Thumb up: But Boris Johnson won’t lose money on his Brexit deal like the rest of us.
Read this, which refers to Boris Johnson’s new Brexit deal:
▪️End of Union ▪️Workers’ rights trashed ▪️Environmental protections ending ▪️Huge hit to trade ▪️Huge slump in growth ▪️Jobs going ▪️Chlorinated chicken ▪️NHS for sale to US ▪️End of right to work, retire & live in 30 countries
Some of you will no doubt be saying, “Don’t give us all that Project Fear talk, Mike! It’s all just scaremongering to keep us as vassals to the fascist EU superstate!” Or whatever.
But is it scaremongering? Is it really, when the economic figures come from Boris Johnson’s own official government analysis?
Isn’t it more accurate to say that the unelected prime minister is once again lying through his teeth in the knowledge that the kind of voter who would respond as I suggest above will lap it up?
Analysis published by the UK government last November suggested that a deal along the lines of that agreed by Johnson would have a major adverse economic impact on the UK, with British people hit by falling wages and declining growth.
Johnson’s own government’s analysis suggested that a deal along the lines of that agreed on Thursday will reduce annual economic growth by 6.7% compared to staying in the EU. That’s a major hit to the UK economy which will make average households thousands of pounds poorer than they would have been had we remained in the EU.
The UK government’s own analysis also suggested that a deal along the lines of Johnson’s would have a big impact on the average wages of people living in the UK. According to its central projection, average real terms wages would fall by 6.4% compared to staying in the EU.
The economic hit would inevitably lead to the UK government being forced to borrow more, or dramatically slash the services it provides to the public. According to the government’s own analysis, there would be a 3% increase in borrowing as a percentage of economic growth.
Admittedly, negotiations over the final shape of the UK’s future trading relationship with Europe – and the rest of the world – have not yet begun – Boris “Get Brexit Done” Johnson lied about that too.
But the broad direction is clear. The UK economy is going into a ditch.
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Philip Hammond with John McDonnell. Both know that governments do not go bust, which means they can borrow more cheaply than companies. Mr Hammond’s problem is he is ideologically opposed to that kind of borrowing [Image: Jeff Overs/BBC/PA].
We should all be grateful to Larry Elliott at The Guardian – and also to Philip Hammond – for making it easier to discuss the economy in terms everybody can understand.
That is, everybody except Conservatives, it seems.
Tory policy for the last several decades has been to sell off publicly-owned industries and services and cut the welfare state, in order to reduce taxes and provide higher returns to people who run the businesses that make the most money. The rest of us can go hang, in their opinion.
Trouble is, they arrogantly failed to understand that their well-being depends on the prosperity of the rest of the population; if the majority of people don’t have the wherewithal to buy the products produced by the rich, they won’t stay rich for very long.
The financial crash happened because people who weren’t earning enough were being offered loans they couldn’t pay off – by financiers who were betting on them being unable to service the debt.
When the prediction came true, the Conservatives managed to slither into office on the back of a lie that Labour had spent too much. This narrative clearly indicated the choice they took – to cut public spending massively.
This ‘starve the beast’ policy meant the poorest in society – unemployed and working-class people – were starved of money. As the Tories cut public spending in order to reduce the national deficit, the debt burden on these already-poor people rose, hugely increasing poverty. The statistics hide this fact because they are based on average earnings and average earnings have fallen.
The Tories thought their reduction in public investment would be balanced by an increase in private investment – but the boardroom bosses knew there was no point because their products would be bought by too few people to make the investment worthwhile.
That is the reason businesses have taken the easy way out – employing more people on the lower rates of pay and worse in-work benefits supported by the Tories’ cruel policies in order to increase their profits by minimising their outlay.
It is also the reason that public spending on infrastructure is the only realistic way of boosting the economy and reducing the national debt. John McDonnell has it exactly right:
Extra borrowing certainly means an increase in the national debt and higher debt interest payments in the short term, but that is not the real issue.
Imagine the chief executive of a FTSE 100 company going on TV to announce that the company was planning to go to the City to finance a new plant. The interview would not centre on what the investment meant for the company’s debt interest payments. The chief executive would be asked about what it meant for jobs, earnings and profits.
