Every comment by Liberal Democrats, on the budget, the NHS or anything else for that matter, should be prefaced by the phrase:"the Tories have 306 MPs, we have 57." Given that parliamentary arithmetic, the best Liberal Democrats can hope to do is nibble at the margins to ameliorate some of some of the worst consequences of Tory philosophy.
So first the good news: the rise in fuel duty is to be retained. The Chancellor has stuck to his guns and not caved in to the motorist/road-haulier lobby as Labour so cravenly did under similar circumstances. Whether this is due to Liberal Democrat pressure or an unsuspected green streak in George Osborne's make-up I can't say.
Second the threshold for the 40% tax band has been lowered (by £825) so that this swathe of the well-heeled do not get most of the benefit of raising the threshold for the 20% band by £1,100 to £9,205. Pity he didn't for the whole £1 100, but as I didn't expect anything at all, this deserves half a cheer.
And that's about it.
Although I am a pensioner, (though not, I hasten to add, a Granny, or even a Grandfather for that matter,) I can't say that I'm too upset about the freezing and eventual abandonment of our age allowance. Pensioners whose income reaches the tax threshold will have an income of at least £3 618 over and above our state pension which is to rise to £5 587, and some people are expected to live on that alone. Pensions exist to prevent destitution when one's earning life is over, and you can live quite comfortably on £177 a week. Some of us have much more and enjoy the life of Riley, so have no need of an extra tax-free perk. What sticks in the craw, of course, is that this change is made to finance the absurd cut in tax for those with a taxable income of over £150 000 (over eight times the national average wage.) Were our modest sacrifice used to fund extra welfare benefits we wealthy pensioners would at least be compensated by a glow of virtue.
The two worst aspects of the budget are that it does nothing for those who are suffering most from the failure of unregulated capitalism: the low paid, the unemployed and others on welfare benefits. These do not benefit from the raising of the income tax liability threshold since, because their incomes are so low, they don't pay that tax anyway. They continue to suffer whilst the rich are rewarded.
Secondly , in spite of the evidence that it is a crass failure, the Tories are sticking to their austerity policy, and there is nothing in the budget which will stimulate demand, bring us out of recession, create jobs for more people, and thus increase the tax take and reduce the national debt, which in any case remains at relatively modest levels. If Osborne believes that the cut in the 50% tax rate and a further drop in corporation tax are going to produce the necessary stimulus he deceives himself and the truth is not in him.
Talking of truth, both Liberal Democrats and Tories are fond of claiming that that raising the income tax threshold takes umpteen thousand people out of tax. This is a gross misrepresentation. It may take them out of paying income tax, but unless they live in clandestine tents in a field,have no televisions, buy only uncooked food and children's clothes, and never drive, smoke or drink alcohol, they pay the council tax, the BBC licence fee, VAT and duties, which can add up to quite a lot.
I had thought Nick Clegg was learning. There were few nods of agreement as he sat on the Government front bench during the Chancellor's speech, and we were spared the embarrassment of an approving embrace at the end of it. However, Clegg has now sent me an Email telling me: "This is a budget we can be proud of." It clearly isn't for members of the party who wish to see conquered the five giants identified by Beveridge, and the implementation of Keynesian economics to bring us out of recession.
Better to emphasise that that 306/57 split. We can be proud of our bit of tinkering at the edges, but should dissociate ourselves from the whole.
Showing posts with label Politics and economics. Show all posts
Showing posts with label Politics and economics. Show all posts
Friday, 23 March 2012
Saturday, 7 January 2012
Putting the boot in on executive pay.
It is good news that Nick Clegg is going to use his deputy-priministerial status to "do something" about the excesses of executive pay, and the signs are that David Cameron is, at least vaguely, "on side" on the issue. Unfortunately the most likely option is to put an employee representative, or maybe representatives, on remuneration boards. This sounds more like an unprotected little toe rather than a steel-toecapped boot.
Certainly one employee representative will not be enough. Two would be better, but even they would need substantial back-up to produce arguments based on research and evidence in addition to moral indignation.
Economic historians tell us that the "invention" of the Joint Stock Company with limited liability was as important to the development of the Industrial Revolution as the technological inventions, since it enabled investors to put money into companies without putting their entire fortunes at risk.
When I first campaigned as a Liberal in the 1960s we argued that the existing Joint Stock Company was no longer "fit for purpose" and we proposed lots of ingenious plans to ensure that company boards should have equal representatives of shareholders, employees and the community. No one interest should have an automatic majority, so companies would be forced towards decisions that were in the interest of all concerned, rather than just the shareholders.
That still seems a good idea, and I suggest that Liberal Democrats in government should search the party archives and dust down these splendid ideas. If it is felt that things have moved on in the last half century than, rather than a feeble couple of "worker representative" I'd like to see Nick Clegg use his deput-priminister's department, in conjunction with Vince Cable's Department for Business, to produce proposals for a major revision of company law which will ensure that the interests of all relvant influences are taken into account when companies make decisions.
It is not just remuneration boards which need reforming, but the entire way our capitalist sector is organised. Liberal Democrats have made great sacrifices by going into government. We might at least try to ensure that something substantial comes out of the pot, and not just sticking-plaster remedies.
Certainly one employee representative will not be enough. Two would be better, but even they would need substantial back-up to produce arguments based on research and evidence in addition to moral indignation.
Economic historians tell us that the "invention" of the Joint Stock Company with limited liability was as important to the development of the Industrial Revolution as the technological inventions, since it enabled investors to put money into companies without putting their entire fortunes at risk.
When I first campaigned as a Liberal in the 1960s we argued that the existing Joint Stock Company was no longer "fit for purpose" and we proposed lots of ingenious plans to ensure that company boards should have equal representatives of shareholders, employees and the community. No one interest should have an automatic majority, so companies would be forced towards decisions that were in the interest of all concerned, rather than just the shareholders.
That still seems a good idea, and I suggest that Liberal Democrats in government should search the party archives and dust down these splendid ideas. If it is felt that things have moved on in the last half century than, rather than a feeble couple of "worker representative" I'd like to see Nick Clegg use his deput-priminister's department, in conjunction with Vince Cable's Department for Business, to produce proposals for a major revision of company law which will ensure that the interests of all relvant influences are taken into account when companies make decisions.
It is not just remuneration boards which need reforming, but the entire way our capitalist sector is organised. Liberal Democrats have made great sacrifices by going into government. We might at least try to ensure that something substantial comes out of the pot, and not just sticking-plaster remedies.
Sunday, 20 November 2011
Missed opportunity (2)
It has become conventional wisdom to praise Gordon Brown for keeping us out of the Euro, but my own view remains that we ought to have joined at the beginning. I should much prefer to be on the inside trying to make a great project work rather than on the outside gloating over its problems and, I suspect, secretly hoping for its failure.
I am not an expert in counter-factual history but I think it plausible to argue that, had Britain joined, our adherence to rules and regulations would have caused us to block the membership of those countries - Greece and some other "Mediterranean" economies - which blatantly came nowhere near meeting the Maastricht qualifying criteria. Hence, with Britain on the inside from the beginning, the Euro may not have been in its present difficulties.
Be that as it may, our current failure to support France and Germany in their quest for a financial transactions tax (FTT - aka a Tobin tax or a Robin Hood tax) is deeply disappointing. The initial proposal by Tobin was that a tax of a fraction of 1% would curb currency speculation and thus lead to more stability in international trade. The World Development lobby latched on to the idea and suggested that the substantial proceeds of the tax could be used to tackle world poverty. More recently it has been suggested that the takings should be used to bail out European countries with sovereign debt problems.
