Everyone can recall the bitter divisions in our society last year. Families were split about Brexit; friends chose which friends to talk to, there was rage and blame ringing across the airwaves and on social media, while In the House of Commons, the MPs tried and tried again without success to reach agreement on whether, when or how to leave the EU.
But this spring the bitterness is gone. That isn’t because of general weary resignation that Brexit is settled. It’s because in facing the pandemic disease to which we are all susceptible millions of us are pulling together in facing up to it. We have surrendered civil liberties, altered our lifestyles, closed businesses, foregone sociable pleasures and knuckled down to hard work or to the new challenge of staying mostly at home. Nobody is pleased about it, but we are generally united in our feelings about its inevitability. Where will this newfound unity, which is so reminiscent of what we understand happened in the two World Wars, take us next?
In Radio 4’s Any Questions programme last Friday night, the Tory member of the panel spoke of ‘transformational change’ to come, which he expected to be led by the present government. Certainly, the current economic policy of the government shreds the small-state approach expected of the Tories, with the multiple handouts authorised by Chancellor Rishi Sunak. A Tory chancellor is paying 80% of the wages of thousands of workers! and harmony reigns, with the opposition parties including our own generally supportive of the strategy, though critical of its shortcomings. What can the Liberal Democrats do in future other than encourage the government to continue their newfound practice, even if it isn’t rooted in principle, of providing financial support to struggling companies and employees and the self-employed?
The answer for us is undoubtedly to look further ahead and more deeply. Look at the underlying problems of our society and the challenges to come, and demand the transformational changes which will indeed be needed, but which it is not in the Tory DNA to wish for. Just as the Liberal William Beveridge described during World War Two what he saw as the continuing evils of his time and proposed the great reforms that led to the National Health Service and social insurance, so should we now propose the radical changes that are needed to address the equivalent great ills of our time. They are: poverty and inequality, inadequate health and social care, failings of education and training, rising unemployment and lack of sufficient homes, plus the huge problems of climate change. We should demand a new social contract between government and people, with our expectations of the government to be matched with the co-operation and creativity of the people. In a second article, I will suggest some specific changes and remedies we should demand, and ask everyone to contribute their thoughts on this.
The welfare state was created as the result of the social cohesion arising from the devastation and sorrows of the Second World War. This war on the virus which has brought us together can be similarly utilised by our party, give us the distinctive voice we need, and above all to further our country’s wellbeing.
* Katharine Pindar is a long-standing member of the Cumberland Lib Dems
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My Heart responds to all this but there is a huge obstacle – the 30,000 Dead. We know from looking at other Countries that, with better Political leadership that Total could have been much smaller; what about Justice for those who died when they didnt “Need” to ?
As with The Peace Process in Northern Ireland we are faced with a horrid choice between Justice & a better Future.
Thank you for your heart’s response, Paul. There will certainly need to be an enquiry, as our leader has been demanding, and we must find out how far the mistakes should have been avoidable. I did not expect much of this present government of ours, and I too grieve for the many untimely bereaved. This though is a day, somewhat grotesquely, of both life and death, and I am turning here both to remember all those who have lived with great difficulties through austerity under Tory government, and to try if we can to help those who survive to a better life in future.
The saying goes that the two things you can’t avoid are death and taxes. Well, the former is sadly visiting some of us sooner than we had hoped, so perhaps it’s time that the latter put in an appearance. By this I mean that, if we are ever going to create a fairer society, most of us have got to be prepared to pay for it by increased direct taxation.
A timely post, Katharine, and I agree with Paul and John.
As part of ‘blue sky’ thinking we really ought to look at the issue of social care…. it ought to be a National Health and Social Care service.
Do we really want foreign investors and hedge funds to have such influence on the care homes so much in the news now…. and so tragically let down by this government on both testing and PPE ?
Here’s what the Financial Times not many years ago :
“US investors snap up UK care homes. Earlier this year a Wall Street hedge fund best known for its role selling the Hollywood film studio Metro-Goldwyn-Mayer bought 27 care homes for the elderly across Britain. The deal was the second in the UK’s £15.1bn-a-year care home market in less than a year for Anchorage Capital and widely seen as yet another sign of the growing interest in the sector by foreign investors.
With the number of people aged over 65 expected to rise from 10.6m in 2010 to 16.1m in 2035, demand for care homes is already outstripping supply and the concern is that the ageing population will overwhelm capacity.
This is creating a global appetite for investment in Britain’s care home sector, with real estate investment trusts from North America stepping up their involvement in the UK market in the past two years. Hedge funds from the Asia-Pacific region as well as investors from the Middle East seeking sharia-compliant opportunities have also joined more traditional investors such as pension funds in the UK”.
Thanks, John and David, for your comments. There will certainly need to be higher taxes, John, but I hope they will not fall on the poorest. Our policy is the taxation of wealth as well as income, and of land-value taxation on the estates. David, one of the five pillars of our Social Contract idea, following the five evils that Beveridge cited, is of course health and social care. I agree that there has to be cross-party progress on that one, for national concern at this time to be translated into cross-party commitment for a national integrated service with proper financing.
What you tell us about financing of care homes is indeed worrying, and I am very sad about the deaths in care homes which might have been prevented by proper PPE provided to all, and by the probably lesser chance those who caught the virus in homes had of transfer to hospital for the sort of intensive care our PM was given.
Katharine,
you write that “The welfare state was created as the result of the social cohesion arising from the devastation and sorrows of the Second World War”. It certainly made it easier to implement, but it was the culmination of several decades of work and the experience of large scale unemployment and deprivation in the 1920 (extending into the 1930s in the industrial areas of the North and Welsh valleys) that was the catalyst.
This crisis will have to be paid for. Firstly, will be through borrowing. There is no inflation on the horizon, interest rates are low and in some cases negative, and financial markets have been taking up government debt so far without any signs of friction.
The second way governments can “pay for” the extraordinary measures coming in is tax. Although tax receipts don’t need to match spending in the same period, they do still need to be collected.
Tax systems play a crucial role in the economic question at the heart of this crisis: how the pain of lost output is shared out.
In times of war, governments have tended to make wealthier sections of the population and large businesses carry a larger share of the burden than before. In the First World War, for instance, both Britain and the United States imposed an 80 percent tax rate on excess corporate profits (above an 8% annual return,) and the top income tax rate on the highest earners rose from 15 percent to 77 percent. Something similar happened in WW2 when top income tax rates rose to 94 percent in the US. In the UK, the top income tax rate rose even higher to 99.25%.
There is a big difference between now and then, however. Back then, employment was running at full tilt, with men heading off to fight and women flooding into the factories. Right now, the opposite is happening: workers are furloughed, and millions of businesses face bankruptcy. That limits the opportunities for higher taxation to those companies and individuals that can prosper during the pandemic and its aftermath. These will consist largely of those few firms and individuals that are the beneficiary of economic rents i.e. excess profits over and above normal rates of return on real capital invested or very high levels of earnings.
To increase taxes significantly will require a much broader base and that brings us back to the big dividing line in modern society. Those that have significant property wealth and those struggling with expensive mortgages and rented accommodation.
