As the UK stares down the barrel of Brexit, and after a Liberal Democrat conference which didn’t inspire any anticipation of an impending poll surge, the Liberal Democrats need to present a truly radical offering.
The state of UK politics is desperate. The Conservatives are incompetently led, and with eccentric right-wingers lying in wait to add their own special layers of incompetence when May eventually falls.
The Labour party are likewise incompetently led, with no immediate prospect of that situation being resolved either.
What should fill us all with foreboding is that these parties’ internal democracies have evolved to a point where they will be anchored at the extremes for the foreseeable future. With the Labour party moving to one-member-one-vote, and away from the moderating influence of their MPs, their leadership will be stubbornly left-wing for a generation, propped up by the Momentum idealogues.
The Conservatives too, while they still let their MPs choose the final two candidates, now let the predominantly old, white men that is their membership base choose their favourite from that choice. Is their any prospect of a moderate remainer emerging from such a run-off anytime soon?
With Vince ruling out coalition with either of the parties as they currently stand, and with little prospect of a Cleggesque surge, we need a radical offering for an unprecedented political crisis.
We need to stand at the next election with only 2 basic policies: Stopping Brexit and introducing PR. This should be essentially a “none of the above” political offering. British democracy is failing you, providing you with a rubbish binary choice between people you do not like. We need to reset the British political landscape, let the other parties break up, knowing that they can re-form into an array of parties that will not be punished at the ballot box.
At present if the Labour party splits, first-past-the-post hands government to the Conservatives for the foreseeable future. Likewise a Tory split will hand government to Corbyn. Bringing in PR allows us to present an array of 6 or 7 choices to the electorate, so that they don’t have to hold their nose as they put a cross (or a series of numbers) on their ballot paper.
In order to guarantee this isn’t just a Liberal power grab, we can promise not to take up any more than a third of the cabinet positions in the interim. All cabinet positions will be held by people with expertise and competence (sorry on so many levels to Michael Gove). Cross-bench peers, Ken Clarke, Sarah Woolaston, competent people from the Labour party (we can find some I’m sure). And then after the parties have settled in, the mode of PR has been decided and boundaries fairly drawn, the good ship Great Britain has been steadied… then we can call another election that will prevent the extreme left-right lurches in a post-Brexit Britain that loom large over our horizon.
The stakes are too high to be chasing marginal gains.
* Ewan Hoyle is a West Scotland list candidate for the Scottish Parliament election next May
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130 Comments
It’s not the worst idea by any means; though I don’t think there’s a cat in hell’s chance of its being adopted! But my only real objection to this article is to “sorry on so many levels to Michael Gove”. Nobody should ever say sorry to Michael Gove for anything, in any circumstances. Not ever. Not at all. Not even if, having sacked him from the Government of Any Talents Whatsoever, you step on his toe, spill hot soup down his trousers and reverse your car over his cat. (Say sorry to the cat, by all means; though being Michael Gove’s cat may have been a worse fate anyway.)
Sorry, pontificating about PR is a complete waste of time in electoral terms. The vast majority don’t care a toss.
Most of the electorate adopt a ‘what’s in it for me’ approach – which we may not like. But there are enough compelling social and administrative issues to chime (in terms of getting an attitude/approach through) with many more people….
We need to address issues that the electorate out there feel are relevant!.
Have you read the article Graham?
Yes, hence my comments. I do not believe the world you desire to inhabit exists in the minds of the electorate.
I read, “the Liberal Democrats need to present a truly radical offering” and continued reading only to read “We need to stand at the next election with only 2 basic policies: Stopping Brexit and introducing PR” – a recipe for political disaster and maybe even reducing our number of MPs further. As Graham Jeff states there are no votes in PR and being the party of anti-Brexit in 2017 reduced our national share of the vote down from what many of us through was already was our nadir.
A radical offering would be something that transformed everyday lives such as a job for everyone who wanted one and a home for everyone who wanted one and the ending of poverty in the UK.
Obviously the pitch wouldn’t be ‘Vote lib dem, get PR’. It would be ‘look at these terrible choices, wouldn’t you like more (and more appealing) choices in the future after a brief period of governmental competence?’
You say that the Liberal Democrats need to present a truly radical offering consisting of just two policies, which are preventing Brexit and introducing PR.
These are both failed policies for the Lib Dems. Having them on a double bill with nothing else might finish the party off. It may be premature to dish out the coalition cabinet positions just yet.
It’s the money, guys, if you want to get the voters attention then start by phasing out council tax and employee national insurance, replacing the lost tax with more taxes on business. (length of residence replacing NI history for benefits and pensions) rather than electoral suicide of land (garden) tax etc.
A Liberal power grab?
I seem to recall reading a work by James Thurber back in the 1950’s along these sort of lines.
“the predominantly old, white men that is their membership base”
The same membership base that has a (second) female leader in Parliament (and another in Scotland) while Labour and the Lib Dems have leaders who are … pale, stale and male?
Graham Jeffs: “Sorry, pontificating about PR is a complete waste of time in electoral terms. The vast majority don’t care a toss.”
In which case they won’t mind if we change it, will they?
Chris Bertram: we won’t be changing it because they won’t be voting for us based on that as a campaign issue!
Really odd to hear a democratic party whine that another party uses one member one vote.
PR won’t deliver a Lib Dem government. But, at a poll rating of 7%, a 600 member House of Commons would have around 42 Lib Dem MPs. It’s about time that those of us with ‘Liberal’ leanings accepted the fact that we will probably always be in a minority. I can live with that if I knew that my beliefs would at least be properly represented.
As for Brexit, who knows? My choice of a possible third referendum (because that’s what a ‘Peoples’ Vote’ actually is) would be a choice between 1. Leaving the EU with a deal 2. leaving the EU without a deal or 3. Remaining in the EU; but staying out of Schengen and the Euro.
@John Marriott “My choice of a possible third referendum (because that’s what a ‘Peoples’ Vote’ actually is) would be a choice between 1. Leaving the EU with a deal 2. leaving the EU without a deal or 3. Remaining in the EU; but staying out of Schengen and the Euro.”
Perhaps there should be an option to vote not only for remaining but doing so with ever greater political and economic union: no opt-outs (maybe no more rebate) and signing up to join everything going.
That would show that it is no re-run of the 2016 referendum and really give the pro-EU Lib Dems something to get their teeth into, setting them apart from reluctant Remainers in the Conservative and Labour parties.
Currently we are Polling between 10% & 11%, up 4% on 6 Months ago. We are recovering & a bit more self belief would be helpful.
We have been leading the debate on Brexit, Labour are reacting to us; we are not as irrelevant as The Media make out.
@Michael BG – “A radical offering would be something that transformed everyday lives such as a job for everyone who wanted one”
At current unemployment levels, almost everyone who wants a job does have one. At the moment, unemployment isn’t really the problem, which leads on to –
“and a home for everyone who wanted one and the ending of poverty in the UK”
The bigger problem is underemployment, job insecurity and falling living standards for many. We need policies that offer security and rising living standards.
@William Fowler “- if you want to get the voters attention then start by phasing out council tax and employee national insurance, replacing the lost tax with more taxes on business”
I disagree. If voters want to bash businesses they can vote Labour. It would be better to start by abolishing EMPLOYERS National Insurance contributions. Seriously, how does it make sense to tax businesses for the privilege of employing people? This could easily be paid for by a combination of increasing the minimum wage to the point that the majority of people who currently claim in-work benefits no longer need to, and a 1% tax on company turnover.
“Vote LibDem – Because you hate both the alternatives.”
It sounds depressingly convincing.
Ewan, I see where you are coming from. I have been wondering if we should have a modern day Chartist movement, getting a group of MPs behind maybe more than 2 policies – stopping Brexit, PR, house building, votes at 16. PR doesn’t sound very sexy but I tend to frame it as “Getting the Parliament you ask for.”
My worry is that any platform like this wouldn’t be radical enough to deal with the problems we’ve got but if we won PR things would have to change.
@Peter Watson
Perhaps you favour closer union; but I certainly don’t. To be honest, I, like many of those who voted in the first referendum in 1975 just want a ‘Common Market’. The reason why I class myself as an EU pragmatist is because I think the EU has gone too far down the road of federalism. If you want to win people over, don’t overegg the pudding. To be honest, if we could just get that freedom of movement changed to labour rather than people we could be easily on to a winner.
@Paul Barker
As for leading the ‘debate on Brexit’, it reminds me of a famous by election victory in Brecon in the mid 1980s. Neil Kinnock said something like; “Labour shook the tree and the Alliance picked up the apples”. Unfortunately, it’s the other way round now.
Others have already made the point that policies such as PR and Votes at 16 will not win elections. I agree with both and have campaigned for PR since 1983 but they are not vote winners (an inconvenient pre requisite of actually winning elections). As for overturning the 2016 Referendum decision we have made it our main campaigning policy for 2 years now with no noticeable electoral benefit -in fact the 2017 GE result was even worse than that of 2015.
Labour discovered, following electoral defeat in 1979, that turning inwards to ‘comfort food’ politics of ideological purity, internal party ‘reforms’ and sectional politics simply led to even greater electoral defeat in 1983. Without PR purist Parties cannot succeed. With PR they can, but note that typical Liberal Parties in Europe take around 5-10% of the vote whereas our average 20% from 1983-2010 used to give us the largest ‘Liberal’ vote in Europe. But that was a vote based on projecting a wider electoral appeal on ground that the wider electorate was interested in -not on pursuing some purist ‘Core Vote.’
Out of interest can I ask when was the ‘Cleggesque Surge’? Presumably not 2010 when a very modest 1% increase in our vote was accompanied by a net loss of MP’s. Certainly not 2015!
@Peter Watson – I find myself in broad agreement with John Marriott, let us regain the current status quo ie. remain in the EU broadly as we are now with any further treaty changes being subject to a referendum. There is plenty of time in which to deepen the relationship; something I’m happy to leave to future generations.
I suggest one of the contributory factors to the UK attitude towards the EU is because the politicians were in too much of a hurry to achieve some form of united/federated states of Europe and “leave their mark on history” and thus failed to take their electorates with them. Remember the UK is not unique in having reservations about the speed with which some in the EU want to pursue an “ever closer union”.
Hi Paul Holmes,
PR hasn’t been a vote winner before, but it hasn’t been so obviously needed before. I don’t know of a time when the offerings of all parties have been so unattractive to the public as they are now, and with no foreseeable prospect of that situation changing.
…and the Clegg surge happened during the election campaign in 2010, before settling back down to the rather disappointing vote share you describe.
Just because a policy is self evidently (to you and me!) needed, does not mean voters will be motivated to vote for it. I think it was the 1997 election where our Party Polling showed that 0.5% of voters were motivated by concern over the need for PR.
As for ‘I don’t know of a time when….’ Well try 1983 when doctrinaire Labour and Conservative extremes were rampant. The Alliance took 25.5% of the vote (best ever vote share since 1922) but only 22 MP’s due to a) FPTP system and b) Because we hadn’t yet learned how to run a Target Seat strategy.
