- The Chancellor needs an ambitious plan to save the economy
- Government continue to threaten economic recovery
- “Shameful” that bereaved families of NHS and care workers risk losing access to welfare benefits
- Extending eviction ban nothing more than kicking the can down the road
- Brexit reality falls short of rhetoric again as “no deal” threat looms
The Chancellor needs an ambitious plan to save the economy
Responding to reports that debt has increased to over 100% of GDP for the first time since 1961, Acting Leader of the Liberal Democrats Ed Davey said:
This news must not be used as a reason for the Government to make cuts or return the country to austerity.
We know that borrowing is historically incredibly cheap, so it is absolutely clear that borrowing money to boost the economy is the best way to get public finances back on track.
The Chancellor must be far more ambitious in his plans to rescue the economy. The Liberal Democrats have called for a £150bn Green recovery plan to boost the economy and create thousands of new jobs.
Government continue to threaten economic recovery
Responding to ONS figures that show retail sales rose above pre-pandemic levels in July, Acting Leader of the Liberal Democrats Ed Davey said:
This will be welcome news for so many people working on our high streets who would have spent several months worried about their job.
However, we are not out of the woods yet. The Government is yet to bring forward a proper plan for high streets in locally locked down areas, so people are likely to go through more tough times.
The Government also continues to threaten our economic recovery with its damaging Brexit policy. The fact that we could still leave negotiations with the EU with a bad or no deal means that many high street businesses will still be very concerned about what the future holds.
“Shameful” that bereaved families of NHS and care workers risk losing access to welfare benefits
The Liberal Democrats have warned it is “shameful” that bereaved families of NHS and care workers who die of coronavirus risk losing access to welfare benefits if they receive payments under the government’s Covid-19 compensation scheme and called on Ministers to “scrap this senseless rule immediately.”
The Government has confirmed that families who receive the £60,000 payout under the scheme will no longer be able to claim for universal credit, housing benefit or pension credit, as they would be in breach of capital limits.
Layla Moran led the cross-party campaign calling for the introduction of the Covid-19 compensation scheme for families of NHS and care workers who lose their lives to coronavirus.
Figures she uncovered in July revealed only 19 families had benefited so far from the scheme, despite there being over 540 Covid-19 related deaths of health and social care workers in the UK.
Liberal Democrat MP Layla Moran said:
It is utterly shameful that bereaved families of NHS and care workers face losing access to benefits if they receive a payment from the Covid-19 compensation scheme.
This scheme was set up to provide financial security and comfort to the loveed ones of those who tragically died on the frontline against coronavirus.
This exercise in penny pinching is completely tone deaf and risks rubbing salt in the wounds of grieving families. The Government must scrap this senseless rule immediately.
Extending eviction ban nothing more than kicking the can down the road
Responding to reports that the eviction ban in England will be extended until 20 September, Liberal Democrat MP Layla Moran said:
No-one should face losing their homes while this deadly virus still hasn’t been properly brought under control.
Extending the eviction ban by just a mere month is nothing more than kicking the can down the road. It is a dereliction of duty.
For families who have been days away from the threat of eviction, this news will go down like a bucket of cold sick.
The Government must get real on renters right and immediately ease worries by extending the ban until there is a proper long-term solution for people who have found themselves in crisis.
Brexit reality falls short of rhetoric again as “no deal” threat looms
Responding to news that the EU’s chief negotiator Michel Barnier has said a post-Brexit trade deal between the UK and the EU “seems unlikely”, Liberal Democrat Brexit and Foreign Affairs spokesperson Alistair Carmichael said:
We were told that this would be the easiest negotiation ever but, yet again, the Brexit reality is very different from the rhetoric.
Millions of people are looking to the future with dread. With no end in sight to the COVID crisis and the worst economic forecasts for a century or more, the disruption of a no deal Brexit threatens to push the UK into total meltdown.
This is not about party politics. It’s about making sure families can put food on the table and access life saving medicines.
The Prime Minister’s childish refusal to extend negotiations in the face of the COVID-crisis shows he would rather flatter his ego than confront reality. If he can’t face putting the national interest first then he is not fit to lead this country.
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19 Comments
This news must not be used as a reason for the Government to make cuts or return the country to austerity……..We know that borrowing is historically incredibly cheap…… borrowing money to boost the economy is the best way to get public finances back on track……..The Chancellor must be far more ambitious in his plans
If only Ed, and other prominent Lib Dems, had been saying the same thing 10 years ago! Then it was “we have to live within our means, the credit card is maxed out, the Labour Govt has been spending like a drunken sailor etc etc……”
Th reality is that public finances won’t, anytime soon, be “back on track” in Ed Davey’s neoliberal terms. We’ll likely become increasingly like the Japanese in this respect. So a better way to put it is to say they have never been “off track”. Just like exchange rates, they vary according to economic circumstances. This isn’t to say that some economic austerity should be ruled out. If an inflation problem arises from the extra Govt spending, it could be necessary. But not to “balance the books”. That just doesn’t work.
