tax

Norwood Hanson, Paul Krugman and MMT

Published by Anonymous (not verified) on Sun, 29/03/2020 - 10:00pm in

Phil Armstrong, University of Southampton Solent and York College

 2020

 

 1. Norwood Hanson: Is the sun going around the Earth or the Earth going around the sun?

 

Norwood Russell Hanson (1961) considers the conceptual foundations of science; he notes that the work of scientists involves observation. However, such observation is likely to be interpreted differently by different observers, as consistent with an acceptance of the view that all facts are theory-laden (but, importantly, not theory determined). Hanson focuses upon how we conceptualise what we see into general systems, ‘Let us examine not how observation, facts and data are built up into general systems of physical explanation, but how these systems are built into our observations, and our appreciation of facts and data’ (Hanson 1961: 3).

Hanson considers how different observers perceive things differently. He talks about Tycho Brahe[1] and Kepler looking up at the sky, and asks a question, ‘Kepler regarded the sun as fixed: it was the Earth that moved. But Tycho followed Ptolemy[2] and Aristotle in this much at least: the Earth was fixed and all other celestial bodies moved around it. Do Kepler and Tycho see the same thing in the east at dawn?’ (Hanson 1961: 5). Hanson argues that ‘people, not their eyes, see’ (Hanson 1961: 6) and develops his story by noting, ‘Tycho and Simplicius[3] see a mobile sun, Kepler and Galileo see a static sun’ (Hanson 1961: 17) and later notes, ‘Our sense observation shows only that in the morning the distance between the horizon and the sun is increasing, but it does not tell us whether the sun is ascending or the horizon is descending…For Galileo and Kepler the horizon drops; for Simplicius and Tycho and the sun rises’ (Hanson 1961:182). Hanson points out that ‘There is a sense, then, in which seeing is a ‘theory-laden’ undertaking (Hanson 1961: 19) and ‘The observer…aims only to get his observations to cohere against a background of established knowledge’ (Hanson 1961: 20).

 

2. Paul Krugman like Tycho and Simplicius

 

Moving on from the solar system to the financial system we move from asking whether the sun revolves around the Earth (or vice versa) to asking if taxes fund spending (or vice versa); specifically, when we consider the dynamic nature of the efflux and reflux of credit and debits in relation to government’s account we might conceptualise what we observe in two ways:  first we may ‘see’ the taxation (or borrowing) as funding the spending or (lending) [view A]  or second, as the spending (or lending) funding the taxation (or borrowing) [view B].[4]

In this context, we might reasonably compare Paul Krugman to Tycho and Simplicius. By way of example, I might consider a recent series of Twitter posts from Krugman (I have collected them into one passage below).

“I’ve been getting some questions from readers wondering about the cost of the not-a-stimulus (it’s actually disaster relief) package. “Where’s the $2 trillion coming from? Thin air?” Basically, yes. We went through this argument back in 2008-2009, when many people (including some who should have known better) worried that government borrowing was going to “crowd out” private investment. There are times when that happens, but this isn’t one of them. In the most immediate sense, the govt. is going to borrow the money — and its borrowing costs are near record lows, despite the surging deficit…But where does the borrowed money come from? Basically, right now we have trillions in private savings with no place to go, because private investment demand isn’t sufficient to use them; who’s going to invest in the face of a plague of unknown duration? So government borrowing just draws on this pool of excess savings. Furthermore, in so doing it helps prevent an even steeper economic contraction” (Paul Krugman, combined 5 tweets 27/03/20, emphasis added).

It is clear from the text that Krugman implicitly accepts view A. The italicised sections show this most clearly. By acknowledging the possibility of ‘crowding out’[5], arguing that ‘the govt. is going to borrow the money’ and that ‘government borrowing just draws on this pool of excess savings’, it is clear that Krugman conceptualises the government as a currency-user; a position that, as I will show below – in common with Ptolemaic astronomy -is not consistent with the evidence.

 

3. Modern Monetary Theorists like Copernicus, Galileo and Kepler

 

Returning to our discussion of the solar system we might note that the eventual triumph of heliocentrism did not come quickly or easily. Much hard work from astronomers was required but eventually, the battle was won and, ‘By the eighteenth century, after the successes of Galileo, Kepler and Newton, the universe was construed as an intricate geometric-arithmetic puzzle’ (Hanson 1961: 66). I might argue that shifts in worldview are prompted by the observation of some deeply significant anomaly (or anomalies) (Kuhn 1962). In this context,  Hanson (1961: 68-9)  notes, “We ask, ‘What is its cause?’ selectively: we ask only when we are confronted with some breach of routine, an event that stands out and leads us to ask after its nature and genesis.” Hanson refers to retroduction[6] and argues “A theory is not pieced together from observed phenomena; it is rather what makes it possible to observe phenomena as being of a certain sort, and as related to other phenomena. Theories put phenomena into systems. They are built up ‘in reverse’ – retroductively” (Hanson 1961:90).

In the same way that Tycho and Kepler ‘see’ the same things, those who conceptualise the government as a currency-user – such as all mainstream economists and many so-called ‘progressives’ such as Krugman – and those who conceptualise it as a currency-issuer – notably the advocates of MMT – ‘see’ the same things. The issue is how to decide which view is consistent with the development of a theory with the most explanatory power? Returning to the issue of anomalies – or unforeseen observations – we have a clue to the answer. The economics profession has long argued that heightened public deficits would lead to higher long term interest rates and, in turn, that these higher interest rates would lead to lower private investment or ‘crowding out’. This hypothesis follows from their view of the government as a currency-user which borrows from a ‘fixed pot’ of saving in competition with private borrowers.  This prediction was decisively falsified during, and immediately after, the global financial crisis when all the world’s major nations with their own currencies, operating under floating exchange rates, saw declines, not increases, in long term interest rates on government debt[7]. It is true that some, although by no means all – Eurozone nations did see a rise in long term interest rates. However, since MMT explicitly recognises the distinction between Eurozone nations (which have ceded currency-issuing power to another entity – the ECB) and currency-issuing nations, it recognises that Eurozone nations should be conceptualised as currency-users meaning that this outcome is exactly in line with the expectations of MMT[8].

An understanding of MMT removes the supposed element of ‘surprise’ from what is a highly significant anomaly from the perspective of mainstream economics, The advocates of MMT are able – retroductively – to posit the structures and mechanisms which explain this contrast between currency-issuing and currency-using states and I would, therefore, argue that MMT provides the basis for the provision of a satisfying explanation of observed phenomena – absent from mainstream thinking based upon ‘seeing’ the state as a currency-user.

In contrast to perspective which underpins the comments made by Krugman, above, Modern Monetary Theorists contend that when a nation has its own sovereign currency and operates under floating exchange rates, ‘borrowing’ by the state is not operationally required. The government should be thought of as a currency-issuer; it spends first and creates reserves, ex nihilo. It is never revenue-constrained as a currency-user might be. The so-called ‘borrowing’ operation which removes the reserves is voluntary (Mosler 2012). It could allow any untaxed spending to remain in the system. However, such a policy would result in the overnight rate falling to zero (if no other action was taken, such as the central bank agreeing to pay interest on excess reserves).

However, it must be conceded that the difficulties involved in replacing deeply-embedded theories (or paradigms in Kuhn’s [1962] terminology) should not be underestimated and I would argue that this is particularly the case in economics. The economics academy has been highly successful in reducing the ability of alternative perspectives to gain traction. Contrary to their professed acceptance of the principle of falsification, mainstream economists have introduced numerous ad hoc modifications to their apparently failed theories (Armstrong 2018) to avoid falsification. However, despite this disappointing situation, the position of mainstream economics is far from impregnable and the advocates of MMT must continue to challenge its hegemonic status. We can only hope that mainstream economics and its conceptualisation of the state as a currency-user is eventually destined to be consigned to the status of an episode in the history of economic thought, following in the footsteps geocentric thinking in astronomy.

 

References

 

Armstrong, P. (2018), ‘MMT and an Alternative Heterodox Paradigm’, Gower Initiative for Modern Money Studies, https://gimms.org.uk/2018/12/26/mmt-heterodox-alternative-paradigm/.

