Tag Archives: growth

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.

Have YOU donated to my crowdfunding appeal, raising funds to fight false libel claims by TV celebrities who should know better? These court cases cost a lot of money so every penny will help ensure that wealth doesn’t beat justice.

https://www.crowdjustice.com/case/mike-sivier-libel-fight/


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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.

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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.

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‘Budget responsibility’ debate makes even Taxpayers’ Alliance look cleverer than Tories and Greens

George Osborne's plan to put you into debt: He wants you to be spending nearly two times more than you earn, so he can balance his books. What a (insert your own expletive here)!

George Osborne’s plan to put you into debt: He wants you to be spending nearly two times more than you earn, so he can balance his books. What a (insert your own expletive here)! [Image: Huffington Post.]

They were lining up to make fools of themselves after last night’s debate on the ‘Charter for Budget Responsibility’.

The Tories, of course, didn’t have to wait until after the debate – the fact that it took place at all made George Osborne look like an idiot. He had dismissed plans for a Labour-sponsored fiscal responsibility act as a “completely feeble stunt” back in 2010, but last night laid himself wide open to accusations that he was doing exactly the same thing.

In fact, it seems, he was trying to lay a “deficit trap” for Labour, in trying to get the Opposition party to explain how quickly it intends to balance the books.

No dice. Labour was quite comfortable with the charter, pointing out that it sets no date for the elimination of the national deficit but merely puts it in the third year of an undefined ‘five-year cycle’. The strongest words on the subject in the charter are that the books should be balanced “as soon as possible” which, Labour pointed out, is entirely consistent with the party’s own strategy.

In addition, as the Institute for Economic Affairs thinktank pointed out in the Huffington Post, no government can bind its successor (force it to continue a policy run by the previous administration). This means that Labour has supported a bill that conforms with Labour plans, and remains free to carry out those plans in whatever way it chooses, post-May 7, if it wins the election.

Shadow chancellor Ed Balls was so sure of his ground, he quoted an assessment of Osborne’s debate by the right-wing, reactionary Taxpayers’ Alliance, whose chief executive Jonathan Isaby labelled it a “meaningless political gimmick of the most transparent kind…that serves only to remind taxpayers how dramatically the Chancellor has missed his own original target”.

It isn’t often the Taxpayers’ Alliance turns out to be more intelligent than the rest, so let’s give it its due in this instance.

Claims are already circulating that Labour’s plans, which allow for borrowing to continue on infrastructure projects – investing in the economy, could add an extra £170 billion (in today’s terms) to the deficit during the 2020s. This assumes that such investment will yield no positive benefits to the economy, and there is no evidence that this would be the case. In fact, experience suggests the exact opposite.

An extra £170 billion of spending won’t matter one jot if tax receipts increase by more than that amount.

Ed Balls knows this – and said as much in the debate: “Three factors can bring the deficit down: spending cuts, decisions to raise taxes, and what happens to the underlying growth of the economy and the tax revenues which flow from that. The Chancellor did not talk about the third factor, for understandable reasons.

“Ultimately, the only way of reversing the problem is yes, to cut spending, and yes, to raise taxes… but also to get the economy growing in a stronger way which will bring in tax revenues.”

You see, while the economy is (technically) growing again, the jobs that have been created are in low-paid, often insecure work and there is lower productivity. As a result, income tax receipts are a cumulative £68 billion lower than Osborne’s 2010 forecast, and national insurance contributions are a cumulative £27 billion lower than he planned. But this was always going to happen with a Tory chancellor.

Tories always try to depress wages, in order to maximise profits for business owners and shareholders who vote for them. This means that income tax must fall, yet – bizarrely – they always seem surprised when it happens.

The fact that Osborne’s low-wage economy means more working people receive benefits is another cost burden for the Treasury. Labour, of course, plans to eliminate this by getting workers onto a living wage.

Osborne’s own plans would cut government spending – mostly on the kind of wealth redistribution that allows the poorest and the working-class to enjoy a reasonable standard of living – by around 26 per cent, totalling a massive 41 per cent since 2010, if a Conservative government is returned in May.

In addition, he is relying on a £360 billion borrowing spree by UK citizens, according to the Office for Budget Responsibility – which will leave households with an amount of debt 180 per cent larger than their income (see the image at the top of this article).

