Join our live discussion of the Pre-Budget report
Liberal Conspiracy have teamed up with LabourList, Left Foot Forward and the TUC to host a joint, live discussion of the Chancellor’s Pre-Budget Report.
There is speculation the government may introduce a transactions levy and / or introduce a year-long Windfall tax on banker’s bonuses. The TUC’s Brendan Barber yesterday set out three tasks he needs to pull off.
Update: The discussion is now over
I am an unlikely class warrior
Here’s what I don’t get.
When I talk to serious people in badly cut suits, they are unanimous in their opinions. “Oooh, the deficit is troubling”. They say, grimacing in fiscal sympathy. “It’s all very serious” they add, stroking their chins in deficit based peturbation. “Sacrifices must be made” all concur, gazing steely eyed towards a future of budget balances and restraint.
You know what? I agree with them.
I sit alongside, in my own badly cut suit, grimacing and chin stroking and gazing sternly at the dissolute world with the best of them. I nod along solemnly when, to quote Benedict Brogan, we hear the regular call for a “politics, not of them and us, but of “we” “.
But I have to respond, “Who exactly is this “we”?”
Because when it comes to asking people who have done very well out of prosperity and asset growth to contribute towards last and this years current economic rescue operation, I’m all for it. Go right ahead, I say.
continue reading… »
Productivity in public services: how the Tories lie
contribution by Margin4Error
Last week the Conservatives launched a new line of attack on the public sector. Phillip Hammond, the Shadow Chief Secretary to the Treasury, told Policy Exchange that the public sector was inefficient.
He said that in the last twelve years its productivity had grown a lot slower than the private sector. Then he concluded that had it kept pace we could have had the same services for £60billion less tax each year.
There are a lot of inferences intended. One is that Labour is wasteful. Another is that the private sector is more efficient than the public sector. Another is that voters can expect something for nothing from the Tories, or “more for less” as the official line goes.
But the most important inference is that the Tories can cut the deficit by cutting waste rather than by raising taxes or sacking nurses.
£60billion?
So let’s start with the £60billion annual saving that Labour cruelly denied us.
First of all I have to acknowledge a weakness in my article. I can’t break down their figures for you. I can’t break them down because I don’t have them. In fact no one seems to.
The Conservatives don’t appear to have referenced their assertion anywhere. As such, other than the mouth of Phillip Hammond, we don’t know where £60billion came from.
That problem aside, we are talking about a fairly modest rise in productivity over twelve years.
continue reading… »
Yes, let’s tax the ‘wealth creators’
It’s the ultimate fallback argument for the richest one or two percent of the population; sure, the £20m penthouses overlooking Hyde Park, the private jets and the 37 meter superyachts might make it look as if we are flaunting it, but at the end of the day, don’t you ever forget for one moment that we are the wealth creators.
We don’t owe you lot anything. In fact, you owe us. And if you so much as try to detract even minimally from our immense fortunes, we shall have a collective hissy fit and depart your third rate neocommunist shithole country forthwith for some free enterprise paradise somewhere else, plunging the mass of the population into abject penury. The bottom would fall out of the domestic servant labour market, all because of your ingratitude. And then you’ll be sorry.
I mean, we can’t have democratically elected governments enacting progressive taxation, can we? That would mean that we would have to pay proportionately as much as our cleaning ladies, to use a comparison first put forward not by the far left, but by SVG Capital boss Nicholas Ferguson two years ago.
Expect many op-eds pitched at this level of sophistication over the coming days, as the bourgeoisie pretends to quake at the prospect of some sort of minimal tax clawback on bankers’ bonuses.
Swing to left in international elections
At the weekend, elections were held in Romania and Bolivia:
In Romania, the incumbent President Traian Basescu, of the centrist Democratic Liberal Party appears to have narrowly defeated the Social Democrat candidate Mircea Geoana, earlier exit polls suggested that Geoana was leading by 51% to 49%.
In Bolivia, the socialist Evo Morales won a landslide victory, with 61% of the vote. Former army captain Manfred Reyes Villa finished second, with 23% of the vote.
The elections took place in very different economic situations:
The Romanian economy is set to contract this year by 8.8 percent. After years of record economic growth fueled by easy credit and heavy foreign investment based on a neo-liberal economic model, Romania’s economic fortunes collapsed last year in the wake of the global financial crisis. Romania has also been impacted by downturns in Spanish and Italian construction sectors. Some ten percent of Romanians live outside Romania working in construction and working as domestics or day laborers.
