Budget

IPA Demands That The Government Stop Subsidising Low Income Workers And Instead Focus On The Rich

Published by Anonymous (not verified) on Wed, 01/04/2020 - 1:00pm in

ipa-james-paterson

The Gina Rinehart funded ‘think-tank’ (sic) the IPA has demanded that the Government stop subsidising low to middle income earners and instead focus their bail out funds on looking after the richer members of society.

”There’s no use giving valuable Government funds to anyone currently earning less than $250 K per year,” said an Adjunct Spokesperson for the IPA. ”This pandemic has hit our countries billionaires hard.”

“They’ve seen their share portfolios fall and to make matters worse their corporate boxes at events like the NRL and AFL are virtually worthless.”

“Surely the Government could at least refund them what they paid for their corporate boxes.”

When asked why the IPA was so obsessed with seemingly robbing from the poor to feed the rich, the adjunct Spokesperson said: ”We believe in trickle down economics. In that if you give the rich champagne they will then piss it on down to the poor.”

“Now, if you’ll excuse me I’m off to deliver a paper to the Treasurer on how poor people should be taxed for breathing in rich people’s air.”

Mark Williamson

@MWChatShow

You can follow The (un)Australian on twitter @TheUnOz or like us on Facebook https://www.facebook.com/theunoz.

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Government Moves To Reassure Negative Gearers That They Are There For Them

Published by Anonymous (not verified) on Mon, 23/03/2020 - 7:00am in

morrison 730

Prime Minister Scott Morrison has moved quickly to reassure those who are negatively gearing one or more properties that the Government will be there for them no matter how bad things get.

“It is a tough time for many Australians at the moment, I acknowledge that,”said Prime Minister Scott Morrison. “However, rest assured my Government will do what ever it takes to protect all those people out there who negatively gear.”

”Whether it be negatively gearing one property or seven, we have your back.”

When asked why his Government was so quick to reassure negative gearers, banks and airlines as opposed to pensioners and new start recipients, the Prime Minister said: ”People on new start know that there money is guaranteed so they need not worry about anything.”

“We need to focus on those who have a lot to lose as opposed to those who have not much at all.”

”Now, if you’ll excuse me I’m off to have a chat with Rupert Murdoch, just to see if he needs anything.”

Mark Williamson

@MWChatShow

You can follow The (un)Australian on twitter @TheUnOz or like us on Facebook https://www.facebook.com/theunoz.

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Seven questions for Rishi Sunak on the coronavirus job retention scheme

Published by Anonymous (not verified) on Sun, 22/03/2020 - 2:31am in

Tags 

Budget, Economics, HMRC

I have already noted that I have major reservations about much of Rishi Sunaks coronavirus job retention scheme. As the day has gone on these have only grown. Right now I have seven questions that need answers:

1) What happens if an employer of laid off staff refuses to apply for them to be treated as furloughed? Does that mean they cannot get payment under this scheme?

2) What happens if the employer refuses to, or cannot, pay the 20% of pay not covered by the scheme? Does that mean the government will not pay their 80% part under this scheme?

3) What happens if the employer goes bust during the duration of this scheme? Does that mean those on the scheme then lose their benefits under it? Why should that happen if it does?

4) Who pays the employer's national insurance due on this pay? And if the employer, why? What if they say they can't afford it? Can the scheme not work in that case?

5) What happens to mandatory pension contributions whilst this arrangement is in force, and who pays the employer's part?

6) If an employee has lost their job since 1 March as a result of coronavirus why can't they just apply to HMRC direct for 80% of their old pay up to the ceiling you set? Wouldn't that be fairer? And, please note, given online PAYE failings HMRC do have all the information to confirm such claims.

7) People need answers to these questions now. When will you supply them?

 

NOTE ADDED 23.3.20

A great many questions have been asked about this scheme.

I understand people’s concerns, but three matters arise.

First, nothing on this blog is personal advice.

Second, in every case I have had to offer same variation on the theme ‘wait and see’ - we do not know the rules are as yet so no one knows the answers to questions raised, me included.

