An anti-Brexit demonstration outside Parliament on June 12 last year.
The possibility of a Tory prime minister trying to prorogue Parliament – discontinuing it without dissolving it – in order to pass a “no-deal” Brexit has been pushed back by the House of Lords.
Peers voted by a majority of 103 to ensure Parliament will sit in the weeks leading up to the October 31 deadline, making it impossible for Boris Johnson (or, indeed, Jeremy Hunt) to ensure the deadline can pass without MPs interfering.
The vote happened the day before the Office for Budget Responsibility (OBR) warned that a “no-deal” Brexit could trigger a recession, shrinking the economy by two per cent by 2020.
The organisation said increased uncertainty and falling confidence would deter investment and hit trade.
The decision was an amendment to the Northern Ireland (executive formation) Bill which returns to the Commons today (July 18).
Voting by MPs is likely to be tight.
Supporters of Mr Johnson are saying that concerns over the economy are fear-mongering, and that it is buoyant at the moment.
That may be, but the OBR is saying leaving without a deal would add £30bn a year to borrowing from 2020-21 onwards and 12 per cent of GDP to net debt by 2023-24.
Watch how your MP votes – and take note of the effect on the economy. There will be an election soon, and you should judge your MP on whether they are reckless about your well-being.
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.
Chancellor of the Exchequer Philip Hammond recently said public sector workers like nurses were overpaid, according to a Cabinet leak. So he probably won’t shed tears over an economic forecast that could allow him to postpone easing the cap on their pay that has sent them to food banks to make ends meet.
Commentators like the Financial Times would like to say government plans are going sideways because of “weak economic forecasts”, but the fact is they were always rubbish.
Tory deficit reduction ideas that involve squeezing the poor rather than expanding UK productivity and economic output were never going to work. That’s never – not a few years after they predicted.
Today we found out that the Office for Budget Responsibility has been over-optimistic in all its productivity forecasts for the seven years since it was formed by David Cameron. Some of us aren’t surprised at all.
But here’s a thought:
Isn’t it curious that these facts are only acknowledged when the government is being asked to ease austerity, cut student debt and build houses?
It’s almost as though someone is letting the information trickle out only in order to stop politicians from helping the poor and vulnerable and keep them in line, helping only the very rich instead.
Philip Hammond is facing what officials describe as “a bloodbath” in the public finances in his Budget next month as weak economic forecasts derail the government’s plans.
As much as two-thirds of the £26 billion of headroom in the public finances that the chancellor created last year as a buffer for the economy through the Brexit period is likely to be wiped out after the government’s fiscal watchdog concludes its forecasts for growth have been too optimistic.
The Office for Budget Responsibility will publish on Tuesday a new analysis suggesting it has persistently over-estimated Britain’s productivity over the past seven years and will give a broad hint that it will rectify the situation with a more pessimistic Budget forecast.
Slower growth in the forecast will limit deficit reduction and cut the size of the war chest that Mr Hammond put aside to smooth the Brexit transition. This leaves him in an awkward position politically, because he is under increasing pressure to end the austerity cap on public pay, lower the burden of debt on students and build houses.
The situation will dismay the Treasury and surprise economists, who have been encouraged by a steady improvement in Britain’s monthly public finances figures, even as economic growth has slowed this year. In August, the UK posted its lowest budget deficit since before the financial crisis, borrowing a net £5.7bn, well below the consensus estimate of £7.1bn.
The NHS budget would have to rise by two per cent every year until 2066 to be balanced, the OBS said. [Image: Isabel Infantes/AFP/Getty Images].
You didn’t think the NHS crisis would go away just because Theresa Mayfly made a (poor) speech about Brexit, did you?
Not a bit of it! The Tory government and all its stooges have a lot more scaremongering to do, if they’re going to get you to accept privatisation of healthcare and make you start paying health insurance.
(That will be on top of the tax and National Insurance you currently pay for the NHS, because you can bet they aren’t going to cut your taxes any time soon.)
Today’s turn of the screw has it that the NHS will need an extra £88 billion in funding over the next 50 years because medicines and treatments are going to become more expensive and more of us are going to need them.
That is, of course, a preposterous statement.
It assumes that nothing will be done to alleviate the causes of funding pressure on the health service – and that would only be true if the Conservatives stayed in office for the next 50 years, inflicting their wretched rule. They should come with a health warning: “Tories can seriously damage your health.”
This is demonstrably true. Remember when then-Health minister Alistair Burt filibustered a bill that would have provided cheap and effective drugs for the NHS by compelling the Government to seek new licences for medicines that were not covered by patents but which could benefit patients? He probably added billions to the 2067 cost of the NHS, right there.
There are other ways to reduce costs besides the price of medicines, though. For a start – ending bed-blocking. How many healthy people are in hospital beds because there are no care homes for them and their own family members (if they have any) simply won’t have them?