I have some sympathy with David Cameron's view that such a tax, now proposed for all financial transactions, is not viable unless it is adopted by the US and other major financial centres. However, I should like to see him and George Osborne lobbying hard for this, as Gordon Brown lobbied hard for a package to "save the world" in 2009, rather than standing to one side and saying it can't be done.
I have read recently that, just as the Labour party was, and perhaps still is, the political arm of the trade union movement, today's Tories are now the political arm of the City of London. That seems to ring true. But it is a nonsense to force great democracies to dance to the tune of the greedy and amoral speculators of "the market." This should be stopped. An FTT of not just of a fraction of 1%, but 2%, 5% or what ever it takes to put the markets in their place is, in my view the obvious solution. Where are the politicians with the energy and vision to be working for this?
It is true that an FTT would place a disproportionate cost on Britain vis a vis our European partners because of London's financial pre-eminence. Perhaps the analogy is too strong, but I cannot help reflecting that, in the past British politicians have been prepared to send our young men to shed their blood in order to "save" Europe. When it comes to sacrificing the income of their paymasters, their priorities are different.
I am not an expert in counter-factual history but I think it plausible to argue that, had Britain joined, our adherence to rules and regulations would have caused us to block the membership of those countries - Greece and some other "Mediterranean" economies - which blatantly came nowhere near meeting the Maastricht qualifying criteria. Hence, with Britain on the inside from the beginning, the Euro may not have been in its present difficulties.
Be that as it may, our current failure to support France and Germany in their quest for a financial transactions tax (FTT - aka a Tobin tax or a Robin Hood tax) is deeply disappointing. The initial proposal by Tobin was that a tax of a fraction of 1% would curb currency speculation and thus lead to more stability in international trade. The World Development lobby latched on to the idea and suggested that the substantial proceeds of the tax could be used to tackle world poverty. More recently it has been suggested that the takings should be used to bail out European countries with sovereign debt problems.
I have some sympathy with David Cameron's view that such a tax, now proposed for all financial transactions, is not viable unless it is adopted by the US and other major financial centres. However, I should like to see him and George Osborne lobbying hard for this, as Gordon Brown lobbied hard for a package to "save the world" in 2009, rather than standing to one side and saying it can't be done.
I have read recently that, just as the Labour party was, and perhaps still is, the political arm of the trade union movement, today's Tories are now the political arm of the City of London. That seems to ring true. But it is a nonsense to force great democracies to dance to the tune of the greedy and amoral speculators of "the market." This should be stopped. An FTT of not just of a fraction of 1%, but 2%, 5% or what ever it takes to put the markets in their place is, in my view the obvious solution. Where are the politicians with the energy and vision to be working for this?
It is true that an FTT would place a disproportionate cost on Britain vis a vis our European partners because of London's financial pre-eminence. Perhaps the analogy is too strong, but I cannot help reflecting that, in the past British politicians have been prepared to send our young men to shed their blood in order to "save" Europe. When it comes to sacrificing the income of their paymasters, their priorities are different.
Thursday, 22 September 2011
Liberal Democrat Conference; morale booster
Liberal Democrat activists are certainly a hardy lot. In spite of the loss of about one third of our (their) council seats last May endless repetitions of our achievements in government:
* pensions linked to earnings
* 880 000 low earners out of income tax
* the pupil premium
* the green investment bank
* loans rather than up-front payments for part time students
et al
were endlessly cheered. Surprisingly, fixed term parliaments, which I feel in the long run may be the most important achievement, weren't mentioned all that often.
There were also, unfortunately, endless repetitions of the half-truths, if not the downright lies, that the public deficit is all the fault of Labour's profligacy, and that savage cuts are necessary to avoid the fate of Greece. Polly Toynbee's headline, "Balderdash and Mendacity " (Guardian 20/09/11 - sorry, link thing is not behaving itself) may be a bit strong, but really she has the conference bang to rights
Happily, light may be beginning to dawn. Vince Cable called for "stimulus" along with stability and solidarity, and there were hints of small gobbets of extra expenditure.
I've just heard on the "Today" programme an American whose name I didn't catch say that normally he was in favour of balanced budgets but current American attempts to lower their interest rates even further are a waste of time and that "fiscal stimulus" as advocated by "your Mr Keynes" is what is needed. Maybe the world is learning.
* pensions linked to earnings
* 880 000 low earners out of income tax
* the pupil premium
* the green investment bank
* loans rather than up-front payments for part time students
et al
were endlessly cheered. Surprisingly, fixed term parliaments, which I feel in the long run may be the most important achievement, weren't mentioned all that often.
There were also, unfortunately, endless repetitions of the half-truths, if not the downright lies, that the public deficit is all the fault of Labour's profligacy, and that savage cuts are necessary to avoid the fate of Greece. Polly Toynbee's headline, "Balderdash and Mendacity " (Guardian 20/09/11 - sorry, link thing is not behaving itself) may be a bit strong, but really she has the conference bang to rights
Happily, light may be beginning to dawn. Vince Cable called for "stimulus" along with stability and solidarity, and there were hints of small gobbets of extra expenditure.
I've just heard on the "Today" programme an American whose name I didn't catch say that normally he was in favour of balanced budgets but current American attempts to lower their interest rates even further are a waste of time and that "fiscal stimulus" as advocated by "your Mr Keynes" is what is needed. Maybe the world is learning.
Tuesday, 13 September 2011
The Banking Firewall
George Osborne's repose to the Vickers proposal to create a "firewall" between the retail and "casino" activities of the banks is perhaps more robust than many feared. However, several questions remain.
Most obvious is: why on earth do we have to wait until 2019?. It is already four years since the run on Northern Rock. Four years after the Great Crash of 1929 the Americans actually introduced their Glass-Seagall Act which created a similar separation, not proposals to think about it. It is the repeal of the Glass-Seagall Act in 1999, with similar deregulation in the UK, which is largely responsible for our present financial woes.
Why therefore is there to be a seven year pause: time for the banks to find ways round the new regulations? VAT has been increased, benefits are being cut and public services slashed now, not in seven years time for us to get used to the idea. Just to put things into perspective, the recent riots are said to have cost the UK taxpayer £133m. Such rioters as have been caught and convicted have been punished now rather than been given seven years to sort themselves out. The cost of bailing out the banks is said to be in excess of £850bn but the bankers do get their seven years potentially to wriggle out of the consequences of their folly. So much for justice and all being in this together.
A second question is to ask whether a "firewall" or "ring-fence" is enough. There's already a whole financial industry devoted to finding ways round new rules, and this area will provide another lucrative field. Vince Cable has advocated complete separation between retail and merchant banking activities, and he is probably right.
Much is made of the estimate that the cost of the proposals, if fully implemented, is said to be between £4bn and £7bn. £7bn is roughly the total paid out in City bonuses in 2010.
Most obvious is: why on earth do we have to wait until 2019?. It is already four years since the run on Northern Rock. Four years after the Great Crash of 1929 the Americans actually introduced their Glass-Seagall Act which created a similar separation, not proposals to think about it. It is the repeal of the Glass-Seagall Act in 1999, with similar deregulation in the UK, which is largely responsible for our present financial woes.
