In this morning's video I note that Steve Baker – until recently a Tory MP – has claimed that in twenty years' time – when we will be celebrating the centenary of the welfare state – we will no longer be able to afford it. Is he right, or talking a load of nonsense, as usual?
The audio version is here:
This is the transcript:
Can we afford the welfare state?
I ask the question because I watched a television interview recently where Steve Baker, who was until recently a Tory MP, asked that very question. And he claimed that in about 20 years time, or on about the centenary of the creation of the welfare state, we would no longer be able to afford it.
I thought about what he had said, and it didn't make sense to me. So, I just want to discuss this question of do we think we will be unable to afford the welfare state in future when we apparently will have been able to do so for a century by the time he predicts that we'll have to give it up?
What are his assumptions? Well, the first one is, and it must be, about the rate of growth between now and 20 years' time. He didn't specify that assumption, but there are three options that he could choose.
One would be that the economy will grow. In other words, we will be richer as a country than we are now. And we are already, let's be clear about this, a rich country.
Or, we might be at the same level of income as we have now. Which would still leave us as a rich country.
Or we might see our income decline, but there's no evidence-based upon past precedent that that is likely at present. And I don't think it very likely, whatever challenges we face, because although we need to go through a green transition I actually believe that could generate more economic activity, not less.
So, let me take the neutral version of those assumptions and presume that we are no richer in 20 years' time than we are now, but we're also no poorer.
What will change, then, between now and 20 years' time, which then gives him the right to claim that we couldn't afford a welfare state?
Well, the obvious fact is that I will look a lot older than I do now. And I won't be alone. So will you. But actually, as a proportion of the population, more people will look old than they do at present. Because we do have, presuming no change, as a result of migration, an ageing UK population. And the ratio of people at work to those who are dependent will change and therefore, each person at work will be required to supposedly support more dependent people.
Will that be possible, is therefore one of the assumptions that Steve Baker must have asked himself to come to this claim that we can't afford a welfare state. He's obviously concluded that presuming that we have the same amount of income we will not be able to allocate as much to those who are dependent than we will to those who are at work and therefore those people at work will either not be able to, or will not be willing to, support those who are dependent.
But, note that I've assumed that the overall income of the country is stable. If there are fewer people working to create that stable income, they will all be better off if they don't reallocate any of the excess income that they now earn because there are fewer of them to those who are dependent on them. So, he's basically saying we won't be able to afford a welfare state because people will not be willing to support the elderly.
It's an interesting idea. Maybe Steve thinks that's the way in which charity will work. Or rather, it'll all be down to us looking after our own elderly relatives. And tough, if you have nobody who wants to do so. I don't know what his assumption was, but I don't see why he thinks this stable state with fewer working people should reward those in work more but leave those who are dependents in poverty.
There's another assumption that Steve made I think and again, he didn't specify any of these things, so I'm trying to work out the basis of his claim that the state will not be able to act as the intermediary in this transaction of taking more money off people who are at work and paying it to those who are dependents because it will have other claims on its income.
What is that other claim? I am quite sure, on the basis of what he said that he thinks that other claim will be the payment of interest on government borrowing, which he thinks is out of control. So in other words, what he's saying is, bad luck those who need to be supported by the state, the wealthy need the money. That is the assumption he's making. The state will have to pay so much out to the owners of government debt, which he thinks will rise disproportionately, with a consequent increase in the interest rate payable and therefore the cost payable to them, that there will be nothing left over to provide for people who need support from society.
In other words, he's saying that in 20 years' time, our society will be so unequal that the wealthy will claim everything and there will be nothing over to support those who are living in poverty.
Is that a reasonable assumption?
Is that the way it's going?
Would we be able to do anything to stop that happening?
Look, of course we could. Steve Baker's assumption is quite absurd.
First of all, there are likely to be significant changes to the structure of our society over the next few years. We are seeing significant inward migration to the UK at present. And actually, we should be celebrating that fact.
Why? Because the people who are coming in tend to be young, tend to be well educated, tend to be highly motivated, tend to be innovative, and even entrepreneurial. They want to join our workforce. That's why they want to come here, by and large, to provide a better way of life for themselves and, in particular, for their families.
And they are going to become the people who will supplement the workforce to ensure that there will be sufficient people to look after the people who are in old age. I have little doubt that this trend will continue. Firstly because, unfortunately, we're unable to stop wars around the world, it seems, right now. And secondly, because climate change is going to force more people into refugee status, because there will be large parts of the world, some even in southern Europe, where it will become very difficult for people to live. They will therefore be looking for somewhere else to go and we are one of the potential destinations.
Our advantage, their cost, their requirement to relocate, but our gain because we will have the people we need to rebalance the effective economy we have, which requires there to be sufficient people at work to support those who are dependent.
Then, let's look at the other assumptions. Will we allow debt to rise so heavily? No, of course we won't. Why won't we? Because there's no need to, in the sense that if that becomes a part of life, we will simply do what Japan has done and have the government repurchase large parts of the debt that is in existence through a quantitative easing process to ensure that the government is keeping the amount of debt that is in private hands under control to the amount that can be afforded as a safe deposit facility, which is what the national debt is in any case.
