Public spending cuts: ineffective, unnecessary, dangerous
contribution by Adam Lent
Politics seems to be on a collision course with economics at the moment. With the right-wing press screaming for cuts and the polls showing a majority of voters agreeing, the main parties are now positioning themselves as cutters.
But there are three main arguments against public spending cuts.
1. Cuts are ineffective; they will not reduce the deficit and may actually increase it. As I pointed out in a previous post, this was the experience of the early 1980s. Margaret Thatcher’s attempts at cuts in the early 1980s created a deep recession which seriously damaged the public finances. The deficit only began to reduce in 1985 when the economy recovered.
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Lefties surrendering to the conservative movement
The Observer recently reported that ‘a senior government aide’ told them that, “I personally think we have got to look at universal benefits. It is unsustainable.”
Jackie Ashley wrote, “if there have to be cuts, then taking away child benefit from the better off, and the winter fuel payment from richer pensioners, would seem sensible ideas and are on Labour’s agenda.”
Comically, these are described as measures for Labour to shore up ‘the core vote’. They are nothing of the sort. The proposals to get rid of universal benefits are quite simply an unconditional surrender to people who loathe and despise left-wing values.
It has been a long term project of the conservative movement in this country to undermine the welfare state, and reduce it to a low cost, low quality residuum for poor people.
It is sad and pathetic to see government advisers and leftie journalists buying into the values and assumptions of the conservative movement and trying to undermine these achievements.
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Why I keep saying Gordon Brown has to go
Research by the Fabians showing the Labour party is losing women voters has elicited predictable comment. On Guardian CIF Rowenna Davis says ‘Brown must start listening to women‘, while over at Next Left Sally Gimson says ‘Labour needs to be less macho to win women voters‘. I don’t use “predictable” in a derogatory way because both make good points. But I fear they’re misunderstanding the problem.
The public are no longer interested in Labour policies. They have switched off and Gordon Brown is suffering from deep voter fatigue. This is partly because the government has nothing new to say, partly because there is no coherent message and partly because they’re tired. It’s not about policies; it’s probably no longer even about the message.
Labourites insist: ‘We must take on the fight harder and we must drive home how bad Tories are on public services‘. But it won’t work.
How shall I put this?
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The bubble is coming back
contribution by Josh Ryan-Collins
The recession is over claim the newspapers. Growth has returned. House prices are definitely on the up. Let the good times role.
But we are probably entering in to another credit bubble, of exactly the kind that caused the last financial meltdown. If you neglect a child and let them eat so many sweets they get sick, the general advice is to set some pretty strict rules afterwards to limit further sweet bingeing. In contrast, the financial sector has just had billions of pounds thrown at it by governments (and taxpayers) and, in return, it has been asked to change very little about how it operates.
As this astonishing interactive graph from the New York Times shows, big finance, after shrinking from $1.87 trillion dollars market capitalisation in the summer of 2007 to just $290 billion in March 2009, has now tripled in size from this low back to to $947 billion.
Some of the banks got knocked off along the way of course, meaning some of the survivors – such as JP Morgan Chase – are even bigger than they were before the crash. And the sector as a whole is even more concentrated and, arguably, poses more of a systemic risk.
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Osborne’s immediate plan of 30% cuts
There is a potentially important revelation in Peter Oborne’s Daily Mail column today, which is mostly an entertainingly argued dismissal of the ‘push-me, pull-you ‘oxymoron’ of ‘progressive conservatism’, as a Blairesque ‘all things to all people’ project.
Oborne worries that about the mixed messages, but is confident that plans are being drawn up for the spending axe to fall more sharply
On the one hand Shadow Chancellor George Osborne has sent out the solid ‘conservative’ message to the City that he will enforce huge public spending cuts. Simultaneously, however, Cameron and other members of the Shadow Cabinet are keen to put out a more ‘progressive’ message …
The truth is that Osborne will be forced to implement swingeing cuts after the election. Indeed, I can reveal he has ordered the Treasury’s permanent secretary, Nick Macpherson, to find savings of nearly 30 per cent in departmental budgets which would come into effect immediately if the Tories gain power.
Oborne welcomes this approach but wants the Tories to come clean ahead of the election.
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On clean cars, Spain leads the way
The Guardian reported this week that disused phone boxes are being earmarked as “recharging points” for electric cars in some of Spain’s biggest cities.
I decided to find out more about it and, by the look of it, it really appears the Spaniards are going to lead the way.
In a stark contrast with the tiptoing around paraded by other governments worldwide, next month Prime Minister José Luis Rodríguez Zapatero will unveil the Pacto por la Energía, so far the biggest electric vehicle production stimulus programme.
