Tag Archives: co-operation

Huge increase in zero-hour contracts – in a ‘booming’ economy?

[Image: Eoin Clarke.]

This graph is now out of date but shows the rapid rise of the zero-hours contract. By the end of 2014, the number of people on zero contracts was 697,000, according to the ONS. [Image: Eoin Clarke.]

Here are a few figures from the Office of National Statistics:

  • Number of people employed on a “zero-hours contract” in their main job was 697,000 for October to December 2014, representing 2.3% of all people in employment. In the same period in 2013, this was 1.9% of all people in employment (586,000).
  • The number of people saying they are employed on “zero-hours contracts” depends on whether or not they recognise this term. It is not possible to say how much of the increase between 2013 and 2014 is due to greater recognition rather than new contracts.
  • Number of contracts that do not guarantee a minimum number of hours where work was carried out was 1.8 million for the fortnight beginning 11 August 2014. The previously published estimate was 1.4 million for the fortnight beginning 20 January 2014.
  • The two estimates of contracts should not be directly compared. They cover different times of year so changes in the numbers may reflect seasonal factors.
  • On average, someone on a “zero-hours contract” usually works 25 hours a week.
  • Around a third of people on “zero-hours contracts” want more hours, with most wanting them in their current job, compared with 10% of other people in employment.
  • People on “zero-hours contracts” are more likely to be women, in full-time education or working part-time. They are also more likely to be aged under 25 or 65 and over.
  • Over half of businesses in Accommodation and Food Services and a quarter of businesses in Education made some use of no guaranteed hours contracts in August 2014.

This is at a time when the Organisation for Economic Co-operation and Development has said the UK has bounced back strongly from the recession and has one of the strongest economies in the G7 nations.

Admittedly, the OECD has said productivity – stagnant for many years now – must improve in order for living standards to rise, but this is not part of the zero-hours plan. The Conservative-led Coalition wanted to put as many people as possible into jobs of any description, in order to claim a drop in unemployment – but zero-hours contracts, while helping businesses by eliminating in-work benefits like sick pay and holiday pay, do not help productivity at all; they use more people to achieve the same result.

In the case of the UK, it seems, they have been achieving worsening results, as dipping tax receipts have made all-too-clear. George Osborne claimed a surplus in January, but this is clearly a manufactured result, formed from panic after the last few tax revenue figures became public.

So what does Labour say about all this?

Scottish Nationalists will be surprised to learn that the party Pete Wishart believes is “cuddling up to the Tories” was unequivocally critical.

“The Tories’ plan is failing working families,” said Chuka Umunna, shadow business secretary.

“While they prioritise a few at the top, for others there’s a rising tide of insecurity. Ministers have watered down every person’s rights at work and zero-hours contracts have gone from being a niche concept to becoming the norm in parts of our economy.

“The ONS’ findings today that there are now 1.8 million zero-hours contracts and that the number of people reporting they are on a zero-hours contract for their main job has risen by almost 20 per cent is yet another stark illustration of a recovery which is not working for working people.”

He said: “Labour’s Better Plan for Britain’s Prosperity would ban exploitative zero-hours contracts, prohibit employers from requiring workers to be available on the off-chance they are needed, ensure zero-hours contract workers who have shifts cancelled at short notice receive compensation and give employees who consistently work regular hours the right to a fixed-hours contract.

“Ministers have sat on their hands and opposed our plans, in the face of rising insecurity for people.”

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Labour’s ultimatum to tax havens

150207ed-miliband

Ed Miliband has warned the tax havens costing British families and businesses billions of pounds that they will have just six months to put their house in order and open their books – or face being placed on an international blacklist.

He has highlighted figures showing that, despite David Cameron boasting more than 18 months ago that he had forced tax havens to open up, not one of the tax havens linked to Britain as Overseas Territories or Crown Dependencies has yet delivered on Cameron’s promise that they would publish a register showing who owns the companies registered there – and some have explicitly refused to do so.

The lack of leadership shown by the UK government has frustrated and slowed the pace of reform on tax avoidance across the world.

In a letter to heads of government, Mr Miliband served notice on them that that under the next Labour government they will have six months to publish publicly-accessible central registers of beneficial ownership.

If they fail to meet this deadline, the next Labour government will withdraw the protection they get from international scrutiny and ask the Organisation for Economic Co-operation and Development to place them on its tax haven blacklist.

In an interview with the Guardian newspaper, Mr Miliband said: “More than 18 months have passed since David Cameron promised to shine a light on the tax havens in UK overseas territories and Crown Dependencies – and their affairs are still shrouded in darkness. That may be good enough for him, but it will not satisfy me, or the incoming Labour government.

“There is nothing pro-business about defending tax avoidance. The United Kingdom has a responsibility to open up the Overseas Territories and Crown Dependencies which are held responsible for so much tax secrecy and avoidance.