As a consequence, it will be able to control the interest rate, and if only it took control of the Bank of England, it would have absolute control of that interest rate at the same time.
As to the payments due on quantitative easing, it can cancel those in net terms. It's paying itself, therefore this idea that debt will run out of control is another, let's be blunt about this, stupid idea put forward by Steve Baker.
Is it therefore possible that his claim that as a rich society we won't be able to support our elderly and other dependents is correct?
No, he's talking absolute nonsense.
What he's saying is that his assumptions of a stable society with no population growth and an increasing income for those at work plus an increasing reward for those with wealth will produce this outcome.
All of those assumptions that he's making are wrong. And therefore, his conclusions are wrong.
And therefore, do we need to worry that we're not going to be able to afford our welfare state? No.
We can afford it.
We will afford it.
There will be an old age pension.
There will be support for those who need it.
There will be a state, and it will provide services, including education and the NHS and everything else, but only if we stop people like Steve Baker from talking nonsense and being in government.
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Given that the UK has a problem with low productivity one other obvious area to start would be to look at productivity and how we might improve it,
Also of course do things like hand car wash’s represent a sensible use of labour?
Selective employment tax anyone?
“Productivity” all depends on what’s being produced. And if we’re intending to be joined up here, productivity takes land, water, energy, so we head closer to ecocide that much faster. And everything produced needs a consumer, so everyone is producing more and consuming more. I don’t know about you, but that doesn’t sound like a meaningful life.
Fact: “Affordability” is gaslighting us.
It is a ploy to break the NHS with a view to complete privatisation.
Perhaps if private “partners” were not taking so much profit out of the system.
Read
How to Dismantle the NHS in 10 Easy Steps by Dr Youssef El-Gingihy
https://www.amazon.co.uk/How-Dismantle-Easy-Steps-second/dp/1789041783/
View
The Great NHS Heist https://vimeo.com/ondemand/thegreatnhsheist
https://www.youtube.com/watch?v=ro-oU0u8Jos
See too the blog just posted
If a country can’t afford it, how then is it possible that the people of said country somehow can? We’re systematically lied to by government and associated media, we’re in what an academic I spoke with recently called a system of total distortion and a total system of distortion, which I thought summed it up.
Silly me, I thought climate change was going to knock several percentage points off our GDP, and our daft policy response e.g. size well and subsidies to CCS was going to knock off the same again. Today I’m reading the worst that will happen is we stand still
See the blog just posted
Looking at the future wider world, there are two supply-side constraints – food and energy. Not money.
We have potential access to unlimited clean energy. Indirectly, energy is prosperity, so that there is no energy constraint on future prosperity.
Food is another matter, I suggest the world is close to capacity in terms of food production. Worse, misuse of fossil fuels means that the world will become poorer in terms of food availability. This will lead to wars over a diminishing resource, which wars will reduce still further.
It does not help that the UK imports nearly 40% of its food and energy.
Obsessing over public debt, while turning a blind eye to private debt is a disaster. It is blocking the strategic investment the UK needs to survive, let alone for a sustainable future.
Money is never the constraint
A wiullingness to use it can be though
I don’t think food is a constraint. With sufficient energy (and there is no fundamental shortage of energy) we can produce as much food as we want. Consider vertical farms.
Over the past few decades food production has increased dramatically, contrary to the 1970’s Malthusians. If it had not we’d already have mass starvation (not just that caused by conflict).
And the the world population will stabilise and decline over the next century (a good thing in my opinion since it is the fundamental cause of over exploitation of the planet and excessive C02 pollution).
I don’t think we have serious limits on what can materially be provided.
I guess I’m an optimist 🙂
We already produce sufficient food for the current global population, and projected increases. The problems that arise are in distribution and waste, (as well as longer term reduction in soil fertility under industrial monocultures). As Amartya Sen noted, famines are all man made. Food production is not the main issue.
Globally we are currently consuming at 1.7x the level of resource capacity possible for renewal, annually.
Of course there are limits on material consumption on a finite planet, let alone for those non-renewable resources which are not reclaimed or recycled.
The “green growth” proponents have packaged a myth.
It is not physically possible – even if the environmental degradation and reduction in biodiversity that would be required in anthropising the entire surface of the planet were acceptable, and they are not.
The UK has suffered the worst loss of biodiversity of any nation in Europe, so we have a lot of remediation to undertake.
We desperately need to adopt the precautionary principle, given existing levels of habitat destruction. Global regulation is poor.
One example, is ocean floor mining of metal nodules. Only very recently has it been discovered that these manganese nodules are involved with an electrolytic process that actually releases oxygen into the oceans. We don’t yet know how important this is, but that knowledge ought to stop any mining of nodules right now and for the forseeable future.
None of the renewable energy globally produced since 2000 has reduced total energy consumption. This is still rising.
There is still a massive disconnect between growth in consumption and sustainability.
