Ethics

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We need constitutional reform to tackle the malaise in British politics

Published by Anonymous (not verified) on Sat, 28/05/2022 - 4:31pm in

There is a deep malaise in British politics (I use the term deliberately). We are all fatigued by Johnson’s antics and incompetence, but that is his plan so we need to be wary: his intention is to succeed with his fascist revolution by grinding us down until we accept it. Troubling though this is, the issue is actually deeper than that. The malaise reflects the loss of consensus.

I am not pretending consensus is always good. That around neoliberalism was clearly very harmful to the country, and the world at large. Anyway, I do not seek political agreement. Rather, I suggest there is an absence of agreement on the need for competent government, fair representation, the nature of the state, which countries it comprises, what their relationship should be, what government should do, and how, and in the ethics that might drive decision making around these and related issues.

The malaise is, perhaps, most marked in the Tories, where the coalition around Johnson is collapsing. It would do so more quickly if there was a viable alternative leader, but there aren’t any real candidates, let alone ones who might appeal to the country. As a result Johnson survives, as maybe the last supposed Tory, although he long since abandoned all that the modern Conservative supposedly represented.

Labour is also a failed coalition, unable to accommodate left and right wings of the party simultaneously, so different are their views.

The SNP is little better. The leadership and membership of that party are far apart when it comes to policy.

The LibDems have swung left and right, the latter disastrously.

The Greens come in many differing hues, which is one reason why they continue to fail to break through.

The space for alternatives to these parties is seemingly non-existent, and yet what is obvious to most is that they would, if they felt able to, vote for representation by none of the above, albeit that they find bits of some that might appeal. We naturally want coalition in which ideas can by synthesised into strategy by agreement, but what is apparent is that our political system comprises parties seemingly unable to get close to this goal within themselves, but who seek an outright win despite that (and get it, Labour holding Wales, the SNP Scotland and the Tories England for now, although I am not sure for how much longer). The political crisis that we face is that what we wish for, which is a representation for our views, is not an option available to us. And so we are alienated from politics, even though we hold very clear political views, and seek to uphold the integrity of government.

The solution has to be electoral reform. Proportional representation, state funding of political parties, reform of rules on donations, an elected second chamber, a right to freedom of speech (excluding the promotion of hate crimes), proper devolution, a right to referenda on leaving the Union, properly devolved local power on a consistent basis, firm codes of conduct, control of the media and its ownership backed by state funding but with a guarantee of editorial independence, and so much more is required, as is a constitutional commitment to addressing climate change.

And we need to be working in this now. I am not quite sure how. Best would, perversely, be through a citizen’s assembly structure jointly sponsored by those political parties committed to democracy. That would require courage. It would require trust in people. It would require the ability to work together that coalitions - including the cross party ones that actually exist in the Commons and elsewhere on a routine basis - always demand.

Is that possible? I do not know. But I am certain it is what we need.

Sunak’s bailout package was a massive bung to the energy sector that will not stop inflation, but will increase inequality

Published by Anonymous (not verified) on Fri, 27/05/2022 - 5:41pm in

I tweeted this thread this morning:

As I made clear yesterday, the package of measures introduced yesterday by Chancellor Rishi Sunak failed to address the inflation issues he needed to address at this moment. What I did not address was whether it was inflationary in itself.

There are suggestions being made, e.g. by Sky economist Ed Conway, that putting money in people’s pockets is inherently inflationary by giving people money. I have to suggest that this is to misunderstand the current situation and what these measures do.

Whilst it is true that the £400 paid to be paid to every household this year looks as if it will increase available disposable incomes in some cases, the simple fact is that the current fuel price inflation is not going to matched by handouts in any case.

The reality is nothing the Chancellor has done will do more than help people settle bills. I suggest that’s inadequate because it does nothing to tackle the cause of the problem, which is exploitation by energy companies, which is what is creating the already existing inflation.

What is more, since the cash to be provided only helps settle the excessive and exploitative demands that they have made, and does not in any case provide an excess of funds to then be spent on other goods, it is hard to see how this package is inherently inflationary in itself.

What this package does is let people pay the prices set by energy companies and regulators. Since millions of households could not have done so at all without this aid, and others could only have done so by crushing other spending, inflation is not the economic consequence.