“And it is costing everyone who relies on our schools, our hospitals, our roads and our railways. It is costing everyone who pays their fair share of taxes, including millions of British businesses.

“Billions of pounds are being siphoned off into tax havens where our authorities cannot discover even the true ownership of firms registered there, let alone the scale of wealth hidden away.

“Today, I am putting these tax havens on notice that they will have just six months to open up their books or face international sanction.”

In a speech to the Labour Local Government Conference in Nottingham, Mr Miliband also said: “When you are working every day in your communities to deliver services, you are being let down by a government that operates one rule for those at the top and another rule for everyone else.

“Today, we have a government planning real cuts in spending on schools but one that only postures—and does not act over the scandal of tax avoidance.

“Let me say to the Prime Minister: It is not pro-business to defend tax avoidance.

“Britain is losing billions of pounds in lost revenue that could be invested in our future. It is costing everyone who pays their fair share of taxes, including millions of British businesses.

“Businesses and working people who pay their taxes, do the right thing and play by the rules are affronted by tax avoidance – and they are fed up with a government that has failed to act.”

He said: “The current Conservative leadership have become the political wing of offshore hedge funds.

“Unlike them, we will not stand by.

“We will ensure a country where everyone plays by the rules, from top to bottom – and we need to do so much more to restore the basic bargain of our country.”

This is a brilliant move by Labour. It is a promise to make tax avoiders pay what they owe, and restore balance to a tax system in which the Conservatives have placed too much of the burden on the poor.

With more tax coming in from those who are able to pay more, it follows that there will be less need for cuts – and claims that Labour are a party of austerity will be proved unfounded.

You see, Labour is only planning £7 bn of cuts because it sees that current tax revenue is not enough; the Tories want to make £50 bn of cuts because they don’t want the state to provide any services for people who can’t pay a relative fortune for them. There’s a big difference between them.

Is it too much to hope for a positive Labour announcement on welfare benefits next?

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Income inequality growth means Coalition was either lying or stupid

[Image: Inequality Briefing.]

[Image: Inequality Briefing.]

How nice of the Organisation for Economic Co-operation and Development (OECD) to remind us all, in its new research, that income inequality has a “statistically significant impact” on economic growth!

Perhaps its next report will be entitled “Egg-sucking for grannies”.

It seems that hardly a day goes by without someone telling us this simple fact of life. It isn’t that long since Inequality Briefing told us that a reduction of the gap between the richest and poorest in the UK – to the levels in Denmark or the Netherlands (both of which are roughly on the same level as this country economically) – would put an extra £2,500 in every household’s budget.

That, in turn, would give the economy a major uplift because it boosts spending power. More money would flow through the system and the fiscal multiplier would be higher – meaning the amount of value it creates as it works its way to the Treasury as tax payments would be greater. Then – in a properly-working economy – it would go back into the economy as government investment and the process would start again.

We don’t have a properly-working economy; we have a Tory economy.

That’s why the message has to be repeated constantly, in the same way a teacher might have to repeat a lesson to an uncomprehending child (in this case, George Osborne).

The OECD’s finding that redistribution of wealth via taxes and benefits does not hamper economic growth will fall on deaf ears while George Osborne is the resident of 11 Downing Street. He has been cutting taxes on the rich, and reducing benefits for the poor.

According to the OECD, the gap between rich and poor is at the highest level in 30 years among its 34 members. The richest 10 per cent earn, on average, 9.5 times the poorest whereas – in the 1980s – they earned 7 times as much. Osborne thinks this is a good thing, even though the economy is stuttering on the edge of another precipice.

His policies are designed to increase the income gap: Benefits have been capped to ensure they do not increase in line with inflation – meaning employers are free to pay their workers less, saying that there are plenty of unemployed people who would be happy to take the lower amount. Trade unions are toothless, having had all the fight taken out of them during the first neoliberal Tory government of the 1980s.

The result will be less money flowing through the economy, meaning lower tax income for the Treasury, making it harder to provide public services (as Osborne intends). This provides an excuse for public services to be cut in favour of inferior but more expensive privatised systems that put even more cash into the hands of the rich and starve the economy still further. Debt increases exponentially and the United Kingdom doesn’t just fall over the economic precipice – we leap into the chasm like a lemming in a Disney movie.

The fact is, George Osborne is a Tory. He’ll never accept that his ideas are wrong for the United Kingdom. Whether that means he has been lying to you about his plans, or he is just really, truly stupid, we may never know.

So the OECD’s message isn’t for him at all.

It’s for you – and anybody else who will listen.

The only way to improve our standard of living is to rid the country of Tory neoliberal economic idiocy, by voting them out at the next general election, and taking steps to ensure they can never return on the back of the discredited foolishness they’ve been peddling to us.

The only way that can happen is if we – individually and personally – take responsibility for educating the people around us to understand the faults in Tory ideology and the dangers they represent.