That can be solved very easily, with a little funding for social care, and a little education for family members. There are advantages to having somebody at home all the time, especially a senior citizen, that some families do not realise. I shall not go over those arguments here, but be assured that they are good.
Over time, it is likely that fewer people will fall victim to some health threats, because information enabling their prevention will become available. That should reduce the burden on the health service and prevention is always better than cure.
Some health threats, of course, happen because of workplace conditions created and supported by Conservative policy. Light-touch regulation means companies are able to flout the Health and Safety at Work Act, leading to accidents and also long-term health needs caused by poor conditions in the workplace.
Low pay causes stress, mental illness and also physical illness, as workers struggle to make ends meet. It also causes low productivity and harms profitability, although Tory-supporting bosses get upset whenever that is explained to them.
Proper regulation and decent pay would solve a majority of these workplace problems.
Finally, there is the spectre of private health companies and the huge amounts of money they are stealing from the public health system. Eliminating them – and the bureaucracy that supports them – would free more than £22 billion today. Who knows how badly they’ll be fleecing us in 2067, given the chance?
None of the above requires a breakthrough in medical science.
All it needs is the will to do things in a better way – starting with the removal of the Conservative government that is the cause of so much illness.
Get rid of the Tories and we could – literally – save a fortune.
The NHS budget will need to increase by £88bn over the next 50 years, meaning governments could have to raise taxes or cut spending in other areas to fund it, the Office for Budget Responsibility (OBR) has said.
The soaring costs threaten to render public finances generally “unsustainable”, according to the OBR’s latest fiscal sustainability report. It says the government could find it hard to deliver on its pledge to balance the budget during the next parliament.
The NHS’s budget will need to increase from £140bn in 2020-21 to about £228bn by 2066-67 in order to keep pace with the rising demand for healthcare, according to the OBR’s projections.
The Resolution Foundation’s predictions for government spending, based on the different parties’ declared plans.
Vox Political’s article on Nicola Sturgeon’s London speech provoked a disgruntled response from Jonathan Portes. The NIESR boss sent a message stating that the article’s fiscal arguments were out of whack.
He didn’t ask for this blog to straighten them out, but the information he sent, coupled with some other pieces he suggested – by Professor Simon Wren-Lewis and the Resolution Foundation – make it inevitable that another stab is required. If you support the SNP, you’re still not going to like it.
The first comment from Mr Portes is as follows: “1. SNP plan is slower deficit reduction than Lab/LDs, which in turn slower than Cons. All consistent with falling debt/GDP ratio. So all are sustainable. Haven’t looked at detail, but Simon WL & I both think Lab too cautious – so SNP not obviously crazy.”
Simon Wren-Lewis’s article states: “In reality what Sturgeon was proposing was still deficit and debt reduction, but just not at the pace currently proposed by Labour.”
And the Resolution Foundation adds: “The SNP would commit to delivering existing 2015-16 plans, as each of the Westminster parties have, before changing course.”
There’s a major point to make here, which all three of the sources above have missed. It’s that the SNP and its adherents have been cursing Labour from High Heaven to Low Hell for committing to Tory austerity policies because Ed Balls promised a Labour government would stick to Coalition spending – note that word, spending – limits for the first year after the general election.
Why have SNP adherents been slating Labour when the SNP has committed itself to the exact same Conservative spending limits, for the exact same period of time? Doesn’t this also make the SNP a party of austerity?
This leads us neatly to a point made by the Resolution Foundation. Ms Sturgeon wants to put a lot of space between SNP plans and those of Labour by claiming that Labour is committed to eliminating the UK’s structural deficit by 2017-18. They say Labour signed up to that when it voted to support the Charter for Budget Responsibility. You may recall there was another big fuss about Labour supporting Tory austerity, being just the same as the Tories, and there being only 17 MPs who oppose austerity (the number who voted against the CBR). Bunkum, according to the Resolution Foundation.
“The ‘Charter for Budget Responsibility’ is highly elastic: it’s not based on a firm commitment to reach balance in 2017-18,” states the Resolution Foundation article. “Instead it represents a rolling ‘aim’ of planning to reach current balance three years down the road.” The article adds: “Most economists are sceptical about how much difference it (the charter) will make.
“So what if Labour targets a current balance in 2019-20 instead? Based on current OBR assumptions this could be achieved with as little as £7 billion of fiscal consolidation in the four years to 2019-20 (including the cost of extra debt interest).”
Labour has made it clear that it plans to make only £7 billion of cuts. As this coincides exactly with the Resolution Foundation’s figures for a 2019-20 budget balance, logic suggests that this is most likely to be what Ed Balls is planning.
So SNP (and Green) adherents who crowed about Labour austerity being as bad as that of the Tories need to apologise – sharpish.