Third, I am sorry that I cannot keep providing variations in that same answer. I know people are worried - but I cannot answer questions on something unknown - so everyone has to wait for the rules and then seek their own advice, I am afraid, starting with your own employer. 

Impact of Covid-19 on UC Graduate Students: Now is the Time to Improve their Funding, Not Cut It

Published by Anonymous (not verified) on Thu, 19/03/2020 - 10:26am in

Tags 

Budget

Statement to the UC Board of Regents by Shane K. M. Wood, President, UC Irvine Associated Graduate Students; Department of Theater and Drama

The Pandemic we find ourselves currently enduring has shown just how precarious the lives of our students across the state are. Within days of the rolling campus closures, the student governments from each campus began receiving reports of students who would be losing their housing because of lack of work or inability to move as has been suggested for social distancing. In particular, our graduate population has been specifically impacted, many scrambling to create online classes with little to know training while being expected to also contend with all the other logistics

When speaking about the need for more funding for our graduate students, it is often mentioned that the state is cautious of another economic downturn and therefore will not contribute more money to the system. Frankly, this is an unacceptable stance to take. Our graduate students are a huge economic driver for the UC System and the state as a whole. Not only are we responsible for a large portion of undergraduate education, but also the research our system, state, and society depend on--including the continual study of the Covid-19 virus and the media, literature, and art we’re being urged to utilize during social isolation.

As the graduate students navigate the next few months, foregoing personal research, travel, and coursework as they continually adapt to the changing needs of this pandemic, the Regents must urge the state to begin investing in its graduate students, not only to support the current population doing this essential work, but to allow the UC to get back on track once this crisis is over to continue the enormous growth of the graduate population that is being asked of each campus.

A logical start is to insist that state commitment for graduate students be raised and expanded to cover the additional costs that this 20% increase in graduate numbers will represent to the state. The UC simply cannot commit to this increase without a firm commitment from the state for their increased and continued financial investment in this vital population.

The government’s spending promises have shown the need for austerity is a lie and a sham. It’s time to hold the government to account for its political decisions, not its fiscal prudence or otherwise.

Published by Anonymous (not verified) on Sun, 15/03/2020 - 10:21pm in

Man teaching girl to wash her hands properlyImage by CDC on Unsplash

In 2010 the newly elected Conservative government, using smoke and mirrors, turned what was a private debt crisis caused by global reckless greed and speculation by financial markets into a sovereign debt crisis. Liam Byrne’s stupid joke note left in the Treasury, suggesting that there was no money left, gave them the perfect opportunity to cash in by claiming that was no alternative to austerity and cuts to public spending. The then Prime Minister David Cameron and his Treasury sidekick George Osborne declared that ‘maxing out the credit card’ and putting off dealing with the problem would make it worse and suggested that without spending cuts we could end up like Greece. The Chancellor declared in his Spending Review – ‘we have taken our country back from the brink of bankruptcy.’

Believing that their own household budgets were like the state’s public accounts (a constantly reiterated message) it’s no wonder that the nation gave a huge sigh of relief. People were mistaking the prospect of “healthy” public accounts for a healthy economy. The nation, which accepted the false premise that there wasn’t any money left in the treasury coffers, subsequently paid a heavy price for this misunderstanding; a misunderstanding that was endlessly promoted by successive Chancellors.

What followed allowed the government to deliver a political agenda which had nothing to do with balancing the budget, even if presented as such. It was quite simply the mechanism to further hollow out our public services, reform the welfare system and sell-off and privatise public assets. It brought to its conclusion a decades-old plan which began as early as the 1970s and was pursued by Margaret Thatcher, as a result of her love affair with the ideas of the economist Friedrich Hayek and the Chicago School of economics; continued by Tony Blair and New Labour.

This Wednesday the new Chancellor of the Exchequer, Rishi Sunak, stood at the despatch box to give his first Budget. The public, from being told over 10 years ago that Labour had spent beyond its means and as a result, the nation would have to cut its cloth and make a sacrifice to restore the public accounts to order, suddenly discovers that the money we were told we didn’t have for public services which were previously “unaffordable”, can inexplicably appear, as if by magic. From apparent scarcity to abundance. Along with the Bank of England cutting its base rate in an effort to fight the impact of Covid-19 on the economy, the money taps have also been miraculously switched on.