In 2007, Romanians abroad sent €7 billion back home; this remittances are barely expected to top €5 billion. The International Monetary Fund suspended a €20bn ($29.7bn, £18bn) rescue package for the recession-hit country until a new government is in place and ready to enact budget cuts. Mr Basescu has pledged to implement public sector job cuts, suggested by the IMF as a way of putting the budget in order. Mr Geoana has said he would not, but he too has promised to co-operate with the IMF.
Bolivia’s projected economic growth of 2.8 percent this year is the most of 32 Western hemisphere nations tracked by the International Monetary Fund in its October World Economic Outlook. This year Bolivia will shed a title it has held for nearly a century. Since the end of its tin boom, Bolivia has been South America’s poorest country. Under Morales, the macro-economic management of the economy has been handled deftly doubling the country’s foreign reserves. The mantle of South America’s poorest country now passes to Paraguay.
More info here.
The bankers don’t deserve bonuses
Why is there still a row about bankers’ bonuses? What I mean is that the issue should by now be settled against them. There’s abundant evidence that large bonus “incentives” are not only not justified (pdf) by efficiency considerations, but can actually backfire, with the result that intelligent observers are demanding an end to them.
If we were serious about designing high-powered incentives, we’d consider abandoning bonuses and instead simply killing under-performing bankers. After all, the threat of death works perfectly well in motivating airline pilots or soldiers. So why not apply it more generally?*
Let’s be clear. Bankers’ bonuses have less to do with rational incentive mechanisms than with the fact that bankers have power. It’s a form of legal extortion.
Which raises the question; why is this not more clear? It’s because any power structure is sustained by ideology – a set of cognitive biases which might have a grain of truth but which serve to defend vested interests. In the case of bonuses, there are four such biases:
continue reading… »
The public sector rich list
The TaxPayers’ Alliance released its annual Public Sector Rich List today, always a sure-fire hit with the media. Among the statistics highlighted by the TPA – and quoted enthusiastically by journalists – are:
There are 8 people in the public sector who earn more than £1 million a year, compared with 4 people last year.
There are 35 people in the public sector earning above £500,000 a year compared with 21 last year.
There are 120 people earning above £250,000 a year compared with 88 last year.
Which is odd, because, in the small print beneath these statements, the TPA says the real reason for the increases is that it has surveyed more staff – by investigating more quangos and making more Freedom of Information requests. “The figures are therefore not directly comparable with previous editions of the Rich List,” the TPA cautions.
So why compare them then? And if it is going to compare them, why not be consistent and include inconvenient data, such as:
The average total remuneration of those included on the list is almost £225,990 per annum, compared with £240,000 per annum last year. Excluding staff in the newly nationalised banks, this year’s average is £209,151 – down 13% on last year.
Removing the nationalised bankers also brings the number of Rich List members earning more than £1 million a year down from 8 to 2 – ie half last year’s number, despite the larger survey group. Surely a cause for both TaxPayers’ Alliances to rejoice!
continue reading… »
AGW: battle of the conspiracy theories
Let’s forget the actual data for a second. Let’s assume that we know absolutely nothing about the likelihood of Anthropogenic Global Warming (AGW) theory being true, but that either the climate scientists or the [denialists/sceptics - insert loaded term of your choice here] are right.
Let’s also assume that one side consists of crooks, cheats and liars, and the other side of bold seekers for truth – but we don’t know which one.
What happens if you try and deduce which side is lying from how the world has acted, based on every actor’s incentives?
Who’s in it to win it?
If AGW is false and people are lying to try and show that it’s true, who benefits? To start with, some geeks who get money to build computer models, some hippies who get to feel less silly about 50 years of veganism and hair-shirt-wearing, and some companies selling turbines and carbon filters.
The nuclear industry is the obvious big potential money-draw, and has form on extorting enormous quantities of state cash – but almost the entire environmentalist establishment hates them and rails against their product, and nuclear currently isn’t counted as ‘renewable’ by any major standards. Still, they’re the ones to watch if there were a conspiracy.
On the other hand, if AGW is true and people are lying to try and show that it’s false, who benefits?
continue reading… »
The ‘horrors’ of inheritance tax
David Blackburn in the Spectator explains the horrors of inheritance tax:
Take one example: a family friend, who was a career soldier rising to the rank of Colour Sergeant, retired to a two-up two-down in suburban Essex and lived off a combination of state and service pensions for 27 years. He died in 2006 and his estate yielded £84,000 in inheritance tax.
The deduction means that a maximum of 3 of his 4 grandchildren will enjoy the opportunities that a private education can offer; he had intended all four to do so, among other things, such as enabling his children to move up the property ladder.
I’m assuming this is the worst example of the iniquities of inheritance tax that Blackburn is aware of.