Now that these points are cleared up, let’s look at the substantive issue. Here’s the Resolution Foundation again: “The first minister’s headline was that she favours £180 billion of extra spending in the next parliament relative to current coalition plans… an increase in ‘departmental spending’ of 0.5 per cent a year in real terms over four years [we’ve established that the first year’s spending would adhere to Coalition-planned spending levels]. Our estimates suggest that raising departmental spending by 0.5 per cent in each of the four years after 2015-16 would indeed yield a cumulative increase in spending of around £180 billion (in 2019-20 prices, £160bn in today’s) compared to existing coalition plans. So that seems to fit.
“Another, more conventional, way of putting this is that in the final year of the next parliament, departmental spending would be around £60 billion higher in the SNP scenario than it would be under the coalition’s outline plans. This means that departmental spending would end up in roughly the same place in 2019-20 (in real terms) as it is now. We’d see £8 billion or so of departmental cuts in 2015-16 broadly cancelled out by a rise of around £7 billion across the following four years. It also means that, all else equal, there would still be a (small) UK-wide current deficit come the 2020 election.”
As you can see from the graph, the scenario that suggests a Labour balance in 2017-18 would imply a big difference with the SNP, particularly in the first half of the next Parliament – but, come 2019-20, “there would still be a £48 billion gap between Labour and the coalition plans; not that far short of the £60 billion gap that would exist between the SNP and the coalition”.
The scenario in which Labour balances its budget by 2019-20 “would in theory be consistent with spending roughly £140 billion more than coalition plans.
“The SNP proposal implies increases in total departmental spending of £1-2 billion per year over four years whereas Labour’s 2019-20 scenario implies cuts of £1-2 billion per year over the same period. This is against total departmental spending of around £350 billion. By 2019-20 this difference adds up to roughly a £14 billion gap between the two parties. Now, that’s a real difference but given the scale of the numbers involved, (and the fact that some of Labour’s consolidation may come from tax increases rather than spending cuts), it’s also a relatively modest one.”
It’s more or less the same amount the Coalition Government borrows every month, in fact.
Now let’s throw a spanner in the SNP’s works. The Resolution Foundation points out: “Fiscal discussions of this type tend to suffer from a severe case of false precision. None of the party leaders knows any better than you or I what will happen to productivity next year, never mind in 2020… Any difference between, say, the Labour and SNP spending plans would be dwarfed by the fiscal implications of even modest boosts (or dips) in productivity. Indeed, even the very large difference between the SNP (or Labour) and the coalition’s plans could be overshadowed by a significant shift in productivity trends. And, to Sturgeon’s credit, her remarks this week emphasised productivity.”
Yes – productivity. Does anybody remember that, prior to the referendum, the SNP wanted Scottish voters to believe that any borrowing that might be necessary in an independent Scotland would be offset by increased productivity? What did Simon Wren-Lewis have to say about that? Oh yes: “Governments that try to borrow today in the hope of a more optimistic future are not behaving very responsibly.”
But that is exactly what Ms Sturgeon was proposing for the whole of the UK; borrowing on the assumption of increased productivity.
Here’s a chance to put another SNP myth to bed, from the same writer. In his article about Ms Sturgeon’s speech, Professor Wren-Lewis states: “Of course this is the same person who, with Alex Salmond, was only six months ago proposing a policy that would have put the people of Scotland in a far worse fiscal position than they currently are, an argument that has been reinforced so dramatically by the falling oil price. You could say that it is a little hypocritical to argue against UK austerity on the one hand, and be prepared to impose much greater austerity on your own people with the other.”
The argument he mentions ran as follows: “Scotland’s fiscal position would be worse as a result of leaving the UK for two main reasons. First, demographic trends are less favourable. Second, revenues from the North Sea are expected to decline. This tells us that under current policies Scotland would be getting an increasingly good deal out of being part of the UK [and therefore independence would be detrimental].”
He added that the Institute for Fiscal Studies, which had independently analysed the SNP figures, had made a mistake on interest rates. The IFS analysis, he wrote, “assumes that Scotland would have to pay the same rate of interest on its debt as the rUK. This has to be wrong. Even under the most favourable assumption of a new Scottish currency, Scotland could easily have to pay around one per cent more to borrow than rUK. In their original analysis the IFS look at the implications of that (p35), and the numbers are large.”
The Resolution Foundation notes that “the flipside of higher spending, all else equal, would be higher debt and higher debt interest payments”.
So the SNP plan, as this blog pointed out, could create an interest-payment problem for the next government that bites into the extra money said to be for services.
Mr Portes made two other minor points, as follows: “2. Your stuff about Lab could spend more if economy does better wrong way round. If economy worse, we need higher deficit. Over time, as income goes up, so does/should spending. But short-term macro should be countercyclical.”
When I wrote the material about Labour spending more in a better-performing economy, I was thinking of the Labour government immediately after World War II. The current Labour Party has mentioned this period in recent speeches and releases, and it seems clear that Messrs Miliband, Balls et al consider their task, if elected in May, to be similar to that faced by Mr Attlee and his party – the reconstruction of the UK after a long period of destruction.
Are we to believe the economy is likely to worsen, in which case more borrowing will be needed? It’s certainly possible that major shocks are on the horizon. This writer is in no position to speculate.