Why therefore is there to be a seven year pause: time for the banks to find ways round the new regulations? VAT has been increased, benefits are being cut and public services slashed now, not in seven years time for us to get used to the idea. Just to put things into perspective, the recent riots are said to have cost the UK taxpayer £133m. Such rioters as have been caught and convicted have been punished now rather than been given seven years to sort themselves out. The cost of bailing out the banks is said to be in excess of £850bn but the bankers do get their seven years potentially to wriggle out of the consequences of their folly. So much for justice and all being in this together.
A second question is to ask whether a "firewall" or "ring-fence" is enough. There's already a whole financial industry devoted to finding ways round new rules, and this area will provide another lucrative field. Vince Cable has advocated complete separation between retail and merchant banking activities, and he is probably right.
Much is made of the estimate that the cost of the proposals, if fully implemented, is said to be between £4bn and £7bn. £7bn is roughly the total paid out in City bonuses in 2010.
Saturday, 6 August 2011
Markets Rule - Not OK
For centuries, until the Enlightenment I suppose, most societies lived in fear of their gods or god and felt the need to avert disasters by placating them, him, her or it in various bizarre ways.
Today all societies are in thrall to "the markets." This is as irrational as sacrificing a bull, lamb, virgin or whatever in order to produce a good harvest. It is ludicrous that the welfare of millions, in Greece, the US, Europe generally, the developing world, should be put at risk, not by belief in an external force over which we have no control, but by a few greedy and amoral men (and possibly some women) who it is perfectly possible to control if the world's politicians had the guts and integrity to do so.
I am not a money market specialist so do not have a comprehensive solution, but here are two suggestions:
1. A substantial Tobin-type tax on all monetary transactions, not just foreign currency transactions, to make speculation much less profitable and thus calm erratic fluctuations.
2. All purchases to be backed by actual money: that is, an end to borrowing or leverage.
Further, and perhaps more informed, suggestions welcomed.
The world's principal finance ministers need to get together, sink their petty differences and get tough in the interests of ordinary people whose welfare is being sacrificed at the altar of these false gods.
And do we really need to take so much notice, indeed go in fear of, the priests of "the markets", the ratings agencies, whose confidence in, for example, Iceland, was so far off the mark? It is worth asking whether S&P's downgrading of America's creditworthiness is based on sound analysis or an attempt to undermine President Obama, so he becomes subject to the jibe: "The President who lost us our AAA rating," (rather as the Tories used to mock Labour as "The party of devaluation" until they themselves discovered the short term virtues of economic stimulation by what has become depreciation of the currency.)
Today all societies are in thrall to "the markets." This is as irrational as sacrificing a bull, lamb, virgin or whatever in order to produce a good harvest. It is ludicrous that the welfare of millions, in Greece, the US, Europe generally, the developing world, should be put at risk, not by belief in an external force over which we have no control, but by a few greedy and amoral men (and possibly some women) who it is perfectly possible to control if the world's politicians had the guts and integrity to do so.
I am not a money market specialist so do not have a comprehensive solution, but here are two suggestions:
1. A substantial Tobin-type tax on all monetary transactions, not just foreign currency transactions, to make speculation much less profitable and thus calm erratic fluctuations.
2. All purchases to be backed by actual money: that is, an end to borrowing or leverage.
Further, and perhaps more informed, suggestions welcomed.
The world's principal finance ministers need to get together, sink their petty differences and get tough in the interests of ordinary people whose welfare is being sacrificed at the altar of these false gods.
And do we really need to take so much notice, indeed go in fear of, the priests of "the markets", the ratings agencies, whose confidence in, for example, Iceland, was so far off the mark? It is worth asking whether S&P's downgrading of America's creditworthiness is based on sound analysis or an attempt to undermine President Obama, so he becomes subject to the jibe: "The President who lost us our AAA rating," (rather as the Tories used to mock Labour as "The party of devaluation" until they themselves discovered the short term virtues of economic stimulation by what has become depreciation of the currency.)
Wednesday, 3 August 2011
Happiness without Growth
While I was on holiday last week figures were published to show that the British economy had grown by only 0.2% in the previous quarter. The news was reported with almost universal lamentation, accompanied, I suspect, by secret relief from the government that the figure wasn't actually negative.
Just as unfettered market forces and monetarism have been the unchallengeable economic creed for the past 30 years, a situation which has led to disaster, so now it it seems universally accepted that the only way to achieve full employment and prosperity, is thorough further economic growth, which will inevitably lead to a greater and more irreversible disaster.
The political right have not hesitated to use the present crisis to implement their ideology of cutting back the state but we on the left are shamefully neglecting the opportunity to propose the alternatives which do not involve the further ravaging of scarce resources, pollution of the environment and the disfunctions which arise from increasing inequality.
We don;t expect people, animals or plants to carry on growing for ever: they reach maturity and stop. Surely it is now time to accept that our economy has reached maturity and explore better ways of sharing its abundant fruits, beyond the wildest dreams of our grandparents, so that "no one shall be enslaved by poverty, ignorance or conformity," as my Liberal Democrat membership card has it.
For academic back-up to these idea see Tim Jackson's "Prosperity without Growth" (subtitled "Economics for a finite planet"). Wilkinson and Pickett's "The Spirit Level" (subtitled "Why equality is better for everyone") and the website of the Centre for the Advancement of the Steady State economy, CASSE.
I'd like to hear more discussion on these lines at the Liberal Democrat Conference, and less on how we can restore a more benevolent version of the system as before, under which, as an American economist has put it: "The faster we run the behinder we get."
Just as unfettered market forces and monetarism have been the unchallengeable economic creed for the past 30 years, a situation which has led to disaster, so now it it seems universally accepted that the only way to achieve full employment and prosperity, is thorough further economic growth, which will inevitably lead to a greater and more irreversible disaster.
The political right have not hesitated to use the present crisis to implement their ideology of cutting back the state but we on the left are shamefully neglecting the opportunity to propose the alternatives which do not involve the further ravaging of scarce resources, pollution of the environment and the disfunctions which arise from increasing inequality.
We don;t expect people, animals or plants to carry on growing for ever: they reach maturity and stop. Surely it is now time to accept that our economy has reached maturity and explore better ways of sharing its abundant fruits, beyond the wildest dreams of our grandparents, so that "no one shall be enslaved by poverty, ignorance or conformity," as my Liberal Democrat membership card has it.
For academic back-up to these idea see Tim Jackson's "Prosperity without Growth" (subtitled "Economics for a finite planet"). Wilkinson and Pickett's "The Spirit Level" (subtitled "Why equality is better for everyone") and the website of the Centre for the Advancement of the Steady State economy, CASSE.
I'd like to hear more discussion on these lines at the Liberal Democrat Conference, and less on how we can restore a more benevolent version of the system as before, under which, as an American economist has put it: "The faster we run the behinder we get."
Monday, 1 August 2011
Red Tape
I have just spent a delightful week walking on the Gower in South Wales so have picked up only snippets of news. However, I gather that Vince Cable's department is to unleash entrepreneurial spirits by abolishing lots of red tape. That sounds to me rather a forlorn hope, since what budding entrepreneurs need is potential customers, ie demand, rather than fewer regulations which are, in the main, designed to protect employees and customers from inappropriate exploitation. One person's "red tape" is another person's health, safety, security of employment and human dignity.
Nevertheless I recognise that some regulations are a bit daft. Shops should be able to display liqueur chocolates in their windows without fear of turning teenagers into alcoholics, though I suppose parliament will rush to reinstate the age limit for buying Christmas crackers as soon as a toddler chokes on one of the little plastic gadgets.