So the consequences are:
continue reading… »
The cost of ‘No Recourse to Public Funds’
This is a guest post by James Radcliffe of Shelter Cymru in response to the current immigration series. It takes a view of some of the consequences of legislation passed to restrict migrant worker’s access to benefits and explodes the myth immigrants are getting free houses, free cars and massive benefits.
When the A8 countries joined the EU in 2004, the UK government was faced with the usual scare stories in tabloid newspapers about Britain being over-run by hoards of migrants who would both steal our jobs and lazily claim benefits.
Faced with these concerns the UK government introduced additional restrictions on people from the new members of the EU. They introduced the Worker Registration Scheme (WRS) in order to initially monitor and restrict access to benefits.
For those of you still unconvinced of the power of the media, it is worth taking a look at the leaked paper from the ministerial working group on immigration that considered whether to extend the WRS beyond the initial transition period. Note the following paragraphs:
“The change in policy is likely to be perceived domestically as a loosening of the governments grip on migration and benefit shopping. This would contrast unhelpfully with other government policy to tighten management of the migration system (as set out in the five year strategy for immigration and asylum). Public and media opinion remains largely resistant to rational arguments for migration, and the media climate is more hostile to migration now than in early 2004………..by closing the WRS, the UK would be going out on a limb re-igniting the media debate to no obvious (domestic public) advantage”
This has a consequence. In order to be eligible for public funds*, an A8 national has to been registered on the WRS and working in the UK for 12 months continually (they are allowed up to 30 days break). If they do not meet these criteria then they cannot access housing services, and many welfare benefits.
In the jargon they have No Recourse to Public Funds (NRPF). A8 nationals in the UK with this condition do not have a welfare state to provide a safety net for them should they lose their job or get evicted from their home, etc.
As a result, anecdotal evidence of destitution amongst A8 nationals began to emerge from a variety of sources. I’m highlighting a couple of case studies that we uncovered in the course of our research to illustrate the human side of NRPF.
continue reading… »
Why are Tory writers so stupid?
Maybe it’s a good job that newspapers don’t matter, because even the so-called quality ones carry appalling errors. Via Tim and Danny, here are two in the Torygraph.
First, it tells us that:
A low income household is one that lives on less than 60 per cent of the average UK household income
No. Low income is defined, for official purposes, as 60% of the median household income. If you’d read the Joseph Rowntree report, or even just the summary of it, you’d know this*.
Second, Janet Daley writes:
The Office for National Statistics points out that the amount spent on state education has risen by 43 per cent since 2000 but school “productivity” – measured by GCSE and stats results - has actually declined by 7.5 per cent. There is what statisticians call an inverse correlation between the amount of money spent by the state on schools and their academic success.
This is just gibber.
continue reading… »
The Truth about Immigration – Economic Migration
Note: Having split the asylum article in two, this is longest single article in the series and pretty data heavy to boot. Its also not one that can be easily split without compromising the argument, so for ease of reading and comfort I’ve provided a full PDF version for download – Economic Migration.pdf -it probably has loads of typos.
Other than asylum, the most contentious issue within the entire immigration debate over the last 10-12 years has been that of economic migration.
With the annual number of asylum applications received by the UK having fallen dramatically, from a peak of 84,000 in 2002 to less than 24,000 in 2006 and 2007, the lowest such figure since 1993, the tabloids have needed a new source for their favourite ‘swamped by foreigners’ stories and since the expansion of the EU into Eastern Europe, that source has been provided by migrant workers.
As ever, the truth is much more complicated than the tabloids would have us believe and contains some fairly stark lessons about the true state of the British economy, lessons that politicians on all sides of the House of Commons seem unwilling to acknowledge openly.
In July, this year, the Daily Mail ran what is, for both the tabloids and mid-market newspaper titles, a fairly typical story about economic migration:
British jobs for foreign workers: Experts reveal 70% of new jobs taken by migrants
More than seven out of ten jobs created under the Labour Government have been taken by foreign-born workers, experts revealed last night.
The percentage of new jobs taken by those born overseas is the highest of any of the major economies analysed by the Organisation for Economic Co-operation and Development.
The article carries on to make the specific claim that an OECD analysis of British labour market trends since 1997 had shown that of an increase of ‘around 2 million’ jobs since 1997, ‘almost 1.5 million of this was accounted for by persons born abroad’ before adding that this amounted to ‘71% of the total’. This is a classic example of the press altering reality to fit a pre-packaged agenda. The report, itself, was published on the day after the OECD released its 2009 ‘International Migration Outlook’ report with this press release:
Keep doors open to migrant workers to meet long-term labour needs, says OECD
30/06/2009 – The economic crisis is likely to cause the first major fall in the number of migrants coming to work in OECD countries since the 1980s, according to a new OECD report. This is already happening, for example, in Ireland, Spain and the UK, which were among the countries first hit by the downturn…
In the United Kingdom and Ireland migration from the new EU member countries has declined by more than half.