“3. Finally, stuff about credit rating agencies/bond markets/Greece is absurd propaganda. I’ve written on this many times.” He’s right; it wouldn’t have been included it if Yr Obdt Srvt had stopped to think about it, but the article was up against a deadline and this writer was throwing in all the cautionary words he could find.
So let us forget about them. Here are a few more. Simon Wren-Lewis, at the end of his article, notes: “I read a blog post recently that suggested this was an election Labour would be better off losing… A Labour government dependent on SNP support would be abandoned by the SNP at the moment of greatest political advantage to the SNP and disadvantage to Labour. However if we assume that the oil price stays low there is no way a rational SNP would want to go for independence again within the next five years. It might be much more to its long term advantage to appear to be representing Scotland in a responsible way as part of a pact with Labour.”
Is the SNP rational? All the evidence available so far suggests it isn’t.
It put forward arguments that were deceptive about an independent Scotland’s economic future.
Its representatives and followers spread lies about Labour economic policy.
All indications suggest the SNP will try to create the conditions required for Scottish independence at the earliest opportunity, and then leave the rest of the UK hanging.
The original article on Ms Sturgeon’s speech ended by saying the SNP would be hard to trust.
After the findings of this one, it is nigh-on impossible to do so.
No doubt some of you will scream that this post is overdramatizing, but the consequences of further fiscal consolidation (that’s austerity to most of us), as laid out in Professor Simon Wren-Lewis’s latest Mainly Macroarticle, seem undeniable.
He tells us the National Institute has used the model NIGEM to analyse the macroeconomic impact of the different political parties’ fiscal plans post-2015, which is published in the latest Review. (Chris Giles has a FT write-up.) The result: The more fiscal austerity you undertake, and if monetary policy fails to perfectly offset the impact on demand, the lower output will be.
You don’t need a crystal ball to see what this means, if we get another Conservative, or Tory-led, government. Lower output means a lower tax take, therefore less money to spend on the NHS and welfare benefits (areas like Defence and International Development will always have funds – we can’t let ourselves go defenceless and we must continue our programmes of cultural imperialism, after all).
So further Tory austerity instantly implies the imposition of even harsher standards of qualification for state benefits, pushing even more vulnerable, sick and disabled people off the books and into their graves. We’ve all known that voting Tory is an endorsement of state-sponsored suicide but it’s time we all owned up to it.
It means the sale of the National Health Service in England to private companies will be accelerated, with consequent impacts on the amount of grant funding for the health service in the other UK countries; the service will continue to worsen and even more deaths will be the result.
But the Tories will want to pretend to the media that all is well, which means an increased push to get people into part-time, temporary or zero-hours work, and an increased number of benefit claimants being funnelled into work activity programmes that, in fact, reduce the number of available jobs. The resulting low-pay economy is exactly what the Conservatives want; the workers will be kept down and the employers can pocket the profits.
Nobody in the government or even the Bank of England will tell you this because, it seems, they haven’t done any analysis and won’t make any such forecasts.
The Office for Budget Irresponsibility is not allowed to look at alternative fiscal policies in the short term and must therefore put the bravest possible face on what is offered to it – that is why every single forecast to come out of that organisation has been hopelessly optimistic.
We’re back to evidenceless policies again. The Tories are saying “everything will be okay”, because – for them – it will be. They and their rich friends will have loads of cash. Who cares that the entire infrastructure of the United Kingdom – and the British way of life – will be dismantled and disappearing from under them?
Think this is overexaggerating? Let’s go back to Prof Wren-Lewis and examine the Tories’ record. He writes: “If you go back to 2010, the OBR’s main forecast didn’t look too bad: the recovery was continuing, and interest rates were able to rise as a result.
“But good policy does not just look at central projections, but it also looks at risks. Then, the risks were asymmetric: if the recovery became too strong, interest rates could always rise further too cool things, but if the recovery did not happen, interest rates would be stuck at their lower bound and monetary policy would be unable to keep the recovery on track.
“In 2010 and beyond that downside risk came to pass [bolding mine], and the recovery was delayed. Fiscal policy put the economy in a position where it was particularly vulnerable to downside risks, which is why it was an entirely foreseeable mistake.
“Exactly this point applies to 2015 and beyond. The problem with further fiscal consolidation while interest rates remain at their lower bound is that it makes the economy much more vulnerable to downside risks.”
In other words, it seems Conservative policy, as set down by History graduate and towel-folder George Osborne, deliberately weakened this country’s ability to recover from the crash of 2008 and afterwards.
How secure is you job? How safe are your savings?
Do you really want to risk them on more Tory bungling?
I also suggested that the OBR was discredited by endorsing them. As the table below shows, I did the maths to show why that had to be the case (it wasn’t hard to do). And now, as the FT reports:
“Britain’s economic recovery has generated far less tax revenue than forecast, raising the prospect of even deeper spending cuts after the general election to balance the budget.