The failures of most nations post Paris to actually implement their “legally binding commitments” to net zero is mere backsliding.
The prospects of reaching a climate tipping point before net zero is reached are increasing, (and all that will do is slow existing processes, given the timelags involved in stabilising geophysical processes triggered already) and the lack of substantive action is self destructive.
There are no reasons for optimism.
“Where we are using up resources, do not let us submit to the vile doctrine of the nineteenth century that every enterprise must justify itself in pounds, shillings and pence of cash income, with no other denominator of values but this… Anything we can actually do we can afford. Once done, it is there. Nothing can take it from us. We are immeasurably richer than our predecessors. Is it not evident that some sophistry, some fallacy, governs our collective action if we are forced to be so much meaner than they in the embellishments of life?”
That is just as true today at it was when Keyes said it. In 1942.
Streeting has been speaking about the risk of the UK becoming a health service with a state attached rather than a state with a health service.
As things stand the UK’s GDP is about £2,200 billion. We spend about half of that – about £1.1 trillion – in the public sector. Social protection and social services (including pensions and benefits) are about £380 billion. Health is about £250 billion. About a quarter of public spending and about 11% of GDP.
The idea that the NHS is or will become unaffordable it just plain nonsense.
The US spends about $4.5 trillion on health from a GDP of about $29 trillion. That is more than 15% of GDP. So there is much more we could spend if we have the will to do so. If the UK matched the US, that would be another £90 billion on health each year. Does it become more affordable when it is done inefficiently and wastefully by some private citizens (and some get no health coverage at all) rather than more efficiently (in terms of bang for buck) and more equitably by the state on behalf of everyone?
Thanks
Money, debt, interest etc. confuse the issue… which is what Steve Baker appears to want to do – confuse.
It comes back to Keynes – “anything we can physically do we can afford to do”.
So, can we look after older, sicker folk in the future? Yes we can… if we choose to.
Sure, it may require a re-ordering of priorities but it can be done. A start would be to get the current generation to invest in the stuff (infrastructure) that will make workers more productive in the future.
In getting rich we have as a species been destroying the planet as a habitat. What does the Reality Dodger Steve Baker have to say about that? I don’t think we’ll find anything of any merit including the notion that a reduction in market consumption obviously releases resources for public welfare.
Steve Baker is the epitome of Neo-liberalist thinking.
How many times can you be wrong but still willing to be wrong again?
His being wrong on BREXIT has ruined lives. He is a destroyer who delightfully thinks that by just apologising for his support for bad ideas everything is OK. He sees no downside to that at all. Because there is not one for him you see. He does not need to be accountable.
He should retire to somewhere else and just…..shut up. But he won’t it seems. Because he’s useful idiot in a useful idiot society dominated by hegemonic powers that value useful idiots.
As to the matter at hand, wrestling to protect good ideas has a lot to do with language.
I really do not like the word ‘welfare’. It has negative connotations. I always felt that I lived in a state providing SOCIAL SECURITY. Because that is what it is. Health security. Job security. Income security.
‘Welfare’ – my arse. The worst word ever created in my view to describe the help a state can give its citizens. We should do what the Neo-libs do – create our own reality to counter-act their bullshit, and stop using their terms of reference.
When will we learn!!!!
[…] By Richard Murphy, part-time Professor of Accounting Practice at Sheffield University Management School, director of the Corporate Accountability Network, member of Finance for the Future LLP, and director of Tax Research LLP. Originally published at Fund the Future […]
A year or so ago, Steve Baker was in the news, saying that he had had a mental health problem, and that he was rethinking some of his views.
I think that is more or less what he was saying, but emphasising his religious belief, even though some of his utterances seemed to contradict this belief.
I felt frustrated by some of his statements and this prompted me to write this silly doggerel which I have not allowed anyone to see as i am conscious that it could be seen as belittling mental health problems. I seek your opinion, and if you feel it is not appropriate or adding anything, don’t publish.
I must emphasise that this is the effort of a retired agricultural engineer, trying to be poetically funny, while making a point.
ODE TO A HEADBANGER
There once was a Tory called Steve Baker
His views so potty, he was a Moonraker
He told many lies about our EU friends
To further his extreme right wing ends
Rightwing touches he has lit
He is nothing but a political half wit
How can someone who professes Christianity
Be responsible for so much political insanity
Because of his mental health he now finds it hard
And now says his former views we should disregard
He now says he lost his mind
And I know this may sound a bit too kind
But is this his quest, the truth to find?
Is he a born again teller of truth.
Maybe I am forlornly seeking a hens tooth
Or is he just thinking of the polling booth.
And I know this really does sound absurd
We are now expected, as you may have heard.
To believe it is possible to polish a turd.
And again, you may have heard the talk
That it is nearly impossible to educate pork.
Looks like the UK population will have passed the peak and be well into decline in 20 years time, at least if the latest Total Fertility Rate figures are used (the “official” population projections rely on outdated TFR trends), and the same will be happening all over the world.
Once the population is declining the current economic system cannot work.
World populations not falling yet
And it will move