There’s a line in one of the Horatio Hornblower books in which the Admiral of the Fleet tells the young hero it’s every officer’s duty to leave the navy in better condition than when he found it.
That’s a good philosophy for any organisation.
What a shame the Conservatives don’t have the same philosophy – about anything at all.
In particular, we see their actual philosophy – “sell it off and ruin it” – in action in the UK’s water industry, which was privatised by the Thatcher government in 1989.
A new report by Parliament’s public accounts committee states that privatisation has been such an catastrophe that there is a serious risk that parts of England will run out of water altogether within the next 20 years.
The report says that “ponderous” water companies – 70 per cent of which are now owned by foreign businesses – have made “no progress” in reducing leakage meaning that more than three billion litres of water leaks out of the system every single day.
That’s one-fifth of the UK’s daily supply!
The committee says the Department of the Environment, Food and Rural Affairs (DEFRA) has failed to provide enough leadership in telling the private companies how to balance investment in infrastructure and reducing customer bills, but This Writer thinks that is nonsense.
The private companies are neither investing in infrastructure nor cutting costs – they are literally draining us dry.
We pay too much for the water we get and the lack of investment in the UK system by its foreign owners means soon we won’t even get it!
This is a problem entirely created by the Conservatives with their ridiculous lie that private firms are more efficient, more economical, and cost the consumer less. They aren’t, they aren’t and they don’t.
And by letting these firms fall into the hands of foreign business people, it seems our money is being invested into the systems in their own countries, rather than in ours. It’s certainly boosting the treasuries of the countries where these firms are based in tax – rather than our own.
This is an English problem.
Scotland receives its supply from the publicly-owned company Scottish Water, which is the most trusted public utility in the UK. It constantly invests in its system, keeps customers happy – and paying less, and is even reducing its carbon footprint.
In Wales, three million people get their supply from the not-for-profit firm Glas Cymru/Welsh Water which, according to surveys, has sector-leading levels of customer satisfaction.
Customers in Northern Ireland do not pay water charges to their publicly-owned water supplier, Northern Ireland Water.
Other water firms are still UK-based – and some are only part foreign-owned.
Across the board, bills have increased by 40 per cent on average. Considering the efforts made by the publicly-owned/not-for-profit firms, it’s likely that some English customers have suffered much higher hikes.
Shareholders have received at least £56 billion since privatisation in 1989.
Six water companies have been found to be avoiding millions in tax.
Water makes big money.
But you can see that most of it has been going abroad.
It certainly hasn’t been used to plug any leaks!
The message is clear: public ownership is cheaper, more efficient, and guarantees that customers’ taps won’t run dry.
It seems the private shareholders are swimming in cash while ensuring that, in a very short time, you die of thirst.
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.
And here‘s The Guardian with some of the finer details:
“A Labour government would ban zero-hours contracts, repeal the Trade Union Act, clamp down on bogus self-employment, end private finance initiatives and set up a department for employment to implement the policies, he said. There would be a particular emphasis on workers in the gig economy.
Workers in jobs with flexible hours and short-term contracts could be given similar rights to those in permanent work, including eligibility for sick pay, parental pay and similar benefits, he said.
Government contracts would only be given to firms that allowed collective bargaining and a Labour government would relaunch employee ownership funds, under which staff at larger companies would receive shares in order to give them a stake in the profits and management of their firms.
McDonnell also repeated a promise that Labour would spend £500bn over a decade to fix Britain’s crumbling infrastructure.
This would include road and rail, digital, research and development and alternative energy sources, he said, adding that the £500bn figure was supported by the Confederation of British Industry (CBI), with whom Labour was working to develop the proposals.”
That’s fine – but are these plans any good?
Let’s have a poll:
Feel free to use the ‘comment’ column to detail the reasons for your response.
Andrew Adonis said Brexit was ‘a dangerous populist and nationalist spasm worthy of Donald Trump’ [Image: Martin Godwin for the Guardian].
Let us be clear from the start: This Writer is not a fan of Andrew Adonis. He was a Blairite who was too keen to introduce the private sector into public service.
I’m aware that he regretted introducing tuition fees, but he still went through with the introduction of the policy.
So his appointment as “infrastructure tsar” for a Conservative government did not surprise me in the least.
His resignation – on the prejudicial terms that have come to light – has. Pleasantly!