“The latest blow to the public finances was an admission from the Office of Budget Responsibility on Monday that income tax receipts – the biggest single source of government revenue – are likely to fall short of government targets this year, despite record levels of employment.”
Three immediate issues follow from this. The first is that the quality of Treasury forecasting is dire. No one in their right minds could have believed the levels of growth forecast in March 2014 as shown in this table, the data for which is taken straight from the March 2014 budget with my extrapolation of growth rates added:
It wasn’t just growth in tax revenues that was forecast, it was growth way beyond any underlying level of economic increase in activity that was suggested was going to happen this year, and that was always utterly implausible.
Second, we have to consider the possibility that the Treasury just lied when putting forward these growth projections. They are so ridiculous, that has to be the best possible explanation for them.
And we have to the consider that the OBR may have been complicit in this – because if it was truly independent it should have been flagging up how unlikely this revenue growth was in March, and not now.
And what does it all mean?
It means all Osborne’s economic claims are bunkum – but you should read Mr Murphy’s analysis at Tax Research UK.
What the Conservatives offer: This was described on Facebook as the most awkward photo of the Tory conference – rightly. Not only is she obscuring this year’s slogan in an embarrassing way, but she is doing it with what appears to be a fascist salute.
More information on the lies being told at the Tory conference comes from Kitty S Jones. Vox Political had intended to run a detailed piece but Yr Obdt Srvt had to deal with a slight emergency (being a carer, these things do happen) and now we’ll just quote the salient points:
“The deficit reduction programme takes precedence over any of the other measures in this agreement” – stated in the Coalition Agreement. Of course the truth is that this whole process of prolonged austerity is NOT about deficit-cutting. It’s just the cover for Tory ideology. It is actually about shrinking the State and squeezing the public sector until it becomes marginal, then non-existent, in an entirely market-driven society. The bank crisis-generated deficit has been a gift to the Tories in enabling them to launch the scuttlebutt that public expenditure has to be massively cut back, which they would never have been able to get away with, without the deficit-reduction excuse in the first place.
I am still seeing the “inherited debt” LIES that the Tories are still telling, despite official rebuke from the Office for Budget Responsibility (OBR) chief Robert Chote, and this is same Tory-led government lost our triple A Moody and Fitch credit rating, and that borrowed more in 3 years than Labour did in 13. Figures from the Office for National Statistics (ONS) showed that the coalition had borrowed £430.072 billion in just 3 short years, whereas the last Labour government managed to borrow just £429.975 billion in 13 years, and unlike the Tories, Labour invested most of what they borrowed in public services.
The much bandied-about 2010 deficit of “over 11%” is false. This is the Public Sector Net Borrowing (PSNB – total borrowings) and not the actual budget deficit which was 7.7%. (See OBR Economic and Fiscal Outlook March 2012 page 19, table 1.2.)
In 1997 Labour inherited a deficit of 3.9% of GDP (not a balanced budget) and by 2008 it had fallen to 2.1% – a reduction of a near 50% – now that’s impressive. It is implausible and ludicrous to claim there was overspending.
In cash terms a millionaire’s debt would be greater than that of most people. Therefore the UK would have a higher debt and deficit than most countries because we are the sixth largest economy. Therefore it is laughable to compare UK’s debt and deficit with Tuvalu’s where GDP/Income is £24 million whilst the UK’s income is £1.7 trillion.
In 1997, Labour inherited a debt of 42% of GDP. By the start of the global banking crises 2008 the debt had fallen to 35% – almost a 22% reduction (page 6 ONS). Surprisingly, a debt of 42% was not seen as a major problem and yet at 35% the sky was falling….lordy me.
The deficit was then exacerbated by the global banking crises after 2008. (See HM Treasury archives). The IMF have also concluded the UK experienced an increase in the deficit as result of a large loss in output/GDP caused by the global banking crisis and not even as result of the bank bailouts, fiscal stimulus and bringing forward of capital spending. It’s basic economics: when output falls the deficit increases.
The large loss in output occurred because the UK, like the US, has the biggest financial centres and as this was a global banking crisis we suffered the most – not as a result of overspending prior to and after 2008, as the International Money Fund (IMF) concurs.
The UK national debt is the total amount of money the British government owes to the private sector and other purchasers of UK gilts. The national debt now stands at£1.5 TRILLION (and rising), so a further saving of £3 Billion in benefits, as proposed by Osborne, will clear the debt in, say, a mere 500 YEARS.
Damning: The graph by the House of Commons Library, showing how earnings have plummeted since Cameron’s Coa-lamity government came into office.
David Cameron must be so proud. He wanted a return to the Victorian era and that is exactly what he has achieved.
Wages have nosedived, meaning the gap between the richest and poorest is larger than it has ever been; we already know that diseases once thought long-gone are stalking our streets once again while the National Health Service has been bled to the point of death; and the welfare state is in critical condition, with people who have paid into the system all their lives bullied out of claiming benefits when they are needed and sent back to die in their homes.