In the event that the chief executive was asked about the cost of the investment, they would give the same answer as McDonnell did, that at current rates of interest the investment would more than pay for itself, because otherwise we would not be doing it. Our debt interest payments will depend on what happens to interest rates and inflation, but our best judgment is that the investment will wash itself.
The Tories cannot support this plan because it conflicts with their neoliberal ideology, which demands that government’s must not spend money and must not interfere in industry.
This proves that their neoliberalism is fatally flawed:
Instead of obsessing about the red herring of debt interest payments, more attention should be paid to the things that do matter. Labour is planning to borrow to invest, not to cover day-to-day government spending, and that makes sense if the return on the investment is higher than the cost of financing the extra debt.
Governments do not go bust, which means that they can borrow more cheaply than companies. Since the financial crisis of a decade ago, interest rates have been historically low and if he chose to do so, Hammond could borrow money at a cost of little more than 2%, below the current rate of inflation.
That’s right – debt is a red herring. It only becomes important when government policy deliberately increases it in order to pressurise poor and working-class people.
Investment in the right places will bring a return of around six times the cost of debt interest payments – a flood of new money that could revitalise a UK economy that has been withering under Tory mismanagement for many years.
And pay special attention to the point that governments do not go bust – at least, UK governments don’t. This is because we have our own sovereign currency and can manipulate it, if needed, to ease our debt burden. That’s what quantitative easing was all about.
Proof of this point is the fact that, even when the UK’s credit rating was slashed after George Osborne missed all his deficit and debt targets, the cost of borrowing – for the government – stayed at rock-bottom.
But both Mr Osborne and his successor, Mr Hammond, have ignored this opportunity. It is against their beliefs as Tories.
So the evidence is clear:
Tory policies don’t work.
Labour policies will.
No wonder the Conservatives are trying to distract you with other things.
What a shame for them that the examples in the Guardian article – Brexit and the implied improprieties of Damian Green – are just as damaging to a government that can only survive if we are stupid enough to believe the stupid things they do.
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Philip Hammond, by cartoonist Dave Brown: Mr Hammond’s policies are more likely to strangle the UK’s public services than the Chancellor himself.
It takes a special kind of genius to (metaphorically) shoot your own mouth off and shoot every Tory MP of the last seven years in the foot – at the same time.
That is the achievement of a Twitter user who, with stunning insight, calls him- or herself “Voice of Reason”.
This person clearly set out to undermine Labour’s answer to this week’s Budget statement, which Conservatives have tried to reduce to a claim that John McDonnell would borrow so much money, he would bankrupt the country.
That is impossible in a sovereign country, and there’s a huge difference between borrowing money, spending it, and having nothing to show for it – as the Conservatives have been doing – and borrowing in order to invest in business and receive a financial reward in return.
These facts seem to have bypassed “Voice of Reason”, who transmitted the following to the world:
Borrower:Please can I borrow £2m to buy a house?
Lender: How will you repay the loan?
Borrower : I won’t need to because the investment pays for itself.
Let’s just nail the fundamental flaw in the argument right now: John McDonnell and Labour have never claimed they won’t need to pay back any money they borrow – they want to invest such cash in money-making enterprises that will make a profit for the country. That doesn’t mean the premise of John McDonnell borrowing money for a house is false, as the Tories’ own policies have offered ways to make that work, too – as we shall see, now.
I don’t know whether the people who responded to this ill-advised outburst were Labour supporters or economists, or Labour-supporting economists, but they dealt out a lesson that everyone should remember. Let’s consider their responses:
Borrower: Can I borrow £2million please? Lender: How will you repay the loan? Borrower: By investing the money in things which will increase my revenue. Lender: Great, that's how this shit works.https://t.co/ZN5Hq8Ds1p
With apologies to those who are easily offended by harsh language, that really is how this works. Labour is proposing business loans that are intended to produce a return on the investment – making more money than the initial outlay, which is exactly the same as any other business loan.
For ways to make money after buying a house, try this:
Jesus. So you can't tell the difference between the state borrowing to invest in infrastructure to boost productivity, employment and therefore tax receipts and a family applying for a mortgage for a home?
Ohnojamiemoron. You’ve missed the point. Before you can make a profit you need to borrow the money first and find someone who will lend it to you. It doesn’t appear by magic. And of course all Labour have ever done is piss away billions for nil return.