“Millions of people are looking to the future with dread……no end in sight to the COVID crisis…. the worst economic forecasts for a century or more….”
Firstly, albeit in our own bumbling way, we do seem to have made reasonably good progress in bringing the virus under control. Much better than many, including myself, expected when the death rate was rising exponentially in early April. Secondly, the economic forecasts have been much worse in the last century. They weren’t looking too good in 1940, for example, when we couldn’t trade with Europe at all and our trade with the ROW was hampered by submarines sinking the ships that were necessary for that to continue. Plus we had, in neoliberal terms, to find money “we hadn’t got” to pay for the war effort. So we need to put our present problems into a correct perspective.
Things aren’t looking too good in the EU at the moment. Yes, they have come up with a supposedly generous €750 billion package, but this is spread out over more than just one year. However, the GDP of the EU is some €16 trillion pa. So if their GDP falls by 10%, which it probably will, then the package will need to be double that, for at least a year, and probably for several years to correct the problem.
Furthermore the money can’t be in the form of loans. It has to be created, spent where it needed then forgotten about. Will the EU under the influence of Germany and other frugally and fiscally conservatively minded countries rise to the challenge? Maybe. But maybe not!
In any case, from our own perspective, we can’t look to the EU to do us any favours when they have such problems of their own. We need to look both to ourselves and elsewhere.
https://www.theguardian.com/world/commentisfree/2020/jul/24/eu-coronavirus-fund-europe-recovery-package
From whom do we borrow the money?
What are the terms and conditions?
When does it have to be repaid by?
Why did and does our leadership, national, party and media, still behave with pre-fiat money habits?
The”Deficit Myth” by Stephanie Kelton is a most exciting, useful and hopeful book on fiat money economics as are the books by Warren Mosler!
And, most important of all, why do we “borrow” money that we can, and sometimes do, create for ourselves?
@ Steve,
“why do we “borrow” money that we can, and sometimes do, create for ourselves?”
We, ie the British Govt, don’t actually do any borrowing, as such, unless it is in a foreign currency. Or possibly gold. We can borrow, for example, some dollars or some gold from the USA or the IMF, in just the same way as you and I can borrow from bank.
But when it comes to the domestic currency the situation is different. It’s not possible to borrow your own IOUs in any case. What we call ‘borrowing’ is just an exchange of one type of IOU for another. Cash for bonds and vice versa. The process of the swaps is simply a way of controlling interest rates. If Govt wants lower long term rates it creates cash in exchange for bonds. If it wants higher long term rates it does the opposite.
This seems like a good time to look at introducing a government and local authority employment scheme for anyone wanting to work on worthwhile projects. Being paid to work on the land for six months or longer to help farmers, create wilderness or in our national parks would look good on a cv and help restore our infrastructure following Brexit.
One of the interesting things about a democratic but unequal country, when the latter outnumber the former there is tendency to approve measures that will destroy the wealth of the minority, either by maxing out taxation or printing more money (which usually destroys the currency, the virus the exception as all large countries simultaneously printed extra money).
If you want to generate extra wealth you encourage people to risk their own money and time starting up a new business, current tax/NI rates do not make that particularly attractive. The huge layers of wasteful govn spending suggested would merely mean higher taxes and even less incentive, the country is sadly bloated and somewhat ruined by excessive government and councils…
@ Frank West,
I think we’d all agree that if countries create and spend too much of their currencies they can create an inflation problem. Let’s consider three possibilities:
1) Just proportion of countries are doing that and so they are the ones who are suffering from high inflation.Their currencies are falling in value on the FX markets relative to the ones who run a more sensible fiscal and monetary policy.
2) Everyone, or at least those who are in charge of the major currencies, is creating and spending too much, and to the same extent. Everyone is suffering from high inflation even though the relative values of their currencies is remaining approximately the same on the FX markets.
3) Everyone isn’t creating and spending too much, and maybe should even be spending more. Everyone has a low rate of inflation and currencies aren’t varying too much in value relative to each other.
So which one best describes the current situation?
Peter Hirst/Frank West,
I think the two suggestions can go hand in hand. It is a good time to look at introducing a government and local authority employment scheme for anyone wanting to work on worthwhile projects. The emphasis being on worthwhile is schemes are to maintain public support.
