It was the result of far too much blind optimism by financial institutions that should have known much better, as this Flip Chart Fairy Talesarticle shows.
If you want the full details, read that article, but to whet your appetite, here are a few snippets.
For a start, the Organisation of Economic Co-operation and Development (OECD) was useless. In June 2007 it suggested that, if there was a downturn, the UK’s deficit might rise above three per cent of GDP; two years later it was at 11 per cent.
The OECD’s idea of the UK’s structural deficit in 2007 was around 2.5 per cent, but it now says the actual level was five per cent, and it didn’t realise. Nice!
Almost all our financial institutions, as the following graph shows, believed the economy would grow (by up to five per cent!) in 2008 and 2009. Outturn: Minus six per cent.
In May 2008 the Bank of England said it expected conditions to improve gradually.
The International Monetary Fund had already said, in April that year, that growth in the UK would slow to 1.6 per cent in 2008, with a moderate recovery (!) in 2009.
And what was Labour’s perspective? At the end of August 2008, Alistair Darling told The Guardianwe were facing economic times that were “arguably the worst they’ve been in 60 years. And I think it’s going to be more profound and long-lasting than people thought.”
Most people didn’t believe him.
So – all Labour’s fault? It seems Labour’s Chancellor was the only one who saw it coming! For many, that won’t absolve Labour of the imagined crime; they’ll say Darling – and Brown before him – should have tightened up regulations to head off the crash and protect the UK from what happened in the rest of the world.
But with everybody else and their mother arguing that there was no need, clearly they should take some of the blame as well.
“This particular Secretary of State, along with his Department, is pushing people through [the] cracks and hoping that the rest of the country will not notice that they have disappeared.” – Glenda Jackson MP, June 30, 2014.
If the man this blog likes to call RTU (Returned To Unit) thought he would be able to show that his behaviour had improved, he was sorely mistaken – as the comment above illustrates.
It is vital that this information reaches the general public despite the apparent news blackout, in the mainstream media, of any disparaging information about Duncan Smith or his DWP.
But we were discussing the debate as a trial. Let us first look at the evidence in favour of the government.
There. That was illuminating, wasn’t it?
Seriously, the government benches were unable to put up a single supportable point against the mountain of evidence put forward by Labour.
Iain Duncan Smith, the Secretary-in-a-State, resorted yet again to his favourite tactic – and one for which he should have been sacked as an MP long ago – lying to Parliament. He accused Labour of leaving behind a “shambles” – in fact the economy had begun to improve under intelligent guidance from Alistair Darling. “The economy was at breaking point,” he said – in fact the British economy cannot break; it simply doesn’t work that way. His claim that “We were burdened with the largest deficit in peacetime history” is only supportable in money terms, and then only because inflation means the pound is worth so much less than it was in, say, the 1940s – or for the entire century between 1750 and 1850. He called yesterday’s debate “a cynical nugget of short-term policy to put to the unions,” but the evidence below renders that completely irrelevant.
He said complaints about long delivery times for benefits were “out of date” – a common excuse. He’ll do the same in a few months, when the same complaint is raised again.
“Universal Credit is rolling out to the timescale I set last year,” he insisted – but we all know that it has been ‘reset’ (whatever that means) by the government’s Major Projects Authority.
He said there had been four independent reviews of the work capability assessment for Employment and Support Allowance, with more than 50 recommendations by Sir Malcolm Harrington accepted by the government. This was a lie. We know that almost two-thirds of the 25 recommendations he made in his first review were not fully or successfully implemented.
He said appeals against ESA decisions “are down by just under 90 per cent” – but we know that this is because of the government’s unfair and prejudicial mandatory reconsideration scheme – and that the DWP was bringing in a new provider to carry out work capability assessments. Then he had to admit that this provider has not yet been chosen! And the backlog of claims mounts up.
He tried to justify his hugely expensive botched IT schemes by pointing at a Labour scheme for the Child Support Agency that wasted hundreds of millions less than his Universal Credit, without acknowledging the obvious flaw in his argument: If he knew about this mistake, why is he repeating it?