Instead the economic consequences are threefold. First, the debt leverage that would have gone onto private households is reduced, being replaced by government money creation, which is the right alternative. Households are saved by the government as a result.

Second, to some degree other spending that would have had to be eliminated to pay energy bills is maintained as a result. More people will be able to eat properly as a result. And some parts of the economy that might have been crushed e.g. hospitality, might survive.

To this extent, this whole package can be seen as anti-recessionary in tone. It’s not a stimulus though, it’s merely holding the line.

Third, the funding is a direct subsidy to the energy companies, who even get a quite extraordinary climate change defeating package of oil and gas subsidies thrown in for good measure. They are the only real winners from this - because literally all the money paid out will end up with them.

So the economic impact is not measured at the household level - where at best debt, poverty and homelessness is avoided, but the opportunity for new inflation driving consumption is not created as the subsidy is less than the fuel price increase.

Instead the consequence has to be measured by looking at what the energy companies do with the subsidy they are now effectively picking up from consumers now able to reward them for the exploitative prices they are imposing.

There are three things energy companies can do. They can invest more. I actually think that very unlikely to happen. Oil majors don’t really do green whatever they say, and the North Sea has no long term future.

Or they can sit in the cash, but why would they do that? Or they can pay it out as dividends and share buy backs, which we know is what is happening. That inflates their share price, rewards their executives for their assault in society and increases inequality.

And please don’t tell me this is good for pensions because even pension funds have decidedly skewed ownership with bias to the wealthy.

In other words, when this logic works through what we get is the government subsidy working straight through the economy to benefit the already wealthy whilst those hard up continue to just get by, at best. That’s the net result of this.

The question then is whether or not that is inflationary and the answer is that of course it is. It fuels the prices of the goods only the wealthy, in the main, but but which are in inflation indices, like second hand cars, and fripperies. And those prices do trickle down.

What should the answer to that be? Glaringly obviously it would be to tax wealth more. That was the necessary part of yesterday’s package that was not there. Well, that, and the missing excess profits tax on banks as they gain from interest rate rises.

Sunak helped his friends in the energy traders, energy companies and banks yesterday, and most missed any additional tax charge.

What he did not do was help small business. They will remain badly hit by energy costs for which they will get no help at all. That will drive inflation, because his failure to cut energy costs themselves will mean businesses passing on excess prices to consumers, or go bust.

So, Sunak did fuel inflation yesterday but not by the subsidies given, but by giving them in the wrong way, and by allowing all the gains to flow to energy companies, who will increase inequality as a result.

Economically this was in that case a very poor package. It leaves too much inflation in place. The benefit of the subsidy to households flows straight to those creating this crisis, and the risk of recession driven by small business failure was not addressed.

Sunak needs to do better. As in 2020, I think we will be seeing him back at the Despatch Box again soon.

Sunak’s glory days have long gone: today will see a miserable package of measures that will fall far short of the required level of action

Published by Anonymous (not verified) on Thu, 26/05/2022 - 6:21pm in

Rishi Sunak is to announce measures to tackle the cost of living crisis today. He will supposedly spend £10 billion. He will also announce a windfall tax on energy companies that will collect considerably less and be collected some time in the future, proving that (as always) spend comes before taxation.

It seems likely that some previously announced arrangements e.g. the enforced loan arrangements, will be scrapped. I suspect that this means the package will actually mean the package will be worth somewhat less than £10 billion in reality.

The likely replacement is some form of grant to lower income households. I sincerely hope a better measure of who these are than the council tax band of the property that they occupy will be found.

I suspect that the targeting of this will be hopeless. Increasing pensions and universal credit will be useful, but there will still be massive gaps that will be unaddressed. Sunak has form on this from the Covid era. Headlines matter much more to him than detail. He seems indifferent to the suffering his inattention to that detail creates.

What I can say with certainty is that package will be hopelessly inappropriate. Giving grants does not stop the inflation. In that case its impact, via increasing RPI and spillover into other prices and costs, like student loan interest, continue. This is precisely why I have kept saying prices themselves must be cut by reducing taxes on energy.

The quantum of the package is also too small. Even if it all got to the families facing fuel poverty they will only get £800 or so a year, but fuel costs alone will have risen by £1,500 by the autumn. And wage rises will not compensate by a long way, and they (which most commentators seem to forget when discussing the percentages on this issue) are taxed.