However, the regulation which requires sellers of television sets to inform the TV Licence people of the name and address of the buyer seems to me to be perfectly sensible. That may sound a bit illiberal, but I am all for measures which make it more difficult for people to avoid paying their dues. On the wider tax collecting front it seems common sense that the government should employ more staff in HMRC in order more effectively to chase up the tax evaders and avoiders, and the payments they simply haven't got round to collecting. If this were tackled with the same enthusiasm as the harassment of alleged "benefits cheats" that really would make a massive dent in the deficit.
A regulation I should like to introduce is the French one of requiring motorists to display a current insurance certificate in their windscreens. We all pay higher premiums because some motorists get away with having no insurance at all.
Nevertheless I recognise that some regulations are a bit daft. Shops should be able to display liqueur chocolates in their windows without fear of turning teenagers into alcoholics, though I suppose parliament will rush to reinstate the age limit for buying Christmas crackers as soon as a toddler chokes on one of the little plastic gadgets.
However, the regulation which requires sellers of television sets to inform the TV Licence people of the name and address of the buyer seems to me to be perfectly sensible. That may sound a bit illiberal, but I am all for measures which make it more difficult for people to avoid paying their dues. On the wider tax collecting front it seems common sense that the government should employ more staff in HMRC in order more effectively to chase up the tax evaders and avoiders, and the payments they simply haven't got round to collecting. If this were tackled with the same enthusiasm as the harassment of alleged "benefits cheats" that really would make a massive dent in the deficit.
A regulation I should like to introduce is the French one of requiring motorists to display a current insurance certificate in their windscreens. We all pay higher premiums because some motorists get away with having no insurance at all.
Friday, 24 June 2011
Short Termism
One of the greatest problems of the UK economy is short termism: that our investors are far more concerned with making a quick profit in the City than with long term investment in enterprises that will create a stream of income in the future, along with employment, innovation and general prosperity. As Harold Wilson put it, it is easier in this economy to make money rather than to earn it. In half a century nothing much has changed.
The same short termism exists in our politics. After less than a year as Labour leader Ed Miliband is being battered from all sides, including his own, by accusations of ineffectiveness. In my view he would be wise to ignore them. To quote Wilson yet again,"A week is a long time in politics," and the likely four years before the next election is a very long time indeed. Miliband is therefore right, in my view, to have set up commissions for comprehensive reviews of Labour's policies in all areas and we can hope that his party will put a series of distinctive and credible programme for us to consider at the next election. In the meantime my advice to him is to keep as low a profile as possible, cut down on the sniping at Prime Minister's questions and elsewhere, concentrate on getting Labour's policies right and relevant, and in general play the long game.
I sincerely hope that we Liberal Democrats will do much the same. Last weekend's opinion polls showed us down to 12%, but a week is a long time in politics for us too. I hope we are not so obsessed with the short term problems of taking the minor role in the governing of the country that there is not time and energy left over for looking ahead. When Nick Clegg achieved the miracle of getting the media and public to pay some attention to us at the last election, out policies were found to be wanting. We need to be able to put forward a more robust package next time, viable, relevant and in keeping with our Liberal ethos.
Nick Clegg's suggestion that the government equity in RBS and Lloyds TSB should be shared among all adults, to the tune of about £700 apiece, so I've read, seems to me to have short rather than long term consequences. In the short term it might produce a bit of popularity but, as with the demutualisation of the building societies, most of the shares would be quickly cashed in, go into the hands of the existing financial institutions and wealth holders and nothing much would change. Better in my view to turn the banks into the equivalent of those German ones charged with a duty to provide credit to enterprises for long term investment at low rates of interest.
The same short termism exists in our politics. After less than a year as Labour leader Ed Miliband is being battered from all sides, including his own, by accusations of ineffectiveness. In my view he would be wise to ignore them. To quote Wilson yet again,"A week is a long time in politics," and the likely four years before the next election is a very long time indeed. Miliband is therefore right, in my view, to have set up commissions for comprehensive reviews of Labour's policies in all areas and we can hope that his party will put a series of distinctive and credible programme for us to consider at the next election. In the meantime my advice to him is to keep as low a profile as possible, cut down on the sniping at Prime Minister's questions and elsewhere, concentrate on getting Labour's policies right and relevant, and in general play the long game.
I sincerely hope that we Liberal Democrats will do much the same. Last weekend's opinion polls showed us down to 12%, but a week is a long time in politics for us too. I hope we are not so obsessed with the short term problems of taking the minor role in the governing of the country that there is not time and energy left over for looking ahead. When Nick Clegg achieved the miracle of getting the media and public to pay some attention to us at the last election, out policies were found to be wanting. We need to be able to put forward a more robust package next time, viable, relevant and in keeping with our Liberal ethos.
Nick Clegg's suggestion that the government equity in RBS and Lloyds TSB should be shared among all adults, to the tune of about £700 apiece, so I've read, seems to me to have short rather than long term consequences. In the short term it might produce a bit of popularity but, as with the demutualisation of the building societies, most of the shares would be quickly cashed in, go into the hands of the existing financial institutions and wealth holders and nothing much would change. Better in my view to turn the banks into the equivalent of those German ones charged with a duty to provide credit to enterprises for long term investment at low rates of interest.
Tuesday, 12 April 2011
Short-termism : financial and political
In the financial sphere it has long been the case that investors are more interested in making a fast buck than in long term investment to generate growth and streams of revenue in the future. Harold Wilson put it succinctly 50 years ago when he said; "It is easier in this county to make money rather than to earn it." That remains true today, except that the speculators have now demonstrated their ability to lose money quite dramatically, and then expect the much derided state to bail them out.
One banking reform we urgently need is some banks dedicated to providing funds at modest rates of interest for long term investment. I believe Germany has these and they have contributed greatly to Germany's pre-eminence in manufacturing. There is no mention of such a provision in yesterday's proposed reforms. Perhaps a future for RBS?
In the political sphere the same short-termism predominates: the vision of our politicians is limited to the next election and rarely beyond. We desperately need some "statesmen/women" with the capacity to see beyond the next few years and the courage and honesty to tell us the truth. The proposal discussed in yesterday's blog, of "recall" would, if adopted, make such far-sightedness even less likely.
One banking reform we urgently need is some banks dedicated to providing funds at modest rates of interest for long term investment. I believe Germany has these and they have contributed greatly to Germany's pre-eminence in manufacturing. There is no mention of such a provision in yesterday's proposed reforms. Perhaps a future for RBS?
In the political sphere the same short-termism predominates: the vision of our politicians is limited to the next election and rarely beyond. We desperately need some "statesmen/women" with the capacity to see beyond the next few years and the courage and honesty to tell us the truth. The proposal discussed in yesterday's blog, of "recall" would, if adopted, make such far-sightedness even less likely.
Wednesday, 16 March 2011
The Tax Gap
It used to be argued that death duties were a "voluntary tax" since those liable to them were rich enough to employ clever accountants who worked out ways of avoiding paying them. A report published this week indicates that much the same is true of Corporation Tax. The report suggests that something like half a million companies disappear from the register each year, and the total tax unpaid is probably in the region of £16billion. HMRC apparently lacks the resources to chase them up. Bizarrely, HMRC has shed some 30 000 staff in recent years and a further 15 000 are to go before 2014 under the coalition spending cuts.
According to the report, the annual cost of running HMRC £4.4billion. How crazy to further emasculate the goose which could collect the golden eggs.
A reminder that HMRC itself estimates that the total of uncollected tax from all sources in the last financial year reached £42billion, so 9% of all taxes. To be clear, that is uncollected, not including tax avoided or evaded.
