The FT reports this morning that:
Business confidence has climbed to its highest level for at least 22 years, with optimism growing in all UK regions, a study has found.
Companies expect stronger profits, orders and sales over the next six months, raising hopes of continued economic growth, according to a survey of 1,500 businesses by Lloyds Bank.
It also notes that:
Deal frenzy, animal spirits, merger mania — call it what you like, it is back. The value of global mergers and acquisitions hit $1.75tn in the first six months of the year, a 75 per cent rise on the same period last year and the highest since 2007.
Amidst that euphoria comes the news from the Guardian that:
So many patients are facing long waits for treatment, GP appointments and diagnostic tests that the NHS is "palpably fraying at the edges", the leader of Britain's doctors warns on Monday.
Crucial services are deteriorating because the cash-strapped health service cannot cope with rising demand from patients at the same time as ministers are "attacking the overall financial viability of the service", Dr Mark Porter said.
And then there is this, from the same paper:
Bus services, libraries and leisure centres are at risk of closure over the next few years as English councils have to deal with rising demand for elderly care and a giant budget black hole, the Local GovernmentAssociation has warned.
The LGA said councils in England face a funding gap of £5.8bn between March 2014 and March 2016, which could put frontline public services under threat of having their funding cut.
And the Joseph Rowntree Reform Trust has reported that:
A couple with two children needs to earn £40,600 to have an acceptable standard of living, almost 50% more than before the recession, according to a report that highlights the squeeze on families from soaring energy bills and benefit cuts.
While the amount needed to cover a family's basic needs had risen 46% since 2008, average earnings had risen only 9% in that time, the charity said. On top of that many families had lost out because of changes to tax credits and benefits.
These reports, all from this morning's news, highlight a divided Britain and a divided world. A limited few who own and control capital seem to think that they have never had it so good. Those that they employ are having a torrid time. The rich do genuinely think they are getting richer. The rest know they are not.
And yet underlying all this there are real tensions. As the FT says this morning:
The Bank for International Settlements has warned that “euphoric” financial markets have become detached from the reality of a lingering post-crisis malaise, as it called for governments to ditch policies that risk stoking unsustainable asset booms.
While the global economy is struggling to escape the shadow of the crisis of 2007-09, capital markets are “extraordinarily buoyant”, the Basel-based bank said, in part because of the ultra-low monetary policy being pursued around the world.
The hype and froth of the markets that is spilling over into business confidence my all be an illusion according to BIS, fuelled by low interest rates.
But there are contrary voices on that issue. Danny Blanchflower's warnings on increasing interest rates at a time when there is real excess capacity in the economy, represented by both unemployment and undermeployment, are well reflected by Larry Elliot this morning, who says:
Underemployment will disappear, Bell and Blanchflower say, when the economy again approaches full employment. They add that the last time interest rates were raised in July 2007, the total underemployment rate stood at 5.8% — 5.5% unemployment plus 0.3% underemployment. Today the equivalent figure is 8.4% (6.6% plus 1.8%).
All of which helps to explains three things: why there has been much less wage pressure than the Bank of England has been predicting until now; why there is likely to be less wage pressure than the MPC is anticipating in the future; and why the MPC should be wary of those who say looming wage pressures justify an immediate ratcheting up in interest rates.
Yet again there is a deeply divided perception of what is important: the Bank for International Settlements, based in Switzerland, wants interest rates to rise to control capital markets. In the real world of unemployment, underemployment, low pay, a cost of living crisis and potential mortgage rate increases the exact opposite is needed.
What is apparent in each of these cases is that there is a missing link in the equation, and it is tax. There is no mention of the role of tax in these various arguments, excepting that from the Joseph Rowntree Foundation, who note that tax has added to the woes of those trying to balance the budgets of UK households. Despite this, it is tax that could solve the problem of euphoria in capital markets: a financial transaction tax would be the first step to achieving this goal. Higher corporation tax rates, especially on banks, would be a second step. A land value tax to cool property markets would obviously be of value right now. So too would more progressive income tax help: it is obvious that there is a need for significant redistribution of income and wealth in the UK and yet that is not happening. Removing National Insurance charges from those on low levels of income whilst increasing the rate for those high earners who currently make little relative contribution would be another step in the right direction. Reconsidering VAT rates on most goods and services, whilst leaving them higher on non-essentials (a policy pursued, let's remember, by Margaret Thatcher) would help this redistribution process, as would the imposition of an investment income surcharge for income tax purposes on rents, dividends, interest and other investment income over a sum of, say, £2,000 a year, to create the equivalent of a National Insurance charge.