Very brief opinion poll blips don’t count for much. The Alliance in the early 1980’s polled at very high levels for rather longer than one good TV debate. But it’s the actual vote that counts and in 2010 we took just 1% more than in 2005.
There is not a snowballs chance in hell of getting PR.
Since we had one for the AV vote, there would have to be a referendum on PR, and be in no doubt, it will no longer be acceptable to have a simple majority like the Wales devolution of barely 1% majority.
The undermining of our democracy by the especially the LibDems, claiming that the EU referendum majority of 4% was, and is undemocratic, will ensure that any future referendum on anything will require a super majority, perhaps 75% to be considered democratic, and on that basis PR hasn’t an earthly of getting through.
As ye reap so shall ye sow.
Oops, got that back to front. ‘As you sow, so shall you reap’
Hi Paul, but the leadership election systems within the major parties in 1983 were moderated by MPs wanting to win seats. Now we have OMOV systems vulnerable to entryism and anchoring the parties at the extremes.
@John Marriott & Roland
To be honest, my suggestion of a Hard Remain option in another referendum was somewhat tongue-in-cheek.
But it does reflect a degree of cowardice that I perceive on the part of the Remain campaign which does not try to present a vision of the sort of EU membership it wants. Cameron’s dismal negotiations were soon forgotten, and all that was offered before and since the 2016 referendum, and in the way a “People’s Vote” is depicted now, is a campaign based upon fear of changing the status quo which consequently has not resonated with those unhappy with the status quo.
@ Nick Baird
There are 1.44 million people unemployed all of which are looking for a job and don’t have one. There are about 2.3 million disabled and long-term ill people of which I think about half might want a job of some sort. However, underemployment is a problem so I should defined “job” better. How about a “suitable job”? A “suitable” home is implied. I wonder why it isn’t when talking about jobs.
I don’t know what level the minimum wage would have to be to reduce the 6.8 million working age claimants by 3.4 million. There are 3.7 million people claiming housing benefit. However, I advocate regional living wages to replace the national one at 70% of a regions medium earnings.
When was our country last well led?
@John Marriott
“It’s about time that those of us with ‘Liberal’ leanings accepted the fact that we will probably always be in a minority. I can live with that if I knew that my beliefs would at least be properly represented.”
I agree with you and I’ve always felt that way.
The issue to me is the fact that FPTP can – and has done (Feb 1974) – result a party winning a parliamentary majority in seats on a minority vote across the country. Or that a small majority in the popular vote can result in a huge majority in seats out of all proportion to the popular majority. And vast numbers of voters needn’t bother voting at all because they have no chance whatsoever of electing someone who might represent their own point of view.
@Ewan Hoyle @Paul Holmes
I think the point about ‘Cleggmania’, a word typically coined by the popular media, was that only when ‘exposed’ to the public in general via the TV debates, did the people in general realise that there was someone out there other than Dave and Gordon. Unfortunately, following his ‘success’ on the telly in 2010, Nick thought he could repeat that in the EU debates with Farage and we all know what happened there (2010 “I agree with Nick” 2016 “How do you see the EU in ten years’ time?” Clegg; “About the same”). This stance of ‘everything in the EU garden is rosy’ is probably one of the reasons why Leave won the argument in the end.
Paul is quite right that PR is hardly a vote winner on the doorstep. However, I would not wish to be as negative as that ‘agent provocateur’, Mr Jack Graham. The trouble was that, when the nation actually got a chance to have its say on voting reform, it was offered what amounted to a minor adjustment that really wasn’t PR but which the Yes campaign managed to mishandle and by allowing itself to be muscled out by Cameron’s twin attack dogs, Messrs Cummings and Elliot, who learned the lesson of telling porkies (Clegg about to enter No 10 – as PM?) which stood them in good stead a few years later when their propaganda helped to deliver the Leave vote.
@Peter Watson re: “a degree of cowardice …on the part of the Remain campaign”
I agree the Remain campaign was uninspiring, but then the challenge was making remain emotionally engaging – it is always easier to take a wrecking ball to something than to spend the time renovating it…
The challenge with a second referendum, isn’t to rerun the first, but to change direction; a vote for remain would open the door to further discussion about the type of remain, given the UK would have a seat and a vote at the up coming EU future directions summit… It is easier to negotiate when you are inside the tent and the rules provide no means to remove you from the tent – I’ve always maintained that the best way to leave was to vote remain… 🙂
PR is not a vote winner. We tried to get it in Coalition and people left us in droves. It’s a party priority and I agree with it and reform of the House of Lords but, as several people say, it’s not a priority for the overwhelming majority of people who want to live without a struggle.
The obvious policy partner for ending Brexit is to pledge to end the causes of Brexit: to redistribute the advantages of EU membership and to work for EU reform.
Michael BG: And who are those mysterious people who are going to do unsuitable jobs ? I expect much if not most of the leave vote was motivated by opposition to immigration so if it is stopped or drastically reduced then the existing workforce will have to do those jobs that not many people are willing to do. Will they ?
Never understood why going for PR in the Upper House (with greater powers) is not a good way forward. Stops tactical voting and provides for a damper on policy swings.
For clarity, the pecentage thinking X is among the important issue facing Britain at the moment. https://www.ipsos.com/ipsos-mori/en-uk/issues-index-august-2018-public-concern-about-eu-and-brexit-remains-historically-high-levels
EU/Brexit etc. 57%
NHS/Heath etc 40%
Immigration/immigrants 20%
Housing 18%
Crime etc. 17%
Economy 17%
Education 15%
Povery etc 14%
Lack of faith in politicians etc. 12%
Enivonment 11%
With 44% thinking that Brexit/EU is the single most important issue facing Britain – followed by the NHS/Health at 9%
I’d add a third, either an environmental one putting more emphasis on combating climate change or going beyond Labour’s idea of employee share ownership to give all stakeholders a say in their businesses and reducing corporate greed and corruption.
> And who are those mysterious people who are going to do unsuitable jobs ?
UK residents!
Whilst I oppose Brexit, if we do go through with it, it does deliver a number of opportunities to deliver LibDem policies.
With respect to “unsuitable jobs”, the closing of the door to immigrants, means that we, as a society, have to face up to these jobs: why do we regard them as unsuitable, what can we do to improve these jobs etc.
By continuing to allow “unsuitable jobs” to be done by immigrants we are perpetuating a mindset that is unhelpful in the modern highly connected world; you only need to look at the leading Brexit lights and their pumped up self importance and attitudes to negotiation with ‘foreigners’, we can see the blindness this mindset engenders.
@Paul Holmes
“As for overturning the 2016 Referendum decision we have made it our main campaigning policy for 2 years now with no noticeable electoral benefit”
We have increased our poll rating from around 7% to 10% which may not sound much but is around 50% more people supporting us. Clearly if we don’t address Brexit (and it is whether we like or not going to be about the only issue in the media for the next 6 months) we are not addressing what concerns the British people the most – and by a country mile – see above.
“Out of interest can I ask when was the ‘Cleggesque Surge’? Presumably not 2010 when a very modest 1% increase in our vote was accompanied by a net loss of MP’s.”
There is clearly criticism of Clegg to be made – especially during the coalition but there is no doubt that he had a very good 2010 election campaign – and history should not be re-written too much.
Before the debates we were getting below 20%, afterwards we didn’t have a single poll that gave us below 25%.
To get 23% was disappointing when we were averaging about 27% in the polls at the end but it MIGHT be that the opinion polls were inflating us by 4% throughout and Paddy Ashdown has commented that we tend to have a tailing off in the last week of a general election campaign – may be people “flirt” with us but finally decide to go back to their roots.
Obviously we had mainly won seats off the Tories and with them finally (mostly) getting their act together it was going to pose some difficulties – about 10 (I think) of the 13 losses were against the Tories and each arguably had some special circumstances – that Sandra Gidley for example held on to Romsey in 2005 was a minor miracle and great tribute to her and her team. Of the 3 loses to Labour – Chesterfield (as you obv. know only too well!) and Rochdale were agonisingly close at under 2%. And one was in Scotland which was different electorally – there was absolutely no change at all in seats over 2005 – we had won Willie Rennie’s seat in a by-election.
@ Steve Trevethan “when was the country last well led?”
1945-51…….. Before that 1906-1913ish (with a big blind spot on women’s suffrage).
Roland: Immigrants do these jobs because the money is better than what they would get if they stayed in their home countries. If they did not come it would be very hard to fill them and the costs of providing many services would rise although quite a lot of people are employed doing pointless work or just there to boost the egos of their managers so they can boast about how many people work for them.
Many jobs are unpleasant and people will not do them if they can find something better. It has little to do with any dislike of foreigners although I agree with your point about the pumped up self importance of some of the leading Brexiteers and even their supporters.
Maybe we need not worry any more in view of the tremendous cheers at the Labour Conference when someone said that Remain must still be an option in any vote. I think it was Keir Starmer.
On the question of how much we have recovered in the last 6 Months : its from between 6% & 7% in the spring to between 10% & 11% now. The average of the last 5 Polls gives us 10.8%, very nearly back to where we were when The Election was called.
There is some evidence that the growth in our support may have accelerated in the last few Weeks but its too soon to be sure.
@ nvelope2003
I don’t understand your thinking. Do you do a job with is unsuitable for you?
As a liberal I believe everyone should chose to do the jobs they want and meet their needs and that is what I mean by suitable. Everyone has a limited choice regarding what type of jobs that are suitable for them. When asked by my GP years ago why I haven’t tried to become a doctor I said because I was no good at biology.
There is this idea that there are jobs only foreigner will do. The reality might well be that it is only foreigners will do them at the wages on offer. If the jobs paid more and were secure then more people living in the UK would want to do them. Demand and Supply forces do work with labour.
The whole point of ensuring there is always a large pool of unemployed people looking for work is to ensure wages don’t rise very quickly. There is a belief that full employment as we had in the 1950s and 60s would cause wage inflation.
@Michael 1 “There is clearly criticism of Clegg to be made – especially during the coalition but there is no doubt that he had a very good 2010 election campaign”
This is very true but ironically I believe that it worsened the later collapse in support for the party. By the end of the election campaign the Lib Dems were very much personified by Nick Clegg. This was epitomised by the famous/infamous “No more broken promises” election broadcast (I hated it because of all the litter!). Subsequently the loss of trust in Nick Clegg infected the way that the whole party was viewed.
“We need to stand at the next election with only 2 basic policies: Stopping Brexit and introducing PR.”
I agree with all of those who disagree with this!
It’s fine to make these red lines for any electoral pact or coalition agreement, but ultimately voters need to understand clearly what Lib Dems want the UK to be like within the EU and what policies they will support if holding the balance of power under PR.
@Paul Holmes “Others have already made the point that policies such as PR and Votes at 16 will not win elections. I agree with both and have campaigned for PR since 1983”
What did this campaign for PR take the form of. Because whilst I respect you a lot I can’t recall seeing you do anything on this when you were an MP. That’s not especially a criticism because virtually no-one else was.