It is shameful to live in a country which puts so much energy into hounding so-called benefits cheats, particularly the mentally and physically ill, and is so "relaxed" about unpaid taxes.
According to the report, the annual cost of running HMRC £4.4billion. How crazy to further emasculate the goose which could collect the golden eggs.
A reminder that HMRC itself estimates that the total of uncollected tax from all sources in the last financial year reached £42billion, so 9% of all taxes. To be clear, that is uncollected, not including tax avoided or evaded.
It is shameful to live in a country which puts so much energy into hounding so-called benefits cheats, particularly the mentally and physically ill, and is so "relaxed" about unpaid taxes.
Monday, 7 March 2011
CAAT Petition
I have been a passive supporter of the Campaign Against Arm Trade (CAAT) for many years, having been introduced to it by a member of one of my WEA Classes who was an enthusiastic anti-arms campaigner as well as an advocate of the wit and wisdom of the Methodist Recorder.
I regret that I've never found the time to come to grips with the detail of the iniquity of Britain's trade in arms but of the following broad principles I am sure:
1. We supply arms to all sorts of unsavoury regimes. The excuse is that every country is entitled to defend itself and there are rigorous rules about what we sell and to whom. Such rules are either meaningless or flouted and much of what we sell can equally be used for internal repression. Tear gas to Colonel Gaddafi is just one example. David Cameron's embarrassing trip flogging arms in the Middle East at this highly inappropriate time just highlights the hypocrisy that has been going on for years.
2. A powerful excuse is that the arms industry is highly profitable and provides lots of employment. In truth this is only so because it is heavily subsidised by the government. If our universities were subsidised to a fraction of the money poured into arms they would continue to be world class without either difficulty or charging tuition fees to domestic students. Umpteen other worthwhile industries would also thrive if the subsidies were diverted to them (wind and wave power technology to name but two).
3. Employment could be maintained be converting arms factories to other more worthwhile products. For example, anyone who has ever travelled on an unsurfaced road in the Third World would know that any resemblance between a bus and a tank is to be welcomed. Hence the tank factory in Leeds could be converted to building robust buses and trucks for export to Africa.
CAAT is currently organising a petition, "This is not OK",the first tranche of which will be presented to Downing Street on Wednesday 9th March. Please find it by clicking this link and then adding your name to this very worthwhile manifestation of the Big Society.
I regret that I've never found the time to come to grips with the detail of the iniquity of Britain's trade in arms but of the following broad principles I am sure:
1. We supply arms to all sorts of unsavoury regimes. The excuse is that every country is entitled to defend itself and there are rigorous rules about what we sell and to whom. Such rules are either meaningless or flouted and much of what we sell can equally be used for internal repression. Tear gas to Colonel Gaddafi is just one example. David Cameron's embarrassing trip flogging arms in the Middle East at this highly inappropriate time just highlights the hypocrisy that has been going on for years.
2. A powerful excuse is that the arms industry is highly profitable and provides lots of employment. In truth this is only so because it is heavily subsidised by the government. If our universities were subsidised to a fraction of the money poured into arms they would continue to be world class without either difficulty or charging tuition fees to domestic students. Umpteen other worthwhile industries would also thrive if the subsidies were diverted to them (wind and wave power technology to name but two).
3. Employment could be maintained be converting arms factories to other more worthwhile products. For example, anyone who has ever travelled on an unsurfaced road in the Third World would know that any resemblance between a bus and a tank is to be welcomed. Hence the tank factory in Leeds could be converted to building robust buses and trucks for export to Africa.
CAAT is currently organising a petition, "This is not OK",the first tranche of which will be presented to Downing Street on Wednesday 9th March. Please find it by clicking this link and then adding your name to this very worthwhile manifestation of the Big Society.
Thursday, 3 March 2011
Deficit hyper-uppers
In an article in the Observer last month William Keegan wrote:
"There is something barbaric about the way this coalition is setting about a deficit problem whose seriousness it has cynically magnified for its own political purposes."
Alas Liberal Democrats are in this deception up to the neck. In an "all member" issue of Liberal Democrat News which I have just received Nick Clegg begins his front-page article: "Tackling the legacy of Labour's debt is one of the most urgent tasks facing the government," continues "Labour left us well and truly in the red" and later cites "the deficit and debt left by Labour" as "the most obvious symptom of a much deeper economic malaise." On an inside page, in an article which could well have been written by Tory, Lorely Burt writes: "Our economy really is in a mess...You really can't underestimate how bad our debt situation is," and later, "(o)ur role as Liberal Democrats is to pick up the pieces... The first task is to reduce the deficit. By doing so , we can give confidence to businesses that they can invest in our economy without the worry of our becoming a financial basket case like Greece or Ireland."
Patiently in this blog I have tried to put the case that Britain’s debts are not historically high, that Labour’s expenditure was reasonably prudent up to 2008, the year of the crisis, and that the current deficit is a result of falling revenues arising from the recession rather than profligate expenditure. Above all, we are not Greece, are not and never have been in danger from “the markets,” who are, after all, largely institutions within our own economy , including many pension funds, lending to the our own government. The “savage cuts” are far from a matter of necessity but are ideologically driven. Liberal Democrats, as heirs to the party of Keynes and Beveridge, should be advocating pump priming rather than cuts. This case is supported by a group of distinguished economists and commentators , including including David Blanchflower, Martin Wolf, Joseph Stieglitz, and Paul Krugman.
Further support for this view appeared in yesterday's papers. No less than the Governor of the Bank of England, Mervyn King was reported as placing blame for the deficit not on Labour's profligacy but on the city and financial sector, and regretting that "(t)the price of this financial crisis is being borne by people who absolutely did not cause it." A correspondent in the Guardian, Barry Krushner, gave devastating detail on the real state of the economy. His letter is worth quoting in full:
* The Guardian, Wednesday 2 March 2011
George Osborne dissimulates. He knows that Ed Balls is at odds with Labour party policy on cuts, knowing that we have 12 to 13 years to pay off debt and deficit. But he also knows that our level of debt (less than 60% of GDP net of bank assets) is within Maastricht Treaty limits (60%) and lower than almost all OECD countries; that this debt is low by historical standards (we sustained debt at more than 100% of GDP for 20 years up until the early 1970s); that debt repayments (less than 3% of GDP) are lower than they were under Thatcher (5.15%) and Major (3.8%); that our deficit is partly created by a low overall tax-take (around 36% compared with the EU average of 40%). He knows this because these are official statistics (available on Google - mostly Office for National Statistics but also ukpublicspending.co.uk).
He knows, therefore, that whereas our economy, dominated by manufacturing up to the early 1990s, delivered GDP growth of 2.5%, the financial sector since then has delivered growth rates of less than 1.5% – another element of structural deficit. He knows that, whereas public sector costs have risen year on year over the past 30 years, so has outsourcing to the private sector – currently at around 20% of total public sector resource. Though he may privately be content with Labour's failure to stem the concentration of wealth (the index of inequality rose under Labour – the Gini Coefficient up almost 5 points), Osbourne will be more circumspect that Labour borrowed less and repaid more debt than previous Conservative administrations (borrowing was roughly 50% less under Blair/Brown than it was under Major – more than twice Thatcher's debt repayments were made).
