2011 December » Tax Research UK

The Labour narrative – a work in progress

Dec 312011

Howard Reed is an economist who I respect a lot so when he writes a lengthy comment in this blog I think it worth giving I publicity. He wrote today of the Policy Network report on Labour’s election strategy published on Thursday:

I’ve just read the McClymont/Jackson Policy Network report and to be fair to them, I think it’s been reported very misleadingly in the Guardian (as happens so often nowadays, sadly!)

While it is true that the report does say that Labour can’t win the next election solely by relying on support from public sector workers (and I’d agree with that, given that only a minority of people work in the public sector, and even less after the ConDem cuts) the main focus of the report’s conclusions is that Labour needs to deliver a positive message about economic renewal and growth to win in 2015 – with well-worked out positives which present a clear alternative to the ConDems (e.g. more activist industrial policy). I think this is right – the ConDem appeal to voters is based on negativity and fear and Labour has won most convincingly in the past with a positive message of economic renewal (1945, 1966, 1997).

It seems to me, given the thrust of the report, that McClymont and Jackson would be highly sympathetic to many of the policy ideas for economic renewal presented in The Courageous State and also Compass’s Plan B, for example. So for me, the report isn’t that bad – certainly a lot better than the last Policy Network publication, In the Black Labour, which basically said Labour should abandon the economic argument to the Tory Party. However, it’s not a perfect report by any means. The main weaknesses in the McClymont/Jackson report, as far as I can see, are:

1) there is no way, realistically, to deliver social democratic outcomes without spending more than the Tories (or the ConDems, if they choose some kind of electoral pact) are going to want to do in 2015-20. Thus there isn’t much alternative to Labour being defined as a party that wants to “tax and spend”, at least to a higher degree than the Tories. But given the immense macro and microeconomic damage being caused to the UK by the cuts, I don’t see this as a problem in itself. Rather, as Richard says, “the only way to stimulate the private sector right now is for govt to spend”. That needs to be the key message on the economy – along with explanation of what the money will be spent on and how it will benefit ordinary people.

2) There is no mention of the environment in the report at all and I think this is a very serious omission. “Growth” will only be possible insofar as it respects environmental constraints and in particular, limits to natural resources and limits to carbon emissions. Without that, our economic model is entirely sunk.

Just my €0.02 on this anyhow!

I agree with Howard that the Guardian’s reporting of this report was not flattering and that it did contain more worthwhile elements than the Guardian suggested, but the most cursory glance at today’s letters page in the Guardian makes clear just how far adrift very many people think Labour is, including I suspect many who simply will not vote at the next general election as a positive way of suggesting no choice offered to them is a credible or acceptable. In particular I think it worth drawing attention to the letter from Chris Guiton, who has clearly read the pamphlet and says:

While McClymont and Jackson’s emphasis on an activist industrial strategy is to be commended, it’s interesting what’s not mentioned in their pamphlet. Where’s the discussion, for example, about genuine steps to curb the power of the City; the development of a fairer, more progressive tax system, tackling inequalities of wealth as well as income; or action to return the utilities to public control. The continued focus on the squeezed middle, and rejection of increased public spending, suggests a political perspective wedded firmly to New Labour managerialism and an austerity-lite economic policy. Labour’s problem is a failure to articulate an electoral argument to benefit the majority, low-income as well as middle-income.

I think that when this pamphlet is read in association with the previous Policy Network publication on ‘fiscal conservatism’ and also in the light of Ed Balls’ too enthusiastic recent defence of the City just how easy it is to misread Labour economic policy documents even when, as Howard notes, there are merits to some of the arguments in this document.

That leads to the inevitable conclusion that the problem is that Labour has still not developed a coherent short narrative of what it dan really deliver for the people of this country, starting with a commitment to create jobs. And let’s also be honest; so far have none of us critics done that convincingly enough, as yet, either.

2011 was always going to be ghastly, and it was just that

Economics, Uncategorized 8 Responses »

Dec 312011

I never thought the first full year under a Tory government since 1996 was going to be easy. And it wasn’t.

The Tories proved neoliberalism doesn’t work. If you take away the life support of the state the economy does not grow – it shrinks. Some of us had predicted that. Millions are already bearing the needless wounds of our not being listened to. Millions more will do so before we get out of this mess. As people are the core of my concern this guaranteed this was a bad year. The wanton destruction of hope for millions in so many ways is testament to the bankruptcy of thirty years of economic thinking from our political mainstream, right wing dominated as it has universally been. The export of that message of despair into the EU has created a contagion of neoliberal toxicity that will wreck the lives of millions more throughout the continent.