According to the Spanish Government, if all of the country’s cars were electric, oil bills would see savings of up to €11m a year and the country’s oil dependency down twenty per cent.
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The logic of the ‘left-wing’ BBC
Here’s a BBC reporter on Radio 5 Live (around 47 mins and 30 secs in) quizzing Ian Gray, Scottish Labour Leader, on the political response to Diageo’s decision to a) slash 900 jobs in Kilmarnock and b) turn down flat alternative plans put forward. This is the same Diageo plc which posted £2bn profits on August 27th.
I just wonder, when we face public spending cuts two years from now, whoever wins the election, with what authority do politicians push through those spending cuts when you criticize companies for looking for efficiencies in their operations?
Get that? Remember it well, because it’s a new interviewing tactic thought up by those clever BBC journalists in the wake of Labour’s admission that it’s planning spending cuts as well as the Tories. I’m sure we’ll hear it lots more.
And just marvel at the logic that lies behind it:
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Apparently the Tories saved the economy!
I realise that Ben Brogan is political commentator at the Daily Torygraph but even a pretence of impartiality is nice sometimes, no? His latest wheeze: Let’s give Dave and Osborne the credit for saving our rating
Dear god. That is some serious leap of logic. Let’s ignore the fact that lefties were arguing for ages that public debt was not at unprecedented or dangerous enough levels to bankrupt the economy. Let’s ignore the fact that Osborne and his crew got it completely wrong over nationalisation and had to humiliatingly accept that later. Let’s even ignore the economy is only bouncing back so quickly because of a stimulus the Tories argued against and Labour nevertheless pushed through.
Their own treasury secretary was still arguing yesterday that our credit rating was going to be downgraded even though it wasn’t. Let’s ignore all that to give this sorry shower of shadow ministers full credit for making rubbish arguments throughout shall we?
What Brogan is doing is offering a talking point for the Tories as the economy starts to recover – they should claim credit for being right all along. You’ll soon see this repeated across the same right-wing media that was recently claiming we were on a path no different to Zimbabwe’s. All that hysteria around quantitative easing will be forgotten as Tories rush to scrub their memories and start fresh.
Open borders is the mainstream view
Philippe Legrain, author of Immigrants: Your Country Needs Them, is on the wireless tonight advocating scrapping immigration controls. What puzzles me, though, is the BBC’s description of this position as iconoclastic.
In truth, Philippe’s position is mainstream. What’s odd and extreme is the argument for immigration controls. Look at this from three perspectives.
1. The invisible hand. Perhaps the dominant strain in liberal thinking is the Smithian-Millian argument that liberty promotes aggregate well-being. Immigration controls are a denial of this. They raise the question. If a freedom as basic as the right to work where one chooses diminishes overall well-being, is there a consequentialist argument for any liberties at all? Of course, you can argue that immigration brings negative externalities. But I’m not at all sure these are any greater than the externalities created by many other market transactions.
An attack on the right of immigrants is an attack on the fundamental argument for a market economy. It’s a radical view.
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Why don’t pension critics attack the fat-cats?
contribution by Nigel Stanley
The attack on public sector pensions by the TaxPayers Alliance, right-wing newspapers and the more excitable employer organisations is the kind of campaign used by the shrink-the-state US right.
There’s a very clear narrative – public sector pensions are unaffordable, unreformed, out-of-control and provide fat cat pensions. Its aim is to divide less well off people and make them vote for the interests of the rich.
Yet its evidence base continually shifts, with outrageous misrepresentation of statistics and deliberate bending of the truth in an admittedly complex area that very few people understand. The result is that even progressive people accept there is some big problem with public sector pensions that needs resolving.
Today the TUC publishes the first comprehensive rebuttal of the arguments used against public sector pensions and instead shows that for every pound that taxpayers spend on public sector pensions this year, they are giving £2:50 to subsidise the pensions of the richest one per cent who earn more than £150,000.
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Migration is not a crime, but the discussion is criminal
contribution by Left Outside
Carl Packman recently wrote of the left’s problem on immigration. However, it is not the just the left which has difficulty discussing immigration. The right does too, because they just can’t help themselves distorting the truth or outright lying.
As I began to discuss here, talk about immigration in this country is tainted by decades, indeed centuries, of prejudiced stereotypes that are difficult to escape. Unfortunately some papers extend so little effort to escape this regrettable history that numerous blogs have been created to monitor them.
A lack of originality, a surplus of bile
What I want to create is a crib sheet for any article you see on immigration, migrants, refugees or asylum by looking at the history of that discussion. Our modern debate on migration has not developed out of a vacuum.