@Katharine Pindar “We should demand a new social contract between government and people, with our expectations of the government to be matched with the co-operation and creativity of the people.”
It seems you’re finally beginning to take notice of Beveridge’s dictum that security would be provided by the state in exchange for service and responsibility.
How do you define co-operation and creativity? What obligations are placed on the citizens as their part of the contract?
@Joe Bourke “To increase taxes significantly will require a much broader base and that brings us back to the big dividing line in modern society. Those that have significant property wealth and those struggling with expensive mortgages and rented accommodation.”
Exactly Joe, a very pertinent point. Much in the way of social and health care could be funded by the wealth stored up in houses owned by those requiring such care.
I have worked in health & social care since 1983. We must have a National Care Service. The terms & conditions for those working in “social” care are appalling. It is not just the hourly rate but the lack of good quality training, paid sickness & career progression. Much/ most of our social care provision is “for profit” thus a business not a service. It is a good example of what our NHS will look like if we are not very careful.
Joe, thank you for your very informative comment. I see what you mean of course about the build-up of deprivation that led to the mindset necessary for the great reforms after the Second World War. I hope there may be a responsive mindset now, when people think about it, recalling the deprivation of so many people in our country in the last decade which was allowed because of an uncaring government and brought into sharp focus by the UN Rapporteur on extreme poverty, Philip Alston. It is the deprivation which leads to my and Michael BG’s call for a Beveridge-inspired new social contract to be defined and campaigned for by our party.
Meantime, I should very much like to know what you think the party should be putting forward as the optimal solutions to the economic situation arising from the current health crisis. I suppose they must be radical, given as you say that the population who can afford the higher taxes that must follow is small. I suppose even the businesses doing well now out of increased spending, such as the grocery stores, had falling profits beforehand.
Much of what has been written about the elderly over the past few is always as if they are burden on the rest of society and younger people are held back by the cost of keeping us alive longer than past generations could ever dream of, is this not something that we should be celebrating whatever age we are . Of course that extended life has to be paid for, probably by taxes in which everyone will have to contribute, if able, and also taking into consideration the words of Georgina Sullivan in her post! The fact is most people will be old one day, if they are lucky, stay well everyone!
Is there significant wealth stored up in tax havens?
Is it possible to run an efficient state without clear information on the tax base?
What is a “tax loophole”?
@Barry Lofty you highlight the tension between what the individual wants and what’s best for society as a whole.
50% of health spending goes on the last six months of life – 50%. That’s what, £20bn p.a.?
There are a lot of difficult conversations to be had – just because something can be done, doesn’t mean it should be. There is a lack of honesty about how think of the health service; they’re humans and can’t work miracles, and sometimes the best approach at end of life is to manage it with dignity.
@Georgina Sullivan “We must have a National Care Service. The terms & conditions for those working in “social” care are appalling. It is not just the hourly rate but the lack of good quality training, paid sickness & career progression.”
All GP surgeries are private businesses. Do they have poor hourly rates of pay, lack training, paid sickness and career provision? If they don’t, what’s the difference between GPs and social care, and who is responsible for that difference?
“Much/ most of our social care provision is “for profit” thus a business not a service. It is a good example of what our NHS will look like if we are not very careful.”
I’ve already given the example of GPs above. Have you ever been to continental Europe? How do they fund and run their healthcare systems? Are they free at the point of use?
Katherine . A social contract along the lines of a new Beverage plan is policy ,A National Social Care Service is a delivery mechanism . I don’t believe as Labour did that their was a magic overseas money tree to pay for such a service it would certainly not be a reliable funding stream .it has to come from general taxation perhaps VAT or insurance .This does not prevent us amending tax bands and allowances for low income households to ensure any general taxation was not unfairly levied on low income households .
@ Georgina Sullivan “We must have a National Care Service”.
Yes, absolutely, Georgina, and merged with the NHS. I wish those running the Lib Dem Party would wake up to this and regard it as a priority ‘big idea’ and give attention to all the areas you mention when the present crisis is over. The current crisis has revealed how necessary this is.
@ Neil Sandison The ‘Magic Money Tree’ is growing in the opposite direction…. businesses for profits being exported often overseas……. and fragility and insecurity when it is badly run.
As a Convenor of Social Care I remember one Property Developer/Care Home Owner deliberately flooding a care home for the elderly on a Christmas Eve in order to empty the premises he wished to develop.
The Nuffield Trust published a good report last year titled “What can England learn from the long-term care system in Germany? https://www.nuffieldtrust.org.uk/research/what-can-england-learn-from-the-long-term-care-system-in-germany
The report concludes “While we can learn a huge amount from the systems and experiences of other countries, a new social care system in England needs to suit this country’s social and cultural context and trends. Far from advocating for a wholesale adoption of Germany’s system, we would urge a thoughtful approach to identifying elements that might work for England while being mindful of the long-term consequences of some of Germany’s original decisions. The mechanisms and system design will necessarily be different, but the fundamental principles upon which Germany’s system is based – fairness, transparency, consistency, stability and sustainability – are ones that provide strong foundations for the next stage of debate. There is also much to be learnt from the policy development process Germany adopted to bring about comprehensive system change.
Reform of our social care system cannot be put off any longer. We urge policymakers to start a positive dialogue about social care and we urge politicians to cross political divides to find a workable long-term solution.”
The issue of funding has to be tacked to make any progress as Dilnot has consistently pointed out.
@ JoeB,
You’re advocating moving the NHS in a direction that even Nigel Farage wished he hadn’t!
Any changes are going to come at a cost and that’s even if the changes are designed to produce exactly the same outcomes. If you want better outcomes then the costs will increase still further. The German system is 32% more expensive than the NHS as it is.
The Tories would probably like to make the same changes but they are wary of the fallout and loss of votes it would cause. So, sensibly, they don’t say very much before elections but after they’ve won a majority they get their plans out. They’d probably have been doing that right now but Covid-19 has put a spanner in their works.
If the Lib Dems want to lose even more working class votes, than they already have, and become an even more a party of social groups A and B, than they already are, then proposing big changes to the NHS is a good way to do that. Of course you can explain all you like that you aren’t really yellow Tories and that the changes will be to everyone’s benefit – but I doubt it would do any good.
If you want to make changes, take a leaf out of the Tory “how to win elections” book and say next to nothing on the NHS, and find some other way to win.
This is not about politics it about human beings acting like the superior beings on this planet that we think we are, it about humanity doing the right thing by our fellow humans it is called passion! Sometimes profits and selfish greed have to take a back seat whatever political persuasion we follow.
Peter Martin,
it is those arguments and playing of politics with healthcare that leaves the NHS in a parlous state year after year. If the great majority of developed countries can run a public health system without encountering the perennial crises that the NHS experiences every winter (now extended to the summer) then you have to ask why the UK cannot do the same.
The kind of waiting times for GP appointments, hip operations and in A&E would be wholly unacceptable in most modern states. Why are they acceptable in the UK?
The Nuffield report above asks similar questions about social care.