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Was the crash really ‘all Labour’s fault’? – Flip Chart Fairy Tales

Of course it bleedin’ wasn’t.

It was the result of far too much blind optimism by financial institutions that should have known much better, as this Flip Chart Fairy Tales article 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.

screen-shot-2014-09-11-at-10-21-16

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 Guardian we 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.

That’s all this blog is saying.

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Sink, Britain, Sink! – the cost of privatising water management

– This is a song by a local musician, here in Mid Wales, written during the last serious flooding. I make no apologies for opportunistically linking to it as it says a few choice words about the situation and the government.

“And the rains came down, and the floods came up” – The Wise Man and the Foolish Man (Southern Folk Song).

Some of you may have noticed we’ve had a few spots of wet weather recently. This is nothing new to our island nation.

The trouble is, having fallen on us all, the water hasn’t had the decency to clear off and drain away. Instead, it has built up and up and caused a huge amount of flood damage to land and houses that were not built in a safe place, as in the song lyric quoted above, but in flood plains.

This is a result of bad planning – by water and sewerage companies that have failed to implement successful drainage schemes or to divert floodwater from rivers in order to prevent overflow, and by planning authorities that have allowed housing to be built in the wrong place.

What were they thinking?

My guess is that the water companies were thinking about the money, and planning authorities wanted to ease overcrowding.

We live in a country where management of the water supply went into private hands several decades ago. When that happened, it became impossible to have any kind of integrated plan to deal with the supply of water, droughts, floods and storage. Water supply became a commodity to be bought and sold by rich people according to the golden rules of capitalism: Invest the minimum; charge the maximum.

So reservoirs have been sold off to foreign water companies, meaning we have no adequate response to droughts. None have been built, meaning we have no adequate response to floods. Concerns about river flooding have been neglected. There has not been the investment in extraction and storage of floodwater that repeated incidents over the last few years have demanded.

The government is reducing its budget for handling these issues. Not only that, but it is delaying implementation of a new policy on drainage.

This would be regulated by local authorities, who have responsibility for planning approvals. Some might say these authorities should have had a little more forethought before granting applications to build on flood plains, or for adaptations to existing properties that have prevented water from draining into the soil and sent it down drains instead, to overload the sewer system.

Some of these are matters of necessity: Planning officers may have gone to the limit of what is allowed, in order to allow housing developments that relieve the burden of overcrowding; in other matters, they may have been unable to apply any legal restrictions on applications.

In short, there is no joined-up thinking.

There will be no joined-up thinking in the future, either – unless the situation is changed radically.

Meanwhile, the cost racked up by the damage is huge – in ruined farmland, in ruined homes and possessions, and blighted lives. And what about the risk of disease that floodwater brings with it? The NHS in England is ill-equipped to deal with any outbreaks, being seriously weakened by the government-sponsored incursions of private, cheap-and-simple health firms.

Something has to give beneath the weight of all this floodwater. Change is vital – from commercial competition to co-operation and co-ordination.

Privatisation of water has failed. It’s time to bring it back under public control.

Is anyone opposed?

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From the DWP to the economy – the Coalition’s growing credibility chasm

All the wrong things for all the wrong reasons: The evidence shows no good reason for George Osborne's economic austerity policies - other than, possibly, an intention to rob this nation of everything possible before 2015.

All the wrong choices for all the wrong reasons: The evidence fails to support George Osborne’s economic austerity policies – the only likely explanation seems to be an intention to rob this nation of everything possible before 2015.

The more we learn of the Tory-led Coalition’s policies, the wider the gap grows between what it is doing and what it should be doing.

Look at the sham psychometric tests, exposed by fellow blogger Steve Walker in a series of articles on his Skwawkbox site. It is now firmly established that the DWP – aided by the Cabinet office ‘nudge unit’ – set out to pressgang put-upon benefit claimants into taking part in a crude piece of neuro-linguistic programming – no matter what answers you provided, the test always pushed out a ridiculously upbeat appraisal of your character and then tried to get you to act according to this verdict in your jobsearching activities. The theory is that this will make a jobseeker more confident and finding a job easier. The problem is that it’s quite utterly ludicrous.

If you haven’t already, you can read the Skwawkbox exposure of this particular caper on that site – there are plenty of links to it from this one. The reason it is mentioned here is that it provides a useful set of questions with which to analyse any government activity: First, is the theory behind this activity sound? Second, if that theory is being used to support a particular course of action, is that action justifiable?

So let’s turn once again to George Osborne’s reasons for pursuing economic austerity, as described in the letter Vox Political received from the UK Treasury last month.

Firstly, the letter warns against the perils of losing market confidence. By this, we can see that it means we should fear any downward revision of our credit rating by the credit agencies, as “a one percentage point increase in government bond yields would add around £8.1 billion to annual debt interest payments by 2017-18”.

