As the FT notes this morning, less than a year after being returned to office on the back of his supposed economic competence George Osborne will have to admit today to breaking two of his three economic promises.
He has already admitted to breaking his welfare cap.
Now he will have to admit that borrowing will increase this year despite his promise to reduce it year-on-year.
And to add to his woes, although I am sure he will not admit it, there is no hope that he can meet his fiscal rule of balancing the books by 2020, as I explained last autumn.
If George was one of my students he may well now be heading for a fail. What's obviously true is that the myth of George Osborne is broken. Despite which, let's be clear, Labour appears to be unable to capitalise on the issue.
Suppose, though, that George Osborne is aware of his own problems. It must be possible for a politician to have that degree of self perception, at least as to their own fortunes. And let's presume that he might use the still considerable authority he has to seek to resolve this situation. What might he do?
First, he will buy popularity. The suggested tax exemptions for modest AirNB and eBay trading will be pathetic gestures, massive tax complications and open doors to much evasion, but I presume they will happen. So will increased allowances, most especially for the higher rate tax bracket, to buy Middle England Brexit votes (not that anyone will recall this largesse by 23 June).
Benefits will be cut in some way.
So will departmental spending be reduced, but the detail will not be disclosed.
Corporate tax takes will be planned to increase modestly, but don't rule out a 17% rate to balance supposed international abuse measures.
The self employed may take a hit: class 4 NIC increases are the obvious one, which will just increase the incentive to incorporate and so be counter-productive.
But none of these things will raise the money needed. There is only one, desperate way that can be done now and that is by asset sales. This is why I think the sale of housing association stock is the rabbit Osborne will pull from the hat; he desperately wants to be rid of this sector's debt. And this will happen on top of other already expected sales. And all because the core policy of cutting his way to a balanced budget is a tautological impossibility because every pound he cuts costs the economy more, which is why it has been admitted that GDP is less than expected.
George, then, is a victim of his own dogma. But the one thing he won't change is that. We will all be the victim of his resulting desperate acts in one way or another. And he will still fail all his economic tests come what may.
There won't be a lot of laughs this Budget Day.
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Does the forced conversion of all schools to “academies” count as an asset sale?
It may in due course
That’s somewhat “after the horse has bolted”, given that the odious Michael Gove handed over 3,000 State schools to his chums free, gratis and absolutely for nothing, with NO records, so that the DfE COULD NOT even say TO WHOM the ownership deeds had been conveyed, SURELY one of the reasons for privatising the Land Registry, to put it outside the scope of the Freedom of Information Act.
The inestimable “Another Angry Voice” notes this “giveaway” in this article:
http://anotherangryvoice.blogspot.co.uk/2014/01/michael-gove-ideological-vandalism.html?m=1
And updates his criticisms here:
http://anotherangryvoice.blogspot.co.uk/2016/03/forced-privatisation-english-schools.html?m=1
Yet FURTHER chapters on the longest, deepest and most shameful “distraction burglary” in history. Frankly, the whole Tory Cabinet, and the Coalition Cabinet that preceded it, should be in jug for fraud and fraudulent conversion.
I watched the BBC news last night and their ‘political correspondent’ – a lanky Asian gentleman with glasses and a nifty scarf whose name eludes me – pointed out that Government debt was now £1.5 trillion.
Anyone seeing that would think that we were in a bad situation – especially if not party to this blog and other alternative takes on the situation (so we are talking about a lot of people aren’t we?).
I mused on that for some time and the thing that nags at me is that a fair bit of that money came out of bailing our failed private banks.
The way I see it is that the Banks owe the Government. It is the Banks that have the debt – not the Government. In terms of who owns the ‘cognitive map’ I think that this message is valid but is seldom heard. When will the Banks pay the Government back for helping them out?
Not only that, but there is also a prima facie case for taking the American Government to court over the shoddy regulation of its banking sector where the problem started (sub-prime loans, then CDOs, credit swaps etc.,).
As long as the £1.5 trillion is portrayed as a Government problem and not a Bank problem, Osbourne can continue to destroy the economy and our society.
The recent announcement on all schools becoming academies for example is essentially the privatisation of our schooling system and will enable investors (the top 1% again!) to get their hands on one of the last and significant Government budgets even though there is no evidence that academies are uniformly better than LA managed schools.
We do not owe £1.5 trillion
We owe £375 billion less as £375 billion is owed by the government to itself and that is just not possible
The problem is they deliberately count that 375 as extra ‘debt’ for purely manipulative reasons. They now that this is never explained to the public and the BBC just megaphones the propaganda. Shameful. Labour as usual, mute and tongue-tied (FFS!).
I repeat my entry below from a previous post which is now closed for further comments, but I think is worth considering further as both the health and education services of this country are increasingly taken back into the hands of the private sector and subject to the inevitable effect of market forces:
You can just see where this is heading, back to a divisive education system with schools run as businesses, senior managers on six figure salaries, consultants in every corridor, performance related pay for all teachers, zero hours contracts and unpaid interns used wherever possible, the narrowest of “education” to meet employers needs and to hit targets, a production line of indoctrinal activity to make sure children are suitable for their “place in society”, under-performing and special needs sent to “correctional facilities”, etc etc etc.
