The poverty of supposed macroeconomic thinking in the UK is illustrated by a report in the FT this morning that says:
Andy Burnham has scope to increase investment in infrastructure without breaking the UK government's fiscal rules by being bolder in exploiting flexibility created by chancellor Rachel Reeves, according to forthcoming research.
The Labour leader, due to take over as prime minister on Monday, could mobilise an extra £16bn for infrastructure over the coming five years thanks to extra latitude resulting from a 2024 change in the definition of public debt, says the Resolution Foundation think-tank in an upcoming report seen by the FT.
Let me break this claim down.
Firstly, UK government investment is meant to be £160 billion a year and rising, according to the latest budget forecasts. So, this new sum supposedly 'found' by the Resolution Foundation is less than 2 per cent of total planned investment over that period. And given that total government spending is about £7 trillion, and maybe more over those five years, the figure is about 0.2 per cent of total spending. In the grand scheme of things, this is, therefore, meaningless in terms of its difference to planned investment, levels of economic activity and economic outcomes. The Resolution Foundation report is just meaningless number shuffling without cause in that case.
Secondly, this suggestion is also meaningless, because it supposedly exploits flexibility provided by Rachel Reeves. However, if Rachel Reeves could provide flexibility, so could any other Chancellor. This just reveals that these so-called rules are just made up. In themselves they are of no consequence. They are PR exercises solely intended to limit the role of government, serving no other purpose whatsoever. This is what the Resolution Foundation and FT should be highlighting, but are not.
The reality is that the UK has 5 per cent unemployed people. It has skills going to waste and massive unmet need. That situation is the deliberate outcome of fiscal rules designed to limit the scope of government, and a Bank of England approach to monetary policy deliberately designed to create both crippling interest burdens and unemployment in this country.
No one needs to play around to find £16 billion of potential spending capacity in UK fiscal rules. They just need to highlight the folly of such rules when the UK also has around £8 trillion of supposed financial wealth (and maybe more), most of whih is used for financial speculation. It could instead be used to fund constructive investment in ways I have outlined, many times. And £16 billion of this sum is also around 0.2 per cent of that total.
Have we really sunk to the point that macroeconomic debate is little more than an argument about such minuscule sums within contexts themselves wholly artificially created not to direct meaningful policy but to prevent it happening? It would appear that we have.
Let's state the blunt truth. We probably need to invest a sum approaching £35 billion a year to deal with climate change alone. Any less, and we do not manage that process. We aren't delivering that scale of investment. Instead, there is an argument about £16 billion over five years.
I despair.
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Please do not despair!
Your team shines a rare bright light in a deliberately developed, deceiving, depressing (Western) world.
Might you be persuaded to being pissed off instead of despairing?
OK…
Actually, for the first time for a month I feel OK today – whioch is very good news.
Please don’t despair, despite the huge provocation.
There is still hope.
Accepted
But there are odd moments…
Again, compare this with the line of credit to private banks in the central bank reserve account (CBRA) – plus interest – and tell me you think we live in a democracy?
Democracy – achieving it – is still on as far as I am concerned as a project. But facing up to the fact that we are not in one is really important. It helps stave off despair and keeps things real.
Yes, it’s actually weird how often one can read in media that the state has finally saved some millions or few billions (most of the time in socially important parts).
And they (the politicians & the journalists) nearly always celebrate that as if they’d found the fountain of youth.
A lot of times when I’m talking to people about that they also seem to be some kind of impressed.
I then constantly have to say, that those sums are basically nothing for the states finances.
We desperately need financial education / awareness and that all media are demanded to always put those numbers into context of possibilities.
Otherwise jumping in this liquid will turn out not to be the fountain of youth but the dirt puddle of frailness.
I like that
I suspect that this is playing on people’s ignorance. £16 billion sounds impressive just put down on its own. But, as you’ve pointed out, when you divide it over 5 years it sounds less impressive and when you add in the total spend on investment and the total government spend it sounds even less impressive – almost derisory.
Craig
A billion pounds is a lot of money. But only £14 per man woman and child in the country. £16 billion over five years is about £50 per person per year.
Would it be spent (or as a politician would say, “invested”) on something of merit, or is it just accounting shenanigans? Ever since Gordon Brown, the Treasury has seen its job as creating increasingly extreme contortions to get around the rules that the politicians set for themselves. Robbing Peter and Paul to make the numbers add up in the Red Book or Green Book.
The ship of state is blithely sailing onwards towards the iceberg. But look – we could create a little extra space on the promenade deck by arranging the deckchairs differently.
Thanks
In the run-up to the leaving speech by Keir Starmer, reporter Clive Myrie just mentioned his view of the electorate:
“Waiting and waiting for change, that changed perceived to be not coming, and the sense perhaps that Keir Starmer was not being Labour enough, was somehow carrying on a policy of so-called neo-liberalism that perhaps is a little too much Blairite.”
Source: https://www.bbc.co.uk/news/live/cgrkv8e8l9qt#player
(After around 11:13)
He is asking for a P45
Yes indeed Richard and the endless drumbeat on BBCs R4 WATO ‘how on earth will Burnham afford that’, ‘what well he cut’, ‘what taxes will he raise’.?<p>
Its so instinctive – the only fixed quantity is ‘money’ (no it isn’t) – whereas lots of other ‘real’ resources are fixed – although many are unused – such as unemployed doctors, unemployed young people, and some are wasted on CCS ,Nuclear power, or corrupt HS2 and defence contracts <p>
The level of propaganda is at 1984 level – no ‘expert or independent politician is allowed on R4 unless it was someone like the IFS person who talked about the inevitability of the £100bn interest payment on govt debt ‘unless cuts are made’.<p>
It wont be long before quoting Keynes:’what we can actually do we can afford’ will be an arrestable offence under recent State Security legislation
I fear you are right on the last
And now political commentator Chris Mason:
“… it’s a talk about politics changing to a greater degree than it has for 40 years, not only the critique that in his view, there has been 40 years of neoliberalism, and he means that as an insult, he’s talking about the records of previous Labour governments, as well as those you might expect a Labour PM to criticise.”
Source: https://www.bbc.co.uk/news/live/cgrkv8e8l9qt#player
(After around 13:05)
Maybe there is hope….
Once you realise the nature of the big lie, there is always hope surely? A big part of solving a problem is admitting there is one in the first place. Our politics is in a state of denial as is much of the West (why else would we tolerate homeless people for example?).
All we can do now after the warm words is watch what the Burnt Ham actually does.
We thought there was gong to be some big changes in 2008. And then look at what happened. But what happened was driven by real fear of capital losing control of the narrative . It was close. But only because politics did not know what to do either.
Beyond hope, what is there? Well, look to your self – there’s tenacity, obduracy, stubbornness – all put to work in the name of something better, something principled, sustainable, factual. If that’s all there is then there is no option but to take that. History is long; life is considerably shorter. Goodness me, you’ve done your bit. There is no reason to give up on hope. These new infographics for example are marvellous. You ain’t done yet.
Thanks
I am supported by a good team to whom I allow a long lead so they can innovate as they think appropriate