In fact, we are forced to watch tedious reruns of discussions concerning Huguenots in the 1680s, Irish migrants in the early 19th Century and Eastern Europeans in the late, Jews in the 1930s and West Indians and South Asians in the 1960 and 70s.
As Paul Gilroy describes in There Ain’t no Black in the Union Jack “the wearisome task of dissecting the rhetoric is not helped by its lack of originality: ‘they’ are taking our jobs and houses, using up local resources and undermining ‘our’ culture and, in return, offering ‘us’ disease and terrorism.” However, dissect it we will, again and again, until they fucking learn.
Any immigration story you read in the above papers will be shaped by the groundless assumptions under which the anti-immigrant polemicist operates. These do not pop out of thin air, they are drawn from the past. Pick an article; I will guarantee that it will contain a combination of the below:
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A 10 pt plan to save Labour?
1 – establishment of a High Pay Commission;
2 – greater tax justice, including closing tax havens and more equal distribution of income and wealth;
3 – index link benefit levels, pensions and the minimum wage to average incomes;
4 – replacing tuition fees with a graduate solidarity tax;
5 – a Fair Employment Clause in all public contracts;
6 – windfall and transaction taxes and resetting capital gains tax;
7 – a new covenant with the military, including more investment in mental healthcare, equipment, housing and support for veterans funded by scrapping plans to renew Trident and re-deploying the money saved within the Minister Of Defence budget;
8 – a Green Neal Deal*, to include scrapping the third runway at Heathrow;
9 – remutualisation of the finance sector;
10 – a credit card bill of rights for consumers.
… according to Jim Pickard, taken from a speech that Jon Cruddas gave yesterday.
The advice is simple: move leftwards or lose the election. I can see two advantages with this. First, this manifesto would be electorally popular, and it would fight on a different ground than the one Tories want now (size of public debt). Secondly it would invigorate a very demoralised Labour base which would otherwise not bother to go out and vote or deliver leaflets.
The problem is that it doesn’t go far enough.
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What is the left-wing position on immigration?
Recently blogger Left Outside noted, in his entry on Dan Hannan’s praise for Enoch Powell, that:
Discussing immigration is difficult in this country, often it descends into one side calling the other racists. Or more commonly, a writer beginning a piece by stating that it is no longer possible to discuss immigration in this country, without being accused of being a racist. I don’t think that this is a particularly healthy way to conduct debate.
Not healthy indeed. But who is lagging behind? Dialogue on asylum, immigration, migration is very important, but little is said by the left on the subject other than to denigrate the position taken by the BNP.
But to leave a void instead of valid ideas, leaves the issue in the court of the far right and does nothing to counter the argument that the leftist attitude towards migration is anything other than mere contrarianism.
In today’s current political climate especially, there can only be one thing as bad as a policy where all immigration and asylum is curbed (more or less in line with how the BNP stand), and that is an open door policy. For this is the sort of argument sympathised by libertarians and hardcore free marketers of the Milton Friedman ilk who embrace a pick of the workforce for as little payment as possible, and a constant wave of unemployment just in case that cheap worker gets silly.
Another reason why the left needs its voice heard on immigration is because who a country accepts or denies as being legitimately in need of political asylum may be wrong.
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Cayman Islands collapse: why it matters
The Cayman Islands are insolvent. Broke. Unable to make ends meet. Government staff are going unpaid, and the Island authorities have written a begging letter to the UK pleading for a bailout. Our Government has said no, because it doesn’t think Cayman can pay back the debt [PDF]. The world’s 5th largest banking centre, with 80% of the world’s hedge funds, is bust.
Cayman is one of the world’s most important tax havens – or as they are better termed, secrecy jurisdictions: places where banking and trust secrecy is enacted for the primary benefit of non-residents. In Cayman, financial secrecy is so extensive it is illegal to even ask for some kinds of financial information.
This sort of financial secrecy is a global menace. It enables massive tax avoidance, and facilitates tax evasion, the easy flow of illicit funds, terrorist financing, money-laundering by criminal gangs, and mass capital flight out of the world’s poorest economies. It is also at the heart of the financial order which collapsed so spectacularly last year, with very tangible consequences for millions of ordinary people.
The significance of Cayman’s problems is far-reaching.
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Why Tories should actually watch The Wire
I want to focus on something specific about what The Wire achieves amidst those more general assesments. Namely, a sublime exposition of the importance of uncontrolled arbitrariness in life. The Tories would do well to pay attention.
The Wire is unambiguously engaged in the same exploration of issues of arbitrariness and luck in determining socioeconomic distributions, and the attitudes we attach to them. In particular, it brings out beautifully the way in which one’s birth – over which one has no control – determines so much.
