Tag Archives: NIESR

Reports on Brexit tell us the worst about May’s deal

Cartoonist (and friend of Vox Political) Gary Barker produced this cartoon, explaining prime minister May’s policies in a few brief words. It seems likely her Brexit will follow this pattern, don’t you think?

Many people are confessing that they are confused about exactly what the different scenarios for Brexit mean.

Is Mrs May’s deal the only one in town? (I’m afraid that won’t be answered here.)

Is her deal better than no deal? If so, should we blithely accept it? (No, we shouldn’t.)

Two reports have appeared over the last couple of days, courtesy of NIESR and UKandEU (whoever they are). Analysis of both follows, but be warned by Professor Brian Cox (who has good advice here, unlike his comments last week):

The Financial Times commented on the same report as follows: “Theresa May’s Brexit agreement will hit British living standards up to the equivalent of £2,000 a year per person in the long run, according to a second independent economic examination of the prime minister’s deal.

“The researchers said the exact costs were highly uncertain, but the deal was likely to impose significant new friction to trade with Europe, reduce the economic benefits of migration and worsen the outlook for the public finances.

“Anand Menon and Jonathan Portes of King’s College said the group had not taken account of any short-term potential disruption caused by a no-deal scenario because “we do not believe meaningful quantitative modelling of this scenario is feasible”.

“By 2030, they estimate that gross domestic product per person would be between 1.9 per cent and 5.5 per cent lower if Mrs May’s deal were passed than if the UK remained in the EU. That is the equivalent of an annual hit to living standards of between £700 and £2,000 per person. If there was no deal, the study found that long-term costs might rise to more than £3,000 each year.

“Compared with the results from the National Institute of Economic and Social Research, published on Monday, which suggested a hit in the range of £700 to £1,100 a year per person, the new results generate larger losses when they add an assumption that productivity growth would suffer from increased trade friction.

“The results released on Tuesday will heap further pressure on Mrs May as she tries to persuade the public of the merits of her deal.”

For commentary on the NIESR report, let’s go to the BBC: “The government’s Brexit deal will leave the UK £100bn worse off a year than if it had remained in the EU, a study by the National Institute of Economic and Social Research has said.

“The study commissioned by the People’s Vote, which wants a second referendum, said GDP would be 3.9% lower by 2030.

“”This is the equivalent of losing the economic output of Wales or the City of London,” it said.

“It found that the government’s preferred outcome – leaving in March 2019 and entering a transition period lasting until December 2020 before moving to a free trade agreement – would lead to a huge reduction in trade and investment.

“By 2030, at the end of the first decade outside the EU, the research predicts that GDP per head would fall by 3%, amounting to an average cost per person of £1,090 at today’s prices.

“It also estimates that total trade between the UK and the EU would fall by 46%.

“The report also modelled alternative Brexit outcomes against staying in the EU.

“This showed that remaining in a customs union beyond the transition period, possibly through invoking the so-called Irish “backstop”, would still mean a hit of £70bn annually by 2030.

“Another scenario, favoured by some Brexit supporters, of an “orderly no deal” departure from the EU would reduce GDP by 5.5%, or £140bn, it said.

“Chancellor Philip Hammond has said the deal is better than staying in the EU.”

So he must be mistaken, or lying – according to the economic modelling by NIESR.

And that means Mrs May’s deal should be treated with suspicion.

Certainly Labour’s Shadow Chancellor thinks so. Commenting on the UKinEU report, John McDonnell said: “This analysis confirms what everyone knows: that this deal will be bad for growth, incomes and the public finances.

“If the Prime Minister is unwilling or unable to deliver a Brexit deal that works for the whole country, she should stand aside, call a General Election and let Labour deliver a deal that protects jobs and delivers for the whole country.”

The bottom line is that all of the possible deals that have been presented to the nation will harm ordinary people.

Contrast that with the claims made by the various ‘Leave’ campaigns in the run-up to the EU referendum in 2016 and the conclusion is obvious: People who voted to leave the European Union were conned.

And now Mrs May is trying to con us all again by saying her deal is the best one possible. The best than can be said of it is it’s the deal that suits her best. Everything else she says is just another con act.

But then, we can’t expect any better from her, really, can we?

Here’s the bottom line:

Every MP knows the above.

Those with a conscience will use that information to vote against Mrs May’s bad Brexit deal.

Those without – well, we’ll know who they are, at least.

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The government is not UNABLE to assess its policies’ impact on the disabled. It is REFUSING to do so

[Image: www.disabledgo.com]

[Image: www.disabledgo.com]


People who signed a petition calling for the Conservative Government to “assess [the] full impact of all cuts to support and social care for disabled people” have been told that the tools aren’t there to do the job. This is because the Tories have chosen not to use them.

More than 29,000 people have signed the petition, leading to a response from the Department for Work and Pensions. If it tops 100,000 signatures, it may trigger a debate in Parliament. Don’t get your hopes up – the evidence provided in these debates is routinely ignored by the government because it doesn’t want to know.

