inequality

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Was the 2021-22 Rise in Inflation Equitable?

Published by Anonymous (not verified) on Fri, 01/07/2022 - 12:35am in

In our previous post, we discussed how the labor market recovery—the “maximum employment” half of the Federal Reserve System’s dual mandate—featured not only a return of overall employment rates to pre-pandemic levels, but also a narrowing of racial and ethnic gaps in employment rates. In this post, we take up the second half of the dual mandate—price stability—and discuss heterogeneity in inflation rates faced by different demographic groups during the rise in inflation in
2021-22. We find that, in contrast to inequalities in employment rates, disparities in inflation rates have widened during the recent inflationary episode, with less advantaged groups experiencing more inflation.

While employment rates for racial and ethnic groups are tracked by the Bureau of Labor Statistics (BLS), there are no demographic-specific official measures of inflation rates. However, the BLS computes separate inflation indexes (consumer price indexes, or CPIs) for different categories of goods, such as food, clothing, energy, housing, or entertainment. The BLS also conducts a Consumer Expenditure Survey (CEX), which allows one to see how different demographic groups allocate their spending to these different categories. For example, as the 2019 CEX shows, Black Americans spend relatively more on transportation and housing and relatively less on food and entertainment than white Americans do.

Using a procedure similar to several papers in the literature, we assume that prices within each goods category are the same for everyone and are well represented by the CPIs, but that different groups consume different amounts of goods from different categories. We can then obtain estimates of the inflation of the consumption basket for each demographic group as a weighted average of the CPIs of the components of the consumption basket, with the weights being that group’s shares of the components. We call this inflation measure Demo-CPI, which will be the basis for our statements about changing inflation gaps across demographics over time. It is likely that our procedure underestimates inflation disparities between different groups of Americans because, in addition to consuming different bundles of goods, different demographics likely face different prices for the same goods, with less advantaged demographics facing higher price growth.

The chart below shows the time path of twelve-month inflation for the national average for the major consumption categories that we consider. Before the pandemic, average CPI inflation was steady at around 2 percent. Once the COVID-19 recession began in March 2020, inflation fell (as it often does in recessions), collapsing to nearly zero at one point, and slowly recovered back to its pre-pandemic level over the remainder of 2020 after lockdowns were lifted and the COVID-19 recession ended. However, in early 2021, inflation soared far above 2 percent, and it has been increasing up to the present. Currently, inflation in the major consumption categories we consider (Demo-CPI) is 9.2 percent year-on-year, which is more than the CPI for all urban consumers (CPI-U, 8.6 percent) but close to the CPI for urban wage earners and clerical workers (CPI-W, 9.3 percent). The differences can likely be explained by the fact that the CEX is not restricted to urban residents while the CPI-U is, and by differences in the coverages of some goods categories between the CEX and the CPI-U.

Inflation Soars in 2021-22

Sources: Bureau of Labor Statistics, Consumer Expenditure Survey and CPI; authors’ calculations.
Note: The shaded area indicates a period designated a recession by the National Bureau of Economic Research.

We now turn to discussing disparities in this overall Demo-CPI inflation rate across demographic groups. The chart below plots deviations from the trend in the prior chart for white, Black, Hispanic, and Asian Americans between 2019 and the present. As in our previous post, if inflation gaps remain constant over time, we would expect to see straight horizontal lines for the different demographic groups. This is roughly the case during 2019, when Asian Americans experienced slightly more inflation than did the national average , while Black and Hispanic Americans experienced slightly less (white Americans on average experience inflation similar to the national average). With the COVID-19 recession, the picture changed noticeably. Inflation for Black and Hispanic Americans fell, while inflation for Asian Americans rose relative to the national average, as prices for housing and apparel grew more slowly than the national average, while prices for food grew faster. After the end of the COVID-19 recession in May 2020, inflation differentials for different racial and ethnic groups declined again. However, when overall inflation began rising in March 2021, inflation disparities surged, with Black and Hispanic Americans experiencing higher inflation than the national average and Asian Americans experiencing lower inflation. These disparities are more than twice as large as those observed during 2019.

While the measured magnitudes of the inflation disparities are not very large (0.2-0.6 percentage point for Black and Hispanic Americans relative to the 9.2 percent overall inflation rate), they likely underestimate the actual gaps for the reasons mentioned above, with the actual gaps likely being considerably higher. The changes in the gaps relative to 2019 should be more informative, however, and suggest large changes in the magnitude of inflation inequality.

Demographic Inflation Gaps Small Before Pandemic, Open Up During Inflation Rise

Sources: Bureau of Labor Statistics, Consumer Expenditure Survey and CPI; authors’ calculations.
Notes: Demographic categories are not mutually exclusive. The shaded area indicates a period designated a recession by the National Bureau of Economic Research.

There is a strong contrast between the widening demographic disparities in inflation and the narrowing demographic gaps in employment rates that we observed in our previous post. In many ways, the situation is the reverse of what happened during the long recovery from the Great Recession. Then, inflation remained quiescent, while employment rates remained below their pre-crisis levels for years, with less advantaged groups experiencing particularly prolonged employment slumps. Currently, employment rates, both on average and for less advantaged groups, are nearly back to their pre-COVID levels, with employment gaps for Black and Hispanic Americans close to multi-decade lows. However, inflation has risen sharply overall and especially for Black and Hispanic Americans. These facts are important to consider in pursuing a monetary policy that strives for maximum employment and price stability for all Americans. The ways in which different demographic groups experience inflation and the Fed’s response to it will be an important issue that we will continue to track.

Chart data

 portrait of Ruchi Avtar

Ruchi Avtar is a research analyst in Equitable Growth Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.

 portrait of Rajashri Chikrabarti

Rajashri Chakrabarti is the head of Equitable Growth Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.

 portrait of Maxim Pinkovskiy

Maxim Pinkovskiy is an economic research advisor in Equitable Growth Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.  

How to cite this post:
Ruchi Avtar, Rajashri Chakrabarti, and Maxim Pinkovskiy, “Was the 2021-22 Rise in Inflation Equitable?,” Federal Reserve Bank of New York Liberty Street Economics, June 30, 2022, https://libertystreeteconomics.newyorkfed.org/2022/06/was-the-2021-22-ri....

Disclaimer
The views expressed in this post are those of the author(s) and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author(s).

Charity Fallacy: Private Schools Estimated to Get £3 Billion a Year from Tax Exemptions

Published by Anonymous (not verified) on Tue, 28/06/2022 - 10:42pm in

Sam Bright explores a new report that reveals how exclusive academic institutions skirt their charitable commitments while relying heavily on the taxpayer

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Private schools benefit from tax exemptions to the tune of £3 billion every year, according to a new academic estimate.

The research suggests that the UK’s 1,300 private schools gained tax advantages as a result of their charitable status equating to more than 6% of England’s total state school budget – £47.6 billion – in 2020 to 2021.

These institutions are productions lines to the top jobs in politics, public life and much of the rest of the economy. The Social Mobility Commission found in 2019 that 39% of the ‘elite’ had attended private school – including 29% of MPs, 39% of the Cabinet, 44% of newspaper columnists and 65% of senior judges. This is despite the fact that private schools only educate 7% of pupils.

As the new research points out, private school graduates also disproportionately attend university – particularly the most prestigious, with more than 31% of Oxford University students being privately educated in 2020. Since universities are subsidised by the government, the higher education of the privately schooled is effectively being paid for (through taxes) by those educated at state schools.

Even more fundamental are the tax exemptions enjoyed by private institutions.

The research explains how operating surpluses (profits) and capital gains (profits on the sales of investments including shares, land and facilities) are exempt from income tax, capital gains tax or corporation tax. Meanwhile, in England and Wales, private schools receive an 80% discount on business rates and can claim an extra 25% from the government on all donations received.

These tax exemptions were created in the early 20th Century and have not been amended since.

In return, private schools must fulfil a charitable purpose, providing a public benefit with their resources – mainly in the form of fee remissions to relatively poorer students. However, the rules applied to these remissions are vague.

An Upper Tribunal case in 2011 set the basis for the charitable support required by independent institutions – stating that their duty is fulfilled if they provide remissions to those of “modest means” – defined as those who could not afford the school’s full fees. However, given the drastic inflation in private schools fees in recent decades – more than doubling in the last 25 years – these institutions are therefore able to deliver on their charitable requirements by offering financial assistance to relatively well-off pupils.

“The vast majority of children from families with more modest incomes are excluded by this fee spiral from enjoying such facilities – which should, by law, be available for public benefit,” according to the research, produced by academics at Cardiff Metropolitan University, Monash University, and Tampere University.

In 2018/19, UK private schools awarded fee remissions totalling more than £1 billion to 176,234 out of their 537,315 students, the research states.