Put simply, it is hard to see how Lord Adonis could have spoken out more strongly against Mrs May, her government, her legislative strategy and her abilities in general. He’s given her a right old trashing.
If you don’t believe me, take a look at his resignation letter – the actual letter, not the sanitised version put out by Mrs May’s government. She tried a bit of damage control here, but Lord Adonis wasn’t having any of it. Here’s the unredacted version:
“The European Union Withdrawal Bill is the worst legislation of my lifetime.”
He has accused Theresa May of being the worst lawmaker to head the United Kingdom since 1963. That’s quite an achievement!
“Brexit is a populist and nationalist spasm worthy of Donald Trump.”
This is not meant kindly. He is saying that the voters who gave Brexit its miniscule majority engaged their emotions – not their brains – in doing so, and in so doing, have condemned the United Kingdom to a long period of suffering.
“By allying with UKIP and the Tory hard right to wrench Britain out of the key economic and political institutions of modern Europe, you are pursuing a course fraught with danger.”
He is accusing Mrs May of pushing herself and the Conservative Party to an unacceptably right-wing position politically. There is nothing intelligent about her action or intention, he is saying. She is dismantling the UK’s ability to make its way in the world, with no alternatives lined up to take the place of the current systems.
“If Brexit happens, taking us back into Europe will become the mission of our children’s generation, who will marvel at your acts of destruction.”
Hard right-wing and Brextremist commentators have already raised issue with the “if” at the start of this sentence. Lord Adonis is saying that Brexit should not happen; that it is the worst possible course of action for the United Kingdom and that we will waste generations trying to win back the ground that a few hard-line jingoistic nationalists are determined to throw away on behalf of the rest of us. He is right. Brexit will be cripplingly damaging. There is no argument against halting it. Saying “We had a democratic vote” means nothing when you add the required caveat “that makes absolutely no sense at all”.
For those who are determined to force their version of democracy on us, I like to reference Alan Moore’s classic line about democracy. Suppose every animal on Earth had sentience and was able to vote on what we all had for breakfast, with the result as enforceable as Brexit seems to be for the Brextremists. Human beings would vote for bacon and eggs, or porridge, or some accepted breakfast food, right? And then billions upon billions of ants and other insects would vote for excrement. We would all end up eating sh*t in the name of democracy.
That’s a pretty good metaphor for what Brexit will do to the United Kingdom, as everybody with an ounce of sanity knows.
The line about future generations marvelling at Theresa May’s “acts of destruction” may seem pessimistic to some, but Lord Adonis is saying that a certain proportion of the current generation is too blinkered to accept the facts. Future generations won’t have the prejudices of the current age to blind them and will have bitter experience to inform their actions.
All in all, therefore – and this is what Lord Adonis is saying – the only sane policy is to scrap Brexit altogether.
“A responsible government would be leading the British people to stay in Europe while also tackling, with massive vigour, the social and economic problems within Britain which contribute to the Brexit vote. Unfortunately, your policy is the reverse.”
He’s saying the Conservative government under Theresa May is irresponsible. With regard to Brexit, dangerously irresponsible.
“The Government is hurtling towards the EU’s emergency exit with no credible plan for the future of British trade and European co-operation, all the while ignoring – beyond soundbites and inadequate programmes – the crises of housing, education, the NHS, and social and regional inequality which are undermining the fabric of our nation and feeding a populist surge.”
Okay, this part is quite involved. In a nutshell, Lord Adonis is saying that the narrow vote in favour of Brexit was informed by the crises mentioned here – in housing, education, the NHS, social and regional inequality. These are all products of almost 40 years of useless neoliberal policies that have dismantled the perfectly capable state system we had before in favour of an anarchic private-enterprise hell in which the rich exploit the poor to their death while telling them immigrants and foreigners are to blame for their predicament.
“I would have been obliged to resign from the Commission… because of the Transport Secretary’s indefensible decision to bail out the Stagecoach/Virgin East Coast rail franchise. The bailout will cost taxpayers hundreds of millions of pounds, possibly billions if other loss-making rail companies demand equal treatment. It benefits only the billionaire owners of these companies and their shareholders, while pushing rail fares still higher and threatening national infrastructure investment. It is even more inexcusable given the Brexit squeeze on public spending.”
This is a reference to the government’s decision to spend public money bailing out a private company that has tried to run a privatised railway line and failed. The Conservative government is committed to the neoliberal ideology that privatisation produces more efficient and profitable services, but the East Coast rail franchise proves that it doesn’t. This is not acceptable to the Tories so they are determined to sink millions (or perhaps billions) of pounds of your money and mine into keeping it in private hands, rather than simply re-nationalising it, for the good of the country.