The DWP screed starts with some waffle about being committed to a “fair tax and welfare system” with the effect of each policy change “carefully considered”, in which “everyone contributes to reducing the deficit” and where “those with the most contribute the most”. Is that in money or percentage terms?

But it continues: “However, it is not possible, using the Government’s existing analytical tools, to produce a cumulative assessment of the impact of policies on disabled people.”

This is why a cumulative impact assessment published by Landman Economics and the National Institute for Economic and Social Research (NIESR), for the Equality and Human Rights Commission, recommended more than a year ago that the DWP should change its tools.

“HM Treasury has a world-leading distributional model, which it has used since 2010 to publish analysis of the impacts of policy decisions on households across the income distribution,” the DWP response states. “This model uses the Living Cost and Food Survey (LCF), which does not have information on disability status. It contains expenditure information which allows analysis of the impacts of indirect taxes such as VAT and fuel duty, and underpins a unique model of public service usage; both of these enable HMT to consider the impacts of all of the Government tax and spending decisions which directly affect households.

“As well as the inability to identify who has a disability in the data, most analysis of the impacts of welfare reforms tend to be limited in that they take static snapshots of benefit changes. Fundamental reforms are designed to support people into employment and will therefore enable people to generate more income for themselves. Analysis needs to take account of behaviour change of reforms rather than the more limited approach of focusing solely on benefit changes.”

(Of course we know that the reforms mentioned here do not support people into employment; they deprive people of the benefits they need to survive and force them into an unknown future. For example, a DWP study in 2012 found that more than half the people who had been told they were “fit for work” after a work capability assessment had been left unemployed and without any income at all. The Department had been forced to reveal the facts by – guess what? – a Freedom of Information request. This probably contributed to the government’s current attempt to curtail the use of such requests.)

“This analysis shows that the proportion of welfare and public service spending which benefits poorer households has not changed since 2010-11, with half of all spending on welfare and public services still going to the poorest 40 per cent of households in 2017-18. At the same time, the richest fifth of households will pay a greater proportion of taxes than in 2010-11 as a result of government policy – and more than all other households put together.

“The Government spends around £50 billion on disability benefits and services annually, and expenditure on sick and disabled people is higher than the OECD average. Welfare changes since 2010 have included protections for key vulnerable groups least able to increase their earnings, including those who need additional support as a result of disability. In the Welfare Reform and Work Bill 2015:
• Many disability-related elements of the benefit system are still uprated by the Consumer Price Index (but this is the lowest index of inflation. How is that supposed to be an advantage for the disabled?)
• The additional component for those in the Support Group of Employment and Support Allowance and Universal Credit (UC) equivalents has been maintained
• Households which include a member who is in receipt of Disability Living Allowance, Personal Independence Payment, the Support Component of Employment and Support Allowance or UC equivalents are exempt from the benefit cap.

“Overall, reforms are focused on supporting people to find and keep work where appropriate. Growing evidence over the last decade shows work can keep people healthy as well as promote recovery which is why, as part of the Government’s objective to achieve full employment, it aims to halve the disability employment gap.”

There is no evidence to show that work makes people healthy; Iain Duncan Smith merely adapted the phrase “Arbet macht frei” from the gates of the Auschwitz extermination camp he visited several years ago to create a new lie. As for halving the disability employment gap: The Conservative Government has made sure there continues to be a large number of people without work, who now receive less money in benefit than they need to avoid going into debt. This means competition for jobs is increasing. Any employer faced with a choice between taking on an able-bodied worker and someone with a disability who will need adaptations and special treatment will opt for the former; it’s simply better business.

“Last year 226,000 more disabled people found work [how many stayed in it?] and to continue this success the Government has extended Access to Work to provide support to more disabled people in pre-employment, launched Specialist Employability Support to provide intensive, specialist support to the disabled people who need the most help and has extended Work Choice, providing tailored support to disabled people, to 2017. The Disability Confident campaign is working with employers to ensure that they understand the benefits of recruiting and retaining disabled people in work.

“Sickness Absence in the workplace is also a major issue, with employees off sick for four weeks or more being at greater risk of not returning to work. The Government recognises the importance of early support which is why Fit for Work has been developed; giving access to free, impartial work-related health advice to help employees on sick leave get back to work.”

This is the tyrannical scheme under which “fit notes” from your GP are refused and people are discouraged from claiming the Incapacity Benefits they need.

“In terms of Social Care and NHS reforms, the Government is committed to supporting the most vulnerable. The Care Act 2014 introduces a modern system to promote and maintain the wellbeing of those with care and support needs so they can live independently. This includes introduction of a new national eligibility threshold which allows local authorities to maintain previous levels of access for service users. This threshold is set out in Eligibility Regulations, and local authorities cannot tighten eligibility beyond this threshold. The Act also provides new legislative focus on personalisation by placing personal budgets into law for the first time for people and carers, increasing opportunities for greater choice and control, so that people can choose social care best suited to meet their needs.”

