fiscal rules

Happy New Year – a personal announcement

Published by Anonymous (not verified) on Sat, 18/01/2020 - 2:29am in

Happy New Year!

This blog has now been running for nearly nine years. In recent months, the output has slowed and I see that I haven’t done anything since September.

In the main, this is because work elsewhere is keeping from writing. I think that is likely to continue in the near future: I will mainly be producing private commissioned reports for UCU branches following the publication of the latest round of annual reports.

I will probably fire up this blog again for the budget in March for the budget and later that month, when I should be able to say more about a couple of new initiatives.

In the meantime, here is the latest odd development in the ongoing saga of Reading’s  National Institute for Research in Dairying Trust. The headline captures it: “Dead Radioactive Goats Experimented on Decades Ago Could be Buried in Berkshire”. More precisely, in Shinfield.

Proceeds from that sale of Shinfield land was subsequently passed on by the trust to the university. Reading’s latest accounts tell us that the matter of this multimillion pound loan from the trust to the university is still not resolved:

“”During the year, the University and one of its connected trusts, the National Institute for Research in Dairying Trust (NIRD), have been in discussions to resolve some legacy governance issues that were self-reported to OfS and the Charity Commission. These discussions are progressing well and are still ongoing. To date, they have not raised any issues that would have a material impact on the University. The University is the sole Trustee of NIRD, and NIRD is accounted for as part of the University group.”


At the national level, the announced change to the government’s fiscal rules makes it more likely that the programme of student loan sales will come to an end. The ONS announced that the two sales so far completed have lost £2.7billion and that this will now count as capital expenditure in the national accounts. 

Now that the government has decided to stop targeting Public Sector Net Debt as part of its fiscal mandate, the main aim of the loan sale loses much of its point. As explained here (and elsewhere) over the years, the fiscal illusion embedded in the composition of PSND (not changed by the ONS’s recent accounting overhaul) means that student loans are not counted as an asset in that headline figure. Any sale thereby improves PSND as the cash raised does count: PSND is reduced whatever loss is registered on the loans. What has changed is that the loss now scores as expenditure.

PSND is now sidelined and the losses on sales count as expenditure against the new secondary target of Public Sector Net Investment (3% of GDP per year). That would seem to mean that the sale programme performs badly against what are effectively the government’s chosen performance targets.

That PSNI target already has to accommodate the c. £10bn pa needed to fund estimated write-offs on new loans. For more detail on those impacts, seethe Office for Budget Responsibility’s restated March 2019 forecasts(from which the table below is taken).

impact writeoffs PSNI

Unlike in 2017 and 2018, there was no sale in December. The Budget would be the normal occasion on which the Chancellor would confirm whether or not they are still going ahead.

Now that the accounting more accurately reflects the impact of the decision to sell or not, you would expect reason to prevail and the scheme to be halted.


There is no Planet ‘B’, so we’d better save this one (and how we do it)

Published by Anonymous (not verified) on Sat, 07/09/2019 - 11:18pm in

Climate protester holding sign with the slogan "We don't have time"Photo by Markus Spiske on Unsplash

While climate chaos continues to make the news, from hurricanes and fires in the Amazon to melting ice in Greenland, politicians, journalists and others are still killing us softly with the vocabulary of economic orthodoxy. John Sauven, an economist and director of Greenpeace, claimed that we will leave our children with a ‘planet sized debt’ if government fails to act now to address climate change. As he quite rightly points out, in the face of the climate emergency government is still acting as if we’ve got plenty of time, but the reality is that if we don’t act now the future cost to our children will not be the financial one he claims; it will be their survival that is at stake.

Everywhere you look, whether it’s spending on public and social infrastructure or saving the planet, in the eyes of politicians, journalists and institutions it all boils down to whether we can afford it and how it will be paid for. Journalists who challenge fiscal stimulus whichever Chancellor is offering it, do so in terms of concerns about ‘damaging the public purse’ and ‘breaking fiscal rules’. Or the suggestion that paying for public services is limited by how fiscally prudent the Chancellor has been or how much he might be able to borrow on fickle international markets.

