Bolitics The New Condem Government

[veloman]

Apparently the OBR is now saying the problem is lack of demand.

It is obvious to me that many people posting on this subject are more 'au fait' with Economics than I am. But... when I did have to study it(a long time ago), the importance of the 'Balance of Payments'

was emphasised. Now, I guess, we don't make anywhere near as much as we did in the late 60's /early 70's and a hell of a lot of what we buy is made in China/Far East so wouldn't an increase in demand make this B of P situation worse and thus further impact on the Economy?

Glad to see he (Osborne) has had another go at the teachers; they are the real villans that have got us into this mess ! (rocket polisher)

[peterms]

Now, I guess, we don't make anywhere near as much as we did in the late 60's /early 70's and a hell of a lot of what we buy is made in China/Far East so wouldn't an increase in demand make this B of P situation worse and thus further impact on the Economy?

It's true that we import more and export less than we would like, and that needs addressing. Several people have made the argument in this and other threads about rebalancing the economy. That might include eg investing in developing technologies for the future (since we're unlikely to be able to put together cars and consumer electronics better and cheaper than others). As we import 40% of our food and lots of our energy, things like developing more food production and sustainable energy would help to reduce our imports in these areas.

Short term, yes, increasing people's income would mean that some gets spent on imports, but a lot of it will also be spent on things produced at home, as well as things like distributing and retailing the imports, which in turn help to create some further employment. The balance of payments probably would get worse, but if we want to get out of recession, we do have to get people back to work and spending money. Getting them back to work on things like construction, food production and renewable energy will boost the domestic economy. Making that balance better is quite a long-term goal.

[veloman]

^^^^^^^^^^

Can't disagree. Sounds suspiciously like 'The Multiplier' to me.

[markavfc40]

It is shocking to think that Osborne is basically continuing on the same path that has failed for the last 2 and half years. What is also shocking is that most of the cuts they have made are yet to take effect.

In Birmingham it was this week announced that they need to find 600 million pound of savings by 2017 and that on top of some services having to be totally decommissioned that a further 1000 Council jobs will go next year and given the savings required in the following years it is likely that job cuts of a similar amount will be lost over the following 3 years. This is an area with already high unemployment.

This is happening across all public services and on top of the massive impact on service users, usually those most vulnerable and needy in society, it has the added impact that a culture has been created of millions of people in fear of losing there jobs. This is happening in both the public and private sector. Now what do people not do when they feel they have no medium to long term job security? they don't spend. Osbourne did nothing in his autumn statement to encourage growth, to instill confidence, to get people spending. The guy simply does not get it.

Osbornes arrogance in failing to accept that he has got it badly wrong and to change course is going to continue to lead us up shit creek without a paddle. Two and half more years of these arrogant, out of touch fools leading us is a scary prospect.

When Osborne became Chancellor I inserted my current sig. Sadly he is proving me right.

[mykeyb]

I can understand that maybe 200 - 300 years ago that running the country was probably decided on political and moral viewpoints, however in the 22nd century surely there must be a better way to do it.

As an over simplistic view since the 60's Labour in power, spend more than should eventually get thrown out, Tories come in make life tough to balance books, country gets feed up by the time books are balanced and Labour comes in - repeat and rinse.

How is that going to change.

[Ads]

Maybe there is a Third Way?

[AshVilla]

It is shocking to think that Osborne is basically continuing on the same path that has failed for the last 2 and half years. What is also shocking is that most of the cuts they have made are yet to take effect.

In Birmingham it was this week announced that they need to find 600 million pound of savings by 2017 and that on top of some services having to be totally decommissioned that a further 1000 Council jobs will go next year and given the savings required in the following years it is likely that job cuts of a similar amount will be lost over the following 3 years. This is an area with already high unemployment.

This is happening across all public services and on top of the massive impact on service users, usually those most vulnerable and needy in society, it has the added impact that a culture has been created of millions of people in fear of losing there jobs. This is happening in both the public and private sector. Now what do people not do when they feel they have no medium to long term job security? they don't spend. Osbourne did nothing in his autumn statement to encourage growth, to instill confidence, to get people spending. The guy simply does not get it.

Osbornes arrogance in failing to accept that he has got it badly wrong and to change course is going to continue to lead us up shit creek without a paddle. Two and half more years of these arrogant, out of touch fools leading us is a scary prospect.

When Osborne became Chancellor I inserted my current sig. Sadly he is proving me right.