What’s being said is that a drop in our credit rating would mean the people and organisations that have invested in UK government debt (by buying our bonds) might move their funds to others, meaning the government could be faced with an interest rate rise, leading to increased difficulty in borrowing.

But we know that this isn’t true. The UK’s credit rating was downgraded only a few months ago. Did interest rates rise? Was our ability to borrow hindered at all? No. There’s a reason for that.

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.

This means that the Treasury’s next point, that “any loss of investor confidence in the UK’s fiscal position would not only affect the UK, but also the global economy” is also meaningless. There won’t be a loss of investor confidence, so there won’t be an effect on the global economy.

We move on – to the Chancellor’s claim that fiscal austerity is required to prevent the slowing of economic growth that happens when the national debt hits 90 per cent of gross domestic product (or thereabouts).

You’ll recall that my letter to the Chancellor was prompted by the revelation that the academic paper on which he relied most often, by Reinhart and Rogoff, had been proved to be mistaken. The Treasury’s response pulled out a series of references to other academic works suggesting a fiscal cliff similar to the Reinhart-Rogoff model, off which we would drop if the national debt passed an arbitrary level around 85-90 per cent of GDP. These were published by the International Monetary Fund, which we know isn’t quite as keen on austerity as it used to be; the Organisation for Economic Co-operation and Development, which this blog marked out as “schizoid” only a few days ago; and others.

Obviously I haven’t had time to look up eight academic works to support any opposing theory I may wish to create – and I think I would be foolish to try. I don’t have any grounding in economics beyond what I’ve been able to pick up by following the national and international debates.

But, then, according to Dean Baker of the Center (yes, it’s American) for Economic and Policy Research: “As a general rule economists are not very good at economics.”

He writes: “Most economists are unable to conceptualize anything that someone with more standing in the profession did not already write about. This is the only reason that the Reinhart-Rogoff 90 per cent debt-to-GDP threshold was ever taken seriously to begin with.”

That prodded my curiosity to check some of the papers listed by the Treasury in support of its stance, and the three that I checked (The Real Effects of Debt, Public Debt and Growth, and How Costly Are Debt Crises?) all listed the Reinhart-Rogoff paper in their supporting references. So Mr Baker is right.

“Debt is an arbitrary number,” he continues. “The value of long-term debt fluctuates with the interest rate… The value of our debt will plummet if interest rates rise… This means that we could buy back long-term debt issued today at interest rates of less than 2.0 percent for discounts of 30-40 percent. This would sharply reduce our debt-to-GDP ratio at zero cost.

“Bonds carry a face value, meaning the amount that will be paid off when they reach maturity. This is what gets entered in our debt figure. However bonds also carry a market price, which fluctuates inversely with interest rates. The longer the term of the bond, the more its price will vary with interest rates.

“If interest rates rise, as just about everyone expects over the next three-to-five years, then the market price of the bonds we have issued in the current low interest rate environment will fall sharply. Since we count our debt at the face value of the bonds, not their market price, we could take advantage of the drop in bond prices to buy up… bonds at sharp discounts to their face value.

“The question is why would we do this, we would still pay the same interest? The answer is that the policy would make no sense for exactly this reason.

“However, if we accept the Reinhart-Rogoff 90 per cent curse, then reducing our debt in this way could make a great deal of sense. Suppose we can buy back debt with a face value of 60 per cent of GDP at two-thirds its face value, or 40 per cent of GDP. In our debt accounting we would have reduced our debt-to-GDP ratio by 20 percentage points. If this gets us below the 90 per cent threshold then suddenly we can have normal growth again.

“Yes, this is really stupid, but if you believed the Reinhart-Rogoff 90 per cent debt cliff, then you believe that we can sharply raise growth rates by buying back long-term bonds at a discount. It’s logic folks, it’s not a debatable point — think it through until you understand it.”

I found Mr Baker’s piece after asking Jonathan Portes of the National Institute for Economic and Social Research (NIESR) for his opinion on the Treasury letter. He described it as “Predictable and largely irrelevant”.

So despite my lack of economic education, we have a working theory that suggests the Treasury has built its economic castle on the sand; that its justification for austerity is unsound. What about the austerity measures themselves? Are they justifiable on any level at all?

Evidence suggests not.

Let’s go back to our other friend in this matter, Prof Malcolm Sawyer. “Fiscal austerity and cuts in public expenditure do not work – there is a limited, if any, effect on reducing the budget deficit, and any return to prosperity is severely undermined.” We can see that this is true, using the government’s own figures. It managed to cut the deficit from £150 billion to £120 billion in 2011-12, mostly by axing large projects that invested in the UK economy. How much did it cut from the deficit in 2012-13? Less than £1 billion. The benefit cuts that created much of the fuel for this blog have not helped to cut the deficit at all.