It is astonishing that planetary and human well-being is reduced to financial costs rather than our very survival. As the Executive Secretary of the UN Convention on Biological Diversity, Cristiana Paşca Palmer, noted at the end of last week, without action to stabilise the climate and protect ecosystems, we risk moving towards a tipping point of no return. As she said, we don’t just need to transform the way in which we consume and produce but ‘we need to put biodiversity and natural capital at the centre of the economic paradigm’. Who argues, given the seriousness of the situation, that we need to think about financial affordability? The more important question is what do we do to save ourselves and the planet which sustains us?

However, while Brexit dominates the political show in the UK, commitment to action by politicians around the world seems, as Greta Thunberg recently noted, limited to rhetoric and fine promises but very little else. And time is ticking.

The consequences of climate change which the media brings to us on an almost daily basis and the apocalyptic scenes of flattened buildings in the Bahamas and burning rain forest combined with the increasing scientific evidence put before us should surely emphasise the dire nature of the challenges we face.

The acceleration of the melting of Greenland’s massive ice sheet has caused the average global sea level to rise by more than a millimetre, this year alone. The ice sheet stores huge amounts of water, which if melted would raise sea levels by up to 7m. But even small increases could threaten the lives of millions of people living in low-lying areas like Bangladesh and coastal cities around the world like New York and ones with large tidal rivers like London. As glaciers melt, water flows into the oceans and raises sea levels, which in turn brings storm surges and catastrophic flooding on coastal seaboards across the world.

In hotter climes, Hurricane Dorian has battered the Bahamas this week causing devastation, structural damage, flooding and deaths. It was a category 5 storm, the strongest ever to hit the islands, which then slowly moved northwards to pound Florida with strong winds and heavy rain as it progressed up the east coast. As the seas warm due to climate change, it fuels stronger and stronger hurricanes which in turn suck up more moisture which then finally falls as torrential rain.

A double whammy of destruction.

Agriculture also contributes to the greenhouse effect and climate change and is likely to challenge food security in the future. In a report published this week, the European Environment Agency noted that as heatwaves are revealing the vulnerable nature of agriculture in relation to climate change, crop yields and livestock productivity are already being affected across Europe. This phenomenon is being repeated across the planet.  In a world where more than 10% of people already don’t have enough to eat and yet where sufficient food is produced to feed the current world population, climate change will increasingly contribute to future food insecurity as a result of reduced food production and increasing prices.

As soil erosion and degradation increases, and water becomes scarcer, which in turn combines with extreme weather events, the impact of climate change on populations around the world will result in rising hunger and threatens mass migration. It is a sobering thought.

Since agriculture and food production are already in themselves a major source of greenhouse gas emissions and as more intensive food and meat production have become the norm, then it is clear that we face some pretty stiff challenges for the future. The European Environment agency points out that the potential benefits to some farmers of global warming will be outweighed by the losses.

As humans, we need to grasp the fact that what affects one part of nature as a result of living beyond its means will have knock-on effects elsewhere and this is playing itself out with destructive consequences. Nature is indifferent to humanity and yet we stand before it, ignoring the facts with astonishing hubris.  Earth is the only planet we’ve got, so we should worry less about the public finances and more about ensuring a future for our children – follow the link to find out why.

In other news this week, in his spending review, the Chancellor promised the UK a ‘decade of renewal’ as he set out his plans for spending on education, the NHS, social care, policing, the military and tackling climate change as well as increased funding for local government. The Chancellor said in the House that he was turning the page on the age of austerity, but the reality is that its consequences will continue for some time yet and are painfully in evidence wherever you look. You can’t repair the damage of a decade in one fell swoop just by throwing money at it. The Institute of Public Policy Research commented that ‘The public shouldn’t be taken in by today’s spending review. It does not reverse a decade of austerity and chronic underinvestment in our society and economy’

It is risible that after 10 years of cruel austerity, the Conservatives want to convince us that their financial prudence has paid off which has given them headroom to spend. Without wishing to knock a fiscal stimulus, which is definitely a good thing, the fact that it is couched in terms of household budget economic orthodoxy is disappointing and suggests that the brakes could as easily come on as go off should the government decide to. The question to ask is whether austerity is really over or just on pause? The prospect of a coming election might explain the giveaway and the electorate well knows politicians’ promises don’t always translate into reality.  As the IPPR and many commentators have noted, however welcome this stimulus is one should also question how much it can achieve after 10 years of cuts. The damage it has done to the fabric of society is profound and it is more likely to be a case of trying to play catch-up and will not address the structural and human consequences of 10 years of austerity.