Note also that Brexit is forcing a reduction in public spending. The Leave campaign swore to us – promised us fervently, day in, day out – that Brexit would provide more money for public services, from the moment the decision was made. Clearly that was a lie. It seems idiotic, therefore, to expect the floodgates to open and money to come pouring into the UK, the moment our departure from the EU takes place.
We are going to be poorer – significantly so – after Brexit. Unless you are a company director, you may be driven to extreme poverty. If you voted in favour of that, ask yourself why.
“Astonishingly, Stagecoach has not only been bailed out: it remains on the shortlist for the next three rail franchises.”
If anyone can explain this, please do. It makes no commercial sense whatsoever.
“Brexit is causing a nervous breakdown across Whitehall and conduct unworthy of Her Majesty’s Government. I am told, by those of longer experience, that it resembles Suez and the bitter industrial strife of the 1970s, both of which endangered not only national integrity but the authority of the state itself.”
A “nervous breakdown”? Yes, that seems accurate.
“Conduct unworthy of Her Majesty’s Government”? Yes – David Davis alone bears out that claim.
A danger to “the authority of the state itself”? Certainly.
Nobody This Writer knows has anything but contempt for Theresa May, her government, and its conduct – and Lord Adonis, having made exactly the right points, will only deepen that contempt across the UK.
Andrew Adonis, the former Labour minister, has resigned as chair of the government-backed National Infrastructure Commission in protest at Theresa May’s management of Brexit, describing the process as “a dangerous populist and nationalist spasm worthy of Donald Trump”.
The former transport secretary headed the body that makes recommendations to the government on projects such as the high-speed rail link HS2. Most recently he recommended that 1m new homes be built in the “brain belt” spanning Oxford, Cambridge and Milton Keynes.
He resigned with a strongly worded letter accusing the prime minister of becoming the “voice of Ukip” and pursuing policies that he said would leave Britain in “splendid isolation”.
Adonis said he would be “duty bound” to oppose the government’s EU withdrawal bill, which will reach the House of Lords in the new year. He described the bill – the government’s flagship piece of Brexit legislation – as “the worst legislation of my lifetime”.
He said Britain could have left the EU, abiding by the result of the 2016 referendum, “without rupturing our essential European trade and political relations”. Instead, the prime minister had “become the voice of Ukip and the extreme nationalist rightwing of your party”.
Jeremy Corbyn’s detractors need to start accepting that they are on the wrong side of the argument; Labour’s membership wants a party of conviction – not one that goes any way they wind blows.
Detractors of Jeremy Corbyn are pushing hard to discredit him any way they can – see yesterday’s article on Alastair Campbell for an example. But the arguments put forward by these critics lack depth.
In his latest article, Professor Simon Wren-Lewis has been exploring whether the Corbyn phenomenon also lacks depth or if there is indeed something to it. It is perceptive in that it examines the issues rather than the personalities, and exposes weaknesses that we all knew existed in Labour policy – but that some of us choose not to acknowledge.
Well, it’s time to acknowledge them! This is only an excerpt from the article and you are heartily advised to visit Mainly Macro for the rest of it.
Whether Corbyn wins or loses, Labour MPs and associated politicos have to recognise that his popularity is not the result of entryism, or some strange flight of fancy by Labour’s quarter of a million plus members, but a consequence of the political strategy and style that lost the 2015 election. They should reflect that if they are so sure they know what will win elections, how come they failed to predict the Corbyn phenomenon. A large proportion of the membership believe that Labour will not win again by accepting the current political narrative on austerity or immigration or welfare or inequality and offering only marginal changes to current government policy. On economic policy in particular they need to offer reasons for voters to believe that there are alternatives to the current status quo of poor quality jobs, deteriorating public services and infrastructure, and growing poverty alongside gross inequality at the top. That means, whether he wins or loses, working with the Corbyn phenomenon rather than dismissing it.
It is nonsense to suggest that the Labour party membership has suddenly become markedly more left wing than it used to be. Corbyn’s popularity has much more to do with how the party in parliament has responded to both election defeats.