Tbh Birmingham City council is a joke

They claim to need to be making savings yet if you go down Harborne High Street you will see the clock tower building which has been incased in scaffolding for about 2 - 3 years now

It might not sound like a big deal but to keep that scaffolding up it costs a whopping 12k a week and has already cost upwards of 700k...

[tonyh29]

Maybe there is a Third Way?

this one ?

[TheDon]

It might not sound like a big deal but to keep that scaffolding up it costs a whopping 12k a week and has already cost upwards of 700k...

I'd love to see some math on that.

[markavfc40]

Seems we have a few on here who are still going along with this clueless prick

[peterms]

Good piece by Will Hutton.

George Osborne's savage attack on benefits is an affront to British decency

George Osborne in his autumn statement displayed a total contempt for the welfare of the less well-off

What constitutes a good society? What are our responsibilities and obligations to one another? To what extent is our humanity about looking solely after ourselves or being part of something we call society? The autumn statement, opening a new chapter in its rewriting of Britain's tattered social settlement, has suddenly made these the fundamental questions in British politics. The last vestiges of an approach to organising society based on a social contract have been shredded. In its place there is an emergent system of discretionary poor relief imposed from on high in which every claimant is defined not as a citizen exercising an entitlement because they have hit one of life's many hazards, but as a dependent shirker or scrounger.

David Cameron and George Osborne, repudiating the canons of the Enlightenment, the New Testament and the British commitment to fair play, think they are on a political slam dunk. Osborne gloried in his depiction of his actions in support of the nation's "strivers" and attack on the shirkers. With a populist centre-right press behind him, he thinks he has launched a political masterstroke. Does the Labour party dare to vote against next year's proposed welfare bill removing the link between inflation and the increase in benefits?

Everyone knows the coalition argument by heart. Fairness demands that the recipients of Britain's allegedly enormous welfare bill play their part in the crash programme to eliminate Britain's budget deficit.

Austerity must hit everyone. The welfare system, so the argument goes, has become a colossal scam encouraging systematic cheating and, worse, a culture in which idleness is rewarded and work penalised. What is more, support for social solidarity as a principle is disappearing. Polls reveal large majorities who support the coalition's propositions.

But can so much of our culture, and what it means to be part of western civilisation, be put aside so easily? The idea that the best society is one organised around a voluntarily agreed contract between its members who come together and acknowledge reciprocal obligations is not so lightly torched. It may be unfashionable to defend the conception of a social contract, but our religion and our culture enshrine the notion of mutual responsibility and obligation.

Life is risky and hazardous for everyone. The bad luck of a broken family, unemployment, poor health, unexpected expenses of old age, mental illness and physical incapacity can hit anyone, however hard working. These risks confront everyone.

A good society recognises these risks and insists they should be shared and insured against in an agreed system of collective insurance. The great thinkers of the Enlightenment proposed that if society was to get beyond theocracy, anarchy or despotism, then it had to be underwritten by such a social contract. To organise society as an individualistic war of one against another was barbaric, while the other models, slavishly following the rules of one religion or one supreme leader, denied freedom.

Cameron and Osborne will publicly say that they still respect such values, but, privately, they are pursuing a different agenda. The terms on which millions have made their plans and life choices have been torn up. The automatic link between inflation and the uprating of benefits is to be scrapped for at least three years. The tax relief available to those building retirement pensions is to be further withdrawn. This comes on top of the capping of benefits, whatever the need, the restrictions on housing benefit, further limiting of incapacity benefit and the shrinking of access to child benefit. Additionally, there is a new bridgehead further to remove employment protection in the labour market, trading employment rights for shares in the company.

Is any of this fair? The heart of fairness is to establish a proportional relationship between contribution and outcome to which everyone consents. People have made calculations about how they are to handle the costs of old age, bringing up their children, physical incapacity or the lack of work in their area on the basis of social contributions to their circumstance that they reckoned on being an inviolable part of the deal. Now they find it is all turned on its head by fiat and for which no one voted. A social contract is a bargain over time. I pay my taxes and national insurance contributions. I should get benefits back when I need them.

What is happening is both illegitimate and contemptible and as the proposals are rolled out, more and more people will start to think so as they are affected too. The anti-welfare opinion poll majorities will begin to dissolve.