Labour has yet to lay out a strong enough alternative - and the continuing sore of New Labour needs to be jettisoned before it can do so. I’d argue the alternative might be found in The Courageous State – but then I would.

It was a good year for the Green Party and the SNP. The former pleases me. The break up of the Union worries me as a habitual resident of East Anglia, but we now have to admit it’s on the agenda. Labour, in particular, ignores it at its peril.

Unions found their voice this year and showed that they could act for their membership. Many were enocuraged by that.

Occupy took almost everyone by suprise and are changing the terns of debate. That was a highlight of the year.

The tax narrative I discuss here has remained very firmly on the political agenda, and its importance is if anything rising as the tax gap is seen to have so profoundly undermined the viability of the economies of so many EU countries now in economic turmoil. Occupy and the unions have both embraced these ideas in various ways: why the right will not do so when the message is about the rule of law and creating fair competition is hard to understand unless, of course, they’re not really interested in either.

The campaign against tax havens had successes. The Isle of Man lost the last of its VAT subsidy. The Channel Islands’ VAT abuse was defeated. The European Union Savings Tax Directive made progress despite the attempts of the Swiss. The UK-Swiss tax deal was shown to be just one of the many dodgy deals our own H M Revenue & Customs have done – a fact now widely known about.

The green movement had a bad year – if reversals of government policy and failure to tackle climate change were the indicators used. Caroline Lucas showed a different politics is possible. I hope the burden is one she can sustain.

But the real story of 2011 can be summarised in three ways. Unemployment rose, sharply. Real wages fell, sharply. Banks and bankers prospered at public expense. That’s all we need to know to make it clear that there remains much to do and that 2011 took us nowhere near the right direction is solving the issues we face.

Comments – yet again

Blogging, Uncategorized 24 Responses »

Dec 302011

I visited my father, who has been unwell, today and returned to moderate 21 comments on this blog.

I have rarely deleted so many – and apart from one gratuitously neoliberal / neocon comment from a person who is invariably deleted anyway have commented why in each case.

Might I remind those commenting though of some basic rules, all already in the comments policy? First, do not be gratuitously offensive, especially to other commentators.

Second, being offensive about anyone with left of centre views is a sure way to be deleted unless backed by argument – and that seemed beyond several commentators today.

Third, as I know (and acknowledge I have not always got right) issues like mental ill health need handling with care.

Fourth, calling me a communist because you claim to be a Guernsey politician (which claim is, I hope, bogus for the sake of Guernsey) is not a way to prove your credibility.

So please note the comments policy because I will not always be so generous in noting reasons for rejecting comments. I will just delete them and reserve this space for those who can debate rather more maturely.

The Policy Network looks set on ending the Union and putting Labour out of office forever

Labour 30 Responses »

Dec 302011

I’m aware I’m a day late on this one, but so what? The issue is important and won’t go away.

The Guardian reported yesterday that:

Ed Miliband will lose the next election if Labour falls into a trap set by theConservatives and allows itself to be defined solely as the defender of public spending, one of the party’s leading frontbench intellectuals has warned.

Gregg McClymont, the shadow pensions minister who is a former Oxford history don, writes in a new pamphlet that Labour will avoid the Tory trap only if it resists the temptation to appeal to its core supporters in the public services.

I confess I’d never heard of Gregg McClymont, and it’s not a name to forget. And I have to say I doubt his intellect.

Of course Labour can forget its core vote and concentrate solely on playing Westminster neoliberal games for the benefit of the home counties elite as the Policy Network are suggesting. And it will lose Scotland for good if it does. And with the SNP so dominant north of the border that will mean the end of the Union – and with it any prospect of Labour victory ever again.

If that’s what Mandelson and his friends want, so be it. But let’s be unambiguous about the fact that they’re demanding the end of the United Kingdom and the end of the Labour Party as an effective political force. That, of course, may be their agenda. But if it is at least they should either admit it or they should start applying their intellects. Because right now they’re not doing at least one of those things, and maybe both.

If there’s one thing to stop in 2012 it’s the new NEST pension scheme

Pensions, Uncategorized 4 Responses »

Dec 292011

As the FT notes today:

Retirement planning is set to change irrevocably in 2012 as, later in the year, “auto enrolment” is expected to see millions of workers start saving in a company pension scheme for the first time.

