Category Archives: Economy

Propaganda alert: UK economic growth is nothing to crow about and here’s the reason

Back in business? But how far will the UK economy restore itself after Covid, with the shadow of Brexit hanging over it?

What a way to spin something we all knew would happen.

According to economic forecaster EY Item Club (who?), the economy is growing at its fastest rate in 80 years. Gosh!

But… isn’t that because it stalled altogether last year, due to the Covid-19 pandemic, and is just now bouncing back?

Is it not the truth that, rather than growing, we should say the economy is being restored to the level we might expect after the crisis?

I think it is.

As The Guardian‘s report puts it,

The EY Item Club said it now expected GDP to grow by 7.6% … The UK economy shrank by 9.8% in 2020.

So that’s 2.2 per cent of shrinkage that the economy won’t make up this year, meaning the nation as a whole will be worse-off than before the pandemic hit.

There are other elements likely to affect the UK’s economic performance, including inflation and unemployment.

The recovery is extremely fragile, and another Covid wave could bring it crashing to a halt or even into reverse.

And there’s also the elephant in the room. I notice that nobody involved in this article has mentioned Brexit.

Source: UK economy growing at fastest rate in 80 years, says forecaster | Economic growth (GDP) | The Guardian

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The Tories have run the UK into the dirt and Labour needs to ram the point home. Here’s how

Money, money, money: Boris Johnson thinks it’s for handing out to his party’s friends and donors rather than for investing in the UK economy. Labour needs to explain why his Tories, despite their false claims, are silly with our cash.

It’s no secret that Labour under Keir Starmer is failing to make the right points against Boris Johnson’s lying Tories.

Some of the worst falsehoods in the Tory narrative are about the economy – but, as Mainly Macro‘s Simon Wren-Lewis mentioned (on which I expanded), Labour has consistently failed to address them in any meaningful way.

Professor Wren-Lewis has followed up his article with a new piece suggesting possible pressure-points Labour could attack.

I think he’s wrong to suggest Keir Starmer should do so, as Starmer is unlikely to want to – or indeed to be around for long after the local elections next month, but the ideas are sound and whoever becomes the new leader should certainly consider them seriously. They are:

1. Austerity – Conservatives from David Cameron onwards claimed austerity was a vital response to the economic crisis of 2008 onwards; in fact it harmed the economy.

Labour should assert – forcefully – that there was no debt crisis and the economy needed stimulation rather than starvation. Tory austerity not only delayed any recovery, but diminished it so that wages are now – perhaps permanently – lower.

So the Tories attacked the UK’s economic well-being in order to impoverish the wider population.

2. The second wave of Covid-19 was much worse that it could have been because Tory Chancellor Rishi Sunak resisted an early lockdown.

This delay meant not only that many more lives were lost to the virus than ever needed to be, but also that the lockdown that eventually had to be imposed had to be much longer.

So the Tories attacked the UK economy – and caused many thousands of unnecessary deaths – by failing to lock down strongly and early when cases started rising.

3. Brexit has created a bureaucracy mountain that has hit exports and many firms very badly. I suspect Professor Wren-Lewis wrote his piece before the extent of the violence in Northern Ireland became clear to him, otherwise he could have mentioned this.

It means the Tory-created bureaucracy has harmed the UK economy in a way that has actually re-kindled the Troubles in Northern Ireland after 23 years of hard-won peace.

Professor Wren-Lewis goes on to state that Labour avoids the argument because party leaders know the Tories will answer it with claims about “overspending” by the last Labour government.

But these claims have always been false:

Prof Wren-Lewis also suggests a few responses to the usual attacks we can expect from the Tories and their lackeys in the mainstream media. For example:

No, the Coalition government’s austerity measures did not save the UK from a financial crisis. The Conservatives have demonstrated, many times now, that the Bank of England will create any money needed to cover the UK’s debts, if the markets won’t or can’t do so. Risk of inflation is negligible for reasons we’ve seen in action in the Covid crisis.

No, it isn’t reasonable to suggest Labour was partly responsible for the damage the crash of 2008 onwards caused by pointing at its failure to regulate the banking sector. At the time, the Conservatives were demanding even less regulation, meaning they would have caused more harm to the economy if they’d had the chance.