The reaction of most of the parliamentary party to the 2015 defeat seems to be that the pre-2015 strategy was right in principle but had just not focused enough in placating the marginal English voter, which they believe means more appeasement and shifting further to the right. The party membership seems to have reacted very differently to the 2015 defeat. The membership appears to believe that the pre-2015 strategy has clearly failed, and it is time to start talking with conviction about the issues you believe in. This is exactly what Jeremy Corbyn does: he is a conviction politician, who is not prepared to try and be someone else to win votes.
If Labour is to have any hope in 2020 it has to start attacking Osborne’s unnecessary and obsessive austerity, as well as getting the past history straight. There are also reasons for thinking that the power of deficit fetishism for voters will steadily decline. In that sense, on this issue and perhaps others, Corbyn seems to have an advantage.
Ed Balls: He wants to put £30 billion worth of infrastructure funding into the hands of local government.
Today’s most interesting election announcement comes from Labour, which is promising to deliver “the biggest devolution of economic power and funding to England’s city and county regions for generations”.
Plans to devolve £30 billion of funding over five years – including funding for housing, transport, business support, employment and adult skills – will be at the heart of the next Labour government’s Spending Review, if elected in May.
A Labour Treasury will allow city and county regions which come together in combined authorities to keep 100 per cent of extra business rates revenue generated by additional growth. They will then be able to invest this to support further business growth in their regions.
All areas will be able to access these freedoms and areas which choose not to have an elected Mayor will not get a second-class deal.
It’s a clear attack on George Osborne’s plan for a “northern powerhouse” – Labour is asking, why just concentrate on ‘The North’ when so many other areas outside London need help due to Tory economic mismanagement?
It is to be hoped that Labour has not forgotten its support base in this business-friendly frenzy. Will this funding be used to promote the Living Wage, for example? Will it be used to create the new work demanded by its jobs guarantee – and will they be permanent, well-paying careers?
“Local areas will be in the driving seat on key decisions affecting their local economies – with new powers over back-to-work schemes, to drive house building, and to integrate, invest in and plan transport infrastructure,” said shadow chancellor Ed Balls, ahead of today’s announcement. It seems Labour has picked up a trick from the Tories – if this scheme fails anywhere, they will be able to blame it on local government. Hmm.
“And we will also let city and county regions keep all the additional business rates revenue generated by growth… We will not only back our great cities, but our towns and county regions too. Not just urban areas, but also rural areas.”
So there is much to recommend this plan – if a Labour government in Westminster can co-ordinate successfully with local authorities, of all colours, in the regions.
So much for democracy: Reports say China’s rulers have blocked Instagram in a bid to stop images of Hong Kong riot police unloading canisters of pepper spray and tear gas into the faces of peaceful demonstrators – so here’s a nice shot of demonstrators handing out pro-democracy leaflets instead.
Hot on the heels of Vox Political‘s article stating that the Conservatives have been selling off the UK’s most important infrastructure to anyone with something that can be used as currency in their pocket comes this confirmation from Pride’s Purge:
Chinese organisations and businesses with close links to the Chinese Communist leadership have already large stakes and controlling interests in huge parts of UK essential infrastructure such as water, gas, electricity, telecommunications and transport.
Read the rest on Pride’s Purge. The article concludes:
“If so many people are concerned about the loss of UK sovereignty to the EU – shouldn’t we be having a referendum on the loss of our sovereignty to the Chinese too?”
Yesterday (February 11) we had a chance to see what the Tories – or at least some of them – want to do to state benefits.
Charlie Elphicke, Tory MP for Dover, launched a debate in the Westminster Hall in which he called for the axing of maternity pay – and other in-work benefits – to make way for a new insurance system into which employers and the self-employed would pay, and from which the costs of maternity leave and other benefits would be met. He suggested that participating employers would see a corresponding cut in their National Insurance contributions.
He said he wanted this system to pay out at minimum wage levels, rather than at the current £137 per week maternity rate. The state would back the scheme, but it would be entirely funded by businesses.
The taxpayer would not fund any of this scheme – at least, not the way the visionary Charlie put it during the debate. It would be “paid for by the workplaces of the nation”.
This is how (some) Tories want the system to be: Insurance schemes-a-go-go, with people and businesses standing or falling on their ability to meet the requirements of the system.
Obviously he has not considered the drawbacks of such a scheme. One is very simple: If employers are paying everything towards in-work benefits, why not simply pay the Living Wage, whether a person is working, on maternity, or whatever? The cost would be the same or lower – because there would be no government administrative burden.