This is David Cameron’s brave new Britain.
The figures on wages are the latest blow against the public-relations Prime Minister’s credibility – they come from the respected House of Commons Library.
The graph (above) uses figures from the Office for National Statistics, the Bank of England and forecasts from Coalition poodles the Office for Budget Responsibility.
It shows that real earnings are expected to have fallen by 2.3 per cent between 2010 and 2015 – the first fall since 1922-3 when wages fell by 1.8 per cent – and the largest since 1874-80, under Conservative Prime Minister Benjamin Disraeli, when they fell by 2.6 per cent.
Firm figures for 2010-13, from the ONS, paint an even worse picture – they show a 4.6 per cent drop during the three-year period.
So, Dear Reader, if you have been doubting Labour’s claim that wages have dropped by £1,600 per year, in real terms, since the Tories and the Liberal Democrats sidled into office, doubt no more!
This factual evidence has thrown into chaos Conservative claims that the UK has returned to prosperity because our Gross Domestic Product has finally exceeded its pre-financial-crisis peak.
Vox Political was right to say GDP might be up 3.1 per cent on last year but it has nothing to do with most of the population.
What is our part-time Chancellor going to do about it? He’s done quite a lot of nose-diving himself and, considering what he has managed from his office…
Let’s hope the song isn’t ‘Gold’, because the irony would be too much to bear.
George Osborne might as well go back to prancing around a prostitute’s boudoir to a soundtrack by Spandau Ballet.
A moment of crisis for David Cameron as he realises it is unlikely that George Osborne has the faintest idea what the Autumn Statement means.
If anybody else had prattled on for 50 minutes while hardly uttering a single sensible word, they would have been consigned to a mental hospital forthwith.
But this is Coalition Britain, and the speaker was George Osborne, the man who likes to tell us all that he is in charge of the nation’s finances. Thanks to his government’s Department for Work and Pensions, nobody is allowed to have mental illnesses anymore; after this speech, it seems likely we all have an idea about the reason for that.
A 50-minute speech is a lot of verbiage, and it is certain that worthier journalists across Britain – if not the world – have already analysed it to exhaustion. Allow me to let you into a secret:
They’re probably trying too hard.
Most of the speech was about putting Labour down. The Opposition has made all the headway over the past few weeks, and we all knew Osborne was under orders to change the mood music of the nation in time for Christmas.
Did he manage it? Not really. His speeches always come across as strained events, where he’s making an effort to be clever without ever achieving it. As a result, the message gets lost. We can therefore discount the Labour-bashing.
That leaves us with what he actually said. Even here, his meaning was at times opaque. What follows is an attempt to provide a handy guide to George-speak, for anyone unfortunate enough to have heard him yesterday.
Osborne: “We have held our nerve while those who predicted there would be no growth until we turned the spending taps back on have been proved comprehensively wrong.”/Meaning:“I am lying. Austerity failed miserably and the economy flatlined. A few months ago I realised that we would have nothing to show at election time so I turned the spending taps back on, with Help To Buy and Funding For Lending. I know that these are exactly the sort of Keynesian economic levers that I preached against for three years but I’m hoping that nobody noticed.”
The hard work of the British people is paying off, and we will not squander their efforts./Osborne appears to be celebrating his three years of stagnation. He inherited growth and decided to trash it. (MagsNews on Twitter)
There was no double-dip recession./“Phew! Lucky escape there!”
At the time of the Budget in March, the Office of Budget Responsibility forecast that growth this year would be 0.6 per cent. Today, it more than doubles that forecast and the estimate for growth will be 1.4 per cent./“Please God don’t let anybody remember that three years ago, the forecast for this year was 2.9 per cent.”
Today in Britain, employment is at an all-time high… We have the lowest proportion of workless households for 17 years./These jobs have increased the numbers of the working poor. Too few are full-time; too many are part-time, zero-hours or self-employed, serving up no National Insurance contributions from employers, no holiday or sick pay, or making contractors work long hours for less than the minimum wage.
The number of people claiming unemployment benefit has fallen by more than 200,000 in the past six months—the largest such fall for 16 years./“And we have imposed sanctions on more people on Jobseekers’ Allowance than ever before, in order to produce that figure.”
By 2018-19, on this measure, the OBR does not expect a deficit at all. Instead, it expects Britain to run a small surplus. These numbers mean that the Government will meet their fiscal mandate to bring the structural current budget into balance and meet it one year early./Although of course the books were initially supposed to be balanced by 2015. (Huffington Post live blog)
This year, we will borrow £111 billion, which is £9 billion less than was feared in March./…and £41 billion more than forecast in 2010.