And no, Labour did not “overspend”. That party left office in 2010 with a record deficit of more than 10 per cent of GDP, but only because of global economic events and measures taken to prevent job losses after banks started collapsing. After 11 years of Conservative rule the UK has a record deficit of 17 per cent of GDP – because of “overspending”? Arguments that Labour would also have introduced austerity can be overcome by pointing out that the party’s critics can’t criticise the party for both over- and underspending.

Finally, Prof Wren-Lewis suggests that the argument about Tory economic incompetence may be wrapped up in a larger attack on Tory incompetence in general:

Boris Johnson and his Tories have been incompetent in handling Covid, running the NHS, looking after law and order, and handling public money.

Their only success has been in handing public money to their personal friends and funders.

Put it like that and Labour is on a path to electoral victory again – if that party can devise policies that capture the public imagination (Jeremy Corbyn was very good at that) and defend them against Tory attack lines (he wasn’t quite so successful there).

But Keir Starmer won’t put it like that because he simply doesn’t have the grit for it. That’s why we have to wait for the next Labour leader and hope that they will.

Source: mainly macro: Labour should start contesting the Tory record in running the economy

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Banning protest won’t save the Tories if a hot summer of discontent boils over into violence

Sound and fury from 2011: discontent with the government of the day boiled over into riots – and for much less reason than might present itself in 2021. Boris Johnson is hastily banning large protests – but will anybody care?

Here’s a disturbing truthbomb from Richard Murphy:

He makes good points.

Boris Johnson is promising a much better summer than we had in 2020 but the early indication are that he will disappoint us yet again.

As matters stand, history is sure to remember him as the prime minister who promised us the world and then took our world away from us instead.

So he reckons Covid-19 will be under control. Why are our health experts planning for another surge in cases, to hit us around July?

At the moment, half of the UK population is half-vaccinated, and there will be shortages from April onwards. That’s the reason variant strains of Covid are appearing; the virus is mutating to beat the defences of a half-protected population.

Johnson reckons we’ll all be able to resume our foreign holidays. How can we, considering the state of foreign nations’ vaccination regimes?

And Johnson reckons the UK’s industries are going to bounce back – what’s the phrase? “Build back better”? – with a boom during the summer. But post-Brexit problems indicate that any such economic explosion is likely to be a damp squib.

He knows all this.

Why else do you think his government has legislated to restrict protest events to the point where anything that is actually noticeable is to be punished with imprisonment?

It is exactly the wrong response. But he’s a Tory and doesn’t know how to do anything apart from punish the poor.

His decisions are all wrong. They are equivalent to clamping the lid on a pressure cooker and turning it up to maximum. What do you think will happen?

I hope I’m wrong.

If I’m not, I just hope that anyone resorting to violent protest remembers that indiscriminate vandalism won’t do anybody any good – 2011 taught us that. It is pointless harming the innocent.

If you’re angry with the government, make sure it’s the government – and its enforcers – who feel the brunt of that anger.

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Here’s why a DECENT NHS pay rise will help us all

Paying NHS staff more money will improve the UK’s economy massively.

That’s the educated opinion of Tax Research UK’s Richard Murphy, and who are we to argue with him?

In his latest video clip, Mr Murphy explains that the Tory government’s decision to offer only a derisory one per cent pay increase – less than the rate of inflation – is actually harmful to its own hope of economic recovery.

The Tories have based their offer on a false belief that the NHS does not contribute to the economy. This is easily disproved because a person who is fit and healthy is clearly more able to create profit than somebody who is ill or injured.

The benefit to the economy provided by the NHS has actually been measured and it seems that for every £1 invested in the health service, the economy benefits by between £2 and £4.

That’s a hell of a markup!

Think about it. Most supermarkets operate on the basis of profits between – what – five and 15 per cent, if I recall correctly. This is a profit of up to four HUNDRED per cent.

In a nation that badly needs to re-establish its economy after Covid-19 – not to mention Brexit – that’s not to be sniffed at, but sniffing at it is exactly what Boris Johnson, Rishi Sunak and the other Tories are doing.