In fact the UK government never has any problem finding people who will lend money. The process was explained on the BBC’s Daily Politics this week: The Bank of England issues debt securities called “gilts” in one of two forms. A conventional gilt is a bond issued by the UK government which pays the holder a fixed cash payment (or coupon) every six months until maturity, at which point the holder receives his final coupon payment and the return of the principal; index-linked gilts pay coupons which are initially set in line with market interest rates.
Government bonds are usually in the currency of the country of origin, in which case the government cannot be forced to default.
The terms on which a government can sell bonds depend on how creditworthy the market considers it to be. International credit rating agencies will provide ratings for the bonds, but market participants will make up their own minds about this.
Not only does the UK have its own sovereign currency, meaning it cannot be forced to default on its debts, but market participants have chosen to ignore several downgrades by credit rating agencies since the Conservative took office in 2010.
This means UK gilts are considered extremely safe forms of investment. About two-thirds of UK gilts are held by insurance companies and pension funds. The UK has absolutely no problem finding lenders.
The claim that Labour has only ever spent money without making any return is risible. History shows that Labour is the party with a record of paying off the national debt; Tories merely increase it. Recent history shows that the Tories have borrowed more than every UK Labour government there has ever been.
It is indeed economically illiterate to claim that anyone borrowing money to invest it in profitable enterprises, then using the profit to pay off the debt with interest, and still having cash left over, is a “nutcase”.
It is also economically illiterate to claim that the national debt will be paid off by borrowing money and then slashing economic growth, as the Tories have claimed for the past seven years.
So their economic policy can’t be about paying off the national debt.
In fact, Tory economic policy is about ensuring that the state cannot fund public services and must therefore sell off publicly-owned assets, forcing citizens to pay for services themselves – a far more expensive form of provision which therefore makes a large profit for any privately-owned provider of those services.
It is also about ensuring that the majority of citizens simply don’t have the funds to pay for those services privately, putting them at a permanent disadvantage in comparison to the rich asset- and shareholders.
That is why the Conservative-led governments of the past seven years have offered huge tax cuts to the richest people in the UK, when that money could have been used to help pay off the deficit and debt; and austerity to the poorest, cutting public services and business investments that could have brought in revenue for the state.
The policy means tax revenues are never enough to cover the cost of public services, providing the Tories with an excuse to go on cutting them until there are none left.
According to the Office for Budget Responsibility (OBR), we will reach that point in 2031. The Tories themselves are hoping to manage it in 2025.
Those are the dates at which these two organisations reckon the deficit will go into surplus, and that’s why we may conclude that it is the date by which all public services the Tories want to sell into private hands will have gone.
And this is the only explanation of Conservative policy on taxation and borrowing that makes any sense at all.
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Here’s yet another lump of coal for the Conservative Government’s Christmas stocking.
With borrowing up to £66.9 billion for the year – by November – it seems unlikely that the Office of Budget Irresponsibility’s prediction that only another £2 billion will be borrowed between now and March will come true.
In fact, the BBC’s story is so full of excuses for the Tory government that it seems the Corporation is no longer even trying to deny allegations that it is now nothing more than an apologist mouthpiece for the Conservatives.
Even if Osborne succeeds in cutting borrowing, but not by the amount he predicted, then he will fail to raise the amounts he claimed in his Autumn Statement – sums on which he is relying, in order to keep his other promises.
And the borrowing figure quoted today doesn’t include support for public sector banks and housing associations. Of course, one might wonder why these organisations need support at all – the Tories are always talking about selling off the public’s share in the banks (to their friends, on the cheap) and the housing associations were not – to This Writer’s knowledge – making a loss.
OBR chairman Robert Chote is quoted with a mealy-mouthed excuse about contributions to the EU and the World Bank – contributions whose timing would have been known well in advance and which should, therefore, have been accommodated.
And a Treasury spokesman is quoted with a frankly incredible claim that George Osborne’s plan is working. Do these people ever feel even a twinge of embarrassment when they peddle this nonsense?
The only message to draw from the figures is that Tory economics doesn’t work.
Government borrowing figures were worse than expected in November, casting doubts over whether the chancellor will meet forecasts for this financial year.
Borrowing for the month was £14.2bn, up by £1.3bn compared with November 2014.