Of this £1 billion, some £440 million – 44% of the total fee remissions – was means-tested. The means-tested £440 million was shared between 44,395 students – an average of around £1,000 a head. Just 6,118 – 1.1% of all private school students – received a full scholarship, and a further 2.1% received fee remissions in excess of 75% of fees.

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A New Oligarchy

The inflation of fees has been partly propelled by the burgeoning wealth of Britain’s super rich – with the wealthiest 10% of households now holding 43% of all wealth in Britain, while the bottom 50% hold just 9%.

Britain’s private school system is also inflated by vast amounts of international wealth.

There are some 2,300 Russian children currently studying in UK private schools, and a report by Transparency International found that between 2004 and 2014 there were 327 “laundromat” payments – cash flows designed to hide illicit wealth – to independent schools in the UK, amounting to £2.8 million.

“Whether it’s those with Kremlin connections or individuals accused of corruption, sending children to private schools can be a stepping stone towards integrating into the British establishment and laundering reputations,” says Ben Cowdock of Transparency International. “Independent schools should be aware that they are exposed to high levels of risk and may even be accepting tainted funds.”

Currently, however, these schools are not legally obliged to report suspected money laundering, and their assets continue to multiply.

The Byline Intelligence Team has previously revealed that the top nine public schools in England – the so-called ‘Clarendon Schools’ – have increased their assets by 44% or almost £600 million in the past six years. The total consolidated assets (minus liabilities) of the nine schools rose from £1.36 billion to £1.96 billion between 2015 and 2020, the research found. All of these institutions possess charitable status.

The affluence of Britain’s elite private schools has attracted attention in recent months, after it was revealed that Chancellor Rishi Sunak and his wife Akshata Murthy had donated £100,000 to his alma mater, Winchester College, which is part of the Clarendon group.

Winchester has increased its net assets by more than £70 million – from £276 million in 2015 (equivalent to £312 million if inflation is taken into account), to £385 million in 2020. Over the course of the last decade, Winchester has seen its assets double from a base of £140.4 million (equivalent in real terms to £175.5 million). It costs £43,335 a year to attend Winchester, a boarding school that before September 2022 has only accepted boys.

Prime Minister Boris Johnson was also educated at an exclusive private school, Eton, which currently charges £44,000 a-year for attendance – comfortably more than the average full-time salary in the UK, which stood at £38,000 in 2021.

The published financial accounts of Eton and Winchester College show that they possess total reserves of £323,000 and £526,000 per pupil respectively.

As highlighted by the new research, private schools are “subject to little or no accountability with regards to the effectiveness or equity with which they use this cash” – with these institutions tending to invest in new luxury facilities, thus further inflating school fees.

Eton’s science department, for example, was given a £20 million makeover in 2019, while the construction of an aquatics centre – boasting a 25-metre pool with a moveable floor – is currently underway.

St Paul’s, with annual fees at £40,000, recently completed a 10-year building project, costing £114 million. According to the high society magazine Tatler, the results are “fabulous”. They include an award-winning science building, a new drama centre with “possibly the best school theatre in the UK”, and a ‘rare books room’. 

This all signals a wider trend: elite institutions, with few formal regulations governing their conduct, serve an increasingly narrow elite that has seen its wealth and privilege swell in recent years in the midst of persistent economic and political crises suffered by the rest of the population.

As the institutions of democracy, academic learning and wealth creation are pooled by this elite, the country appears to betraying its commitment – however distant – to meritocracy, and is instead moving closer to oligarchy.

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The Swedish City That Asked Its Banks for an Ultimatum

Published by Anonymous (not verified) on Tue, 28/06/2022 - 6:00pm in

Annie Hohlfält has lived in Gothenburg for 25 years. It’s a place she loves, but she’s also only too aware of the economic disparities bubbling beneath the surface of Sweden’s second-largest — and highly prosperous — city.

“Gothenburg is one of the most segregated cities in Sweden, maybe even in Europe, thanks to socio-economic differences that have created a kind of second class,” she says. “There are areas that are very isolated from the rest of the city. They’re not really part of the urban fabric.”

As head of development and social sustainability for Framtiden, the City of Gothenburg’s property management arm, Hohlfält hopes to change all that through an innovative project that is seeing Framtiden pour SEK 11 billion (around US $1.1 billion) into six of the city’s most vulnerable neighborhoods over the next three years. This covers 84,000 residents whose average life expectancy is around eight years lower than the average Gothenburg resident. 

With this money, the city and Framtiden have agreed on 14 “tasks” they have set out to achieve by 2025. These include a summer jobs and family support program for young people, as well as a job creation and small business development scheme, and are set to help tackle some of the neighborhoods’ biggest problems: Low education standards and high unemployment levels, which have led to widespread poverty and endemic gang-related crime rates.

Annie HohlfältAnnie Hohlfält.

Overall, the budget for improving life in these six communities has gone up 50 percent since 2019. What makes this initiative stand out, however, is the way in which the City of Gothenburg is working with its banking partners to negotiate a new way of financing ambitious projects such as this beyond the typical revenue-raising activities of taxation, fines, local service charges and corporate partnerships. 

With six major Nordic banks, the City of Gothenburg has agreed on a loan that allows the city to borrow, repay and withdraw again. Against this loan, the city will pay a higher interest penalty if its targets are not met. If it does meet its targets, it will receive a discount on the interest payments. In addition to Framtiden’s work in the city’s most vulnerable areas, separate targets include three initiatives to help Gothenburg reach its goal of becoming carbon neutral by 2030.

Tying loans like this to social and sustainable goals, with a penalty and reward structure, are becoming more popular in the corporate world. But they’re still rare when it comes to local, regional and national government bodies, which is why Gothenburg is being seen as such a pioneer.

Not everyone is behind it. Faduma Awil, who lives in Hjällbo, one of the six focus neighborhoods, agrees that boosting education and employment rates are at the heart of lifting areas like hers out of poverty. But she’s concerned that a lack of on-the-ground consultation and lived experience of what are largely migrant communities will mean this new strategy will see the same fate as its predecessors, regardless of any financially innovative reward and fine structure.

“We have 189 nationalities living in Hjällbo,” she says. “The Swedes who come here come for work then go home again. The city has put a lot of money into different projects, but after two years we are back in the same spot again because the city comes up with what they think are the solutions. They don’t listen to the people in the area to ask, ‘What do you need? How can we improve your lives?’” 

Awil came to Hjällbo in 1993 after migrating from Somalia to Sweden several years before at the age of seven. She grew up to become a social worker before taking on a coaching role at careers support center Sammjobb. 

“That’s the way you tackle a problem — togetherness — not coming in with your solution and what you think is good. You don’t know me. You cannot know what is good for me and my peers.”

BiskopsgårdenBiskopsgården is one of six vulnerable neighborhoods in Gothenburg to receive funding. Credit: Trygve Finkelsen / Shutterstock.

A City of Gothenburg spokesperson confirmed that the structure of the financial agreement meant there was no public consultation. But Framtiden’s Hohlfält adds that many of the new initiatives were developed after feedback from residents on their most pressing needs and that, when it comes to implementation, there is always consultation and dialogue. For example, Framtiden has a “tenants budget” tool through which residents can decide through a democratic process how to use a designated amount of funding.

Having been in her role for almost two years, Hohlfält is aware of past urban improvement strategies in Gothenburg which failed due to a lack of specific goals and enough funding. The difference now, she argues, is that both of those are now in place, along with the financial carrot/stick framework, giving her confidence that this new initiative can finally change the face of Gothenburg. 

“When you start talking about these socio-economic factors, it becomes so heavy and sometimes it feels like everybody’s checking out — that change is impossible, because it’s just the way it is,” she says. “But no, that is not the way, because it stems from previous decision-making, dependent on politics and civil servants. What has been really interesting is that this strategy has created momentum to bring other city organizations [including social enterprises and private enterprises] into our work, to add on their resources and skills.”

Perhaps the balancing act to Hohlfält’s optimism is the realism with which the city’s portfolio manager, Fredrik Block, approaches Gothenburg’s latest initiative. He fears the ambition of improving the city’s six most vulnerable neighborhoods will be the hardest goal to achieve in such a short space of time given, he says, tackling social issues like crime involve volatile variables that a city can’t always control. 

Likewise, he believes Gothenburg’s climate goals — reducing the energy consumption of city-run properties, converting to a fossil-free council vehicle fleet and moving to a city-wide green heating source — may be hard to reach within the next few years, although he is confident the city could hit its vehicle target by 2025, having already reached 63 percent.

Block hopes that any interest penalties paid to the banks in the short-term for failing to meet targets will be offset by discounts achieved in the longer-term as the projects gain momentum and show results.