“The current social care system in England is widely regarded as unfair, complex, confusing and failing to meet growing care needs in the population. Germany was in a similar situation 24 years ago, but successfully brought about far-reaching reform. As the UK government promises to fix our social care system, what can England learn from Germany’s experience of reform”?
If you want to see a high-quality health and social care system in this country the last thing to do would be to “take a leaf out of the Tory “how to win elections” book and say next to nothing on the NHS.” We need to stop fooling ourselves that the NHS is the ‘envy of the world’ and putting up with a systemically flawed form of organisation and funding that consistently sees the NHS and the social care sector prevenyed from being able to match the health outcomes of comparable developed nations.
It is interesting that the major concern of this thread has centred on the need for a better national care service. Georgina, thank you for starting it – your post did not in fact appear in time for me to comment on it this morning, but it has had wings of its own. For my part I expect we will need to have increased national insurance payments to ensure a better service, and I believe we may have a policy of eventually integrating national insurance contributions and income tax. A central National Care Service, whether combined with the NHS or not, sounds of some appeal, but I doubt whether it should be national except in terms of standards, with registration and some inspection, and would not want the private provision nationalised (TCO will be pleased to hear!).
However, Neil Sandison is right to point out that a Social Contract along the lines of a new Beveridge plan is a matter of policy, while a .National Care Service, if any, would be a matter of means of delivery. (Thank you Neil, though Katharine with an ‘a’ please!) I am concerned here with policy, with the concept of a new national Social Contract to deliver remedies for the great ills of our time which equate to the five great evils identified by William Beveridge in the ’40s. The equivalent great ills identified by my colleague Michael Berwick-Gooding and myself do of course include inadequate health (and social) care. but I had anticipated the current needful debate on this theme – thank you, everyone – and concentrate on two others, poverty and unemployment, in the follow-up article to come. The issues of adequate housing provision, and of education and skills provision being universally well delivered, are the other identified ills which should be faced, along with all the problems arising from climate change.
If a National Care Service was integrated into the NHS it would be misleading to describe it as a classic case of nationalising or privatising.
@Joseph Bourke “it is those arguments and playing of politics with healthcare that leaves the NHS in a parlous state year after year. If the great majority of developed countries can run a public health system without encountering the perennial crises that the NHS experiences every winter (now extended to the summer) then you have to ask why the UK cannot do the same.”
The simple reason is that every other European country knows that it is perfectly possible to deliver universal healthcare, free at the point of use, without having to do so via a socialist system – which is the legacy of the Liberal idea of a universal safety net being implemented by Socialists.
It means that healthcare spending and delivery is subject to the political whims of the government of the day, rather than being detatched from politics as it is in France, Germany, the Netherlands and other European countries that use the social insurance funding model – and get better outcomes to boot.
Barry Lofty 30th Apr ’20 – 2:17pm……………..This is not about politics it about human beings acting like the superior beings on this planet that we think we are, it about humanity doing the right thing by our fellow humans it is called passion! Sometimes profits and selfish greed have to take a back seat whatever political persuasion we follow…..
As I’ve said before (many times) the BBC coverage is far inferior to that of the 7pm CH4 news..On the 28th Dame Jane Goodall was given a 10 minute? slot.. . May I suggest that anyone who hasn’t seen it does… Her.. ‘We have disrespected animals and disrespected the environment’ – contribution to the debate was worth more than all the waffle from ‘Auntie’
Barry Lofty. Regarding your post of 10.39, Barry, I’m happy to say that I’ve heard and read several attacks lately on the over-seventies having been considered en masse and ordered to stay at home. David Blunkett on R4 one day was particularly trenchant, and there have been pieces in the quality papers, all saying that the over-seventies should be left to decide for themselves. Absolutely right. We all know people even in their eighties (like the local chair and secretary of my own local party!) who are still making a big contribution to society, but whether 80, 90 or (bless him!) 100, ‘seniors’ should have the same rights as everyone else to live in freedom and be able to seek self-fulfilment.
David Raw. Surely that is a question of ownership, David. There presumably isn’t anything wrong in our capitalist society in private companies owning care homes, or schools either, so long as the state lays down some rules about how they operate and enforces standards with periodic inspections.
@Katharine Pindar “but whether 80, 90 or (bless him!) 100, ‘seniors’ should have the same rights as everyone else to live in freedom and be able to seek self-fulfilment.”
It’s not as simple as that. Older people are being asked to stay AT(!) home because they are more at risk of getting serious COVID-19 complications that require ICU care. Too many will overwhelm the health service.
Fine if those most at risk want to risk catching it and getting serious complications, but they should accept the corollary of not being hospitalised.
@ Katharine I’m sorry, but I’m afraid we have to disagree there, Katharine.
I suggest you have a look at Georgina Sullivan’s comments above. They carry force and truth. Would you let private hedge funds and offshore tax haven for profit businesses employ NHS nursing staff and then export the profits ? Frailty, in some cases dementia, as well as end of life care are conditions just as important as other conditions.
David, this is not an area of which I have any knowledge, so please explain what it is that you and Georgina are advocating. Of course one doesn’t like the idea of hedge-fund managers and wealthy people with offshore accounts running strings of care homes, but I suppose that is a product of the capitalist system. I don’t like such people to be controlling property in the cities either, and presume we should have higher taxes and at least transparency about tax havens. But the German system evidently has problems with provider profits too. Who do you want to own and provide the care homes of England? Are you suggesting that local authorities should do that?
@David Raw “Would you let private hedge funds and offshore tax haven for profit businesses employ NHS nursing staff and then export the profits ?”
Which is more important to you:
– the ownership of the healthcare producer, or
– the outcome for the patient?
For example, if a private healthcare provider had better outcomes than the nationalised provider, and was still free at the point of use, would you object to it in principle?
The care home sector covers a wide range of provision. They include retirement communities with onsite facilities like bowls greens and exercise classes that cater to the interests of the elderly to more modest sheltered housing; residential care homes; nursing homes that can cater for dementia sufferers and of course domiciliary care in peoples homes.
This coronavirus crisis has shown that national centralisation of public health services cannot cope with what is in fact a multitude of localised outbreaks. The emaciation of local authority services has left local councils ill-prepared to manage what ultimately is a local issue that requires tracing and control wherever outbreaks are clustered. The current NHS funding may be better managed by local authorities than a Whitehall department.
The King’s fund commissioned a study of the social care and health systems of nine countries in 2014 https://www.kingsfund.org.uk/sites/default/files/media/commission-background-paper-social-care-health-system-other-countries.pdf
The health and social care systems of developed countries face common challenges. Many governments across the Organisation for Economic Cooperation and development (OECD) have cut or frozen welfare spending since the global financial crisis began in 2007, populations are ageing, and as technology advances, the cost of health care continues to rise.