Bhaskar, R., (2017), The Order of Natural Necessity, Gary Hawke (ed.), Luxemburg: CreateSpace Independent Publishing Platform.

Galilei, G. (1632/1953), Dialogue Concerning the Two Chief World Systems (Dialogo sopra i due massimi sistemi del mondo), Berkley: University of California Press.

Hanson. N (1961), Patterns of Discovery, Cambridge: Cambridge University Press.

Kuhn, T. (1962), The Structure of Scientific Revolutions, Chicago: University of Chicago Press.

Mosler, W (2012), Soft Currency Economics II, US Virgin Islands: Valance.

 

 

[1] Tycho Brahe (1546 – 1601) was a Danish astronomer who developed a view of the solar system which recognised that the moon orbits the Earth and the planets orbit the sun, but retained the position that the sun orbits the Earth.

[2] Claudius Ptolemy (c. AD 100 – c. 170) was a Greek mathematicianastronomer and astrologer whose Ptolemaic approach suggests that the Earth is at the centre of the universe.

[3] Galileo compares the Copernican with the Ptolemaic systems in Dialogue Concerning the Two Chief World Systems (1632). In the text, Simplicio presents the case for the Ptolemaic system and argues against the Copernican alternative. The character’s name is generally supposed to be derived from that of a sixth-century follower of Aristotle, Simplicius of Cilicia.

[4] A third view might be summed up by the question, ‘Is the distinction important?’ I would argue that the distinction is important since the government can spend without prior tax revenue whereas prior spending (or lending) is logically and historically required for taxes to be paid. Thus only view B above is valid.

[5] The crowding-ou hypothesis suggests that heightened government deficits lead to higher long term interest rates and that,  in turn, these higher rates, reduce – or ‘crowd out’ – private investment. Little or no evidence to support this hypothesis exists (Armstrong 2018).

[6] In the retroductive moment, a scientist imagines a mechanism or structure which, if it were true, would explain the event or regularity in question. It is the use of the imagination to posit explanatory mechanisms and structures’ (Bhaskar 2017: 28).

[7] Armstrong (2018).

[8] Armstrong (2018)

 

 

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Rishi Sunak is wrong. ‘Righting the ship’ won’t require any taxpayers to ‘chip in’ to cover the cost of his spending plans – not now, in the future, or ever. 

Published by Anonymous (not verified) on Sun, 29/03/2020 - 4:37am in

Scientists wearing masks holding sign with the slogan "Together we do it"Image by Gerd Altmann from Pixabay

Marcus Tullius Cicero was a Roman statesman, lawyer and academic sceptic philosopher. He wrote ‘The Safety of the People shall be the Highest Law.’

This week, it was reported that the former health secretary Jeremy Hunt was in charge when medical advice to stockpile protective equipment in event of a flu pandemic was rejected on the grounds that stockpiling would be too expensive. By this decision, it would seem that this government chose deliberately to put cost over the health of its citizens, thus perpetuating the myths about the unaffordability of public services. The health and safety of the nation has been in the hands of a government which thought saving money was more important than keeping people protected. Jeremy Hunt claimed a while back, that public services depended on a healthy economy. That falsity will come to haunt him as we find out the hard way that it is, in fact, the other way around. A healthy economy depends on a healthy nation.

The neoliberal order which has dominated the global corridors of power for more than 40 years, combined with monetarist policies and more recently austerity following the global financial crash, has led to the destruction of public and social infrastructure not just here but in many developed nations around the world including the EU trading bloc. It lies at the heart of this crisis.

The horrors we are seeing in Spain, France, Italy, the US and other countries as the COVID-19 coronavirus compromises the ability of health and other public services to cope underline painfully the consequences of government decisions. Governments which rejected the power of the state to serve its citizens, promoting the god of the markets – the invisible hand – instead, have appeased it at every turn to favour the global corporations which have dictated the rules.

In the UK, despite the early advice from other experts in countries where coronavirus had already struck, government prevarication and failure to act expeditiously has allowed the disease to spread through the nation affecting many, not just those who are elderly with underlying health conditions. All human life is precious and yet this government has treated some as expendable and put the lives of those in the front line in the health service at risk.

As GIMMS noted in a previous MMT Lens, we will pay a heavy price for the ‘just in time’ approach to our health and public services and the lie that they were only affordable if the economy was doing well.  The media, having done little to hold the government to account for decades and especially in the last 10 years, has left us without sufficient nurses, doctors and health workers, beds, ventilators, ICUs and other equipment. Our health professionals are still crying out for Personal Protective Equipment (PPE) and are selflessly putting their own health at risk for others.  They are crying out for ventilators to keep people alive. They are crying out to be tested to keep themselves and their patients safe.

A healthy economy relies on public infrastructure, which is in short supply as a result of government choice. Ramping up the much-needed supplies is proving slow and difficult, not to mention demonstrating government incompetence. A good government delivering public purpose would have meant that we would have been better able to deal with this emergency and we might not be witnessing its current trajectory.

Our public infrastructure has been the victim of government cuts and we are now paying the price for the breakdown which is occurring as a result of limited or non-existent emergency planning, deregulation to suit market demands and privatisation – which have all been justified by the lie that the state had no money of its own and public services were a luxury determined by the health of the economy.

When the Chancellor got up to announce his spending plans and the measures to help those now unable to work, people cheered. If nothing else, this should have demonstrated quite clearly that the government was not constrained by tax or borrowing in order to spend, despite the charade that successive governments have played out about how its spending is paid for.

With big business queuing up for handouts (reminiscent of those banks that were too big to fail who were bailed out with public money) for others, it has been like squeezing blood from a stone. The very people who form the backbone of society, who keep it functioning and contribute to the economy through their work – the self-employed in particular – are being asked to jump through hoops to get any money at all, leaving them struggling and worrying about the future. People who for a decade have been living hand to mouth with scarce or no savings, working in zero-hours employment, the gig economy or in part-time work, will have to wait months for the government to pay up. Those in desperate need without employment are being asked to apply for Universal Credit for a measly £94.50 a week hanging on in telephone queues which can be as long as 90,000. It will not be long before those who congratulated the Chancellor for his largesse will have to think again, as bills go unpaid and people go hungry. People need support now, not later. The breakdown of society is in the offing if the government fails to act as it could now simply by authorising the central bank to make payments through HMRC who hold our data.

Alongside the tragedy which is playing out, the household budget narrative is never far behind, even in the words of Rishi Sunak who during his announcement of measures for the self-employed claimed that when this emergency was over we’d have ‘to chip in to right the ship’ promoting yet again that at some time in the future there will be a cost to taxpayers. Which in short there will not, since the government does not need to collect tax before it can spend!

Next, an ITV newsreader asked, ‘can the public finances take the strain?’ And this was followed by Robert Peston telling the TV audience that we’ll be ‘paying off the national debt for years’. To be clear – for the UK government, which is the currency issuer, there is no strain on the public finances and there will be no future burden on the taxpayer.

The Tax-Payers Alliance then announced that in future there would have to be ‘growth-enhancing’ measures and spending restraint’ both mutually exclusive positions which hark back to a false claim that cutting public spending could lift growth. The evidence is before us right now that this is not true.

Finally, the journalist Philip Inman suggested that Sunak’s budget spending spree could come at a high price, ‘fighting a war with borrowed money.’ Except that the government, as the currency issuer, does not need to borrow to cover its deficits; nor does it need to issue bonds in order to spend.

Our public and social infrastructure is under severe pressure and cracking under the strain, and people are suffering and dying. And yet they are still arguing about the financial cost of the Chancellor’s spending as if deficits and borrowing were the devil, balanced budgets the epitome of a government’s economic success or that there will be a price to pay if fiscal prudence is abandoned.

The ONLY cost in the future is the human cost we will face if the government fails to act in a manner that secures the lives of citizens, ensures they can pay their bills and eat during this emergency.  Fiscal prudence is the least of our worries!

We must today, tomorrow and in the future, keep holding to account government, politicians and all those who peddle the economic orthodoxy that there is no money. The Chancellor has shown that there is the possibility to spend without checking the public purse first. It is a political choice. So much is now at stake and we need as nations to keep pushing with more persistence until change happens. The battle lines are being drawn as we speak. The coronavirus, hard as it is, may be our societal wake-up call. Let’s hope so.