Shall we have a look at the Landman/NIESR cumulative impact assessment – the assessment the DWP says it cannot perform – and its recommendations for the Department, that could have been implemented in summer 2014 but weren’t? [boldings mine]

“Impact of tax, spending and benefit changes 2010-15

  1. The impacts of tax and welfare reforms are more negative for families containing at least one disabled person, particularly a disabled child, and … these negative impacts are particularly strong for low income families. This is not surprising, given the significant reductions to working-age welfare, and the high proportion of working age welfare spent on disabled people, particularly those on low incomes.
  2. Women lose somewhat more from the direct tax and welfare changes compared to men. This is mainly because women receive a larger proportion of benefits and tax credits relating to children, and these comprise a large proportion of the social security reforms between 2010 and 2015. It should be noted that these results are sensitive to the precise assumption made on the ‘sharing rule’ being used within households.
  3. Households containing younger adults do better than other households; although the impact of benefit changes is relatively uniform across groups, they benefit more from changes to direct taxation (the increase in the personal allowance) than any other group.
  4. In terms of public services (as opposed to tax and welfare), Black and Asian households lose out somewhat more than other groups. This is largely due to greater use of further and higher education, and (for Black households) social housing.

“Recommendations

“The main recommendations of the study are that:

1. HM Treasury’s distributional impact analysis of tax and benefit changes should incorporate analysis by groups sharing different protected characteristics in particular disability, ethnicity, age and gender. The analysis should:

  1. show the impact of tax and benefit changes by different groups;
  2. show the interaction between distributional impacts by income and by equality group;
  3. identify the key drivers of differential impacts; and
  4. identify the key assumptions made in producing the analysis and, where appropriate, present alternative assumptions.”

This was not adopted by the Treasury (or the DWP).

“2. HM Treasury should consider its approach to equality impact assessment for the next Spending Review (2015). In particular, it should:

  1. issue guidance to Departments on data collection and analysis;
  2. identify in which areas quantitative analysis of equality impacts is likely to be feasible and informative, focusing on key service areas (health, education, etc); and
  3. publish a detailed explanatory and methodological note to guide interpretation of distributional impact analysis (covering both income and equality issues).”

This was not adopted by the Treasury (or the DWP).

Your comments are welcome; the above is merely what This Writer could derive from the statement at first sight of it.

Undoubtedly many of Vox Political‘s readers will have their own observations about this DWP drivel.

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Vox Political vindicated on unemployment figures

austeritydolequeue

How pleasant to see Vox Political‘s concerns about the massaging of UK unemployment figures being taken up by the kind of people the mass media actually respect.

A report on the BBC News website states that Conservative Party claims that unemployment has dropped by around 60 per cent in some areas is based on “wrong data” – in other words, the Tories are lying.

This blog has been saying that for a very long time!

The story says Tories have been using Jobseekers Allowance figures – the so-called Claimant Count – to justify their claims, but the independent Office for National Statistics showed only a 20 per cent drop in those seats. The ONS said online: “the number of unemployed people in the UK is substantially higher than the claimant count”.

Jonathan Portes, director of the National Institute of Economic and Social Research (and well-known to readers of this blog), said: “Many people who are unemployed don’t claim JSA… JSA figures at the local level are accurate, but it is not correct to confuse JSA rates and unemployment.”

In the BBC story, a Tory spokesman said the concern over the data was “nonsense”. He said: “This unemployment measure is provided by the independent House of Commons Library – and for constituencies they are the most up to date and most reliable numbers to use.”

Yes, the House of Commons Library does provide figures – with a caveat that they do not include the number of unemployed people claiming Universal Credit, and there is no date set for when those figures will be included in the Claimant Count (as reported by David Hencke in November last year). The current way of calculating these figures is misleading from the start.

In an article from the same month, This Writer made some other pertinent points:

“If employment has increased – and there’s no reason to say it hasn’t – we can also conclude that the reason employers are more willing to take people on is that they can pay peanuts for them and rely on the government to top them up with in-work benefits. It seems likely that the work was always there but employers weren’t going to take anybody on if it meant increasing the wages bill and reducing the amount of profit available to them. Now that zero-hours contracts are available, along with part-time schemes that deny people pensions and holiday pay, it’s a different matter.

“The number of people who were self-employed increased by a staggering 186,000, to reach 3.25 million, while people working as self-employed part-time increased by 93,000 to reach 1.27 million. That’s 4.52 million – almost one-sixth of the total number of people in work. If you think that’s great, you haven’t been paying attention. Remember this article, warning that the increase was due to older people staying in work? And what about the catastrophic collapse in self-employed earnings we discovered at the same time?