It is equally true to say that If you want to generate extra wealth you encourage people to risk their own money and time starting up a new business. The problem there is most people do not have their own money to start up a new business and of those that do around 60% fail in the first three years https://dcincubator.co.uk/blog/60-of-new-businesses-fail-in-the-first-3-years-heres-why/#:~:text=Yet%20the%20same%20article%20exposes,you%20take%20a%20closer%20look.
A potential alternative solution is worker coperatives or local authority managed businesses and in soome cases national ownership as argued in the Labour party report https://labour.org.uk/wp-content/uploads/2017/10/Alternative-Models-of-Ownership.pdf/ These models mitigate individual risk and can get around the problem of lack of access to capital while retaining a core group of essential skills in private sector businesses that have run into funding problems.
“If you want to generate extra wealth you encourage people to risk their own money and time starting up a new business.”
This is an assumption made by the neoliberal right which does need to be challenged. Wealth isn’t all created by small businesses, especially if they used to be much larger ones. How many cafes do we really need on the high street? What about previously successful business such as post offices, greengrocers and bakers? Are we better off with a new take-away instead? As has already been said, 60% of new ventures fail in the first three years. That doesn’t of course mean that the remaining 40% go on to be rip roaring successes. There will be failures after that too. Many just limp along until the owners retire or expire.
This is not to say that those who genuinely want to start a business shouldn’t be given the opportunity. But there have to be other opportunities too. Not everyone is suited to running one. Not everyone can afford to take the risk. And the risk always involves being able to find enough paying customers to support whatever the business is supplying. A worker co-operative or council ownership won’t change the fundamentals. A posh restaurant in an affluent area could possibly do quite well. But put the same business in a depressed region and it will flop badly. There won’t be enough paying customers.
And where does the money come from originally to create those paying customers? Joe likes to spin the yarn that it all comes from private banks. But there are private banks in Middlesbrough just as there are in Maidenhead. Where are we more likely to find the paying customers? And is it because the residents there are somehow intellectually superior and know how to make money from starting up new businesses?
Frank,
Please ignore the usual socialist insults. I proudly boast that I am a neo liberal. The history of the world shows we have always won and socialists have always lost.
But it is true we don’t need any old business. Economic success does not come from making a living taking in each others’ washing.
No. We need to do what we were once good at and what the rising nations are getting supreme at.
That is, we need businesses that suck the wealth out of other countries’ economies.
@ Innocent Bystander,
Just to check there’s no mistake:
You are advocating for ” businesses that suck the wealth out of other countries’ economies.” ?
And how do you suggest they do that?
In the days of Empire officials at the Colonial office were guided by what was called the ‘Grand Strategy’. The British Empire was foremost a trading bloc. The strategic goals of foreign and defence policy, the overarching purpose of which was to ensure international stability as the best means to protect the country’s myriad economic, political, and strategic interests, intertwined defense of the home islands and the protection of imperial economic interests.
Brad de long’s blog carries an article as to how this was applied to the rubber plantations of Malaysia https://www.bradford-delong.com/2005/07/the_grand_strat.html It concludes:
“As soon as the British had established the rule of law in Penang, various kinds of Chinese people began to move in and establish businesses. Most of them were Hokkien Chinese from north of Hong Kong, though Cantonese, Hakka, and other groups also settled there. Likewise, Tamils and Sikhs came from across the Bay of Bengal. As rubber trees began to take over the countryside, a common arrangement was for Chinese immigrants to establish rubber plantations and hire Indian immigrants (as well as Malays) as laborers.
The British involvement, then, was more catalytic than anything else. They didn’t own the rubber plantations. They merely bought the rubber on an open market from Chinese brokers who in turn bought it from producers of various ethnicities. The market was just a few square blocks of George Town where British law was enforced, i.e. where businessmen could rely on a few basics like property rights, contracts, and a currency”
This was the nature of the British Empire – principally a financial and trading empire and a precursor to modern-day globalisation.
What businesses will flourish in the future will be determined by the vagaries of supply and consumer demand in competitive markets. Central planning has always failed without the essential discipline of price discovery and exposure to competition. That applies equally whether capital is furnished by private shareholders, via workers cooperatives or mutuals, local authorities, or national government. The same business basics apply regardless of the form of ownership structure.
Innocent Bystander may be referring to the likes of Richard Cobden whose statue adorns the Bradford Wool exchange https://statues.vanderkrogt.net/object.php?webpage=ST&record=gbyh010. Cobden as a manufacturer, Radical and Liberal statesman, was associated with two major free trade campaigns, the Anti-Corn Law League and the Cobden–Chevalier Free Trade Treaty.