 

 

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The post Rishi Sunak is wrong. ‘Righting the ship’ won’t require any taxpayers to ‘chip in’ to cover the cost of his spending plans – not now, in the future, or ever.  appeared first on The Gower Initiative for Modern Money Studies.

A Short Comment on the UK Government’s Fiscal Policy in the Current Crisis

By Phil Armstrong, University of Southampton Solent and York College.

Man putting on protective mask and wearing latex glovesImage by Terri Sharp from Pixabay

The UK government’s significant fiscal expansion – in line with its ‘do whatever is required’[1] mantra – is, of course, welcome. However, I would argue that it is still far too small to deal with the massive demand shock associated with the coronavirus pandemic (Mitchell 2020a, 2020b) and also that it is incorrectly targeted. It pays insufficient attention to the poorest groups in society; the government has failed to take the necessary steps required to ensure the income of those most in need is adequately supported during the crisis. Clearly, the situation is evolving on a daily basis and, looking forward, it is highly likely that there will be continual calls for the government to increase its fiscal intervention from many sectors in society – not least business leaders who fear the effects of rapidly declining demand.

However, I would stress that the intervention is being enacted against an inapplicable theoretical and ideological backdrop, specifically the mistaken neoliberal framing of the so-called ‘government budget constraint’ (GBC). The logic of the GBC conceptualises the government as a currency-user, which might finance its spending by taxation, by borrowing (debt issuance) or ‘printing money’ (Mitchell 2011). According to mainstream thinking, each of these methods carries problems; increased taxation reduces non-government sector spending power and allegedly generates disincentive effects, ‘excessive’ borrowing leads to higher long term interest rates, in turn, causing ‘crowding out’[2] and ‘money printing’ inevitably results in inflation.   There is also an underlying ideology implicit in neoliberalism; that state expansion soaks up real resources which would be better (or ‘more efficiently’) used by the private sector.

In extremis, it appears that the Conservatives (who have shown a marked distaste for expansionist state intervention in the recent past) and even business leaders who would normally be opposed to increased government spending and enlarged deficits are now prepared to put their weight behind the fiscal expansion[3]. However, the underlying framing based upon the GBC is likely to come back to bite us all – hard – in the future. In line with the erroneous conceptualisation of the state as a currency-user, the government is presenting its current additional spending as being ‘financed’ by borrowing. The story is founded upon the idea that the government needs to spend significant extra sums now – owing to the severity of the crisis – and heavy borrowing is, therefore, essential (reinforced with the contention that it is cheaper for the state to borrow now than in the past as long term interest rates are very low) in the manner of household who accepts a very large credit card bill because there is no other way it can survive[4].

However, following this line of thinking will lead to a damaging and erroneous conclusion. It is highly likely that in the future – when the crisis has passed – mainstream economists will argue that there is a financial ‘mess’ to fix; ‘unacceptably’ large public sector deficits may well persist beyond the crisis alongside an ‘excessive’ national debt as a proportion of GDP. The narrative will then, no doubt, suggest that they need to be ‘dealt with’– possibly with another, even harsher, round of austerity than last time – and it will those least able to cope who are most likely to be the ones asked to bear the greatest share of the burden (as was the case the last time austerity was imposed).

This conceptualisation of the government as a currency-user suggests that money printing and bond issuance are alternative ways of financing a deficit, however, advocates of MMT conceptualise the state as a currency-issuer. From this viewpoint, in reality, they are not alternatives.  The government always spends by the creation of new money – both taxes and borrowing logically and historically follow spending (or lending). Only money that has already been issued by the state can be collected in taxes or used to buy state debt. When the government spends, it does so by crediting the bank accounts of its target recipients, simultaneously increasing the target’s bank’s reserve account by the same amount. When taxes are paid by a private sector agent, her deposit balance falls and her bank’s reserve account balance at the central bank (CB) is correspondingly marked down[5].  The purchase of government debt is best conceptualised as a reserve drain (Mosler 2012) which changes the composition of non-government sector holding of risk-free state debt but not its size.

I would argue that having this correct conceptualisation is the key to avoiding the return of austerity. In reality, the government sets its aims, determines its budget and spends by the ex nihilo creation of new money. When the operational reality of the financial system is correctly understood, then the expectation of a post-crisis ‘mess’ to fix disappears. Once the economy has recovered, that does not necessarily mean a need for austerity or even fiscal retrenchment – only the post-crisis economic outcomes such as growth, employment and price stability matter. If unemployment persists after the crisis has passed, then government net spending should still be regarded as being too low, irrespective of the size of the government deficit both in absolute terms and as a proportion of national income. Only in an economy suffering from inflation from excess demand would fiscal contraction be required.

These are challenging times for us all, but in the current crisis we have the opportunity to push forward the insights of MMT and to challenge established thought – particularly with respect to the inapplicable government budget constraint. If our understanding of the operational reality of the monetary system can be characterised by the insights of MMT, the full scope of existing fiscal space can be understood and importantly, the likely post-crisis push for fiscal retrenchment can be effectively countered.

 

[1] See Islam (2020).

[2] The crowding hypothesis is based on the contention that higher interest rates will lead to lower private sector investment, meaning that large government deficits effectively ‘crowd out’ private investment. Little, if any, empirical support for this hypothesis exists (Armstrong 2015).

[3] For example, Richard Branson expressed his support for fiscal retrenchment in 2010 (Stratton 2010) but changed his mind in 2020 when arguing in favour of a £7.5 billion government support package for the airline industry (Hockaday 2020).

[4]  ‘We are in an entirely new world. A wartime effort, with wartime deficits to cover it’, Rishi Sunak, quoted in Islam, F., BBC News online, 17 March 2020.

[5] It is important to stress that private sector debt or bank money cannot provide the final means of settling a tax bill which occurs when a taxpayer’s bank’s reserve account at the central bank is debited in favour of the Treasury account (Armstrong 2019).

 

References

 

Armstrong, P. (2015), ‘Heterodox Views of Money and Modern Monetary Theory (MMT)’

https://moslereconomics.com/wp-content/uploads/2007/12/Money-and-MMT.pdf

 

Armstrong, P. (2019), ‘A simple MMT advocate’s response to the Gavyn Davies article ‘What you need to know about modern monetary theory’, Gower Initiative for Modern Money Studies,

https://gimms.org.uk/2019/05/27/phil-armstrong-gavyn-davies-response

 

Hockaday, J. (2020), ‘Airline bosses to ask for £7,500,000,000 bailout to survive coronavirus.

The Metro online, https://metro.co.uk/2020/03/14/airline-bosses-ask-7500000000-bailout-survive-coronavirus-12399300/

 

Islam, F (2020), ‘Coronavirus: Chancellor unveils £350bn lifeline for economy’, BBC News online, 17 March, https://www.bbc.co.uk/news/business-51935467

 

Mitchell, W. (2011), ‘Budget Deficit Basics’ 4 April

http://bilbo.economicoutlook.net/blog/?p=14044

 

Mitchell, W. (2020a), ‘The coronavirus crisis – a particular type of shock – Part 1’, March 10,

http://bilbo.economicoutlook.net/blog/?p=44484

 

Mitchell, W. (2020b), ‘The coronavirus crisis – a particular type of shock – Part 2’, March 11,

http://bilbo.economicoutlook.net/blog/?p=44488

 

Mosler, W. (2012), Soft Currency Economics II, US Virgin Islands: Valance

 

Stratton, A (2010), ‘Richard Branson backs Tory plans to cut spending sooner rather than later’, The Guardian, 16 February,

https://www.theguardian.com/politics/2010/feb/16/branson-back-tory-deficit-cuts

 

 

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Keir Starmer’s 10 Pledges for the Labour Party

I’ve just received a pamphlet from Keir Starmer’s campaign team, promoting him as the future of leader of the Labour Party. It begins with this quote

“I’ve spent my life fighting injustice. I’m standing to be leader of our Labour Party because I’m determined to unite our movement, take on the Tories and build a better future. If all parts of our movement come together, we can achieve anything.”

