I struggle to know where to begin when talking about Rachel Reeves' totally illogical package of tax cuts announced yesterday, which she claims are intended to tackle the cost of living for 'ordinary' families.
The proposals are quite bizarre. She has announced free bus journeys for children in August. She has not, however. announced free bus journeys for the adults who will accompany those children during August, meaning that there is still an obstacle to families of very limited means taking a day out by bus. In itself, that indicates the lack of what might be called 'joined-up thinking' in what she is proposing.
I am not saying that this proposal is meaningless, but in rural areas, it can have limited consequences.
I am saying that, in the grand order of the challenges we face, how this came to have priority, alongside a reduced VAT rate on some tourist attractions during August, with all the complications that will involve, is very hard to work out.
We are facing, as I keep saying, an impending global crisis that will be caused by physical shortages of oil, gas, and essential products, including food. By August, this will be very much more apparent than it is now. I suspect that it will have begun to hit by then.
Why Rachel Reeves thinks a day out with a free bus ride for children, and a slightly reduced admission charge at some tourist venues, is going to solve the problem of balancing household budgets in the light of pressure on food bills, energy bills, rent, mortgages and a multitude of other costs, plus the rising risk of job losses, is almost impossible to fathom.
This move appears to be up there with Rishi Sunak's “Eat Out to Help Out” campaign from the summer of 2020 for its level of incoherent thinking, although that one actually killed people, and I doubt this one will, which is to its advantage.
It is, nonetheless, economically and politically incoherent and might, I expect, be a suitable epitaph for her career as Chancellor, representing as it does a person floundering well out of their depth in the face of a task that is way beyond their comprehension.
That the last point is correct was evidenced by her framing. Reeves claimed that the £1.8 billion cost of the concessions that she is providing will be paid for by taxes on energy companies.
This just proves how little she really understands about the economy she manages.
Taxes do not, cannot, and never will fund government spending. Taxes represent a debt created by the government as a mechanism to recover from the economy the money that it has spent into it as a consequence of its spending programmes.
Coincidentally, taxes can have benefits in reducing inequality, supporting certain activities within the economy, and more, but primarily they exist to control inflation, and the taxation mechanism is very straightforward. It creates a debt owed by law for the sole purpose of cancelling spending power in the economy that would otherwise result from the money creation that occurs whenever the government spends in furtherance of its budget.
It could be claimed that because Rachel Reeves has now chosen to provide a package of support for some people in the economy that will increase government spending in some areas, and reduce taxes in others, the resulting impact on government cash flow can be balanced by additional taxes elsewhere, but that is not what Rachel Reeves said.
She said this package will be funded by additional taxes paid by energy companies, but that is not true. As a matter of fact, when energy companies pay their taxes, they do two things.
Firstly, they cancel the existence of money that the government has previously spent into the economy, meaning that its inflationary impact is eliminated, and secondly, the debt that the energy company now owes is cancelled and gone forever.
There is absolutely no relationship between the energy company paying its tax and the provision of free bus rides for children. To pretend otherwise simply misrepresents the truth.
That misrepresentation is further evidence of how little Rachel Reeves ever came to understand the process that she has supposedly managed.
My problem is that I very much doubt Ed Miliband, who is being lined up as her successor as Chancellor, understands these processes any better.
My question, then, is a simple one. Is it any wonder that we live in a country plagued by macroeconomic mismanagement when those in charge of our macroeconomy have no understanding of the levers that they can pull, and neither do the vast majority of those who teach macroeconomics at our universities?
We're in a mess because of the ignorance of those in HM Treasury. That could be solved, but there is no apparent desire to do so. And that is our problem. Whilst the dewire is to perpetuate the status quo, we are going nowhere.
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Senior Chinese politicians tend to have STEM backgrounds and spend years learning their trade beavering away in the bureaucracy. Our guys tend to be PR and Law. Not even many Accountants who should understand double-entry. Reeves has been challenged about her cv and TheTimes said about her time at HBOS in Leeds “her actual role was “running a customer relations department dealing with complaints and mortgage retention”. Enough said.
As a woman, our Rachel from Accounts is – by all accounts – a bit of knob……………..
Apparently in medieval times, the lord of the manor and his guests used to wipe their hands on bread at banquets and then give the bread to the poor. How thoughtful. This escapade to me has all the markings of a same begrudged act of kindness from a person who said that her party is essentially not a party for the relief of the poor.
What I don’t see is any analysis from The Government of who benefits from these changes.
The suggestion sems to be the middle classes
Not like (say) a one off payment to everyone on Universal Credit
However I would not knock free bus tickets for children as that will benefit some of the poorest families.
Perhaps that should be made permanent
What about the rest of the family, ie the parents? So they have to pay for their bus tickets, which obviously cost more than kids’ bus fares?
“Perhaps that should be made permanent”
In some parts of the UK, it already exists: “In Scotland, free bus travel is available for everyone aged 5 to 21 through the Young Persons’ Free Bus Travel Scheme”. But, y’know, for the media in England, including supposedly left organs like the Guardian, SNP BAAADD!
I too was left wondering at the relevance of what Rachel Reeves was saying and rather alarmed at all the Labour MPS braying their support. If the strait of Hormuz is not open and fuel and other commodities are in short supply I think people will be more worried about that than having a day out at a theme park. In fact if fuel is in short supply I wonder whether the priority should be for it to be used to transport essential goods about. As for the emphasis on jet fuel supplies – its time to cut air flights – the government could start by stopping private flights but they won’t. If we get lots of dry weather this summer then crops will be reduced which will impact supplies and prices. The government and opposition parties and media are oblivious to the effects of climate breakdown and unwilling to do anything at all. They are obsessed with growth to the detriment of us all.
If Hantavirus or Ebola has reached the UK by August, Reeves’ plan could also kill people, though probably still not as many as ‘Eat out to help out’ did.
Typically, right wingers note: “I bet the main reason for this is recent revelation that families on benefits enjoy hugely discounted tickets to a lot of attractions, prompting criticism on behalf of those in work & ‘just about managing’.” (Seen in a recent tweet I came across, which ignores the fact that many “in work” are also “on benefits.”) The engrained meanness and spite just can’t be hidden, and fuels far right parties like Reform, but it also underlines why wiser heads back in the day backed the principle of Universalism, and why neoliberals are so keen to destroy it.
Tokenism, and clearly not the answer to the problems about to hit.
According to the Guardian, it is £17 off a family day out at a wildlife park. Trouble is, the family will need to be fed. That seventeen quid will probably buy a burger bun meal these days. If you want chips, add another five.
I lose interest as soon as politicians like Reeves frame everything in terms of helping “working people” and “hardworking families.” It’s all so boring now, and simply shows how false and shallow they are.
And she’s doing nothing for what is likely to hit this winter, when energy costs will spike up again. Labour’s approach will be “targeted support”, which basically means people having to apply for benefits. That will then put people in a system that is stigmatized and under pressure. Chances are, most won’t qualify for any help, even if they are on the breadline. “Let them freeze” will be Labour’s version of “let them eat cake”. And in a country that already has £5.5 billion of debt owed to the energy companies, we can expect this winter’s price rise to add a few billion more before the sun shows itself again in 2027.
But Labour will still say they are doing something. And this last week, they watered down Russian oil sanctions because Britain getting its fix of oil to help motorists, is more important than standing up to a dictator and his illegal war. I’m sure the people of Ukraine are impressed by our commitment.