In the meantime, the failure to tackle the actual price rises will let the Bank of England persist with its ruinous interest rate increase policy until it is too late to prevent the harm it will cause.

The failure to come today is likely then to be fivefold.

First, too little will be spent on a feeble gesture to seek to deflect attention from Partygate.

Second, this spend will be poorly targeted.

Third, it will not stop the knock on effects of inflation.

Fourth, the claim that action is constrained by the inability to raise money is wrong. The Bank of England wilfully returned much more QE funding than will be spent today to financial markets in March, wholly unnecessarily, meaning no such constraint exists.

Fifth, the root cause of the problem - which is exploitation - will not really be addressed.

It is all likely to be a failure in the making. Sunak’s glory days at the Despatch Box are long gone.

The Tories are fascism in progress

Published by Anonymous (not verified) on Wed, 25/05/2022 - 5:19pm in

In the midst of Partygate and all that goes with it the possibility that the continuing passage of the Public Order Bill now before the Commons.

As Caroline  Lucas said of the Bill during the Second Reading debate this week:

This is a deeply dangerous Bill, and I am pleased to support the reasoned amendments. The measures in the Bill represent a fresh outright attack on our fundamental rights. Indeed, as others have said, the human rights organisation Liberty has called it a

“staggering escalation of the Government’s clampdown on dissent.”

We are in the grip of multiple crises: a cost of living scandal that is pushing millions of households into fuel and food poverty; a war in Ukraine with disastrous consequences; and the accelerating climate and nature emergencies. What we need at this critical juncture is more democracy, not less—not a ban on our constituents participating in certain protests, not subjecting them to 24-hour GPS monitoring for the crime of disagreeing with the Government, and not barring them from participation in public life.

I agree with Caroline, and many Labour opponents including Yvette Cooper, of whom Priti Patel is clearly terrified. This is a Bill intended to restrict our right to protest and to free speech still further. The penalties are draconian. It will, in effect, be a crime to express dissent with the government in a peaceful fashion.

This is what the issues with the Tories really is. Partygate reveals their contempt for the law. What this Bill reveals is their contempt for political freedom. And that means they are fascism in progress.

Only 2% of people think that the Institute of Chartered Accountants in England and Wales should benefit from fines for poor auditing

Published by Anonymous (not verified) on Mon, 23/05/2022 - 4:51pm in

Tags 

Ethics

I wrote an article on Friday for AccountingWEB in which I suggested it inappropriate that the Institute of Chartered Accountants in England and  Wales profited by £55 million as a result of audit fines paid in the last two years by firms that they regulate when I think it that Institute’s job to ensure such failures did not happen. I should add that I am a fellow of the ICAEW.

I highlighted the blog in this tweet:


In fairness, the ICAEW responded, saying:

I have to say that I am not convinced. A willingness to accept change does not alter the fact that the ICAEW has already been unjustly enriched, in a fashion that to me has the risk of moral hazard written all over it. We also know that the chance of any real change in audit regulation is very low right now, despite what has been said in the Queen’s Speech. Simultaneously, audit fines appear to be rising inexorably as continuing catalogues of failure by the big firms continue to emerge.

There is also no indication in these tweets as to what part of the public interest in accounting this £55 million might serve. I can suggest many uses, but none is noted in the tweets, and nor have I found any meaningful reference elsewhere. I have also seen no suggestion that anyone is being consulted on this issue, including the ICAEW membership.

In that case, I put a poll on Twitter to assess public sentiment on this issue:

I do not pretend that this is necessarily representative, but it was interesting that the voting pattern stabilised very quickly around the eventual outcome, which really could not be clearer.

The ICAEW option of it using the funds could be covered by a charitable use, but that was not the implication of the question, and is rather ruled out by the first option. The option that stands out is that the victims of audit failure should be compensated, which seems entirely logical. I suspect it occurred to no one that these fines should go to the Treasury.

I will be sharing this result with the ICAEW and will be asking for a further response.

Work is not the way out of the cost of living crisis

Published by Anonymous (not verified) on Mon, 23/05/2022 - 4:16pm in

According to Boris Johnson work is the way out of the cost of living crisis.