Liberal Democrat Work and Pensions minister Steve Webb put some more of them into words.
“As the system currently works… 93 per cent of the cost of statutory maternity pay is refunded to employers. In fact, more than 100 per cent is refunded to small firms,” he said.
“If an employer is reluctant to take on a woman who might have a child, therefore, the pure finances should not make a huge difference.
“I am not therefore sure that having a collectivised… system of insurance is any different substantively for the employer. Either way, employers are getting reimbursed — the costs are being met and are not in essence falling on the employer.”
In other words, there would be no benefit to employers.
He continued: “Whenever we set up a new scheme, we have new infrastructure, bureaucracy and sets of rules. If we had the levy—the at-work scheme that he described — we would have to define the new tax base, have a new levy collection mechanism, work out who was in and who was out, have appeals and all that kind of stuff. There is always a dead weight to such things. Simply setting up new infrastructure costs money. I would have to be convinced that we were getting something back for it.”
In other words, the scheme proposed by the intellectual Mr Elphicke would be more expensive than the current system.
“He then says that he wants the rate not to be some £130 a week, but to be £200 and something a week,” said Mr Webb.
“I was not clear where that extra money would come from. If we pay women on maternity leave double, someone must pay for it. If he does not want that to be an extra burden on firms, paying for it will simply be a tax increase.”
In other words, the scheme might be doubly more expensive.
In addition, he said the proposal created issues around whether it distorted the choice between becoming an employed earner or a self-employed person.
And he pointed out that Mr Elphicke’s proposal was based on a belief that women taking maternity leave would not return to their previous employment – but this is no longer true. Mr Elphicke’s proposal is based on an outdated understanding of the market.
Mr Webb said: “The norm now for an employer who takes on a woman who goes on maternity leave is that — four times out of five — he will come back to the job for which she was trained, in which she is experienced and to which she can contribute.
“We now find that three quarters of women return to work within 12 to 18 months of having their baby… We need to educate employers about the fact that, if they do not employ women of childbearing age, they are depriving themselves of talented people who contribute to the work force. Not employing such women is clearly a bad thing, not only from a social point of view, but from an economic point of view.”
There you have it. Mr Elphicke’s proposal was defeated by a member of his own Coalition government; it was archaic, it was expensive, and it offered no profit for the people who were to pay for it.
That won’t stop him pushing plans like this. You will have noticed that a keystone of his scheme was that businesses would pay for in-work benefits – not the state. Charlie Elphicke is a Tory, and Tories cut taxes for very rich people like themselves. He’ll go on pushing for it in one form or another, for as long as he remains an MP.
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Calls for a ‘commission of inquiry’ into the impact of the government’s changes to social security entitlements on poverty have won overwhelming support from Parliament.
The motion by Labour’s Michael Meacher was passed with a massive majority of 123 votes; only two people – David Nuttall and Jacob Rees-Mogg – voted against it.
The debate enjoyed cross-party support, having been secured by Mr Meacher with Sir Peter Bottomley (Conservative) and John Hemming (Liberal Democrat).
Introducing the motion, Mr Meacher said: “It is clear that something terrible is happening across the face of Britain. We are seeing the return of absolute poverty, which has not existed in this country since the Victorian age more than a century ago. Absolute poverty is when people do not have the money to pay for even their most basic needs.”
He said the evidence was all around:
There are at least 345 food banks and, according to the Trussell Trust, emergency food aid was given to 350,000 households for at least three days in the last year.
The Red Cross is setting up centres to help the destitute, just as it does in developing countries.
Even in prosperous areas like London, more than a quarter of the population is living in poverty.
According to the Joseph Rowntree Foundation, for the first time, the number of people in working families who are living in poverty, at 6.7 million, is greater than the number of people in workless and retired families who are living in poverty, at 6.3 million.
Child poverty will rise from 2.5 million to 3.2 million during this Parliament, around 24 per cent of children in the UK. By 2020, if the rise is not stopped, it will increase to four million – around 30 per cent of children in the UK.
The use of sanctions depriving people of all their benefits for several weeks at a time, had increased by 126 per cent since 2010 and 120 disabled people who had been receiving jobseeker’s allowance had been given a three-year fixed duration sanction in the previous year.
There are now more than 2,000 families who have been placed in emergency bed-and-breakfast accommodation after losing their homes.
The per cent rise in the overall homelessness figures last year included nearly 9,000 families with children, which is the equivalent of one family losing their home every 15 minutes.