As an aside, when public and business confidence is at rock bottom and fear is rampant, it beggars belief that the central bank believes that cutting rates will stimulate people to consume (unless it’s toilet roll, pasta or hand sanitiser) or businesses to invest. Ten years of reliance on central bank monetary policy to stimulate the economy has proved ineffective. The fiscal approach, i.e. government spending to support the economy and its public infrastructure, is the only route left to any government, left or right, if they are to address the prospect of recession as a result of 10 years of austerity or indeed economic collapse because of the coronavirus outbreak.

More importantly, the fiscal approach is also the only route available to fight the immediate consequences of the virus in terms of containing it; the government must use the power of the public purse, alongside its legislative powers, to ensure that resources are freed up to get help to where it is needed. Whether that’s financial support for individuals or businesses caught up in the coming economic slowdown or bringing private sector health companies into public use – meaning hospitals and trained staff – to meet increased demand.

That said, we cannot avoid the stark fact that after ten years of austerity, which have gouged out our public services and left them pared down and in an appalling state of decay with those working in them struggling to pay their way using food banks or in deep debt, it remains to be seen what can be achieved immediately. Austerity reduces our domestic productive capacity, laying the foundation for inflationary pressure when the economy needs to grow or when the nation has to respond to a crisis. The corona crisis will create inflationary pressures which will result in rationing access to real resources and public services. This and many other governments have for decades put bankers and the financial sector before the health of their nations and their citizens.

Just to be clear, in case there is some confusion, turning on the taps has nothing to do with printing money in the Treasury basement, collecting tax or borrowing from the market to fund its spending programme. It is doing what all sovereign currency-issuing governments like the UK’s can do and have been able to do since 1971 – spend the money into existence via a computer keyboard at the central bank, where an employee authorised by the Treasury enters numbers onto a screen and transfers to the appropriate accounts whatever sum of funding it requires to deliver its capital programmes or fund its day to day spending. The fact that government spending is still couched in household budget terms of collecting tax or borrowing serves an agenda and nothing else. It is worth repeating here that there was no such scarcity of money when it was a question of spending it to feather the nests of corporations, reduce taxes for the same or serve a specific government agenda, from bailing out the “too big to fail” banks after the 2008 financial crash to buying votes in the House to keep the government in power.

So, having presided over 10 years of the destruction of our public and social infrastructure, the ravaging of our public services and social security system and all that that has meant for the economy and some of the nation’s most vulnerable citizens, now suddenly it appears the government’s austerity breaks have been taken off and the gears crunched into fourth! If you are wondering how this has this happened, when up until quite recently being fiscally prudent has been all the rage, according to a government minister the sacrifice of the great British public has now paid off, enabling the government to spend. Dear Rishi and any others promoting this nonsense, please pull the other one, it has bells on! The veil pulled over the eyes of the British public who are now suffering the very real physical and economic consequences of government policies is now being torn away in the most brutal way.

The harsh reality is that the sacrifice was unnecessary and indeed damaging. It was justified on the back of a monstrous lie about how the state finances actually work. We heard them say that the nation had been living beyond its means and this required drastic remedial action to avoid bankruptcy. The myths about how money works have left our public and social infrastructure in such a state of decay that the last 10 years of austerity combined with the risks that the spread of coronavirus pose and its effects on the world economy are increasingly becoming self-evident. Government’s ideological choices, with their focus on keeping markets and corporations sweet, have been responsible, not lack of public funds. To put it bluntly, political choices are killing us.