Like the Bank of England, Johnson claims the UK has a ‘red hot’ labour market, with vacancies exceeding the number of people available to accept employment.

My appraisal suggests this is untrue. The jobs available seem to have three characteristics. They are low paid. They are zero hours, or something akin to it. And many are with agencies, with the intention that the employer assume no obligation to the person they’d rather not call an employee beyond the end of any working day.

The latest example I found was in discussion with a teaching assistant training to be a teacher. Right now is the time when this year’s new teachers should be looking for their first jobs. But there are almost none available. Schools can no longer afford the commitment to permanent staff. So they hire supply teachers on temporary contracts to avoid the commitments required to a full-time staff member.

Older teachers cannot afford to work on the rates these supply contracts offer.

Younger teachers do not get the support they need.

Nor can they afford the rent. So they sometimes have to take a second job.

That also explains why vacancies exceed the number of available people: we live in a world where too many have to rely on multiple jobs to cover the basic cost of living. It’s really not rocket science to work this out, but it’s beyond Johnson and the Bank of England.

Teaching is not alone in being degraded in this way. Nursing is a long way down this route, with ‘bank’ nurses covering an increasing number of shifts. I have no doubt it is to be found elsewhere too. It is far too commonplace in university teaching. The approach riddles the private sector.

Professions are being degraded. Security is being destroyed. The quality of service supplied is being undermined. Wages do not cover costs. Children, patients and so many others do not get the service they expect from people who cannot in any way be blamed for that. The casualisation of their work is meant to undermine employees, and it does. The people to blame are those who thought this a good idea, from Cameron, Osborne, May, Hammond, Johnson and Sunak onwards.

The simple fact is that there is no ‘red hot’ labour market in the UK. There are just shit jobs on offer to those who in desperation have to eventually take them in the absence of any alternative.

This is not a solution to the cost of living crisis. It is all about the deliberate destruction of value in the name of increasing financialised returns, whether in state or private sectors, where that return is utterly indifferent to value, people, ethics or the long-term.

What to do about it? That’s a harder question. I will have to come back to it more than once, I suspect. But unless we can restore the dignity of work - and the direction is continually in the other direction at present - we really are in deep trouble.

Ultimately the answer is in reducing the rents that extract value every day from working people, whether those rents be literally exploitative charges for living in houses; excessive house prices and now growing mortgage costs; forced membership of pension schemes that cannot pay a return as the funds are invested in environmentally bankrupt companies, or the exploitation of people’s labour by employers who have been trained or forced to cease to care. All these crush the value of work.

In that case right now work provides no answer to the cost of living crisis, because that crisis has been created by the same monopoly empowered exploitative philosophy that is simultaneously seeking to destroy the value of people’s labour.

The cost of living crisis is indication that our economy is shot to pieces, and needs a complete overhaul. I suspect nothing less will do.

Let’s face it: the Met must be corrupt. Partygate is really hard to explain unless that is the case

Published by Anonymous (not verified) on Fri, 20/05/2022 - 5:15pm in

A great deal is being said about Partygate today. Those with considerably more legal expertise in this area than I have got appear to be befuddled by the Met’s decision-making process.

How is it possible for one person to be fined for attending an event that was obviously illegal in itself, and for another person known to have been there to be found not guilty when attendance was, in itself, the crime? That is very hard to work out. Unless, that is, the Met is a corrupt instrument within a fascist state, knowing what is required of it. Then everything makes sense.

Which leaves just one question to ask. What are the odds that the Durham police are also corrupt? I can only guess, but my money would be on that being the case.

Public sector debt paranoia at this moment in time is no excuse for the government imposing private poverty on the UK’s population

Published by Anonymous (not verified) on Fri, 20/05/2022 - 4:26pm in

As the Guardian has noted:

Consumer confidence in the UK has fallen to the lowest level since records began in 1974 amid growing concern over the cost of living crisis.

Stoking fears that Britain is heading for a recession caused by the squeeze on family budgets, the latest monthly snapshot showed consumers are now gloomier about their prospects than they were during the 2008 financial crisis.

The chart looks like this:

What can usefully be said that has not been by Danny Blanchflower and myself already? I think three things.

