Tag Archives: growth

An economist trashes Liz Truss on her policies

Liz Truss and money: she doesn’t understand it and her fiscal policy reflects that.

The Liz Truss Tory administration’s focus on growth is a public relations stunt, it seems, from what an Oxford professor of macroeconomics has to say about it.

Simon Wren-Lewis, who write’s the Mainly Macro blog, has published a harsh critique of Truss’s plan for 2.5 per cent growth.

He says the concentration on building the economy represents a PR departure from previous Tory governments that have let it shrink – but none of her proposed tactics will achieve this strategy goal.

In particular, policies that promote inequality (tax cuts, lifting the cap on bankers’ bonuses, refusing to impose a windfall tax on energy producers) may be based on a notion that greater inequality encourages growth – but this is not true; the evidence suggests no such association or the exact opposite.

Higher inequality, in fact, reduces growth. In contrast, there is a wealth of evidence to show that lower inequality might promote it. Furthermore, fiscal measures that favour the rich were tried by George Osborne and did nothing to stop, but may even have assisted, the last 12 years of UK economic decline.

Truss’s other big idea is to cut back on regulation. This is nonsense because of Brexit, which has increased red tape exponentially.

And we have a perfect example of how de-regulation hinders growth in her plan to review (read: scrap) anti-obesity measures. As Professor Wren-Lewis states,

it is clear that more obese people implies a greater burden on the NHS, requiring either higher taxes to fund it or a reduction in social welfare as other care is rationed.

Also the reduction of regulations to keep our beaches clean of sewage means more people taking holidays abroad and fewer overseas tourists coming to the UK.

Even the 2.5 per cent growth target is wrong, according to Prof Wren-Lewis; GDP per head is what assists social welfare, not GDP as a whole, so the target is for the wrong thing. It is an empty gesture – like sacking the Treasury’s permanent secretary for no reason other than to show things have changed.

The verdict is that

this decade or more of economic decline will not end by cutting taxes, deregulation, making exporting harder, and increasing inequality.

Either Truss is lying to us while trying to create an extremely short-term bounce that might win an election for her – or she is monumentally stupid. Which do you think it is?

Source: mainly macro: Going for growth?

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Bankers’ bonuses restored while your pay plummets. Did the mass media even report this?

Have you seen this on the mainstream news… anywhere?

It seems the Tory government has taken advantage of its new Brexit-given freedoms to lift a cap on bankers’ bonuses.

It’s being touted as part of a drive to return the UK to economic growth – but in reality it is nothing of the sort.

Bankers are paid a fortune already and don’t need the cash. Therefore they won’t spend it into the economy – they’ll stash it away somewhere and it won’t do anything to restore economic growth.

Also, the Bank of England has been advocating pay restraint for the rest of us – in the face of double-figure inflation – because it says pay rises in line with inflation will cause even more inflation.

Do you get the impression these people are talking out of their collective rear ends?

If a government wants to get its economy going, it has to pay money to the poorest people in the country – because they need it, and they’ll spend it. The cash will go through more hands, if it starts at the lowest level, before being taxed out of the system – and this means it will create the greatest boost to the economy, adding value with every exchange.

What’s happening here will harm the UK economy. See if I’m wrong.

Here’s the clip that inspired this article:

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Liz Truss and her 2.5% economic growth target: jam tomorrow?

Liz Truss and Kwasi Kwarteng have been laying out their stall, and pride of place has gone to their claim that they will create consistent economic growth of 2.5 per cent before the next general election.

This would appear to be an impossible dream, as the Bank of England – whose recent forecasts have all been over-optimistic – is predicting a recession lasting to the end of 2023 (that’s six quarters of negative economic growth).

The best Truss can hope for is an improvement after then, which is unlikely to turn into consistent 2.5 per cent growth – certainly not by the time of an election in late 2024.

And Labour would naturally compare the economy at that time with its condition when she took over – negatively.

Looking forward, the prediction is that Truss will do what Tories always do – say Labour would wreck everything and that if we just vote “Conservative” one more time, we’ll all see the benefits.