Total borrowing for the financial year to date is now £66.9bn, down £6.6bn from the same point last year.
The independent Office of Budget Responsibility (OBR) estimates that borrowing for the whole of the financial year 2015-16 will be £68.9bn – excluding support for public sector banks, and also excluding new changes to the treatment of housing associations.
That is below last year’s £90.1bn, which would mean Chancellor George Osborne would have achieved his aim of cutting government borrowing.
The Resolution Foundation’s predictions for government spending, based on the different parties’ declared plans.
Vox Political’s article on Nicola Sturgeon’s London speech provoked a disgruntled response from Jonathan Portes. The NIESR boss sent a message stating that the article’s fiscal arguments were out of whack.
He didn’t ask for this blog to straighten them out, but the information he sent, coupled with some other pieces he suggested – by Professor Simon Wren-Lewis and the Resolution Foundation – make it inevitable that another stab is required. If you support the SNP, you’re still not going to like it.
The first comment from Mr Portes is as follows: “1. SNP plan is slower deficit reduction than Lab/LDs, which in turn slower than Cons. All consistent with falling debt/GDP ratio. So all are sustainable. Haven’t looked at detail, but Simon WL & I both think Lab too cautious – so SNP not obviously crazy.”
Simon Wren-Lewis’s article states: “In reality what Sturgeon was proposing was still deficit and debt reduction, but just not at the pace currently proposed by Labour.”
And the Resolution Foundation adds: “The SNP would commit to delivering existing 2015-16 plans, as each of the Westminster parties have, before changing course.”
There’s a major point to make here, which all three of the sources above have missed. It’s that the SNP and its adherents have been cursing Labour from High Heaven to Low Hell for committing to Tory austerity policies because Ed Balls promised a Labour government would stick to Coalition spending – note that word, spending – limits for the first year after the general election.
Why have SNP adherents been slating Labour when the SNP has committed itself to the exact same Conservative spending limits, for the exact same period of time? Doesn’t this also make the SNP a party of austerity?
This leads us neatly to a point made by the Resolution Foundation. Ms Sturgeon wants to put a lot of space between SNP plans and those of Labour by claiming that Labour is committed to eliminating the UK’s structural deficit by 2017-18. They say Labour signed up to that when it voted to support the Charter for Budget Responsibility. You may recall there was another big fuss about Labour supporting Tory austerity, being just the same as the Tories, and there being only 17 MPs who oppose austerity (the number who voted against the CBR). Bunkum, according to the Resolution Foundation.
“The ‘Charter for Budget Responsibility’ is highly elastic: it’s not based on a firm commitment to reach balance in 2017-18,” states the Resolution Foundation article. “Instead it represents a rolling ‘aim’ of planning to reach current balance three years down the road.” The article adds: “Most economists are sceptical about how much difference it (the charter) will make.
“So what if Labour targets a current balance in 2019-20 instead? Based on current OBR assumptions this could be achieved with as little as £7 billion of fiscal consolidation in the four years to 2019-20 (including the cost of extra debt interest).”
Labour has made it clear that it plans to make only £7 billion of cuts. As this coincides exactly with the Resolution Foundation’s figures for a 2019-20 budget balance, logic suggests that this is most likely to be what Ed Balls is planning.
So SNP (and Green) adherents who crowed about Labour austerity being as bad as that of the Tories need to apologise – sharpish.
Now that these points are cleared up, let’s look at the substantive issue. Here’s the Resolution Foundation again: “The first minister’s headline was that she favours £180 billion of extra spending in the next parliament relative to current coalition plans… an increase in ‘departmental spending’ of 0.5 per cent a year in real terms over four years [we’ve established that the first year’s spending would adhere to Coalition-planned spending levels]. Our estimates suggest that raising departmental spending by 0.5 per cent in each of the four years after 2015-16 would indeed yield a cumulative increase in spending of around £180 billion (in 2019-20 prices, £160bn in today’s) compared to existing coalition plans. So that seems to fit.
“Another, more conventional, way of putting this is that in the final year of the next parliament, departmental spending would be around £60 billion higher in the SNP scenario than it would be under the coalition’s outline plans. This means that departmental spending would end up in roughly the same place in 2019-20 (in real terms) as it is now. We’d see £8 billion or so of departmental cuts in 2015-16 broadly cancelled out by a rise of around £7 billion across the following four years. It also means that, all else equal, there would still be a (small) UK-wide current deficit come the 2020 election.”