A third of families spent less than £20 a week on food and that the average spend on food per person per day was precisely £2.10. That is a third less than those families were able to afford three months before that.
The proportion of households that had to make debt repayments of more than £40 a week had doubled and the average level of debt was £2,250.
A third of families had council tax debt.
2.7 million people had lost out through the Government’s changes to council tax benefit – many of them disabled people, veterans and some of the most vulnerable in our communities.
Households were having to spend 16 per cent more on gas and electricity.
There are 2.5 million people who have been unemployed for the best part of two years, and there were 562,000 vacancies when the debate took place (Monday), so four out of five of those who are unemployed simply cannot get a job whatever they do.
Cuts to local authorities mean many home care visits are limited to 15 minutes.
The 10 per cent of local authorities that are the most deprived in the country face cuts six times higher than those faced by the 10 per cent that are the most affluent.
60 per cent of benefit cuts fall on those who are in work.
Mr Meacher said the biggest cause of absolute poverty was the huge rise in sanctioning, often for trivial reasons such as turning up five minutes late for a job interview or the Work Programme:
A dyslexic person lost his Jobseekers Allowance because his condition meant that in one fortnightly period he applied for nine jobs, not 10. He was trying to pay his way and already had work, but it provided only an extremely low income.
The jobcentre didn’t record that a claimant had informed them that he was in hospital when he was due to attend an appointment and he was sanctioned.
A claimant went to a job interview instead of signing on at the jobcentre because the appointments clashed – and was sanctioned.
A claimant had to look after their mother who was severely disabled and very ill – and was sanctioned.
A Job Centre sent the letter informing a claimant of an interview to their previous address, despite having been told about the move. The claimant was sanctioned.
A claimant was refused a job because she was in a women’s refuge, fleeing domestic violence and in the process of relocating, but I was still sanctioned.
Mr Meacher also quoted what he called a classic: “I didn’t do enough to find work in between finding work and starting the job.”
The latest DWP figures suggest that more than one million people have been sanctioned in the past 15 months and deprived of all benefit and all income. “Given that the penalties are out of all proportion to the triviality of many of the infringements, and given that, as I have said, four out of five people cannot get a job whatever they do, the use of sanctioning on this scale, with the result of utter destitution, is — one struggles for words — brutalising and profoundly unjust,” said Mr Meacher.
Other reasons for the rise in absolute poverty included:
Delays in benefit payments.
The fact that it is impossible for many poor and vulnerable people to comply with new rules – for example a jobseeker who asked to downsize to a smaller flat who was told he must pay two weeks’ full rent upfront before getting housing benefit. He does not have the funds to do so and is stuck in a situation where his benefits will not cover his outgoings due to the Bedroom Tax.
The Bedroom Tax, which applies to around 667,000 households, and two-thirds of those affected are disabled. More than 90 per cent of those affected do not have smaller social housing to move into.
The Benefit Cap, imposed on a further 33,000 households.
Mistakes by the authorities; up to 40,000 working-age tenants in social housing may have been improperly subjected to the Bedroom Tax because of DWP error (although Iain Duncan Smith claims a maximum of 5,000).
Mr Meacher said: “The Chancellor’s policy of keeping 2.5 million people unemployed makes it impossible for them to find work, even if there were employers who would be willing to take them, and the 40 per cent success rate of appeals shows how unfair the whole process is.”
Responding to a comment from David TC Davies (Conservative) that those who are not looking for work must realise there will be consequences, particularly when a million people have been able to come to the UK from eastern Europe and find work, Mr Meacher said, “Those who come to this country are more likely to be employed and take out less in benefits than many of the indigenous population.”
He asked: “Is all this brutality towards the poor really necessary? Is there any justification in intensifying the misery, as the Chancellor clearly intends, by winding up the social fund and, particularly, by imposing another £25 billion of cuts in the next Parliament, half of that from working-age benefits?
“After £80 billion of public spending cuts, with about £23 billion of cuts in this Parliament so far, the deficit has been reduced only at a glacial pace, from £118 billion in 2011 to £115 billion in 2012 and £111 billion in 2013. Frankly, the Chancellor is like one of those first world war generals who urged his men forward, over the top, in order to recover 300 yards of bombed-out ground, but lost 20,000 men in the process. How can it be justified to carry on imposing abject and unnecessary destitution on such a huge scale when the benefits in terms of deficit reduction are so small as to be almost derisory?”