Here’s a video clip to explain it all further:

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Poor income growth and inequality mean UK families face ‘terminal decline’ in living standards

Champagne for some: rising income inequality and stagnant growth for poor families mean most of the UK is teetering on the brink of financial disaster – and our politicians have been to blame since 1992.

Income growth for poor households has suffered “complete collapse” over the past 20 years.

Income inequality has run rampant under successive governments since 1992, with five of the most unequal years taking place since 2013-14.

Add these together and our failed politicians have left the UK’s families “brutally exposed” to the cost of living crisis.

That is the finding of a new report by the Resolution Foundation:

Real typical household disposable income growth for working age families fell to 0.7% a year in the 15 years leading up to the Covid-19 pandemic.

Non-pensioner family earnings rose 2.3% per year, or 25% per decade, between 1961 and 2004-05. Average income growth dropped to 0.7% between 2004-05 and 2019-20.

Too many families today have low discretionary incomes, little or no private savings (one-quarter have less than a month’s buffer), and an inadequate social security safety net (basic unemployment support is now down to just 13 per cent of average pay, its lowest level on record).

The lowest fifth of the population had no greater earnings on the eve of the pandemic than in 2004-05, despite GDP per person expanding by 12% during this period.

On the eve of the pandemic, social and private leased households’ incomes were 37% and 24% below average. Single parents had 35% lower salaries, while children under 5 had 20% lower incomes.

Couples without children (33% higher), mortgagors (27% higher), those 55-60 (19% higher), and those in the South East of England had salaries well above the general median (12 per cent higher).

The research says salary is driving Britain’s falling living standards. Typical salaries remain the same as they were before the financial crisis, reflecting a salary loss of £9,200 per year.

Adam Corlett, Principal Economist at the Resolution Foundation, said a solution needed to be found quickly: “To do that, we must address our failure to raise pay and productivity levels, strengthen our social safety net, reduce housing costs and build on what we’ve done well – such as boosting employment for lower-income households.”

Read more: Poor income growth and inequality has left British families ‘brutally exposed’ to the cost of living crisis

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

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

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

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

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

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

I think it is.

As The Guardian‘s report puts it,

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

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

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

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

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

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

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Iain Duncan Smith is to give his ignorance to post-Brexit government reform

The pick of the Tories: Iain Duncan Smith is a creature of odious habits and even worse politics.

The former Tory leader whose ‘reforms’ of social security have led to the deaths of thousands upon thousands of people has been appointed to lend his ignorance to the government again.

Iain Duncan Smith will chair the new Taskforce on Innovation, Growth and Regulatory Reform.

The title of the organisation creates the acronym TIGRR – tiger, get it? But Duncan Smith is no kind of tiger. As benefit claimants know from his time as Work and Pensions Secretary, he’s a little bitch.

This Site has its own acronym for him – RTU. It stands for “Returned To Unit”, the message of shame on the record of armed forces personnel who fail training for promotion up the officers’ ranks – as he is said to have done.

The government has claimed that the TIGRR will “identify and develop proposals across a range of areas that will drive innovation and competitiveness, reduce barriers to start-ups and scale-ups, create opportunities for innovation to make the most of cutting-edge technologies, and support growth and dynamism right across the UK economy”.

But with RTU at the helm it is more likely to reduce competitiveness with new schemes that will be massively expensive while helping nobody (like Universal Credit), create barriers that stop people getting what they need (as he did with all benefits, particularly those for the sick and disabled), and abandon cutting-edge technologies for paper and ink (as DWP workers were forced to do when his plan for Universal Credit to be fully computerised fell on its ass).

He didn’t even help his own government! All his so-called “reforms” created more expense and none of them saved any money at all.

Labour has said it is ready to fight over any reforms that could be harmful – particularly to employment rights.

While This Writer has nothing personal against Andy McDonald, I remember when the party under Ed Miliband, in the dying days of its previous right-wing, neoliberal incarnation, voted in support of RTU to harm benefit claimants and I have a doubt.