As you can see from the graph, the scenario that suggests a Labour balance in 2017-18 would imply a big difference with the SNP, particularly in the first half of the next Parliament – but, come 2019-20, “there would still be a £48 billion gap between Labour and the coalition plans; not that far short of the £60 billion gap that would exist between the SNP and the coalition”.
The scenario in which Labour balances its budget by 2019-20 “would in theory be consistent with spending roughly £140 billion more than coalition plans.
“The SNP proposal implies increases in total departmental spending of £1-2 billion per year over four years whereas Labour’s 2019-20 scenario implies cuts of £1-2 billion per year over the same period. This is against total departmental spending of around £350 billion. By 2019-20 this difference adds up to roughly a £14 billion gap between the two parties. Now, that’s a real difference but given the scale of the numbers involved, (and the fact that some of Labour’s consolidation may come from tax increases rather than spending cuts), it’s also a relatively modest one.”
It’s more or less the same amount the Coalition Government borrows every month, in fact.
Now let’s throw a spanner in the SNP’s works. The Resolution Foundation points out: “Fiscal discussions of this type tend to suffer from a severe case of false precision. None of the party leaders knows any better than you or I what will happen to productivity next year, never mind in 2020… Any difference between, say, the Labour and SNP spending plans would be dwarfed by the fiscal implications of even modest boosts (or dips) in productivity. Indeed, even the very large difference between the SNP (or Labour) and the coalition’s plans could be overshadowed by a significant shift in productivity trends. And, to Sturgeon’s credit, her remarks this week emphasised productivity.”
Yes – productivity. Does anybody remember that, prior to the referendum, the SNP wanted Scottish voters to believe that any borrowing that might be necessary in an independent Scotland would be offset by increased productivity? What did Simon Wren-Lewis have to say about that? Oh yes: “Governments that try to borrow today in the hope of a more optimistic future are not behaving very responsibly.”
But that is exactly what Ms Sturgeon was proposing for the whole of the UK; borrowing on the assumption of increased productivity.
Here’s a chance to put another SNP myth to bed, from the same writer. In his article about Ms Sturgeon’s speech, Professor Wren-Lewis states: “Of course this is the same person who, with Alex Salmond, was only six months ago proposing a policy that would have put the people of Scotland in a far worse fiscal position than they currently are, an argument that has been reinforced so dramatically by the falling oil price. You could say that it is a little hypocritical to argue against UK austerity on the one hand, and be prepared to impose much greater austerity on your own people with the other.”
The argument he mentions ran as follows: “Scotland’s fiscal position would be worse as a result of leaving the UK for two main reasons. First, demographic trends are less favourable. Second, revenues from the North Sea are expected to decline. This tells us that under current policies Scotland would be getting an increasingly good deal out of being part of the UK [and therefore independence would be detrimental].”
He added that the Institute for Fiscal Studies, which had independently analysed the SNP figures, had made a mistake on interest rates. The IFS analysis, he wrote, “assumes that Scotland would have to pay the same rate of interest on its debt as the rUK. This has to be wrong. Even under the most favourable assumption of a new Scottish currency, Scotland could easily have to pay around one per cent more to borrow than rUK. In their original analysis the IFS look at the implications of that (p35), and the numbers are large.”
The Resolution Foundation notes that “the flipside of higher spending, all else equal, would be higher debt and higher debt interest payments”.
So the SNP plan, as this blog pointed out, could create an interest-payment problem for the next government that bites into the extra money said to be for services.
Mr Portes made two other minor points, as follows: “2. Your stuff about Lab could spend more if economy does better wrong way round. If economy worse, we need higher deficit. Over time, as income goes up, so does/should spending. But short-term macro should be countercyclical.”
When I wrote the material about Labour spending more in a better-performing economy, I was thinking of the Labour government immediately after World War II. The current Labour Party has mentioned this period in recent speeches and releases, and it seems clear that Messrs Miliband, Balls et al consider their task, if elected in May, to be similar to that faced by Mr Attlee and his party – the reconstruction of the UK after a long period of destruction.
Are we to believe the economy is likely to worsen, in which case more borrowing will be needed? It’s certainly possible that major shocks are on the horizon. This writer is in no position to speculate.