Conservative Mark Harper said Labour opposed the Tories’ most popular scheme – the benefit cap. That was a lie. Labour supported the cap, but would have set it at a higher level. We know that the Coalition government could not do this because it would not, then, have made the huge savings they predicted.
Now, the evidence against.
First up is Rachel Reeves, shadow secretary of state for work and pensions: “After £612 million being spent, including £131 million written off or ‘written down’, the introduction of Universal Credit is now years behind schedule with no clear plan for how, when, or whether full implementation will be achievable or represent value for money.
“Over 700,000 people are still waiting for a Work Capability Assessment, and… projected spending on Employment and Support Allowance has risen by £800 million since December… The Government [is] still not able to tell us which provider will replace Atos.
“Personal Independence Payment delays have created uncertainty, stress and financial costs for disabled people and additional budgetary pressures for Government… Desperate people, many of whom have been working and paying into the system for years or decades and are now struck by disability or illness, waiting six months or more for help from the Department for Work and Pensions.
“The Work Programme has failed to meet its targets, the unfair bedroom tax risks costing more than it saves, and other DWP programmes are performing poorly or in disarray.
“Spending on housing benefit for people who are in work has gone up by more than 60 per cent, reflecting the fact that more people are in low-paid or insecure work and are unable to make ends meet, even though they may be working all the hours God sends.
“More than five million people — 20 per cent of the workforce — are paid less than the living wage. Furthermore, 1.5 million people are on zero-hours contracts and 1.4 million people are working part time who want to work full time.
“This… is about the young woman diagnosed with a life-limiting illness who has waited six months for any help with her living costs. It is about the disabled man whose payments have been stopped because he did not attend an interview to which he was never invited.
“The Government are wasting more and more taxpayers’ money on poorly planned and disastrously managed projects, and are allowing in-work benefits to spiral because of their failure to tackle the low pay and insecurity that are adding billions of pounds to the benefits bill.
“The Government are careless with the contributions that people make to the system, callous about the consequences of their incompetence for the most vulnerable, and too arrogant to admit mistakes and engage seriously with the task of sorting out their own mess.
“What this Government have now totally failed to do is to remember the human impact, often on people in vulnerable circumstances, of this catalogue of chaos. Behind the bureaucratic language and spreadsheets showing backlogs and overspends are people in need who are being let down and mistreated, and taxpayers who can ill afford the mismanagement and waste of their money.
“To fail to deliver on one policy might be considered unfortunate; to miss one’s targets on two has to be judged careless; but to make such a complete mess of every single initiative the Secretary of State has attempted requires a special gift. It is something like a Midas touch: everything he touches turns into a total shambles.
“Meanwhile, the Secretary of State will spew out dodgy statistics, rant and rave about Labour’s record, say “on time and on budget” until he is blue in the face and, in typical Tory style, blame the staff for everything that goes wrong.”
Julie Hilling (Labour) provides this: “The Government do not know what they are talking about… They talk about the number of jobs being created, but they do not know how many of them are on zero-hours contracts or how many are on Government schemes or how many have been transferred from the public sector.”
Stephen Doughty (Labour/Co-op): “another stark indictment of their policies is the massive increase in food banks across this country.”
Helen Jones (Labour): “When I asked how many people in my constituency had been waiting more than six months or three months for medical assessments for personal independence payment, the Government told me that the figures were not available. In other words, they are not only incompetent; they do not know how incompetent they are!”
Sheila Gilmore (Labour): “Although the problems with Atos were known about—and it is now being suggested that they had been known about for some time—a contract was given to that organisation for PIP. Was due diligence carried out before the new contract was issued?”
Gordon Marsden (Labour): “Many of my constituents have been caught by the double whammy of delays involving, first, the disability living allowance and now PIP. They have waited long periods for a resolution, but because a decision is being reconsidered, their Motability — the lifeline that has enabled them to get out of their homes — has been taken away before that decision has been made. Is that not a horrendous indictment of the Government?”
Emily Thornberry (Labour): “I have been making freedom of information requests.. in relation to mandatory reconsiderations. When people get their work capability assessment, and it has failed, before they can appeal there has to be a mandatory reconsideration. The Department does not know how many cases have been overturned, how many claimants have been left without any money and how long the longest period is for reconsideration. It cannot answer a single one of those questions under a freedom of information request.”
