Tag Archives: AAA

‘Slimy’ minister talks up unfunded housing scheme while 50,000 face eviction

'Slimy' Tory mouthpiece? Kris Hopkins (left), the Coalition's new housing minister, takes tea with David Cameron on a Northampton housing estate while talking a lot of nonsense about Help to Buy.

‘Slimy’ Tory mouthpiece? Kris Hopkins (left), the Coalition’s new housing minister, takes tea with David Cameron on a Northampton housing estate while talking a lot of nonsense about Help to Buy. [Picture: WPA Pool/Getty Images Europe]

One of Parliament’s “slimiest, nastiest MPs” has got stuck into his new job, putting out a press release on how the hideously ill-judged ‘Help to Buy’ housing scheme is “surging ahead”.

Kris Hopkins, the Conservative MP for Keighley whose only previous claims to fame were allegations that “gangs of Muslim men were going around raping white kids” (thanks to Johnny Void for that one) and a Twitter spat with the odious Philip Davies, said the equity loan scheme had driven up the rate of house building and captured the public imagination with more than 15,000 reservations for new-build homes in its first six months.

Reality check: House building is at its lowest level since the 1920s. In the 2012-13 financial year, only 135,117 new homes were completed – the lowest number on record.

Earlier this year, Hopkins called for Conservatives to unite behind David Cameron – to which Nadine Dorries responded, “pass the sick bag”. Yesterday, he at least was united behind Cameron – as they toured a Northampton housing development.

According to the press release, he said government action to restore confidence to the housing market was working, with over a third of a million new homes built over the last 3 years, including 150,000 affordable homes.

Reality check: That is a lower number than any period on record prior to the current Coalition government. It is not an achievement. It is a disaster.

Under the equity loan scheme, buyers can get mortgages on new build homes with a five per cent deposit, with the rest provided by an equity loan from the government of up to 20 per cent on properties with a value of £600,000 or less.

Yesterday (October 8), Cameron and his Chancellor, George Osborne, launched the second part of Help to Buy – the mortgage guarantee – which will also be available on existing properties worth £600,000 or less. Lenders will be able to offer a 95 per cent loan-to-value mortgage, made possible by a government guarantee to the lender of up to 15 per cent of the value of the property.

Reality check: In English, this means the taxpayer is underwriting people’s mortgages. Osborne reckons he has put aside £12 billion for this part of the scheme but – as former Chancellor Alistair Darling recently noted  – the source is unidentified. “Strange that when Labour makes promises, the Tories claim it will mean more borrowing, yet it’s fine for them to make unfunded promises,” Mr Darling wrote.

Back to the press release: “Housebuilding is growing at its fastest rate for 10 years,” it says.

Reality check: The Channel 4 article, quoted above, warns us to “take the proclamations we are getting from the government about high rates of growth in housebuilding with a hefty pinch of salt. Housebuilding completions are starting from modern record lows; the rates of growth are bound to be high.”

What does Kris Hopkins have to say about this? Not a lot, in fact. He blathers that the equity loan has “captured the imagination of the public and is boosting the supply of new homes across the country”.

Reality check: Back to Channel 4 – “The levels… show that something went wrong in 12/13. Turning the corner means going from abysmal to terrible.”

“Our policies on housing are working,” said Hopkins in the press release. “Housebuilding is growing at its fastest rate for 10 years, and the tough decisions we’ve taken to tackle the deficit have kept interest rates low and are now delivering real help to hardworking people.”

Reality check: We’ve already covered the speed at which house building is growing; he should not be pretending this is a huge success when the number of new houses being built has fallen to a record low. As for the policy on the deficit keeping interest rates low – Vox Political blew that out of the water months ago. For clarity: A government can always service its debt, if that debt is in its own currency. Our debt is in UK pounds and we can always service it. Our creditors know that, so they remain happy to continue financing it. Otherwise, with Osborne borrowing 75 per cent more than he said he would in 2010, and with the UK’s ‘AAA’ credit rating gone in a puff of agency doubt earlier this year, Osborne would have been up a certain creek without an economic lever (to mix a metaphor or two).