There was IMO a big mistake after 2005 not to make the flawed electoral system a major campaigning plank. Had that been done for several years it would have been a great springboard when the expenses scandal hit (the one time in recent years the party did promote PR) and that could have led on to it being more up front in 2010 and a strong point the Tories might have conceeded in the coalition negotiations. (remember they made significant concesssions on all the Lib Dems headline policy points)
Michael 1: You write “[Clegg] had a very good 2010 election campaign” I disagree. We should NOT have lost seats to Labour in 2010. Simple as that. In an election where a tired, unpopular Labour government was defending its record, not only should we have wiped the floor against Labour in seats we were defending against them, we should also have won the low-hanging fruit which we failed to win. It particularly sticks in the throat for me that we failed to take out the awful Emily Thornberry from Islington South & Finsbury when we had come so close in 2005. We similarly failed to take Oxford East. If it had not been for the accident of a Hung Parliament leading to the Lib Dems being part of a coalition government, there would have been serious questions being asked about our failures in 2010, and calls for Clegg to resign as leader. We were starting to learn how to campaign against Labour in 2005. We fell back in 2010.
Some people credit Nick Clegg with being the first Lib Dem leader since the 1920s to bring Liberals into government in peace time, as if engineering a hung parliament was somehow in his gift. He just got lucky, that was all.
David Raw: Asquith believed that giving women the vote would benefit the Conservatives and he was right up until recently. In the 21 years between 1918 and 1939 there were Conservative majorities or Conservative dominated coalitions for almost 19 of them. In the 52 years from 1945 to 1997 there were 35 years of Conservative Government and 17 years of Labour Government followed by a Labour Government from 1997 to 2010 which many labour supporters felt was not a real Labour Government at all. No doubt that is why they elected Jeremy Corbyn to be their leader. The next election will be very interesting – I hope I am still here to find out.
Michael BG: Employers, including National and Local Government and state owned organisations, will not pay any more than they have to because that would require price or tax increases which are unpopular so they encourage immigrants to fill vacancies. Reductions in the labour force could cause wage increases but it might also result in less jobs because of improved efficiency and the closure of state provided services. There have been big reductions in subsidised rural bus services and some libraries because of the cost of providing them for small numbers of users and also because of changing habits or needs. Shops are also cutting back because of technology, the internet etc. The newly nationalised industries will also require massive job losses to reduce the burden on the taxpayer as they did when they were nationalised in the 1940s so maybe there will be less unsuitable jobs except for those who like opening and closing train doors for example.
Alex Macfie 25th Sep ’18 – 8:14pm………………….Michael 1: You write “[Clegg] had a very good 2010 election campaign” I disagree. We should NOT have lost seats to Labour in 2010. Simple as that. In an election where a tired, unpopular Labour government was defending its record, not only should we have wiped the floor against Labour in seats we were defending against them, we should also have won the low-hanging fruit which we failed to win……………
A far more pertinent question is, “Why didn’t the Tories sweep the board” against ‘a tired, unpopular Labour government’? I’d suggest that the electorate have far longer memories than parties (especially ours) credit them with.
Does any seriously believe that the 8 years since 2010 have been better than those before? The reason that Labour, under a ‘moderate’ Labour leader like Milliband, didn’t do well in 2015 was the continuing misrepresentation (led by Clegg/Alexander/et al) that the financial collapse was caused by Labour overspending; and which party benefited from that story?.
Those still writing Corbyn off might do well to remember that the only reason a 2017 election was called was because he was seen a ‘no-hoper’ who would lose by a landslide (based on the same polls that give the Tories a narrow lead).
As for the next election; as nvelope2003 writes, it will be very interesting – I, too, hope I am still here to find out.
Nvelope2003: I was making a couple of points, firstly that everyone should have a job which is suitable for them and that increasing wages and improving terms and conditions would make more jobs suitable.
I agree with you that if wages were increased and employers forced to provide better terms and conditions they may wish to invest to improve the productivity of their workers. I think that would be a good thing. I think having a pool of cheap labour available is a bad thing for society.
We do need to be aware of the possibility that there will just be less work in the future and think about how we share out the work and split the increased returns on capital.
@ nvelop. Asquith was right to oppose women’s suffrage because it would let in the Tories? A rather superficial view of why the Tories dominated interwar politics, I’m afraid.
In many ways Squiff was an admirable PM in holding the prewar party together but his strength was more in tactical adroitness than in the big vision stuff.
There was a memorable comment from him when discussing the Representation of the People Bill just before the war with Catherine Marshall, secretary of the peaceful NUWSS, and at the time a Liberal. When he was reminded by Catherine that, ‘women are people too’, his response was ‘I suppose so’.
Like so many radicals at the time Catherine eventually went Labour.
So called ‘moderation’ often leads into a moral cul de sac.
@nvelope2003
>Employers, including National and Local Government and state owned organisations, will not pay any more than they have to because that would require price or tax increases which are unpopular so they encourage immigrants to fill vacancies.
Which one of the reasons why we need to ‘deliver’ on Brexit and limit the use of immigrants/non-UK nationals. However, you are right government itself is a big contributor to the mess we are currently in and some waking up and smelling the coffee will be required.
>Reductions in the labour force could cause wage increases but it might also result in less jobs because of improved efficiency …
Don’t see less jobs as necessarily being a problem, given I would expect efficiency improvements and thus job losses regardless, just that they may take longer to realise when there is a ready supply of cheap labour. Also by delivering on Brexit
we will be starting to address the future problem of too many people and too few jobs and thus reduce welfare dependency (LibDem policy).
Delivering on Brexit means investing in UK people (LibDem policy), making jobs available to UK graduates (LibDem policy), who’s University education was paid for by UK taxpayers (LibDem policy).
Interestingly, delivering on Brexit will also help LibDem policy on housing, hospitals, schools…
David Raw: You have misquoted me. I did not say Asquith was right to oppose women’s suffrage but that he was right to believe that it would help the Conservatives. That is quite a different issue. Of course there were other reasons for Conservative dominance such as the destruction of the Liberal party as a parliamentary force in the 1920s while it split the left of centre vote in some constituencies and the drift towards the Conservatives by Nonconformist small businessmen who feared the Labour Party. This drift was one of the reasons why the Liberals were less radical than they should have been as they feared this loss of Nonconformists and others to the Conservatives without a corresponding increase in working class support.
I think many might have said “I suppose so” when Catherine Marshall made her comment but it was not very wise. If we are in an age when people are demanding radical change then the Liberal Democrats will not benefit very much as Corbyn will be the one who seems to offer radical solutions but nationalising Royal Mail and the railways seems an expensive anachronism in the age of the internet and the car. I suspect privatisation of those organisations has given them a new lease of life and only this terrible Conservative Government’s misguided interventions has damaged the growth in railway passengers.
expats: The pertinent question now is why isn’t Labour 20 points ahead in the polls right now against this incompetent hard-right Tory government? It certainly would be if it were led by a Wilson or a Blair. As regards the 2017 general election, loss of the Tory lead from opinion polls early in the campaign to the eventual result was much more to do with the bad Tory campaign than anything Labour did. Jezmania did increase the Labour vote, but mainly in already safe Labour seats, so not very helpful for making gains under FPTP.
And it doesn’t follow that Labour are going to build on its present poll rating in an election as it from its low base in the 2017 election — you can’t make a soufflé rise twice. Corbyn is something of a marmite politician, so it is doubtful he can win an overall majority, as there are so many voters who wouldn’t support him under any circumstances. Also the political landscape has changed since 2017. Back then he was relatively unknown, and got a lot of abuse but little scrutiny. Now he and his policies are getting a lot more proper scrutiny. On Brexit, Labour will not be able to carry on blowing two dog-whistles each aimed at opposing packs. And the ongoing anti-semitism row is a serious problem for Labour.
The Corbynistas seem to think they can win by “One More Heave”. Such is the hubris in the Labour camp that some seem to think they actually “won” the last election. In case you’ve forgotten Lib Dems have been there already. One reason for the disappointing 2010 election result is that Cleggmania led our campaigns team to abandon targeting in favour of a One More Heave strategy, where we would supposedly get dozens more seats on a national uplift. Well, we know what happened there. One More Heave didn’t work for us in 1974 either, or in 1983.
, @envelop. Women weren’t given the vote in 1918…… Only some women – over 30 with certain property qualifications – hence a bias towards the right…..
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Roland: I understand that the Brexiteers will permit immigration from all countries not just the EU because people from, for example, the Philippines or Indonesia will work for even less money than EU citizens which will increase the value of any investments they still hold in Britain. Apparently many have sold or will sell them at a high price in the expectation that they will be able to buy back the ones they want at a knock down price after we have left the EU. Apparently the benefits of leaving the EU are not expected to materialise for 50 years when even any of those at school now will be retired
Michael BG: There may be a shortage of jobs in some places but there are over 800,000 job vacancies. In London which has many immigrants I often see adverts for job applicants which are almost permanent though there are said to be large numbers of unemployed. In the West of England employers find it very hard to fill vacancies although the place is stacked out with highly paid incomers from London etc so you rarely hear a West Country accent except in Bristol.
London and Southern England have always relied on immigrants to do the work, firstly from other parts of the country, then from Scotland, Wales and Ireland despite many people not having regular work. Should we not all try to make our contribution to society as long as we are able to do so ? Many people try to do so despite illness, disability and other problems including having to do work they do not like but some make little or no effort.
David Raw: Women got the vote on approximately equal terms with men in 1928 and although Labour was the largest party in 1929 and formed a minority Government dependent on Liberal support the Conservative dominated National Government won a majority of about 425 (some sources say 492) in 1931 and 247 in 1935. Even in 1945 the Conservatives polled 39 % of the vote including allies against 47.7 % for Labour and from 1951 until defeat in 1964 they won with increasing majorities. Can anyone really predict the result of the next election ? It should be a Labour win but no one is sure.
Nvelope2003: It would be interesting to know what skills are required for the long term vacancies and why unskilled people are not taking them up.
If there are 1.44 million people unemployed and about 1.15 million disabled and long-term ill people looking for jobs but only 800,000 jobs there are not enough jobs for everyone to have one no matter how unsuitable they are. Also employers are not keen to employ people they feel are unsuitable to do the job.
Have to done many jobs that you hated? Are you employed doing a job you are unsuitable for? Do you understand why a temporary job for some people is worse than no job at all?
@ envelop…… you distort the basis of Asquith’s opposition to female suffrage. It was much more than political party fear of Tory domination. It was mysogony sufficient to give the editor of LDV a heart attack.
Viz Hansard 6 May 1913 : “Would our political fabric be strengthened, would our legislation be more respected, would our domestic and social life be enriched, would our standards of manners – and in manners I include the old fashioned virtues of chivalry, courtesy and all the reciprocal dependence and reliance of the two sexes – would that standard be raised and refined if women were politically enfranchised? “
@nvelope2003 “I understand that the Brexiteers will permit immigration from all countries not just the EU…”
Yes this is one of the disconnects, we know that many voters voted Leave because they wanted reduced levels of immigration – from all sources not just the EU, yet the leading Brexiteers want to see more and cheaper immigrant workers, hence why they are so keen for no special deal for EU immigrants post-Brexit. I suggest the LibDems should be exploiting this disconnect (divide and conquer).