There’s a brief biography that runs

A Life Devoted to Fighting Injustice

Keir is the son of an NHS nurse and a toolmaker. As a former human rights lawyer, Keir is dedicated to Labour’s core principles of fairness and justice.

He has devoted his whole life to fighting injustice and defending the powerless against the powerful, as his ten-year unpaid battle over the McLibel case goes to show. he has fought against the death penalty abroad, defended mining communities against pit closures, and taken up hundreds of employment rights and trade union cases. After being the Director of Public Prosecutions, he was elected MP for Holborn & St Pancras in 2015, later becoming Shadow Brexit Secretary. Defeating Boris Johnson is a huge task but Keir knows that if we bring our movement together and stay true to our values, we can win, and change Britain for the better.

As leader of the Labour Party, Keir will contine to fight for justice in all its forms: social justice, climate justice, economic justice.

There’s then three columns of endorsement from people such as Dawn French, Rokhsana Fiaz, the elected mayor of Lewisham, Laura Parker, the former National Coordinator of Momentum, Emma Hardy, the MP for Hull West and Hessle, Aneira Thomas, the first baby born on the NHS, Sarah Sackman, a public and environmental lawyer, Alf Dubs, the refugee campaigner, Paul Sweeney, the former MP for Glasgow North East, Ricky Tomlinson, David Lammy, the MP for Tottenham, Doreen Lawrence, Konnie Huq, the TV presenter and writer, Mick Antoniw, the member of the Welsh Assembly for Pontypridd, Ross Millard of the Sunderland band, the Futureheads, Lucio Buffone, a member of ASLEF and LGBT+ Labour national committee member, and the Unison General Secretary, Dave Prentis.

The back page contains his ‘My Pledges To You’. He says

My  promise is that I will maintain our radical values and work tirelessly to get Labour in to power – so that we can advance the interests of the people our party was created to serve. Based on the moral case for socialism, here is where I stand.

His pledges are as follows

  1. Economic Justice.

Increase income tax for the top 5% of earners, reverse the Tories’ cuts in corporation tax and clamp down on tax avoidance, particularly of large corporations. No stepping back from our core principles.

2. Social Justice.

Abolish Universal Credit and end the Tories’ cruel sanctions regime. Set a national goal for wellbeing to make health as important as GDP; invest in services that help shift to a preventive approach. Stand up for universal services and defend our NHS. Support the abolition of tuition fees and invest in lifelong learning.

3. Climate Justice

Put the Green New Deal at the heart of everything we do. There is no issue more important to our future than the climate emergency. A Clean Air Act to tackle pollution locally. Demand international action on climate rights.

4. Promote Peace and Human Rights.

No more illegal wars. Introduce a Prevention of Military Intervention Act and put human rights at the heart of foreign policy. Review all UK arms sales and make us a force for international  peace and justice.

5. Common Ownership.

Public services should be in public hands, not making profits for shareholders. Support common ownership of rail, mail, energy and water; end outsourcing in our NHS, local government and justice system.

6. Defend Migrant’s Rights.

Full voting rights for EU nationals. Defend free movement as we leave the EU. An immigration system based on compassion and dignity. End indefinite detention and call for the closure of centres such as Yarl’s Wood.

7. Strengthen Workers’ Rights and Trade Unions.

Work shoulder to should with trade unions to stand up for working people, tackle insecure work and low pay. Repeal the Trade Union Act. Oppose Tory attacks on the right to take industrial action and the weakening of workplace rights.

8. Radical Devolution of Power, Wealth and Opportunity.

Push power, wealth and opportunity away from Whitehall. A federal system to devolve powers – including through regional investment banks and control over regional industrial strategy. Abolish the House of Lords – replace it with an elected chamber of regions and nations.

9. Equality.

Pull down obstacles that limit opportunities and talent. we are the party of the Equal Pay Act, Sure Start, BAME representation and the abolition of Section 28 – we must build on that for a new decade.

10. Effective Opposition to the Tories.

Forensic, effective opposition to the Tories in Parliament – linked up to our mass membership and a professional election operation. Never lose sight of the votes ‘leant’ to the Tories in 2019. Unite our party, promote pluralism and improve our culture. Robust action to eradicate the scourge of antisemitism. Maintain our collective link with the unions.

This is all good, radical stuff, but there are problems. Firstly, his commitment to taking ‘robust action to eradicate the scourge of antisemitism’ and his decision, along with the rest of the Labour leadership contenders, to sign the Board of Deputies’ highly manipulative pledges, means that more people are going to be thrown out of the party without any opportunity to defend themselves, based only the allegations of anonymous accusers. We’ve seen innocents like Jackie Walker, Ken Livingstone, Marc Wadsworth, Mike Sivier, Tony Greenstein, Martin Odoni and so many others suspended and thrown out through the party’s kangaroo courts. One poor lady has died through the shock of being so expelled, even though she was a passionate anti-racist. This isn’t justice, it’s a pledge to renew the witch hunt.

As for promoting peace and human rights – how long will that last with the Board of Deputies demanding to supervise everything relating to Jews? Israel is a gross violator of human rights, but the Board has consistently defended it and its deplorable actions. Their demands that Labour adopt the IHRC definition of anti-Semitism was to stifle criticism of Israel by declaring them ‘anti-Semitic’. This pledge might be genuine, but the momentum anyone applies it to Israel the BoD will start howling ‘anti-Semitism!’ again and decent people will start getting expelled. Especially if they’re Jewish.

And his plan for giving Britain a federal constitution doesn’t seem to be a good one. From what I’ve read, it has been discussed before, and while it may solve some problems it creates others. It’s supposed to be no better than the current arrangement, which is why it hasn’t been implemented.

I also don’t back him on Europe. Oh, I’m a remainer at heart, but I think a large part of  the reason we lost the election was because, instead of accepting the results of referendum, Labour pledged itself to return to the EU. This was partly on Starmer’s insistence. He is right, however, that EU nationals in the UK should have voting rights.

But I have to say that I don’t trust Starmer. His campaign team were all supporters of Owen Smith, one of those who challenged Corbyn’s leadership. They include Luke Akehurst, one of the leading figures of the Israel lobby within the Labour Party. Tony Greenstein a few days ago put up a piece arguing that, whatever he claims to the contrary, as Director of Public Prosecutions he always sided with the authorities – the police, military and intelligence services – against everyone else.

My fear is that if he becomes leader of the Labour Party, he will quietly forget these pledges and continue the Blair project.

See: http://azvsas.blogspot.com/2020/02/keir-starmer-is-candidate-that-deep.html

http://azvsas.blogspot.com/2020/02/pauline-hammerton-expelled-for.html

Private Eye Attacks the Tories’ Stupid and Damaging ‘Free Ports’ Policy

Published by Anonymous (not verified) on Thu, 20/02/2020 - 9:52pm in

Eight days ago on 12th February 2020, Mike put up a piece criticising the Tories’ great new wheeze for invigorating Britain’s economy. They want to set up ten ‘free ports’ after Brexit, in which there will be no import/ export tariffs on goods if they aren’t moved offsite. No duty is paid, if these goods are re-exported, so long as they don’t come into the UK. Similarly, no duty will be paid on imported raw materials if they are processed into a finished product, provided that these aren’t then move to the rest of Britain.

Mike comments

No doubt the businesses involved in taking raw materials, processing them and re-exporting them would have their head office based in a tax haven.

So, who benefits? The UK economy won’t!

See: https://voxpoliticalonline.com/2020/02/12/who-will-profit-from-post-brexit-freeports/

This is exactly the same point made by Private Eye in its latest issue for 21st February to 5th March 2020. In its article, ‘Unsafe Havens’, the Eye says

Given Rishi Sunak’s background in offshore finance, it’s no surprise he will soon be turning parts of the UK into tax havens. Just three days before last week’s promotion, the eager-to-please Sunak launched hi spet policy for freeports around the UK.

He first pushed the plan as a relatively new MP in a 2016 paper for the right-wing Centre of Policy Studies. Now he has his hands on the tax controls and can do whatever it takes to entice major investment in the zones (ie big tax breaks and few questions asked).

