The highlight of the Budget proposals are the tax concessions' promised in return for the 3 per cent wage limit. According to the Government, 'a taxpayer on average earnings would gain as much from a one per cent reduction in the rate of price increase as from a fl a week pay increase'. Impressive looking figures are produced to 'prove' that by keeping down wages somone on the average wage will gain approximately £3 in the pay packet. But all this is based on the fairy tale that this incomes policy will reduce inflation.
In fact the Government is pursuing a whole series of policies which are either directly intended to, or will inevitably result in, prices increasing. Take the continual devaluation of the pound. This is of course produced by the international capitalist crisis, but it is also a conscious policy of the British employing class and the Labour Government. Business magazines like The Economist openly declare that ancy want ine excnange rate to keep talling and that a large part of the fall has actually been created by the Bank of England. Yet every fall in the value of the pound dramatically increases prices both for raw materials for industry and, most of all, in the price of food and other essentials for the working In fact the fall in the value of the pound is so great that it has already made totally unrealistic Healey's promise to reduce inflation to single figures by the end of the year. The Henley Centre has estimated that the slump in the pound itself ll drive up inflation oy at least a further 3 per cent.
The other obvious instance where prices are being de berately inflated is in relation to profits-the section of total value produced by the working class which is taken by the capitalist class. All the talk by Healey of the need for industry to increase its profits means for the working class one clear thing-not merely speed-up and productivity drives to increase the amount of work done, but increased prices to drive down wages and restore profits. The whole aim policies is not to hold down prices but to hold down wages while prices rise more rapidly. The aim of the Government's policy is not to hold down prices but to increase profits. This is the sole purpose of the 3 per cent wage limit.
Big business certainly has little confidence in the ability of the Labour Government to hold down inflation for any period of time. One of the concessions forced by the bosses from Healey is an apparently small item which allows 'extension of the same way.
standards. of Government the allowance of stock appreciation for two years'. This clause is or vital interest to une runng class. it means in elect that as the price of the goods they hold in stock rises due to inflation, so also the rate of tax paid-which would normally go up with price-decreases. In short, stocks "appreciation allowances' are an automatic form of protecting profits against inflation. While rising prices must be allowed to cut wages, the ruling class has no intention of letting its profits be affected by inflation in No wonder the Sunday Telegraph of 11 April could be so confident in predicting an increase in profits of 13.8 per cent this year, as against a further 2 per cent drop in living Effect of thresholds But if the ruling class is insistent that its profits should be protected against inflation, it is also completely against granting the sole demand capable of protecting wages against inflation, that of automatic pay increases to compensate for rises in the cost or uving. ne only une m me past lew years when there was even a minimal step towards protecting wages against inflation, particularly the wages of the low paid, was under the old threshold system. In Spring 1975 a survey revealed that in 62 out of 82 major national agreements for workers earning less than f30 a week a greater than average increase was registered. But without the threshold this would only have been the case for 42 of these groups.
The Tories originally devised the threshold system as a method of holding down wages. But the labour Government was eventually forced to scrap them because by reflecting the rate of increase in prices, in however distorted a way, they were proving too expensive for the employers.
The most important initial step in the struggle against inflation and its effects is to ensure that every one per cent increase in prices is accompanied by a corresponding increase in take-home pay. This demand must be extended to cover all state benefits and grants. The new cash limits on social spending must be countered with the demand for a sliding scale of social expenditure. The starting point of the fight for this demand must be that the capitalists bear the cost of inflation. But this means that the distortion of the price index by the state statisticians must be thoroughly exposed through the drawing up of a cost of living index by committees of trade unionists and housewives, carrying out systematic surveys of prices instantaneously at the local level. Figures produced by ASTMS researchers have shown that Treasury estimates on inflation are up to one third lower than trade union calculations. Such local survevs could really begin to challenge the propaganda campaign of bogus figures flooding out from Whitehall. Marching for jobs on 26 November-the kind of action to throw back Healey's attacks After the experience of the 5 percent fall in living standards caused by the Ef limit, most militants have probably correctly concluded that any incomes policy under capitalism cuts wages rather than defending them. But still many workers accept the story that inflation is caused by wage increases or public expenditure.
This lie can and must be nailed.
Altnougn excessive wages are supposed to be the cause of inflation, the share of wages and salaries in the economy has actuany been taming as inmation speeds up When wages do go up there is no iron law which says that prices should also in crease. If an increase in wages was matchInFLATIONInternational Monetary Fund and the Financial Times? It is certainly true th the proportion of state and public ex penditure has increased enormously. E even the capitalist press hard-liners ad that this expenditure itself is not inflationary.
The vast bulk of this figure is com posed of 'transfer payments' paid for sales of goods, rent, state loans, taxati etc. This is not inflationary as everythi in this category which is put into the economy is balanced up by finance tal out.
What does cause inflation is the sle in the rate of profit, the consequent