“The reduction of the budget deficit can only come from a revival of private demand which is harmed by an austerity programme,” Prof Sawyer continues. Again, we can see that this is true. Austerity measures such as benefit cuts and the axing of infrastructure investment projects means there is less money available to the people who are most likely to spend it – the working- and middle-classes, and those who are unemployed. People with less money have to spend just about everything they receive in order to cover their costs. That money passes into circulation and the economy grows, through the fiscal multiplier effect. An attempt to explain this effect appeared on this blog within the last few days. The point is that demand increases when the people who earn the least have more to spend.

Therefore we see that Prof Sawyer’s next statement, “Deficit reduction requires investment programmes and reduction of inequality to stimulate demand”, is already proved.

So the answer is to reduce the unemployment rate by creating more jobs and closing the jobs deficit, as highlighted in this blog only a few days ago; to raise incomes by significantly increasing the minimum wage and adopting the proposed ‘living wage’, as promoted in this blog frequently; and investment in infrastructure projects.

What has Osborne done, along with his economically-illiterate chums?

He has created high unemployment.

He has depressed wages.

He has cut infrastructure projects.

He has, therefore, sucked all the demand out of the economy. What effect has this had?

Economic growth has, in the single word of Shadow Chancellor Ed Balls, “flatlined”, borrowing has remained high and the national debt is continuing to rise.

In other words, this part-time Chancellor’s strategy – a plan on which we have all been asked to judge the entire Coalition government, let’s not forget – has failed. Hopelessly.

I return you to Prof Sawyer, one last time [bolding mine]: “The austerity programme is economically irrational, socially irresponsible, and lacks credibility that it can reduce the budget deficit and secure any return to prosperity. The time has come to rebuild through investment and through a major assault on inequality.”

Thinktank’s schizoid report will not help Osborne to secure more cuts

Schizoid report: José Ángel Gurría, secretary general of the OECD. He'd probably object to the way we've defaced his sign, but it now provides a more accurate description of his organisation's opinions.

Schizoid report: José Ángel Gurría, secretary general of the OECD. He’d probably object to the way we’ve defaced his sign, but it now provides a more accurate description of his organisation’s opinions.

How can the Organisation for Economic Co-operation and Development tell George Osborne that he should invest in infrastructure projects but continue with his policy of cutting public spending, when the first public spending he cut was infrastructure projects?

Is this a sign of the delirium into which the western economies are sinking, partly through slavish adherence to neoliberal nonsense – in the face of all the facts – and party through a lack of raw intelligence?

The OECD, according to The Guardian, has revised down its economic growth forecast for the UK. What a surprise; they haven’t revised our growth upwards since before Osborne became Chancellor – and that alone indicates where the problem lies.

It says spending cuts and a lack of consumer and business confidence are restricting what we should all call “the recovery” only in mocking terms.

But, as the newspaper reports, “it [the OECD] backed George Osborne’s plans for further spending cuts, saying: ‘With a high budget deficit and gross government debt rising to 90 per cent of GDP in 2012, further fiscal consolidation is necessary to restore the sustainability of public finances.'”

What? It’s still supporting the discredited view that when public debt hits 90 per cent of GDP, growth is slowed? Hasn’t that idea been comprehensively rubbished – not only on paper but in the fact that UK growth hit standstill point the instant Osborne came in as Chancellor and inflicted his policies on us all?

It isn’t the amount of debt that’s the problem – its the stupid things that blinkered upper-class idiots do in response!

The OECD said the Labour market was “resilient”, so it obviously has been paying too much attention to DWP press releases when it should have looked up the facts. According to the Resolution Foundation (yes, another thinktank), as reported in The Independent, “The jobs market remains weak and is likely to continue to struggle well into the second half of the decade, making this a more severe downturn for employment levels than the two previous recessions”.

The article states: “The Resolution Foundation has performed an analysis of the total adult employment rate – which reflects the increase in the size of the population and the growth of the available workforce – and found that there remains a “jobs gap” of 930,000. This is the number of new jobs that would be required to restore the employment rate from its present level of 58.5 per cent to the 60.3 per cent recorded in 2008. This jobs gap has actually grown from 830,000 in the final quarter of last year.”

Once again, we see the facts do not support Coalition government press releases.

The OECD’s claim that average real earnings are “weak”, on the other hand, is realistic and gives the necessary perspective to a report from the Office for National Statistics that the total number of weekly hours worked across the economy hit a new record high of 950.3 million in the first quarter of the year.

If everybody’s working so much, why haven’t we got any money? Answer: Because the Tory-led government has been pushing wages downwards, ever since it came into power. Average earnings for bosses of FT350 companies have rocketed upwards, but the worker on the street had a pay rise of just 0.8 per cent last year. Look at the way benefit increases have been pushed below the rate of inflation (the DWP again!) in order to make the unemployed desperate to take whatever work they can get – no matter how poorly-paid – and to put those who have jobs in fear of losing them, so that they won’t be demanding pay rises anytime soon.