After Dubai
Sovereign default is basically the posh name for what happens when a country says it can no longer meet repayments for the 545% APR doorstep loan it took out from Provident Financial.
But here’s the good bit; in these cases, the friendly neighbourhood bloodsuckers can’t exactly send round the bailiffs to take away the telly and the stereo. So what do they do? Hold a whipround for the victim instead, and write off large chunks of what is outstanding.
Would that Britain’s poor were treated the same way as Mexico in 1982, Russia in 1998 or Argentina in 2002. The real surprise is that states don’t try it on more often than they do.
Why Frank Field MP is talking nonsense
Via Paul, I see that Frank Field has written some utter bilge. He says:
It simply isn't possible to increase the money supply by 300% and for there not to be a megadose of hyperinflation built into the system.
This is plain wrong. I assume he’s talking here about the Bank of England’s balance sheet. Its overall liabilities/assets have quadrupled since the summer of 2008.
Now, things are complicated here by a change in the data in 2006. But there is a precedent. The Bank of England’s balance sheet also exploded in 1998-99. There was no subsequent hyper-inflation.
continue reading… »
Labour should expel Frank Field MP
‘What we’ve go to do here is get people to understand it’s not a referendum it’s a choice and as a choice it has consequences,’ said Sean Woodward MP at the Labour party conference.
And the fast emerging electoral strategy, as reflected by Labour Matters, is all about ensuring that the voters see the clear blue water between Labour and the Tories.
The focus, say the electoral strategists and the PR people, should be on the way Labour is dealing with the economy, and the 1937-style disaster that may well ensue if the Tories get into power.
And as election strategies go, it’s pretty good one, especially as it’s starting to be sharpened up by a concentration on how the Tories will ‘target investment on a tax giveaway of £200,000 to the 3,000 wealthiest estates’; in general the focus is on reminding people that, in the end, it is the Labour party that is wedded to the interests of the working class, not the Tories.
Time then, for Labour members, you’d think, to get behind the message. Unless you’re Frank Field, that is.
continue reading… »
Observer repeating right-wing spin on inheritance tax
Andrew Rawnsley has an excellent article in today’s Observer on the changing politics of inheritance tax. In the era of deficits and looming austerity, the Conservative pledge looks less canny than when it was first announced in 2007, as if the one group that the Conservatives can find some tax relief for in these difficult times are the very rich.
The Observer’s Political Editor, Toby Helm, also reports that, in view of the changed circumstances, the government is considering freezing the threshold, rather than increasing it as planned.
This would seem to me to be the least the government could do as part of a program for spreading the burden of paying for valuable public services in what are indeed difficult times.
But consider how Helm chooses to describe the issue:
continue reading… »
Needing real Labour: Skelmersdale
Reposted – the site that this post links to was down on Friday.
Over the last little while, yours truly has been spending time talking to people who need public services, but feel (and often are) excluded from the lofty political circles that will decide the future of those services.
From today, we’ll publish excerpts from these interviews and links to the full articles on a new site.
First up is the West Lancashire town of Skelmersdale – an old ‘new town’ badly in need of regeneration. Poverty is an issue for some Skem locals. Fury at their powerlessness is another. Everyone I spoke to was a Labour voter. I spoke to some Labour councillors. Tory councillors have refused to talk to date.
(Regeneration plans for Skelmersdale have been threatened by Everton and Tesco plans for a stadium and retail park in nearby Kirkby (Skelmersdale is only ten minutes’ drive from Kirkby). West Lancashire borough council wanted to regenerate Skelmersdale by building Skelmersdale a retail centre of its own, but was unlikely to do so if a bigger retail centre was built in Kirkby. (Last week, the government rejected the Everton and Tesco plans)).
Below is an excerpt from the first of four interview sessions with Skelmersdale locals – everyday people who feel they’ve been abandoned by the political process:
Hazel Scully
Long time Skelmersdale council housing tenant Hazel Scully is pleased that West Lancashire borough council is planning a facelift for run-down Skelmersdale town centre – there’ll be a new high street, shops, cinema, library, sports centre, swimming pool, housing, and a lovely landscaped park to replace the spooky weedfest along the River Tawd that presently serves as Skelmersdale’s main municipal space.
It is just a pity, says Scully bitterly, that she won’t have much chance to enjoy the improvements.