The simple fact is that the appointment of this death machine should tell us everything we need to know about what his organisation will do. And it won’t help anybody.

Source: Iain Duncan Smith appointed post-Brexit government adviser | The New European

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Johnson caught lying about economic growth in Prime Minister’s Questions

Boris Johnson: He’s all ‘blood and thunder’ in Parliament but analyse what he says and it turns out to be ‘bull**** and bluster’ instead.

I was going to ask why Boris Johnson keeps making false claims like this in Parliament.

But I can already answer that question:

Because he knows he will always get away with it.

That’s what happens when you have compliant – indeed, supine – Tory-loving mass media reporting your behaviour; the lies are ignored.

Did I say lies? Yes, I think they were.

His claim was that the UK economy has grown by 73 per cent under the Conservative government, and this was a lie.

I’m sure he knew that the date from which 73 per cent growth can be claimed is 1990, and that it was achieved under both Conservative and (New) Labour governments. But he didn’t say that.

The current Tory government – in office since 2010 – has achieved economic growth of just 20 per cent.

Worse than the lie is the fact that, due to Tory policies enacted since 2010 (with the help of the Liberal Democrats and the Democratic Unionists at different times, let’s not forget), the benefits of economic growth since that year have been restricted to the very rich.

Wage and benefit increases for the very poor have been frozen or cut, plunging millions of people – including and especially children – into poverty.

So-called ‘Victorian’ diseases linked with lack of money have also returned.

And the death toll among people who have seen their benefits restricted or cut off – most probably because the Department for Work and Pensions has altered their claim and lied about it – has been enormous.

But very few people know about that because the Tories don’t monitor the deaths properly and never provide reports.

And then there’s the matter of public debt:

Yes indeed, Mr Johnson – if you’re going to crow about economic growth, what have you done with the money? You’ll be pleading poverty, the instant anybody says it is needed to shore up a service you have cut.

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Pound to be renamed the Yo-Yo while UK continues to have Conservative government


No – not really.

But the comparison with a toy that bounces up and down according to the actions of its custodian is useful, considering the woeful effect on the UK’s currency whenever certain Tory politicians open their mouths.

Obviously the pound plummeted when it was revealed that more Britons had voted to leave the European than remain in it.

Then Theresa May became prime minister and Sterling took a tumble whenever she made a speech.

Now the infection has spread to Philip Hammond.

Thankfully, our currency regained at least a little of its value after all of these… incidents, let’s call them.

In seriousness, it is an indication of market jitters over Brexit – the effect of which remains a mystery, and a dangerous liability for the economy and the well-being of everybody in the United Kingdom.

But This Writer believes it has as much to do with the failed government of the Conservative Party under Theresa May and her lieutenants, including Mr Hammond.

The pound briefly fell against a slew of currencies on Wednesday, after the Office for Budget Responsibility slashed its growth forecast.

Sterling initially slipped by around 0.2 per cent against both the euro and the US dollar. It also fell against other major global currencies, including the Swiss franc and Japan’s yen, but was trading higher again by the end of the day.

The pound has endured a turbulent ride since June 2016’s Brexit vote. Even though it has stabilised somewhat in recent months, it remains around 10 per cent lower against the dollar since the referendum and around 13 per cent lower against the Euro.

In the longer term, analysts are cautious about forecasting a sustainable recovery for the currency – especially considering the stubborn uncertainty over what Brexit will eventually look like.

Source: Sterling falls after UK economic growth forecast is slashed


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Has Chuka Umunna taken leave of his senses?

Ill-judged: Blue-scarved Chukka Umunna should remember that Michael Heseltine did much to destroy the UK's communities as part of the Thatcher and Major governments.

Ill-judged: Blue-scarved Chuka Umunna should remember that Michael Heseltine did much to destroy the UK’s communities as part of the Thatcher and Major governments.

After the story in The Guardian there are only two things required of Chuka Umunna: Repudiation – or his resignation.