Natascha Engel (Labour): “The welfare state is designed as a safety net to catch people who absolutely cannot help themselves… That safety net is being withdrawn under this government, which is certainly pushing some of my constituents into destitution.”
There was much more, including the devastating speech by Glenda Jackson, partly in response to Natascha Engels’ comments, that is reproduced in the video clip above.
The vote – for the House of Commons to recognise that the DWP was in chaos and disarray – was lost (of course). A government with a majority will never lose such a vote.
But once again, the debate was won by the opposition. They had all the facts; all the government had were lies and fantasies.
By now, one suspects we all know somebody who has died as a result of Coalition government polices on welfare (or, preferably, social security). Two such deaths have been reported in the Comment columns of Vox Political since the weekend, and it is only Tuesday.
That is why it is vital that this information reaches the general public despite the apparent news blackout, in the mainstream media, of any disparaging information about Duncan Smith or his DWP.
Share it with your friends, use parts of it in letters to your local papers or radio stations, even mentioning it in conversation will help if the other person isn’t aware of the facts.
Don’t let it be suppressed.
You don’t want to do Iain Duncan Smith’s work for him, do you?
Mr Os-bean: As Ed Miliband gave his response to the Budget, George Osborne had a gormless smile on his face that made him look like Mr Bean. This is not him – but it’s the closest image I could find at short notice. [Image as credited]
If a Conservative government is returned to office after the 2015 election, there will be yet more spending cuts and service cuts afflicting hard-working, low-paid families.
That was the message for most people in George Osborne’s latest attempt at a Budget speech today.
There were plenty of groan-worthy moments as the part-time chancellor trotted out the Coalition’s catchphrases: “We will fix the roof while the sun is shining” (groan. The job is taking so long, one has to question whether the contractor is Con-ning the client). “We are all in this together” (groan). Oh really?
Benefit spending is to be capped at £119 billion per year, albeit rising with inflation; public sector pay “restraint” will continue for the foreseeable future. This is from the government whose Prime Minister was confirmed, only minutes previously, as having approved 40 per cent pay rises for his special advisors!
Most significant is the fact that Osborne avoided mentioning ordinary working people for most of his speech; this was a budget for businesses, with the benefits reserved for fatcat bosses.
No major advanced economy in the World is growing faster than the UK, said Mr Osborne; more people are in work. This appears to be borne out by current employment figures (although it should be noted that this is due to a vast and questionable boom in self-employment – the number of employees has dropped by 60,000).
Where is the benefit to the British economy? Why has the deficit not been eliminated? Osborne said it stood at £157 billion in the year he came to office, and would be £108 billion this year, but in fact £39 billion was removed due to measures brought in by the previous Labour chancellor, Alistair Darling. He has cut government spending by something like £80 billion so far, but the deficit has dropped by – possibly – £10 billion. Not a good start to his speech.
There will be further investment in high-speed rail, even though there is no way of predicting whether this hugely costly investment in making train journeys 20 minutes faster will create any economic improvement.
There will be money to fund new centres for medical research – but will these be absorbed by private health firms after the public purse has paid for them?
There will be investment in faster extraction of oil from the North Sea – aiming to get as much as possible out before the Scottish referendum, in order to impoverish the Scots if they decide to go for independence?
And there will be investment in low-cost energy (finally killing the highly questionable green agenda) – meaning money for shale gas companies, and to hell with the environmental cost.
All this investment will go into businesses whose main contribution to the Treasury – Corporation Tax – has already dropped by a quarter (from 28 per cent to 21 per cent) and will go down to 20 per cent this year. This is less than the lowest level of Income Tax.
Up go the profits – down go the tax payments. Who benefits?
Council tax in England remains frozen, meaning fewer public services.
The personal tax allowance is to rise, so people may earn £10,500 before paying tax. This is nowhere near enough to offset the massive drop in living standards that has been caused by the Tory-led Coalition. The cost of living has risen for 44 out of the 45 months of this Parliament – for the whole period, if the earnings of high-paid bankers are removed from the calculation.
The threshold for payment of the 40p tax rate is to rise, so fewer people will pay the higher rate.