However, before we get too excited about a change of direction (and how the government will explain it) whilst one can obviously support a fiscal programme of government spending as the right approach, one has to question who it will benefit. Whilst, of course, there is a role for the private sector in delivering big infrastructure projects they will continue to feather the bank accounts of big business. This means public money pouring into private profit whilst top management continues to pay itself big salaries, pensions and other bonuses. Whilst investment in our privatised railways has been promised, top management will continue to benefit from public money and pay itself handsomely whilst at the same time failing to provide good, reliable services as many travellers will attest. Government pours money in, but fails to dictate the terms in the public interest.

Sunak neither mentioned the perilous state of social care nor the appalling consequences of the introduction of Universal Credit on the lives of many involuntarily unemployed people and those with disabilities. And whilst he has announced a spending review, which will include local government, the combined effects of 10 years of cuts to funding will take more than a future spending review to improve the dire financial situation of local councils and the current parlous state of local infrastructure and services.

The economy is not some nebulous presence overseeing things from the heavens; it is us. From nurses, doctors and other health professionals, those that teach our children or lecture in other institutions of learning to ensure a healthy and educated society for today and tomorrow to those who sweep the streets and remove the rubbish along with the army of social carers looking after our loved ones in their own homes or in residential care. The government has failed the economy. It has failed us. It has, in fact, decided that some of us are expendable; surplus to requirements.

The ‘spend, spend, spend,’ message has however not gone down well in some circles and whilst we may think that household budget narratives have been swept away in favour of fiscal spending, the question of how it will be paid for still hasn’t gone away. A quick perusal of the government’s own Executive Summary for this week’s budget in which it talks about ‘creating a fair and sustainable tax system to fund first-class public services’, mentions that ‘over the past decade it has taken action to restore the public finances and reduced the deficit by four-fifths’ and suggested that the ‘historically low cost of borrowing means that it can support the economy and provide significant investment in public services and infrastructure’ is still nodding its cap to household budget narratives of how governments spend.

The reaction of the Adam Smith Institute which suggested that ‘spending like a drunken sailor…wasn’t the way to create a thriving entrepreneurial economy’ or the IFS which remarked that ‘The Chancellor seems to think the only best way to boost growth is through public spending’ shows that we still have a way to go in changing the institutional and press narrative.

With the mantra of low interest rates and borrowing to spend still prevailing even amongst what one might call ‘progressive’ left-wing economists and journalists, we seem to still be stuck in the household budget box of taxing and borrowing. Indeed, one economist and commentator claimed that ‘spending on growth-promoting investments would ensure that government wouldn’t have any trouble repaying its debts over the long term’. It is now the job of the left-wing not to question the fiscal prudence of government as in the usual ping pong of debate about the state finances – that train has now left the station – but to hold it to account for its political choices.

The house is still on fire, the emergency suddenly grew into one of huge proportions with increasing climate uncertainty, environmental catastrophes, the prospect of an economic collapse which will affect vast swathes of the world population and we still have people talking about being fiscally prudent in one way or another. It is time to wake up to the reality that it is not a balanced budget that will save us, it is a government which puts human beings at the top of its priorities instead of polluting, exploitative corporations and is willing to make the policies and spend within its resource capability to address the challenges we face for the future.

 

Events

Challenging the narrative about how governments pay for public services – Northampton

March 28 @ 1:30 pm – 4:30 pm

 

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The post The government’s spending promises have shown the need for austerity is a lie and a sham. It’s time to hold the government to account for its political decisions, not its fiscal prudence or otherwise. appeared first on The Gower Initiative for Modern Money Studies.

The markets are not convinced by Rishi Sunak

Published by Anonymous (not verified) on Thu, 12/03/2020 - 7:56pm in

Tags 

Budget, Economics

This morning's chart for the FTSE 100 suggests that the markets are as unconvinced by Rishi Sunak's budget as I was:

As votes of confidence in a budget go that's about as bad as they get.

Calm budget reflection suggests that Sunak has not as yet got any real awareness of the scale of the problem that’s facing him

Published by Anonymous (not verified) on Thu, 12/03/2020 - 6:41pm in

Tags 

Budget, Economics

It is time for calm budget reflection. Or rather, as calm a budget reflection as can be delivered on a day when the world appears to be moving into lockdown.