“I’m delighted we’ve launched the second part of Help to Buy, the mortgage guarantee, which will strengthen the package of measures that have already done so much to restore confidence in the housing market,” Hopkins concluded.

Final reality check: Michael Meacher is one of many who believe that ‘Help to Buy’ will do nothing more than create another housing price ‘bubble’, most likely leading to another debt crisis. “Even [George Osborne’s] Tory supporters believe [this] will throw oil on the fire of the already overheated surge in house prices,” he wrote.

Meanwhile, at the other end of Britain’s housing market, 50,000 people are facing eviction because of the Bedroom Tax.

The Magical Land of Os(borne) – fantasy economics


George Osborne’s claim that his nonsense policies have magically turned the economy around, coupled with his equally-preposterous claim that the UK needs another seven years of austerity before he can balance the books – provides a fine example of the duality at the heart of Conservative economic policy.

He needs to convince you that his choices have made a difference and the nation’s fortunes are changing, but he also need to convince you that we’re in a terrible mess – or he won’t have an excuse to continue cutting more public services and selling them into the private sector so his rich friends can use them to fleece you.

The two claims are not only contradictory of each other – they are self-contradictory. The evidence shows that Osborne’s policies delayed the recovery, rather than encouraging it, and the ‘Starve The Beast’ plan he cribbed from George W Bush has long been recognised as harmful to any country’s economic health; by cutting services he is starving the economy of the liquidity that is its lifeblood.

(This is a point worth remembering: Whenever a TV news reporter says Osborne or the government want to make cuts in order to “save” money, they mean the government will be “taking money out of the economy” – which will consequently be worth less. As a result, some people will have to become poorer. Can you guess who?)

Before we congratulate Osborne in ways that are anything like as effusive as David Cameron’s endorsement earlier this week, let’s look at the facts: According to Martin Wolf in the Financial Times, in three and a half years, the UK’s economic performance has improved by just 2.2 per cent – against a prediction of 8.2 per cent by his pet Office of Budget (Ir)Responsibility. In the second quarter of 2013, Gross Domestic Product was 3.3 per cent below its pre-crisis peak and 18 per cent below its 1980-2007 trend, making this the slowest British recovery on record.

Osborne and the Conservatives point proudly to the strong increase in private-sector jobs but, as Mr Wolf states, “this is hardly something to boast about”. While employment – on paper – is at an all-time high, productivity has fallen back to the level it reached in 2005. What does this say about the quality of the jobs that are being filled? Are they high-quality, long-term, well-paid careers, or are they part-time, zero-hours, throwaway fillers? We all know the answer to that. Average wages have been cut by nine per cent, in real terms, since 2010 – and they are still falling.

Even by the standards of other crisis-hit, high-income economies, the UK’s performance has been dismal, says Mr Wolf, pointing to work by Spencer Dale and James Talbot of the Bank of England. This indicates that the Eurozone has performed just as badly – but the difference is that the Eurozone countries do not have control of every economic lever that is available to them; Britain does.

Osborne claims that high global inflation and the performance of the Eurozone have impacted on the UK; Mr Wolf’s assertion is that austerity is the reason for this disappointment – and Osborne was just as much a cheerleader for austerity in Europe as he has been for it in the UK. Furthermore, as the Labour Party pointed out in its report, “David Cameron’s out of touch, you’re out of pocket” (2013), inflation in other G7 countries has been lower than in the UK, indicating that high global prices have little to do with the problem.

“Yes, but,” says Osborne, “austerity has kept interest rates down.” Did it? Did it really? In that case, interest rates would have been kept low because of the promise (in 2010) that borrowing would be brought down by 2015. When the Coalition came to power, Osborne said he expected to borrow a total of £322 billion by 2015. In March this year, that figure had risen to £564 billion – an increase of 75 per cent! Meanwhile the deadline for the national debt to start falling has slipped from 2014-15 back to 2017-18 and the level at which the debt was expected to hit its peak has jumped from 70.3 per cent of GDP to 85.6 per cent. The deficit has been stuck at £120 billion a year for the last two financial years, despite the repeated claims that it has been cut by one-third. None of this has affected long-term interest rates and neither did the loss of the UK’s AAA credit rating in February this year.