Is this necessary? Osborne insists it would be a "disaster" to turn back from his target of balancing the budget within five years and social spending must share the burden. He is an economic illiterate. Economics 101's first principle is that if households, companies and banks are simultaneously saving and building up surpluses, as they are at present, then someone in the system has to have a deficit to compensate, otherwise there is a downward depressive economic vortex. That someone necessarily is the government. Its deficit is the counterpart of surpluses elsewhere. Osborne could and should have used his autumn statement to give the private sector the confidence to invest, to borrow, to innovate and to spend and so run down its vast £700bn cash stockpile. He should have adopted a bold target for the growth of nominal income, launched a multibillion pound infrastructure programme and cheap loan guarantee scheme. Then the pressure on the government's own books would have been relieved.

He did none of these, instead believing that financial repression and shameful withdrawal of benefits are the triggers of recovery. Is every last aspect of Britain's social contract defensible? Plainly not. As far as possible, a social contract should be designed to recognise labour market realities and not undermine incentives, restrict itself to insuring against inevitable risks and hazards and be supported by sufficient taxation and a government doing its level best to promote economic growth and jobs. Reform should take place within such a framework, but that is not what is proposed. Labour is steeling itself to do the right thing; if it can spell out what a 21st-century social contract looks like, this is an argument that can be won.

The Lib Dems also have to brace themselves. Osborne, his politics, economics and values, should be opposed to the last. Are they prepared to do what must be done?

[blandy]

Not a political or party political point, but

Is any of this fair?

is missing the point really. Fairness (or decency) is in the eye of the beholder.

Apparently most people agree that "people on benefits should not get more than the average working wage (26k, I think it is) - so most people would say that aspect is "fair" of what the Gov't is doing. Ask them "who should pay for the mess" and most people again would say "the bankers" or "the rich", so cutting or not raising benefits, while cutting tax rates for the rich is seen as "not fair".

Questions like the one in the article are talking points, but really what matters is "what will work?"

The tories mess everything up. What they have done and are doing hasn't worked and isn't working. What Labour did, didn't work. What the Lib Dems have tried to do hasn't worked - they've just been eaten alive by the tories.

None of them are proposing anything that will work. Labour are just sitting pretty saying nowt, pretty much, because they know while the tories keep messing up, they don't need to. whatever the lib dems say gets ignored, and what the tories say is mostly mendacious drivel.

They all try and appeal to what we see as "British fair play", but they're all missing the point completely in terms of sorting it out. They're not trying to sort it out, they're trying to get themselves elected.

[mjmooney]

I'd love to see some math on that.

Only one? I'd like to see several.

[peterms]

Some facts in response to Osborne's justification for hitting people on benefits.

Indexing benefits to inflation is not "unsustainable"

In the Autumn Statement the Chancellor decided to cut working age benefits and tax credits, thus reversing his previous (sensible) policy of allowing the "automatic stabilisers" to operate, and ignoring the advice of the IMF. More on the macroeconomic issues here. He justified this change thus:

But we have to acknowledge that over the last five years those on out of work benefits have seen their incomes rise twice as fast as those in work. With pay restraint in businesses and government, average earnings have risen by around 10% since 2007. Out of work benefits have gone up by around 20%.

That’s not fair to working people who pay the taxes that fund them.

Those working in the public services, who have seen their basic pay frozen, will now see it rise by an average of 1%.

A similar approach of a 1% rise should apply to those in receipt of benefits.

That’s fair and it will ensure that we have a welfare system that Britain can afford.

David Smith, writing in the Sunday Times, repeated the Chancellor's argument verbatim and stated that:

"In five years, out of work benefits have risen 20%, earnings 10%. That is unsustainable.."

The numbers are correct: but they are highly selective, and David's conclusion is simply wrong. The value of out of work benefits relative to average earnings (and more broadly the incomes of those in work) has fallen steadily over the past three decades, until the recent slight uptick resulting from the recession:

<a href=

http://2.bp.blogspot...s1600/jsa1.jpg" style="margin-left: 1em; margin-right: 1em;">

In 1979, unemployment benefit (the predecessor to Jobseekers' Allowance) was about 22% of average weekly earnings; today it's about 15%, a relative decline of about a third. What's going on? Simple: JSA has been indexed to inflation. In normal times, earnings rise faster than prices, as workers become more productive and the economy grows; this chart shows the cash value of both JSA and average weekly earnings:

So indexing benefits to prices has been far from unsustainable, or "unfair" to working people, over the last 30 years. Indeed it has resulted in a substantial reduction in spending on out of work benefits as a proportion of GDP, compared to the alternative of indexing benefits to earnings.