Back to the OECD: It wants a house-building programme to spur jobs growth. Without this, it warned that house values could overheat, sparking another price bubble. Isn’t that what George Osborne wants? Look at the so-called “second-home subsidy” he announced in the March budget, when he said the government would underwrite a percentage of new house purchases. Already we have seen warnings (from Sir Mervyn King in this Vox article) that it will create a price bubble.

So not only is Osborne right; he’s also wrong. Growth is down because of his policy of cuts, but he should continue making them. Unemployment is down – but the jobs gap has grown.

Also, not only is Osborne wrong; he’s very wrong. Low wages mean economy-boosting demand is also low – but the government is pushing wages down still further. House-building is needed to spur jobs growth and prevent a price bubble – but he isn’t building houses and he is actively pursuing the creation of a price bubble.

That’s what the OECD report says. There’s no way Osborne should be using it to support his policies but I bet he will.

If I were the secretary of state in one of the government departments he’s trying to squeeze for more cuts, I would be phoning the local mental hospital, saying a dangerous madman was loose in Whitehall and demanding that he should be sectioned.

But it seems that, instead of this, the ministers who’ve dragged their feet will be subjected to a grilling by the all-new ‘Star Chamber’, which is the name for the public expenditure committee Osborne has set up. Apparently ‘Star Chamber’ has a “mystique” about it (according to The Guardian); in fact it will consist of Osborne, Danny Alexander and those ministers who’ve given in and agreed cuts, haranguing the dissenters until they fold up like cheap thugs who’ve been punched in the kidneys once too often.

The fact that they will all eventually capitulate means we can laugh at them next time they’re on television trying to act tough, but the whole sorry story leaves us with one immutable fact:

This is no way to run an economy.

Don’t blame the poor when the rich are bleeding you dry

bluelabour

You know that things have come to a pretty pass when Labour Party supporters turn against the poor.

This has happened at a time when the number of people with money to spare has dropped dramatically, meaning more of our people have become poor.

The change may reasonably be blamed on Labour’s adherence to Liam Byrne’s diabolical welfare policy, that aims to continue where the Conservatives and Liberal Democrats leave off – demonising people who have done nothing wrong, unless you count illness, disability and unemployment as a personal choice.

It suggests that people of good heart are leaving the party in large numbers, allowing those who are left to turn it into what its critics have claimed it to be for a considerable time now: Tory Lite.

The change is identified in a report by the Joseph Rowntree Foundation, that showed 47 per cent of Labour supporters surveyed in 2011 thought that, if benefits were less generous, people would learn to support themselves – up from 17 per cent in 1987.

The fact of the matter, of course, is that benefits are much less generous now than they were in the 1980s. In 1987, unemployment benefits totalled around 20 per cent of the average weekly wage; now they come to around 10 per cent – around half of what they were. But Labour supporters – Labour! – say they are too generous.

It looks like the Tories really are brainwashing people with their nonsense rhetoric, as repeated in newspapers that Labour supporters shouldn’t be reading, like The Sun and the Daily Mail. That good friend of the Conservative Party, Joseph Goebbels, was right – “If you tell a lie big enough and keep repeating it, people will eventually come to believe it.”

Of course, Goebbels added: “The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent.”

So those of us who are interested in the facts may be looking forward to hard times. It’s still better than being a fair-weather friend of social justice – only interested in the good of our fellows if it doesn’t impact on us.

But it is already impacting on everybody!

The Office for National Statistics, using Organisation for Economic Co-operation and Development (OECD) figures, has reported that the UK has plummeted down the international league table of economic well-being, from fifth to 12th within the six years up to 2011.

On a separate labour-market ranking, the country fell even further, dropping 12 places. In the labour market league table it ranked 21st out of 34 countries. Top of the league was Norway, which has just three per cent unemployment and, as I understand it, a thriving welfare state. Think about that.

The ONS noted changes to taxes and benefits as key factors in the drop.

This morning, one of Vox‘s longest-serving commentators reported that there is a change among the people around him; that those who argued against his criticism of the Conservative-led government are now turning to the Left. If so, it seems they are not turning to Labour.

Recently we have witnessed a movement to form a new political movement, representing socialist views but untarnished by the memory of New Labour’s 13 years of Neoliberal mistakes. Several contenders have cropped up but none of them will carry any weight at the next general election – instead, all they are likely to do is sap enough votes from Labour to let the Conservatives back into office again. That would be a calamity for the country.

No, the best thing to do is to take Labour back for the people it was meant to serve. First step in that direction must be to consign Liam Byrne and his vile mess of a welfare policy to the back benches, and design a new plan, attacking the causes of unemployment and workplace sickness and disability, rather than their symptoms. This is simple logic.