>Apparently the benefits of leaving the EU are not expected to materialise for 50 years when even any of those at school now will be retired
Interestingly, when you talk to many committed Brexiteers about this, this is unimportant, what is more important to them now is “at least we are leaving…” So I don’t take this as an argument that will create much traction among those who voted leave. What is imortant to many who voted leave is investment in UK residents specifically jobs for our children – something which also aligns with LibDem policy…
So whilst I will push for a no exit Brexit, I suspect reality will be a no deal or last minute fudged deal next March. So, I looking to prepare the groundwork for the new dawn…
It is interesting to look at the government figures for work visa’s. A direct impact of removing NHS appointments from the quotas has been to allow a significant increase in the number of visas issued to IT workers. No, I might at times be a little thick, but in no way can IT jobs be described as ‘unsuitable’, particularly as an entry requirement will be a degree… The evidence from the USA is that the employment of graduate level IT workers directly contributed to wages being 20~30% lower. So if we want our graduates to be more able to afford their student loan repayments and actually have jobs…
Michael BG : If there are over 800, 000 job vacancies why are there still 1.44 million people unemployed ? I have had jobs that I did not like and I did not enjoy some aspects of jobs which I otherwise did like but I do not understand why a temporary job can be worse than no job unless it is something to do with losing benefits. A job gives you experience and a record of work which will appeal to potential employers. I am retired now but it did take some time to get used to not having a job although I was fortunate to have some part time work for a few years. I suppose some people would agree with Oscar Wilde who said work was for those with nothing better to do but no one would have the mostly pleasant life they have now if people had not been willing to do things they did not like doing like my grandparents’ generation who worked on the railways repairing the tracks or in service in a big house.
There are many jobs in for example care homes which are not being filled because the money needed to pay people is being spent on pointless higher education which for many people is just like the finishing schools for the upper classes and a degree is not required for many jobs. Even students admit it is just a rite of passage and a fun time for boozing and socialising for many of them. Obviously that does not apply to training doctors and other professionals.
There will always be work and a need for people to do it. The Luddites were wrong and there are more jobs than ever before because we all want a better life and things to do.
Michael BG,
I think you are looking for simple answers where there are none. Both the number of people employed in the UK and the number of vacancies in a tightening labour market are at an all-time high https://www.theguardian.com/business/2018/jan/24/uk-employment-level-hits-joint-highest-since-1971
Since 2001, the UK population has grown by 6.6 million (82% of the increase being attributed to net inward migration). If newly arrived migrants can find work relatively easily, you have to dig deeper to uncover the reasons for persistent long-term unemploymernt ithat accounts for approx 1.1% of the total work-force. Around 2.5% of unemployment is attributed to so-called frictional unemployment. There appears to be very little involuntary unemployment in the UK.
There is a trade-off with a minimum wage set by the low-pay commission, that means some people may not be employed who otherwise might be employed at a lower rate. That is a trade-off we accept so that the much larger numbers employed at a minimum wage can have an income that together with ta credits keeps them from falling below the poverty level.
In my view, locally administered job guarantees are the only practical way of reaching the 300,000 or so long-term unemployed that find it difficult to secure work in the current market. The job guarantee can equip people with the work skills they need to eventually secure better paying work in the private sector.
David Raw: It was unfortunate that Asquith did not support women’s suffrage but it does not detract from his belief that it would help the Conservatives because it did until recently and seems to be doing so again. It did not help the Liberals whereas universal suffrage for men probably brought about the rise of the Labour party after 1918 so that by 1924 they formed the Government and the Liberals were out of the game.
Nvelope2003: Thank you for giving some idea of your age. If you are 68 or older then you would have been born in 1950 or before and would have been working in the 70s. At that time lots of people could leave a job one day and start another the next. For this to have been possible it is likely that there were more job vacancies than people looking for work.
You stated that there are over 800,000 job vacancies. There are always going to be job vacancies. Full employment might be defined as the number of job vacancies equally the number of people looking for a job. (I hope that answers your question.) I would like there to be more job vacancies than people looking for a job.
Taking a temporary job can affect people on benefits adversely. If a person’s claim is ended then after 26 weeks they will need to make a new claim with all the waiting times when a person receives no benefit.
I expect everyone has had a job which included some aspects of their job which they disliked. If a person dislikes their job a lot this is likely to lead to reduced productivity and even ill-health.
Re: the number of vacancies
I’m not sure if this is a meaningful measure. I’ve worked in several companies that continually advertised. Was there a vacancy? Not really.
When you know your staff turnover rate, the dynamics of your business, then maintaining a steady flow of applicants can be important; I may not have a vacancy right now, but I anticipate having a vacancy soon, this vacancy might arise because of someone resigning or because of a contract win.
I do think that Joseph Bourke is on to something with the focus on the long-term unemployed, to which I would add the long-term economically inactive. Whilst the long-term economically inactive aren’t claiming welfare and thus not directly costing the government money, they are an underutilised resource that potentially will incur very little additional cost if they became active compared to importing a worker, who then needs housing etc.
Joe Bourke, it really annoys me when people claim that having the highest number of people in employment is an achievement. With a population at its highest it should not be a surprise that we have the highest number of people in work. You wrote the UK population has grown by 6.6 million since 2001.
What you didn’t point out is that the number of vacancies were not measured before 2001. Therefore all that can be claimed is we have the highest number of vacancies since 2001. I wonder if there are fewer job vacancies now than in the 1960s and early 1970s.
There are about 4% classified as unemployed, therefore if you are correct and 2.5% is frictional unemployment then there are 1.5% at the involuntary level for this section of society. You have not considered those who are disabled or have long term health issues who would like a job. If the figure is over 1.1 million then that is another 3.3%.
As you know I support a job guarantee alongside a training guarantee for the long term unemployed, and those who are disabled or with long-term health issues who wish to work. If people on in a guaranteed job are paid at the minimum wage rates this should also put pressure on wages, which I think would be a good thing.
Michael BG,
according to the Guardian article the employment rate, which measures the proportion of 16- to 64-year-olds in work, reached 75.3%, a figure that was higher than for a year earlier and the joint highest since comparable records began in 1971.
Note the word comparable for both employment rate and vacancies. Vacancies have been measured throughout the post-war period. The employment rate is naturally much greater than pre-1971 with so many women having entered the workforce on a long-term basis. Beveridge’s definition of full-employment was vacancies equal to unemployment benefit claimants i.e. pretty much where we are today, Claimants of unemployment related benefits including Employment and Support Allowance and other incapacity benefits, and Income Support and Pension Credit were 918,000 n August 2018 according to the ONS.
The issues we should be focusing on are why wages remain stagnant and at or below inflation in such an economic environment. That has as much to do with the transition to a lower productivity service based economy and the prevalence of rent-seeking activities in the UK economy, as it does with relative employment rates.
@Michael BG – commenting on more than one of your posts…
“Taking a temporary job can affect people on benefits adversely. If a person’s claim is ended then after 26 weeks they will need to make a new claim with all the waiting times when a person receives no benefit.”
That is just an argument for rectifying the manifest defects in the system rather than using it as an excuse for people not taking the temporary jobs available,
“If a person dislikes their job a lot this is likely to lead to reduced productivity and even ill-health.”
And sitting around without work if/when there is work which needs to be done and there are people capable of doing it also leads to reduced productivity and even ill-health… And the longer one spends out of work the more difficult it is to get back into it – losing the habit of getting up on time, getting to work on time etc.
“As you know I support a job guarantee alongside a training guarantee for the long term unemployed, and those who are disabled or with long-term health issues who wish to work. If people on in a guaranteed job are paid at the minimum wage rates this should also put pressure on wages, which I think would be a good thing.”
So what kind of jobs are you proposing to guarantee? Suppose they don’t match the capacities of those seeling employment..?
I perceive your outlook as rather utopian when we seem to be living in an increasingly dystopian world.
nvelope2003: “[women’s suffrage] would help the Conservatives because it did until recently and seems to be doing so again”
[my italics] Interested to know why you think the emphasised part. Opinion polls have shown for quite some time that women tend to be somewhat to the left of men in their politics. This tallies with my own anecdotal evidence; I remember when I was at secondary school (late 80s/early 90s), the girls tended to be more left-wing than the boys. The shift seems to have started in the 1960s, when women started to enter the workforce in significant numbers. So it’s a long-term trend. I would be interested to know if it’s shifting back, and why.
Right-wing politics seems to be a macho world. There was a photo of Tommy Robinson supporters outside court in Metro this morning. There was just one woman in it.
@ JoeB,
With all due respect to William Beveridge times have move along since he tried to define full employment. Then the rate of unemployment in Scotland, Northern Ireland and Wales, was included in his economic model of the UK as whole. Now the rate of unemployment in Spain, France, Italy, Bulgaria etc etc should be included, at least to some extent, because the ‘free movement’ principle clearly affects the UK model. However, you’ve cheerfully excluded those numbers from your considerations.
If you can’t work out for yourself “why wages remain stagnant and at or below inflation in such an economic environment”, then there’s probably little I can say that will help you!
@ Nonconformistradical,
What’s utopian about guaranteeing someone a basic living income? The alternative, literally, is to allow someone to die if they can’t find legitimate work. Or be forced to take their chances on a life of crime.
The difference between those who support a UBI and those of us who support a JG is that we require people to do something for society in return. We can tie in training with the JG. It’s all got to be worth a try because the real problem of long term unemployment is that it leads to unemployability. The costs to society are then huge.
It’s been done before and it can be done again!
https://en.wikipedia.org/wiki/Works_Progress_Administration
Michael BG: Maybe some people could walk out of one job one day and into another one the next day in the 1970s but I was looking for a career and so that was not really practical. I remember my doctor asking me how much I earned and when I told him he said “not exactly a princely sum” but I managed to live a reasonable life. Many jobs become a bit dull after a while but everyone is different in their expectations. I used to become frustrated and depressed without work to do but because of my age I am no longer able to work now except for the daily chores which themselves are becoming a burden.
I guess we all have to accept that some day.
“It’s been done before and it can be done again!”
Roosevelt’s New Deal and Hitler’s Autobahns were Keynesian economic disasters in waiting but both were terminated by World War 2.
The trouble with Keynesian economics is that it created massive inflation. The post war boom was caused by the need to rebuild the economy and all the damaged and destroyed infrastructure after wartime devastation.
@Peter Martin
“What’s utopian about guaranteeing someone a basic living income? The alternative, literally, is to allow someone to die if they can’t find legitimate work. Or be forced to take their chances on a life of crime.”
What I found utopian about Michael BG’s suggestions is failing to indicate what sort of jobs could be guaranteed. There will never be absolutely full employment where everyone who wants/needs employment can obtain exactly the kind of employment they would like.