At this point, warnings from the EU begin to sound ominous. Although Sunak claimed that freeports, which exempt imports from various taxes and tariffs in great secrecy, weren’t possible within the EU, there are in fact 82 of them. But the EU has found they do far more harm than good. And on the very day Sunak launched his consultation promising to “unleash the potential in our proud historic ports, boosting and regenerating communities across the UK as we level up”, the European Commission was clamping down on freeports yet further, pointing to a “high incidence of corruption, tax evasion, criminal activity”.

Even Sunak innocently asks in his consultation: “In your view, are there any particular tax policies that you think could increase the risk of tax avoidance or tax evasion activity being routed through a freeport?” To which the correct answer is: yes, the freeport policy itself.

I was immediately suspicious of this policy, because it looks like an attempt to copy the Chinese ‘Special Economic Zones’. These are islands of unrestricted capitalism in certain provinces, where there are very low taxes and, I believe, employment rights for workers. They have helped to turn the country into an economic superpower, but the cost is immense. There is massive worker exploitation, and there have been well-publicised cases of employees at various companies, who have committed suicide because of their ill-treatment. So much so that one company responsible for extremely poor working conditions put up suicide nets around one of its factories in order to catch staff trying to end their lives but jumping off. China’s an extremely authoritarian state, but there are rumblings of discontent from its impoverished and exploited workers and human rights activists.

Way back in the late 19th and very early 20th century a nasty term, ‘Chinese slavery’, was applied to conditions like this. Part of the impetus in the formation of the early Labour Party was the fear among British workers that the government was going to force them into similar conditions.

The Chinese shouldn’t have to work in such exploitative environments, and neither should Brits – who include people of Chinese descent, who have been here for generations. This is yet another nasty, exploitative idea from a nasty exploitative party, which feels that the workers, whether White, Black or Asian, should be forced into conditions of near slavery.

While they enjoy the profits funneled through tax havens.

Let’s have a conversation about what our values are and where we want to go. It’s time to recognise, in the words of Howard Zinn, that ‘We can’t be neutral on a moving train’.

Published by Anonymous (not verified) on Mon, 10/02/2020 - 5:10am in

Chalk board with the words "what's next" written on itImage by Gerd Altmann from Pixabay

‘For a decent standard of living, we all need security and stability in our lives – secure housing, a reliable income and support when things get difficult. For too many there is no such security. Millions of people in the UK are struggling to get by, leading insecure and precarious lives. It’s time to take action on poverty and put this right.

Joseph Rowntree Foundation

UK Poverty Report 2019/20

 

Warning…warning…black hole ahead!  No, not of the dense matter variety but one of the financial kind. That is, of course, if we are to believe the doom-mongering headline in the Financial Times this week that ‘Javid is set to miss his surplus target as finances head for £12bn black hole’.  It suggested that if the economy followed the Bank of England’s economic forecast, it would leave the Chancellor with a £12bn deficit by 2022-3 instead of the surplus he is aiming for and he might have to consider tax rises or more austerity to fill this ‘black hole’.

On the one hand, we have some in the government promising to splash some cash on our decaying school, hospital and other public infrastructure, a situation which has arisen as a result of a decade of government deliberately harmful austerity policies. And on the other, a Chancellor promising fiscal prudence having previously, it must be said, declared an end to austerity.  There seems to be some internal conflict on the subject! Oh, to be a fly on the wall in the conversations between No 10 and No 11!

While the planet continues to burn, and our public and social infrastructure further decays, the head bean counters in the Treasury and other public institutions are still tallying the public accounts on their abacuses. One hopes that we are starting to move away from such narratives, but equally one wonders whether the usual economic mantras will again kick back in? The Conservatives have dined out for decades on their reputation of economic competence and fiscal rectitude. They have used it successfully to mount attacks on the previous Labour government with the message that they had to sort out its mess (when the banks were to blame), and to justify dismantling the public and social infrastructure.

It has given them the perfect opportunity to deliver their ideological agenda of reduced state intervention, but at the time pour public funds into private profit. It has sold the public the incorrect narrative that our public services depend on collecting sufficient taxes which, in turn, they say depends on a healthy economy which, in turn, depends on businesses being able to make money with the least regulation possible.

The public has largely gone along with this narrative since understandably it measures the public accounts in the same way as its own.  Of course, private households – that includes you and me – ARE bean counters. We get an income, out of which we must pay our bills and settle any borrowing repayments with anything left over being used for discretionary spending or saving. If there is anything left over, that is.

The same goes for local government, which relies on government funding and local tax collection to fund its services. It also applies to businesses and corporations whose success, or otherwise, depends on their profit and loss sheets.  We are all users of the currency and as such dependent on the whims of government and its ideological agenda. Neither businesses nor local government have currency-issuing powers and nor do individual citizens unless, of course, they are breaking the law!

We have been led to believe that the health of the economy is measured in whether a government can balance its budget or save for a rainy day. We’ve gone down Alice’s rabbit hole and supped the ‘drink me’ potion with dire results. We need to rethink this accounting model which puts financial health above the health of the nation and the economy and does not represent actual monetary realities.

If we haven’t already, we should start by casting an eye over the consequences of the economic orthodoxy which has led to austerity and cuts to public spending.  Only this week the Joseph Rowntree Foundation published its report UK Poverty 2019/20 which provides a stark reminder of the dire effects of both the Conservative ideologically driven policies and its austerity agenda. The CEO of the JRF Claire Ainsley described the new government as having a ‘historic opportunity [..] to loosen the grip of poverty among those most at risk’ although its criticism fails to point the finger directly at government policies which have led to rising poverty and reinforced the gap between the rich and working people. It also fails to acknowledge an understanding of the long-term agenda that austerity has been – a cover for reduced state intervention, less democratic accountability and the promotion of the notion of self-reliance and personal responsibility.

The statistics should shock us:

  • The poverty rate is at 22% with little change in recent years
  • 5m people were destitute at some point during 2017 including more than a third of a million children.
  • Seven per cent of individuals have been in poverty for more than two years
  • Around 14 million people are in poverty in the UK, more than 1 in 5 of the population made up of 8 million working-age adults, 4 million children and 2 million pensioners.
  • In-work poverty has risen from 9.9% in 97/98 to 12.7%.
  • Around 56% of people in poverty are in a working family compared to 39% 20 years ago.
  • Seven in 10 children in poverty are now in a working family
  • In 2017/2018 31% of the 13m people with disabilities in the UK lived in poverty; that is around 4 million people.
  • There are 4.5 million ‘informal’ carers in the UK, of which nearly a quarter were living in poverty. More than half were women and three-quarters of working age.
  • Rates of poverty amongst Bangladeshi or Pakistani households is nearly 50%

This is but a small snapshot of the report which you can read in full hereBeneath these statistics lie the real lives of real people struggling on a daily basis to keep a roof over their heads, bills paid and food on their table whilst at the same time grappling with insecure employment in the low-paid, part-time, gig or zero-hours economy. And these things are no longer the burden of just working-class people, middle-class professionals, from nurses to teachers and academics, are now feeling the pinch as government has, over 10 years, cut its spending and made their jobs increasingly precarious.

Some would have us believe, like the political commentator Iain Dale, that cuts to spending were not responsible for the tragic death of the young French teenager at the Tate Gallery. Incensed, he stormed out of an interview on Good Morning Britain when Grace Blakely suggested that austerity had been at the heart of this terrible event and made the entirely valid point that our most vulnerable children have been failed by a government that is supposed to protect them.

And that is the nub of the question. What is the role of government? To balance its books or serve public purpose? We have been consistently failed by a government that has put bean-counting at the heart of its policies, not because it was essential to deliver a balanced budget, but to deliver its long-held belief in its political agenda, an agenda which has been pursued by successive governments on the right and left. The fact that it is promising to spend now (with caveats) should surely be a signal to ask why if there was no money yesterday there is today and why, when it suits, the government can always find the monetary wherewithal to spend?  The next question we should ask is who will benefit from this increased government spending if it goes ahead?

While the wealthy carry on getting richer and businesses continue to benefit from public money, whether in the NHS (minus its National) or education, social care, local government or other public institutions, the public and social frameworks are decaying by the minute with no apparent let up despite all the wonderful promises.  Time will tell, as will the next Chancellor’s budget in March.