“3. Finally, stuff about credit rating agencies/bond markets/Greece is absurd propaganda. I’ve written on this many times.” He’s right; it wouldn’t have been included it if Yr Obdt Srvt had stopped to think about it, but the article was up against a deadline and this writer was throwing in all the cautionary words he could find.
So let us forget about them. Here are a few more. Simon Wren-Lewis, at the end of his article, notes: “I read a blog post recently that suggested this was an election Labour would be better off losing… A Labour government dependent on SNP support would be abandoned by the SNP at the moment of greatest political advantage to the SNP and disadvantage to Labour. However if we assume that the oil price stays low there is no way a rational SNP would want to go for independence again within the next five years. It might be much more to its long term advantage to appear to be representing Scotland in a responsible way as part of a pact with Labour.”
Is the SNP rational? All the evidence available so far suggests it isn’t.
It put forward arguments that were deceptive about an independent Scotland’s economic future.
Its representatives and followers spread lies about Labour economic policy.
All indications suggest the SNP will try to create the conditions required for Scottish independence at the earliest opportunity, and then leave the rest of the UK hanging.
The original article on Ms Sturgeon’s speech ended by saying the SNP would be hard to trust.
After the findings of this one, it is nigh-on impossible to do so.
If you’re boggling at the headline, rest assured it is correct!
Let’s run down the figures. According to the Office for National Statistics (ONS), government borrowing (excluding the public sector banks) was £11.8 billion last month, an increase of £1.6 billion, or around 10 per cent, compared with September 2013.
Public sector net debt (again excluding those banks) was £1.4513 trillion – 79.9 per cent of GDP. This was an increase of £100.7 billion compared with September 2013, meaning the national deficit for the year to September 2014 was the same amount.
George Osborne’s target for the financial year 2014-15 is to reduce borrowing to £95.5 billion. With tax receipts going down – by £1bn in the six months since the start of the financial year, against Treasury predictions that they would rise (because we’ve all got jobs, right?) – this seems less and less likely.
According to The Guardian, a Treasury spokesman responded to the figures by saying the “government’s long-term economic plan is working”.
The trouble is, the Coalition Agreement states that “We [Conservatives and Liberal Democrats] recognise that deficit reduction, and continuing to ensure economic recovery, is the most urgent issue facing Britain”.
The deficit is increasing, not reducing, yet George Osborne says his plan is working.
[Image: David Symonds for The Guardian, in February this year.]
Britain has returned to prosperity, with the economy finally nudging beyond its pre-crisis peak, according to official figures.
Well, that’s a relief, isn’t it? Next time you’re in the supermarket looking for bargains or mark-downs because you can’t afford the kind of groceries you had in 2008, you can at least console yourself that we’re all doing better than we were back then.
The hundreds of thousands of poor souls who have to scrape by on handouts from food banks will, no doubt, be bolstered by the knowledge that Britain is back on its feet.
And the relatives of those who did not survive Iain Duncan Smith’s brutal purge of benefit claimants can be comforted by the thought that they did not die in vain.
NO! Of course not! Gross domestic product might be up 3.1 per cent on last year but it’s got nothing to do with most of the population! In real terms, you’re £1,600 per year worse-off!
The Conservatives who have been running the economy since 2010 have re-balanced it, just as they said they would – but they lied about the way it would be re-balanced and as a result the money is going to the people who least deserve it; the super-rich and the bankers who caused the crash in the first place.
You can be sure that the mainstream media won’t be telling you that, though.
Even some of the figures they are prepare to use are enough to cast doubt on the whole process. The UK economy is forecast to be the fastest-growing among the G7 developed nations according to the IMF (as reported by the BBC) – but our export growth since 2010 puts us below all but one of the other G7 nations, according to Ed Balls in The Guardian.
“Since most international trade is in goods and not in services, once the proportion of the economy devoted to producing internationally tradable goods drops below about 15 per cent, it becomes more and more difficult to combine a reasonable rate of growth and full employment with a sustainable balance of payments position,” he writes.
“In the UK, the proportion of GDP coming from manufacturing is now barely above 10 per cent. Hardly surprising then that we have not had a foreign trade surplus balance since 1982 – over thirty years ago – while our share of world trade which was 10.7 per cent in 1950 had fallen by 2012 to no more than 2.6 per cent.”