“How many of these are people who have been persuaded to claim tax credits as self-employed people, rather than jump through the increasingly-difficult hoops set out for them if they claimed Jobseekers’ Allowance – and do they know they’ll have to pay all the money back when their deception is discovered?

“The number of people in part-time employment has also increased, by 28,000 to reach 6.82 million. Are we to take it that this means under-employment has increased again?

“Public sector employment has fallen again. If you want to know why the government keeps messing you around, there’s your answer. There aren’t enough people to do the job. This month’s statistics show 11,000 fewer public sector employees than in March, and 282,000 fewer than this time last year.

“Unemployment is said to have dropped – but remember, this is not counting people who have been sanctioned. A recent study by Professor David Stuckler of Oxford University suggests as many as half a million people could have been sanctioned off-benefit in order to massage the figures, meaning that the total listed – 931,700 – is probably wrong. Remember also that Universal Credit claimants aren’t counted, nor are those on government work schemes – another 123,000 people.

“This means the actual unemployment rate is likely to be double the number provided by the official statistics.

“And what about people on ESA/DLA/PIP?”

In January this year, This Writer added: “New research by Oxford University and the London School of Hygiene & Tropical Medicine has shown that only around one-fifth (20 per cent) of people who have been sanctioned off of Jobseekers’ Allowance have actually found work, leaving 1.6 million in limbo; they’re off the benefits system but researchers can only surmise that they are relying on food banks.”

And in February, Vox Political had this point to make: “We also know that many thousands have died – through suicide or complications of their physical conditions (if claiming incapacity benefits) after receiving decisions that were not only wrong, but may have been fraudulent.”

Whichever way you slice it, the Tories aren’t being straight with you.

You can trust Vox Political to give you the facts, though.

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Duncan Smith has ruined the DWP – and has nothing to show for it

131010benefitdenier

Universal Credit has been an unmitigated calamity and so-called ‘reforms’ intended to end billions of pounds of spending on Incapacity Benefits every year have instead increased the cost – that is the end-of-Parliament report on Iain Duncan Smith’s Department of Work and Pensions from Jonathan Portes, director of the National Institute of Economic and Social Research (NIESR).

In addition, the department has suffered serious – and possibly lasting – damage to its reputation since 2010, a reputation that was at a high when Mr Portes left it in 2008, due to the success of its integration of benefit offices and job centres into Job Centre Plus.

“Six years on, that reputation is in tatters,” he writes in The Guardian. “This decade’s flagship programme – the integration of the six major working-age benefits into universal credit – is far behind schedule, with tens of millions of pounds of IT investment already written off and much more to come. The [National Audit Office]’s verdict has been damning, describing weak management, ineffective control, and poor governance, with both ministers and civil servants coming in for severe criticism. External experts – most of whom supported the principles behind universal credit – are unsure of whether the system can ever be made to work, even several years late.

“But this is far from the worst of the failures. The collapse of the department’s contract with Atos to reassess incapacity benefit claimants means perhaps half a million remain in limbo. The suffering of individual claimants misclassified by Atos and DWP – in some cases left literally starving – has been well-publicised. Less so has been the cost to taxpayers. But the Office for Budget Responsibility’s Welfare Trends report, published last week, shows an upward revision of £3bn a year in spending on incapacity benefits – entirely attributable to delays and mismanagement.”

And it is all the fault of the Tories, it seems.

Mr Portes states: “But the evidence points to a combination of hubris on the part of Iain Duncan Smith, a reluctance by civil servants to push back against unrealistically ambitious timetables, and arbitrary, Treasury-driven spending cuts.” The man we call RTU (Return To Unit) or SNLR (Services No Longer Required) is too proud to admit his ambition outweighed his ability; his staff were too timid (afraid of him?) to make him face the realities of the situation and the Treasury, run by Duncan Smith’s rival George Osborne, forced cut upon cut onto the department, perhaps in an effort to make the Secretary-in-a-State look worse than he already did.

So “Even after it was obvious that the [Universal Credit] programme was well off-track, Duncan Smith continued to claim it was ‘on time and on budget’.”

Sir Bob Kerslake, outgoing head of the civil service, described a “culture of good news” where no one could say that things were going wrong.

And “Duncan Smith’s well-publicised attempts to shift the blame for the mess to civil servants has poisoned relations within the department”.

Meanwhile, in a bid to claw back some of the money lost on UC, ministers were desperately clamping down on incapacity benefit claimants: “Ministers firmly believed that hundreds of thousands of people on incapacity benefits could in fact work, and that the new work capability assessment would show just that, giving the Treasury some of the savings it needed. So when their own independent reviewer, Malcolm Harrington, told them that the work capability assessment needed major changes, and meanwhile the reassessment process should be delayed, they ignored him; not pressing ahead would have left a significant black hole in the sums.