From October 1, all workers aged between 22 and the state pension age, and employed by a company with 50,000 or more staff, will be automatically en-rolled into their employer’s pension scheme – unless they ask to opt out. This new government policy will be rolled out to smaller employers from 2013.

I do, of course, want people to have decent pensions. And I am entirely happy that employers should contribute, but this pension scheme is going to be an outright disaster for the UK, for those forced into these schemes and for the economy as a whole.

But let’s be clear, this is going to be an economic disaster. the scheme was designed in 2006 and is built around the obviously failed logic of that era. So employees will be forced to invest in the stock exchange – just increasing the boom and bust cycle – and not a penny will go into creating new investment or new jobs.

As bad, this will be saving at a time when we have too much saving and not enough investment or even consumption to create the jobs we need. S0 this will just add to the imbalances in the economy.

This is the wrong pension plan at the wrong time with guaranteed disastrous outcomes. It’s one of the things I’m not looking forward to in 2012.

A coherent solution to our current economic predicament – at last

Courageous State 2 Responses »

Dec 292011

The following was posted on Amazon today. I’ve no idea who T-Runner is – but thanks all the same:

A coherent solution to our current economic predicament – at last., 29 Dec 2011

T-runner - See all my reviews

This review is from: The Courageous State: Rethinking Economics, Society and the Role of Government (Paperback)

The Courageous State: Rethinking Economics, Society and the Role of Government

After reading Nick Shaxson’s excellent book ‘Treasure Islands and the men that stole the world’, I had been searching for practical solutions to our current economic malaise. Richard Murphy’s book is this.

The book is divided into three parts.

The first is a review of our current economic status that covers much of the same areas as Nick Shaxson – the rise of neoliberalism. Richard Murphy attacks the intellectual abdication that equates active government to bad (big) government. This section is easy to follow, but is less compelling than `Treasure Islands’ relentless and readable analysis.

The second section makes the point that man and society are more than money and the material economy. This rather obvious point is rammed home (as is probably necessary) with diagrams that highlight how progress in the financial area may perversely restrict potential in a wider context. The numerous examples given through this discussion prepares a descriptive intellectual background to the subsequent solutions.

The third section contains Richard Murphy’s solutions. These are radical, but practical and are clearly informed by the author’s experience in business. It would not be surprising to find that many small businesses would strongly endorse many/most proposals.

After reading the book I find myself thinking ` What would the UK be like if this radical programme were put into operation?’. This is simultaneously an exciting and a scary prospect.

Could there be economic flaws at its heart? Who to believe? Witness the recent and sudden conversion of leading economists to the view that the Eurozone needed fiscal union all along. Could a minor country implement the proposals without the support of others within a larger union? How would powerful vested interests frustrate / block implementation?

Despite these concerns, the ideas in this book need to move centre stage to reinvigorate the heart of our anaemic economic debate.

Why the NHS cannot be replaced by the market

Economics, NHS 3 Responses »

Dec 292011

There is much discussion on my Twitter feed this morning on the NHS. My argument on why we cannot afford competition in the supply of healthcare in the UK – and why the NHS must as a result remain not just under state control but have the sham market within it abandoned as it is an extremely expensive charade is made in The Courageous State where in Chapter 6 I argue as follows:

It is a simple fact that when a service such as healthcare has to be provided to everyone, the costs of competition just explored cannot be afforded by society as a whole.

So, for example, we already know that it is incredibly expensive to maintain a network of hospitals within reasonable distance of most people in the UK, particularly outside the major conurbations. If, however, genuine competition were to now be part of the supply mechanism for healthcare, it would be necessary to have alternative suppliers of medical services available for all to choose from. But that would, by necessity, require duplication of resources since there is no competition to prevent market abuse when a person cannot choose between two hospitals within reasonable distance of where they live. If, however, two (at least) reasonable alternative hospitals are to be made available, each hospital must first have excess capacity so that this choice can be exercised, and second each must maintain that excess capacity indefinitely. As a result, they must always run at less than full capacity and doctors and nurses will have to wait around in them in the hope that patients might arrive even if they do not, but must be paid nonetheless.