I’m not a teacher and have no direct experience of academies, so please someone tell me this is not true and I have got it all wrong. I really will be happy to be corrected!
http://www.bbc.co.uk/news/education-35814215
As an ex-teacher I can assure you you are not wrong -the whole sector has been dumbed-down and comoditised to the nth degree.
I left because the atmosphere in education was spiritually asphyxiating. Teachers have been turned into data collectors with identity badges swinging around their necks so they look corporate.
There’s an interesting documentary about about the asset sweating of education on RT and a book http://www.amazon.com/Against-Americas-Public-Schools-Commercializing/dp/0321080734
The real issue is that the State at first may well fund schools and pay the private sector directly to run them thus cutting out the local authority.
Essentially then, these state budgets will be managed locally by business minded head teachers who turn into directors – sometimes managing a chain of schools. These may well form bigger groups of schools managed by the same management team.
I’ve seen this before in my field of housing.
With the Housing Association sector, when the Tories started to use HAs to build new homes to rent (rather than local councils), the HA could get 100% of the grant needed to fund the new development. Over time however, the grant rates were reduced and even a competitive element was brought in to encourage HA s who wanted to apply for the lowest grant levels (‘value for money’ it was called by the Housing Corporation – Ha ha – how we laughed when we found there were shortfalls in our project funds and all that money we used to put aside to help keep rent low for our tenants now had to prop up development finances – oh and didn’t the cost of housing benefit start to go up….hmmm….sorry I’m digressing too much.
And guess where the HA s who did under bid for grant get their shortfall of development money from?
Why – private banks of course! And private banks means ‘investors’. Then the privatisation process is complete – especially when you have the pension funds involved.
It would not surprise me if we begin to see in education what we saw in social housing:
1. Offer nice big fat amounts of money to entice people in – make them feel secure and special working for the Government – their new ‘best friend’.
2. Then slowly at first change the rules citing budget restraints and offer less money having also ’empowered’ the organisations to be more ‘local’ and more accountable (in other words – you’re on your own folks and its all your own fault if it goes wrong).
3. Then stand back and watch the schools walk into the arms of the banking sector to make up the short fall in cash as well as being reliant on really expensive consultants to work out what they are doing. Oh – and you must also let the banks see all you outgoings and costs so that they can advise – independently of course – where you can make ‘savings’ to protect their investment returns and those of the pension funds. Also expect to see schools joining forces to take advantage of the much vaunted ‘economies of scale’ so that returns can be fed back to investors.
4. Don’t forget to appoint a really well paid CEO who will be paid highly enough to lie and cheat about the schools performance – even willing to tell people that Jedi Knights really exist.
Bang! They’ve got you!
Cynical perhaps? No – not really – this is how it happens. This is how the 1% get their hands on state expenditure. It’s how our pensioners feed off the generation below them even if many of them (bless them) are unaware of it because it is a crap way of how to pay for pensions anyway.
My partner is a teacher who apparently works part-time and averages over 37 hours a week. Part-time. Her head teacher (the most expensive wage in the school) is now out helping to manage other schools in the area and attending seminars held by Nicky Morgan. My partner gets given parts of the head teacher’s work load. She’s constantly knackered. No wonder teachers are leaving. And who will replace them? A call centre in India?
There is a strange focus on government ‘debt’ as a bad thing, whereas companies that borrow to invest or individuals that borrow to buy somewhere to live are mostly seen to be doing a good thing.
Government debt is not larger than household debt and is not even the largest component in the total UK debt see
http://www.economicshelp.org/blog/4060/economics/total-uk-debt/
So why so much urgency to reduce this component as opposed to others.
The other side of debt is that for ever debtor there is a creditor who in the case of UK government debt is mostly UK pension funds, so we mostly own the our own debt and are happy to store money in this way until we need it later. So I think you can make a case just to rebrand the national debts as national savings bonds, pensioners bonds or whatever other brand name you care to think of. However we should try to remove are all the layers of financiers that make a profit as intermediaries in the relationship between us as both debtor and creditor.
To whom, exactly, do we “owe” this £1.5 trillion?
Bearing in mind the UK is a currency issuer, and that £1.5 trillion represents 300 years of saving by the non-government sector.
As for the academy-isation of schools, that one is corruption, pure and simple. And with teacher morale and recruitment in crisis I’d love to know where the Tories think they are going to get the staff to cover the extended school day they are proposing
70% is owed in the UK
Most is due to pension funds, insurance companies, banks and some private investors
Housing Association stocks are not the only social/public/commons assets to be flogged off. Amongst public property in the frame are the Met Office, Green Investment Bank, and Channel 4, as detailed in this article from the real Guardian:
http://off-guardian.org/2016/03/16/time-to-halt-the-great-public-asset-boot-sale-and-create-social-wealth-funds/
“Sales offer a one-off windfall — the family silver can only be sold once. They mean the permanent loss of collectively owned public assets, many highly profitable, built up over many decades, and the end of the stream of income delivered over time. Although such sales can reduce the cash debt at a given moment, they aggravate the problem of public indebtedness as the asset base which once helped to balance the debt shrinks away. On this course, Britain will soon be all debt and no assets. The state is the custodian of these assets on behalf of citizens yet seems intent on mindless short-termism that will be paid for over and over again by subsequent generations.”