Just think about that. Back in 2010, he was comparing the national debt to households having ‘maxed out’ all their credit cards. That was when the debt totalled 78.4 per cent of GDP (the amount of income the nation generates every year). Why is he now saying that households should take on a burden that is proportionally more than twice as large?

Of course the comparison between national and household budgets is pointless because they do not correspond with each other, as Green MP Caroline Lucas pointed out in yesterday’s debate. Unfortunately she then went on to make a fool of herself by claiming, on Twitter, that the 18 MPs (including herself) who voted against the charter are the only MPs who are against austerity. If she knows enough to point out the difference between national and household budgets, she should know that this is inaccurate – therefore this was a direct lie to the electorate.

The effect of all this bluster – especially on Twitter last night – must be similar to the proverbial turkeys queuing up for Christmas. If anybody still wishes to tell us all that Labour’s plan for economic growth means the party avidly supports austerity, let us look forward to their detailed and clear explanation.

Based on current experience, we may be waiting a long time.

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Osborne’s biggest lie: ‘Conservatives are competent’

As history will remember him: George Osborne will be remembered, but not for his calamitous career as Chancellor. His name will forever be linked to cocaine and (let's call them) 'ladies of the night'.

As history will remember him: George Osborne will be remembered, but not for his calamitous career as Chancellor. His name will forever be linked to cocaine and (let’s call them) ‘ladies of the night’.

Georgie Orgy, nose puddings and lies
Starved the poor – some of them died.
When the voters have their say
George Osborne will run away.

It would be impossible to take George Osborne seriously, if not for the fact that his plans threaten the livelihood, health, and indeed the lives – not only of British citizens, but of the nation itself.

His words yesterday (Monday), during the row with the Liberal Democrats over economic policy, certainly do not deserve any respect after the absolute nonsense he spouted to Parliament last week, masquerading as the Chancellor of the Exchequer’s Autumn Statement.

According to the BBC, he said spending cuts to reduce the deficit are a “price that works for our country”. Why?

“We are going to have to make savings.” Why? “We are going to have to cut certain welfare bills like benefits that go to working-age people.” Why?

“But the prize is economic stability, growth, jobs in the future, brighter future, I think that’s a price that works for our country.” Why?

Notice that he did not give any reasons for his statements. He presented them as though they were incontestable facts. They’re not.

Look at, for example, his claim that working-age benefits must be cut. Is he proposing cuts to benefits taken by working people because their employers are too miserly to pay them a living wage? Does he have a plan to help those people make ends meet, then? This writer hasn’t seen it!

That’s unless it’s the hoary old “Ask your boss for a raise.” Clearly, privileged George never had to try that.

You can be sure he won’t be requiring companies to pay a living wage to make up for the shortfall of in-work benefits that he is planning. The result is as inevitable as night following day: Working people will be unable to support themselves. If they pay housing costs but don’t buy food, they’ll become sick and will lose their jobs; if they buy food but neglect the rent/mortgage, they’ll be evicted and will lose their jobs due to homelessness.

The huge cumulative drop in the amount of cash being circulated through the economy implies a consequent effect on businesses; with fewer ordinary working people able to buy their goods, firms will go out of business. Super-rich twits like Osborne will be insulated from the effects for a while but the recession he is determined to cause will eventually overtake even his family wallpaper business. What will he do then?

The last four and a half years have shown that cutting public spending will not reduce the deficit. As many people have pointed out, it is madness to repeat the process and expect a different result. Looking at the BBC quotation, it seems Osborne is caught in a lie. His spending cuts aren’t about reducing the deficit at all; they’re about reducing the state – as bloggers like Alex Little, Martin Odoni, Professor Simon Wren-Lewis, kittysjones, and blogs like Flip Chart Fairy Tales, Skwawkbox, and even Vox Political have made clear.

We don’t have to make savings – we should be concentrating on increasing productivity and profit instead. That will get the deficit down much more quickly than whittling away the apparatus of the state until the damage is irreparable.

We don’t have to cut benefits to working-age people – we should be ensuring that nobody with a job needs to claim benefits; that they are paid enough to support themselves and their families.

We should also be providing the highest-quality education to youngsters and training to jobseekers young and old, in order to ensure that they can get a job without spending useless months parked in a benefit system that is more about hiding the unemployed in sanction hell than about providing any actual help.

Osborne’s way offers no stability, no growth, no jobs, and you’d better believe he offers no future.

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It’s more likely that George Osborne is the next Doctor Who than he will balance the government’s books – Tax Research UK

I have warned, successively, that the Budget forecasts on tax revenue growth were ludicrously high both for this year and for several to come, writes Richard Murphy.