Suggested alternatives to the punitive austerity programme of cuts came thick and fast during the debate. Challenged to explain what Labour’s Front Bench meant by saying they would be tougher on welfare than the Tories, Mr Meacher said: “As the shadow Chancellor has made clear on many occasions, is that we need public investment. We need to get jobs and growth. That is the alternative way: public investment in jobs, industry, infrastructure and exports to grow the real economy, not the financial froth, because that would cut the deficit far faster than the Chancellor’s beloved austerity.”
He asked: “How about the ultra-rich — Britain’s 1,000 richest citizens — contributing just a bit? Their current remuneration — I am talking about a fraction of the top 1 per cent — is £86,000 a week, which is 185 times the average wage. They received a windfall of more than £2,000 a week from the five per cent cut in the higher rate of income tax, and their wealth was recently estimated by The Sunday Times at nearly half a trillion pounds. Let us remember that we are talking about 1,000 people. Their asset gains since the 2009 crash have been calculated by the same source at about £190 billion.
“These persons, loaded with the riches of Midas, might perhaps be prevailed upon to contribute a minute fraction of their wealth in an acute national emergency, when one-sixth of the workforce earns less than the living wage and when one million people who cannot get a job are being deprived of all income by sanctioning and thereby being left utterly destitute.
“Charging the ultra-rich’s asset gains since 2009 to capital gains tax would raise more than the £25 billion that the Chancellor purports to need. I submit that it would introduce some semblance of democracy and social justice in this country if the Chancellor paid attention to this debate and thought deeply about what he is doing to our country and its people.”
Ronnie Campbell (Blyth Valley, Lab) suggested that the Government might save a lot more if its members “showed the same energy and enthusiasm for getting those who evade their taxes and run to tax havens as they do for going after the poor, the sick and people on the dole”.
Against this, David TC Davies offered insults and distortions of the facts, quoting the Daily Mail as though it provided an accurate account of current events: “Members of the shadow Cabinet might need a boxing referee to sort out their disputes at the moment, as we read today in the Daily Mail.”
He said: “We took office with a deficit of £160 billion and a debt that was rising rapidly to £1 trillion. That was after years of overspending in good times, as well as in bad, by Labour, a cheap money supply and lax banking regulation under the former Government.” Labour’s spending, up until the financial crisis, was always less than that of the previous Conservative administration; Gordon Brown and Tony Blair both ran a lower deficit than John Major and Margaret Thatcher, and at one point actually achieved a surplus, which is something that the Conservatives had not managed in the previous 18 years. While Mr Davies here complained about the “lax banking regulation”, Conservatives supported it at the time and in fact demanded more DE-regulation, which would have made the financial crisis worse when it happened.
“We had disastrous economic decisions, such as that to sell gold at a fraction of its real rate,” said Mr Davies. Yes – the UK lost around £9 billion. But compare that with the disastrous economic decision by George Osborne to impose more than £80 billion worth of cuts to achieve a £7 billion cut in the national deficit. The UK has lost £73 billion there, over a three-year period.
And Mr Davies said: “Worst of all and most seriously, we had a welfare system that allowed people to get into a trap of welfare dependency, leaving them on the dole for many years, but at the same time filling the consequent gap in employment by allowing mass and uncontrolled immigration into this country, which completely undercut British workers.” The first assertion is simply untrue; the second is a legacy of previous Conservative administrations that agreed to the free movement of EU member citizens, meaning that, when the eastern European countries joined in 2004, citizens migrated to the UK in the hope of a better life. Labour has admitted it should have negotiated for a delay in free movement until the economies of those countries had improved, making such migration less likely, but the situation was created before Labour took office.
Challenged on the Coalition’s record, Mr Davies fell back on the Tories’ current trick question, which is to counter any criticism by asking: “Is he suggesting that we are not doing enough to pay down the national debt? Is he suggesting that we should cut further and faster? If so, and if we had the support of other Opposition Members, that is exactly what the Government could do and, indeed, possibly should do. I look forward to seeing that support for getting the deficit down.” This disingenuous nonsense was batted away by Labour’s Hugh Bayley, who said “investing in the economy, creating jobs and thereby getting people off welfare and into work” was the way forward.