Despite his reservations over how soon certain targets can be achieved, Block is resolute that he and his team didn’t spend months developing the plan only to retreat if things get tough.

“The targets are ambitious,” he says. “But we’re committed to reaching them.”

The post The Swedish City That Asked Its Banks for an Ultimatum appeared first on Reasons to be Cheerful.

Growing discontent as the cost of living rise continues to bite

Published by Anonymous (not verified) on Mon, 27/06/2022 - 12:04am in

Demonstration by workers employed by Mitie on strike at st George's Hospital, Tooting.GMB members employed by Mitie on strike outside St George’s Hospital, Tooting, for better pay and conditions and to be directly employed by the NHS. Photo by Helen O’Connor

“An attitude to life which seeks fulfilment in the single-minded pursuit of wealth – in short, materialism – does not fit into this world, because it contains within itself no limiting principle, while the environment in which it is placed is strictly limited.”

E.F. Schumacher –  Small Is Beautiful: Economics as if People Mattered

 

Anyone remember when Boris Johnson hid in a fridge to avoid being interviewed by Piers Morgan? It’s getting to be a habit. While the country’s economy reels, and people’s lives are wrecked by growing global instability, rising energy and food prices, and the consequences of 12 years of damaging Tory economic policy, Johnson decided to sneak off to Kiev instead of meeting Tory activists in Doncaster, prior to this week’s by-elections in Tiverton and Honiton, and Wakefield. As a Tory MP suggested, “The PM ought to be making every effort to support and respect the people who hold his future in their hands.” Not for the first time, he fell short of the expectation that Ministers should serve the interests of their citizens and not their own.

The by-election results are a testament to people’s growing disaffection, not just with the Prime Minister, but with the Tory government, which has demonstrated time and time again its priorities in terms of in whose interests they govern. Priorities which have impoverished many and enriched the few, and left the public and social infrastructure unable to respond effectively to the economic threats it has faced and continues to face. Thus, in a predictable flurry of tactical voting, Labour lost its deposit in Tiverton and won Wakefield, and the Lib Dems lost their deposit in Wakefield and won on a huge swing in Tiverton.

As positive as this might be viewed, and regardless of whether Johnson does the decent thing and resigns, the country still faces two more years of Tory rule, with all the economic pain that is likely to bring. Leopards don’t change their spots, unless of course it’s in their interests to do so, as is the case with Rishi Sunak’s reported decision this week to restore the pensions triple lock next year. Clearly a bribe to give their retired voting supporters a reason to put yet another x on the voting slip.

Worse, even if there were an election tomorrow there would be little choice on offer between three political contenders still wedded to serving the City and big business, and the neoliberal ideology that has dominated policy for decades.

We have three political parties whose policies are driven by the household budget narratives of government spending, rather than spending in the context of the real resources that the UK government has at its disposal, and which are the real constraints that need to be managed to avoid inflationary pressures. In the light of that framework, these are spending choices which are political and not monetary in themselves, and which determine who gets the pie. And over the last decade and longer, it is very clear who have been the winners and losers.

In this respect, the household budget narrative of how a government spends continues to frame the debate through headlines and articles which analyse the public accounts, and in doing so, keep the false mantra of public unaffordability in the public eye.

This week, Sky News in its headline suggested that the government had been ‘forced to hand over £7.6bn in record payments on public debt after inflation pushed borrowing costs to some of their highest levels on record’, and the same news outlet also reported that the National Debt had grown in April by £18.6bn. The Telegraph also suggested that it would cut the Chancellor’s ‘headroom’ for further spending or cutting taxes.

Just more of the same old nonsense.

The government has not, in fact, been forced to do anything of the sort. These references represent part of the smoke and mirrors that are intended to deceive the public about the nature of how the government spends. The government as the currency issuer is always able to meet any liabilities in its own unit of account which include maturing bonds. Those bonds do not constitute borrowing in any shape or form, any more than taxing creates the funds allowing governments to spend.

When Michael Gove warns ‘tough times’ are ahead and claims that the pressure of the public finances means that government is unable to provide the level of support to people it would like, it is a whopping lie of the first order.

It is vital, therefore, to bring clarity to the public about how government really spends. It boils down to a few simple facts: The government is the currency issuer and has to spend money into existence before it can collect any tax at all, or issue bonds. Contrary to belief, the issuing of these bonds does not constitute borrowing, rather they form a safe savings mechanism for big corporations which allows the Central Bank to manage its target interest rate. Furthermore, the government, as the currency issuer, can always meet those liabilities and any interest accrued upon maturity.

As for the National Debt, that is quite simply all the money the government has ever spent into existence and didn’t tax back. The money that circulated in the economy. Not something that anyone needs to spend time worrying about. People should instead be concerned about a government using the language of taxation and debt to deny them functioning and quality public services. And which, combined with government market-led policies, have been responsible for the low-wage economy and the growth in food banks and homelessness, while at the same time immorally lining the pockets of large corporations and their rich friends.

Sunak is endlessly given a platform by a compliant media to repeat his messages that government, ‘must take a balanced and responsible approach to support now, while also not burdening future generations’, or that it is, ‘making sure every penny of hard-earned taxpayer money is being spent on our world leading public services.’

On that last point, it is ironic that Sunak thinks that his government has created a world-leading public service sector, when it is clear that over the last 12 years it has done the exact opposite. It has devastated them whilst driving its privatising agenda. The state of our NHS is living proof of that, as a Panorama programme earlier in June demonstrated, as an undercover reporter exposed the scandal of a US-owned company, Operose, which is prioritising profit over patient care. With staffing shortages, rising waiting lists, crumbling NHS infrastructure and a demoralised workforce, we are paying a heavy price for government policies and insufficient public sector funding.

If governments seek to be accountable, that should be related to their policies and achievements, or not as the case may be, not whether they have been fiscally responsible.

As for the claimed burden faced by future generations which this blog has spoken about many times, the only debt that will be owed to those future generations will be the one created by government failure to invest in the country’s infrastructure today, to ensure that one can be as productive as possible tomorrow. Instead, based on our current trajectory, the country faces a bleak future based on using the public accounts as the measure of a country’s economic success or failure.

While the Tories bet on continuing to con the public with their talk of the necessity to be fiscally responsible, a couple of weeks ago Labour, in the same vein, took the Tories to task over its own published record on the public finances which showed that Labour presided over nine budget surpluses compared to the five under the conservatives. The data also indicated that the highest peacetime deficit came under the Tories during the pandemic. The report also said that Labour had ‘failed’ to set out how they would pay for their spending measures and attacked the party for its ‘reckless’ approach to the public finances and the third-highest deficit ever recorded after the second world war and the pandemic.

This is yet more of the nonsense which prevails in political circles and is reported by the mainstream media.

Firstly, whilst Labour chases rebuilding its reputation as being fiscally responsible, it, like the Tories, adheres to the false notion that balanced budgets and surpluses are the golden grail of public accounting. It is unfortunate that Labour and the Conservatives choose to conduct a war based on who supposedly has been the most fiscally disciplined, rather than examining the background to those surpluses and basing their critique on that. Surpluses, just as deficits are neither good nor bad in themselves and simply represent government spending and taxation in relation to the economic circumstances that prevail.

We should reject the implied notion that government surpluses create savings that can be used later to fund public expenditure. As Bill Mitchell explains:

A budget surplus exists only because private income or wealth is reduced.’

It is the context of that reduction that is all-important.

The real consideration should be an examination of why there is a surplus or deficit. What were the economic reasons? The pandemic, the global financial crash and now the global uncertainty arising from rising energy and food costs are three examples of why deficits of both political parties increased, to save an ailing economy facing recession and alleviate the associated human consequences. There was no alternative, unless one preferred economic collapse to ensuring that a country could function during difficult times. The point of contention might be who the beneficiaries of the government spending actually were, and the question was it a fair distribution?

Surpluses equally can arise when government fails to spend adequately, thus pushing the non-government sector into increasing its debt burden, which ultimately has an unavoidable consequence as debt levels become unsustainable as they did during the build-up to the Global Financial Crash.

As Bill Mitchell wrote in 2009 and as we are currently experiencing:

“In terms of fiscal policy, there are only real resource restrictions on its capacity to increase spending and hence output and employment. If there are slack resources available to purchase then a fiscal stimulus has the capacity to ensure they are fully employed. While the size of the impact of the financial crisis may be significant, a fiscal injection can be appropriately scaled to meet the challenge. That is, there is no financial crisis so deep that cannot be dealt with by public spending.”

What was true then is true today. So, whilst Labour and the Tories fight their battles on the premise of fiscal discipline, the elephant continues to thrash about in the room. It is worth reiterating that the only measure of a government’s economic success is what it actually did to preserve a functioning economy in good times or bad, and the outcomes of those decisions. Not whether they lowered the deficit, balanced the books or recorded a surplus. Our political parties have it all upside down.