“The predictable result – tens of thousands of appeals, many successful; considerable hardship; administrative chaos; and eventually the collapse of the DWP’s contract with Atos. And the long-term downward trend in the number of people on the benefit has now actually reversed. Ministers have yet to explain why, if it is really the case that hundreds of thousands of people were receiving the benefit when they shouldn’t have been, the “reforms” are now actually seeing the numbers going up again.

“The promised savings, of course, have long since vanished. In fact, the OBR estimated last week that the delays to the government’s plans for these two benefits are now costing taxpayers close to £5bn per year – dwarfing savings made elsewhere, and leaving a large potential black hole in the next government’s budget.”

Perhaps this is why Rachel Reeves keeps talking about money, rather than the human cost of the DWP’s bungling.

Only this morning, she was on Twitter telling us she would be appearing on LBC to talk about how Labour will “make work pay” – annoyingly trying to steal a Tory soundbite.

Perhaps, also, this is why the DWP is infamously reluctant to answer Freedom of Information requests. The infamous call for an update on the number of ESA claimants who have died since November 2011, first made by Yr Obdt Srvt in 2013 (following other unsuccessful attempts) is now  – on a second attempt – with the Information Commissioner’s Office on appeal after ministers found another reason to refuse it.

And the Huffington Post has told us that a perfectly legitimate request by Newsnight’s Chris Cook has also been snubbed by the department.

“Iain Duncan Smith’s DWP has made a name for itself as one of the most vindictive arms of government since the coalition came into power, far more concerned with saving money than serving its jobless customers, and as useful as a wet paper bag in getting people into work,” wrote Nick Stephenson.

“It has been found to be using targets to drive sanction numbers ever upwards, its actions are one of the main reasons why people need to use foodbanks, and its latest wheeze is for staff to go into schools to scare children away from claiming benefits.

Here on Vox Political, as stated above, we call Iain Duncan Smith ‘Return To Unit’. On the evidence above, let’s hope the voting public decide it’s time he actually went.

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Happier workers really do make more profit, report shows

More respect, please: If company bosses stop trying to wring every last ounce of profit out of workers while paying them a pittance, and start treating them well instead, they'll be surprised at how well their firm starts to perform, according to a new report.

More respect, please: If company bosses stop trying to wring every last ounce of profit out of workers while paying them a pittance, and start treating them well instead, they’ll be surprised at how well their firm starts to perform, according to a new report.

The nice folk at NIESR have produced a new report that supports something this blog has been saying for many years – that businesses make more profit if they take better care of their workforce.

The report is headed Happier workers, higher profits? and states: “We found those workplaces with rising employee job satisfaction also experienced improvements in workplace performance, while deteriorating employee job satisfaction is detrimental to workplace performance.

“Employee job satisfaction was found to be positively associated with workplace financial performance, labour productivity, the quality of output and service and an additive scale combining all three aspects of performance.

“Workplaces experiencing an improvement in non-pecuniary job satisfaction… also experience an improvement in performance.

“By contrast, there was no robust association between job-related affect (measured in terms of the amount of time feeling tense, depressed, worried, gloomy, uneasy and miserable) and workplace performance, nor pay satisfaction and workplace performance.”

The conclusion is that “these findings are consistent with the proposition that employers who are able to raise employees’ job satisfaction may see improvements in workplace profitability (financial performance), labour productivity and the quality of output or service [bolding mine, for reasons that will become apparent].

“Although we cannot state definitively that the link between increasing job satisfaction and improved workplace performance is causal, the findings are robust to tests for reverse causation and persist within workplaces over time, so that we can discount the possibility that the results are driven by fixed unobservable differences between workplaces.

“There is therefore a prima facie case for employers to consider investing in the wellbeing of their employees on the basis of the likely performance benefits.”

This ties in very closely with Vox Political‘s many comments on the Living Wage. The relationship is obvious: Pay somebody enough that they don’t need to ask for State benefits and their sense of self-worth increases hugely.

Here’s what this blog said on the subject back in April last year: “If a person receives enough, in return for their work, to pay their way in the world without having to take state benefits, several things happen.

“They feel valued in their position, and try harder. The quality of their work improves, along with that of the other workers in the company who also receive the living wage, and as a result, the employer is likely to benefit from improved orders. The company flourishes [increased productivity] and is able to take on more employees.

“As a result of this, the firm and its employees are able to pay more taxes and National Insurance contributions – not as a result of an increase imposed by an oppressive government, but because more people are employed there [and profits are higher]. The government therefore has more cash to fund public services; it has less need to borrow money and will not have to pay as much in social security benefits – in-work benefits will be unnecessary because working people will be receiving enough to put them above the threshold for that support, and fewer people will be claiming out-of-work benefits.

“The government can then pay off its debts and deficit more quickly, after which it can cut tax rates. This means everyone will have more money in their pockets – including employers, who can plough the extra cash back into the firm with infrastructure improvements and more employment.

“You see how this works?

“Contrast this with what happens when you employ somebody on the minimum wage, or abolish it.