In 2011, OECD countries spent an average of 9.3 per cent of gross domestic product (GDP) on health care (OECD 2013a). The United States is by far the highest spender, devoting 17.7 per cent of GDP to health care. Meanwhile, the eight other countries profiled in this report have lower expenditure levels, ranging from 7.4 per cent GDP in Korea to 11.9 per cent GDP in the Netherlands. The United Kingdom sits in the middle of that group, spending 9.4 per cent of GDP on health, just above the OECD average. This data includes both public and private spending on health care, including capital investment in health care infrastructure.
After both world wars there was a desire to change society for the better, to increase economic equality. After a vaccine is being provided for Covid19, we should be in a post-world war period where there is a desire to make society more equal and to put in place policies which ensure no one is left behind, by poverty, health issues, education, training and skills, lack of a job or the lack of a home of their own.
Joseph Bourke,
The measures taken by the government to help businesses and people do not “have to be paid for” by increasing taxes or by reducing the amount of the national debt. Just like the increases to the national debt during the two world wars the ratio of national debt to GDP can be reduced over time by having economic growth at a higher rate than the percentage of the government’s deficit in relation to GDP each year. It could even be possible to fund all the changes to society envisioned in our new social contract without increasing taxes by huge amounts.
TCO
“50% of health spending goes on the last six months of life”.
Please provide a link to where this is reported by the NHS?
I note you support the idea that healthcare should be provided free at the point of use. If someone requires social care because of a health issue, what makes it different from their need for healthcare? Why should social care not also be provided free at the point of use?
Michael, in your comment to Joe Bourke I understand and agree with your remark that reducing the national debt after this health crisis is not urgent, any more than it was after either of the two World Wars. The ratio of national debt to GDP can be reduced over time through economic growth. I am interested, though, and ask both of you whether you have any thoughts yet on how economic growth is to be achieved again, so that there may be funds to increase welfare benefits and reduce poverty, among other good aims. Do you suppose that there will have to be continuing government and bank support for existing and new enterprises, for instance, and somehow encouragement of flexibility and co-operation among businesses and entrepreneurs?
Katharine, you say, “on how economic growth is to be achieved again”……
May I add a corollary ? …….without damage to the planet and global warming…. but with sustainability……………
I would gently suggest to those on the free market side of the party that will be very difficult to achieve without an input from ‘the state’.
PS for clarification “without further damage to the planet and without increasing global warming…. but with sustainability……………”.
Good points, thank you, David. incidentally, Michael BG and I both thought that Michael
Heseltine talked good sense on Newsnight a couple of hours ago, about the usefulness of economic development being fostered within local areas.
There is no secret as to how the UK’s WW2 sterling debt was repaid, it was inflation to reduce the value of savings held by the public (together with the maintenance of wartime levels of taxation to generate primary surpluses as world trade recovered) as the OBR analysis makes clear https://obr.uk/box/post-world-war-ii-debt-reduction/
“Over the 30 years from 1946, national debt increased from £27 billion to £64 billion in nominal terms. That £37 billion increase was almost entirely due to the issuance of fresh debt to cover interest payments over the period, as successive governments ran a cumulative primary (i.e. non-interest) surplus of £7.6 billion over this period, averaging 1.6 per cent of GDP a year. Both non-interest spending and receipts were broadly flat as a share of GDP over most of the 30 years.”
“In nominal terms, GDP grew by 8.8 per cent a year on average over this period, comprising 2.3 per cent average annual real GDP growth and a 6.5 per cent average annual rate of whole economy inflation.
The interest rate on government debt was also lower than the inflation rate in 24 of the 30 years, notably when inflation was particularly high. The persistence of these negative real interest rates in part reflected ‘financial repression’ – in other words, that the interest rates at which the government could borrow were held below inflation by a number of institutional and policy factors. Among them was the Bretton Woods system, which featured restrictive exchange rate controls and a fixed exchange rate. Quantity and price controls on domestic bank lending also encouraged domestic financial institutions to invest in government debt.”
“When the percentage increase in nominal debt caused by interest payments is lower than the percentage increase in nominal GDP from economic growth, the ‘snowball’ effect on the public debt to GDP ratio is to reduce that ratio. In nominal terms, debt increased by 137 per cent over the 30 years, but nominal GDP increased by more than 1,200 per cent in the same period. This reduced the debt ratio by four-fifths of its original level to less than 50 per cent of GDP.”
This is the most likely outcome of this crisis – i.e. maintaining inflation above interest rates and higher levels of taxation in the future as the economy returns to growth.
@ JoeB,
“This is the most likely outcome of this crisis – i.e. maintaining inflation above interest rates and higher levels of taxation in the future as the economy returns to growth.”
Having inflation above inflation rates is nothing new as you acknowledge in your previous comment. It’s really nothing to do with “this crisis”. Govt policy for inflation is, and has been for many years, that it should be 2%. This is a target and not an upper limit. At the same time it has been Govt policy to force down interest rates. Base rate is now 0.1% which is the lowest ever. Longer term rates have been forced down by QE. It’s all deliberate Govt policy and nothing to do with the supposed free market in Govt debt.
Post war levels of taxation were high to prevent even higher inflation. It wasn’t anything to do with a recovery in world trade. If it hadn’t recovered so well there would have been an even bigger inflation problem. During the war years there was a build up of spending power with many workers being comparatively well paid. But, due to wartime shortages and rationing there wasn’t much to spend money on. Consequently the rationing had to be kept in force for several years afterwards – and again this was essentially to prevent inflation and curb spending power. The alternative would have been to do the same thing as Germany. Scrap the old currency and start a new one.
If higher levels of taxation are required when the economy does get under way again it will only be because the economy is overheating and there is a need to control inflation. The taxation isn’t necessary to “repay debt”. So that will be a good scenario! Much better than having a depressed economy with the Govt vainly trying to reduce its deficit with yet more austerity economics.
You can’t complain about simultaneously high levels of taxation and high levels of inflation. The taxation is necessary to prevent inflation.
Peter. I am glad to know that extra taxation will not be needed to repay national debt. That much I understand, though sadly Joseph’s explanation is rather beyond me, and I would like to know what he thinks our party should be seeking on the economic front, whether acceptance or pressure for changes. As this piece suggests, the country is in a co-operative mood (which hopefully will survive for a while if the lockdown is sensitively lifted), and this offers an outstanding opportunity for our party to seek the kind of progressive changes required to tackle the deep-rooted problems of our society.
Peter Martin,
The Bank of England sets the base rate i.e the interest that commercial banks can borrow at from the BofE, While commercial banks are free to set their own interest rates for borrowing, the rates that they charge on loans and offer on savings tend to be derived from the base rate. This means that central banks can use base rates to encourage or discourage consumer spending, depending on the state of the economy.
The base rate will impact the interest rate that consumers receive, because commercial banks will alter their interest rates in line with any changes put out by central banks. If a central bank increases the base rate, commercial banks will increase their interest rates and borrowing becomes more expensive. If the base rate falls, commercial banks will decrease their interest rates and spending is likely to increase. However, it can go no lower than it is now at virtually zero.
The rate of interest the government pays for its borrowing is determined by market prices set in bond auctions. As long as people believe that a government will pay the interest on its debts, that it won’t suddenly default on them, and that they’ll be able to sell their ownership of the debt easily when they need to, investors will carry on lending that government money. Expected inflation and its impact on currency depreciation is a key factor in the interest rate that lenders will demand in bond auctions or if overseas lenders will buy bonds at auction at all.