Whilst the endless merry-go-round of public indoctrination and deception by politicians and a compliant mainstream media continues, scarcely a day goes by when that dreaded word inflation is not mentioned to keep the troops fearful and in their place as if they were not already suffering enough. Articles in the mainstream media castigate the Bank of England for not acting sooner to curb it with interest rate rises or suggest that it has to go much further yet.

As people struggle to keep their heads above the water as the rises in the cost of living continue to bite, the government once again shows who in the pecking order are its priorities.

This week the Treasury said that there would be no ‘inflation-busting’ pay rises for the public sector and urged private companies to consider similar pay restraint. At the same time, it defended its above-inflation rise for pensioners and its plans to cut limits on director and non-executive pay, as part of a package of business deregulation. On the last point, have we learned no lessons at all?

Whilst Sunak insists that pay rises for workers should be, ‘proportionate and balanced’, to prevent price pressures getting out of control, at the same time he claimed that the planned increase in state pensions was different because high pensioner incomes do not feed into the cost for businesses creating goods and providing services.

As Ben Riley-Smith from the Telegraph pointed out, Downing Street’s arguments about pay and inflation now make little sense. It seems yet again that in a low-wage economy in which working people were already struggling, the government are choosing to throw them under the bus yet again to curb inflation at a time when wages are already falling, and demand is sinking as retail figures showed this week. When costs rise, uncertainty rises with it, and then impacts the high street.

There is absolutely no distinction between income increases via pensions or pay all will add to aggregate demand and the capacity to spend. This is a deliberate choice by the government and smacks not of economic common sense but political bias. Long forgotten are the claps for the people who kept the economy functioning during the pandemic.

These inflationary pressures as Martin Lewis the Money Expert suggested, result from supply-led problems, not demand-led ones, and such interest rate rises will feed through into the cost-of-living pressures already being felt by working people.

And as the economist John T Harvey noted in an article in Forbes:

“… it’s abundantly clear that the lion’s share of what we are facing today is being driven by supply-chain issues […] Gas prices are not going up because people had so much money they wanted to do some more joy riding and oil companies couldn’t keep up.  Rather, as with the OPEC oil embargo in 1973, a geopolitical event has created uncertainty and a decrease in supply.  These are the factors responsible for our inflationary woes. […] Nothing in our current scenario suggests that lowering the level of economic activity […] would be helpful.”

And yet, as the TUC noted in an analysis, while bonuses paid to the bankers, insurance brokers and other financial sector employees have reached a record high, the rest of the country struggles with soaring cost of living pressures that are outstripping pay rises. Wealth inequity is built into our economic system and working people pay the price. The rising discontent is currently feeding through into industrial action or threats of industrial action.

So, what should the government’s strategy be? GIMMS Associate Neil Wilson suggests the following :

  • Interest rates should be going down, not up, because taxing young people trying to set up home and giving that to rich people with money is completely the wrong approach.
  • Instead, we need to understand that taxes are there to stop the private sector from hiring people so the public sector can hire them. If we have inflation, then we are undertaxed for the size of government we have.
  • Therefore we reduce the size of government, or we increase taxes on business so they hire fewer people. Employee NI changes should be shifted to Employer’s NI.
  • The number of people on out-of-work benefits is entirely in the gift of private sector businesses. All they have to do is offer sufficiently attractive wages and conditions. In other words, learn to compete and stop offering substandard jobs. Rather than out-of-work benefits we should provide a guaranteed living wage job for all, then it would be even clearer that the problem is with the quality of the private sector job offers, not the willingness of the people to work.
  • Since the inflation problem is a lack of energy, why are we arguing about money rather than talking about measures to use less energy?

Whilst the temptation is increasingly to focus on domestic issues, we ignore at our peril the global context of the effects of the pandemic and the conflict in Ukraine on world economies, not to mention the climate crisis which seems to have taken a back seat, or rather dropped off the agenda.

It is increasingly clear that there will be severe consequences for countries in the global south. Countries that do not enjoy food and energy sovereignty, are loaded with foreign debt, and who have suffered at the hands of the IMF which imposes tough conditions for bailouts, destroying public infrastructure and privatising public assets.

Countries who, on top of this, are also having to deal not only with the shocking rises in the price of food staples like grain and energy, related to the conflict in Ukraine, but also with the costs associated with western manufactured wars and economic exploitation, and human-caused climate warming.

There is not a week that goes by when those consequences are not laid bare. Those of a rotten economic system which favours the global north.

This week the UN warned that only an immediate scaling up of funds and humanitarian relief could save Somalia from famine.

In March and April, a brutal heatwave struck India and Pakistan which killed at least 90 people and led to wheat crop failures, power outages and forest fires.

This month, more than 110 people have died and millions have been stranded as excessive Monsoon rains devastate India and Bangladesh, adding to the damage already caused by unusually heavy rain which lashed north-eastern India and Bangladesh in March.

In Niger, people are on the other hand, praying for rain, as malnourished children die as the global food crisis worsens years of drought, caused by the climate crisis which has led to increasingly unpredictable patterns of rainfall and longer dry seasons.

And in Chile, working people are becoming desperate as a severe drought which is turning a reservoir into a desert has affected copper output, stoked tensions over water use for lithium and farming, as well as fuelling forest fires. Plans are now being drawn up for water rationing.

In the Congo, peat which stores vast amounts of carbon is under threat from climate-induced longer dry seasons, unsustainable farming practices and the possibility of significant oil deposits being exploited close to peatlands, with government already parcelling out blocks of land and seeking potential investors.

These events come as climate talks in Germany between rich and poor countries over funding compensation to deal with climate change caused by the emissions of richer countries, ended in acrimony as the US and EU fail to agree.

As Congo’s Environment Minister pointed out, ‘It’s time we understood that it is in our common interest to conserve [the peatlands]. Because if [the West] doesn’t help support our conservation work, we shall be obliged to use our own natural resources, because we need money simply to live.’

That goes for all countries faced with similar dilemmas, and we are as far away as we have ever been from developing global solutions.

With Sri Lanka’s Prime Minister warning this week that the country is on the point of economic collapse, it exposes the fundamental exploitative and toxic nature of the economic system. A country that has as the economist Fadhel Kaboub tweeted recently, ‘failed to invest in food and energy sovereignty, raced to the bottom chasing low value added export industries, remittances and tourism. All fueled by debt in foreign currency.’

The climate crisis, combined with the toxic economic system which is driving it, is posing an existential threat to humanity. The natural world and its biodiversity is under threat as never before, and yet despite the promises, we are now going backwards.

As Antonio Guterres, the head of the UN, made clear last week, fossil fuel firms ‘have humanity by the throat’, as the industry and its backers pull in record profits as energy prices soar, and governments give the go-ahead for further oil field development or re-opening coal plants as Germany is proposing to do. Suddenly the appetite for addressing the climate emergency has been supplanted by other immediate concerns, rather than the long-term effects of continuing to burn fossil fuels and use up the world’s finite resources to keep a dying economic system alive.

We have choices. They start with unpicking the lies about how the government spends, so the public understands the scam that has been perpetrated over decades by politicians, orthodox economists, and the media.

Change is inevitable. The question is what sort of change do we actually want for our children and what needs to happen to achieve it? We need an urgent challenge to a toxic system. Learning how money works is fundamental to that quest.

 

 

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The post Growing discontent as the cost of living rise continues to bite appeared first on The Gower Initiative for Modern Money Studies.

It is Critical that the Housing Bubble is Safely Deflated

Published by Anonymous (not verified) on Sat, 25/06/2022 - 4:42pm in

[Published in Pearls & Irritations today 25 June. My pre-election attempt (the previous post) didn’t make it.]

Stratospheric housing prices are perhaps the most critical domestic issue in Australia. Not only are a collapse of the housing bubble and a recession now threatening, but homelessness and rent stress, unaddressed and exploited, can quickly fester into ugly politics. The elephant in the room is the excessive money created by under-regulated commercial banks.

Housing prices are a prime driver of severe inequality and a serious threat to the stability of the Australian economy. Rises in interest rates threaten to collapse the very high levels of household mortgage debt and bring on a serious recession. The dream of home ownership is disappearing for many. 

Homelessness and rental stress are rapidly increasing problems. Around 5 in 1000 Australians are now homeless and rental stress affects around a million households. Australia, let us remind ourselves, is still a very prosperous country, per capita. The problem is severe inequality.

The un-affordability of housing has undone most of the gains of the postwar decades. Why should home ownership be more out of reach now than it was in 1960? The cost of building a house can’t be much greater, relative to average income. It is the cost of the land that has inflated. There is a speculative bubble in land prices.