As a result, we already have "a welfare system that Britain can afford", at least for those of working age. Declan Gaffney et al note (table 3) that all out-of-work benefit spending only amounts to some 3 percent of GDP. And even overall benefit spending, which has to accommodate the growing number of pensioners, has levelled off, as Chris Dillow has pointed out. There is nothing remotely unsustainable about any of this.

In the last five years, however, earnings have risen much more slowly than prices, as the Chancellor points out. This is highly unlikely to persist, however, and it is certainly not what the official figures suggest: the Office of Budget Responsibility's forecast, which is not particularly optimistic about growth over the near term, suggests that earnings will rise about 5% faster than prices over the forecast period (table 1.1). So unless we are stuck in permanent depression, even a modest recovery will in time lead to earnings rising significantly faster than prices, and the relative value of out of work benefits will decline again. No policy action is required to ensure this (although economic recovery would help!).

So unless the OBR is completely wrong, and the economy flatlines for the foreseeable future, with no or negative growth in earnings relative to prices (and even at my most pessimistic I don't think that's likely) then the idea that benefits need to be cut in real terms in order to ensure either fairness to those in work or long-term sustainability is nonsense.

[PauloBarnesi]

Good piece by Will Hutton.

It should read

“Savage cuts on journalists at the Guardian & Observer whilst management line their pockets is an affront to decency”

[drat01]

I see that despite the welcome words from Cameron the true Tory stance on Homosexuality is very much alive and well and thriving in the party.

Another weekend of more and more instances of why the Tory party retains and actually seems to encourage its role as the "nasty" party. From that despicable woman Esther Mcvey and her views on the reckless and immoral way that the Tory party has affected Remploy, through to the obscene David Davies and his comments. Add to that David Bone and you can see that the Tory party still maintains a high profile set of "members" (and that term can be used in many ways).

For all of the spin that Cameron may want to put on things it's very much apparent that the core values of the Tory party and its members and supporters is still one that is divisive and extreme. It has little place in the 21st century.

[drat01]

I can understand that maybe 200 - 300 years ago that running the country was probably decided on political and moral viewpoints, however in the 22nd century surely there must be a better way to do it.

As an over simplistic view since the 60's Labour in power, spend more than should eventually get thrown out, Tories come in make life tough to balance books, country gets feed up by the time books are balanced and Labour comes in - repeat and rinse.

How is that going to change.

Interested to hear on what criteria you are using for this often used claim by Tory party and it's supporters. When you say spend what are you talking about and what are you judging it against? When you say balance the books what does that mean exactly? Your claim seems to show that you feel that economic problems started with Labour in the sixties? Or is the claim one of the many Tory soundbites with little in the way of facts when examined?

[drat01]

I see that there are more examples of the BS that Cameron et al have been spouting re the NHS are being open for all to see now. Remember how Cancer care became a political football at the last election and Gideon and Cameron, along with many other lies, stated that all would be OK with them? It seems that now not to be the case

Funsding and staff "cut" for cancer network

[markavfc40]

I see that there are more examples of the BS that Cameron et al have been spouting re the NHS are being open for all to see now. Remember how Cancer care became a political football at the last election and Gideon and Cameron, along with many other lies, stated that all would be OK with them? It seems that now not to be the case

Funsding and staff "cut" for cancer network

It was always going to take a little time to see the effect the cuts and changes to the NHS would have and we will now start to see far more examples of this.

The Tories are a **** disgrace. Its as simple as that. As was said on QT on Thursday the NHS won't survive two terms of a Tory government.

[drat01]

Mark as some on here know, I have two close members of my family who are "employees" of the NHS (a GP and a Pharmacist), plus I have elderly parents who rely on things like social care and the NHS for general well being. I add to that family members who have had (and beaten) that **** awful C word disease under the care of NHS, a recent grandson born 2 months prem but now @ home thanks to great care from NHS, so I get somewhat annoyed when something as special as the NHS is under so much attack from a bunch of Tory *&^%$'s who have always despised the idea of what the NHS gives. I think that the NHS has already been killed as it was and the reliance on paid health care will have to be the norm because of the Tory (and lets not forget the Lib Dems) policies which have done more damage to it in the short time they have been in office than any previous Gvmt.