As long as the interest rate paid on government borrowings covers expected inflation and the currency is stable there will be a market for bonds. Once that stability is lost the market starts to dry up as the UK experienced in the 1970s after the pound has been floated and capital controls lifted so that UK investors were free to seek better returns overseas.
The financial repression of the post-war period to erode the value of government debt cannot be repeated without reimposing capital controls. If that is done, borrowing from overseas lenders is likely to become much more difficult. They will no longer willingly hold sterling and the currency would depreciate rapidly generating high inflation and a sharp reduction in living standards.
Tax increases on the self-employed in the form of higher national insurance have already been flagged up by the Chancellor and there will be more to come.
This is the reality of real-world economics.
Katharine,
I think we should focus on and argue for two fundamental policies at this point in time – job guarantees and affordable housing.
We are already seeing a very steep rise in unemployment. That will get much worse when the subsidy for furloughed workers comes to an end. There is an acute danger that we will see a repeat of the 1980s with millions of people consigned to a life of long-term unemployment and surviving on benefits. Local authorities need to be empowered and funded to introduce job guarantee and training schemes that offer a full-time minimum wage job to anyone who is legally resident here. The council in coordination with job centres can assign workers to fill NHS, Care sector, agricultural sector and construction sector jobs in the first instance whether in the public, charity or private sectors.
The second pressing issue is housing. As with the furlough scheme the moratorium on evictions is due to come to an end at the end of June when we can expect to see a steep rise in homelessness. Local authorities will need to be provided with funding to lease empty hotels and similar premises for temporary housing.
Libdems should argue for the immediate reform of the 1961 Land Compensation act to give regional Mayors the powers to acquire building land at existing use values and begin a major public and private housebuilding program. Simultaneously, with these measures we should argue for the introduction of a Land Value Tax to replace both business rates and council tax from the start of the next financial year as a means of relieving hard pressed tenants of the pressure of business rates and council tax as well as making council tax a lot more progressive.
These two issues – full employment and affordable housing are the foundations on which economic recovery and restoration of the safety net can be built.
Job guarantees are not enough, the government has to get involved at a local level in investing and stimulating local economic development. We should be calling for a pilot of a job guarantee scheme in north east England which is the region with the highest rate of unemployment. Run by district councils but including local businesses as a provider of guaranteed jobs, paid for by central government.
As Kathrine has mentioned last night I saw Michael Heseltine on Newsnight and I would adapt his ideas, and have local district councils as the lead organisations to set up joint working relations in their areas defined by themselves to drive economic development in their local areas working with local businesses and local universities and technical collages with finance being provided by central government.
Joe Bourke,
We as a party should adopt Shelter’s target of 3.1 million new social homes over the next 20 years including their target of 209,000 new social homes a year. Our policy of replacing business rates with our Commercial Landowner Levy according to our own figures will cost £1.4 billion a year. It is not a net revenue generator.
Reform of the 1961 Land Compensation Act seems is very sensible, but I oppose your proposals to replace Council Tax with a Land Value Tax. I favour reforming the existing Council Tax and moving it to more of a property tax with the a flat percentage rate applied rather than having the existing bands which means that the more a home is worth the lower the percentage of the tax is to this value.
I oppose your vision of job guarantees which seem like workfare and not very liberal.
What we don’t know is if there is going to be too much demand in the economy following the ending of lockdown with people spending the money they had little opportunity to spend during lockdown, or too little as people are reluctant to resume their previous spending habits.
Michael BG,
the government is already involved at a local level in investing and stimulating local economic development. There is a network of local enterprise partnerships established across the country.
https://www.lepnetwork.net/about-leps/location-map/
The Libdems Business rate reform is not designed at a revenue generator. It is revenue neutral policy that transfers the burden of business rates from tenants to landowners just as the council tax reform proposals will.
Libdem proposals have included a British Housing Company as set out by Vince Cable in his speech to the Royal Institute of British Architects
https://www.theguardian.com/society/2018/jun/26/lib-dems-vince-cable-land-buying-agency-to-boost-house-building
“The aim would be to acquire sites at a price as low as 40% of land acquired in the open market without paying the ‘hope value’ which attaches to those sites currently earmarked as having development potential…the powers would be given under amendments to the 1961 Land Compensation Act.”
Job Guarantees underpin the right to work which is as Liberal as you can get. The UN defines poverty as “Fundamentally, poverty is a denial of choices and opportunities, a violation of human dignity. It means lack of basic. capacity to participate effectively in society. It means not having enough to feed and cloth[e] a family, not having a school or clinic to go to, not having the land on which to grow one’s food or a job to earn one’s living, not having access to credit. It means insecurity, powerlessness and exclusion of individuals, households and communities. It means susceptibility to violence, and it often implies living on marginal or fragile environments, without access to clean water or sanitation.”
Giving the British public land which to grow one’s food would not be much use. most of us would starve before we could grow anything that could be eaten. What we can do is ensure that everyone has the right to a job to earn one’s living.
This is a most useful debate, on job guarantees and provision of housing – thank you both, Joseph and Michael. I think job guarantee schemes must be the most urgent to seek. given as you say Joseph the threat of thousands soon remaining unemployed. You wrote, ‘Local authorities need to be empowered and funded to introduce job guarantee and training schemes that offer a guaranteed minimum wage job to anyone who is legally resident here.’ Yes, but I hope that would not be limited to residents who had been in the area for many months, because I think that people moving about the country in search of work will be a necessary and desirable feature very soon. That would suggest as Michael says some government involvement in the schemes will be necessary: central funding of the councils for this purpose will anyway come with some conditions. I agree with Michael that ‘the council in co-ordination with job centres’ should not be ‘assigning’ anyone, only publicising the vacancies widely and continuously. I suppose as Michael suggests that local councils, district or county, should be undertaking the business of stimulating local enterprise in co-ordination with established businesses and local university technical colleges, and where there are established local enterprise partnerships they should be given jump-starts now by government to undertake this urgently. Who in our party leadership is spokesperson for industrial strategy and employment to whom we could refer this priority project?
I will come back on the housing issue, as you say, Joseph, also vital for tackling poverty.
@ JoeB,
“They {overseas lenders} will no longer willingly hold sterling and the currency would depreciate rapidly……..”
The overseas lenders are largely the central banks of the mercantilistic countries who are addicted to running an export surplus. Germany, China, Taiwan, Korea, Singapore…
So they sell us lots more than they buy from us and naturally end up with surplus £££. So what do they do with them? They can’t just dump them as you suggest. The pound would fall and they’d lose their export markets. They’d have to stop being net exporters if they had no-one to net export to!
So they are caught in a trap of their own making. All they can do is lend them back to the UK and pick up whatever small amount interest is on offer.
Peter Martin,
if that were true the ECB and China National Bank would have accumulated trillions of pounds of sterling reserves over the years, which of course they have not. They hold enough reserves to cover a few months of sterling imports and have back-up swap lines should they need more. Most of their reserves are held in US dollars and gold.