In the meantime, the stories of those affected by government policy continue to cause concern.  This week, ITV published Department of Housing figures which showed that the numbers of people with disabilities and medical conditions waiting for housing had risen by almost 11,000 in two years – a rise of more than 10%.

The National Audit Office, as a result of the concerns about links between welfare reforms and declining mental health, reported on its investigation of how government monitored suicides among benefit claimants, saying it was highly unlikely that the 69 cases investigated by the DWP over a five-year period represented the overall numbers of self-inflicted deaths. It criticised the government for not having any robust record of contact from coroners about such cases.

Furthermore, a report published by the Office for National Statistics earlier this week revealed that people’s life satisfaction fell in July-September 2019 compared to the year before and that anxiety remained high as concerns about the future economic outlook and employment prospects grew. It also revealed that real household spending per person had grown at its slowest rate since the end of 2016.

As northern cities face huge cuts to council funding, adding to the already dire financial situation being faced by councils and the prospect of more cuts or local tax rises, combined with a country facing the prospect of weak growth as a result of government’s 10 years of domestic policies and a global slowdown, the future is not looking bright right at this particular moment. We have been led down a dark alley with a dead-end at least for the majority of citizens.

But it didn’t, indeed doesn’t, have to be like this. With the knowledge to challenge the notion that money is scarce and that there is no alternative to the market-led dogma which has dictated government policies for too long, we could turn things around. We are fighting an ideological battle dressed up in household budget terms and as a result, the future of our public and social infrastructure, not to mention our planet, is at stake.

In the light of the confusion and uncertainty which currently prevails and a divided left wing which is tracking backwards, we need a conversation about where we go from here. What sort of society do we want to live in? A dystopian Mad Max society which favours large corporations over democracy and puts individuals at the top of the pyramid or one which understands that humans flourish best where there is cooperation, compassion and caring?  It’s up to us. As Howard Zinn, the political activist wrote ‘You can’t be neutral on a moving train’.

The Gower Initiative was formed to begin that conversation and challenge the status quo. You can find out more here.

If you would like to be part of that conversation, we have four events coming up in February and March. Join us if you can!  Follow the links for tickets.

London

20th February

https://www.eventbrite.co.uk/e/gower-initiative-for-modern-money-studies-seminar-tickets-88843075029

22nd February

https://www.eventbrite.co.uk/e/mmted-masterclass-tickets-88855464085

Manchester

21st February

https://www.eventbrite.co.uk/e/gower-initiative-for-modern-money-studies-seminar-tickets-88853917459

Northampton

28th March

https://www.eventbrite.co.uk/e/challenging-the-narrative-about-how-governments-pay-for-public-services-tickets-89462136659

 

Join our mailing list

If you would like GIMMS to let you know about news and events, please click to sign up here

Support us

The Gower Initiative for Money Studies is run by volunteers and relies on donations to continue its work. If you would like to donate, please see our donations page here

 

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The post Let’s have a conversation about what our values are and where we want to go. It’s time to recognise, in the words of Howard Zinn, that ‘We can’t be neutral on a moving train’. appeared first on The Gower Initiative for Modern Money Studies.

Private Eye Attacks Hypocrisy of Non-Dom Tax Dodging Press Barons

Five years ago in 2015 the then leader of the Labour Party, Ed Miliband, outraged the press barons in Fleet Street by suggesting the abolition of non-dom tax status for people actually living in the UK. This frightened them, as many of them, such as Evgeny Lebedev, the owner of the I and Evening Standard, David and Frederick Barclay, the weirdo owners of the Torygraph, and Heil owner Viscount Rothermere, also avoid paying British tax through non-dom status. There was therefore a flurry of articles in their papers scorning Miliband’s suggestion and declaring that if it came in, it would bankrupt Britain by forcing all the millionaires in London and elsewhere to flee the country. And the papers certainly did not tell their readers that there was more than a bit of self-interest behind their attacks on Miliband.

Private Eye, which, according to editor Ian Hislop, skewers humbug, therefore published an article in their ‘In the Back’ section, ‘Street of Sham’ in the issue for 17th to 30th April 2015 attacking this fine display of gross hypocrisy. The piece ran

So consuming was the Tory press’s rage at Ed Milibands’s plan to make Russian oligarchs and gulf petro-billionaires in London liable for the same taxes as British citizens, its hacks forgot to declare their interest.

“London backlash over Ed’s non-dom attack,” boomed the front-page of the London Evening Standard, as if a mob had descended on Labour HQ to defend London’s much-loved oligarchs and hedge-fund managers. “Attacking non-doms could backfire on us,” continued an editorial inside. Sarah Sands, the Standard’s Uriah Heepish editor, did not risk her career by saying who the “us” included – namely her boss, Standard proprietor Evgeny Lebedev, the Russian who last year dodged the Eye’s repeated questions over his own domicile.

Silence infected the Telegraph too, where not one of the reporters who warned that Labour’s “cataclysmic” decision would drive away “tens of thousands of entrepreneurs and business leaders” mentioned that their owners, the weirdo Barclay twins, reside in Monaco and the Channel Islands to avoid British tax.

Instead they quoted James Hender, head of private wealth at Saffery Champness accountants, who warned that the rich may leave. The Telegraph didn’t tell its readers that Hender boasts of his long experience ensuring that “the most tax efficient strategies are adopted for non-UK situs assets” for his non-dom clients.

It was the same at the Mail, which failed to declare that its owner, 4th Viscount Rothermere, is treated by the tax authorities as a non-dom. And at Sky, political editor Faisal Islam reported that “Baltic Exchange boss Jeremy Penn slams Labour non-dom plans” without declaring that his owner, Rupert Murdoch, does not pay UK tax and that Penn acts for super-rich shipping owners.

Jolyon Maugham QC, who has advised Labour and the Tories on tax reform, tells the Eye that any reader silly enough to believe the Tory press and tax avoidance industry should look at what they said in 2008, when Labour introduced the first levies on non-doms.

Back then the Mail then said the central London property market would crash as non-doms sold up and moved to Switzerland. In fact, between Labour introducing the levy and 2014, prime central London property prices rose 41 percent. At the end of 2014, Knightsbridge estate agent W.A. Ellis said 54 percent of sales were to overseas buyers.

The Mail was equally certain the City would suffer. On 8 February 2008 it cried that the levy “risks the City’s future”. The British Banking Association warned of “a devastating blow”. The Telegraph of 12 February 2008 said that “the country’s wealthiest individuals are being bombarded with leaflets and letters explaining how easy it would be to relocate to Switzerland, Monaco and a host of other countries”. Not to be outdone, Mike Warburton, senior tax partner at accountants Grant Thornton, said the levy was the “final straw”.

If a word of this had been true, there would be no non-doms left for Milband to tax. As it is, there are 115,000 because, as Maugham says, London remains a “very nice place to live, if you’re wealthy. And that won’t change.” Or as the Financial Times put it: “The many advantages of London as a financial centre do not dissolve simply because of a change in a hitherto generous tax treatment of resident non-domiciles.”

The pink ‘un has only recently realised the iniquity of the non-dom rule, with an editorial last month calling for its abolition. Editor Lionel Barber modestly claims some credit for Miliband’s stance. But as editor for almost a decade, why was he so late to the party? Surely not because, until 2013, FT owner Pearson was run by US-born Dame Marjorie Scardino, who would certainly have qualified for non-dom status and whose London flat, the Eye revealed, was owned via an offshore company?

The Daily Mail’s owner, Lord Rothermere, is a particularly flagrant tax dodger in this regarded. The current Rothermere inherited the status from his father, who really was not resident in the UK. He lived in Paris. But Rothermere junior appears very much to have made Britain his permanent or at least primary residence. He has a parking space in London, and the Eye reported a few years ago he was extensively renovating his stately home in the West Country.