She and everybody else who lives on the town-centre Firbeck and Findon estates will be removed from view as part of the upgrade. The council wants to demolish the estates, shift the occupants elsewhere in the borough, and build homes for private sale in place of Firbeck and Findon.
‘We don’t fit in,’ says Scully glumly as she fiddles with the lace pane that she has draped over the large table in her small kitchen. ‘We don’t fit in with their vision of a new, updated Skem.’
Others suspect an infernal Conservative agenda. ‘Is there gerrymandering going on?’ West Lancashire Labour councillor Jane Roberts says on Save Firbeck – ‘and you do start to wonder [about gerrymandering]‘ she says on the phone.
Read the rest.
Does taxing the rich work?
Tim and Richard are debating that old question, would higher taxes on the rich, as demanded by Compass, actually raise tax revenue, or would the rich emigrate, work less or fiddle their taxes with the result that less income would be raised?
Economic theory is absolutely no help here, as there are two competing effects. The income effect predicts that higher taxes might lead people to work harder, in order to maintain their post-tax incomes. The substitution effect says that if work becomes less remunerative, they’d do less of it and spend more time with the guitar or golf clubs.
It is an entirely empirical question as to which one dominates – in other words, as to where the Laffer curve is.
Here, though, is the problem – the empirics are also uncertain. Take, for example a recent paper (pdf) from IFS economists. It says:
If the richest 1% see a 1% fall in the proportion of each additional pound of earnings that is left after tax, then the income they report will rise by less than half that – only 0.46%. Although a tentative estimate, this suggests that the government would maximise the revenue it collects by imposing an overall marginal rate on the highest earners of 56.6%, very close to the 53.0% currently charged.
Victory to Tim, you might think.
No. For one thing, as they say, the estimate is tentative. Allowing for this gives us another interpretation. This is that the revenue-maximizing top tax rate is 95% likely to be in the range 45-75%. This encompasses Tim’s and Richard’s views.
And it could be that Richard is nearer the truth. continue reading… »
Reporting back from the Citizens’ Assembly
You’ve got to love London Citizens’ strategy. Stick a politician on stage in front of several thousand people, present him (and it usually was a “him”) with some wonderfully populist solutions to a bunch of devastating facts and ask, “So are you with us?”
The policies presented to the squirming politicians and business leaders at a choc-a-bloc Barbican last night were made all the more difficult to avoid because they were decided democratically. Over a thousand of London Citizens’ members were involved in developing the policies, which you can read here.
Despite some inevitable wrangling, representatives from all political parties committed to working with London Citizens on these proposals. Greg Hands said the Conservatives would introduce a cap on store card interest rates (although notably, he didn’t say what that cap would actually be) and a representative from the British Bankers Association, who was brought on stage straight after a heart-wrenching personal testimony about debt, was asked if he’d commit to help responsible lending. (He did). Stephen Timms said he’d hold a meeting with London Citizens and the OFT to discuss capping interest rates, and Andrew Altman, CEO of the Olympic Legacy Programme said he’d meeting with London Citizens quarterly to discuss their plans. (Damn I’d love to see officials’ faces when these bigwigs tell them they have to add these dates to their diaries.)
Although London Citizens does get a bit happy clappy at times, it would be pretty arrogant of the left not to think it hasn’t got a lot to learn from this movement. Besides the “stick ‘em on stage and see” tactic, I took away three other lessons:
Be prepared to risk anarchy for democracy. This organisation isn’t afraid to hand highly eccentric people the microphone, to put street dancers on stage or to ask the audience if they endorse their chair. Somehow, it works.
Don’t be afraid to work across groups. London Citizens has got representatives from mosques, unions, churches, race-based organisations and schools. Sure they don’t agree on everything, but they agree on the important stuff.
Don’t be afraid to put morality, art and emotion into politics. It doesn’t water it down – it makes it come alive.
Citizens’ response to the economic crisis
Earlier this year, London Citizens asked its member organisations to come up with a ‘citizens’ response to the economic crisis’.
Thousands of people were involved in these discussions, and the following priorities were agreed:
continue reading… »
You can read articles through the front page, via Twitter or rss feeds.
» Why don’t MPs pay back tuition fees instead of increasing ours?
» Obama is right to slam BP – and why capitalists should too
» Why does Phillip Blond see civil cohesion as a security issue?
» So what if the Labour candidates went to Oxbridge?
» Last night’s Labour hustings: will it get interesting or turn to torture?
» It’s now down to Ken to win London for Labour
» The Labour people need
» Blog Nation: what would you like to see discussed?
» The Labour leadership’s token contender.. and it’s not Diane Abbott
» In defence of these fraternal nominations
» Is this the end for the socialist left?
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