This being the case now it was also the case during the 80’s when public assets paying into Government coffers and providing a steady income stream were sold off. It would therefore be interesting to see just how those previous thefts of public assets by the supposed custodians have impacted on Government and public finances, particularly between differing administrations.
Perhaps those who are so keen on incorporating the drag factor impact on Government debt levels and repayments between administrations, such as, for instance, wannabe porn stars, film tribute acts, Billy no mates, Chicken Licken or whatever they are calling themselves today in Cheltenham, might like to tackle that and incorporate this factor into the data points to assess the impact.
However, I doubt any of us grown ups here on this site will be holding our breath. Such an exercise is likely to be above the pay grade.
Osborne is set to reach a level of asset flogging greater than Thatcher in the 80’s.
By the way, Dave, I live near Cheltenham in a Housing Association house-we’re not all at the races (smiley emoticon).
I suspect you may well have misinterpreted my reference Simon.
Living in that part of the world you will no doubt be aware that the racecourse is not the only facility in Cheltenham which covers a large acreage.
Well said Dave, as I think both you and I know very well the attack on public assets via privatisation is much more about the constant fear in the private financial class that “socialism” still exists in this country and must be extinguished at all costs.
It is no secret that since the emergence of the UK labour party as a political force, the traditional conservatives and liberals have seen it as their god given duty to extinguish all possible threats to their dominance and control through all possible financial and political means.
The more I read about the post-1940’s US dominated political consensus it becomes even more apparent that the forces of US capitalism have been ever present in this attack on European and UK social democracy (or democratic socialism) or any other form of socially accountable political and economic system that dared poke its head above the parapets.
However the clear failure of that political and economic system to continue to deliver social progress in the US, now presents a new opportunity for left wing forces to develop a cross Atlantic as well as cross European opposition to this oppressive form of politics and economics.
There is still hope, but oddly I now see emerging movements in the US as part of the solution and we should no longer see all the US establishment as the problem, while acknowledging that the dominant political and economic direction is still entirely inappropriate for a sustainable future.
In my view the forthcoming US elections will be critical in how the future of our own country develops and Labour’s chance in 2020.
And maybe it is time that some other debt reduction (directly buying the dept bakc or indirectly spending it in the economy) by money creation is put on the agenda.
With inflation so low, salaries struggling and still some production capacity in reserve, I am sure there is still plenty of room for money creation.
Every time Cameron/Osborn say that money must be saved to balance the books, the Labour should scream “Why, since we can still create money and spend it with no consequences?”
I’m sure that will go down well with the country.
Well,I suppose that someone should dispel the myth that the state economy works like a family and balancing the books is the recipe to jeopardize the economic growth.
If not the Labour, who?
If not now, when?
I can assure you that the £1.5 trillion figure was super imposed over one of the arches of the Admiralty building ( I think) as the reporter read it out.
The way I describe it is how it came across to me.
Who can you trust in the media these days to give the truth or even (perhaps) the many truths there about this issue?
PSR – as I’ve said before, we need to say a resounding ‘bollocks’ to the BBC/C4 and all the myth-bearing bullshit journalists that are more interested in their careers than social equity -linty of other channels to use:
RT (Going Underground)
Al Jazeera (some caveats needed for this one)
Real News
Democracy Now
I’ve long been waiting for them to go for Housing Associations-as a housing association tenant I’m anticipating this ‘pull of the rug’ from underneath me.
The Tories desperately want social housing financilaised and in their hands and the portfolios of Landlords (largely them). The notion that houses can exist that are not being wrung through the banking system and distributed as CDOs galls them immensely.
I suspect the sequence will be:
1) Cuts to HA grants
2) HA bosses go off with ‘hand-shake’
3) JOb losses as HA staff are dismissed.
4) leveraged buy out of HA’s
5) Houses sold to buy to let merchants.
6) Tenants have to leave as can’t afford new rents- creating massive suffering and mental health issues/illness.
7) Demonisation of those tenants as ‘skivers/scroungers’ by Daily Mail.
8) Labour party mute and impotent.
Talking about broken promises and failure to deliver, the farse that is now becoming Hinkley Point C is yet another example of warped economic thinking. In the time taken to try to get this deal done, we could have increased the real renewable (and non-toxic) energy supply in this country by a huge amount if the money and subsidies had been invested into wind, solar, tidal, geothermal, hydro etc etc etc…
Instead we have this bizarre situation that despite committing the highest ever amount to pay for an electricity supply, neither of the world’s so called experts in government funded nuclear energy (France and China) can commit to deliver a safe, reliable and economically viable solution.
Time to pull the plug on this disastrous Tory idea and switch to energy sources that can deliver jobs, investment, energy and no pollution or risk of lethal contamination.
http://www.theguardian.com/uk-news/2016/mar/18/hinkley-point-c-nuclear-deal-22bn-poison-pill-taxpayer