For example, as GIMMS has covered previously, the adult social care system is in a state of collapse. Local authorities have been increasingly firefighting to deliver their statutory obligations which include social care. Worse, the proposal to collect a 2% council tax precept to raise a measly £500m will further depress local communities already suffering the consequences of government cuts, the effects of low wages and insecure employment. It will be a tax burden that local communities can ill afford and overall will do little to create the ‘decade of renewal’ the Chancellor is promising.

Also, this week the BBC Panorama programme asked whether we have reached a crisis point in education funding. Following staff and pupils at a primary school in Great Yarmouth, it gave an insight into the many challenges faced by head teachers across the country in trying to balance their books – from having to take the difficult decision to let teaching assistants go and cutting after school services for pupils whose parents have to work.

A survey carried out by the National Governance Association in 2018 revealed that almost half of schools covered by the survey were providing additional services for families in need, including washing school uniforms, meals outside of term time, food banks and emergency loans. The Chief Executive of the NGA said that ‘School staff have an increased burden of providing welfare services because of chronic underfunding in other areas and particularly cuts to local authority services.’ The leader of the Association of School and College Leaders stated that schools were becoming ‘a fourth emergency service providing clothing, food and pastoral care.’

In a rich country, this is a shameful and totally unnecessary state of affairs. The government, through its austerity policies, has failed a generation of children whose deprivation will likely follow them into adulthood. A well-functioning and cooperative society depends on having well-educated and healthy citizens. Instead of nurturing children to give them the best start possible, the government has perversely done exactly the reverse and the societal cost both today and in the future will be substantial.

And meanwhile with no mention by the Chancellor of welfare, the disastrous reforms and cuts to spending on benefits which are causing serious and indeed life-threatening hardship to many indicates that unless they can serve the government’s electoral agenda, those without power and influence can be disregarded as irrelevant. And let’s not forget the effects of such cuts on the economy. Spending always equals income to someone whether that’s by the government or the private sector and if both are cut then the economy and citizens become the casualty.

A few weeks ago, GIMMS asked what makes a good society?  In the FT this week, in a new series entitled The Corbyn Revolution’, the headline drew attention to the Labour Party’s plans to rewrite the rules of the UK economy which will ‘represent a fundamental redistribution of income and power’. These fighting words are getting the Establishment very hot under the collar since they represent a challenge to the status quo out of which they have done very nicely!

Labour is proposing higher taxes on the rich, nationalisation of rail, water, mail and energy companies. The mission is, as the FT puts it, ‘to shift power from capital to labour, wresting control from shareholders, landlords and other vested interests and putting it in the hands of workers, consumers and tenants.’

Aside from the plan to introduce a Universal Basic Income which GIMMS has covered in previous blogs two issues stand out in these plans by the Labour party which need to be examined more carefully. Firstly, the proposal to bring in a ‘right to buy’ scheme to help tenants buy their homes at a reasonable price. In a reversal of Margaret Thatcher’s policy of selling off council homes in the 80s the scheme it is claimed would help to tackle the proliferation of buy to let and the problem of landlords who fail to maintain their properties adequately. It would also allow for properties to be purchased below the market price.

Whilst clearly the crisis in housing and the problem of bad landlords needs to be addressed, surely the solutions to both these problems are elsewhere? Stringent legislation is needed to ensure that landlords are properly regulated and cannot abuse tenants both on rents and the quality of accommodation. More social housing needs to be built to deal with the crisis which pushes tenants into the private rental sector in the first place because there is no choice. The party has already committed to a radical programme for building a million genuinely affordable new homes in England over 10 years most of which will be for social rent. If Labour truly wants to deal with a decades’ old problem which successive governments have failed to grapple with adequately, then government as the legislator and the keeper of the public purse has a role to play in stricter regulation, implementing a house building programme and bringing the million or so empty homes into productive use.

The second issue is Labour’s plans for ‘inclusive ownership funds’ which would require every company with more than 250 employees, which equates to half Britain’s workforce, to transfer 1% of their shares each year into an ‘Inclusive Ownership Fund owned by its employees.  The shares would be held collectively and entitle the fund to ‘voting rights and decision-making powers in the company – as well as entitling every worker to dividend payments’ (capped at £500 per employee – circa £41.00 a month) with the balance being paid to the government to pay for public services and welfare.  It would, according to James Meadway give a ‘much-needed boost to workers’ earnings.’