Savers are to be helped but – again – this is not a boost for the poor. Most working and unemployed families don’t have any spare money to put into the banks. How does it help them to know they would not pay any tax on savings up to £15,000 in an ISA, when they cannot afford to open one?
And there is a new Pensioner Bond for rich senior citizens (poorer pensioners don’t live long enough to benefit).
As Ed Miliband said in his scathing response, the Coalition can afford to give a tax cut of £200,000 per year to bankers who earn £5 million – but can’t afford £250 per year extra for nurses.
Mr Miliband said the Budget speech was more significant in what it hid than in what it actually said.
Working people are suffering under the Bedroom Tax, under cuts to their tax credits, and they are having to visit food banks if they want to eat.
This is a government that gives with one hand, but takes back much more with the other.
And the Conservatives have the bare-faced cheek to call themselves “The Workers’ Party”.
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‘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 Voidfor 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.
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.
Another fool who doesn’t think before speaking: David Gauke, pictured here with jaws clamped shut in a desperate attempt to prevent his foot from leaping into his mouth. It would serve him right if his ill-judged attack on a Labour MP brings the entire party and all its supporters together for a concerted attack on the Conservative-led coalition’s silly and baseless policies.
Tory Treasury tax-avoidance fan and whistleblower-basher David Gauke’s attack on the Labour Party is yet another shot in the foot for the Government That Can Do Nothing Right.
His ill-judged, ill-timed remark that Labour MPs were “turning on each other” is more likely to galvanise Her Majesty’s Opposition into more co-ordinated and powerful attacks on Coalition ideology and incompetence – especially after we learned the Tory claim that they inherited an economic mess from the last Labour government was nothing more than a blatant lie.
“They don’t really have anything to say and they’re now turning on each other and I think their own backbenchers are beginning to realise that the Labour leadership haven’t really got a voice,” Gauke told the BBC in response to a piece by Labour’s Swansea West MP, Geraint Davies, in The Independent.
In doing so, it seems Gauke was trying to distract attention from what Mr Davies was actually saying – which is worth repeating here, because it is likely he speaks for a huge majority of Labour members who are becoming increasingly frustrated by the contradictory and self-defeating behaviour of their leaders.
So what does Mr Davies say?
First: “The electorate doesn’t yet see a clear choice between the parties on cuts vs growth.” This is because Labour has promised not to reverse Conservative-led ideological cuts and to keep spending at Tory-set levels for 2015-16, if returned to office at the general election – even though the Conservatives have decisively lost the argument on austerity. It simply isn’t necessary.
Second: “The Tories have been relentless in asserting that Labour messed up the economy. Not rebutting this charge makes us look like a shamefaced schoolboy admitting responsibility by omission.” Mr Davies makes a second good point here – more so because, as William Keegan reported in Sunday’s Observer, the spring issue of the Oxford Review of Economic Policy exonerates the last Labour government of any economic wrong-doing. Gordon Brown and Alistair Darling did the right thing – and it is worth reminding everybody that the Conservatives, at the time, supported their actions. That was when the Tories were led by – who’d have thought it? – David Cameron and George Osborne, just as they are now!
The Observer article went on to note that US Treasury Secretary Jack Lew has also endorsed the Labour government’s actions in his recognition that demand in our economies must be stimulated. Conservative-led Coalition policy has drained demand away. This is why the smart commentators are pointing out that the unforeseen upturn in the UK economy in recent months has nothing to do with government policy; it’s just that things had to get better, sooner or later.
Third: He puts up his opinion – that a Labour government should boost the UK’s productive capacity “by linking industry, universities and councils. We need a sharper focus on the growing export opportunities to China, India, Brazil and Russia. We must invest in homes and transport, use public procurement as an engine to grow small and medium-sized firms…. We need to continue a journey towards jobs and growth, not to be diverted into a cul-de-sac of more cuts.”
The last comment dovetails perfectly with the attack launched by Labour this week on the Coalition’s record – which claims the average worker will have lost £6,600 in real terms between the 2010 election and that due to take place in 2015.
Paraphrasing former Tory PM Harold Macmillan, Labour said many workers had “never had it so bad”, pointing out that David Cameron has presided over a more sustained period of falling real wages since 2010 than any other prime minister in the past 50 years.
