Tax or Borrow?
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PMQs today actually had some interesting politics: Starmer advocating a windfall tax, v. Truss rejecting tax rises (on the grounds that they deter inward investment). However, BBC is splashing that she actually intends to borrow, to keep taxes down.
In effect, there is no difference: the only point is that debt disciplines the state through forcing it to pay back. But, in the short-term the state has commandeered the effective demand, and it crowds out investors – after all, state debt is a secure bet so good that it’s practically risk free.
The risk for Truss, though, is that by borrowing, she is effectively subsidising Shell and the energy producers through taxation that will come out of capitalist profits generally.
This may seriously provoke a faction fight between capitalists and their hangers on…
We will know the details later on this morning, but whatever they are, it’s so much for “free market” capitalism and for the “small state” (not that Truss stands for that anyway since she wants to increase spending on the state’s core — the armed forces).
We know that the capitalist class is split on this as that’s what the argument between Truss and Sunak was all about. It seems that most don’t think her plan to grow the economy through tax cuts, direct and indirect, on profits will work. Normally this would not have been left to be settled by a grouping of local councillors, small business people, and members of golf and Constitutional clubs. But it was and the result is what it is, ruling out the obvious solution (from the point of view of the capitalist class as a whole) of a windfall tax on those capitalist enterprises that had reaped windfall profits from the situation.
It is not just the gas producers who are reaping windfall profits but also companies producing electricity from non-gas sources (nuclear, renewables) since under present arrangements, for some reason, the price of electricity is tied to the price of gas.
Anyway, it’s their problem.
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