Here’s why – as explained in an article on this site in June:

As Professor Malcolm Sawyer notes in Fiscal Austerity: The ‘cure’ which makes the patient worse (Centre for Labour and Social Studies, May 2012), “It is well-known that a government can always service debt provided that it is denominated in its own currency. At the limit the UK government can ‘print the money’ in order to service the debt: this would not take form of literally ‘printing money’ but rather the Central Bank being a willing purchaser of government debt in exchange for money.” This is what is happening at the moment. Our debt is in UK pounds, and we can always service it. Our creditors know that, so they remain happy to continue financing it.

“With interest rates at the zero bound, austerity weakened the economy relative to what might otherwise have happened,” wrote Mr Wolf.

Nobody thought recovery would never happen under austerity, merely that it would be damagingly delayed… This has been an unnecessarily protracted slump. It is good that recovery is here, though it is far too soon to tell its quality and durability. But this does not justify what remains a large unforced error.”

Looking to the future, Osborne has reacted to the new barrage of Labour policies, all of which have been carefully costed against savings in current budget areas, with a series of rushed measures that are entirely unfunded. Remember that, next time a Conservative accuses Labour of borrowing and spending!

The married couples’ allowance, worth less than £4 per week (and less than £2 if you’re on a low income) is unfunded. The promised fuel duty freeze is unfunded. These will cost more than £2 billion and no source has been identified.

And what about the £12 billion stage two of the housing ‘Help to Buy’ scheme, that Osborne rushed forward to this month?

He has pulled £14 billion out of nowhere, but still expects us to believe he will resume his stalled deficit cuts by £35 billion by 2015, £42 billion by 2017-18 and £43 billion by 2020, in order to create a budget surplus.

All the while, he is promising “improved living standards for this generation and the next”. For whom? These cuts must come from somewhere, and they mean removing a cumulative total of £120 billion from the economy each year by 2020. That has to come from somewhere.

Look at the amount by which bosses’ pay in FTSE100 companies has increased in the last three years – 32 per cent, while average worker pay has dropped by nine per cent.

Do you really think the “Have-yachts” will be paying for these cuts?

Further reading: George Osborne’s credibility gap (Alistair Darling, Guardian)

Have the Tories taken leave of their senses? (Michael Meacher, blog article)

From the DWP to the economy – the Coalition’s growing credibility chasm (Vox Political, June 2, 2013)

Treasury responds to Vox’s austerity challenge (Vox Political, May 13, 2013)

“Unfair, incompetent and completely out of touch” – the chance(llo)r’s autumn statement

(Please note: This is a first-glance appraisal; it may contain inaccuracies, gloss over parts that you find important or miss things out entirely. Feel free to mention anything you feel important in the ‘Comments’ column)

In May 2010, the Conservatives asked us to judge them by two yardsticks. The first was that they would cut the deficit – completely – by the 2015 election. The second was that they would protect the National Health Service.

We all know what they did to the National Health Service, and everybody living in England who must now rely on a now-corrupted and degenerate system has my complete and utter sympathy.

Now we know that they have completely failed with the other measure as well. The deficit will not be eliminated by 2015 and the national debt is unlikely to be falling.

That was the main message from Gideon George Osborne in his Autumn Statement as Chancellor of the Exchequer. The announcement adds validity to predictions that the UK will soon lose its AAA credit rating.

Estimates for government borrowing over the course of this Parliament have – of course – risen and it is now estimated that the Conservative/Liberal Democrat Coalition will borrow £212 billion more than stated after the 2010 general election.

Austerity is therefore likely to continue until 2018 and the deficit in 2015 – when it was supposed to reach zero – is now expected to be £73 billion. The message here is that the government will eliminate the deficit in five years’ time.

Wait a minute! Isn’t that what Gideon said in 2010? Have we been taking welfare cut after welfare cut, pay cut after pay cut, attacks on public sector pensions and cuts to economic investment for two and a half years, only to be told that we have been standing still?

This is not just incompetence; it is endangerment. This government is harmful to the UK economy. International readers should note that this entails a knock-on effect, dragging the world backwards as well. You are all endangered by this disaster.

It’s also a breach of a Conservative manifesto promise from 2010 – thanks to the BBC’s Paul Mason for this snippet.