Especially given the advance of AI etc. which may well make it all the more difficult for people with no or limited skills to get work – that’s the dystopian part.
“The difference between those who support a UBI and those of us who support a JG is that we require people to do something for society in return. We can tie in training with the JG. ”
No problem with that.
“the real problem of long term unemployment is that it leads to unemployability. The costs to society are then huge.”
Couldn’t agree with you more. But that seems a good reason why if even temporary work which needs to be done is available then people not already in work and/or training should be more open to doing such jobs – provided they are physically capable, do not have significant care responsibilities, are paid at least the minimum wage and the job is reasonably local.
Innocent Bystander,
Hitler appointed Hjalmar Schacht as Germany’s Minister of Economics. Schacht supported public-works programs, most notably the construction of autobahnen (highways) to attempt to alleviate unemployment – policies which had been instituted in Germany by von Schleicher’s government in late 1932, and had in turn influenced Roosevelt’s policies. He also introduced the “New Plan”, Germany’s attempt to achieve economic “autarky”, in September 1934. Germany had accrued a massive foreign currency deficit during the Great Depression, which continued into the early years of the Third Reich. Schacht negotiated several trade agreements with countries in South America and southeastern Europe, under which Germany would continue to receive raw materials, but would pay in Reichsmarks. This ensured that the deficit would not get any worse, while allowing the German government to deal with the gap which had already developed. Schacht also found an innovative solution to the problem of the government deficit by using mefo bills, a kind of bill of exchange. During the economic crisis of 1935–36, Schacht, together with the Price Commissioner Dr. Carl Friedrich Goerdeler, helped lead the “free-market” faction in the German government. They urged Hitler to reduce military spending, turn away from autarkic and protectionist policies, and reduce state control in the economy. Schacht and Goerdeler were opposed by a faction centering on Hermann Göring.
Göring was appointed “Plenipotentiary for the Four Year Plan” in 1936, with broad powers that conflicted with Schacht’s authority. Schacht objected to continued high military spending, which he believed would cause inflation, thus coming into conflict with Hitler and Göring.
In November 1937 he resigned as Minister of Economics and General Plenipotentiary at both his and Göring’s request. He had grown increasingly dissatisfied with Göring’s near-total ignorance of economics, and was also concerned that Germany was coming close to bankruptcy. From 1938, Göring and Hitler just used totalitarian wage and price controls plus the forced labour of inmates held in concentration camps to continue the increase in military spending up to and during WW2. Schacht survived the war and wrote of his experiences in the inter-war years in his book The Magic of Money (1967).
@ Innocent Bystander
“Roosevelt’s New Deal and Hitler’s Autobahns were Keynesian economic disasters in waiting but both were terminated by World War 2”
Whether the pre-war economic policies of Germany and the U.S.A were influenced to any significant extent by Keynes is at best debatable. What isn’t debatable is that the “Keynesian disaster” wasn’t spending on autobahns but the spending on WW2 itself.
Once it had started it wasn’t a conflict that was settled by money but the availability or otherwise of real resources. Governments do tend to turn to economists who do actually understand how things work when their necks are on the line!
@ JoeB
“He had grown increasingly dissatisfied with Göring’s near-total ignorance of economics, and was also concerned that Germany was coming close to bankruptcy.”
Whatever other faults Goring might have had, maybe he wasn’t quite as ignorant about economics as you suppose. If he knew that Germany couldn’t go bankrupt providing its debts were denominated in Reichsmarks then he was more enlightened, on that subject, than most.
That’s not to say there couldn’t be an inflation problem or that Germany couldn’t run short of real resources but that’s not the same as bankruptcy.
@ Alex Macfie. You’ve forgotten Marine le Pen, Maggie Thatcher, Emelda Marcos, Madame Ceaucescu, Eva Peron, two of the Mitford sisters, Queen Victoria, Mrs Pankhurst, Catherine the Great, Elizabeth 1, and Mary Tudor – none of whom could be described as fully paid up members of the bleeding heart Liberal tendency.
@JoeB – “The issues we should be focusing on are why wages remain stagnant and at or below inflation in such an economic environment.”
I’m a little surprised that you ask this question. The answer is obvious: a ready supply of cheap labour. Why invest and improve per capita productivity and wages when you can more cheaply import labour and pay lower wages.
@David Raw: You could also have mentioned Katie Hopkins and Ann Coulter, but I’m not sure what your point is. sure, there are women who thrive in far-right politics (tho’ it’s debatable whether some of those you mention are examples of this), but in general it is even more masculine and male-dominated than the mainstream.
Peter Martin,
The German economy under Hitler was funded mainly through deficit financing before the war, and the Nazis expected to cover their debt by plundering the wealth of conquered nations during and after the war.
The Nazi government developed a partnership with leading German business interests, who supported the goals of the regime and its war effort in exchange for advantageous contracts, subsidies, and the suppression of the trade union movement..
Cartels and monopolies were encouraged at the expense of small businesses,.
Nazi Germany maintained a supply of slave labour, composed of prisoners and concentration camp inmates, which was greatly expanded after the beginning of World War II. In Poland alone, some 5 million citizens (including Polish Jews) were used as slave labour throughout the war. By 1944, slave labour made up one quarter of Germany’s entire work force.
The Third Reich and Goring may not have run out of paper to print Reichmarks, but they decimated their country, their economy and that of the countries they occupied.Germany had already been rapidly rearming and militarizing before 1936. However, it was in his memorandum of 1936 that Hitler made it clear he expected war to be imminent. He argued that the German economy “must be fit for war within four years.” Autarky was to be pursued more aggressively, and the German people would have to begin making sacrifices in their consumption habits in order to enable food supplies and raw materials to be diverted towards military uses. Speaking to a meeting of his main economic advisers in 1937, Hitler insisted that Germany’s population had grown to the point where the nation would soon become unable to feed itself, so war for the conquest of Lebensraum in Eastern Europe was necessary as soon as possible. Therefore, if the rearmament drive caused economic problems, the response would have to entail pushing even harder in order to be ready for war faster, rather than scaling back military spending. Seeing that Hitler had taken this stance, Schacht resigned as Minister of Economics in November 1937, and the management of the economy effectively passed to Hermann Göring,
Roland,
wages were rising steadily prior to the financial crisis even while immigration from East Europe and elsewhere was escalating rapidly. Migration may have a marginal impact at the lower-end of the wage distribution but there is no evidence it has any significant impact on broad wage growth.
@JoeB,
“……..but there is no evidence, (migration) has any significant impact on broad wage growth.”
Possibly. BUT it’s just a matter of simple arithmetic, Joe. If the population rises, and wage levels remain the same, or rise, then total spending has to rise too. Where is the extra spending to come from?
1) Increased exports? OK we all know the answer to that one as far as the UK is concerned!
2) Increased Private Sector borrowing and spending? That’s what kept the economy going superficially well prior to the GFC
3) Increased Government Spending? Don’t be silly! We don’t want to end up like Zimbabwe or Venezuela.
Thems the choices. Are there any others? It’s when we think there are , but there really aren’t, that Roland ends up being perfectly correct!
Peter Martin,
migrants coming to work here (or just visit) spend the income they earn on goods and service available in the UK. The reason unemployment has decreased (despite a population increase of 6.6 million of which over 80% is attributed to net inward migration) is that migrants create new jobs by spending their wages here.
The increased workforce increases the capacity to produce goods and services which are consumed by the increased population. The state’s spending levels and associated tax receipts rise as the overall size of the economy increases.
The problem arise not in producing goods and services to meet the needs of an increased population (migrants in aggregate produce these goods and services themselves), but rather in accommodating the housing needs of an increased population density or more specifically the need for more land on which residential housing can be built to meet the increased demand.
Land available for development (unlike produced goods and services like buildings) is limited. The supply of residential and cannot increase automatically to meet demand in the same way that produced goods and services can. This increases rents and the price of housing generally squeezing living standards in areas of population pressure.
@JoeB – You missed my point. As someone who often gives lectures here (on LDV) on Economics, I’m surprised that you don’t have an answer to this question.
As for your assertion “Migration may have a marginal impact at the lower-end of the wage distribution but there is no evidence it has any significant impact on broad wage growth.”, I suggest you crunch the numbers, and look at just how “broad wage growth” is calculated. It’s a bit like that report some waved arounda while back saying how immigrantion contributed £8bn to the UK economy, yes the total figure was realish, however, once you dug into the report, and noted the period it was accumulated over and pulled out the City bonus’s earnt largely by a relatively small group of French and German nationals, the figures looked very different.
Roland,
I have indicated in the original comment (and on many occasions) what I believe are the principle causes of low wage growth in the UK i.e.the transition to a lower productivity service based economy and the prevalence of rent-seeking activities in the UK economy.
The preponderance of authoritative research finds that net migration is a net benefit to the UK economy and of particular positive benefit are younger workers from the EU.
Official data suggests that foreign nationals pay more in income taxes and national insurance contributions than they receive in tax credits and child benefit. The Office for Budget Responsibility forecasts that higher net migration reduces pressure on government debt over time. This is based on the fact that incoming migrants are more likely to be of working age than the population in general.
The UK economy is as dependent today on inward migration to maintain public services and in areas like agriculture and construction as it was when the Windrush generation came here in the post-war period.
Services account for 80% of output in the UK economy. Services include high paying jobs in financial, IT and professional services, median level pay in health, education and low paying work in areas like hospitality, cleaning, adult and child care services etc.
To increase wage levels there needs to be a greater proportion of the work-force engaged in higher-value, higher productivity services and manufacturing. That requires sustained long-term investment in infrastructure and skills development.
Similarly to improve living standards, housing costs and taxation levels need to be addressed. A much greater level of investment in public sector housing is needed to relieve excess demand in the private sector housing market coupled with a shift from taxes on wages and small business profits to land taxation to increase the level of households disposable income.
Joe Bourke, firstly 800,000 does not equal 1.36 million and you shouldn’t claim that it does; secondly according to the DWP there are 2.3 million people claiming Employment & Support Allowance (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/734667/dwp-quarterly-benefits-summary-august-2018.pdf).
The reason wages are near to stagnant is because there is too much spare labour capacity in the economy and this results in lack of investment to increase productivity.
Noncomformistradical, re short term employment adversely affecting people on benefit – “That is just an argument for rectifying the manifest defects in the system rather than using it as an excuse for people not taking the temporary jobs available,”
I gave the true reason why taking a temporary job can affect people on benefits adversely. However, we should look to remove this reason and ensure that there are no disincentives to people on benefits taking any job.
The mechanism for a job guarantee scheme is complicated. It is not a quick fix. Those who get a guaranteed job should get a job which is equivalent to the type of job they can expect to find later. It is not a workfare scheme. The aim is to ensure that the person keeps using their existing skills and keeps them up to date so that when the economy picks up they are still employable.
If there are no jobs in the economy that meet the skills of the people eligible for the job guarantee then they would get to be on the training guarantee to give them skills which will make them employable again.
If AI results in less work, then I think a UBI will be needed.