First, and most obviously foremost, it is apparent that the government does really believe that the coronavirus epidemic is going to cause substantial economic harm to the UK. The clearest indication of this did not come from the budget itself, but rather from the last action of Mark Carney whilst at the Bank of England, because the cut in interest rates of 0.5% announced hours before the budget took place has all his hallmarks on it. It was a closing mark of frustration, making clear the limits of what the Bank could do: this was a clear throwing down of the gauntlet to the Treasury that effectively demanded fiscal policy from them. at the same time lines of credit were created and the hint that quantitative easing will be used was given and both tied the hands of his successor, quite successfully. It is apparent that Carney wanted the last word and got it.

Second, despite all the enthusiastic comments in the press the suggested support for small businesses on coronavirus appears feeble, overall. It is true that the arrangements on statutory sick pay are welcome, but at present it is not clear how long it will take for the government to compensate small businesses for the cash that they have to pay, and given that cash flow is king at present, this could be crippling. The fact that statutory sick pay will also only be paid for 14 days is quite absurd: it is entirely possible that a person will have to self isolate for coronavirus more than once, and given that a period of isolation is likely to precede any period of sickness the chance that this will last for longer than 14 days is very high, in which case the offer of compensation appears far less significant than many of the headline writers would suggest. I suggest that the cost to many SMEs will remain crippling.

The other positive move for small businesses is the relief from business rates. Clearly this is of use. But, the loss that is hitting many High Streets comes from the departure of large chains and there was no relief for them even though they are going to be hit very hard indeed by coronavirus and this appears to be particularly shortsighted.

As for the rest of the suppose the business support measures, As I noted yesterday the total package comes to an apparent £7 billion and there are 5 million small businesses in the UK, meaning that support will, on average, come to just £1,400 each, which will be far too little to help many of them by very much. Let us not get over excited by this. The number of small business casualties arising from the coronavirus will, with this level of support, be significant, with substantial job losses following, and significant impact on GDP as well as long-term economic prospects. My suggestion remains that the overall level of support is, firstly, less than the headline writers are suggesting and, secondly, of substantially less significance than they imply. Sunak has delivered a package of far less use the many might have expected when realities begin to hit.

My suspicion is that as a result Sunak will be back at the Dispatch Box much sooner than any of the papers expect. The Bank of England might have correctly appraised the risk that we face, but Sunak has not and as a result the prospect of an emergency budget within a few weeks is real: if that happens expect significant cuts in VAT, the extension of support to bigger business, increased statutory sick pay repayment, and the issue that I have been talking about but which was totally ignored in this package, being mandatory bank loan term extensions and rent holidays, to be addressed. Automatic tax payment extension period will also be on the agenda then: there are simply not going to be enough people to process requests at present. It would seem that the government have simply not got their head around this.

Turning to the rest of the package, three things really stand out. Of these the first to note was the extraordinary absence of almost any significant measures with regard to tax, some minor changes to VAT on electronic books and newspapers (which will help Murdoch greatly), sanitary products and pensions apart (with the latter increasing the aggressiveness of the tax system). The change to entrepreneurs relief was timid; the lack of a mansion tax notable, and the absence of an overall restriction on tax relief for those on high pay quite apparent. What would seem to be clear is that if there is to be any levelling up in the UK it is not to be done via the tax system and that has, of course, to be an opportunity lost. Wealth ineqiuality is not, in other words, anywhere near this government's agenda.

The second big feature was the announcement that fiscal rules are to be reviewed. Although it was claimed that the budget package would comply with the fiscal rule included in the Tory election manifesto, I do not think that any serious observer thinks that this will happen. I would suggest that Rishi Sunak has set him self up for long-term ridicule by suggesting that growth will continue, albeit at low rates, throughout this Parliament, and that it is possible for debt to fall as a ratio of GDP when a combination of worldwide recession, Brexit and the short-term impact of coronavirus make almost anyone with any sense think that this is a wholly unrealistic proposition. The suggestion that fiscal rules will be reviewed was welcome: my suggestion is that in the face of the crisis to come what we need is something entirely different, which is an awareness that the enormous deficits that are going to arise must be used for creative purpose, which will embrace the Green New Deal.