The Tories’ only response has been to repeat the lie that the Coalition was clearing up a “mess” that we all now know for certain Labour neither created nor left.
Conservative business minister Matthew Hancock was the one voicing it this time, so voters in his West Suffolk constituency please note: This man is a liar. You must not trust him.
And of course David Gauke weighed in as well. He’s the minister in charge of tax – who was revealed to have worked for a firm specialising in tax avoidance. Do you trust him? He’s also the minister who reportedly green-lit a plan to discredit Osita Mba, a solicitor with HM Revenue and Customs, after he blew the whistle on the notorious Goldman Sachs “sweetheart” deal that wrote off millions of pounds in interest charges on tax owed to the UK Treasury by the multinational corporation. A trustworthy man?
David Gauke is the MP for South West Hertfordshire. Voters there may wish to reconsider their opinion of him.
What these chuckleheads are missing is the fact that Mr Davies is not a lone voice in the wilderness; his article expressed the opinions of a wide majority of Labour members and voters.
“Will the Labour party declare it is opposed to zero hours contracts and will end them?” he wrote (perhaps after reading the Vox Political article on that subject).
“Will it show it is opposed to blacklisting by making it an imprisonable offence, prosecuting the 44 companies who indulged in it if convicted, and making it sure that all the 3,213 building workers secretly subject to blacklisting are informed of the cause of their up to 20 years’ joblessness and fully compensated? Will it say loud and clear that a decade of pay cuts for those on the lowest incomes is flagrantly unjust when the 0.01 per cent richest have not only not paid any price, but have seen their wealth continue to grow untouched?”
This is the sort of fire Labour members and voters want to see from the leaders. There is nothing to fear from tissue paper-thin Tory arguments and outright lies. It is time to stand up for Labour principles, damn the Tories for their evil, damn the Liberal Democrats as fools and dupes, and set out a plan to get the ship of state off the rocks and into calmer waters.
If Ed Miliband, Ed Balls, and the rest of the Labour front bench have any sense, they’ll realise that continuing with the course they have set will put them in a tiny minority that cannot possibly hope to win the next election. Alignment with Geraint Davies, Michael Meacher and the millions like them should ensure an overwhelming victory.
Celebrating Britain’s ruin: The Bullingdon boys rave it up in Davos – David ‘Flashman’ Cameron (centre, facing us), George ‘Slasher’ Osborne (left, back to us), Boris ‘Zipwire’ Johnson (right, back to us)
Confirmation has come through from the Office for National Statistics that the UK economy shrank in the last months of 2012.
It’s no surprise – you only had to look at the shop sales figures for December to know that something was going wrong.
The poor performance has negated the effects of the growth bump in the previous quarter, when the economy improved by 0.9 per cent, boosted by the London Olympics.
The official Treasury line is: “While the economy is healing, it is a difficult road.” Healing? Total growth for the whole of 2012 has flatlined. Again. If the economy was a hospital patient it would need a sharp electric shock to get it going again (but we’ll come back to that)!
The total economic growth since the Conservative-led Coalition government came into power is 0.4 per cent; less than that recorded during the first quarter of the Parliament when the government was still working under Labour Chancellor Alistair Darling’s spending rules.
“Today’s GDP figures are extremely disappointing, but not surprising. We warned the UK Govt their cuts were too deep, too fast,” said Carwyn Jones, the Welsh Government’s First Minister.
“UK Government cuts to capital investment in major infrastructure projects is causing damage to our economy. A new plan for growth and jobs should now be a major priority for the Prime Minister and the Chancellor of the Exchequer.”
Economist Danny Blanchflower tweeted: “-0.3% lack of growth comes as no surprise but is appalling this was made in #11 Downing Street. The question is what is Slasher going to do?
“Given that the coalition in June 10 predicted growth would be +6 per cent and we now have +0.3 per cent we are entitled to know what went wrong. One-twentieth won’t do.”
Sky News ran with this: “Osborne says Britain faces a difficult economic situation and that he will confront problems to create jobs.”