And we need to get people into the shadow cabinet who have actually held proper jobs. Look at Ed Miliband: Oxford graduate – short media career – Westminster job for Labour. Ed Balls: Oxford graduate (Politics, Philosophy and Economics) – short media career – Westminster job for Labour. Douglas Alexander: University graduate – six-month career as a solicitor – Westminster. Yvette Cooper: Oxford (Politics, Philosophy and Economics) – Westminster researcher job for Labour. Andy Burnham: Cambridge – researcher for Tessa Jowell. Many of these also went to Harvard.

Liam Byrne, the demon of the Labour Party: University (Politics and Modern History at Manchester) – Harvard – then work for a multinational consulting firm (Accenture) and then the Rothschild merchant bankers(!) before going to Labour to help lead its ‘New Labour’ business campaign. This man has nothing whatsoever to do with real working people.

When everybody in a particular group – in business, politics, socially, whatever – is from the same background, they tend to agree about key subjects. From the above group we can see that many of the Labour front bench have followed exactly the same career path. What do they know about working-class people? At least two of them – Ed Balls and Yvette Cooper, no less – graduated from the same Oxford degree course as David Cameron, the comedy Prime Minister.

No wonder people are having a hard time distinguishing between the two main parties and want a left-wing alternative.

It’s time for Labour to grow up and realise it needs to change. It must come back to its voting base and start to represent the people of the UK once again – rather than Oxford, Cambridge and Harvard graduates. If Ed Miliband wants to keep his position, he needs to clear out his shadow cabinet and get some fresh thinkers in. Someone recently mentioned Abraham Lincoln’s ‘cabinet of enemies’, and the fact that it was good for him to have opposing views at the heart of his government.

Until we get that in the Labour Party, maybe we should agree that the ‘Tory Lite’ criticisms are accurate.

What are you going to do about it, Labour?

Treasury responds to Vox’s austerity challenge

osborne britaindeserves

Last month, Vox Political wrote to the Chancellor of the Exchequer, a Mr Osborne, politely asking him whether he had any other documentary justifications for his disastrous programme of austerity after the previous principal pillar of his faith – a paper by Harvard economists Reinhart and Rogoff – had been disproved by a student at a rival university.

Today we received a response! A lengthy, well-considered one at that.

What a shame that we found a way to trash it before we reached the end of page one.

But we’re getting ahead of ourselves. Let’s all read the letter together, shall we? It begins:

“Thank you for your letter dated 22 April about the recent publication by Herndon, Ash and Pollin, a critique to the paper ‘Growth in the time of Debt’ by Reinhart and Rogoff.

“You asked for the Treasury’s views on the recent criticism of the paper by Carmen Reinhart and Kenneth Rogoff which concluded that public debt above 90% of GDP could prove a significant drag on economic growth.

“As you will be aware, the Coalition Government inherited the largest deficit in post-war history due to unsustainable increases in Government spending by the previous Government and the effects of the financial crisis [We don’t know that at all. The largest deficit in post-war history is something to which this writer cannot respond – I only know that the national debt at the end of WWII was 250 per cent of GDP, or very nearly four times as much as it is now. Spending by the Labour administration was less than that of the Conservatives until the financial crisis took place, so the writer is effectively admitting that Conservative spending between 1979 and 1997 was even more unsustainable. As for the financial crisis, the Tories would have done the same as Labour at the time, as is borne out by the history books]. In order to address these problems the Coalition Government set a clear and credible consolidation plan to reduce the risks of a costly loss of market confidence in the UK, to restore confidence and underpin sustainable growth.

“As noted by the OECD in their Economy Survey of the United Kingdom February 2013, ‘global developments have shown that the consequences of loosing [sic] market confidence can be [a] sudden and severe and sharp rise in the interest rates [that] would [be] particularly damaging to an economy with the United Kingdom’s level of indebtedness.’ A 1 percentage point increase in government bond yields would add around £8.1 billion to annual debt interest payments by 2017-18.

“Fiscal consolidation also reduces the risk of adverse feedback between weak public finances and a strained financial sector. This feedback can be very damaging, as evidenced by recent events in the euro area. Globally, the UK has one of the largest financial systems relative to the size of its economy, meaning that any loss of investor confidence in the UK’s fiscal position would not only affect the UK, but also the global economy. As the IMF has stated in their United Kingdom – 2011 Article IV Consultation Concluding Statement of the Mission, ‘the UK financial system thus serves as a global public good’. It is the IMF’s view that the UK’s economic and financial sector policies have a systemic impact on the global economy.

“The Government’s approach is supported by a large body of academic and professional literature which finds that there are strong theoretical and empirical grounds for a relationship between high levels of debt and slow growth, including:

“1. Work by staff of the Bank for International Settlements:

“* ‘The Real Effects of Debt’ by Cecchetti et al, 2011 (published as a Bank of International Settlements working paper in September 2011), found that government debt above 85% had a negative impact on growth.