The non-dom tax status, offshore banking and other ways used by the corporate and super rich to avoid tax are part of the reason for the increasing impoverishment of everyone else. They aren’t paying their fair share of the tax burden, but receiving massive tax handouts instead. Thus the NHS and other important services are deprived of money. The tax burden is then passed onto ordinary, working people. This reduction in taxes for the rich used to be justified under Thatcher with the argument that the money the rich saved would somehow trickle down to the rest of us. This hasn’t worked. It doesn’t encourage the rich to open any more businesses or employ more people. The money just sits in their accounts earning more interest.

It also doesn’t the rich closing businesses and laying people off either. This was shown a year or so ago in America, when one of the corporate recipients of the Republicans’ tax cuts closed a branch or a factory, laying hundreds of workers off.

And the purchase of London property by foreigners is also a further cause of poverty. Ordinary people in the Smoke can’t afford to buy homes as rich foreigners – not asylum seekers or migrants – push property prices up far out of their reach. Some of these homes are simply left empty as an investment in what is known as ‘land banking’. This has a knock-on effect for the rest of the UK. Here in Bristol property prices have also risen to extremely highly levels through Londoners forced out of the capital relocating to the city. And in turn, some Bristolians are looking for cheaper homes elsewhere in places like Wales.

London still is a ‘very nice place to live, if you’re wealthy’, but the tax cuts which make Britain so comfortable for the global rich are causing poverty, misery and homelessness for everyone else.

And this is applauded and cheered by hypocritical press magnates and editors.

Is Boris Planning to Force Poor to Take Out Loans instead of Unemployment Benefit?

Published by Anonymous (not verified) on Sun, 26/01/2020 - 5:29am in

I realise that this may strike some people as a somewhat petty and ill-tempered overreaction to a passing comment someone made, but it’s been annoying me ever since I heard it. And I’m afraid, if it’s true, it could mean further devastating cuts to our already underfunded and dysfunctional welfare state. And it is also a revealing insight into the mean-spirited, jealous mindset of the working class Tory voter.

I was on the bus coming home yesterday when I happened to overhear the conversation from the couple on the seats immediately behind me. From the tone of their voices and their conversation, it seems they were an older couple. The man talked about how families no longer properly looked after their elderly relatives, except in places like Scotland. He said, quite rightly, that retired people also stimulated the economy by going out and having meals or a cup of coffee. That didn’t annoy me at all. What did – and it made so furious I was tempted to turn around and put the old fellow right – was his comment immediately before those. He announced that he agreed with Boris Johnson that workers like brickies – at least, that’s what I think he said – shouldn’t be given benefit when they were unemployed. They should have to take out a loan. He then went on to explain that he’d worked for a certain time without claiming his holidays. Then he was laid off. When he tried to sign on, however, he was told that by the clerk that they had received information about him which meant that he wouldn’t get any money for three weeks. Since then, he said, he always took his holidays.

I don’t know if this remark of Johnson’s is true, or where it was reported. It might be garbled rubbish, or it might be solid fact as reported by the Scum or some other Tory rag. But if it’s true, then it’s dangerous.

It should immediately be apparent how weak the man’s own argument is. Builders, like other workers, contribute to their unemployment benefit through National Insurance and their taxes. They therefore have every right to claim such benefit when they’re unemployed. The fact that the man complaining about it wasn’t is unfortunately, but irrelevant. From the sound of it, when he was laid off he was paid in lieu of the annual leave he didn’t take, and this amounted to three weeks’ worth of money. Or at least, that’s what the Jobcentre was informed or chose to assume.

This country is also suffering under a mountain of debt. The book The Violence of Austerity has an entire chapter devoted to the ‘violence of debtfare’. This debt, from student loans for education, payday loans, mortgages and so on, is not only keeping people poor, in some cases the repayments are actually making them unable to pay for necessities like food and heating. The very last thing this country needs is for more of it. But this is what this gentleman thought Johnson was advocating, and with which he agreed.

I remember the Social Fund and the way it operated in the Benefits Agency in the 1990s. Thatcher’s and Major’s governments decided to replace the system of grants that had been in place to allow claimants to buy certain necessities with a system of loans. It’s not a scheme that worked well. Some long term claimants, I’m sure, would have been better served with grants, not least because the loan system meant that money was deducted from benefit that was already supposed to be the minimum an individual could live on. The current system of loans in the welfare system has exacerbated this, so that with the repayments some people have notoriously been left with only a few pounds to last them the week. But Johnson and this idiot believe that this is acceptable.

I am also disgusted by the attitude behind these comments, though not surprised. When I was at school I remember reading letters in the local paper, The Evening Post as it then was, by people of a certain age supporting Thatcher’s cuts to unemployment and other benefits. The attitude there was that they had never had the benefit of state aid in their youth, and so the younger generation shouldn’t either. And the same attitude and argument crops up again and again whenever the Tories announce yet another round of cuts. I also think that part of the problem is that some of those with this attitude still believe that suitable work is available for everyone, somehow. They’ve benefited from the period between the Second World War and the Thatcher’s election as Prime Minister, when the government was committed to a policy of full employment. And even after that policy was abandoned, there was still the illusion of plenty of employment opportunities. I can remember trying to tell one of my co-workers how difficult I had found it to get a job after graduating university. There didn’t seem to be anything to fit my qualifications. This was also at a time when jobs were so scarce, that there were so many applicants for particular jobs that frequently prospective employers didn’t even inform you if you had been unsuccessful. But nevertheless, my coworkers were sceptical, saying ‘There are plenty of jobs in the paper’. This man clearly assumed that anyone who was laid off would find themselves new work in a relatively short space of time. But that’s no longer guaranteed.

But it’s through such selfishness and the resentment of a certain section of the working class to anyone they feel is getting more state benefits than they are, which the Tories are using to generate support for their welfare cuts.

There is no other justification. The benefit cuts and consequent tax cuts to the rich haven’t boosted the economy. Even right-wing economists now deny that trickledown – the process by which the wealth accrued to the high earners would pass down through society to those at the bottom – works or that it was even a major part of neoliberal economics in the first place. And so they try to justify their cuts with spurious morality.

And to do this, they play on the worst parts of human nature. They encourage a resentment of those they brand less deserving – Blacks and Asians, the disabled, the unemployed, and the poor in a vicious strategy of ‘divide and rule’. And the logic is used to cut benefits to their supporters. I’m sure this man would have been outraged if someone told him that his pension would now be stopped for short periods, during which he would have to take out loans. Much of the Tories’ voting constituency is over 50, and so they have been reluctant to cut their benefits and pensions. This has happened nonetheless. Austerity has already claimed the lives of thousands of senior citizens.

But this will get worse, so long as the Tories are able to utilise that selfishness, fear and resentment to turn the working class and other marginalised groups against themselves. In the end, under the Tories, they will all lose.

It’s just idiots won’t see it, so long as the Tories are able to distract them by a false claim that the benefits system is treating someone else better.

 

Getting the narrative right. Careful stewardship of the economy is not about balancing the public accounts; it is about serving the interests of the nation and delivering public purpose.

Published by Anonymous (not verified) on Tue, 21/01/2020 - 7:25am in

Hand holding note with the slogan "let's rethink"Image by Gerd Altmann from Pixabay

A month on already since the general election and as well as the usual post-Christmas/January blues, the nation still finds itself in a state of deep uncertainty about its future. The economic predictions are not confidence-inspiring. The outward signs of a downturn or a recession are building up.  Retail sales fell sharply in December and according to the ONS, it was the fifth month without growth. The Centre for Retail Research also revealed in its report that the high street had suffered its worst year of job losses for 25 years and is expecting that to increase significantly in 2020. It also reported that over 16,000 shops across the country had closed. Brexit uncertainty is blamed for the poor results, but of course, statistics don’t tell the whole story and there is more than meets the eye.

Whilst, of course, change in the way we shop may bear some responsibility, ten years of austerity and cuts to public sector spending, low wages, precarious employment and rising private debt must take a large portion of the blame.  Combine that with a slowing world economy, global political uncertainty and the prospect of trade wars, not to mention real conflict, it is surely enough to make us all hunker down and keep our wallets firmly zipped up. It has even been suggested that our fears about the environmental cost of our buying habits are making us think twice about how we consume.