“People on the absolute minimum do not feel valued. They consider their employers to be taking more than their fair share of the profits generated by the company where they all work together. They feel undervalued – and demeaned by the fact that they have to claim state benefits in order to survive. Their health may be put at risk, because they may find themselves having to work ridiculously long hours, just to make ends meet. Their work starts to suffer, and they may end up unemployed, either for health reasons or because the company is suffering (as a result of workers turning in substandard work).

“The company makes cutbacks. Its bosses don’t want to take a pay cut so they cut corners elsewhere. The workforce diminishes and the quality of the product suffers. In time, the firm’s contribution to the national economy dwindles – if it doesn’t go to the wall altogether. Its tax and National Insurance contribution plummets.

“The government finds itself paying in-work benefits for increasing numbers of people, and unemployment figures skyrocket. Employers and workers do not provide enough money in taxes and National Insurance to pay the bill for public services, so these are cut back and borrowing increases. The nation goes into a debt spiral.

“That is the current situation.

“Which of the above would you rather have?”

That remains the current situation, no matter what George Osborne may be saying today. The government would not be considering slashing the amount paid to ESA claimants if it didn’t consider the number of people claiming the benefit to be too high. We all know the number of people claiming in-work benefits has rocketed and that Osborne is facing a huge shortfall between the amount of tax he expected to receive this year and the actual amount. What is it – £5 billion? That’s not small change!

There have been huge arguments with right-wingers who have made spurious claims that employers can’t afford to pay more than the minimum wage – or that there is no incentive to do so.

This research provides an incentive to do so.

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Cumulative effect of welfare reform revealed – deprived areas hit much harder than the rich

Deprived parts of Glasgow were worst-affected by 'welfare reform' according to The Courier [Image: thecourier.co.uk].

Deprived parts of Glasgow were worst-affected by ‘welfare reform’ according to The Courier [Image: thecourier.co.uk].

The headline should not come as a surprise – of course changes that cut benefits for the poor are going to harm them more than rich people.

But do you remember David Cameron’s claim that his government would be the most transparent ever?

Isn’t it interesting, then, that the independent Equalities and Human Rights Commission (EHRC) has found a way to compile information on the effects of tax, social security and other spending changes on disabled people, after the government repeatedly claimed it could not be done?

It seems Mr Cameron has something to hide, after all.

We already have a taste of what we can expect, courtesy of our friends in Scotland, who commissioned the Centre for Regional Economic and Social Research at Sheffield Hallam University to study the relationship between deprivation and financial loss caused by “welfare reform”.

The study shows that more than £1.6 billion a year will be removed from the Scottish economy, with the biggest losses based in changes to incapacity benefits. The Scottish average loss, per adult of working age, is £460 per year (compared with a British average of £470) but the hardest hit area was impoverished Glasgow Carlton, where adults lost an average of £880 per year.

In affluent St Andrews, the average hit was just £180 per year.

Of course, the cumulative effect will hit the poorest communities much harder – with an average of £460 being taken out of these communities it is not only households that will struggle to make ends meet; as families make cutbacks, local shops and businesses will lose revenue and viability. If they close, then residents will have to travel further for groceries and to find work, meaning extra travel costs will remove even more much-needed cash from their budget.

For a nationwide picture, the EHRC commissioned the National Institute of Economic and Social Research (NIESR) and the consultancy Landman Economics to develop a way of assessing the cumulative impact of “welfare reform”.

The report will be published in the summer, but Landman Economics has already told Disability News Service that the work was “not actually that difficult”.

Why, then have Mark Hoban, Esther McVey and Mike Penning, the current minister for the disabled, all claimed that a cumulative assessment is impossible?

Some might say they have a vested interest in keeping the public ignorant of the true devastation being wreaked on Britain’s most vulnerable people by Coalition austerity policies that will ultimately harm everybody except the very rich.

Some might say this is why the BBC – under the influence of a Conservative chairman – failed to report a mass demonstration against austerity by at least 50,000 people that started on its very doorstep.

Misguided conspiracy theorists, all!

Or are they?

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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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The Coalition is creating serious problems and distracting you with phantoms

140124earnings

According to the beauty industry, women must now start deodorising under their breasts.

I kid you not – it was in The Guardian.

Columnist Jill Filipovic hit the nail on the head when she wrote: “I can already hear your objections: ‘But the area under my boobs doesn’t stink!’ or ‘What kind of marketing genius not only came up with the term “swoob,” but actually thought half the world’s population might be dumb enough to buy into it?’ or simply, ‘This is a dumb product aimed at inventing an insecurity and then claiming to cure it.’

“You would be correct on all three points.

“In fact, inventing problems with women’s bodies and then offering a cure – if you pay up – is the primary purpose of the multi-billion dollar beauty industry.”

The simple fact is that you don’t really need to worry about smells down there – a good old soapy flannel will cure any such problems.

That’s not the point, though. The aim is to get you thinking about it and devoting your energy to it, rather than to other matters.