@ Joe B,
…… the principle causes of low wage growth in the UK i.e.the transition to a lower productivity service based economy and the prevalence of rent-seeking activities in the UK economy.
These aren’t the principle causes. Why do we have a lower productivity service based economy in the first place? Why would anyone voluntarily give up a better paid higher productivity non-service sector job to do something which paid less well?
migrants coming to work here (or just visit) spend the income they earn on goods and service available in the UK.
But where does that income come from in the first place? Where do those ££ originate?
Do they just magically appear as the availability of goods and services increase? And if they do magically appear in the UK economy why don’t they appear everywhere else in the world?
@Michael BG,
You’re mainly on the right track. Except I might just say that if there were a surplus of labour then there could be an incentive to invest more. Say I was a capitalist who wanted to manufacture something. I’d know that recruiting workers wouldn’t be a problem.
But I’d have to know that I’d have enough paying customers to make the investment worthwhile.
@ Michael BG,
“Those who get a guaranteed job should get a job which is equivalent to the type of job they can expect to find later.”
Mmm. Let’s think how this might work. Suppose we look back at what happened when nearly all the mines closed down. So we had lot of skilled miners, but those skills weren’t needed any longer. They were all entitled to whatever compensation they received from the industry and Government.
But what about after that? How do we know what other jobs they might move into? The function of the JG would be to offer those miners an alternative to life on the ‘dole’. It would involve an element of retraining for all those who were young enough to benefit. Yes the JG should pay a living wage but it wouldn’t be linked to future employment prospects.
The Bank of England inflation report includes detailed analysis of the UK labour market https://www.bankofengland.co.uk/inflation-report/2018/august-2018/the-labour-market-and-pay
“Broader measures suggest that there is limited spare capacity in the labour market. In aggregate, the total net additional hours that people report wanting to work, over and above the hours they usually work each week, has fallen to around zero. As discussed in previous Reports, the proportion of the population who report that they would like a job but are not currently seeking one — the marginal attachment ratio — has fallen sharply in recent years, suggesting that there is no significant spare capacity among those not actively looking for a job. The number of vacancies per person in the labour force — which is an indicator of the difficulty with which employers would be able to fill jobs — is above its pre-crisis average. The rate at which those already in employment are switching to new jobs has risen to close to pre-crisis rates and survey measures of firms’ recruitment difficulties are at or above pre-crisis levels.
With little slack in the labour market, growth in the size of the workforce will come mainly from population growth. A key influence on population growth is net migration to the UK.
The labour market is expected to tighten further in the near term. Employment has continued to grow solidly and labour demand growth appears robust. The strength of employment growth over the past few years has been associated with lower flows out of employment rather than higher flows into it . Within this, the redundancy rate is around half its pre-crisis average. Many survey indicators of employment intentions remain above their past averages and the number of vacancies remains high.”
Michael BG,
I have given you the reference for claimants of unemployment related benefits including Employment and Support Allowance and other incapacity benefits, and Income Support and Pension Credit https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/outofworkbenefits – 918,800 in August 2018 according to the ONS.
Peter Martin,
Where do those ££ originate?. In the early 2000’s Brits were pouring billions into the purchase of holiday home across Europe. Where do you think the money came from? Clue – it was not government spending.
As net inward migration increased in the aftermath financial crisis the purchase of overseas property by Brits dried up and turned towards domestic spending. This spending included a significant element on home improvement/construction services provided by newly arrived migrants.
Joe Bourke, why do you think that the theory of supply and demand does not apply to wages and more people looking for work does not adversely affect the wages offered in our economy by reducing pay rises?
I didn’t think you believed in the multiplier, so how can you write that the spending of immigrants will generate more demand in the economy when you deny that it happens when the government employs extra people funded by increasing the government deficit and at the same time reduces the number unemployed?
If the 1.1 million people who have a disability or health issue that I think would like to work were in work (based on the number of people who are claiming ESA and not the labour survey like the ONS figures you quote) they too would provide a net benefit to the economy. If the unemployment rate was only 2.5% another 500,000 people would be in work providing a net benefit to the economy. It would be interesting to know how many of the 8 million plus part-time workers would like to work full-time. And these people working more and earning more would be providing more of a net benefit to the economy.
Michael BG,
what you are arguing is called the ‘Lump of Labour Fallacy’. A long refuted argument that has no basis in fact. You can find a discussion of the issue here https://www.economicshelp.org/blog/21819/concepts/lump-of-labour-fallacy-immigration/
Fiscal and/or monetary stimulus is an inappropriate response when the economy is at or close to full employment, as the Bank of England survey suggests it is.
Improvements in Public service delivery and welfare provision require tax funded increases in government spending. Improvements in living standards require public and private sector investment funded by borrowing.
@JoeB,
The $ is a monopoly issue of the US government. It’s a govt IOU, or tax voucher if you like. Similarly the Yen with Japan and the £ with the UK. So, naturally the Govt decides the unit of account of its jurisdiction.
All ££, as BoE issue, originate with govt. The commercial banks can issue their own IOUs denominated in £ but they have a liability too. They have to make good their liabilities in BoE issue on demand.
So yes, all ££ have to originate with the UK govt which spends them into existence. Just like the US government spends $$ into existence.
@ Michael BG,
You’ve said that Labour and wage rates have a supply and demand effect. Just like anything else. And you’re right. Joe then tries to muddy the waters with a “lump of labour” argument. That’s possibly a valid argument under a Government which controls the economy in a sensible fashion. But when does that ever happen?
It still doesn’t mean there’s no supply and demand effect for labour! The whole point of the NAIRU is that there needs to be a pool of unemployment and underemployment to prevent wage inflation. It should really be the NAIRUU. Behind all these fancy terms there is a simple enough meaniing. The bigger the pool of unemployment/underemployment the less bargaining power the workers have. That’s just the law of supply and demand at work as you suggest.
You’ll find in all developed countries the right wing forces are torn between wanting low levels of immigration for Nationalist reasons, we have Trump’s wall in the USA for example, but, on the other hand they want high levels to keep the wages of the existing workforce down. They can’t have it both ways.
I’m not sure what planet JoeB is on if he thinks we are at full employment. I’ll start to believe the official figures, and BoE surveys etc, when someone who wants 5 days work but only get 1 day per week is counted as 80% unemployed rather than not unemployed at all. Plus there are lots of other ways that Govts have devised, over the years, to massage the figures downwards.
@JoeB – “Official data suggests that foreign nationals pay more in income taxes and national insurance contributions than they receive in tax credits and child benefit. “
I take it that you are aware that the government does not collect data on in-work benefits given to foreign nationals, with totally undermines any report that claims that foreign nationals pay in more than they receive…
Roland,
Research from the Bank of England https://www.bankofengland.co.uk/working-paper/2015/the-impact-of-immigration-on-occupational-wages-evidence-from-britain considering the period between 1992 and 2014, found that a 1% rise in the share of immigrants reduced averages wages in unskilled and semi-skilled service sector by just under 0.2%.
These impacts were reviewed in two recent government studies by the Department for Business, Innovation and Skills https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/287287/occ109.pdf and by the Migration Advisory Committee https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/333083/MAC-Migrants_in_low-skilled_work__Full_report_2014.pdf respectively.
The available research also shows that any declines in wages are likely to be greatest for resident workers who are themselves migrants. This is because the skills of new immigrants are likely to be more similar to the skills of migrants already employed in the UK than for those of UK-born workers.
A study from 2012 https://onlinelibrary.wiley.com/doi/full/10.1111/j.1542-4774.2011.01049.x which analysed data from 1975-2005 concluded that the main impact of increased immigration is on the wages of immigrants already in the UK. They find that university-educated immigrants are particularly impacted by migration, but that there is little effect on the wage of the UK-born.
The evidence base for economic analysis and policy development is there for anyone who cares to look for it.
Roland,
on the relative contribution of immigrants to the UK economy in terms of taxes vs benefits, recent arrivals tend to be younger than those here for a longer time, This can mean they’re less likely to be receiving state assistance. And if people come here when they’re working-age and leave before they get old, they’re much more likely to be putting in more than they take out
http://www.cream-migration.org/publ_uploads/CDP_22_13.pdf#page=29
The same research looked at all immigrants living in the UK between 1995 and 2012—these people could have arrived decades ago in some cases. For EU immigrants the contributions were smaller http://www.cream-migration.org/publ_uploads/CDP_22_13.pdf#page=41 and those from outside the EU took out more than they put in http://www.cream-migration.org/publ_uploads/CDP_22_13.pdf#page=28
EU immigrants living in the UK are thought to have contributed £1.05 for every £1 received and, for non-EU immigrants, 85 pence for every £1.
Non-EU immigrants are more likely to have had children http://www.cream-migration.org/publ_uploads/CDP_22_13.pdf#page=28while in the UK than EU immigrants. Counting the cost of those children’s education is one reason why the contributions are lower than the receipts for this group.
The latest findings estimate that recent immigrants from the 10 countries that joined the EU in 2004 (mainly eastern European) contributed £1.12 for every £1 received. Those from the rest of the EU put in £1.64 for every £1.
Peter Martin,
the bank of England provides a straightforward explanation of how money Is created in the UK http://edu.bankofengland.co.uk/knowledgebank/how-is-money-created/. The central banks role is to influence the demand for credit creation through its manipulation of interest rates.
The two principal characteristics of MMT are: (1) a theory of public finance, which identifies inflation as the constraint on deficits, and advocates fiscal dominance; and a belief that (2) money is a liability of the state. The latter is false. One feature of a liability is that in order to transfer it voluntarily to another party you must pay them a positive sum. According to MMT, the supposed ‘liability’ money confers on the government is that it is accepted in payment for taxes and other government services. However, everyone else accepts the same money as payment, without further inducement. It should be clear that money is accepted because it is backed by some tangible value. In zero or low tax economies like oil producers it is the oil reserves. In low tax economies like Hong Kong (where public services are largely financed by the leasehold premiums and land taxes) it is the productive capacity of the economy that gives value to the Hong Kong dollar. In the higher tax developed economies it is the same feature that gives value to the currency – the productive capacity of the economy.
As regards the UK operating at or near to full employment, the Bank of England Survey referenced above https://www.bankofengland.co.uk/inflation-report/2018/august-2018/the-labour-market-and-pay states “…that there is limited spare capacity in the labour market. In aggregate, the total net additional hours that people report wanting to work, over and above the hours they usually work each week, has fallen to around zero…the proportion of the population who report that they would like a job but are not currently seeking one — the marginal attachment ratio — has fallen sharply in recent years, suggesting that there is no significant spare capacity among those not actively looking for a job.”
Joseph Bourke, I don’t believe that the amount of work in the economy is fixed. If you thought about my views you would know this. If you read all of what I had written in my post you would know this. The multiplier states that for every new job a reduced amount will go towards generating more demand in the economy because some of their earnings will go in tax etc.; be saved; be spent on imports. What I stated was if there is a pool of labour available then wage increases will not rise as fast compared to the situation where there is almost no pool of labour available.