The reason for the housing bubble is commonly attributed to tax breaks on capital gains and negative gearing. It is true these encourage more existing money to be channelled into investment properties, but they are not the biggest factor.

The biggest driver is unrestricted bank credit, which pumps new money into the economy. Private banks can keep granting bigger and bigger mortgage loans as market prices climb. An inflationary spiral has been operating for decades: higher market prices induce bigger loans, then bigger loans push prices up further.

The difference between now and 1960 is that bank loans were directly regulated back then. If the economy was ‘overheating’ there would be a credit squeeze. The rate at which banks could issue loans was restricted. This market intervention was overseen by that wicked old socialist Bob Menzies.

The present practice of using only interest rates to influence bank lending is indirect, only marginally effective and prone to triggering a collapse into recession, as Paul Keating found out in 1990.

Debt levels are now so high that limiting bank loans might also trigger a recession. Our economic managers, led astray by the deregulation ideology, have steered the economy into a precariously unstable state. It is hard to see how to fix the problem without triggering a crash.

Economist Steve Keen has proposed an escape route that would bring prices down while preserving the equity of present home owners. There are two parts. First, a reversion to regulating bank credit, Menzies-style. Second, a monetary reset to deflate the debt bubble.

Part One: regulate bank lending. This could be done by squeezing credit until prices stabilise. Alternatively or as well, Keen proposes that mortgage loans be capped at a multiple of what the property could be rented for, though rents are now also increasing.

Part Two: a monetary reset. The essence of Keen’s proposal is to convert around half of housing equity into bond equity, so house prices could drop by half but present owners would not lose the equity they have. At the same time mortgage holders can pay down their debt to something more manageable.

The government, through the Reserve Bank, creates fiat money to pay into the bank accounts of every adult resident. Anyone who has a mortgage loan must use the money to pay down their debt, so their debt might come down by half or more. Anyone who already owns their home must use the money to buy government bonds; the equity in government bonds will replace the equity their house loses as prices come down (because of Part One). Those who have fiat money left over from paying down their mortgage will use the balance of the money in the same way as home owners, which they now are, i.e. to buy bonds. Renters and others who do not own a house must also buy government bonds: they end up with an asset they did not have before. This would (partly) compensate them for having been effectively shut out of the housing market.

These are delicate operations that would need to be carefully thought through. Keen has done the first pass. Requiring all the fiat money to be used to buy government bonds ensures that none of the extra money ends up circulating in the economy, so inflation will not be triggered. The payment of loans and the conversion of fiat money to bonds could be done automatically by the banks, so most people would not have to do anything. You would be able to sell your bonds if you wanted, but that would require a buyer who already has money, so again no new money would be added to the economy. The private banks would return more to facilitating useful investment, as they used to, instead of facilitating property speculation.

The end result of this scheme is that present home owners would have some of their home equity converted into government bonds and they would be no worse off. Holders of large mortgages would have their debt reduced by half or more. Renters and others would have an asset they did not have before.

Would the latter be a handout? Yes. Is that a problem? Well, big businesses get handouts all the time in the name of managing the economy (tax cuts and billion-dollar gas pipelines anyone?), the wealthy have been benefitting from a highly skewed economy and the poor have been screwed.

Remember, the Rudd Government put money in the accounts of pensioners as part of its successful counter to the GFC in 2008, so Granny and Gramps could go on a shopping spree to help to save the economy. The Morrison Government put rather more money into private accounts to tide (some of) us through (some of) the pandemic disruption.

This scheme seems to be an ingenious way out of the trap we’ve been steered into by ideologically misguided economic management. It certainly needs to be carefully examined and debated, but that debate needs to involve people who properly understand the money system, as well-explained by Stephanie Kelton in The Deficit Myth and by Keen in Debunking Economics and The New Economics: A Manifesto.

The post It is Critical that the Housing Bubble is Safely Deflated first appeared on BetterNature Books.

End of the Brexit Era? Wakefield Gives Labour a Second Chance

Published by Anonymous (not verified) on Fri, 24/06/2022 - 7:14pm in

The country has moved on from Brexit and won't be distracted by 'culture wars' – where does this leave Johnson and the 'Red Wall'?

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It’s not always greener on the other side. At least that is the conclusion of voters in Wakefield after three years of Conservative rule.

The seat, which in 2019 flipped to the Tories for the first time since 1931, has now returned to Labour.

The by-election was called after the MP elected in 2019, Imran Ahmad Khan, was convicted of sexual assault. Khan had been suspended from the Conservative whip in 2021 pending the outcome of the prosecution, and this scandal undoubtedly played a role in Labour’s political revival in the West Yorkshire seat.

But other factors are relevant too. In particular, Boris Johnson's inability to find a replacement for Brexit – the campaign that converted much of the 'Red Wall' to the Conservatives.

Mirroring other Red Wall seats – former industrial areas in the north of England, the Midlands and north Wales – Wakefield voted comfortably in favour of Brexit, by a margin of 66.4% to 33.6%.

Following three years of parliamentary prevarications, Wakefield and other similar constituencies wanted to ‘Get Brexit Done’, as Johnson promised.

Brexit had herded the electorate into new political tribes, with many traditional Labour voters supporting a cause that had been largely championed by the hard-right. Brexit arguably became a religion – dominating political debate and polarising voters into two aggressively opposed camps.

Through years of national soul-searching – refracted through the lens of Brexit – the campaign to leave the EU morphed from the technocratic to the emotional, coming to define the personal and political identities of all those invested in its outcome.

Prior to the UK's departure from the EU, polls showed little change in retrospective support for Leave and Remain, with the nation pretty much split down the middle.

With the figurehead of Vote Leave placed in charge of the Conservatives in July 2019, Brexit was a unifying force for the party – coalescing these voters under its flag. A few months later, in December 2019, Labour lost 25% of those who had voted for Brexit in 2016 after voting for Labour in 2010, along with 45 Red Wall constituencies.

Now, this has all changed.

Johnson’s personal popularity has collapsed, owing to his ‘Partygate’ lies and anaemic response to the cost of living crisis.

After seizing a host of Labour seats in 2019, the Prime Minister acknowledged that local voters had “lent” their votes to the Conservatives. “I, and we, will never take your support for granted. I will make it my mission to work night and day, to work flat-out to prove you right in voting for me this time, and to earn your support in the future,” he said.

Three years on, this trust has not been repaid – at least in the eyes of voters in Wakefield.

Brexit Betrayals

The apex of this political conundrum for Johnson is the waning potency of Brexit and the issues that it evokes. In YouGov’s tracker of the most important issues facing the country, according to voters, ‘Britain leaving the EU’ is selected by 19% of people – down from 65% on the eve of the election in 2019 – while ‘immigration and asylum’ is selected by 24%.

The Prime Minister has never been wildly popular, contrary to the myths perpetuated by the Conservative Party, having merely been adopted as a Brexit battering ram. Now that Brexit is ‘done’, his usefulness is increasingly unclear, including to those who supported him in 2019.

In a poll conducted by Omnisis for Byline Times in April, 51% of Leave voters surveyed said that the ‘Partygate’ scandal has made them less likely to vote Conservative at the next election, while a clear majority, 63%, no longer trust Johnson to tell the truth.

As for the most important issues facing the country currently, 65% of people opt for ‘the economy’, followed at a distance by ‘health’ (35%). These are the issues of the day, on which Johnson and his party are floundering.

In an Omnisis poll for Byline Times in May, before Chancellor Rishi Sunak announced a new package of cost of living support, an overwhelming 81% of those surveyed said they were dissatisfied by the Government’s response to the cost of living crisis.

As of now, 56% of Conservative voters believe that the Government is handling the economy badly, while 57% think the same about the party’s handling of healthcare.

And on this front, Brexit is increasingly a hindrance to the Conservatives. This newspaper's Omnisis polling in May found that 67% of people asked believe that leaving the EU has made their cost of living higher – a belief shared by 48% of Leave voters – while 64% of people think that Brexit has been negative for the UK.

These perceptions are only likely to harden after this week’s Resolution Foundation report, showing that the north-east of England – one of the country’s poorest regions and also one of its most avidly pro-Brexit – will be hit hardest by the UK's departure from the EU.

In contrast, “there is early evidence that London is, in fact, adapting to Brexit faster than other regions,” the report says.

So, while Jacob Rees-Mogg cautioned that the benefits of Brexit could take “50 years” to materialise – a theory seemingly accepted by most Leave voters – they appear not so tolerant now that the country is forced to trudge through the economic quagmire on the long road to finding those “sunlit uplands”.

There seems little evidence either for the supposed cultural and democratic benefits of Brexit. The Daily Mail carried a front page on the day before the referendum, painting a stark choice for the nation between “Lies. Greedy elites. Or a great future outside a broken, dying Europe”.