Now let’s translate that to politics.

We already know that all the scaremongering about Romanian and Bulgarian immigrants storming the country from January 1 was a crock. That bastion of good statistics, The Now Show, told us last week that the total number of Bulgarian immigrants in the last couple of weeks was “around two dozen so far”, according to their ambassador. In the first three months after our borders were opened to Croatians, 174 turned up.

Yet the government wanted you to believe they would flood our immigration service in their millions, “taking benefits and yet simultaneously also taking all the jobs”.

My use of language such as “storming” and “flood” is not accidental. By far the more serious threat to the UK in the early days of 2014 was the weather – and, guess what, not only was the government unprepared for the ferocity of the storms that swept our islands, the Coalition was in fact in the process of cutting funding for flood defence.

This would have gone unnoticed if the weather had behaved itself, because we would all have been distracted by the single Romanian immigrant who was ensnared by Keith Vaz in a ring of TV cameras at Heathrow Airport.

Now the Tories are telling us that our take-home pay is finally on the rise for all but the top 10 per cent of earners, with the rest of us seeing our wages rise by at least 2.5 per cent.

The government made its claims (up) by taking into account only cuts to income tax and national insurance, using data leading up to April last year, according to the BBC News website.

This kind of nonsense is easily overcome – New Statesman published the above chart, showing the real effect of changes to weekly income for people in various income groups, and also provided the reason for the government’s mistake (if that’s what it was).

“The data used … takes no account of the large benefit cuts introduced by the coalition, such as the real-terms cut in child benefit, the uprating of benefits in line with CPI inflation rather than RPI, and the cuts to tax credits,” writes the Statesman‘s George Eaton.”

He also pointed out that other major cuts such as the bedroom tax, the benefit cap, and the 10 per cent cut in council tax support were introduced after April 2013 and were not included in the Coalition figures.

Once all tax and benefit changes are taken into account, the Institute for Fiscal Studies has shown that almost all families are worse off – and the Coalition also appears to have forgotten the five million low-paid workers who don’t earn enough to benefit from the increase in the personal allowance.

Skills and enterprise minister Matthew Hancock compounded the mistake in an exchange on Twitter with Jonathan Portes, director of the National Institute of Economic and Social Research (NIESR). Asked why his analysis “ignores more than four million people in work (the self-employed)”, Mr Hancock tweeted: “Analysis based on ONS ASHE survey of household earnings data”.

Wrong – as Mr Portes was quick to show: “Don’t you know the difference between household and individual earnings?”

Apparently not. ASHE (Annual Survey of Hours and Earnings) is a survey of employed individuals using their National Insurance numbers – not of households or the self-employed.

So the Coalition – and particularly the Tories – were trying to make us all feel good about the amount we earn.

That’s the distraction. What are we supposed to be ignoring?

Would it be David Cameron’s attempt to bribe councils into allowing shale gas companies to frack their land? Councils that back fracking will get to keep all the business rates collected from the schemes – rather than the usual 50 per cent.

He has also claimed that fracking can boost the economy and encourage businesses into the country, in a further bid to talk down dissent.

Or is it the growing threat of a rise in interest rates, which may be triggered when official unemployment figures – which have been fiddled by increased sanctions on jobseekers, rigged reassessments of benefit claimants, a new scheme to increase the number of people and time spent on Workfare, and the fake economic upturn created by George Osborne’s housing bubble – drop to seven per cent?

It seems possible that the government – especially the Tory part of it – would want to keep people from considering the implications of an interest rate rise that is based on false figures.

As Vox Political commenter Jonathan Wilson wrote yesterday: “If the BOE bases its decisions on incorrect manipulated data that presents a false ‘good news’ analysis then potentially it could do something based on it that would have catastrophic consequences.

“For example if its unemployment rate test is reached, and wages were going up by X per cent against a Y per cent inflation rate which predicted that an interest rate rise of Z per cent would have no general effect and not impact on house prices nor significantly increase repossessions (when X per cent is over-inflated by the top 1 per cent of earners, Y per cent is unrealistically low due to, say, the 50 quid green reduction and/or shops massively discounting to inflate purchases/turnover and not profit) and when it does, instead of tapping on the breaks lightly it slams the gears into reverse while still traveling forward… repossessions go up hugely, house prices suffer a major downward re-evaluation (due to tens of thousands of repossessions hitting the auction rooms) debt rates hit the roof, people stop buying white goods and make do with last year’s iPad/phone/tv/sofa, major retail goes tits up, Amazon goes to the wall, the delivery market and post collapses… etc etc.

“And all because the government fiddled the figures.”

Perhaps Mr Cameron doesn’t want us thinking about that when we could be deodorising our breasts instead.

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Back to the maths class for DWP decision makers

When I was six, I told friends and family I did not want to go out with a girl because "she can't do her maths". What a pity the adults in the Coalition government don't know now what I knew as a child.