The assumption that monetary policy has to, and even can, break the great divide in the UK economy is just wrong: it can't. Tax has to play a key role. And that's what I would really like Ed Balls to say today. But right now that message seems a long way from where it needs to be in the mainstream of economic thinking and so I can't see it happening. But that, in a nutshell, is one of the key problems that we face in the UK economy at this moment.
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How would you deal with the EU restrictions on reducing VAT?
The same way we did last time
that’s fine if you only want to reduce it the handful of goods/services where a reduced rate is permitted under Annex III of the VAT Directive, but not possible if you want to do something more ambitious (which is what I understood you to be proposing when you said “most goods and services”). Changing this requires amending the VAT Directive, which requires an unanimous decision of the 27 EU Member States.
So is it that you are only suggesting reducing the rate on the Annex III goods/services? Or are you proposing a renegotiation of the Directive?
We can drop the standard rate to 15% without problem
I was reading the Spectator Life issue the other day and I came across the following article: http://www.spectator.co.uk/spectator-life/spectator-life-style/9233151/perfectly-suited/ It was written by Dylan Jones, who is the editor of men’s fashion publications.
I read with disbelief the opening:
“The last time I had seen Peter Mandelson had been at a dinner given by Evgeny Lebedev. This was at Evgeny’s apartment near Regent’s Park about six months previously. The dinner was a bit like a media version of Cluedo, full of famous people (and me) who had, at some point in their lives, probably tried to knife one of their fellow diners in the back.
There was Mandy, along with Stephen Fry, Andrew Lloyd Webber, Janet Street Porter, London Evening Standard editor Sarah Sands, Jemima Khan, Rupert Everett and Nigel Farage.”
And there you have it: the rich, the powerful, the famous, all with nothing in common other than the fact that by being rich, powerful and famous they are different from you and me. But it is a bit jaw dropping to see it so brazenly described: the rich oligarch, the political master of spin, the comic actor, the daughter of a famous financier, the media players, all together, forming opinion, dividing the spoils and the nation.
Better dissemination about Nigel Farage’s presence in this group would help to dispel that he he is different from other politicos- as a non twitter / facebook person I can’t help – could you?
Where’s colonel mustard and his revolver when you need him?
Looking at the company, he would’ve used it on himself.
The 46% and 9% figures are probably from Friday’s ONS data; the Equality Trust have a link to them here:
http://www.equalitytrust.org.uk/news/inequality-once-again-rising
I cannot verify the numbers – pdf data isn’t viewable on my mobile phone – but I would venture that the cost-of-living gap worsens, severely, as you go down the earnings curve.
This is worth repeating: averages in economic data conceal extremes – both in the excesses of the fortunate few, and the hardships of the many who are ‘left behind’. Or, in the current climate of austerity, put behind and left trapped there, as an unstated objective of economic policy.
http://www.zerohedge.com/news/2014-06-27/my-fellow-filthy-rich-americans-wake-people-pitchforks-are-coming
Sadly, I think Nick Hanauer is correct about the pitchforks coming. It would seem that no amount of reasoned argument even when backed by a Tsunami of facts is going to change the entrenched attitudes of some of those on the Right. They appear to operate solely on a lower level at odds with a modern democratic society. If they have any higher, human, qualities then these appear to be latent and buried too deeply.
There are two allowed rates of VAT.
5 and 15%
Any changes will now have to be agreed by a unanimous vote by member states.
And I am suggesting 15%
We have 20% now
Oh – I had the impression you were proposing something more radical. So just a 5% cut, then?
That is pretty radical right now
I would leave some items at 20%, or more
You are correct that Tax could alter the balance and slow down the stock market / property markets but there is a difference here on the aim of such a policy….