We will cap overall welfare spending./But this will not include the state pension (half the social security budget) or the most cyclical jobseeker benefits./”A living wage would mean less dosh on in-work benefits; letting councils build would mean less subsidies for private landlords.” (Owen Jones on Twitter)
Pensioners will be more than £800 better off every year./But as usual he’s ignoring the VAT elephant in the room. (Mark Ferguson on Twitter)
We think that a fair principle is that, as now, people should expect to spend up to a third of their adult lives in retirement. Based on the latest life expectancy figures, applying that principle would mean an increase in the state pension age to 68 in the mid-2030s and to 69 in the late 2040s./But life expectancy depends on where you live and how much money you have, meaning the poor continue to pay more towards the pensions of the rich./”Current pensioners better off – future pensioners paying for it. What was that about “making our kids pay for current spending” George?” (Mark Ferguson of LabourList on Twitter)
Most wealthy people pay their taxes and make a huge contribution to funding our public services; the latest figures show that 30 per cent of all income tax is paid by just one per cent of taxpayers./Estimates of the amount of tax that is not collected range between £25-£120 billion per year and it is not the poor who aren’t paying up.
This year the rich pay a greater share of the nation’s income taxes than was the case in any year under the last Labour Government./Because they now have more income. Simple really. (Tom Clark of The Guardian, on Twitter)
Today we set out in detail the largest package of measures to tackle tax avoidance, tax evasion, fraud and error so far this Parliament. Together it will raise over £9 billion over the next five years./Including capital gains tax for foreign investors on sales of UK property, which has nothing to do with tax avoidance/evasion, fraud or error.
We must confront this simple truth: if we want more people to own a home, we have to build more homes… The latest survey data showed residential construction growing at its fastest rate for a decade./The rate of house building is at its lowest peacetime level since the 1920s
This autumn statement has found the financial resources to fund the expansion of free school meals to all school children in reception, year 1 and year 2, announced by the Deputy Prime Minister and supported by me./On Wednesday, the Lib Dems and Michael Gove’s education department argued over who had to pay for it.
Extra funding will be provided to science, technology, and engineering courses [in universities]. The new loans will be financed by selling the old student loan book, allowing thousands more to achieve their potential./And pushing thousands into the hands of debt collectors.
The best way to help business is by lowering the burden of tax. KPMG’s report last week confirmed for the second year running that Britain has the most competitive business tax system in the world./KPMG would know – it writes the tax system and also runs some of the larger tax avoidance schemes.
From April 2015 we will introduce a new transferable tax allowance for married couples… Four million families will benefit, many of them among the poorest working families in our country./Osborne says the Tories are backing British Families – but only ones who are married it seems. (Mark Ferguson on Twitter)/While the new tax arrangements bribe families to marry, the benefit cap will bribe big families to split up. (Tom Clark on Twitter)
We are all in this together./The biggest lie of this Parliament.
We are also helping families with their energy bills./Commence the cutting of the “green crap”. This from the “Greenest government ever”. (Mark Ferguson on Twitter)
Next year’s fuel duty rise will be cancelled./This is a cut in a tax that was never imposed in the first place.
We are going to abolish the jobs tax on young people under the age of 21. Employer national insurance contributions will be removed altogether on a million and a half jobs for young people./Young people will therefore have less chance to get contribution-based benefit. National Insurance assures people their pension contributions – except when it isn’t paid. So they will have no contributions to show for any years they worked before 21 and will have to work until their late 60s.
The cost for a business of employing a young person on a salary of £12,000 will fall by over £500./This is a bonus for businesses, not employees.
“Jobs tax” – it’s ludicrous, isn’t it? National Insurance has been a respected part of British life for more than 100 years but Osborne, living as he does in a mythical Victorian-era golden age that never actually existed, thinks it is a “jobs tax”. Either that or he’s still bruised by the fact that Labour’s labelling of the under-occupation charge as a Bedroom Tax caught on with the public.
Shadow Chancellor Ed Balls got on his feet and immediately attacked Osborne’s “breathtaking complacency” for denying the drop in living standards faced by everyone in the country, with families already £1,600 per year worse off. Osborne laughed. He thought that was funny.
The Shadow Chancellor pointed out that we are enduring the slowest recovery in a century, and that average real wages will have dropped by 5.8 per cent by the end of the Parliament (except for fatcat business bosses).
He was having a hard time getting his points across, however, because Tory MPs were heckling him very loudly. Owen Jones tweeted, appositely, “Do the Tories think that a bunch of braying MPs dripping with privilege, while ordinary people’s living standards crash, is good TV?”
Maybe they did. Maybe they thought they had the public on their side.
Let’s have a look at a few comments from the public – courtesy of the Huffington Post:
“Planning to kill more people, George?” (Robin Stacey)
“Spend more you wet lipped monkey.” (Will Moriarty)
“No one has an ounce of faith in anything you say, you parasitic pool of curdled warthog’s puke.” (Anthony Nicholas)
And finally: “Hope you end the speech with your resignation x” (Joanne Wood – and yes, she did mean to end with a kiss).
What a shame Osborne did not follow her advice.
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George Osborne’s claim that his nonsense policies have magically turned the economy around, coupled with his equally-preposterous claim that the UK needs another seven years of austerity before he can balance the books – provides a fine example of the duality at the heart of Conservative economic policy.