When I was six, I told friends and family I did not want to go out with a girl because “she can’t do her maths”. What a pity the adults in the Coalition government don’t know now what I knew as a child.

Iain Duncan Smith was right to weep when he visited Easterhouse, all those years ago – although he would not have known the reason.

It turns out there are probably drug dealers on that estate with a better grasp of mathematics than anybody in his Department for Work and Pensions – or, let’s be honest, the entire Coalition government.

This week it emerged that the National Audit Office has refused to sign off the DWP’s accounts – for the 25th year running. While this indicates that the problem is not limited to the Coalition, it should be noted that David Cameron’s crew has done nothing to rectify it.

The NAO has instead delivered a “qualified” audit opinion, in respect of fraud and error which is considered to be unacceptably high. It seems the department overpaid £3.5 billion or 2.1 per cent of total benefit expenditure due to fraud and error – and also underpaid £1.4 billion to claimants.

Of this, fraud remained static at £1.2 billion (the same as in 2011-12), while underpayments due to official error increased from £400 million to £500 million.

Official error has increased while fraud has not.

An interesting sidebar to this is the fact that fraud has not decreased either, despite all Mr Duncan Smith’s apparent efforts to hammer it. Next year’s accounts – due after April 2014, although your guess on the actual date is as good as anyone’s – should make interesting reading, as they should show the effect of the major regressions (not reforms) he introduced this year.

Further evidence of government incompetence with the figures came in a chart from Conservative Central HQ’s press office, flagged up by Jonathan Portes and the immeasurably cleverer people at NIESR (National Institute of Economic and Social Research).

The chart’s claim was that 28,500 households had been receiving more than £500 per week in benefits, despite containing people who could work but weren’t – until the £26,000 per year Benefit Cap was brought in and reduced it to nothing.

Mr Portes told us the chart was based on DWP statistics published last week that show that 28,500 households have had their benefit capped at £500 per week, “however, the interpretation – and the chart – is utterly wrong in every respect.

“It just is not the case that every one of those 28,500 households contains someone who “can work”.  As the DWP publication clearly states, the cap applies to households in receipt of key out of work benefits – including both those in the Employment and Support Allowance (ESA) Work-Related Activity Group (WRAG) and those on Income Support (IS).  For people in the WRAG, the position is quite clear. As the DWP itself puts it… they are ‘currently too ill or disabled to work’.

“DWP makes clear that there is no assumption that Income Support claimants ‘can work’, but quite the opposite. As a general rule, most people who ‘can work’ should be on Jobseekers Allowance (JSA), not IS. In practice, most of those on IS are single mothers with young children, who are not expected to work.

“Overall, although we don’t have precise numbers from the DWP statistics, it seems quite likely that in fact less than half of the households affected by the cap contain ‘people who can work but aren’t’.”

Mr Portes went on to analyse the second assumption in the chart – that there are now no households receiving more than £500 per week in benefits that include “people who can work but aren’t” – and found it “just as wrong,” – because DWP guidance exempts households with anyone on DLA, PIP, Attendance Allowance, the support component of ESA or Industrial Injuries Benefits, and those receiving War Disablement Pension and equivalent payments from the Armed Forces Compensation Payments Scheme.

“Of course it’s perfectly possible for such households to contain ‘people who can work but aren’t’ – most obviously households with a child receiving DLA, but there are lots of other possible cases. Moreover, even this excludes couple households where one person is working but the other could work, but is not, who are also exempt. Given enough children and/or high enough housing costs, such households can receive more than £500 per week in benefits,” wrote Mr Portes.

“Again, we don’t know the exact numbers, but we are certainly talking about thousands of households, not zero.”

Only on Monday, Mr Duncan Smith assured the Commons Work and Pensions Select Committee that he had warned CCHQ and Tory chairman Grant Shapps against such jiggery-pokery with his departmental stats: “I have had conversations with him and others about being careful to check with the department.”

So did the chart go out with his department’s full endorsement, in which case this is even more proof that the DWP can’t get its facts right – or did CCHQ ignore Mr Duncan Smith’s words and make its own mistake?

For this government, and Mr “In Deep Sh…ambles”, the result is the same.

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

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

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

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

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

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

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

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

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

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

As Professor Malcolm Sawyer notes in Fiscal Austerity: The ‘cure’ which makes the patient worse (Centre for Labour and Social Studies, May 2012), “It is well-known that a government can always service debt provided that it is denominated in its own currency. At the limit the UK government can ‘print the money’ in order to service the debt: this would not take form of literally ‘printing money’ but rather the Central Bank being a willing purchaser of government debt in exchange for money.” This is what is happening at the moment. Our debt is in UK pounds, and we can always service it. Our creditors know that, so they remain happy to continue financing it.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Evidence suggests not.

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

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

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

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

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

He has created high unemployment.

He has depressed wages.

He has cut infrastructure projects.

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

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

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

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