If I have understood your 11.45pm post you accept that wages do in fact decline (which I hadn’t suggested) for some people because of immigration. The Bank of England has found that with a 1% increase in just the share of employees who are immigrants wages fall by 0.2%. That is much bigger than I had suggested.
The Bank of England report survey which you quote states that it is their opinion that there is limited slack in the economy. I think they are wrong. I disagree that the “equilibrium rate of unemployment” is 4.25%”. I am not convinced that their tables shows what they claim they show. I would be interested to see the research setting out clearly about how much extra work those in part-time jobs would like to do. There is a problem with their opinion because they also report that average weekly hours have fallen to 32.
@JoeB,
“The….. principal characteristics of MMT are….. money is a liability of the state.”
Not quite. Some money is a liability of the State. MMT follows Minsky in saying that anyone can create money. So, for example, if I’m running a card game I can replace £5 notes with blue tiddlywinks, £10 notes with red etc. So I’m creating money. But am I any better off? No of course not. Because I have a liability to replace those tiddlywinks with BoE money on demand. If the people in the card game didn’t trust me, or they thought I was in negative equity and couldn’t make good when required, they wouldn’t go along with it all.
And that’s all the Banks are doing when they are supposedly creating money. This is the gist of the BoE paper you quote. The Govt is in a more advantageous position than everyone else. The don’t have to be in positive equity. They can’t be as the currency issuer because everything has to sum to zero. If everyone else can and must be in positive equity they have to be in negative. It’s just arithmetic.
So there is a hierarchy of money. A pyramid of IOUs. On the bottom would be invoices and credit notes we exchange in business. Then there’s Bank money at a higher level. On top of the pyramid is Govt money. BoE money. You can probably think of other examples like a written cheque which will fit into the general structure.
So you really need to get this right, Joe. An economist who doesn’t understand what Govt money is in an era when there’s no gold, or anything else backing it up, is like a Chemist who doesn’t understand what atoms and molecules are, or a Physicist who doesn’t know what electric and magnetic fields are.
Yes of course non-taxpayers will also accept that ££ are worth something. If I need to pay my taxes and a non taxpayer has £25 then they’ll know that I’ll mow their lawn (or whatever) in exchange!
Don’t tell me you can’t figure that out for yourself , Joe!
@ Joe B,
On the question of full employment, I would say that the general mistake made is to take the UK economy as whole. There probably is closer to full employment, under any sensible definition, in London and the S.E. of England. If Govt generally spends more into the economy and there’s no targetting of spending it is quite likely that it won’t get as much effect as it should. Prices, of property and wages etc, will simply rise in the more prosperous regions.
However, if the spending is targeted towards areas which are clearly not at full employment there will be much greater tangible benefits and, of course, without the inflationary effect of the extra spending.
This is a much bigger problem for the EU with its single currency. Money spent in the Western part of Germany will probably cause extra inflation and won’t produce much, if any, extra benefit. The same money spent in southern parts of Italy or Spain will have a huge benefit and won’t create inflation.
Peter,
The Bank of England is staffed with highly capable economists who understand very well what government money is.
Money can be created in three ways. Notes and coin., banl lending to create depositsand government spending.
As the Bank of England states “most of the money in the economy is created, not by printing presses at the central bank, but by banks when they provide loans.£ New money is created as debt when a bank makes a loan.
Electronic central bank money, or reserves. represents about 17% of the money supply. The BofE They describe its use as:
[M]ost banks have accounts with us at the Bank of England, allowing them to transfer money back and forth. The reserves are funds held in these accounts to ensure that banks can meet their obligations to each other i.e. the purpose of reserves is a liquidity buffer to ensure that inter-bank transactions can be settled on a daily basis.The BofE can increase or decrease reserves through open market operations i.e. the buying or selling of government securities.
Money is created either when the government spends, or when a bank makes a loan.
The bank lends money into existence. That creates private debt that is cancelled on repayment.. Repayment of loans does not provide new money for lending. It just cancels debt. Recording the debt in the books of the bank and customer creates the money and repaying it reverses the entry and cancels the money.
Just as a bank does not wait for someone to deposit money to lend (and could not in the first instance, because until banks lent there would be no money to deposit) so governments don’t wait to collect tax before they spend. Instead they tell their own bank (the Bank of England in the UK) to spend for them. And then when they have spent they have created the money that can be paid in tax. And they have also created the money that can be used to buy the bonds the government issues if tax receipts are less than the total spend.
Government spending creates the money to enable the payment of tax or to buy government bonds i.e. money taken out of circulation from the private sector. Any shortfall in tax revenue compared to spend is either funded by the public lending the money the government has created back to it in the form of bonds. It is only this form on money in the economy – government spending – that can be said to derive its value or legitimacy from the imposition of taxes.
Michael BG,
the world of work is changing rapidly. We are in the midst of a technology and automation driven industrial revolution. There seems to have been some recognition of this fact at the recent labour conference with proposals for a 4 day working week endordedby the TUC. A trial in New ZeaLand of a shorter working week has been declared an unmitigated success https://www.theguardian.com/world/2018/jul/19/work-less-get-more-new-zealand-firms-four-day-week-an-unmitigated-success
We need new ways of thinking. As driverless lorries, cars and trains are rolled out and more and more manual tasks are automated there will be greater competition for the fewer jobs of any kind that are available, driving wages down as a large pool of unemployed workers compete for a dwindling number of jobs.
What is required is an economy that facilitates the equitable distribution of productivity gains between labour and capital. Access to housing for all, whole of life retraining and a universal basic income that recognises that land and natural resources are a communal good and not the sole preserve of a privileged few.
Alex Macfie: There have always been what you would call left wing women but now the left are not radical because they support either the maintenance of the status quo or a return to state control and subsidies without fully or convincingly explaining who will pay for them or where they will come from so now those people are the conservatives (small c). No doubt many women support these policies as they believe they will benefit most because they do not remember that state controlled organisations like railways also raised prices every year as well as receiving large subsidies and providing services demanded by a vocal minority but little used by ordinary people. As the railways and their timetables are still controlled by the Government this policy still continues with increasingly costly effects.
The Conservative party seems to be a coalition of centrist moderates who come from a Conservative upper class background and largely support the status quo and radical free market supporters who want to remove all protection from workers and create a smaller state, leave the EU etc. There are plenty of moderate women who wish to maintain the status quo but not so many who want radical changes.
This also applies to women in the work place in my experience – “we have always done it that way” was a popular response to any plan to improve efficiency though there were exceptions and some of them even suggested useful changes.
The word radical implies going to the root of a problem to look for solutions not harking back to yesterday’s solutions. Of course that does not mean that modern radical solutions are always or even often right.
@ JoeB,
I have no doubt the BoE does have capable people. In fact I’ve no argument with them. The problem is that you don’t appear to understand what they are saying.
IF the commercial banks could “create money” in the way many people claim, then they’d never go bust. They wouldn’t need to bother offering services in the high street. That would be totally unnecessary for them!
Can you try explaining yourself in your own words for a change? Instead of appealing to authority. Especially when you get it all wrong anyway!
And if you want to argue against the MMT view on what money is, that is of course fair enough. But can you argue against what it actually is rather than what you would like it to be?
http://neweconomicperspectives.org/2014/06/modern-money-theory-basics.html
Peter,
it is not lack of understanding. If I have not been clear, I will reiterate that the proposition that it is taxes give a currency value is a simplistic fallacy. It is the productive output of the economy to which money allows access that gives the currency value.
When you are presented with facts or authoritative sources that contradict these fallacies, you complain of obfuscation or lack of understanding
The money supply in the economy is principally created by bank lending as the BofE souces make clear. It is banks and shadow banking financial institutions that generate the over-supply of credit that leads to asset bubbles in the propery and stock markets; and it is the bursting of these bubbles that precipitate major financial crises that lead to severe economic downturns (although not necesarily milder cyclical downturns)..
Government money is not difficult to understand. When the government spends money on wages, goods and services it creates money in the economy (redistributions are internal transfers only).. When it taxes or borrows it withdraws money from the economy.
The more the government spends as a % of national income, the more it has to tax and borrow. The more it borrows, the more it needs to tax to meet debt service costs. Spending in the economy (both public and private) is constrained by the productive resources available. As the economy nears its productive capacity it requires additional capital investment (both public and private) to increase output. The financing for that investment spending comes from government borrowing (withdrawing money from the economy) and bank lending (injecting new money into the economy) . The increased output generated is both the source of income for servicing the newly created debt and what preseves the purchasing power of the currency. Increased spending that does not generate additional output (which it cannot when the economy is close to its physical capacity) simply generates inflation and a fall in purchasing power of the currency.
Peter,
with respect to MMT as I have noted before, it is not most of the basic analysis that I think there is any problem with, it is the assumptions or conclusions you and others draw – such as claims that the government must run a deficit for the private sector to accumulate savings.
In the link you make above L. Randall Way says “Our currency is government’s liability, an IOU that is redeemable for tax obligations and other payments to the state.”
In your comment you appear to take a different position stating that only “Some money is a liability of the State.”
Either way it should be clear that the great bulk of money in the economy is not redeemed to settle tax obligations. Government spending on goods and services (excluding transfers) accounts for around 20% of GDP.
Reserves held by the BofE constitute about 17% of the money supply at present. Are these a liability of government? In theory a commercial bank can ask to convert reserves into cash – the CB can choose to do this or not, but the whole point of having deposits at the central bank is to settle payments between banks. They are only a liability to the exent that the conventions of double-entry bookeeping require a record to be maintained as such.
A casual passerby might imagine that 113+ Comments on this post prove that Lib Dems (still) only really care about PR… but they don’t know about the Joseph and Peter Show…
Yes Malcolm, we owe an apology to Ewan for hijacking this thread. Things started to go awry when David Raw started talking about Asquith and women’s suffrage, and seriously wrong when Innocent Bystander brought Hitler into it a couple of days ago saying – “Roosevelt’s New Deal and Hitler’s Autobahns were Keynesian economic disasters in waiting but both were terminated by World War 2.”
@ JoeB,
Obviously there has to be something of value in the economy. So if we were all living in a desert with few minerals to dig up and insufficient water to grow food then we’d all be in big trouble. MMT doesn’t say that the imposition of taxes would make a currency valuable in those circumstances. MMT can’t conjure up water and oil where none exists!
But it does say that taxes underpins the value of $$ and ££ etc by creating a demand for the currency. The old idea was that $$ were worth something because they were guaranteed against gold. Now there’s no gold. So why would anyone want to swap oil for pieces of paper? Or digits in a computer? They need the digits to pay their taxes.
@ Malcolm Todd,
I am aware that these kind of discussions can be off putting. But the title of this thread is ‘desperate times..’. But why are times “desperate”? The Earth hasn’t been hit by an asteroid. Climate change hasn’t really kicked in yet. We still have oil and gas in the ground. .
Our problems are all self inflicted. There’s really no need for us to have the problems we do. And in the main they are brought about by faulty economic thinking. There’s no other explanation. Why would anyone expect that you can impose a common currency on 19 countries and just expect it to work? If it had we wouldn’t have had Brexit.