I also suggested that the OBR was discredited by endorsing them. As the table below shows, I did the maths to show why that had to be the case (it wasn’t hard to do). And now, as the FT reports:

“Britain’s economic recovery has generated far less tax revenue than forecast, raising the prospect of even deeper spending cuts after the general election to balance the budget.

“The latest blow to the public finances was an admission from the Office of Budget Responsibility on Monday that income tax receipts – the biggest single source of government revenue – are likely to fall short of government targets this year, despite record levels of employment.”

Three immediate issues follow from this. The first is that the quality of Treasury forecasting is dire. No one in their right minds could have believed the levels of growth forecast in March 2014 as shown in this table, the data for which is taken straight from the March 2014 budget with my extrapolation of growth rates added:

Screen-Shot-2014-06-10-at-07_50_24

It wasn’t just growth in tax revenues that was forecast, it was growth way beyond any underlying level of economic increase in activity that was suggested was going to happen this year, and that was always utterly implausible.

Second, we have to consider the possibility that the Treasury just lied when putting forward these growth projections. They are so ridiculous, that has to be the best possible explanation for them.

And we have to the consider that the OBR may have been complicit in this – because if it was truly independent it should have been flagging up how unlikely this revenue growth was in March, and not now.

And what does it all mean?

It means all Osborne’s economic claims are bunkum – but you should read Mr Murphy’s analysis at Tax Research UK.

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Why NHS charging is a zombie policy

http://youtu.be/e6ci9ROmTO8

Several political organisations (including, to Yr Obdt Srvt’s regret, Labour) have been talking up the possibility of imposing charges on the public for NHS services. Possibilities under discussion have included direct charging at the point of use or a new ‘NHS tax’. Nobody wants to mention that this means paying for the NHS twice (we already fund it with our taxes/NI contributions).

BBC Radio 4 recently ran a debate on NHS charging, on which one of the speakers was Dr Clive Peedell. This gentleman is a stalwart of the National Health Action Party, the political group founded to end the Coalition’s privatisation of healthcare by defeating the Conservatives and Liberal Democrats at election time.

He made many solid points – information that the public needed to hear. We know this because the presenter tried to shout him down while he was in full flow, and in the Tory-dominated BBC this is always a sure sign that a speaker is on the right track.

The YouTube clip (above) whittles down the debate to cover only Dr Peedell’s words, in which he states that:

  • It is a myth that charges can reduce demand for healthcare; this is a zombie policy.
  • If people start paying they expect more from the service, so you get people with wants, rather than needs.
  • The NHS has been chronically under-funded for decades – by £267 billion over 25 years.
  • It is become a fantastically efficient system and all the evidence suggests that progressive taxation is the fairest way to pay for healthcare.
  • Even so, there are efficiencies that can be made – the market system costs £10 billion per year in administration costs, and 10 per cent of the budget pays off venture capitalists who invested in costly PFI schemes.
  • Austerity increases demand on the healthcare system and reduces supply.
  • And healthcare spending stimulates economic growth so we should increase healthcare expenditure with money reclaimed from tax avoiders.

The clip is well worth playing.

After all, it isn’t often you hear anybody talking sensibly about the health service for nearly six minutes!

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Labour’s spending plan could humiliate the Tories

"There is an alternative" - and it doesn't have to cost more than we're spending now.

“There is an alternative” – and it doesn’t have to cost more than we’re spending now.

It seems some people are upset that Labour has announced it does not intend to increase public spending, if elected into office after next year’s general election.

This is a perfectly reasonable reaction, depending on the amount of information available to the person holding that opinion.

In other words, if you don’t know why Labour has made this decision, it is perfectly reasonable to assume that the former Party of The Left has turned Tory-lite.

That’s why we’re hearing that Labour will simply continue Tory policies; that the main three parties are “all in it together” (to overuse a hackneyed and devalued phrase).

But evidence is available to suggest that this is a big mistake.

To finance extra spending, Labour would have to borrow more money – but this would push up interest rates and create a potential disaster for people with mortgages and loans to pay off.

According to Modern Monetary Theory – an economic method that seems to have earned credence with all the main parties – government borrowing is not undertaken to finance its spending, but to maintain a target interest rate.