Mr Davies’ Conservative colleague Jeremy Lefroy took a different view, agreeing that increasing numbers of people are finding it impossible to make ends meet, and that job creation and apprenticeships were a better way out of poverty than changing the social security system alone. He agreed that sanctions were applied to his constituents “in a rather arbitrary manner”. He spoke against George Osborne’s suggested plan to remove housing benefits from people aged under 25, saying this “would have a drastic impact on young people who need to live away from home and who have no support from their families”. He spoke in favour of councils increasing their housing stock. And he admitted that disabled people faced severe problems when unfairly transferred from ESA to JSA: “A lady in my constituency says, ‘I am simply not fit for work, but by signing on for JSA I have to say that I am available and fit for work.’ She does not want to tell a lie.”
Steve Rotheram (Liverpool Walton, Labour) spoke powerfully about the effect of being on benefits: “Lots of people in my city are on benefits for the very first time. Far from being in clover — it beggars belief what we read in the right-wing press — they are struggling to make ends meet, and the problem that thousands of Liverpudlians are facing is new to them. For many, the idea that they might miss a rent payment is totally alien. They have not done that in the past 20 years, but since May 2010, their individual household incomes have been on such a downward trajectory that they now find themselves in rent arrears, seeking advice on debt management and unable to afford the daily cost of travel, food and energy. Figures suggest that 40 per cent of the adult population in Liverpool are struggling with serious debt problems.”
And he said poverty had health implications, too: “David Taylor-Robinson of the University of Liverpool and his fellow academics have highlighted the doubling of malnutrition-related hospital admissions nationally since 2008.”
John Hemming (Birmingham Yardley, LD) raised concerns about “the interrelationship between the welfare cap and victims of domestic violence, and whether there are situations that need more attention. I believe that people can get discretionary housing payment to leave a violent home, but it is important that we ensure that there is a route out of domestic violence for women. I am worried about that issue, just as I am about some wrongful sanctioning that I have seen. That does not help at all, because it undermines the whole process.” He also called for “a substantial increase in the minimum wage, because as the economy is improving the Government should look at that, rather than maintain things as they are”.
The vote gave huge endorsement to the call for an independent inquiry into poverty under the Coalition.
But with an election just 15 months away, how long will we have to wait for it to report?
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‘Jeffrey’ Osborne sings for his supper at some CBI dinner.
Try not to choke on your coffee: George Osborne reckons the British economy is “out of intensive care”.
Now, he says, the task is to “secure the recovery”.
He’s starting on Wednesday with cuts totalling £11.5 billion which, once fiscal multipliers are taken into account, means a contraction of around £20 billion in the national economy.
Securing the recovery. Good luck with that, Gideon.
The good news is that he is expected to announce investment in infrastructure projects, including roads, railways, education and science. He has realised – probably too late – that cutting all those infrastructure projects at the start of this Parliament was economic suicide and is trying to do something about it before everyone realises he’s an idiot. He is, of course, much too late for that but the investment – if it goes to well-advised places – might just do some good.
Don’t bank on it, though.
Osborne’s claims about the economy are based on statements that government borrowing has come down and employment is up – but we know that the first isn’t true and the second is not helping. In other words, he’s built his castle in the sand.
Government borrowing rose by £300 million in 2012-13, from £118.5 billion to £118.8 billion, according to the Office for National Statistics. That’s not a huge amount, you may think, but remember this government reckons it has cut borrowing by a third since taking power. That would put borrowing at around £100 billion right now, which is clearly inaccurate.
The debt is now £1.9 trillion, up from 1.1 trillion a year ago – 75.2 per cent of GDP, up from 71.1 per cent.
We all know what the problem is: Austerity – the self-perpetuating (and self-defeating) policy that will eventually bankrupt us all (but not the country. Because we have our own currency, the UK is unlikely ever to go bankrupt. You see, when the Tories told you that, they were lying).
The worst of it is that the other main political parties have signed up to the delusion that all these cuts might actually do some good.
Ed Miliband has ruled out more borrowing. That in itself is not a bad idea. But Ed Balls has admitted that he would follow Tory spending plans, at least for the first year of a Labour government, and there’s a consensus that pensioners will probably be the next defenceless social group to be hit with cuts – this time to benefits such as winter fuel payments.
They are talking among themselves. It seems unlikely that any of them has bothered to look out of the window to find out the real effect of their idiot schemes.
And so the agony continues. Based on an economic fallacy, perpetuated on the masses, while the very rich continue raking it in.
The longer this goes on, the greater the danger to us all.
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?
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.
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).
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.
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.”
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