At the moment there are 80,000 staff vacancies in the health service because the wages aren’t enough to compensate for the long hours, stress and heartbreak involved.

This, along with the ongoing effects of Covid-19, means that patients aren’t getting the treatment – even the routine work – they need and there is a knock-on effect for the economy because they are being prevented from getting back into it and producing the content of work they should be able to provide at the standard they are expected to.

“It’s as much as we can give,” said Boris Johnson. But this is sheer short-sightedness. A five per cent pay rise, as suggested by Mr Murphy, would pay for itself as the benefits spread through the economy.

This Writer is left wondering whether Johnson is deliberately sabotaging the health service in order to make privatisation more acceptable; if it can’t recruit staff, then perhaps it should be handed over to private firms.

The trouble with that is, private firms won’t pay any better because they’ll be busily grubbing for profits for their shareholders.

And they won’t provide the service the NHS offers because most people simply won’t be able to afford their prices.

So the economy will suffer a much greater downturn as increasing numbers of people fall into illnesses from which they simply won’t be able to get up.

It is economic idiocy.

But don’t take my word for it. Here’s Mr Murphy:

One part of the clip that I don’t understand is where he says the NHS is perceived to be free. It isn’t and never has been.

Originally, the cost of the service was said to be paid by National Insurance. Nowadays I think that is not true – or certainly not as true as in the past. Much of the cost is now said to come from general taxation (although we know that tax doesn’t actually work like that; the money taken back by the government is more correctly said to be recycled into use to pay for the NHS).

Either way, the NHS is at least partially supported with payments from the general public. It isn’t free and never has been.

Isn’t it funny how that disappears from the minds of politicians whenever it becomes convenient?

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Sunak’s Budget is ‘for the fairies’ because it assumes that Covid is over

His next job: because Sunak has just served up a Budget ‘for the fairies’ that is likely to fall flat on its face in a few short months.

It seems the phrase du jour is ‘for the fairies’.

Some daft Tory MP said nurses’ calls for pay increases were “for the fairies” – see my earlier story on that.

Now I see Richard Murphy of Tax Research UK has used the same phrase to describe Rishi Sunak’s budget.

He also said the Johnson government is “firing blanks” at every level.

And that Sunak is likely to be back at the Dispatch Box in a very short time with emergency measures to cope with the disastrous failure of all his Budget predictions.

He says these things with confidence because of one simple fact: Covid-19 has not agreed to follow Boris Johnson’s “roadmap” (it’s actually a timetable but you can’t expect a numbskull like your prime minister to understand the English language) out of lockdown.

Don’t take my word for it. Here’s Mr Murphy:

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Budget response by the Leader of the Opposition to the Tory Government

Here it is.

It is particularly enlightening where it refers to the Member for Hayes & Harlington:

You didn’t really expect this to be a video of Keir Starmer, did you?

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Nothing for you if you’re sick, disabled, at school or in care: reaction to the Tory budget

They all do this: but the way Rishi Sunak held the red box indicated there wasn’t much in it. And there wasn’t.

Rishi Sunak’s budget has shown he is a diehard Tory, with concessions for businesses while those of us in need can go whistle.

He has claimed his hands are tied by huge Covid-19-related debts – but we all know that he has already paid them off, by the simple means of creating the money needed to do so.

And his big plans for the future were pathetic: new ‘free ports’ that have always been a bad idea, and an investment bank to replace the one a previous Tory government sold off a few years ago.

We are ruled by intellectual pygmies – and that is being harsh on the pygmies.

I watched the budget speech and commentated on it on Twitter, so I can provide a first-hand account of the announcements – but first, I’d like to go straight to what wasn’t announced, with comments from people who were reading at the time:

So the people who did all the hard work during the Covid-19 crisis will receive no reward for their sacrifices at all – even though many of them sacrificed their lives, contracting the virus and dying because Matt Hancock couldn’t be bothered to supply proper personal protective equipment (PPE) at the right time.

However:

People with disabilities who did not receive the £20 benefit uplift because they are on so-called “legacy” benefits will still receive nothing more, even though the uplift will remain in place until September. After then, it seems people who lost their jobs because of Covid-19 will fall over a so-called “cliff edge”, with the uplift cancelled, forcing them to live on much less.