In times of recession, businesses borrow more and households find it hard to save money for a rainy day (as the saying goes). We have spent most of the last decade either in recession or in the slowest recovery in British history and the private sector simply doesn’t have the spare cash to pay higher interest demanded on loans in the wake of higher government borrowing.

Labour wants to safeguard those businesses; Labour wants to safeguard your homes.

The alternative would cost any government much more in the long run.

It’s as simple as that.

So Labour has set a spending target that is the same as the Conservatives’, ensuring that interest rates can be kept under control.

This doesn’t mean it will continue with Conservative-led spending plans. That would be a betrayal of Labour’s core voters.

Instead, it seems more likely that Labour will seek to stimulate the economy by taking funding away from wasteful areas – this blog would certainly wish to see less public money given to private contractors who pocket half of it as profit – and investing it in economic growth.

With more money flowing through the system and coming back to the Treasury in taxation, it will then become easier to relax restrictions on interest rates, which will help the government with its debt issue (this has to do with the way governments borrow money, issuing bonds at fixed rates of interest, and is a story for another day).

If Labour’s plan works, it will mean humiliation for the Conservatives and the Liberal Democrats, as Labour will have spent exactly the same amount doing it as those other parties have been spending for the previous five years – to little effect.

Do not misunderstand; it is perfectly possible that Labour’s spending plans could be entirely wrong-headed! Labour spent most of the last 20 years experimenting disastrously with neoliberal thinking that, continued and concentrated by the Coalition government, has led us to the current pretty pass.

In this case, it seems the Devil really is in the detail.

But the overarching strategy is sound and Labour should not be criticised for it.

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Marcus Brigstocke v the Government – has he been reading Vox Political?

This is the first pic I could find of Marcus Brigstocke, as he might have looked while delivering the piece quoted below. He's a known beardie so he probably had face-fuzz as well.

This is the first pic I could find of Marcus Brigstocke, as he might have looked while delivering the piece quoted below. He’s a known beardie so he probably had face-fuzz as well.

What a rare and pleasant thing we’ve enjoyed for the last few days – a Bank Holiday weekend with good weather! And isn’t it a shame that this means most of you will have been out, and therefore missed Marcus Brigstocke’s turn on The Now Show.

Here’s a guy who knows how to take the government apart; it seemed as though he’d been reading Vox Political for the last few months because he touched on some of our favourite subjects:

1. The economy

He led with the 0.8 per cent increase in economic growth, mocking the government’s celebratory tone with impressions of how ordinary people took the news, up and down the country (some of the accents were beyond belief).

“Well done, George Osborne,” said Marcus, his voice dripping with sarcasm. “You have proved your theory right, using the Grand Theft Auto model. You have successfully shown that the poor really are like video game prostitutes – if you kick them hard enough, eventually money will come flying out of them.”

Doesn’t this fit nicely with what this blog has been saying about the economy being dependent entirely on the movement of poor people’s money? Those with less spend all – or almost all – of their income and it is this money, being pushed around the system, that boosts profits and keeps Britain going.

He continued: “I know that the state of the economy matters but for the vast majority of people it is as mysterious and cryptic as the shipping forecast… What makes a difference to people is not zero-point-eight-per-cent growth; it’s actual wages and the cost of living.

“The National Institute of Economic and Social Research (NIESR) showed this week that the average worker is £2,000 worse-off since the financial crisis hit,” another common theme here on VP, except in fact it’s £2K per year worse-off. Let’s do a quick shout-out to Jonathan Portes, NIESR’s director, whose Tweets are well worth a read: @jdportes

“I say, ‘hit’. That makes it sound like the crisis swerved towards us. The reality is, the average worker is £2,000 worse-off since the financial sector arrogantly, and with galactic, hubristic stupidity, drove the economy off a cliff, yelling, ‘Does this mean I still get my bonus?’ Of course you’ll still get your bonus. Otherwise you’d leave the country and [chuckling] nobody wants that.” [Laughter from the audience – we’re all in on that joke.]

2. Employment

“More people are in work now; good. But why do employers talk like they deserve a sainthood when they have people working for them? Your company does a thing; you need workers to facilitate the doing of that thing. The workers work, and the thing is done – am I missing something here? Do you feel you need a medal?”

2a. Zero-hours contracts

“One-point-four million British workers are having to scrape a living together from cynical, ruthless, exploitative employers using zero-hours contracts. Value your employees – they are not battery workers; they are people… One in five UK workers earns less than the Living Wage.”