Perhaps worse still, those competing hospitals would very soon be spending a great deal of the cash previously directed at healthcare in promoting their services through advertising. Any supposed efficiency benefits arising from the pressures of competition (none of which have materialised as yet after more than twenty years of pension privatisation) would be more than eroded by that spending. In the meantime any prospect of informed decision-making by many patients would disappear entirely if general practitioners, who make most referrals to hospitals, began touting for business, undoubtedly backed by advertising suggesting the supposed perception of added value that they might supply (“we promise you’ll never leave without a prescription” is a horrible marketing scenario that comes to mind that would, however, please many patients). This process would in turn in all likelihood be backed by a pharmaceutical industry that has the capacity to make monopolistic profits because of the patents system on its products which guarantees them above-average returns on a successful product for a considerable period after its introduction to the market, and which they could then use to drive up demand for their products by manipulating this system of private medical supply to their advantage.

The cost we would incur if we created such competition is obvious: the outcome of all that excess capacity would be a considerable increase in the cost of supplying healthcare in the UK, or any other country where such choice might be made available. The evidence of this can already be seen when the cost of healthcare in the UK is compared to that of the US. The cost of healthcare in the US is approximately US$7,290 a year, according to a recent report by the Commonwealth Foundation, a US-based research body. The comparative cost in the UK is $2,992 a year, with the US being considered by this organisation to supply much worse healthcare despite the price differential.[i] In terms of total costs as a proportion of GDP, the UK spends approximately 8% of its national income on healthcare, which is lower than any of the other seven major countries to which the Commonwealth Foundation compared it, whereas the US spent 16% of its GDP on healthcare. Also, because of the substantial variation in the quality of healthcare provision in the US, where about a quarter of the population are dependent upon very basic services from the state, with the remainder being covered by an insurance-based system that is extremely expensive to operate with between 30% and 50% of all spending (the estimate depending upon the report noted) being absorbed by administration costs, outcomes are no better and may be worse despite the greater spend. This is clear indication of the inefficiency of the market when choice is provided.

[i]Mirror Mirror on the Wall: How the performance of the US healthcare system compares internationally, 2010, Commonwealth Foundation http://www.commonwealthfund.org/~/media/Files/Publications/Fund%20Report/2010/Jun/1400_Davis_Mirror_Mirror_on_the_wall_2010.pdf

Business tells Osborne he’s got his capital investment plans wrong – proving the left to be right, again

Economics 15 Responses »

Dec 292011

I do seriously wonder what, if anything, George Osborne understands about economics and the real world. As the FT reports this morning:

Britain’s hard-pressed construction industry has poured cold water on the government’s plans to stimulate the economy with a £5bn boost to infrastructure spending and a £20bn investment from pension funds, warning it will make “no discernible difference” in the short term.

Why? Because as the article also notes:

An extra £5bn of capital investment, funded by spending cuts elsewhere, formed the centrepiece of the national infrastructure plan announced by George Osborne, the chancellor, last month as part of an attempt to prevent the country sliding back into recession. [But d]espite the chancellor’s announcement actual capital investment by the government is set to fall by £14bn over the next three years, given the much bigger cuts announced in the Comprehensive Spending review of 2010. Spending on infrastructure is expected to drop 30 per cent from £59bn in 2010-11 to £45.4bn in 2013-14.

So, as the FT notes:

“The £5bn merely lessens the fall,” said Noble Francis, economics director at the Construction Products Association, the trade body for the building industry. “Worse still, most of the effects of this ‘boost’ won’t been felt for at least 12-18 months so it certainly won’t be helping construction, or the economy, anytime soon. It will make no discernible difference in the short term.”

This is entirely predictable. First, this was announcing that other people would spend money without getting their prior consent.

Second, as is rightly pointed out by the industry, this only partially corrects previously announced cuts by Osborne: there is no new money in this.

Third, by cutting benefits which are spent with immediate impact this capital spending does in net turn increase the downturn in demand, fuelling the risk of recession.

Fourth, as argued in The Green new Deal, the need is for small projects that can have immediate impact like insulation, solar energy installation and repairs which all have a high local labour content too and not major works right now.

Fifth, as I argue in Making Pensions Work and in The Courageous State, the need is for compulsion on pension fund contributions to public infrastructure projects that create jobs.

These are viable plans. Why isn’t Labour shouting about them?

Corporate psychopaths

Economics 8 Responses »

Dec 292011

As Brian Basham argues in the Independent this morning:

In attempting to understand the complexities of what went wrong in the years leading to 2008, I’ve developed a rule: “In an unregulated world, the least-principled people rise to the top.” And there are none who are less principled than corporate psychopaths.

And yet these are the people – the bankers – we’re bailing out.

Why, oh why?

It’s a compelling read and I think the argument sound.