The economist has a piece this week on the breakdown in relationship between employment and inflation – the so called Phillips curve https://www.economist.com/schools-brief/2020/08/22/why-does-low-unemployment-no-longer-lift-inflation
“Heavy saving by the world’s ageing populations has resulted in too much money chasing too few investments. By lowering the neutral rate [of interest], this “global savings glut” has left central banks closer to the floor on interest rates than they would like. That has made it harder for them to offset any additional downward pressures on prices.”
“One solution is to work in tandem with the government, which can spend any money the central bank creates. Before covid-19, such dalliances were rare. But an increasing number of central banks, in both the rich and emerging world, are changing course. These partnerships will try to stop pandemic-related unemployment turning low inflation into outright deflation. If they fail it will be an economic disaster: mass joblessness coupled with negative inflation.”
This is important to developing counter-cyclical economic policy. In the initial stages of the recession increased government spending is required to stave off severe or extended deflation (as occured in the inter-war years) that is caued by an increased propensity for saving/fall in consumption and business investment. As private sector spending recovers the stimulus needs to be tapered off over time and interest rates increased and/or levels of taxation increased or government spending decreased to temper inflation caused by an increase in money supply.
There may be no observable correlation or linear relationship between unemployment and inflaton, so economic policy needs to be able to support full-employment regardless of the path of inflation/deflation. This requres both direct labour market intervention during recessions (in the form of job guarantees) and long-term industrial strategy along the lines of the mooted green recovery plan to mitigate the fallout from Brexit.
Tax and fiscal policy will need to be tailored for short-term stimulus initially but ultimately to support the allocation of higher proprtion of national income to supporting the provision of public services, at least to levels comparable with Northern Europe.
Just by doing what the Chinese, Germans …. are doing to us now. Have you not spotted that they are getting richer while we get poorer?
It’s not zero sum or a children’s party game where someone makes sure everyone gets an equal prize. It’s winner take all.
Joe,
Ownership structure does not change business basics, as you say, but it does influence the drive and energy of the operation.
Trabant was state owned, Porsche is private. Which would you rather have on the drive?
p.s. sorry that was a bit mischievous, my very first car was a Berkeley T60 which had a 328cc engine ,even smaller than a Trabbi, but I miss it still.
Innocent Bystander,
Porsche, in common with other German firms, appoints a works council. In Germany, they serve two functions. The first is called co-determination, through which works councils elect members of the board of directors of German companies. The second is called participation, and means that works councils must be consulted about specific issues and have the right to make proposals to management. One of the most impressive achievements of the councils is producing incredibly harmonious relations between management and workers, leading to a situation with strong unions and a very low strike rate. This also allows for a lot of coordination between the firm and the workers, resulting in, for example, the ability of many German firms to dramatically scale back the hours of each worker without large scale layoffs during the 2008 financial crisis, and then slowly scaling back up as the recovery took effect. This was all assisted by the Kurzarbeit, a fund that helps workers who have had their hours reduced. Kurzarbeit is a federal subsidy that makes up a portion of lost pay for workers whose hours are temporarily reduced during cyclical reductions in demand. https://www.dailysignal.com/2014/06/19/economic-crisis-survival-germany-shows-preparation-key/
Trabants have a bit of a cult following like the Ford Edsel. The first was the fruit of the East German politburo and the second was a $250 million flop that symbolised corporate executive and marketing failure before New Coke came along.
Joe,
So many round here would like us to be like Germans but our paths diverged centuries ago.
Firstly, their TU are not like ours. Imagine Len McCluskey as a director. Next, they have been growing since the Wirtschafts Wunder. How would TU reps cope with closing a factory or two, like we have to do?
I dealt with TUs all through my career and worked with some shop stewards I would happily charge barbed wire and machine guns alongside. Others were pure nihilists.
Also, Germany has always revered engineers and technicians. We revere everyone but.
Finally, Ford learned from their mistakes, stopped making the Edsel and offered something else. Not Trabant, of course, they kept making the same rubbish with their motto “If you want to give up your place on the 10 year waiting list, you can”.
Germany’s mercantilist economic model is considered fairly old fashioned and stagnant now. The big names of German industry are all old names. Their biggest bank Deutsche Bank makes ever increasing losses and has lost over 90% of its value since the GFC. So Germany has its problems too. They don’t seem to understand that the purpose of exporting is to be able to import. That used to be considered Economics 101.
Consequently they needlessly suppress domestic demand, causing their own workforce to be poorer than it need be, to be able to divert production overseas. The resulting imbalance causes lots of problems in the eurozone and naturally the German working class doesn’t see why they should be expected to bail out the rest of Europe. Why can’t everyone work as hard as them and produce an export surplus too?
Yanis Varoufakis discusses the problem:
https://www.project-syndicate.org/commentary/next-generation-eu-recipe-for-divisiveness-paralysis-by-yanis-varoufakis-2020-08