And his biggest dissimulation – under the continuing influence of the previous Labour administration, 2010 saw £20bn more than forecast wiped off the deficit as a result not of spending cuts but of "New Deal"-style growth stimulation. It is unremarkable that Osbourne can point to the OECD and IMF supporting cuts – they are the global advocates of public austerity. He does not mention the three Nobel prize-winning economists (Pissaredes, Stiglitz, Krugman) and Martin Wolf of the Financial Times, all of whom condemn this austerity policy as a serious historical error. Why not? Clearly because he wants no balanced public contestation over the sustainability of a public sector. The real question is why opposition parties and dissident Lib Dems allow this level of narrative control by the coalition government – "crisis", "unavoidable cuts", "Labour's fault". It's neither "middle" nor "muddle" nor an economic crisis – it's a crisis of democratic debate.
I have noticed that when, on BBC1's "Question Time" or Radio 4's "Any Questions," politicians "on message" quote the alleged "mess" left by Labour as a justification for current policies the audiences responds with a combination of a groan and a hiss. Apparently you can't fool all the people for too long a time. I hope that if these dissimulations are repeated at the Liberal Democrat Spring Conference next week they will be treated with similar derision.
A consequence of this hypocrisy as serious in the long run as the effects of the cuts on the quality of our society is the effect on the quality of our democracy. In the election we promised a new, more honest, politics. Distorting the record of the "last lot" is old politics, and we should be ashamed of using them, particularly as the deception serves not our, but the Tories', ideological ends.
"There is something barbaric about the way this coalition is setting about a deficit problem whose seriousness it has cynically magnified for its own political purposes."
Alas Liberal Democrats are in this deception up to the neck. In an "all member" issue of Liberal Democrat News which I have just received Nick Clegg begins his front-page article: "Tackling the legacy of Labour's debt is one of the most urgent tasks facing the government," continues "Labour left us well and truly in the red" and later cites "the deficit and debt left by Labour" as "the most obvious symptom of a much deeper economic malaise." On an inside page, in an article which could well have been written by Tory, Lorely Burt writes: "Our economy really is in a mess...You really can't underestimate how bad our debt situation is," and later, "(o)ur role as Liberal Democrats is to pick up the pieces... The first task is to reduce the deficit. By doing so , we can give confidence to businesses that they can invest in our economy without the worry of our becoming a financial basket case like Greece or Ireland."
Patiently in this blog I have tried to put the case that Britain’s debts are not historically high, that Labour’s expenditure was reasonably prudent up to 2008, the year of the crisis, and that the current deficit is a result of falling revenues arising from the recession rather than profligate expenditure. Above all, we are not Greece, are not and never have been in danger from “the markets,” who are, after all, largely institutions within our own economy , including many pension funds, lending to the our own government. The “savage cuts” are far from a matter of necessity but are ideologically driven. Liberal Democrats, as heirs to the party of Keynes and Beveridge, should be advocating pump priming rather than cuts. This case is supported by a group of distinguished economists and commentators , including including David Blanchflower, Martin Wolf, Joseph Stieglitz, and Paul Krugman.
Further support for this view appeared in yesterday's papers. No less than the Governor of the Bank of England, Mervyn King was reported as placing blame for the deficit not on Labour's profligacy but on the city and financial sector, and regretting that "(t)the price of this financial crisis is being borne by people who absolutely did not cause it." A correspondent in the Guardian, Barry Krushner, gave devastating detail on the real state of the economy. His letter is worth quoting in full:
* The Guardian, Wednesday 2 March 2011
George Osborne dissimulates. He knows that Ed Balls is at odds with Labour party policy on cuts, knowing that we have 12 to 13 years to pay off debt and deficit. But he also knows that our level of debt (less than 60% of GDP net of bank assets) is within Maastricht Treaty limits (60%) and lower than almost all OECD countries; that this debt is low by historical standards (we sustained debt at more than 100% of GDP for 20 years up until the early 1970s); that debt repayments (less than 3% of GDP) are lower than they were under Thatcher (5.15%) and Major (3.8%); that our deficit is partly created by a low overall tax-take (around 36% compared with the EU average of 40%). He knows this because these are official statistics (available on Google - mostly Office for National Statistics but also ukpublicspending.co.uk).
He knows, therefore, that whereas our economy, dominated by manufacturing up to the early 1990s, delivered GDP growth of 2.5%, the financial sector since then has delivered growth rates of less than 1.5% – another element of structural deficit. He knows that, whereas public sector costs have risen year on year over the past 30 years, so has outsourcing to the private sector – currently at around 20% of total public sector resource. Though he may privately be content with Labour's failure to stem the concentration of wealth (the index of inequality rose under Labour – the Gini Coefficient up almost 5 points), Osbourne will be more circumspect that Labour borrowed less and repaid more debt than previous Conservative administrations (borrowing was roughly 50% less under Blair/Brown than it was under Major – more than twice Thatcher's debt repayments were made).
And his biggest dissimulation – under the continuing influence of the previous Labour administration, 2010 saw £20bn more than forecast wiped off the deficit as a result not of spending cuts but of "New Deal"-style growth stimulation. It is unremarkable that Osbourne can point to the OECD and IMF supporting cuts – they are the global advocates of public austerity. He does not mention the three Nobel prize-winning economists (Pissaredes, Stiglitz, Krugman) and Martin Wolf of the Financial Times, all of whom condemn this austerity policy as a serious historical error. Why not? Clearly because he wants no balanced public contestation over the sustainability of a public sector. The real question is why opposition parties and dissident Lib Dems allow this level of narrative control by the coalition government – "crisis", "unavoidable cuts", "Labour's fault". It's neither "middle" nor "muddle" nor an economic crisis – it's a crisis of democratic debate.
I have noticed that when, on BBC1's "Question Time" or Radio 4's "Any Questions," politicians "on message" quote the alleged "mess" left by Labour as a justification for current policies the audiences responds with a combination of a groan and a hiss. Apparently you can't fool all the people for too long a time. I hope that if these dissimulations are repeated at the Liberal Democrat Spring Conference next week they will be treated with similar derision.
A consequence of this hypocrisy as serious in the long run as the effects of the cuts on the quality of our society is the effect on the quality of our democracy. In the election we promised a new, more honest, politics. Distorting the record of the "last lot" is old politics, and we should be ashamed of using them, particularly as the deception serves not our, but the Tories', ideological ends.
Friday, 21 January 2011
Welcom to Ed Balls
During the campaign for the Labour Party leadership Ed Balls contributed an article to the Guardian which aptly summed up the Keynesian position on the economy. He appears to be one of the few politicians in the country willing to spell out the truth about the economic situation, viz:
the public finances are not in crisis. The current deficit is large but not unprecedented
the deficit is largely the result of a fall in tax revenues rather than Labour profligacy
we are not in danger of an attack from the "markets." Our situation is very different form that of Greece et al
our major problem is of unemployment (especially youth unemployment) rather than the deficit
therefore the most urgent problem is to stimulate employment by tax cuts and pump-priming public expenditure. With interest rates at an all time low this is an ideal time to implement this policy
when recovery has been assured measures can be taken to reduce the deficit (which will largely reduce itself as the tax take increases. An article by an economist of the University of Shanghai, John Ross, published in the Guardian of 11th January, claimed that this was already happening when Labour left office.)
So let's hope, for the sake of those who will suffer from the cut-backs in the welfare state and the unnecessary "austerity," that Ed Balls puts the coalition's economics team on the spot and makes it harder for them to pursue the present ideologically driven and mistaken policies.