This then brings me to my final point, which is the supposed claim by some newspapers that ’we are all Keynesians now’ because Sunak is to borrow at least £30 billion a year more to pay for his programme, much of which will be for investment in wholly inappropriate assets like roads when the real need is for housing, green investment, and local public transport infrastructure, all of which was ignored. If this is Keynesian, it represents a mild dose of it. It is also deluded, because what it very clearly implies is that Sunak believes that he still has control of the public finances, when as I suggested yesterday, this is something that he cannot control if the whole of the private sector (made up of households, businesses and those from outside the UK who have sterling balances) decide to save. What is clear is that the Treasury remains a very long way from understanding the task that it is really going to face, which will require that it put the UK economy back on track after the crisis that is about to hit it, the impact which is going to last for quite a number of years. Unless it truly embraces the use of deficit funding in a way that the Treasury has never done to date then we are in trouble. Nothing Sunak did yesterday suggests that he has any awareness of the scale of the task that he faces. And that worries me.

Of course the bond markets aren’t fazed by more borrowing: they want all the bonds the government can issue and then some more

Published by Anonymous (not verified) on Thu, 12/03/2020 - 5:53am in

Tags 

Budget, Economics

The quality of UK financial commentary is always a cause for despair. This comment comes from the FT this afternoon:

The UK government announced its biggest annual borrowing plan in eight years on Wednesday, as Prime Minister Boris Johnson’s government turns to bond markets to fund its spending spree.

But investors were unfazed by the prospect of a deluge of new gilts, with many having expected an even bigger rise in issuance with borrowing costs close to historic lows.

Of course they were unfazed.

Firstly that’s because they really do not care about the return on bonds right now: they’re buying them because they provide just about the only safe savings medium that is available in sterling right now.

Second, for that reason they are desperate for more bonds and are delighted more are going to be issued.

And third, they appreciate the fact that bond issues mean that they government might be providing a stimulus - which the UK economy badly needs.

Of course they weren’t phased. Unlike financial commentators they can see the value in more bonds.

And I promise you, there are going to be lots of them. 

The budget: expect the unravelling to start soon

Published by Anonymous (not verified) on Thu, 12/03/2020 - 2:05am in

Tags 

Budget, Economics

I had little doubt that Rushi Sunak’s first budget would be a disaster, and it was.

It was a budget in two halves. There was the coronavirus budget, and then the rest. I’ll deal with the issues in that order. I stress, this is being written before I can read all the details.

Coronavirus

There were numerous problems.

First, there was almost no help for big business. The assumption is that they are robust. That assumes this crisis is very short term. I do not share that view.

Second, loans apart I think the small business support was £7 billion. There are 5 million businesses in the U.K. That, then is £1,400 each. That will not go far.

True, the cancellation of business rates will help some businesses, I agree, but unless government compensates local government it will impoverish their services.

And £3,000 of grant per very small business is interesting but a) how long will it take to get it b) how much will it cost to get it and c) is it taxable? I suspect this just a token gesture, in other words.

The offer to cover statutory sick pay for small business was not a gesture, but let’s be clear that £97 a week does not cover people’s costs and the recompense is for 14 days - and anyone who is ill or who has multiple children who might be will be off for much longer than that.

Heaven help those who gave rent to pay. Their plight was ignored.

On coronavirus my conclusion is simple: this was sticking plaster economics with lots of very small gestures that are going to do little to save hundreds of thousands of small businesses and millions of employees from hardship and even insolvency.

The rest

The rest of the budget was as bad as that for coronavirus. There appeared to have been almost no attempt to join these two issues together. So growth was going to be down, but only a very little despite worldwide recession being likely. And despite that the current budget was going to balance every year of this parliament.

I will be candid and say that this is simply fantasy economics. This is not going to happen. The government is going to run major deficits; debt is going to grow as a proportion of GDP despite claims to the contrary and growth is going to disappear for a while. Sunak failed to recognise any of that. He literally spoke about a world that does not exist and an economy that will be nothing like the one he predicts. His whole career will, forever, be blighted by this complete failure.