Comedy Prime Minister David Cameron received early warning of the figures, and responded by having a slap-up meal with his Bullingdon chums Gideon George Osborne (the man responsible for the mess) and London’s comedy mayor Boris ‘zipwire’ Johnson.
Osborne later responded: “We can either run away from these problems or confront them, and I am determined to confront them so that we go on creating jobs for the people of this country.” What jobs?
In fact, this is the very predictable result of the Conservatives’ ideology-led dogma, that put a project to shrink the state ahead of prosperity.
The Tories have always wanted to pin the blame for our debt woes on the state. They suggest that we are in crisis because public spending got out of control, and that this is what happens when the state gets too big.
But this is a fantasy, unsupported by any sound economic analysis and designed to pursue a reckless plan that puts the economy and long-term recovery at risk.
The image of a bloated state getting fatter on taxpayers’ money while crowding out a budding private sector is nothing but propaganda, and here’s why: Before the credit crunch, public sector debt was less than 40 per cent of national income – it was the private corporate sector that was out of control, with debt at almost 300 per cent of national income.
The Tories wanted to say the private sector was being crowded out by the public sector, but in fact, it was being propped up by it.
Those of us who listened to the experts knew that cutting would make things worse, rather than better, but we heard yesterday that Osborne is now ignoring the advice of his former bosom-buddies at the IMF and intends to keep chopping away at the carcass, presumably until there’s nothing left at all.
The same experts, last year, were warning of a double-dip recession – or what legendary economist John Maynard Keynes called the “death spiral”. Now we’re facing a TRIPLE-dip. We haven’t just entered the death spiral; we’re well into it!
Osborne’s solution is to cut benefits and wages so that people have less money to spend on the UK economy. With less money in circulation, shops will close and businesses will go to the wall. Foreign investors will turn away from a nation where they will see there is no profit to be gained. Creditors will start to worry and our credit rating will suffer. By the next election in 2015, there may not be any life in UK business worth mentioning.
Does anyone remember when David Cameron said, “The good news will keep on coming”?
He’s a public relations man, you see. His skill is in saying the opposite of what he means, in order to make a message palatable to the public. You could say he’s not very good at it, because his greatest feat was to persuade the British public to reject his Conservatism a little less harshly than that if all the other Tory leaders since John Major – which is what made it possible for him and Osborne to put us all in this mess by forming a dirty backroom deal with the Liberal Democrats.
I’d like to talk to some of the people he persuaded to vote for his squalid little gang of cutthroats. What would they have done, if they had know what would happen?
I was listening to Gideon George Osborne’s Autumn Statement the other day – and my word, don’t I wish I hadn’t! In between lapses of concentration due to boredom and bursts of sudden fury, depending which idiot pronouncement he was drooling, I had the odd lucid thought, one of which was this:
The financial crisis was caused by bankers. Did anyone ever identify who they were?
It’s a good question and one that I don’t believe has ever been answered. A cursory search reveals no list of British names on the Internet but I don’t think we can blame it all on Fred Goodwin, can we? (Fred ‘the Shred’ was, you’ll recall, stripped of his knighthood due to his role in the banking crisis, as chief executive of the Royal Bank of Scotland)
If nobody else has been named, we can conclude that none of them have been made to account for their actions or pay recompense to those of us who have had to suffer hardships – some extreme – indeed, some fatal – as a result of the foolhardy way they gambled with money that was not theirs and nearly brought the global financial edifice crashing to destruction.
It’s nearly five years since the crash. We can reasonably expect that these people are still in position, still taking home huge bonuses every year (debate among yourself whether they have earned these amounts or not). They have not been held accountable. It seems increasingly unlikely that they ever will.
But their organisations have absorbed huge amounts of public money, paid during the great bailouts of 2008 onwards by the UK Treasury in order to keep them going. It seems to me that these fatcats should be on starvation rations until that debt is paid off but I don’t see that happening. This leads me to my next question:
When are we going to get our money back?
The answer comes to mind immediately: If events continue along the current pattern – never.
That’s not good enough. In fact, it’s downright disastrous for the British economy because we all know by now – and the Autumn Statement confirmed it – that the welfare squeeze and other measures that Gideon has levelled at those of us on low or medium incomes, for the hideous crime of having nothing to do with the banking crisis that led to the recession, isn’t going to make anything better. In fact it can only make matters worse.