This week Kristalina Georgieva, the head of the International Monetary Fund, warned that the global economy is at risk as a result of rising inequality and financial sector instability and noted that across the OECD, and in particular the UK, income and wealth inequality have reached, or are near, record highs. She also noted that social unrest is likely to be the corollary of rising wealth inequality and we are certainly seeing evidence of that around the world in Europe, the US, South America and Asia.   As an aside, it is ironic that the IMF in making these warnings seem to have no concept that it has been their own promotion of destructive economic orthodoxy which has led to this place of great uncertainty and rising inequality.

Boris Johnson promised the nation a ‘golden age’ and yet on that basis, the prospect seems elusive or more accurately an illusory pipe dream.  Whilst on the domestic front certainly the current government could do much to soften the effects of a global downturn through increasing public spending, it is still unclear as to whether they will keep their manifesto promises to invest in the NHS, schools and national infrastructure and if they do will it be enough and who will be the real beneficiaries?

Johnson would seem to have already reneged on his promise to find solutions to the social care crisis, saying that whilst the government would be bringing forward a plan this year it could take as long as five years to implement. Social care, which is already on its knees and facing further cuts and increased charges for its provision, as a result of cuts to local government funding, could find itself yet again put back in the slow lane for government action despite endless promises. The impact would be devastating for those who desperately need support now not in five years’ time.  The Stormont finance minister also said this week that the proposed financial package for Northern Ireland would keep it in an ‘austerity trap’ unless it was increased and that it would do nothing to fix the ongoing problems in health and education.

Daily media reports make it clear that austerity hasn’t ended despite the government’s promises. Our health service is in ongoing crisis due to lack of adequate funding, our school infrastructure and education system is in a state of decay and not fit for purpose, the reforms to the welfare system are reducing people to penury, hunger and homelessness while the green economy has shrunk since 2014 as a result of the substantial cuts to government subsidies, according to figures released this week by the ONS.

We were told there was no alternative to austerity and that the government had to fix the country’s finances to avoid bankruptcy and so it is perplexing to discover that the government has suddenly found some money to put right the ‘economic vandalism’ it has imposed as a result of its supposedly necessary policies.   It is equally surprising in the light of this ‘economic vandalism’ that at PMQs this week Boris Johnson defended it as ‘careful stewardship of the economy’.

It is also cause for concern to read this week that the Chancellor has hinted that there could be tax rises in the Spring or Autumn budget and that he was determined to take ‘the hard decisions you need to sometimes, especially at the start of a new government’. In the same interview, he also claimed that once the government had put an agreement in place with Europe that the UK would ‘continue to be one of the most successful economies on Earth’ which given the state of the economy at present would seem to be wishful thinking or delusional.

‘Hard decisions’ could be related to increasing taxes to fund the government’s spending plans (when of course they don’t) but equally, they suggest the same adherence to balanced-budget orthodoxy. Will the government’s attachment to fiscal discipline take precedence? Old habits die hard. Indeed, in a recent FT article, the Chancellor made it clear that money for Further Education colleges was not generally capital spending which would, under his new budgetary rules, give him scope to borrow, but was instead day-to-day spending, and as such there was little possibility of extra money. He also said that before considering increasing taxes he had told his ministers to look at their budgets and carry out an ‘exercise in prioritisation…. to release resources for his priorities’ which he hoped would provide the money to pay for rising costs of an ageing population in the 2020s which could threaten the public finances. He went on to say that low-interest rates were a market signal from investors that the cash was available to do something productive.  It doesn’t sound much like a brave new world in government monetary financing. But we shall see.

The public has been carefully groomed to accept the lie about how the government finances actually work. Careful stewardship of the economy in the case of the Conservatives implies fiscal rectitude and look where we have ended up as a result.  Whilst government continues to fob the public off with the lie that tax is revenue for spending, the wider implications for a slowing economy of increasing tax would be folly indeed. Further reducing the purchasing power of working-class people won’t mitigate the short-term problems of increases in food and fuel prices, nor help them pay down personal debts. Quite simply, he would be tightening the screw on the economy for no other reason than to inflict pain and create division. The Tories are on an ideology-affirming project; the Chancellor is an avid reader of Ayn Rand.

As an aside here on the subject of taxation, increasing it for the very rich who already have more than their fair share of the national resources might, in hands of a government serving the public purpose, be the right action to take.

More than ever, we need to convey the truth about how governments like the UK spend and that when it spends its focus should be not on balancing books but balancing the economy, in other words, matching spending to the productive capacity of the nation and ensuring full employment.

Whilst the role of government in a democracy is increasingly muddied by the involvement of global corporations in policy decisions, it is important not only that the public understands the basic realities about how governments which issue their own currency spend but also and more importantly that spending choices are the result of political decisions, not checking whether there are sufficient pounds in the public purse to pay for it.  Smoke and mirrors disguise in bare accounting terms the way in which money really works.

The reality is that a government with the power of the public purse can chose either to pour public money into private corporations to run public services, give tax breaks to the rich or indeed bail out banks and fund wars or equally choose to fund publicly delivered services, the public and social infrastructure and embrace full employment policies to deliver public purpose aims. When a government does the former there is generally silence on how it will be paid for and yet when left-wing politicians propose the latter, then the question on the lips of right-wing politicians, the media and economic pundits is ‘where will the money come from’? The fact is that such spending is a question of political choice, not whether there is sufficient money in the public purse through collecting tax or being able to borrow. A sovereign currency-issuing government needs to do neither.

We should also understand that the Conservatives, whilst framing their spending in household budget terms, already make those choices about who gets the money and who doesn’t, and we have experienced the dire consequences of those decisions for 10 years. Their spending plans have been skewed towards the interests of their rich friends and big corporations; the people of this country have been the losers.

What is important for the public to ask is who benefits from a government’s public spending programmes and whether it has the resources to deliver them, not how it pays for them.

If the left truly wishes to deliver real change and an inclusive progressive agenda which serves the interests of all working people, if it really is to challenge the status quo, it will need to change its thinking. It will have to change how it views monetary reality if it is to succeed.

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The post Getting the narrative right. Careful stewardship of the economy is not about balancing the public accounts; it is about serving the interests of the nation and delivering public purpose. appeared first on The Gower Initiative for Modern Money Studies.

Lisa Nandy Praised by the ‘I’ – and the Reasons Are Obvious

Published by Anonymous (not verified) on Tue, 21/01/2020 - 5:25am in

One of the candidates in the Labour leadership elections is Lisa Nandy. I got the distinct impression that she’s from the Blairite right of the party, and is probably the most right-wing candidate there. She made a speech that was very well received by the I. Next to their report was a piece by one of their hacks, declaring that she was original and tough, but that wasn’t what the Labour party wanted. I’ve forgotten quite what the headline was, but it gave the impression that she was what the Party needed, but not what they’d accept.

And the reason for the hack’s praise was obvious. The article it accompanied, about Nandy and her candidacy, had the title ‘Tax Polluters, Not High-Earners’. I didn’t read on. I didn’t feel I needed to. That made it obvious what Nandy’s position was, and why the I was favouring her. She was a Blairite liberal. She was worried about the environment – an entirely good thing – but was definitely not going to do anything to upset corporate interests and the rich, like actually taxing them. Which means she isn’t going to to do anything to tackle the deep and appalling inequalities of wealth in Britain. She isn’t going to redistribute any of the massive wealth that the rich 1 per cent have accrued in the years of Thatcherism to where it’s need at the bottom of the social pile. Or that’s how it seems. She’ll just make token efforts to tackle poverty, without halting the privatisations, including that of the NHS or the promotion of the heads of corporations and senior executives to positions of government. At least, that was my impression. I may well have misjudged her.

Blair’s Third Way failed, just as neoliberalism and Thatcherism have failed. They’re only kept going because of the lies and spin by the media, including newspapers like the I that are supposedly left-wing. But these papers, and the Tories, Lib Dems and Blairites in Labour are just offering the same stale, failed policies.

Thatcherism needs to be junked totally and completely, and the voices clamoring for it in the media should be ignored. We need a return to socialism, and the leadership of someone who will continue the Corbyn project, but will be firmer about defending it and rebutting malicious slurs than he was.

And that person is definitely not Lisa Nandy.

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