the poorest, who will be doubly hit by the removal of the 10 per cent starting rate for tax from April.

The budget gave pensioners a welcome one-off extra £50 on the winter fuel allowance. But this has already been absorbed by the average gas and electricity increase of 11.8 per cent, increasing the average bill by £108 over the year.

The inherent contradictions of the “third way” are only being exposed now that the economy is weakening. At this budget, new Labour had to choose – would it regulate utility companies to slow inflation? Would it raise the minimum wage above inflation to stimulate spending, avoid the burgeoning personal debt crisis and reduce child poverty? Would it tax non-doms, corporates or the mega-rich to tackle pensioner poverty? The answer to all three was: “No.”

As the economy falters, it is clear that the government’s solution is to become more reactionary. Ministers are bringing forward ever more brutal ideas for reducing public expenditure by attacking the most vulnerable. Services are being listed for privatisation and outsourcing in areas never before considered. Public-sector wages are being cut and conditions of employment eroded.

Working with Labour MPs, trade unionists and economists, we formed the Left Economics Advisory Panel (LEAP) to challenge the economic hegemony of our age. LEAP is about promoting the economics of co-operation over competition, of democracy over markets and of the many over the few.

In an age when all the major parties are ideologically committed to neoliberal economic dogma – privatisation, liberalisation and deregulation – that need is more necessary than ever.

LEAP is co-hosting an economics conference “Beyond the Market Economy – socialist solutions for the economic crisis” on May 24 at Birkbeck College. This conference brings together economists, trade unionists, students and campaigners to debate the crisis and, importantly, to develop contemporary socialist policies and campaigns in key areas, with workshops on securing housing for all, ending corporate power – 21st century models of social ownership, drowning in debt – transforming the financial system and defending pay, pensions and jobs in a global market economy. To register send a cheque for £10 (£5 unwaged), payable to “Another World is Possible,” to LRC, PO Box 2378, London, E5 9QU. The March 2008 LEAP Red Papers can be downloaded for free from


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