First, we were relight to have already called the recession based on this evidence of collapsing consumer confidence. As the Bank of England note in their new book on economics, mainstream economists have failed to call 148 of the last 153 recessions. I am happy not to be in the mainstream on this issue. We have already got this right, and it really wasn’t hard to do. You just had to talk to people to know what was coming our way.

Second, if we are already in recession, as I am certain is the case, then it is too late to take action to prevent it. Instead, as I have noted elsewhere today, the required action is on how to limit the impact of this crisis on people’s lives. As I said in a radio interview yesterday, the job now is:

  • to keep people in their homes, whether rented or mortgaged:
  • in their jobs;
  • out of debt;
  • with employers who can survive the shocks to come; and
  • to ensure that they are fed appropriately and are warm.

When at this moment none of those things can be taken for granted, and the government is doing nothing to help, this is a massive challenge which I fear the government will fail. The human cost of that will be high, and I will regret and mourn all the suffering that will occur because all of this is avoidable.

Third, whatever the political significance of Partygate, and it is huge because of the rapidly creeping corruption of fascism that it makes clear exists in this country, this issue is bigger. But, and that is a massive but, if I am right in saying so then it requires the main opposition parties to stop aligning with the bankrupt thinking of the Bank of England and to instead have the courage to go their own way. Direct intervention to help people, requiring government spending of £50 billion or maybe more, is required now.

That funding is readily available, whether through new money creation or by increasing the size of government deposit taking if the funds are to be used for investment purposes (and some should be). Public sector debt paranoia at this moment in time is no excuse for the government imposing private poverty on the UK’s population.

I suggested a programme of action in The Mirror yesterday. I could most certainly expand it. I have no doubt the Treasury and others read what I wrote. The silence from policy makers in response was deafening. And that genuinely worries me. Are we really to consign people to misery because of the poverty of economic thinking?

Inflation will go away – because it always does – and in the meantime here’s how to deal with it

Published by Anonymous (not verified) on Fri, 20/05/2022 - 4:15pm in

One of the arguments that Danny Blanchflower and I are making in our two person opposition to the prevailing establishment thinking on inflation is that the inflation we are now suffering will go away.

We don’t say that this is because of anything the Bank of England, the Fed or European Central Bank might do, most especially when they are getting almost everything wrong right now. We say it simply because it always does. That is an argument that, unlike the irrational claim of central bankers that increasing the price of money stops other inflationary pressures, is backed by data. The data in question comes from the Bank of England but is best presented by the St Louis Federal Reserve Bank, who have a great website when it comes to data. As they display it, this is the inflation data for England and then the UK from 1210 onwards:

Note three things. The first is that the trend in the peaks is steadily downwards.

The second is that deflation has not happened for a century.

The third is that every peak is followed by a fairly rapid downturn.

For those cynical about data from 1210 (and I am no more so than I am about that from last week in a great many cases) I have cut the period covered by the data in this second chart:

What is very apparent is how wavelike the pattern of inflation followed by deflation is until the last century.

And just in case anyone still doubts the data, this is the data from 1945:

The relevance of this last one is to show that inflation peaks are usually pronounced, and rarely result in plateaus. Even if they do, those plateaus are of short duration after which the trend is that there is an almost invariable sharp decline.

Politicians can make things worse, of course: Thatcher did in the early 80s, which most people tend to forget, but there are always consequences for deliberately trashing an economy, as she did. These exceptions apart, it is clear that inflation has not only recently, but throughout 800 or more years of history had a habit of correcting itself.

There are three reasons for pointing this out. The first is to suggest that talk of stagflation is just nonsense. That is especially the case when pay rises are way below inflation, and we’re facing a cost of living crisis because of a shortage of income right now and not demand-pull inflation because of excess wage rises at present.

Second, if inflation reverses without assistance much of the supposed role of supposedly independent central banks disappears.

Third, the focus of policy during periods of inflation should not then be on tackling the inflation. That will sort itself out simply because the panic buying, or market failings that give rise to it, will always be resolved by the the creation of a ‘new normal’ in which sanity is restored.