All of this seems to be good business sense. It also runs contrary to successive governments’ economic policies for the past 35 years, ever since the neoliberal government of Margaret Thatcher took over in 1979.
As this blog has explained, Thatcher and her buddies Nicholas Ridley and Keith Joseph were determined to undermine the confidence then enjoyed by the people who actually worked for a living, because it was harming the ability of the idle rich – shareholders, bosses… bankers – to increase their own undeserved profits; improvements in working-class living standards were holding back their greed.
In order to hammer the workers back into the Stone Age, they deliberately destroyed the UK’s manufacturing and exporting capability and blamed it on the unions.
That is why we have had a foreign trade deficit since 1982. That is why our share of world trade is less than one-third of what it was in 1950 (under a Labour government, notice). That is why unemployment has rocketed, even though the true level goes unrecognised as governments have rigged the figures to suit themselves.
(The current wheeze has the government failing to count as unemployed anyone on Universal Credit, anyone on Workfare/Mandatory Work Activity and anyone who whose benefit has been sanctioned – among many other groups – for example.)
You may wish to argue that the economy is fine – after all, that’s what everybody is saying, including the Office for National Statistics.
Not according to Mr Mills: “The current improvement in our economic performance, based on buttressing consumer confidence by boosting asset values fuelled by yet more borrowing, is all to unlikely to last.”
(He means the housing bubble created by George Osborne’s ‘Help to Buy’ scheme will burst soon, and then the economy will be right up the creek because the whole edifice is based on more borrowing at a time when Osborne has been claiming he is paying down the deficit.)
Ed Balls has got the right idea – at least, on the face of it. In his Guardian article he states: “We are not going to deliver a balanced, investment-led recovery that benefits all working people with the same old Tory economics,” and he’s right.
“Hoping tax cuts at the very top will trickle down, a race to the bottom on wages, Treasury opposition to a proper industrial strategy, and flirting with exit from the European Union cannot be the right prescription for Britain.” Right again – although our contract with Europe must be renegotiated and the Transatlantic Trade and Investment Partnership agreement would be a disaster for the UK if we signed it.
But none of that affects you, does it? It’s all too far away, controlled by people we’ve never met. That’s why Balls focuses on what a Labour government would do for ordinary people: “expanding free childcare, introducing a lower 10p starting rate of tax, raising the minimum wage and ending the exploitative use of zero-hours contracts. We need to create more good jobs and ensure young people have the skills they need to succeed.”
And how do the people respond to these workmanlike proposals?
“You intend to continue the Tories’ destructive ‘austerity’ policies.”
“The economy isn’t fixed but you broke it.”
There was one comment suggesting that all the main parties are the same now, which – it has been suggested – was what Lynton Crosby told David Cameron to spread if he wanted to win the next election.
Very few of the comments under the Guardian piece have anything to do with what Balls actually wrote; they harp on about New Labour’s record (erroneously), they conflate Labour’s vow not to increase borrowing with an imaginary plan to continue Tory austerity policies… in fact they do all they can to discredit him.
Not because his information is wrong but because they have heard rumours about him that have put them off.
It’s as if people don’t want their situation to improve.
Until we can address that problem – which is one of perception – we’ll keep going around in circles while the exploiters laugh.
Isn’t it shameful that the Conservatives are attacking Labour because the Co-op Bank chief has been behaving like the Chancellor of the Exchequer?
The ex-chairman of the bank, Paul Flowers – who is a former Labour councillor, is being investigated by police after he was filmed appearing to buy drugs. How is that different from the above photograph of one G. Osborne (now Chancellor of the Exchequer), raving it up at a party with a lot of cocaine on the table (ringed in red)?
Comedy Prime Minister David Cameron made much of the Flowers investigation at Prime Minister’s Questions – even suggesting, after the unimpeachable Michael Meacher asked an important question about business investment, that the honourable gentleman might have “been on a night out on the town with Reverend Flowers” and the “mind-altering substances have taken effect”.
Apparently it is all right for Gideon to be a drug casualty because he is a Tory; only Labour supporters who take drugs can be bad in Cameron’s addled world.
No wonder Labour MPs chanted “Shame!” at Cameron as he slunk out of the Chamber.