With Johnson’s Vote Leave Government tainted by accusations of corruption and mendacity – rewriting the constitutional rulebook for its own ends – the anti-establishment promises of Brexit seem far from reality.

Brexit also appears to be a strategic distraction for the Conservatives. With the country clamouring for policies to solve real-world issues around jobs, wages, bills, and public services, the Conservative Party is still waging a Brexit 'culture war' – attempting to rehash the playbook of the previous election through ‘anti-woke’ identity conflicts.

Labour has been the beneficiary of a Conservative collapse in Wakefield; the Liberal Democrats in Tiverton and Honiton, as well as previous by-elections in Chesham and Amersham, and North Shropshire.

The question is whether these two opposition parties can capitalise on Boris Johnson’s weakness to such an extent that they have a chance of forging a coalition after the next election. Or if, less probably, Labour can win a majority of its own.

In the Red Wall, that still seems uncertain. Labour’s results were unconvincing in these seats during the recent local elections, although Westminster-level polling has suggested that the Conservatives could lose all but three of their Red Wall seats when a general election rolls around.

Either way, Labour has been given a second chance to prove its calibre in Wakefield, while the Conservatives are forced to wrestle with the reality that the tag-team of Johnson and Brexit has finally lost its golden touch.

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On the Frontline of the Battle for Benefits

Published by Anonymous (not verified) on Thu, 23/06/2022 - 9:52pm in

Chaminda Jayanetti speaks to those affected by the Government's failing system of assessing support for some of the most vulnerable people in our society

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Earlier this year, Byline Times reported on how Government assessments delivered by private firms are unfairly denying the Personal Independence Payment (PIP) benefit to disabled people, with a high success rate for people when these decisions are appealed.

Figures published last week show that two-thirds of tribunal appeals by benefit applicants were upheld in 2021/22, with the Department for Work and Pensions' (DWP) assessments amended or overturned. That’s just among appeals that reached a hearing – large numbers of appeals are ‘lapsed’, meaning that the DWP does not contest the appeal, sometimes withdrawing its opposition to it at the last moment.

Tribunal appeals come after the compulsory ‘Mandatory Reconsideration’ (MR) phase, where the DWP looks again at the initial assessment.

In 2021/22, the DWP only decided in favour of the benefit applicant in three out of every 10 MRs. Successful tribunal appeals effectively overturn the DWP’s MR decisions.

To dig deeper into how the Government is failing vulnerable people in need of support, Byline Times spoke to those on the frontline of trying to get PIP benefits about how the battle for benefits has affected their lives.

Victor's Story

Victor Calver was diagnosed in May 2019 with stage four prostate cancer – terminal and metastasized. He continued working, but was hit with a perfect storm early in the Coronavirus pandemic, when he was made redundant from his job and served with an eviction notice by his landlord.

In November 2020, he applied for PIP. “I phoned them up myself," he told Byline Times. "They sent through the form – about 300 million pages.”

Calver has a tumour in his femur and another in his hip, plus two small fractures in his back caused by his cancer treatment making his bones fragile.

“I live with chronic pain,” he said. “Whilst I'm talking to you, my back’s in absolute agony, my legs are in absolute agony. I don’t know if it sounds weird, but I've kind of got used to it. I just kind of accept pain really. And it’s part of my life.

“If you looked at me, if you met me, when I tell people I’ve got stage four cancer, they don't believe it – because generally I’m very, very positive. And that’s how I deal with it. That’s why I don’t get a lot of support, because everyone thinks ‘he’s alright’. 

“Mentally have I coped? Probably not. I don't think many people would be able to cope with the pain I’m in. Sometimes it literally brings tears to your eyes.”

Calver’s PIP application included a letter from his doctor confirming the extent of his illness. But nothing happened for months, until he received a phone call from the benefits assessors.

He told Byline Times: “They’d ask me questions like ‘can you feed yourself?’ Of course I can feed myself. They say ‘what do you eat?’ And I’d say ‘eggs and spinach’ because I used to buy them egg pots from the BP garages. That’s what I’d eat. They said ‘can you walk?’ I said 'yeah, oh yeah'.

"‘Can you go to the supermarket?’ ‘Yeah, of course I can go to the supermarket'. ‘What do you do? Can you walk 50 yards?’ And 'yeah, of course I can walk 50 yards – but I might have to stop 30 times in between'. 

“I said to them ‘yeah, yeah I can go to the shop’. And they suck you in, so you’re ‘yeah I’ll be fine’, you know, ‘I’ll fight this disease’. The moment I put down the phone I’m in tears.”

Despite the doctor's letters and his terminal cancer diagnosis, Calver scored hardly any points in his application for PIP and its Motability element. His application was rejected.

“According to them I was an Olympic athlete,” he said.

By now it was 2021. Calver had to go through the MR phase, whereby the DWP reviews the decision. It didn’t work – there was no change to his assessment score.

“They didn’t even look at it," he told this newspaper. "I don’t think I got a call back or nothing – just a manager, one of these DWP managers, wrote back, says ‘we agree with the assessor’.”

Despite the doctor's letters and his terminal cancer diagnosis... his application was rejected

Calver went to Citizens Advice. The organisation handled his tribunal appeal and secured further supporting letters from his clinicians. The hearing was scheduled for November 2021. Amid the pandemic, he had to take part over the phone. 

But just 10 minutes before the hearing – and a full year after his original PIP application – he got a call from the court telling him that the Government had conceded on all counts. He was given full PIP and full Motability support, backdated to the time of his original claim and awarded indefinitely.

“It’s absurd," Calver said. "Their solicitor or their barrister probably would have looked at the evidence and said ‘you’re going to lose this hands down’. And they conceded, obviously on legal advice – because they took it all the way to the courtroom only for counsel to tell them ‘you’re going to lose this’. Or even the judge might have told them ‘you’re going to lose this’. To concede 10 minutes before the hearing, it seems like the judge or their counsel has told them ‘what have you done?’

“They knew my personal circumstances – we had to give them details about money, earnings, what we’ve got. They knew I had just been made redundant. They knew I was living alone, I was shielding.”

The backdated PIP helped clear some of Calver’s bills and debts that had built during the pandemic and eventually managed to get him rehoused – although not until a lack of suitable accommodation had left him living in a freezing caravan and sleeping in his car over winter.

“How I got this flat now is they considered my PIP money," he said. "They said now I can afford somewhere. Because before, I wouldn’t have been able to afford it anywhere.”

Alison and John's Story

Alison (not her real name) has supported PIP applicants since the benefit was introduced in 2013, having previously worked for a Government department. She told Byline Times that the introduction of the compulsory MR phase simply delayed the process to get to appeal and placed more stress on the people trying to claim benefits.

Even worse, she has come across cases where the person assessing the MR was the same person who carried out the benefit assessment being appealed against.

“I have problems with the Mandatory Reconsideration process, because they're marking their own homework,” she said. “And they say that the person who's made the original decision, the decision-maker, doesn't do the MR. But I know, because I've seen signatures on letters, that the person who made the decision has also done the MR.

She said that the process was "corrupt" because "it doesn’t abide by the rule of law".

"Its decision-making is highly questionable," she added. Also, the decision-makers are people with no medical qualifications.”

One of the people Alison helped was John (not his real name). Having been on the old Disability Living Allowance (DLA) benefit, he was assessed for PIP in 2017, under the DWP’s programme of moving people from the old benefit to the new one.

Aged around 60, he had lost his leg in a motorbike accident at 18 and had been a full-leg amputee for 40 years. He drove an adapted Motability vehicle that let him use all the pedals with one foot.

“He’s a part-time actor,” said Alison, “and his job is being a casualty. He works with emergency services and the Ministry of Defence, and he takes his prosthetic limb off, and they transport him to where he’s got to lie, cover him in fake blood, he has to scream, and the emergency services are assessed.”

She said a private firm employed by the DWP to conduct benefits assessments carried out his PIP assessment and asked him about his job.

“His job requires him to remove his prosthetic leg,” Alison told Byline Times. “And we'd had a hot summer and he’d had to stop wearing this prosthetic leg because he’d got ulcers on his stump, which meant the only way to get about was on a pair of crutches and one leg. And he lost his higher rate PIP mobility component because he was able to do this job – that's how they rationalised it.

“He couldn't get to his job without his mobility car, which is adapted for an amputee, and his job requires him to remove a prosthetic limb, without which he can't really stand up – he’s not particularly stable. But they used this job as a rationalisation for taking his high rate mobility component off him.”

As a result, John lost funding for his adapted car, which his DLA payments had funded. Instead he had to borrow the money to buy it.

John then failed at the MR stage – with the MR apparently done by the same person who did the original assessment.