It is clear that after decades of reshaping power and wealth towards capital, it is time to reverse the inequalities that lie at the heart of the current economic paradigm. A reordering of both towards labour is vital in achieving that objective. But would an Inclusive Ownership Fund actually achieve this? How would, for example a 1% equity share lend significant voting rights and we need to ask the question whether such a share which would still rely on the market to deliver would make a real difference to working people’s lives?

Rather than offering shareholdings in private companies, why not be bold? Give all people a stake in the economy and greater control over their lives through a government funded Job Guarantee, at a genuine living wage, with benefits and unionisation of roles which currently go unpaid and unrecognised. Labour must seek to genuinely shift the balance of power back towards labour, delivering a just mechanism for ensuring price stability across the economy.  A Left national government with the keys to the public purse as the monopoly currency issuer, is the price setter and legislator and as such it has enormous power that it can wield in favour of working people and our ecology.

One would also have to take issue with the idea that the balance would be paid to government to pay for public services and welfare. With modern monetary realities in mind the government, as currency issuer, can create the money it needs to fund public services and welfare which includes pensions. It doesn’t need to rely on funding from the private sector to do so any more than it does from general taxation or even borrowing on the international markets. The only spending constraint that any such government might face would be resources whether that is labour or other physical resources needed to deliver public services and infrastructure.

Labour needs to be bold. The crisis facing our climate and the working classes is demanding it.  Call out the corporate welfare that arises from a financial sector that manages the faux government ‘debt’ for private pensions. Rein in the casino financial speculation that seeks to privatise its gains and socialise its losses.  In government, Labour would wield the power to set the agenda and create the framework to deliver it. Why not consider abolishing the asset inflating, polluting private pensions sector and replacing it with a guaranteed living state pension?

We must ask ourselves how Inclusive Ownership in corporations that deliver our crucial public services would improve the outcomes for service users? Would an equity share in Southern Health have saved the lives the hundreds of patients with mental illness and learning disabilities that have died in their care in recent years? Or the prisoners who’ve ended their lives while in custody at G4S facilities? Would a 10% equity share have offered sufficient clout to Carillion staff or teaching staff at Academies to protect the equitable education of our nation’s greatest asset… our children? Would the shareholding staff at housebuilding giants be better able to afford a decent home on their wages and salaries?

Labour could choose to be bold, deciding what we allow to be within the scope of the ‘economy’ to genuinely resolve the crisis facing health and social care sectors. Perhaps offer medical staff who work for private providers tax incentives to return to the NHS rather than a shareholding in the private healthcare firms they’ve abandoned the NHS for?  How about abolishing the parasitical private health sector completely? Rather than handing out tax incentives to those who opt for private medical insurance. Nationalise education, health and social care, prisons, rail and water ensure the essential infrastructure in in place to provide our nation with the stability in needs to support future generations, delivering Inclusive Ownership of common goods would be a fight worth winning and educating its electorate for.

It is to be regretted that Labour has yet to embrace modern monetary realities and still looks to the rich and large corporations who’ve hidden their wealth in the Cayman Islands to fund its programme for change and this along with its adherence to fiscal credibility rules could constrain their political agenda. Given the urgency of dealing with the catastrophe of climate change and delivering a fairer, more equitable society, a little bit of window dressing will not cut the mustard.

The country needs politicians who are prepared to embrace modern monetary realities and think boldly. Yes, to a fundamental redistribution of income and power to address the injustices of the last 40 years, that is a given, but it would be best achieved by rejecting a model which has been part of the problem.



Upcoming events:

GIMMS Labour Fringe Event

Dorset Gardens Methodist Church, Dorset Gardens
Brighton, BN2 1RL

September 23 @ 2:00 pm – 4:30 pm – book your free ticket here

Bill Mitchell – Training the Trainers

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London, N1 9FB

September 24 @ 6:30 pm – 21:00 pm – book your free ticket here

GIMMS Talk and Social – Leeds

Headingley Enterprise & Arts Centre, Bennett Road
Leeds, LS6 3HN

September 28 @ 2:00 pm – 5:00 pm – book your free ticket here


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The post There is no Planet ‘B’, so we’d better save this one (and how we do it) appeared first on The Gower Initiative for Modern Money Studies.