His attitude seems wrong-headed because, as managed by Mr Osborne for the past three and a half years, the economy can only be regarded as improving if one has the aid of Mr Cameron’s “mind-altering substances”.
Economic figures released this week are being touted as good news, with tax revenues “boosted” by “a recovering economy and housing market”, according to the BBC.
Take a closer look at those figures and they fall down. Borrowing (excluding the cost of interventions like bank bailouts, so we’re already in the realm of made-up figures) fell by two one-hundred-and-thirds, from £8.24 billion in the same month last year to £8.08 billion in October. Less than two per cent and they’re calling it a “boost”. It might be wiped out again in November’s figures.
Also, it should be borne in mind that growth in the housing market is due to the bubble created by our formerly-substance-abusing Chancellor, while any other economic growth has nothing to do with him and, in any case, does not help the vast majority of the population.
Total public debt has risen again, to £1.207 trillion or 75.4 per cent of gross domestic product – the highest it has ever been – under the Conservatives.
The aim for the national deficit, we are told, is to keep borrowing for 2013-14 at £120 billion or below. In his ‘Emergency Budget’ of 2010, Osborne predicted that borrowing this year would be down to half that – at £60 billion, and estimates have been rising ever since.
The 2011 budget had the 2013-14 deficit at £70 billion; in 2012 it was expected to be £98 billion; and now – £120 billion. Perhaps his original estimate was a coke-fuelled fantasy?
Of course – as this blog repeated only days ago – the Conservative-led Coalition never intended to cut the national debt. This was just a claim ministers made while they changed the system to take as much money as possible from the poor while making it possible for the rich to remove their personal earnings and corporate profits from tax to the greatest extent possible.
Result: Increasing debt and lower-than-necessary tax returns, making it possible for the Tories to claim they must cut public services and the benefit system, while laughing all the way to the banks (the ones that were never penalised for burning all our money in the first place).
So much for “We’re all in it together” – unless that was another reference to “mind-altering substances”, and we didn’t understand it until now.
‘Jeffrey’ Osborne sings for his supper at some CBI dinner.
Try not to choke on your coffee: George Osborne reckons the British economy is “out of intensive care”.
Now, he says, the task is to “secure the recovery”.
He’s starting on Wednesday with cuts totalling £11.5 billion which, once fiscal multipliers are taken into account, means a contraction of around £20 billion in the national economy.
Securing the recovery. Good luck with that, Gideon.
The good news is that he is expected to announce investment in infrastructure projects, including roads, railways, education and science. He has realised – probably too late – that cutting all those infrastructure projects at the start of this Parliament was economic suicide and is trying to do something about it before everyone realises he’s an idiot. He is, of course, much too late for that but the investment – if it goes to well-advised places – might just do some good.
Don’t bank on it, though.
Osborne’s claims about the economy are based on statements that government borrowing has come down and employment is up – but we know that the first isn’t true and the second is not helping. In other words, he’s built his castle in the sand.
Government borrowing rose by £300 million in 2012-13, from £118.5 billion to £118.8 billion, according to the Office for National Statistics. That’s not a huge amount, you may think, but remember this government reckons it has cut borrowing by a third since taking power. That would put borrowing at around £100 billion right now, which is clearly inaccurate.
The debt is now £1.9 trillion, up from 1.1 trillion a year ago – 75.2 per cent of GDP, up from 71.1 per cent.
We all know what the problem is: Austerity – the self-perpetuating (and self-defeating) policy that will eventually bankrupt us all (but not the country. Because we have our own currency, the UK is unlikely ever to go bankrupt. You see, when the Tories told you that, they were lying).
The worst of it is that the other main political parties have signed up to the delusion that all these cuts might actually do some good.
Ed Miliband has ruled out more borrowing. That in itself is not a bad idea. But Ed Balls has admitted that he would follow Tory spending plans, at least for the first year of a Labour government, and there’s a consensus that pensioners will probably be the next defenceless social group to be hit with cuts – this time to benefits such as winter fuel payments.
They are talking among themselves. It seems unlikely that any of them has bothered to look out of the window to find out the real effect of their idiot schemes.
And so the agony continues. Based on an economic fallacy, perpetuated on the masses, while the very rich continue raking it in.
The longer this goes on, the greater the danger to us all.
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