Take, for example, the character of D’Angelo in Series 1 and 2. Most viewers probably start out disliking D’Angelo: he is a murder, a drug dealer, and a man who conducts a long-running affair behind the back of the mother of his child. As clear a cut case of a conventional “bad guy” as you could ask for? Not at all. For one of the best aspects of the first two series of The Wire is the manner in which the D’Angelo is gradually humanised to the audience: he turns out to be a man of great integrity, loyalty, intelligence and honour.
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Dependency culture and bonus culture
Apparently there are at least 164 definitions of the word ‘culture’, according to one 1950s tome on anthropology that was well-known in its day. But in current popular British usage, the term conjurs up a notion of an internally coherent set of beliefs that justify given social arrangements to participants within a particular social structure.
That must be why the systematic trend to towards paying astronomical rewards to selected players in the financial services sector has become elevated into something called ‘bonus culture’. The suggestion here is of some kind of permanence, regularity and legitimation.
By elevating current City practice to the status of a bona fide culture, we are implicitly saying we should leave well alone . It’s a banker thing, baby, you wouldn’t understand.
The logic works in the same direction as when applied to ethnic minorities, giving rise to occasions when many on the left find themselves – uneasily or otherwise – defending practices they would regard as sexist or homophobic in other contexts.
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New migration figures butchered by Daily Mail
Journalism and statistics go together like Dog the Bounty Hunter on a dinner date with Tolstoy.
Usually, tabloid statistics come from some press release sent out by a company with a vested interest, from a “report” by the TaxPayers’ Alliance, or from an NGO, quango, or think-tank.
Sometimes, though, an ambitious journalist will tire of rewriting pre-compiled reports and studies and decide to go and look at the statistics for themselves. This is a risky thing to do because the journo is well aware of their lack of training in stats and the potential for time-consuming redrafts if they make a mistake.
Such is the case with Sue Reid’s “SPECIAL INVESTIGATION” on migrant workers and unemployment in yesterday’s Mail, headlined “Revealed: The areas where there are more migrants chasing jobs than locals“. Sue seems quite proud of her data-mining, as there’s a little photo of her looking pleased with herself next to the words “SPECIAL INVESTIGATION”.
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Tom Harris: Sucking up to the rich
Tom Harris MP has re-posted his article to Guardian CIF and responds to my criticisms of his opposition to the idea of a High Pay Commission:
Sunny Hundal at Liberal Conspiracy, in particular, accuses me of seeking rightwing adulation by seeking to protect the rich. He’s not entirely wrong. I want the Labour party to continue to win the support, not just of our core vote, but of those Thatcher and Major supporters who switched to us in 1997 and who stuck with us for another one-and-a-half elections.
But if supporters of a high pay commission are concerned about inequality, why are they focusing so much on those who are furthest away from poverty? Where are the measures for taking the lowest paid workers out of tax altogether? And how do they expect the poorest in the land to react when told that, although their own circumstances are to be entirely unaffected by the advent of the commission, at least a few people they’ve never met or heard of are worse off as a result? Gosh, I can feel the gratitude already …
Put aside whether you like the idea of a HPC or not, it’s more amazing to consider this is coming from a Labour MP.
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What difference a bit of research can make
One of the following articles was based on a couple of anecdotes, copying down some government spin and personal prejudice on the part of the author.
The other was written after doing some proper research and reporting the opinions of people who work day-to-day to help unemployed people. Can you guess which is which?
Jenni Russell, Nov 2008 – “We must dare to rethink the welfare that benefits no one:
The left has long been blind to the dependency culture that deters adults from flexible work and damages their chlidren”
Jenni Russell, August 2009 – “Some talk about welfare to work. The poor know it as welfare to destitution: The unemployed are being forced to take huge risks with their security when they move into the world of low-paid labour”
A better response to the financial crisis
contribution by Duncan Weldon
The current economic downturn is a crisis of finance. Over the last twenty years alone the world has witnessed a half dozen crises: the bursting of the Japanese ’bubble economy’ in 1989, the Nordic banking problems of the early ‘90s, the Mexican ‘Tequila Crisis’ of 1994, the 1997 Asian Crisis, the Russian Crisis of 1998 and the bursting of the dot-com bubble in 2000.
What all of these various episodes have in common is that a problem that began in the financial markets was allowed to spill out into the real economy, often with severe consequences.
So far the left, whilst rightly calling for further regulation is not really advancing a specific argument beyond vague talk of bonus caps and clawing back previous pay.
Neither of these are a bad idea, but any attempt to reform the financial system needs to be based on firmer grounds.
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» So what if the Labour candidates went to Oxbridge?
» Last night’s Labour hustings: will it get interesting or turn to torture?
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