At this point the narrative switches to a spoof advert: “At GreatBigFacelessBastardCorp we care so little about what we do, we pay our workers the minimum wage allowed under the law! That way we can pass on their listlessness and overwhelming sense of defeated apathy to you, the customer! GreatBigFacelessBastardCorp – crushing dreams so you don’t have to!”

This relates to an argument that Vox Political has been having with Tory-supporting businesspeople for years, going back to the earliest days of the blog. Back in January 2012, I wrote False economies that leave the business books unbalanced in which I stated:

It seems to me that many employees are finding life extremely difficult now, because the amount they are paid does not cover all their outgoings and they are having to work out what they can do without. The cost of living has risen more sharply than their pay, so they are out of pocket.

This creates stress, which can create illness, which could take them out of work and turn them into a liability to the economy – as they would then be claiming benefits.

That’s bad – not only for the country but also for their company, because demoralised employees produce poor work and the company’s turnover will decrease; having to bring in and train up new workers to replace those who are leaving through ill health is time-consuming and unproductive.

Therefore, in taking the money for themselves, rather than sharing it with employees, bosses are clearly harming their own companies and the economy.

In fact, it seems to me that this is a microcosm of the larger, national economy. In order to keep more money, bosses (and the government) pay less (in the government’s case, to pay off the national deficit). This means less work gets done, and is of poorer quality (in both cases). So orders fall off and firms have to make more cutbacks (or, revenue decreases so the government makes more cutbacks in order to keep up its debt payments).

[This seems to have been borne out by subsequent events. More people are employed than ever before, according to the government, yet GDP has improved by only a fraction of one per cent in the last quarter. By rights, it should be about 20 percentage points higher than the pre-crisis peak by now, according to some analysts.]

The message to bosses – and the government – is clear: Cutting back investment in people to keep money for yourselves will cripple your earning ability. Cutting even more to make up for what you lose will put you into a death spiral. You are trying to dig your way out of your own graves.

But there is an alternative.

A reasonable pay increase to employees would ensure they can pay their bills, and would also keep them happy.

Happy workers produce better results.

Better results keep businesses afloat and earn extra work for them.

That in turn creates more revenue, making it possible for bosses not only to increase their own pay but employ more people as well.

Wouldn’t that be better for everybody?

Well, wouldn’t it?

3. Welfare lies

“Young workers are amongst the hardest-hit by the downturn, with pay falling by 14 per cent between 2008 and 2013. Well done, everybody! We pay far more from the welfare budget supporting incomes for people in work than we do for those out of a job.

“The government keep on crowing about the number of people they have in work … most of them are not so much in work as near some work, if only they were allowed to do any.

“If you’re on the minimum wage, kept on a zero-hours contract between 7am and 7pm so you can’t work for anyone else but rack up a grand total of – ooh! – just enough hours so your employer doesn’t have to pay your National Insurance [another VP theme], you get no training, no employee benefits, no hope of any promotion and you hear ‘IDS’ banging on about how he’s ‘the saviour of benefits street’, well, if you can still afford a shoe then please throw it at the radio or through the telly or at his actual face.” This is a reference to sabotage, in which workers threw their crude shoes – or ‘sabots’ into machinery to stop it working, in protest against their working conditions and developments that were endangering their jobs.

“Low pay means higher staff turnover, high absenteeism, poor morale and lower productivity.” That’s exactly as I stated in the VP article from 2012.

4. In conclusion

“I don’t know when money started making money faster than people but… It’s not helping,” said Marcus, truthfully. “So instead of running about with your shirt over your head doing ‘airplane arms’, shouting ‘Nought-point-eight-per-cent’… do something to get the people who actually work to be rewarded, recognised and remunerated for what they do.

“It’s not rocket science and, frankly, if it is, I sincerely hope they’re not on minimum wage.”

When I heard that piece, I very nearly stood up to applaud. If you want to hear it yourself (and I’ve left out enough of it to make it worthwhile, I promise you), it’s available for download here, and starts around eight and a half minutes in.

Actually, it would be better if Marcus hasn’t been reading this blog, because then he would have drawn the same conclusions, from the same evidence, thereby reinforcing my own reasoning.

Now, let’s have your opinions, please. I’ll be very interested to hear from supporters of the current “pay-’em-the-bare-minimum” policy as they almost invariably say things like “We can’t pay them any more” – it’s never “They have good reasons that mean they can’t pay us more”.

Interesting, that.

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