Fourth, instead the focus of policy during a period of inflation should be to:

a) make sure people survive it i.e. to protect the vulnerable who might otherwise suffer as a result of their loss of purchasing power (which should be the priority now);

b) to prevent the risk of recession because of the loss of that purchasing power creating short term liquidity issues for businesses that cannot see a way through to the other side of the inflationary period as a result, with a resulting loss of wellbeing for all involved. This is especially important right now because unless it happens the current pressure on spending p0wer is going to spillover very quickly into serious unemployment;

c) to address the systemic issues giving rise to the political, economic or social failure that resulted in the inflation. So, in our case:

  • address Brexit;
  • continue measures to tackle the impact of Covid on society;
  • tackle the causes of war in Ukraine;
  • address the vulnerability in supply chains;
  • reform energy supply and make it more sustainable, and
  • address the global crises (I use the plural deliberately) developing around food.

What would you not do? Increase interest rates, for a start, threatening mass homelessness when people cannot afford rents or mortgages out of already crushed incomes, and which force businesses into unmanageable debt, and which force developing countries who borrow in dollars into insolvency, whilst benefiting the financial establishment.

What else would you not do? You’d not sit back and do nothing to reduce the inflation peaks when they can be capped by judicious tax cuts to VAT and duties, which makes any downside of this crisis much easier to manage.

And what you would do is provide very specific support to the most vulnerable (people on benefits, pensions and low pay) whilst taking purchasing power away from those on high incomes and earnings who represent the one part of the economy where demand-pull conditions might exist.

This is a theory of how to manage the situation we are now in based on analysis, not economic voodoo. I fear that no one will listen until the damage has been done, but Danny and I will persist in making our case.

Sunak is a man sleep-walking himself to failure, dragging us with him

Published by Anonymous (not verified) on Thu, 19/05/2022 - 3:41pm in

Because I am discussing what Rishi Sunak had to say when addressing the CBI last night with Nick Ferrari on LBC at just after 7 this morning I woke a little earlier than usual to see what others thought, and to watch what I could of the speech.

The conclusion that I have come to is the one that most right-thinking commentators have reached. Rishi Sunak does not have a plan.

He has no plan for corporation tax, which it was trailed that he would talk about last night, but about which he and the Treasury obviously got cold feet, realising that to talk about tax cuts for business would, right now, be unwise, to say the least.

So instead he talked about inflation.

"It's hard", he said.

"We'll see how things develop", he suggested.

And "We'll do all we can", he added, subject to the rather specific caveat "So long as we maintain the integrity of government finances and cut the deficit", ruling out any spending of any significance in the process.

Bluntly, Sunak was exposed for what he is. He's a person with very limited understanding of economics, clueless as to what his prime minister might say next, without power as a result, and in any case ideologically opposed to taking any action on behalf of those suffering right now, which suffering is entirely beyond his comprehension. The result was meaningless babble.

I doubt he can get away with this for long. 9% inflation is bad. 10% is worse. And 10% will happen.

So too, to follow, will deflation happen, which is just as difficult to manage. As my colleague and fellow Mile End Road Economist Danny Blanchflower will point out in an article in the New Statesman today, 810 years of inflation data in the UK or its predecessors shows that once inflation hits 10% a pretty massive correction follows soon after, as night follows day, and deflation is often a part of that.

But that does not mean nothing need be done now.

The peak of inflation in the costs the government can control, like fuel and energy, needs to be capped by cuts to VAT and duties.

Support for those who will lose out most - whether pensioners and those on benefits who need them increased now, or those on low pay who need to see the minimum wage rise, again - could happen at this moment.

The Bank of England could be told to stop the ruinously stupid increases in interest rates that are targeted on an economy where households have too much to spend, which is not what we have.

Windfall taxes on energy companies and banks (who stand to be the biggest gainers if interest rates rise further) are required.

And nothing is being done to help those who quite reasonably live in fear of Covid who are creating the labour shortage in the UK right now, and our supposed "red hot" employment market. Announce sensible measures to help them and that problem can be solved.

Nor. come to that is anything being done about ending Brexit trade wars.

And where is the investment programme we actually need rather than the bungs to business that were sidelined last night? Nowhere to be seen, is the answer.

So Sunak could have a plan. But he hasn't.

Is that due to incompetence, political paralysis, a lack of comprehension or a dogmatic lack of willingness? Who knows? But whatever the cause the result is a man sleep-walking himself to failure, dragging us with him.

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