“2. Research by staff of the International Monetary Fund:

“* ‘Public Debt and Growth’, an IMF 2010 working paper prepared by Kumar and Woo, found that an increase in debt ratio of 10& resulted in an annual decrease of 0.2% in per capita GDP growth, with a stronger effect at higher levels of debt. The paper found some evidence of nonlinearity with higher levels of initial debt having a proportionately larger negative effect on subsequent growth. Analysis of the components of growth suggested that the adverse effect largely reflects a slowdown in labour productivity growth mainly due to reduced investment and slower growth of capigal stock.

“* ‘How costly are debt crises’, an IMF 2011 working paper prepared by Furceri and Zdzienicka, finds that debt crises produce significant and long-lasting output losses. This study also provides support to the idea of a threshold for the debt-to-GDP ratio above which output growth starts to decline.

“* The IMF 2013 WEO box 1.2 ‘Public Debt Overhang and Private Sector Performance’, cites studies that have found a threshold beyond which public debt harms growth. It also lists several reasons why a debt overhang can affect economic activity.

“3. Work by staff of the Organisation for Economic Co-operation and Development:

“* ‘Public Debt, Economic Growth and Nonlinear effects, Myth or Reality?’ Egert, OECD 2012, finds ‘some evidence in favour of a negative nonlinear relationship between debt and growth using a variety of econometric models.

“4. Work by staff of the European Commission:

“* Report on Public Finances in EMU 2012 supports the statement that public debt can trigger economic growth: ‘higher debt levels and interest rates might weigh on economic growth, especially when debt exceeds a certain threshold level as a number of papers suggest.’

“There are also theoretical reasons, highlighted in Boskin, 2012 and OECD, 2012 for believing that higher levels of public debt will damage medium-term growth prospect:

“* First, tax hikes needed to service a higher public debt may crowd out private investment by reducing disposable income and saving.

“* Second, if the higher debt servicing costs associated with increased debt levels are financed by increasing tax revenue, they also imply a deadweight loss on the economy as a result of distortionary effect of raising tax revenues.

“* Third, there is broad agreement that large deficit and debt levels are associated with a higher level of long-term Government bond yields which may crowd out productive public investment and reduce private investment through an increase in the cost of capital. Reduced investment in research and development will have long-lasting negative impacts on growth.

“The approach is also supported by international organisations. The OECD, for example, noted in its November 2012 Economic Outlook that ‘With the budget deficit (excluding temporary factors) at over 8% of GDP and gross government debt at over 80% of GDP, fiscal consolidation is necessary to restore the sustainability of public finances and will strengthen medium-term growth prospects. The fiscal stance remains appropriate, and is supported by the strong institutional framework.’

“Olli Rehn, Vice President of the European Commission, on the speech of the Spring Forecast in May 2013 noted: ‘It is important that the UK follows through with consistent consolidation of public finances with a view to achieve (sic) a more sustainable fiscal position.’

“At the end of this letter you can find the papers referred to above online.”

I shan’t embarrass the letter’s author by naming that person.

The online papers are:

Cecchetti, Bank of International Settlements, 2011. ‘The Real Effects of Debt’ http://www.bis.org/publ/work352.htm

Kumar and Woo. ‘Public Debt and Growth’, IMF 2010 http://www.imf.org/external/pubs/ft/wp/2010/wp10174.pdf

Furceri and Zdzienicka. ‘How Costly are debt crises’, IMF 2011 http://www.imf.org/external/pubs/ft/wp/2011/wp11280.pdf

IMF April 2013 World Economic Outlook (WEO) http://www.imf.org/external/pubs/ft/weo/2013/01/

Egert, OECD 2012. ‘Public Debt, Economic Growth and Nonlinear effects, Myth or Reality?’ http://www.oecd-ilibrary.org/economics/public-debt-economic-growth-and-nonlinear-effects_5k918xk8d4zn-en

Boskin, M. Stanford Institute for Economic Policy Research, 2012. A Note On the Effects of the Higher National Debt On Economic Growth http://siepr.stanford.edu/publicationsprofile/2491

OECD Economic Outlook, November 2012. http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-outlook-volume-2012-issue-2_eco_outlook-v2012-2-en

European Council, 2012 UK Country Specific Recommendation (CSR). http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/20_scps/2012/04_council/uk_2012-07-10_council_recommendation_en.pdf

… all of which can be picked apart with one observation and a couple of attached questions:

Mr Osborne demanded in 2010, that cuts to welfare benefits alone should total £18bn per year by 2014-15 (meaning a total of £90bn over the five years of Coalition government). Other government departments have had to take huge hits as well.

So why is the total drop in the deficit this year just £300 million? And why is the national debt now more than 88 per cent of total GDP – well inside the danger zone that Mr Osborne has been trying to avoid?

Could it be that, once put into practice, the theories outlined above aren’t actually worth a farthing?

Expect much more on this subject as we really get our teeth into the material the Treasury has kindly provided.