The Tories have made a major issue of education in the crisis, demanding that our children must go back to school as soon as possible in order to catch up on what they have missed – but Rishi Sunak has provided no extra facilities for this in his budget. It seems it was all talk and – in fact – the plan is to reopen a major vector for transmission of Covid and hope that the increase in infections – and deaths – won’t be noticed amid the falling numbers triggered by the vaccination programme.

And after years of promising to fix problems in the social care system – that became hugely pronounced when 30,000 people died in care homes because of Tory stupidity – Sunak is breaking that promise by offering nothing.

Meanwhile, those who profited hugely from the pandemic – either by being perfectly situated to continue selling goods to people in lockdown or by receiving government Covid-related contracts to provide services at hugely-inflated costs (many of which were not actually provided because the contractors were not qualified to do so) are to get off scot-free because Sunak has backed away from calls to impose a wealth tax.

So, what has he done?

Well, he carped on a lot about borrowing a huge amount of money to pay for Covid-19. That was a stream of lies from start to finish, as I pointed out:

So we were led to expect tax hikes a-go-go. But this didn’t happen:

The refers to income tax, National Insurance and VAT. However – and this is indeed a ‘however’:

This is the amount you earn before you start paying tax, or before you start paying it at a higher rate. Because these thresholds are frozen, it seems more people will pay at a higher rate due to wage inflation, so there will be a de facto increase in taxes. But this depends on people receiving pay rises to cover their costs and Tory policy over the last 11 years has been to discourage that – it’s the reason real take-home pay has fallen by thousands of pounds per year since 2010.

This was the only increase in taxation, and it is only on a tax on profits. So firms that pay corporation tax can avoid it by ensuring that they make no profit from 2023. The best way to do that is to invest in infrastructure and wages (by employing more people, perhaps).

It would be wrong to say that Sunak’s budget does nothing for ordinary people – but it’s all based around existing Covid-related schemes:

Sunak went on to announce plans for government investment. The main points were:

But “free ports” are not new, nor are they likely to help:

Here’s an interesting point:

Mr McDonnell himself promptly answered it:

There was also some muttering about policies that give a nod to the environment but if you blinked, you missed them – and This Writer blinked. They certainly don’t constitute a “Green Industrial Revolution”!

As Tory budgets go, this is not the disaster for working-class people that it could have been – although the main hits have been offset, so it may be a few months or years until we can know the effects for sure.

The lack of any hard taxes or austerity measures suggests a tacit admission that Covid-19 really is bought and paid-for, and there won’t be any real need to pay for it again.

So This Writer is left with a huge sense of anticlimax. I was expecting to be fearful after today; instead I feel let down.

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Tory ideas about money have been wrong since before 2010. Here’s the reason

Flag-waving fools: Rishi Sunak and Boris Johnson have no idea how to run a country. They rely on patriotism to blind the gullible while they take your cash – and still put us into debt.

Some of us have been saying this for years but here’s a big-league economist to back us up.

Remember all the talk about Labour having “Maxed out the national credit card” that David Cameron and George Osborne used to win just enough seats to form a coalition with oily Nick Clegg’s Liberal Democrats in 2010?

It was nonsense. I said it at the time (and many times afterwards in articles on This Site. You can’t compare a national economy with household income and expenditure.

But it seems people are still being taken in by it because the Tories are still using it as the basis of their economic model.

That is the reason the UK has fallen deeper and deeper into debt during their 10 years in office. We can only go into debt, while they continue to follow this course.

Richard Murphy explains it very well in the video clip but I’ll paraphrase: while households become better-off by restricting spending, the nation loses out because businesses don’t benefit from that spending and cannot pass the money on through the system – therefore the nation becomes poorer.

So, by restricting spending with austerity policies, the Tory governments of the last 10 years have starved the UK of its economic lifeblood and plunged us into trillions of pounds worth of debt.

The only way to improve our economic situation is by spending into the economy with wise investments that help it to grow.

But Conservatives simply do not understand this basic (macro)economic fact. They never have.

See for yourself:

Some households fared well during the first Covid-19 lockdown. The lack of any way to spend their money meant they were able to pay off debts and bank spare cash.