He needs to convince you that his choices have made a difference and the nation’s fortunes are changing, but he also need to convince you that we’re in a terrible mess – or he won’t have an excuse to continue cutting more public services and selling them into the private sector so his rich friends can use them to fleece you.
The two claims are not only contradictory of each other – they are self-contradictory. The evidence shows that Osborne’s policies delayed the recovery, rather than encouraging it, and the ‘Starve The Beast’ plan he cribbed from George W Bush has long been recognised as harmful to any country’s economic health; by cutting services he is starving the economy of the liquidity that is its lifeblood.
(This is a point worth remembering: Whenever a TV news reporter says Osborne or the government want to make cuts in order to “save” money, they mean the government will be “taking money out of the economy” – which will consequently be worth less. As a result, some people will have to become poorer. Can you guess who?)
Before we congratulate Osborne in ways that are anything like as effusive as David Cameron’s endorsement earlier this week, let’s look at the facts: According to Martin Wolf in the Financial Times, in three and a half years, the UK’s economic performance has improved by just 2.2 per cent – against a prediction of 8.2 per cent by his pet Office of Budget (Ir)Responsibility. In the second quarter of 2013, Gross Domestic Product was 3.3 per cent below its pre-crisis peak and 18 per cent below its 1980-2007 trend, making this the slowest British recovery on record.
Osborne and the Conservatives point proudly to the strong increase in private-sector jobs but, as Mr Wolf states, “this is hardly something to boast about”. While employment – on paper – is at an all-time high, productivity has fallen back to the level it reached in 2005. What does this say about the quality of the jobs that are being filled? Are they high-quality, long-term, well-paid careers, or are they part-time, zero-hours, throwaway fillers? We all know the answer to that. Average wages have been cut by nine per cent, in real terms, since 2010 – and they are still falling.
Even by the standards of other crisis-hit, high-income economies, the UK’s performance has been dismal, says Mr Wolf, pointing to work by Spencer Dale and James Talbot of the Bank of England. This indicates that the Eurozone has performed just as badly – but the difference is that the Eurozone countries do not have control of every economic lever that is available to them; Britain does.
Osborne claims that high global inflation and the performance of the Eurozone have impacted on the UK; Mr Wolf’s assertion is that austerity is the reason for this disappointment – and Osborne was just as much a cheerleader for austerity in Europe as he has been for it in the UK. Furthermore, as the Labour Party pointed out in its report, “David Cameron’s out of touch, you’re out of pocket” (2013), inflation in other G7 countries has been lower than in the UK, indicating that high global prices have little to do with the problem.
“Yes, but,” says Osborne, “austerity has kept interest rates down.” Did it? Did it really? In that case, interest rates would have been kept low because of the promise (in 2010) that borrowing would be brought down by 2015. When the Coalition came to power, Osborne said he expected to borrow a total of £322 billion by 2015. In March this year, that figure had risen to £564 billion – an increase of 75 per cent! Meanwhile the deadline for the national debt to start falling has slipped from 2014-15 back to 2017-18 and the level at which the debt was expected to hit its peak has jumped from 70.3 per cent of GDP to 85.6 per cent. The deficit has been stuck at £120 billion a year for the last two financial years, despite the repeated claims that it has been cut by one-third. None of this has affected long-term interest rates and neither did the loss of the UK’s AAA credit rating in February this year.
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.
“With interest rates at the zero bound, austerity weakened the economy relative to what might otherwise have happened,” wrote Mr Wolf.
“Nobody thought recovery would never happen under austerity, merely that it would be damagingly delayed… This has been an unnecessarily protracted slump. It is good that recovery is here, though it is far too soon to tell its quality and durability. But this does not justify what remains a large unforced error.”
Looking to the future, Osborne has reacted to the new barrage of Labour policies, all of which have been carefully costed against savings in current budget areas, with a series of rushed measures that are entirely unfunded. Remember that, next time a Conservative accuses Labour of borrowing and spending!
The married couples’ allowance, worth less than £4 per week (and less than £2 if you’re on a low income) is unfunded. The promised fuel duty freeze is unfunded. These will cost more than £2 billion and no source has been identified.
And what about the £12 billion stage two of the housing ‘Help to Buy’ scheme, that Osborne rushed forward to this month?
He has pulled £14 billion out of nowhere, but still expects us to believe he will resume his stalled deficit cuts by £35 billion by 2015, £42 billion by 2017-18 and £43 billion by 2020, in order to create a budget surplus.
All the while, he is promising “improved living standards for this generation and the next”. For whom? These cuts must come from somewhere, and they mean removing a cumulative total of £120 billion from the economy each year by 2020. That has to come from somewhere.
Look at the amount by which bosses’ pay in FTSE100 companies has increased in the last three years – 32 per cent, while average worker pay has dropped by nine per cent.
Do you really think the “Have-yachts” will be paying for these cuts?
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