Another advantage of Ed Ball's return to the forefront of the political fray is that his abrasive , indeed tribal, approach is likely to make Labour less popular, and fuel press speculation about damaging rivalry with Ed Milliband for the Labour leadership. I admit these are ignoble thoughts for one dedicated to a purer form of politics, but this spin-off is not to be ignored.
the public finances are not in crisis. The current deficit is large but not unprecedented
the deficit is largely the result of a fall in tax revenues rather than Labour profligacy
we are not in danger of an attack from the "markets." Our situation is very different form that of Greece et al
our major problem is of unemployment (especially youth unemployment) rather than the deficit
therefore the most urgent problem is to stimulate employment by tax cuts and pump-priming public expenditure. With interest rates at an all time low this is an ideal time to implement this policy
when recovery has been assured measures can be taken to reduce the deficit (which will largely reduce itself as the tax take increases. An article by an economist of the University of Shanghai, John Ross, published in the Guardian of 11th January, claimed that this was already happening when Labour left office.)
So let's hope, for the sake of those who will suffer from the cut-backs in the welfare state and the unnecessary "austerity," that Ed Balls puts the coalition's economics team on the spot and makes it harder for them to pursue the present ideologically driven and mistaken policies.
Another advantage of Ed Ball's return to the forefront of the political fray is that his abrasive , indeed tribal, approach is likely to make Labour less popular, and fuel press speculation about damaging rivalry with Ed Milliband for the Labour leadership. I admit these are ignoble thoughts for one dedicated to a purer form of politics, but this spin-off is not to be ignored.
Thursday, 23 September 2010
Inudstrial democracy
Vince Cable's statement of the obvious truth that "markets are often irrational or rigged" has produced injured bleats from the CBI et al about over-emotional language with might frighten the horses (by which they seem to mean foreign investment.) How does the right reconcile its belief that trade unions should be hedged aground with all sorts of regulations which restrict their activities, while capitalists should be free to do as they like?
Actually I'm not necessarily a great fan of trade unions. In the 1960s we Liberals had all sorts of ingenious plans for industrial democracy and worker participation. One I liked was that boards of companies over a certain size should comprise one third shareholder representatives, one third employee representatives and one third community representatives. No single bloc would therefore have a majority. These imaginative plans, which, had they been implemented could have transformed the British industrial scene and avoided the horrors of the eighties, were always opposed by the trades union movement, which saw them as a threat to their power base. They preferred confrontation to co-operation.
I am pleased to see hints of a revival of potential co-operative ideas in Vince's speech: mentions of an employee shareholder scheme for the Royal Mail, and the promotion of mutual ownership by Ed Davey. I should like to see ideas about industrial (and commercial) democracy return to centre stage. We shall not obtain a fair society until power is exercised in the interests of all, rather than one "side" or the other.
Actually I'm not necessarily a great fan of trade unions. In the 1960s we Liberals had all sorts of ingenious plans for industrial democracy and worker participation. One I liked was that boards of companies over a certain size should comprise one third shareholder representatives, one third employee representatives and one third community representatives. No single bloc would therefore have a majority. These imaginative plans, which, had they been implemented could have transformed the British industrial scene and avoided the horrors of the eighties, were always opposed by the trades union movement, which saw them as a threat to their power base. They preferred confrontation to co-operation.
I am pleased to see hints of a revival of potential co-operative ideas in Vince's speech: mentions of an employee shareholder scheme for the Royal Mail, and the promotion of mutual ownership by Ed Davey. I should like to see ideas about industrial (and commercial) democracy return to centre stage. We shall not obtain a fair society until power is exercised in the interests of all, rather than one "side" or the other.
Tuesday, 21 September 2010
Fellow traveller II
Another unpublished letter to the Guardian. I sincerely hope that both Phil's conclusions turn out to be wrong, but he poses two very real dangers.
19 September 2010
Dear Editor
As a long standing member of the Lib Dems, a lot fell into place when I read the feature about Danny Alexander, Chief Secretary to the Treasury, in the Guardian (Friday 17 September). On moving into his office, we were told, he took down the portrait of John Maynard Keynes and replaced it with one of Gladstone. Gladstone was a great Liberal prime minister, but his slogan of ‘peace, retrenchment and reform’ included retrenchment which meant cuts. The Victorian era was marked by recurrent slumps leading to a bigger one in the 1920s and a still bigger one in the 1930s. It took the genius of the great Liberal economist, Keynes, to grasp the counter-intuitive truth that you don’t cut your way out of a recession, you spend your way out. In a slump you’re not poor because you lack productive resources, but because you’re not deploying them.
A recession will inevitably worsen government finances, because more unemployed people means more dole paid out and less tax pulled in. If the government misguidedly responds as if it were an individual, by economising, it may balance the books in the short term. But the extra unemployment this causes will widen the deficit again, by increasing dole claimants and shrinking the tax take. So in Keynesian terms there will be a new equilibrium, but at a lower level of output and income. The economic illiteracy of rejecting Keynes’s analysis looks set, I regret, to smash the Liberal Democrats and put the country through the needless agony of the 1930s all over again.
Yours sincerely
PHIL PAVEY
Tuesday, 20 July 2010
A sinner that repenteth
There's an excellent article by Ed Balls in yesterday's Guardian which clearly states the Keynesian position. If you're not yet convinced it is well worth a read. Just a pity that Balls wasn't quite so openly enthusiastic about it when he was an influential part of the government.
Saying one thing in government, than another in opposition (or vice versa in the case of the Liberal Democrats) does little to enhance the reputation of politicians or increase respect for the democratic process. It is now nearly three months since the election, but there is as yet little sign of the promised "new politics" - alas, just the mixture as before.
Saying one thing in government, than another in opposition (or vice versa in the case of the Liberal Democrats) does little to enhance the reputation of politicians or increase respect for the democratic process. It is now nearly three months since the election, but there is as yet little sign of the promised "new politics" - alas, just the mixture as before.
Saturday, 17 July 2010
Wisdom from Abroad
With the possible exception of the New Statesman the entire British media, including the BBC, seems to have accepted as fact that the British economy is in a parlous state, that "savage cuts" are necessary. that the coalition is right to boast of its courageous "tough decisions" and that we must all (actually mainly the bottom 20%) suffer for the greater good in the future. Those of us who believe otherwise are beginning to feel like the odd man out in John Stuart Mill's celebrated "all mankind minus one."
Fortunately there are still some sane voices. On the 8th July the New York Times published an editorial which, whilst generally favourable towards our coalition, describes George Osborne's budget as "misguided." The budget, it continues,"aims to cut too much too soon in pursuit of a pointless structural surplus by 2015. Its real achievements are far more likely to be drastically downsized public services and, if the fiscal austerity backfires , as well it might, a contribution to years of stagnation or worse in Britain and the rest of Europe." It goes on to say that "Britain isn't Greece" and that "recovery would eventually have wiped out much of that red ink."
It is galling to hear Danny Alexander et al defending this folly and blaming it on the alleged "mess" left behind by Labour. Whilst as junior partners in the coalition we cannot prevent Tory policies, we should not pretend to support them.
Fortunately there are still some sane voices. On the 8th July the New York Times published an editorial which, whilst generally favourable towards our coalition, describes George Osborne's budget as "misguided." The budget, it continues,"aims to cut too much too soon in pursuit of a pointless structural surplus by 2015. Its real achievements are far more likely to be drastically downsized public services and, if the fiscal austerity backfires , as well it might, a contribution to years of stagnation or worse in Britain and the rest of Europe." It goes on to say that "Britain isn't Greece" and that "recovery would eventually have wiped out much of that red ink."
It is galling to hear Danny Alexander et al defending this folly and blaming it on the alleged "mess" left behind by Labour. Whilst as junior partners in the coalition we cannot prevent Tory policies, we should not pretend to support them.