The main overseas investors in gilts include primarily foreign pension, investment and hedge funds as well as active bond traders diversifying their portfolio of investments on a geographical basis. They account for about 30% of investment in gilts. The great bulk of foreign investment goes into the UK stock and property markets or is channelled overeseas through UK banks and investment funds.
JoeB,
It wouldn’t be trillions. And lending pounds back to the UK doesn’t have to be via Govt gilts.
It remains a truism that any country running a surplus in its current account has to run an equivalent deficit in its capital account.
So what does an net exporting country do with all the surplus foreign currency it acquires? What can it do if it wants to remain a net exporter?
Your thoughts on the housing crisis are very helpful, thank you, Joseph. You point out that the moratorium on evictions will end at the end of June, and that therefore there could be a steep rise in homelessness, which should be met as an emergency by local authorities leasing hotels and other premises suitable for accommodation. Further ahead, it is clear that the 1961 Land Compensation Act should be reformed as you say, to give authorities the power to acquire land at existing use value in order to begin an urgent programme of building affordable homes. I am not clear, though, whether we would be asking for ‘regional mayors’ to have these powers, since they are not established country-wide, or through a British Housing Company as proposed by Vince Cable.
I am also puzzled by our own policies to some extent. At Brighton in 2018 we voted for the replacement of business rates by a Commercial Landowner Levy based on the land value of commercial sites. At Bournemouth in 2019 we voted for the replacement of Corporation Tax with a new British business tax. You yourself call for a Land Value Tax to replace both business taxes and council tax. I tend to agree with Michael that this may not be the best way to reform council tax, but other than that I am feeling rather confused. Perhaps our party needs greater clarity on such policies?
Peter Martin,
“So what does an net exporting country do with all the surplus foreign currency it acquires? What can it do if it wants to remain a net exporter?”
The US dollar is used worldwide as a medium of exchange for several major commodities including oil and food and is the dominant international reserve currency. The UK like other countries needs more dollars than it earns from export surpluses to the US to pay for oil, food, raw materials and other commodities. These come from inward investmet in financial securities from oil producing countries in the middle east and Russia and exporters like China, Japan and Germany. The clearing of settlements is intermediated through foreign exchange markets.
The largest investor in the UK is the United States despite the fact the UK has run a trade surplus with the US for many years. The UK is also among the largest investor in the US. This is a result of the City’s position as an international financial centre, intermediating investment from around the world. This is also a key reason why maintaining the confidence of financial markets is crucial to the economic stability of the UK.
Katherine,
there are Metro Mayors in place that cover all the big urban centres across the country including London, Birmingham, Manchester, Liverpool, Bristol, Cambridge and Newcastle. It these devolved administrations that have the regional authority and infrastructure to bring together strategic housing and transport developments across a region that crosses local authority boundaries. The British Housing Company would be a state-backed agency set-up to compulsorily purchase land for building.
Libdem tax policy already includes the replacement of business rates with a Commercial Landowners Levy. Council tax reform has not yet been adopted by conference that is yet to come.
The business tax motion passed last year called for the UK to work with other major economies to develop an international system of business taxation with a global minimum rate of tax on profits. However, the party acknowledged that international reform will take time, and that reform of the domestic business tax system is necessary in the meantime. So it was proposed to replace corporation tax with a new ‘British business tax’. While broadly similar to existing corporation tax (ie it would be levied on business profits) it would differ significantly in a number of ways in its calculation and scope .
The background paper says society (ie the state) is entitled to ‘a royalty on business activities’ because it provides the physical, legal and social infrastructure that businesses rely on and benefit from (as well as public services for their customers, suppliers and employees). This is the argument that underpins Land Value Tax.
The party plans, over time, to bring “highly profitable unincorporated businesses, such as wealthy city partnerships and consultancies”, and high earning sole traders, within the scope of the tax. It would accompany this with changes in the income tax and national insurance systems to ensure that individuals are treated equitably irrespective of whether they receive their earnings in the form of salary, drawings, dividends or otherwise.
These changes supplement the motions agreed in 2018 to:
Taxing capital gains and dividends through the income tax system, abolishing the separate tax-free allowances for both;
Abolishing capital gains forgiveness at death;
Introducing a flat rate of relief on pension contributions;
Turning inheritance tax into a progressive large gifts tax.
@ JoeB,
However much you want to spin your “maintaining the confidence of the financial markets” argument there’s no getting away from the simple arithmetic that for every large net exporter there has, penny for penny, to be a large net importer. Germany can only run its large trade surpluses if countries like the UK run trade deficits. They need us!
It simply cannot only be the USA that runs the deficits to allow everyone else to run their surpluses.
Personally, I’d be happy enough if the UK and every other country balanced their trade but I that’s not likely to happen any time soon.
The same nonsensical neoliberal arguments are made in the USA too. If you listen to the speeches of politicians like Rand Paul, you’d come away believing that the USA was owned by China and relied on it to borrow the dollars back that it needed to balance the budget.
This is a typical piece of nonsense from him:
“We had something passed back in 2010 that was called the PAYGO Act … You can only pay as you go. It was sort of like a family would think about it. If you spend some more money, you have to raise your income or you have to save some money.”
Apparently he doesn’t know that the US dollar is the monopoly issue of the US Fed govt and it doesn’t come from China. He seems to be more obtuse than most Republicans. The rest tend to shut up about deficits when they have a Republican president but use nonsense economics for their own political ends when the President is a Democrat. Somewhat touchingly, he doesn’t see the need to change tunes:
“Don’t you remember when Republicans howled to high heaven that President Obama was spending us into the gutter, spending us into oblivion? Now the Republicans are doing the same thing.”
I’d argue we should call the bluff of the bond vigilantes – except we already have. We pay them next to nothing and that’s been the case since shortly after the 2008 GFC as interest rates have fallen. That doesn’t mean we run the economy recklessly but it does mean that we don’t get our knickers in twist about Govt budget deficits providing inflation is well under control.
Peter Martin,
It is firms that export not countries. They do so to earn profits in overseas markets, not for the privilege of exchanging goods for paper that they cannot exchange for equivalent value of goods and services.
We have been told for several years that the German auto-manufacturers need us more then we need them and as a consequence, the EU will eventually accede to any demands the UK makes. How has that been working out? Who is going to be buying new German cars in the current recession and what will become of Germany’s trade surplus then? Do you think we are all going to be better off because Germany can no longer export its vehicles?
The bond vigilantes are largely the pension and investment funds that pay the pensions of retirees. It is pensioners and those living in fixed incomes (here and overseas) who will pay the cost) of negative returns on bonds, not the investment fund managers. At least those in work can get pay rises to offset inflation, not so pensioners whose savings are eroded year on year.