Let’s have a look at the growth forecast from the Office of Budget Irresponsibility. You may recall that in 2012 the economy was initially expected to grow by 2.8 per cent. Don’t laugh! Now the OBR has downgraded that, by a massive 2.9 per cent, to show a contraction of 0.1 per cent. We’re expected to go back into recession for a TRIPLE-dip.

It’s supposed to be the economy, Gideon! Not a rollercoaster ride!

He blames the woes of the Eurozone countries, even though I am reliably informed that it has been comprehensively proven that our economic woes are NOT in major part due to the Eurozone.

So what’s going to happen? Well, millionaires are going to get a tax cut. That’ll help, won’t it? £3 billion, going to the people who need it the least, as Ed Balls said in his response to the Statement.

It’s worth bearing in mind that the 1,000 richest people in the UK are now worth a total of £414 billion – up £155 billion in the last three years. If you were wondering where the money that could stabilise our economy has gone, wonder no more.

What about taxing businesses? We know that the biggest corporations have been hiding their cash in tax havens – is Osborne doing anything about that?

Apparently he is. He’s planning to close tax loopholes and he’s bringing in 2,000 more HM Revenue and Customs staff to do it. Let’s just remind ourselves that he cut HMRC by 15,000 a little while ago.

In the meantime, we have Corporation Tax – is he increasing it? No. He’s cutting it by a further 1 per cent. This means that this tax has been cut by a quarter – 25 per cent – since the Coalition came into power in 2010. And he still can’t get firms to pay up!

Incidentally, Osborne would like us to believe Corporation Tax is keeping the economy weak. However, the US rate is 40 per cent and the economy there is growing.

Where’s the business investment bank we were promised?

Oh! Here’s something: tax relief on pensions slashed for the very high earners. £1 billion expected revenue. Be still, my beating heart.

So: tax cuts for the rich. What do the poor get?

The rise in working-age benefits will be frozen to 1 per cent for the next three years. RPI inflation is currently 3.2 per cent. This means the poor will get six per cent poorer over that period. The Liberal Democrats were crowing about defending inflation-related increases to benefits last year; I notice they have nothing to say today.

The majority of people losing from cuts to tax credits will be people in work.

Disabled people were no doubt completely unsurprised when Osborne wheeled out his tired old line about working people looking at their neighbours’ closed curtains during the ‘scrounger-bashing’ segment of the speech. Let’s all bear in mind that sickness benefit fraud is 0.4 per cent while the government is eliminating 20 per cent of claimants from the welfare bill. That’s 19.6 per cent of claimants who deserve the cash, even if the fraudsters are caught and weeded out (and they probably won’t be).

Disability benefits will be exempt from the freeze, he said, trying to make it seem that the disabled won’t take a hit. This was a lie. Employment and Support Allowance will be affected, and since two-thirds of those who claim ESA long-term are also on the disability benefit, DLA, those most disabled will be hit the hardest.

Scrapping the worse-than-useless Work Programme and Universal Credit would save more than £10 billion, but apparently this won’t happen for fear of upsetting Iain Duncan Smith. As Ed Balls pointed out, though, “You can’t have a successful Welfare to Work programme without work!”

Child benefit remains frozen at the moment, but will increase from 2014. We all know why, I hope. Electioneering. Osborne is hoping that families with (two or fewer) children will support the Tories in the 2015 elections, because of this increase. Pathetic. And anyone who falls for it will be even worse.

Hardly any new infrastructure projects were announced; no new road schemes, no new housing schemes. There’s no repeat of the bankers’ bonus tax.

I could go on and on. You’ll probably hear more about the Statement than Kate’s baby over the next day or so, though; therefore I’ll stop.

One last point: Osborne’s 1.2 million figure for new private sector jobs is a complete fiddle. He is including jobs that have been reclassified from the public to the private sector, also part time jobs and people on the work programme/Workfare, who are working for no pay other than Jobseekers’ Allowance.

Oh, and the government’s borrowing figures may have been fiddled as well; according to Andrew Neil on the BBC it could be £56 billion higher than claimed, by 2017-18.

In March, we had Pasty-gate the day after the Budget Statement. I wonder what we’ll have tomorrow?