The article states that Blue Labour stalwart Umunna would call on Conservative heavyweight Michael Heseltine for advice if Labour wins the general election. If this is true, it is madness.

Heseltine was a leading member of the Thatcher and Major Conservative governments of the 1980s and 90s, pioneering the disastrous ‘Right to Buy’ initiative that sold off the majority of council houses without replacing them, leading to the current housing crisis and the Bedroom Tax.

More recently he authored the ‘No Stone Left Unturned’ plan which made 89 recommendations on ways of stimulating local growth – 81 of which were adopted by the Coalition Government, with little effect. The UK economy has been stagnant for many years, with productivity at around the same level as it was when the Coalition came into office; it seems any boost in GDP has come from other areas – possibly the reduction in wages brought about by the widespread abuse of zero-hours contracts to rob working people of their rights to a steady job and entitlements to holiday and sick pay.

Yet it is in this area – revitalising the cities and regions – that Umunna wants Heseltine to advise. It would be an utterly pointless exercise.

For any stimulation policy to work, it has to put money where it can be most effective – in the hands of the people who actually need it to pay for things they need. But Heseltine is a Tory – they take money away from the proles; they don’t hand it out to them. He’ll devise something that makes towns look very pretty in order to hide the rot inside as local businesses and residents go to the wall.

Not only that, but it seems Umunna has not learned the overriding lesson of the Scottish referendum campaign: Voters will not tolerate a Labour alliance with the Conservatives on any level at all.

One of the main reasons the SNP is polling so well north of the border is because of a myth propagated by its candidates and supporters, that Labour and the Conservatives are “in bed”, “in cahoots”, “in alliance” – choose the phrase you prefer. It isn’t true – Better Together was an alliance of convenience because both parties wanted Scotland to remain in the union; they have very little else in common (although the SNP has exploited the very few examples of common ground to great effect, also).

Now along comes Chuka, thinking he’s clever with a plan to be inclusive and revive the “big tent” policies of Tony Blair – another figure who is now widely reviled by the electorate – and confirming everything the SNP whisperers have been saying!

Is he trying to stab Ed Miliband in the back?

If not, then now is the time to deny the Guardian story and put Heseltine back in his box.

Follow me on Twitter: @MidWalesMike

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Osborne’s RES speech and proposed new fiscal rule – mainly macro

Bottom of the class: George Osborne based his 'Long-Term Economic Plan' on a spreadsheet error by American economists. [Image: Gaianeconomics]

Bottom of the class: George Osborne based his ‘Long-Term Economic Plan’ on a spreadsheet error by American economists. [Image: Gaianeconomics]

I suppose I should say something about this, even though I find it painful reading his speeches, writes Simon Wren-Lewis.

Not because they are so partisan – what would you expect? Perhaps I can describe it by comparing it to an academic reading a student’s essay. With something like Vince Cable’s speech last year, you can read whole paragraphs quite happily, and then make a comment at the end like ‘yes, but you have ignored this etc’. With Osborne’s speeches, you feel the need to get the red pen out after every sentence. Each sentence seems as if it is crafted to mislead.

Take, for example, the issue about whether high debt inhibits growth. Now I happen to think that there are good theoretical reasons why high debt might reduce growth. However my reading of the empirical evidence – exhaustively examined following the critique of Reinhart and Rogoff – is that while there may be some (rather weak) correlation between high debt and low growth, there is no evidence of causality running from debt to growth, and more evidence that causality goes the other way. This is what Osborne’s speech says:

“And the conclusion of the academic literature is that high debt is undoubtedly correlated with lower growth. Even the possibility should give us cause for concern given the huge impact that small growth differentials can have over time.”

Does this give a rather different impression? But read it carefully – does he say anything that is clearly wrong? As I say, it is calculated to mislead, and the speech is full of this stuff.

For more insight on this speech, and a view on Osborne’s new fiscal rules, visit Mainly Macro.

Follow me on Twitter: @MidWalesMike

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