Deficits are normal in recessions and to fund capital investment in normal times. Spending on public services needs to be maintained and tax receipts will fall dramatically during this downturn. Debt deflation would cause even greater pressure on households, so monetary policy needs to be employed to buttress asset values. Right now, the world’s chief problem is battling an economic slump in which inflation is falling, not least due to oil prices. However, the bills will eventually come due
When they do, there may not be a painless way of settling them. The first sign of any debt trouble in the rich world would be rising inflation as the economy recovers. Governments will need to decide – should they respect the independence of central banks to raise interest rates to keep inflation at target, and look to taxpayers – or state pensions and other spending- to pay for the resulting rise in debt interest costs? Or should they lean on central banks to keep rates low and let inflation take-off to ease state debt burdens? These are the trade-offs that will have to be faced.
@ JoeB,
It’s countries that set policies on their exchange rate. Our policy is to let ours freely float. Denmark’s policy is to peg theirs lower than what would otherwise be its market value. It’s the same for Germany but they have the complication they use the euro but it’s clear that a Germany currency would have a higher value.
So why are the Danes so keen to keep their currency below market value? Why do Danes want to pay more than they need for their petrol? Why don’t they want their Spanish holidays to be as cheap as possible? Why don’t they want the price of their car imports from Germany to be cheaper? That’s what we want, isn’t it?
They want to be able to consistently export more than they import. There’s no other possible explanation. And because they have more money coming in than going out they have to run a much tighter fiscal policy to prevent inflation. Under normal circumstances their govt budget is close to being balanced.
There are lots of countries like Denmark who deliberately hold down their currencies to run export surpluses. They know they can only do that if countries like the UK run deficits. And a deficit in trade nearly always translates into a Govt budget deficit too.
Joe Bourke,
I had not heard of Local Enterprise Partnerships but they don’t seem to doing a good job. This of course might be because when setup the government didn’t fund them and they have had only about £7.3 billion to invest between all 38 of them. (A long way from our £50 billion over 5 years for our Regional Rebalancing Fund.) As Michael Heseltine wrote a report about them in 2012 it seems strange he didn’t seem to mention them on Newsnight on Friday.
I do think we need to pilot a job guarantee scheme, but I would not support them as envisioned by you. Assigning unemployed people to your restricted work sectors does not look liberal to me and will not look liberal to those “assigned”. Job guarantee schemes must offer all types of jobs and not just the type jobs you list. Your career does not seem to make you a good fit for any of the types of jobs you have suggested. For example if someone had been an engineer or sales person why would they want to work as an agricultural or building labourer, in a non-medical role in a hospital or as a care worker especially if they saw their future careers still in their previous roles? The liberal way would be to have as wide a spectrum of jobs as possible and for the person going on to a guaranteed job role to choose a role that suits them and will assist them to get a real job in the future in the type of role they want to be in, in the future.
@Michael BG. If you look at the people who sit on LEPs then their lack of success will come as no great surprise. Worst kind of talking shop. In fact, be suspicious of any body with the word “Partnership” in its title, in the way you would be of any country that calls itself the “democratic” republic.
I agree with your comments regarding the job guarantee scheme, for exactly the reasons you state.
I
Michael BG,
my career path has been as follows:
Age 13 – 16 Butchers boy (Saturday’s and after school)
Age 16 – Shop Floor worker in Walls Meat Factory during summer holidays
Age 17 – Bricklayers Hod carrier during summer holidays
Age 18 – Trainee Accountant and plasterer’s labourer at weekends.
Age 30 – A qualified accountant working in the USA and part-time barman at weekends.
Age 40 – English language teacher in Japan and freelance columnist for ex-pat magazine
Age 50 – Self-employed accountant and general dogsbody for local Lib Dems
Age 60 – University lecturer, part-time practicing accountant, and LibDem PPC.
Age 65 – In lockdown -delivering lectures and accounting work online.
I can paint and decorate, do a little plumbing and electrics, and know my way around a car or motorcycle engine.
That’s what would go on my CV at the jobcentre if I had needed a guaranteed job. Whether it was a bookkeeper; a hospital porter; a delivery driver or a fruit picker that was needed, that is what I would do. I would welcome the opportunity to be able to earn a living and maintain my family by doing it until I could find better-paying work elsewhere more suited to my training and qualifications.
That’s a lovely way to answer Michael’s argument on the job guarantee scheme proposal, Joe, and congratulations on your shiny CV! But it doesn’t seem to me to answer his point. Emergency measures have a nasty way of turning into fixed ones – we shall need to be vigilant about civil liberties after this crisis – and I should think the offering of a job in the temporary system could soon turn into expectation that people will take whatever job is offered. After all, job centres have form in that line of reasoning, unfortunately, owing to the Tory government’s attitude that people on benefits must be taught to put up with whatever is offered, and pull themselves out of poverty. Could it be that you have had a certain amount of good fortune, as well as good health, to add to adaptability and many competencies in your life? People who have had their career abruptly halted, perhaps a promising little business suddenly gone, a talent no longer needed – such people, especially if they have lost the resilience of youth, should in my view be treated with respect and tolerance.
Thank you for replying to me (although spelling my name wrongly) by explaining the complications of our business taxation policies. Broad and good intentions, certainly – I hope they will gain clarity and effectiveness in due course.
@Katharine Pindar pretty much everyone has transferrable skills of one sort or another. A Job Guarantee is about offering people jobs that pay more than the basic safety net.
If the job market in an area doesn’t meet the individual’s demand, that individual has three choices:
– retrain / take a job that they can perform
– wait for the “right” job but accept that they will be on benefits
– move location
I think Joe’s suggestion is eminently reasonable – a job guarantee is a guarantee of “a” job, not necessarilly one tailored exactly to what any indivdual may demand.
Joe Bourke,
It seems odd to me that while you were a Finance and Administration Vice-President in the USA you also worked at week-ends as a barman. However, it seems that you might have found it difficult to get another high level accountancy job on your return to the UK from Japan. While I would be surprised that this was because of your lack of a recent high level accountancy position, it could be. If a person takes a job which does not keep their work skills up to date the effect of this can be to make it very difficult to get back into equivalent roles to their past ones afterwards.
While you, as a certified accountant, would be willing to take a job as a fruit-picker it would be illiberal to assign such a job to another certified accountant if they didn’t wish to take on such an arduous physical role.
Michael BG,
nothing odd about it. It was a friend’s bar that I helped out in on busy occasions while learning new skills like how to make cocktails. When I returned from Japan, I had learned a little Japanese and took a position as the Group Finance Director with a Japanese business in the city, until after a few years I started my own business.
There is nothing wrong with a bit of manual labour from time to time. As the old saying goes – a change is as good as a rest and you can pick up some useful life skills. As I remember, Gladstone was still chopping trees into his eighties and Churchill was a member of the Amalgamated Union of Bricklayers.
I’m all in favour of a Job Guarantee Scheme, TCO, but I hope it will be handled sensitively, as I suggested, and not in the way some benefit claimants have had their applications handled. To say that ‘pretty much everybody has transferrable skills of one sort or another’ seems to me to ignore the difficulty that many people with average education and no great skills or special talents have had already and will continue to have to find satisfying jobs. With an increasingly digitised economy and the rise of robots, with much work on offer being temporary or on zero-hours-contracts and on the minimum wage, finding secure and lasting employment let alone a ‘career’ is hard enough already, without the new difficulties.