But that won’t last. In some cases, families are already suffering because their income has fallen below their outgoings and the lockdowns are still going on.

In fact, the Tory plan is to ensure that they leach that money away from all of us as soon as possible.

There is nothing you can do about it in individual households because the household unit is too small to stave off economic intervention from a national government.

But if you group together with others, you might find a way.

Alternatively, you can just stick your head in the sand and wait for Rishi Sunak to empty your bank account and steal your house. It’s up to you.

You’ll probably see the sense in these words on March 2, when Sunak announces his spring budget.

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Record annual slump for UK economy in 2020 – but should Johnson be slammed for it?

Johnson’s blunders: he made promise after promise – and mistake after mistake. And the UK’s economy suffered.

Yes he should, although it may have seemed a tricky one to call.

The simple fact is that the UK’s economy was bound to suffer in the year of Covid-19.

Business – and school – closures were inevitable. Even though Johnson didn’t want to do it, eventually he had to.

And that’s part of the reason he should be blamed: he had to be dragged into every correct decision he made – and usually too late to prevent some harm from being done.

His lockdowns were only ever partial (so not really lockdowns at all), and he pulled out of them too early.

We recently learned that he ignored scientific advice to do so.

He diverted commercial contracts connected with tackling the virus away from experts in order to hand billions of pounds to friends of the Conservative Party who knew little or nothing about the work they were being asked to do.

Test and trace work, to quote a much-criticised example, suffered badly because he put an ex-jockey in charge, who didn’t realise that a virus can mutate – something that seven-year-old children read in school textbooks.

As a result of all this, the pandemic affected the UK far more than it might otherwise have, and the economic effect was worse, as we can see:

The UK economy shrank by a record 9.9% last year as coronavirus restrictions hit output, official figures show.

The contraction in 2020 “was more than twice as much as the previous largest annual fall on record”, the Office for National Statistics (ONS) said.

Muddying the issue is the fact that previous governments had dismantled the UK’s ability to cope with a pandemic infection over many years. But Boris Johnson was part of some of those governments, so he still can’t dodge some of the responsibility.

And, because it is a deadly infection, we don’t know how many people were likely to have been infected – or died – if Johnson had acted more responsibly… or indeed if he hadn’t bothered to do anything at all.

So we don’t know what would have happened in either a worst- or best-case scenario.

So we are left with the knowledge that the economy was going to suffer in 2020, no matter what.

But Johnson did not act fast enough to minimise the damage – and his choices were either wrong or, on the rare occasions they were right, delayed.

We don’t know how badly the economy would have been affected in different circumstances.

But it’s a fair bet that it would have fared better if Johnson’s choices had been wiser.

Source: UK economy suffered record annual slump in 2020 – BBC News

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Employers need to plan for the future. Why is the ‘party of business’ denying them this security?

Ditherer: Rishi Sunak doesn’t know how to safeguard businesses and the UK economy, or link its well-being with public health because the neoliberal dogma he learned does not accommodate phenomena like the Covid-19 pandemic.

Covid-19-related support packages for businesses are set to end soon, with no extension or replacement announced – signifying a £50 billion loss to the UK’s economy.

According to Tory plans the furlough scheme, rates holidays, tax deferrals, VAT cuts and other support packages will be closed at the end of the financial year.

But businesses are now expecting to be closed well into the spring and possibly beyond.

Tory Chancellor Rishi Sunak is not likely to announce his plans for the future of the economy until he makes his spring Budget statement on March 3 – too late for many firms, whose bosses will have to make decisions based on information currently available to them before that, if they are to be seen to be acting with responsibility to their shareholders, creditors and even employees.

Labour has demanded immediate action and, for once, Keir Starmer’s party is right.

Shadow business minister Lucy Powell also touched a raw nerve when she said Boris Johnson’s Tory government had failed to ensure that business support was integrated with public health measures.

As a result, the UK’s Covid-related recession had been the worst of any major economy.

And the longer Sunak dithers, the worst the situation will become.

Source: Businesses facing £50bn ‘bombshell’ as Covid support withdrawn, warns Labour | The Independent

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