“I'm pretty sure it was the same person who assessed it, and I've seen others where that's been done as well,” Alison said. “I clocked it on the signature – ‘this is the same person’. They’re actually looking at their own decisions.”

John also lost his appeal at tribunal. At that point, Alison helped him go to a second tier tribunal – a route that can be requested if there has been an error in law. 

For a disability benefit award to be lowered or removed, the DWP has to prove ‘betterment’ – essentially, that the person has to some degree got ‘better’.

“How do you improve from having a full leg amputation?” Alison asked. “You can’t.”

Alison found a very similar case to John’s that had previously gone to appeal – as luck would have it, the same person who presided over the tribunal in that other case presided over the second tier tribunal in John’s case too. 

“She looked at it and said, ‘this needs to go back to the original tribunal hearing and the tribunal has erred in law, and they need to make a fresh decision’," she said. "And that case got him his car back.”

John’s payments were reinstated and backdated. It was 2019 and the case had gone on for two years. He sold the car he had bought, paid off the loan, and got his new Motability vehicle with the restored benefits. 

“If he'd lost, if he couldn't afford to use that car, if he couldn't afford to keep it and have a loan, he wouldn’t have been able to do his job,” Alison said. “It’s pretty outrageous.”

Natalie's Story

Natalie (not her real name) is 32 and has been diagnosed with agoraphobia, depression and anxiety. She has rarely left the house since she was 18 and never leaves without someone with her. 

“Most of the time I go out the house three to four times a year for blood tests and that’s it,” she told Byline Times.

But when she applied for PIP, she scored zero in both assessments – for the ‘daily living’ and mobility components.

“The second assessor used me going to my doctor occasionally for blood tests, and the time I was taken to the dentist because I kept getting abscesses, against me as evidence of somehow being able to get out and do everything unaided and having no mobility issues," she said. "So even getting medical treatment is being used against us.”

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Both the initial report from her mobility assessor and the response to her unsuccessful MR request explicitly referred to her seeing her GP every three months.

The DWP’s response opposing her subsequent tribunal appeal spelled it out more clearly, using her visits to the GP – which always require a lift from her family or partner – as evidence that she can independently interact with people despite her mental health conditions, and that she can manage her medication independently.

At no stage prior to the tribunal appeal have the private company conducting the assessments or the DWP contacted her GP regarding her PIP application, despite her asking the tribunal to do so.

The report from her mobility assessor also referred to her manner when speaking: "At your telephone assessment, you were pleasant and polite and engaged well. You were not breathless when speaking and spoke in full sentences. Despite mentioning that you felt anxious, you responded to reassurance from the assessor. There were no signs of overwhelming anxiety or distress." 

Natalie told Byline Times that the assessments ignored or distorted what she said.

“I mentioned my new meds [Mirtazapine, which treats depression and anxiety], they asked me to read the name," she said. "Then they reported I hadn’t started any new meds. I explained my vision is slightly worse than it would be if I hadn’t been stuck in almost half my life (I am very short-sighted). Apparently I have no issues with vision according to them. All they have done is lie.

“I told them I was overweight and how my partner cares for me. So they mention I’m not underweight. And somehow come to the conclusion everything my partner does for me I can do on my own too.

“I can’t comprehend it. I heard it was bad but I didn’t realise it was this bad.”

Natalie knows what she would do with the PIP money if she wins her appeal: “At first I’d like to be able to get taxis to get out to somewhere with people. Get used to the drivers, that’d allow to eventually start going on my own. After that, I’d like to work on using public transport, with someone at first then build up to doing it alone. Things like that. I want to use it to help me get better and get passed this point in my life.”

The Government's Response

A spokesperson for the Department for Work and Pensions told Byline Times that "the majority of applications for Mandatory Reconsideration go directly to another decision-maker based in the department’s Disputes Resolution Service and where that doesn’t happen, we have robust internal quality checks so ensure all the correct processes were followed”.

“For the majority of PIP claims, we get decisions right and all assessments are carried out by healthcare professionals trained to consider the impact of someone’s health condition or disability, but we are exploring what more we can do so the welfare system better meets the needs of disabled people through our Health and Disability Green Paper,” they added.

Do you have an experience about claiming benefits to share? Contact the newsdesk by emailing news@bylinetimes.com

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The Conservative Party’s Great Rail Betrayal

Published by Anonymous (not verified) on Wed, 22/06/2022 - 11:17pm in

Sam Bright inspects how the Government is undermining its ‘Levelling Up’ mission through a new era of public transport austerity

The improvement and “modernisation” of Britain’s railways is ostensibly a core feature of the Conservative Government’s ‘Levelling Up’ agenda.

The Government’s Levelling Up White Paper, released in February, promised to “deliver faster, more frequent and more reliable journeys across the north of England and the midlands”.

“Investment in connectivity can improve productivity and economic performance right across these regions”, it added.

Indeed, transport links are crucial to the economic performance of an area and the social mobility of its population. Good transport links improve the exchange of knowledge and resources, allowing the public and private sectors to operate more efficiently. This mobility also helps individuals to access better educational and employment opportunities – boosting their economic prospects.

Currently, however, many towns and cities are ostracised by virtue of their poor public transport links – with commuting to London often easier than catching a service to a neighbouring town. For example, while it takes two hours to travel from Wakefield to the capital (200 miles) via rail, it takes 90 minutes to travel a much shorter distance (50 miles) to Manchester.

Though Britain’s poor productivity has many inputs, this is surely one of the reasons why economic output in London, measured in terms of gross value added per hour worked, is 30% above the England-wide average, and 55% above the lowest-performing region.

Yet, for all the Government’s rhetoric, its actions are undermining Boris Johnson’s regional rebalancing agenda.

The Prime Minister’s economic philosophy has been labelled as ‘boosterism’ – in other words, keeping tax rates high and injecting shots of money into infrastructure.

However, this description neglects the day-to-day austerity that Johnson’s Government is inflicting on public services – including the railways. Transport Secretary Grant Shapps is dutifully carrying out this agenda – pushing through cuts to Network Rail, and saying that he expects £1.5 billion-a-year savings from Great British Railways, the state-owned body that will oversee rail transport in Britain when it launches in 2023.

This austerity is more important than ever, in the context of decisions taken by the Government during the pandemic. In a (successful) attempt to stop mass financial losses, due to collapsing passenger numbers, ministers took the operation of the railways back under public management – with the Government paying private firms an operating fee and covering their losses.

However, after spending £16 billion on keeping the trains running during the pandemic, the Department for Transport is now seeking to cut its spending by 10%. As a result, these cost savings are being passed on to the train operating companies, and Network Rail.

This has a knock-on effect, saddling train passengers with diminished services and undermining the Government’s Levelling Up agenda. Indeed, local train services – typically routes servicing small towns, that are less profitable for the private providers – are being cut. “I am deeply concerned that the impact of the pandemic is being used as a smokescreen for cuts to local rail services,” says West Yorkshire Mayor Tracy Brabin, who has seen services reduced in her region.

Austerity 2.0

This is part of the explanation for this week’s rail strike – with Network Rail attempting to implement cost savings that risk restraining the wages of rail workers, and could result in redundancies. The National Union of Rail, Maritime and Transport Workers (RMT) has initiated a walkout, to negotiate a better settlement.

In relation to the strikes, Labour’s Shadow Rail Minister Tan Dhesi told Byline Times that: “Frankly, Government ministers are spoiling for a fight, providing a helpful distraction to their own incompetence and a helpful vehicle to justify cutting back our railways further. There is no doubt that the Government is far more interested in pushing their own agenda rather than acting in the public interest.”

Ministers and press officers point out that the Government’s ‘Integrated Rail Plan’ promises to invest £96 billion in improving Britain’s rail network – namely by building the western line of HS2, linking the northwest to Birmingham and London. A much-needed upgrade to Transpennine infrastructure in the north of England will also take place, reducing the commute from Leeds to Manchester from 55 to 33 minutes.

This plan has been criticised – not least for dropping the eastern leg of HS2, and for dropping plans to build a new, high-speed east-west line linking Manchester to Leeds. Transport for North has called the plan insufficient, with its chair Conservative peer Lord Patrick McLoughlin saying that it “goes against the best interest of people in the north and fails to deliver the step-change in rail services.”

That said, the Integrated Rail Plan constitutes a significant amount of public investment – albeit less than is necessary. We, therefore, have the Government piling billions into the evolution of rail infrastructure while cutting back spending on the day-to-day operation of the network – which is a major policy contradiction.

But this isn’t a surprise. Marcus Johns of IPPR North described Chancellor Rishi Sunak’s autumn budget as “capital intense and revenue light”. He added that “the Chancellor’s new fiscal rules could lock in austerity in public services and local government while Government points to new infrastructure projects as levelling up.”