Consider fiscal multipliers. Every pound invested by a government in its economy generates more money as it goes through the system. The classic example is investment in construction, which yields more than £2 for every £1 spent. But if you subtract money – for example, by a fiscal squeeze – it follows that the economy suffers a greater loss than just the money that was taken away. I believe writers other than myself have suggested that the planned extra £10 billion welfare squeeze will remove £16 billion from the economy.
Meanwhile the banks, that caused the crisis, are off the hook and free as birds.
I have already stated my belief that the economy needs government investment in order to grow. If that investment took place, people would start making money again and they would logically put it into the banks. At this point, I suggest it would be reasonable to start encouraging the banks to start paying off their debt to us; there could be no argument that repayment would harm their viability as they would be benefiting from new money.
They could start paying a financial transactions tax (FTT) at a rate of 0.1%, applicable to all transactions through the CHAPS (Clearing House Automated Payments System) which is used to make same-day, irrevocable payments. If spent on deficit reduction alone it was envisaged in 2010 that this would halve the deficit by 2013/14. The introduction of the tax at that time would also have fended off overtures of a rise in regressive taxes such as VAT to 20 per cent, which left the most vulnerable in society picking up the bill for the mistakes of the very well-off. It differs from the ‘Robin Hood’ Tax Campaign for a 0.05 per cent tax on banking transactions, as the latter targets a broader range of banking activities. Most of the major EU countries supported such a tax, and on July 18, 2010, the then-head of the IMF, Dominique Strauss Kahn, announced he would back it.
I would also continue levying the Bankers’ Bonus Tax introduced by Alistair Darling in 2009, which raised £2 billion, and extend it to other institutions such as hedge funds and private equity houses, which benefited from the bailout through government-backed guarantees and quantitative easing.
If banks continued to pay excessive bonuses then the tax yield would remain high, accruing a large amount for the Treasury, and a permanent bonus tax could lead to bonus payments being reduced as a way to avoid tax; discouraging the payment of bonuses.
This windfall tax has been replicated in France, where the government warned banks that if they did not obey the strict guidelines on pay they would be excluded from competing for exclusive government contracts.
How about a remuneration cap? This would be a short-term ceiling on total remuneration, given as both cash and share options. This would tackle flagrant high pay, shoring up balance sheets and providing a level playing-field across the banking sector.
The link between excessive pay and the economic crisis is widely acknowledged. Remuneration caps could therefore give greater economic stability to the banking system.
I would also create a High Pay Commission – an open, balanced and thorough examination into pay and income at the top in order to find long term and tested solutions into how better to reduce excessive risk and excessive rewards.
Obviously I would separate banks that engage in ‘retail’ activities from those that engage in ‘investment banking’. I would close that casino because the players use other people’s money. Also, ‘casino’ bankers would be less likely to make riskier choices as they would not have protection from the taxpayer. They would also be regulated, to ensure their actions do not put the economy at risk. I understand this is taking place but I can’t fathom why the government is dragging its feet.
Banks should be encouraged to profit by serving their customers well and collectively providing liquidity and capital to the economy.
These banking regulations would be best enforced multilaterally, by other countries as well as the UK, but this should not stop the UK government taking action on its own.
The disproportionate influence of the financial sector over the UK economy leaves it particularly vulnerable to future crises and we should not allow ourselves to be at the mercy of international consensus.
We know that some automatic opposition to these policies will include fear-mongering that talented individuals will leave Britain in droves and growth will be hit. Evidence indicates this is unlikely but if they want to go, I say, let them. There are plenty more talented people just itching for a chance to take their place.
Others will claim that some tinkering with the system, such as banks planning how they wind-up and toughening up existing rules on capital adequacy and liquidity, will solve all our problems. They won’t. There are some fundamental problems that need to be solved if we are to avoid repeats of this crisis.
Better people than myself have said we must reverse the trend of the past 30 years, where private financial risk has been publicly shared and the gains increasingly privatised.
That’s the truth of it. If we can’t punish the transgressors, we can at least claw back the money they have taken.
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