Worse, he ignored the climate crisis, almost entirely: what he said was greenwash.

And on social issues - like delivering the real transformation for ordinary people who do not want to spend their whole lives sitting in their cars on new roads - there was nothing at all. In that sense, this was a pure neoliberal, running away from the problem unless it concerns big business, budget. He even got in a dig at migrants, who will have to pay more for the NHS.

At its core then this was a Tory budget, but one even more removed from reality and more laden with meaningless gestures than most.

Expect the unravelling to start very soon.

Postscript

It is now clear coronavirus support in total is  £12 billion, so my figure per small business of £1,400 looks fair.

And there will be £30 billion of new borrowing for investment - but supposedly not current spending. Both assume growth. Neither is in the slightest realistic.

Sunak has to show he understands deficits today or he’s doomed from the start – and so are we

Published by Anonymous (not verified) on Wed, 11/03/2020 - 7:23pm in

Tags 

Budget, Economics

It is budget day. Rishi Sunak has the task of delivering what might be the most irrelevant budget I will have ever witnessed, unless he appreciates the economic situation as it really is, and runs with it, accepting that this is his fate,

What do I mean? My suggestion is that unless the government accepts that we are heading for a recession, which is partly of its own creation, and that its sole duty is to now guide the economy out of the mayhem that is coming our way, then all Sunak has to say is inconsequential.

Take an example, but a quite critical one. Sunak will, without doubt, have something to say today about fiscal rules and the level of borrowing that he plans over the coming years. He will seek to frame this with caution, suggesting that this is a matter over which he has some power to decide. And that is simply not true.

As a matter of fact, if (as is likely) the private sector decides to save over the next few years the government has no choice but to borrow. This is a simple equation. As the money creator, and as the borrower of last resort (which as a matter-of-fact a money creating government always is) then if the private sector part of the economy insists on saving then the government has no choice but to borrow whatever that sector wishes to save.

Technically this is described as the sectoral balances. I do not have time to explain this in great detail this morning: try this link for an explanation I did a while ago.

The sectoral balances are not some theory: they are simply an accounting identity. They say that in the case of a single currency (and for all practical purposes that is what the UK has, in the form of sterling) if one part of the economy, which we will call the private sector wants to save, then another part of the economy, which we will call the government sector, has no choice but borrow, most especially when that government is the creator of the currency in question. This is simply an accounting identity: double-entry will happen. The ramifications are, however, significant.

If, as is likely, people stop spending at present because there is going to be a recession (and that is the unavoidable message from the stock market, the Bank of England, and others), then they will unless their incomes completely crash (which is unlikely in the longer term) save. This is what always happens in a recession. And the result is that the government will run a deficit. How big that deficit might be is not within the government's control: it will be determined by the private sector and its decisions about what it wants to save.

In this circumstance all that the government can do is turn the private sector's decision to save into something that is positive for the economy as a whole. I have already suggested the answer to this: simple changes to the rules on ISAs and pensions could redirect up to £100 billion of savings a year into the Green New Deal at no net tax cost to the UK economy at all. In fact, far from having a cost, the economic activity that this would give rise to would boost the Exchequer, as well as delivering the essential infrastructure that we now need, whilst creating jobs in every constituency, and help repair the intergenerational imbalance within the economy, whilst providing people with secure means of saving, whilst turning disadvantage into advantage for many.

This is the type of lateral thinking that our economy now needs, and which we should be looking for from Sunak today. He needs to show that he can deliver what is required to beat the coronavirus crisis in the short-term. That is things like rent and loan repayment holidays; increased social security payments; emergency funding to small businesses that require help and massive injections into both local authorities and the NHS to make sure that beds are freed to manage this crisis. Those things are necessary. But more important will be the recovery: can we get out of the recession as soon as possible by delivering the type of new economy that we need to face the challenges of the 21st-century? This is what I will be really looking for today. I am expecting to be disappointed on all fronts.

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