The Government’s rail infrastructure schemes are not vanity projects – unlike plenty of its levelling-up projects. Its £96 billion Integrated Rail Plan will measurably improve the quality of rail travel in the UK. But the improvements risk being undermined significantly if the network is hollowed-out in the meantime by day-to-day spending cuts.

And, as we’re already witnessing, this austerity will once again be suffered by the poorest areas of the country – the very places that have been promised a new era of economic renewal by the Conservative Party.

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The inter-generational contract that’s being undermined by financial capitalism

Published by Anonymous (not verified) on Wed, 22/06/2022 - 4:27pm in

A reader of this blog, Dave Rotheram, picked up a quote from me and used it on Facebook the other day, noting I said:

We can’t have a successful transition between generations in this country and meet the baby boomers' desire for a comfortable retirement when the upcoming generation has debts and tax rates that make it almost impossible for that younger generation to buy the assets the older generations have to sell to fund those retirements, whether they be shares, bonds or houses. That’s just not possible.

Dave added:

Many people of my generation bitch at my children’s generation and put the blame for their difficulties on silly things like eating avocado but this quote from Richard Murphy picks up on something that gets overlooked - the millennials’ problem is also the boomers’ problem, if only they realised: the boomers haven’t won a battle between generations, just made a potential win-win into a lose-lose.

I thought that a twist that I appreciated. Dave gets that there is what I call a fundamental pension contract. This comes from something I wrote in 2010:

[There is a] fundamental pension contract that should exist within any society. This is that one generation, the older one, will through its own efforts create capital assets and infrastructure in both the state and private sectors which the following younger generation can use in the course of their work. In exchange for their subsequent use of these assets for their own benefit that succeeding younger generation will, in effect, meet the income needs of the older generation when they are in retirement. Unless this fundamental compact that underpins all pensions is honoured any pension system will fail.

As I also argued then:

This compact is ignored in the existing pension system that does not even recognise that it exists. Our state subsidised saving for pensions makes no link between that activity and the necessary investment in new capital goods, infrastructure, job creation and skills that we need as a country. As a result state subsidy is being given with no return to the state appearing to arise as a consequence, precisely because this is a subsidy for saving which does not generate any new wealth. This is the fundamental economic problem and malaise in our current pension arrangement.

I did a video on this here:

 

Home Truths: Boris Johnson is Weaponising the Housing Crisis

Published by Anonymous (not verified) on Thu, 16/06/2022 - 1:38am in

The Government's new housing proposals reinforce a cynical narrative about 'skivers versus strivers' perpetuated by the Conservatives over the last 12 years, argues Sascha Lavin

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In an attempt to relaunch his leadership after a narrowly won confidence vote, Boris Johnson promised a “home ownership revolution”. But the Prime Minister’s proposal to extend ‘Right to Buy’ is far from revolutionary. 

The policy of selling council properties to people living in them at a heavily discounted price has been around since the 1980s, and Johnson’s exact plan to extend this right to housing association tenants was pinched from David Cameron’s 2015 manifesto.

Cameron dropped the pledge after an unsuccessful pilot in the West Midlands found that the scheme further reduced already limited council housing stock. 

But it is the tactics underpinning the Prime Minister’s new policy that are the least revolutionary. Johnson’s proposals regurgitate a key tactic from the Conservative Party's playbook: the Right to Buy policy is another attempt to reinforce divisions between the ‘deserving’ and ‘undeserving’ poor.

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Skivers Versus Strivers

David Cameron, in his first Conservative Party Conference speech as Prime Minister, attacked the idea of “taking more money from the man who goes out to work long hours each day so the family next door can go on living a life on benefits without working”.

With this, he kickstarted a renewed campaign against society’s apparent ‘skivers’, in favour of ‘strivers’. And this manufactured dichotomy – a 21st Century re-working of the ‘deserving’ and ‘underserving’ poor – has been reiterated and reinforced ever since.

Cameron’s Chancellor, George Osborne, compared “the shift-worker, leaving home in the dark hours of the early morning” – a member of the deserving poor – with their undeserving neighbour, “sleeping off a life on benefits”.

Iain Duncan Smith, former Conservative leader and the architect of the Universal Credit benefits system, described out-of-work claimants as “languishing on welfare”.

And this is not just about rhetoric. The party’s policies over the past 12 years have pitted different cohorts of the working class against one another.

Cameron cut billions from the welfare budget, justifying the move as “the best way to help the hard-working families that are in work” – moralising the disastrous effects of his policy on the poorest.

The Coalition Government’s controversial ‘bedroom tax’ punished social housing tenants, including domestic violence survivors and disabled people, for having a spare room in their home. Instead of freeing up social housing as promised, the punitive policy forced people further into poverty. The Department for Work and Pensions’ own evaluation found that more than three-quarters of those affected by it had been forced to cut back on food while one-in-10 were forced to take out payday loans. 

Boris Johnson has followed in his predecessors’ footsteps.

In October, the £20-a-week Universal Credit uplift was cut, despite UN poverty envoy Olivier De Schutter warning that such a move would be “unconscionable at this point in time”. The cut – described by the Joseph Rowntree Foundation as “the biggest overnight cut to the basic rate of social security since World War Two” – is expected to push half a million more people into poverty. 

In response to the cost of living crisis, Chancellor Rishi Sunak’s mini budget in March promised tax cuts “for workers, for pensioners, for savers” – but failed to shield vulnerable households dependent on state benefits.

Paul Johnson, director of the Institute for Fiscal Studies think tank, tweeted that those subsisting on means-tested benefits “will be facing cost of living increases of probably 10% but their benefits will rise by just 3.1%”.

Sunak has subsequently announced that households receiving means-tested benefits will get a cost of living payment of £650, on top of a £400 energy bill discount and a £150 council tax rebate – but, while the cost of living crisis is set to persist for the near future (energy bills will rise again later in the year) it is unclear how long the Chancellor’s generosity will last.

Through Johnson’s Right to Buy proposal, the Conservatives are reiterating the ‘skivers’ versus ‘strivers’ distinction, favouring a fortunate few at the expense of the unhoused many.

Political Posturing

In his ‘benefits to bricks’ speech last week, the Prime Minister promised to “give greater freedoms to those who yearn to buy” by extending the Right to Buy to housing association residents. 

People with simpler dreams – like the 1.19 million on waiting lists for social housing – were deemed to be undeserving of Johnson’s housing revolution. Those who yearn to live in social housing, pushed increasingly into overcrowded or temporary accommodation, were sacrificed so a lucky minority can have a leg-up. 

Yet again, Johnson referenced “hard-working families” in his speech, drawing on David Cameron’s favourite dichotomy.

So, the waiting list for social housing is likely to get even longer under Johnson’s new proposals. Housing Secretary Michael Gove may have promised to replace every housing association property sold off “like for like, one for one”, but for decades these same promises have failed to translate into supply matching demand. 

“Right to Buy pilots have shown that there is not enough money from sales to build new social homes to replace those sold, meaning a net loss of social housing,” said the National Housing Federation’s Kate Henderson.

Since 1980, when Right to Buy was first introduced under Margaret Thatcher, the number of social rent homes has reduced by 1.5 million, with the proportion of households living in homes for social rent falling from 30% to 17%

Social house building in England is at its lowest rate in decades: in the five-year period from the 2015/16 financial year, no homes for social rent were built in 50 local authorities. 

Research by housing charity Shelter shows that fewer than 5% of the homes sold off under Right to Buy have been replaced. The picture is even bleaker in rural communities, where the current replacement rate for social housing is one new home built per eight homes sold, according to the Campaign to Protect Rural England

The benefits to building more social housing are vast. As the Joseph Rowntree Foundation’s Rachel Casey has explained: “Investing in social housing will help low-income households escape poverty in the current economic downturn, and change the unaffordability and unsuitability of the current housing market.” Creating new, affordable housing options would create much-needed downward pressure on the rental market – much needed in cities like London.

Indeed, the London Assembly estimated that there would be a collective saving of more than £900 million if every housing benefit claimant in London who lived in the private rented sector lived in a council home instead. 

But, as Thomas Perrett has noted in this newspaper, Johnson’s motivations for adopting this new policy seem to have little to do with widening access to affordable housing or cutting costs to the public purse. Pointing to the correlation between home-owners and Conservative voters, Perrett argues that Johnson’s motivations are political in nature. 

As Johnson hopes his housing announcements can distract from his political problems, the real losers are the people who bear the brunt of Britain’s housing crisis.

Those who most acutely face a housing emergency – the 96,060 households in temporary accommodation, the 4,266 people forced to sleep rough and the 1.5 million people squeezing into overcrowded social homes – will continue to lose out under Boris Johnson’s 'revolution'. They deserve better.

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