Friday, 9 July 2010
Unbuilt Schools
Reaction to Michael Gove's announcement that the coalition is to abandon over 700 school building projects first centred on the pupils and teachers who will continue to work in sub-standard conditions. It then switched to anger from the users of the 25 or so schools which were not on the list, so thought they had escaped the axe, only to discover that they had been left off by mistake.
One really does wonder about the competence of civil servants who can't even put together an accurate list. What has happened to these "mandarins" who used to have the reputation of running the Rolls Royce of administrations? They have first class degrees from swanky universities and have survived the latest in scientific selection procedures. How is it that they can't do a simple job like this? I suspect that too much emphasis is placed on interview skills and not enough on the ability actually to do the job to which they are appointed. Today we are too prone to appoint and promote the glib who can best spout the latest fashionable jargon rather than those with a proven recored of competence.
However, what has received much less attention are the economic consequences of abandoning these projects. The building industry has long been regarded by economists as a "bell-wether" industry: the first to feel the pinch in a recession and the first to perk up at the start of a recovery. The abandoned projects will lead to unemployed builders, carpenters, brick and concrete makers, plumbers, manufacturers of lavatories etc etc and perhaps some bankruptcies. The famous Keynesian multiplier will kick in as these unemployed cut back on their own expenditure, leading to further decreases in demand and further unemployment, as every school boy or girl who has ever studied economics knows full well.
In other words, school buildings are a classic example of the "pump priming" Keynes advocated for avoiding or ameliorating recessions. In the present precarious circumstances we should be expanding programmes of public works, not cutting them back.
One really does wonder about the competence of civil servants who can't even put together an accurate list. What has happened to these "mandarins" who used to have the reputation of running the Rolls Royce of administrations? They have first class degrees from swanky universities and have survived the latest in scientific selection procedures. How is it that they can't do a simple job like this? I suspect that too much emphasis is placed on interview skills and not enough on the ability actually to do the job to which they are appointed. Today we are too prone to appoint and promote the glib who can best spout the latest fashionable jargon rather than those with a proven recored of competence.
However, what has received much less attention are the economic consequences of abandoning these projects. The building industry has long been regarded by economists as a "bell-wether" industry: the first to feel the pinch in a recession and the first to perk up at the start of a recovery. The abandoned projects will lead to unemployed builders, carpenters, brick and concrete makers, plumbers, manufacturers of lavatories etc etc and perhaps some bankruptcies. The famous Keynesian multiplier will kick in as these unemployed cut back on their own expenditure, leading to further decreases in demand and further unemployment, as every school boy or girl who has ever studied economics knows full well.
In other words, school buildings are a classic example of the "pump priming" Keynes advocated for avoiding or ameliorating recessions. In the present precarious circumstances we should be expanding programmes of public works, not cutting them back.
Tuesday, 22 June 2010
An open letter to Simon Hughes
Dear Simon Hughes
First congratulations on your election as deputy leader. I hope you see one of your functions as being to keep the social liberal flame, and our Keynesian traditions, alive.
I am increasingly concerned that, as Seumas Milne put it in the Guardian (For the Lib-Cons, this is an excuse to shrink the state,17/06/10) “cuts have become, like light touch financial regulation before them, conventional wisdom” and that this view, which I believe to be profoundly mistaken, appears to be unchallenged by Liberal Democrats in government.
The view that cuts now are inappropriate and unnecessary is held by many distinguished economists, including David Blanchflower, Matin Wolf, Giles Radice , and Paul Krugman, who all argue that Britain’s public debt is not dangerously high, that the risk of a downgrading of our debt rating is minimal, and that cuts before the recovery is assured pose a great danger of a double-dip recession. In his article on Monday 14th June the Guardian’s economics editor, Larry Elliott wrote: "The determination to cut budget deficits in (the present) circumstances does not show that policymakers of probity and integrity have replaced the irresponsible spendthrifts of 2008 and 2009. It shows that the lunatics are back in charge of the asylum." (my emphasis).
I’m strongly of the opinion that the Liberal Democrat Party, heir to the party of Keynes and Beveridge, should be opposing the current policy of immediate deficit reduction. I understand that we are the junior partner in the coalition and cannot impose our views on the major partner. However, we needn’t be heard supporting them in public. After all, it is part of the coalition deal that there should be reform of the electoral system, but David Cameron has reserved the right to campaign against that. If Liberal Democrats in government are not, under the terms of the coalition, similarly able to campaign openly against these economic follies, then they should be doing so privately. But there is little evidence of this, in fact the opposite. Both Nick Clegg and Vince Cable claim to have been converted to the necessity of immediate cuts. I feel that this has damaged our credibility and perhaps our integrity as well.
In addition to trying to avoid, or at least ameliorate, economic policies which are both unnecessary and likely to cause pain and distress to thousands of our fellow citizens (especially the poorest 20%) we should remember that our party is supposed to have retained its independence and will fight the Conservatives in by-elections and the next general election. In these campaigns we need to be able to claim credit for our policies, especially of constitutional reform, which we have gained as a result of the coalition, and dissociate ourselves from the economic follies which are against our tradition, our stance in the election campaign and our reason.
Yours sincerely,
Peter Wrigley
First congratulations on your election as deputy leader. I hope you see one of your functions as being to keep the social liberal flame, and our Keynesian traditions, alive.
I am increasingly concerned that, as Seumas Milne put it in the Guardian (For the Lib-Cons, this is an excuse to shrink the state,17/06/10) “cuts have become, like light touch financial regulation before them, conventional wisdom” and that this view, which I believe to be profoundly mistaken, appears to be unchallenged by Liberal Democrats in government.
The view that cuts now are inappropriate and unnecessary is held by many distinguished economists, including David Blanchflower, Matin Wolf, Giles Radice , and Paul Krugman, who all argue that Britain’s public debt is not dangerously high, that the risk of a downgrading of our debt rating is minimal, and that cuts before the recovery is assured pose a great danger of a double-dip recession. In his article on Monday 14th June the Guardian’s economics editor, Larry Elliott wrote: "The determination to cut budget deficits in (the present) circumstances does not show that policymakers of probity and integrity have replaced the irresponsible spendthrifts of 2008 and 2009. It shows that the lunatics are back in charge of the asylum." (my emphasis).
I’m strongly of the opinion that the Liberal Democrat Party, heir to the party of Keynes and Beveridge, should be opposing the current policy of immediate deficit reduction. I understand that we are the junior partner in the coalition and cannot impose our views on the major partner. However, we needn’t be heard supporting them in public. After all, it is part of the coalition deal that there should be reform of the electoral system, but David Cameron has reserved the right to campaign against that. If Liberal Democrats in government are not, under the terms of the coalition, similarly able to campaign openly against these economic follies, then they should be doing so privately. But there is little evidence of this, in fact the opposite. Both Nick Clegg and Vince Cable claim to have been converted to the necessity of immediate cuts. I feel that this has damaged our credibility and perhaps our integrity as well.
In addition to trying to avoid, or at least ameliorate, economic policies which are both unnecessary and likely to cause pain and distress to thousands of our fellow citizens (especially the poorest 20%) we should remember that our party is supposed to have retained its independence and will fight the Conservatives in by-elections and the next general election. In these campaigns we need to be able to claim credit for our policies, especially of constitutional reform, which we have gained as a result of the coalition, and dissociate ourselves from the economic follies which are against our tradition, our stance in the election campaign and our reason.
Yours sincerely,
Peter Wrigley
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