You think such a policy is the right way to go no matter what the economic conditions, the pressure on the NHS or the poor and so are just using the current divergence as an excuse to bring in policies you have wanted for years!
Others would only use these tools as temporary and are resistant to use tax in this way……….they think it should be carefully altered and gradually adjusted on a long term basis. Not turned upside down in order to put out financial fires!
This is the same problem as MMT, people expect taxes to be more or less stable, not yo-yo up and down like interest rates…..
Tax is a tool of economic management
And the needs of the NHS etc are not going away
We need to get real about that – or tell people they are going to die because we won’t pay
The moral case regarding the NHS is powerful and has driven higher expenditure in the past……but will it always be so?
Last week you spoke of the political need to conceal policies until nearer the election despite this being against all you believe regarding democracy ( and it is democracy that you keep coming back to as the reason for tax justice and new policy).
If the need for higher taxes for the NHS would risk losing the election for Labour (I know you will argue they would not but others disagree!), would you deliberately lie or conceal these tax hikes from the voters in order to get the election result you wish?
In other words does your moral crusade for the NHS override your belief in democracy?
You clearly have no comprehension of people’s concerns about losing the NHS
You also presume I am standing for office
I am not a member of a political party
And Farage has the gall to portray himself as a man of the people…
“I am not a member of a political party”
That is dodge and becoming a tired one at that……you can only attack Coalition policy, praise Labour policy (most of the time) so long before people get the hint.
If it walks like a duck and quacks like a duck then it probably is a duck!
You want Labour to win the next election…..full stop…..hiding behind your lack of membership card fools no one……if you want to seem impartial then you have to act impartial…….and you do not act impartially.
I do not deny that I am left of centre. In my opinion all decent people are.
So I would prefer a left of centre government. I accept that inference is fair. But blogs, even if this was funded by a charity, can have bias, just not party political bias.
And Labour is not the only left of centre party. I praise it when appropriate, and criticise hard too.
I have also for example, worked closely with Caroline Lucas and greatly admire her.
And once, a long time ago, there were one nation Tories I had time for too.
Before 2010 I even worked with some Lib Dems. You are just too blind to have noticed.
Your claim us like just about everything you say, blinkered nonsense
Being funded by Unite isn’t a charity contribution its pure politics.
I am not funded by Unite
I do work for Unite
That’s very different
Unite pay nothing at all towards this blog or anything I publish and what I do or say here has nothing at all to do with them
“I do not deny that I am left of centre. In my opinion all decent people are.”
By your outright inference all those who are to the right politically are therefore not decent people…….
It might occur to you that there are millions of people in the UK that work for charities, in the NHS, for the public sector or the armed forces and consider themselves right of centre. They will be delighted to know that in your opinion they are not decent people!
For someone you complains about the divide and rule displayed in UK politics you have considerable ease in displaying your apparent moral superiority and writing off 10.5 million tory voters from the 2010 election as lacking in decency!……Says more about you than them….
In my opinion the modern Conservative party is offensive because, like all neoliberal thinking, it makes the individual and their rights the epicentre of its philosophy.
There is no wisdom tradition that does that. For example, whether you are a Christian or not, the maxim that one should love one’s neighbour as oneself states, at a very minimum, that whilst consideration for yourself is important, it must not exceed that of your concern for others. Modern Conservative thinking is in conflict with that idea, and as a consequence I do think it indecent. That was what I meant by my comment, and I’m very happy to defend it.
”The moral case regarding the NHS is powerful and has driven higher expenditure in the past……but will it always be so?”
That statement sounds more like a wish Ayn Rand would make with her eyes closed, as she blows out the candles on her birthday cake.
Is it possible to get people to vote against their own interests ? Well the US has it down to a tee, so yes it’s possible. It’ll certainly make an interesing election poster ‘vote for a premature, expensive and painful death’.
Or it’s quite possible that people generally like being healthy and alive, rather than suffering, broke and dead.
I thought all the banks had millions in tax losses to use, so is increasing their corporate tax rate actually going to yield anything?
It appears Barclays are generating further losses here
There must be a reason