Why do people think that austerity economics gives us any gains at all? It all starts with the basics. If you don’t understand what modern money is, and many economists clearly don’t, then we’re all screwed! It’s no wonder we have the problems we do.
Peter,
“why would anyone want to swap oil for pieces of paper?” That is exactly what places like Brunei does.
According to MMT, money is a liability or debt of the government because it is accepted in payment for taxes,
However, a ten pound note is not a debt – because the issuer owes the holder nothing. We do not hold notes in order to be repaid, we use them, primarily, to buy things.
Debts have a different function and source of value to physical cash. Debts are used to provide streams of cashflows to their holders, and their value resides in the debtors ability to meet payments. By contrast, money is used to pay for things, and its value resides in a network externality – it has value because it is accepted by others. And the more widely accepted the money is, the more valuable it becomes – hence Brunei or China swapping commodities and manufactured goods for dollars. Debts have nothing to do with network externalities. So the properties, uses, and value of physical cash are completely different to those of debts. That is why we have two different words: “money” and “debt”.
MMT doesn’t recognise the distinction between money and debt and classifies money debt on the basis of double-entry bookkeeping conventions. Debts carry an obligation to be repayed or redeemed. The point is that a ten pound note carries no obligation to be repaid – in fact, it is not even meaningful to ask if you will be repaid for your ten pound note.
If the issuer of a ten pound note owes you nothing, how can MMT imply otherwise? By changing the meaning of ‘debt’, ‘redeem’ and ‘repay’. A fallacy is presenting two things as being the same when they are different e.g. by changing the meaning of ‘debt’ ‘repay’ and ‘redeem’ when it applies it to money.
The payment of taxes – a liability of the taxpayer, does not change the distinct properties of money and debt. This is not to say that the requirement to pay taxes in money issued by the state is not an important means by which the state establishes its monopoly – it is. State directive is an effective way to establish a dominant standard – and a dominant standard with network externalities is extremely difficult to break.
I agree that an understanding of modern money is essential to effective economic policymaking. to do that, you need to begin with an understanding of the difference between money and debt.
Joe Bourke, the article you posted a link to on the Lump of labour fallacy ends by stating that if the number of hours worked in a normal week are reduced this will not “necessarily create jobs.”
On 26th September I wrote, “We do need to be aware of the possibility that there will just be less work in the future and think about how we share out the work and split the increased returns on capital.”
When my parents started work it was normal to work on Saturday morning as part of the normal working week. I think it was in 1950s that this stopped being normal. However we still talk about 40 hours as being normal. We should be thinking about reducing this to 37.5 and then 35 hours.
You should be aware that I support the idea of a UBI.
When you talk of land and natural resources as being communal and not the preserve of a few you sound like a socialist! I think it was Peter Martin who pointed this out to you in the past.
@JoeB,
A £10 note is both a liability to the issuer and asset to the holder. Normally those notes are issued by the BoE but they could be Brixton Pounds or Bristol Pounds or Scottish Bank Pounds. The liability of the Bristol Pound issuer is to make good in BoE pounds on request. At one time the liability of the BoE was to issue a fixed amount of gold in exchange for the paper notes. That’s why they were called promissory notes.
So we can express the Bristol pound as (-10,+10). The issuer of the Bristol pound can’t make themselves rich because the two numbers sum to zero. But they are still ‘creating money’ in the economic sense of the word.
But now there’s no gold. So if the BoE issues a (-10,+10) note (or the equivalent digitally) what’s the -10 ? Its a committment by Govt (and the BoE is really a part of Govt like any other) to accept these as payment in taxes. That’s all. No-one can force the Govt not to be in negative equity.
So if anyone pays £100 in taxes, the Government relived of it -100 liability and its numbers move in the positive direction.
Peter,
I have read L. Randall Wray’s argument that leads him to conclude that “Our currency is government’s liability, an IOU that is redeemable for tax obligations and other payments to the state.” You have to accept the reasoning of MMT to come to that conclusion, which I would suggest many would not.
Bank notes are created and circulated until they become worn and are burnt. Most money in the economy is bank created money and a fraction of this money is used to pay taxes.
When as you do above state that all £’s earned by newly arrived immigrants must come from the government you are using the same argument put forward by L Randall Wray. It is, however, not what happens in the real world. The newly created money is created in the private banking system and arises as a result of the increased spending and output created by an increased population.
@ JoeB,
I really don’t believe you understand the difference between commercial “bank created money” and government money as issued by the BOE.
If you do maybe you can explain why commercial banks can, and indeed do, go bust. But a currency issuing government simply cannot. That’s not to say there can’t be an inflation problem.
The difference of course is that commercial banks can’t go negative. Except perhaps if, like with Italian banks everyone pretends they haven’t! But currency issuing Governments can and should. If they aren’t negative then they haven’t issued any currency.
It’s just simple double entry book-keeping!
Peter,
sovereign currency states default by destroying the value of the currency. The Weimar Republic or Zimbabwe didn’t run out of paper to print bank notes on the currency just wasn’t worth the paper it was printed.
Banks can make bad loans and become insolvent unless they are too big to fail in which case the taxpayer is called upon to bail them out.
MMT is fine when it sticks to a description of how the banking system actually works. Where it goes wrong in my view is when it engages in artificial constructs such as the idea that tax liabilities are what determine the value or utility of a currency.
Government spending (not central bank reserves) can be said to create a claim on the private sector that is met by tax payments or the issue of government securities. Most money in the economy is not, however, government spending, it is private spending conducted within the private banking system.
Peter Martin, on 29th September you made a comment regarding a guaranteed job scheme where you stated that a guaranteed job scheme was not as I described it. I had clearly suggested that two different schemes are needed one I call a job guarantee scheme and the other a training guarantee scheme. Therefore under my two scheme approach the only training required when on a job guarantee is to keep a person’s existing skills up to date.
In your example of a miner they would be offered a training guarantee place, to be trained to do something that there are plenty of job vacancies so when they complete their training and possibly a job guarantee scheme afterwards to give them the relevant work experience there will be job for them to do.
“But a currency issuing government simply cannot.”
Good grief. Take a holiday in Brazil. Venezuela or a couple of dozen others and ask them.
@ Michael BG,
There’s plenty of detail to discuss about how the JG would work. I personally wouldn’t want to have separate training and job programs. We could have day release from jobs or evening classes or approved courses to attend. It’s all negotiable. One question to be answered would be what to do about people who live in very remote places? What if someone moved to an uninhabited island like St Kilda? Should they be guaranteed a job?
@ JoeB @ Innocent Bystander
Look, this sort of stuff was said when the US and UK govt engaged in QE to bail out the banks. We were going to have hyperinflation because of the huge expansion in the “money supply”. It didn’t happen. Those who understood MMT predicted it wouldn’t happen. Those who didn’t understand went off and bought gold bars and created a spike in the price of gold.
Hyperinflations, like in Zimbabwe and the Weimar Republic, tend to occur after wars have destroyed a significant part of a countries productive capacity. I don’t think that’s likely in the UK. Do you?
Joe, you’ve still not explained how banks can go bust if, like you suggest, they can ‘create money’.
“I don’t think that’s likely in the UK. Do you?”
Well, as a matter of fact I do. (BTW Venezuela hasn’t had a war recently).
We have an economy propped up by borrowing. The Keynesians tell us not to fret but when we ask when the economy will turn around and how, they will not say. I see no plausible renewal mechanism of this nation’s ability to pay its way in a world where every nation is fighting for its own prosperity. All the signs are that our earning abilities are ebbing away but our urge to spend on ourselves grows ever larger.
As to “no nation can go bust” go to a favella in Sao Paolo and try that pitch. They will tell you that in the real world if you have nothing to sell you don’t eat. It’s on its way here too.
The stunningly pathetic offerings of our political elite such as “train apprentices” and “encourage more co-operatives” are a thimble full of water onto a forest fire.
So my prediction is (you read it here first) is that the UK’s first run on the banks and collapse of sterling comes in the period 2025 – 2030. (And that’s the first).
Peter Martin,
you are doing yourself and MMT a disservice when you make rather silly statements like “I really don’t believe you understand the difference between commercial “bank created money” and government money as issued by the BOE” and “It’s just simple double entry book-keeping!”
Not every debit and credit in double-entry bookkeeping is an asset or liability. The basic accounting equation is Assets = Liabilities + equity. In accounting we have something called the conceptual framework. This is an agreed set of international norms in which an asset is defined as a “resource arising as a result of past events and from which future economic are expected to flow; and a liability is defined as “a present obligation arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits. Equity is the residual interest in the assets after deducting all liabilities.
A further overriding principle of the conceptual framework is that of “substance over form” i.e. we classify elements of financial according to their economic substance and not their legal form.
The recording of sovereign money as a liability is a convention that is a throwback to the days when bank notes could be converted to gold. In a fiat money system there is no obligation to redeem bank notes or any other form of government money for anything. It is in substance equity of the state not a liability – hence government money is not debt.
You can download a detailed exposition here https://positivemoney.org/2016/04/new-report-why-state-issued-money-is-not-debt/ if you have the time and inclination to delve into the technical details.
Countries, like companies, can issue as much equity as is demanded by the market. When a company issues new shares it dilutes the holdings of existing shareholders, When it buys back its shares it increases the earnings per share.
A country with sovereign fiat currency creates new money via spending and withdraws money via taxes and borrowings. If it increases the money supply without increasing the aggregate output of the economy at the same time it will devalue the currency in much the same way that a firm issuing new equity without increasing its total earnings will reduce shareholder value.
As was pointed out a couple of days ago – this thread has been well and truly highjacked.
Perhaps the economic nerds might agree to disagree…? And then shut up….? Or continue their debate in private…?
The OP was about PR. Personally I’d rephrase it and talk about wider political reform. But this is my contribution for today.
@ Nonconformistradical,
You may think it’s nerdy but Brexit, which is mentioned before PR in this thread, is the direct result of a faulty understanding of economics. Primarily In the EU but also in the UK too. Like this report in the Mirror.
“Philip Hammond to make £1.3 billion cut to vital council services”
There’s no need for it. If LibDems don’t understand WHY there’s no need for it you’ll never get anywhere politically. You be writing articles on why you aren’t in double figures in the opinion polls for ever more.
https://www.mirror.co.uk/news/politics/philip-hammond-make-13billion-cut-13338183
@Nonconformistradical
I quite agree but all the threads end up either in this economic table tennis or similar over Brexit.
Our rapidly collapsing economy is the key anxiety that underlies much of the fear that the people instinctively recognise but which they express in rebellious gestures.
The first group that emerges who can offer a well articulated way forward will romp to electoral power. 99.9% of the other topics covered on this site have no electoral dynamic at all, the people have heard it all before.
My own view is that we can not move forward while this wall of misguided Keynesian economists and their view of “it will be all right soon” prevents Mr and Mrs Public from seeing their impending catastrophe.
There is no serious debate on reviving our economic situation even though it’s by far the big issue.
Who said “It’s the economy stupid”? when asked what the public’s key worry was.