A JG scheme has several advantages which may not be readily apparent:
1) It acts counter cyclically. This means when the economy is buoyant Govt spending on the JG will be less. When it is in recession spending will be higher. Therefore it becomes part of “the automatic stabiliser”. This is an important macroeconomic feature which is not shared by a UBI
2) It sets a floor on wage levels and conditions. Therefore there is less need for extensive legislation and regulation of the labour market.
3) It acts as a buffer against inflation in a more humane and socially acceptable way that the threat of unemployment and underemployment. Google NAIRU and the Phillips Curve for the theoretical reasons we have unemployment, underemployment and what the Germans refer to as mini jobs.
4) It could help businesses who might be unsure of their ability to offer full time positions. Usually a JG will be for the public purpose. But the JG could act in a similar manner to an agency with the business paying the JG management in the same way they would pay an agency. This eliminates the need for zero hour contracts unless some workers specifically ask for them.
@Katharine Pindar pretty much everyone has transferrable skills of one sort or another. A Job Guarantee is about offering people jobs that pay more than the basic safety net.
If the job market in an area doesn’t meet the individual’s demand, that individual has three choices:
– retrain / take a job that they can perform
– wait for the “right” job but accept that they will be on benefits
– move location
I think Joe’s suggestion is eminently reasonable – a job guarantee is a guarantee of “a” job, not necessarily one tailored exactly to what any individual may demand.
“wait for the “right” job but accept that they will be on benefits”
And if there is other work available which they could do and which is needed is it reasonable thay they remain on benefits until exactly what they want comes along?
Retraining opportunities should be increased, TCO, just as benefit levels should be, to enable better choices for the jobless, and I am hoping myself that the crisis will lead to a greater mobility of people, moving out of the big cities in search of new opportunities and cheaper housing. I remember a client of mine who could no longer afford housing in London so had returned to Cumbria, where being talented and creative he did find a good new job, though socially he felt disappointed. Any such mobility for its success will depend on local authorities being financed and encouraged to fund new enterprises and provide more housing, perhaps imaginatively in the short term by taking over as has been suggested some failing hotels. My client had moved back in with his family until I believe moving on to a northern city.
Peter Martin. I think that is a helpful description of some advantages of any Job Guarantee Scheme, thank you, Peter. As you know I want to see such schemes up and running alongside provision of better benefits as part of the working of the proposed Social Contract, and with no need for UBI.
People who advocate a job guarantee often state a person on it will be paid the minimum wage. I don’t agree. As I want a job guarantee to be taken up if the person on it thinks it will benefit their career and their search for a new job, I think it would be fine just to pay a person £50 on top of their benefits, plus all their travel to work costs.
I am not convinced that the working hours of a job guaranteed job should be full-time. I think a maximum of 30 hours should be set, so everyone knows the job guarantee job is not the same as a full-time role doing the same job and also allowing the person on the job guarantee some time during working hours to look for a real job.
TCO,
I don’t see a job guarantee being “about offering people jobs that pay more than the basic safety net”. (This could be said for workfare if those on it were paid more than the basic safety net.) The point of a job guarantee should be about helping the person find a suitable job afterwards, or they could end up on a job guarantee for the rest of their life. This is why the job guarantee job should be one which keeps their work skills up to date and so assists them to get a real job, or is provided along with or after training to do a new role which the person would be happy to do as a real job afterwards.
Joe Bourke,
It seems that your job guarantee scheme is workfare with people being assigned jobs rather than deciding they want to take the role to further their career. Just because you are happy to do manual labour does not mean that those who have never done any manual labour should be allocated manual jobs. Why are you not advocating a voluntary job guarantee scheme?
Nonconformistradical,
If someone has been looking for a particular role but hasn’t found any they should be encouraged to look for other roles or take up a place a government retraining scheme which should run parallel to a job guarantee scheme. Currently of course if a person didn’t apply for any jobs in a week they would be sanctioned.
I would endorse the advantages of a job guarantee scheme as listed by Peter Martin above.
Michael BG,
I have pointed before to where the basis for a job guarantee scheme is set out https://www.libdemvoice.org/opinion-job-guarantees-a-economic-stimulus-worth-considering-27360.html. It is entirely voluntary. As TCO writes above:
If the job market in an area doesn’t meet the individual’s demand, that individual has three choices:
– retrain / take a job that they can perform
– wait for the “right” job but accept that they will be on benefits
– move location
The first of these individual choices can be made readily available to anyone in a local authority administered job guarantee scheme.
Michael BG,
The JG would be flexible, in terms of the hours and content, but there would have to be rules associated with it. Normally there would be an element of training or education but that would be balanced by “real work” too.
We could have JG workers working for the public purpose in hospitals being paid as assistants, or in nursing homes as carers, or working in parks, or on say £10 ph. So anyone would know they could do this work and be paid £10 ph. Therefore the private sector would have to pay at least the same rate to recruit the workers.
The tricky part will be to bring the trades unions onside with all this. Many members will feel threatened. It will need a bit of doing!
Joe Bourke,
It is good to know, at last, that your job guarantee scheme is voluntary, not that your 2012 article makes this clear. I don’t understand why you didn’t make it clear that you saw your job guarantee scheme as voluntary when Katharine raised the issue of you saying people would be assigned roles (2nd May 9.33pm).
Peter Martin,
I don’t like to use the term job guarantee to include a training scheme. If you are paying an hourly rate then the hours worked would determine how much a person would receive. Your £10 per hour is well above the National Living Wage rate.
Perhaps having a maximum of 30 hours of work a week would help Trade Unions recognise that a job guarantee scheme is not about providing cheap labour either for private companies or for organisations in the public sector.
I assume that both you and Joe would allow a person on your job guarantee scheme still to claim benefits if eligible for them with the low salary you both are each proposing.
@ Michael BG,
I think we’ve previously had this discussion on what ‘voluntary’ means. At present to qualify for Job Seekers allowance there must be a willingness to take up any reasonable offer. I’m not sure just how this interpreted in practice. If, for example, we have an unemployed teacher, would they be required to take up a position on a supermarket check out?
So if we add the JG we would possibly have the same problem. But at least it’s not creating a new problem.
Katharine has previously made the point that the purpose of higher social benefits isn’t to encourage those who have useful skills to leave the workforce. However, it sometimes sounds to me that you and some other Lib Dems might be wanting them to do just that. Free us all from the tyranny of work etc etc.
You really need to understand the nature of the system to are trying to improve. The reason Governments levy taxes isn’t to recover the ££ or the $$ they have created in the first place. It’s to directly appropriate the labour power, or indirectly, the goods and services containing the labour power of everyone in the community. We have to work to get the money to pay the taxes.
So a largish direct payment from Government completely negates all that for many workers.
@ Michael BG,
PS
” with the low salary you both are each proposing.”
I’m not proposing any particular figure. That’s not for me to say. £10 p.h. was just by way of an example. But I know that is more than many care workers do receive at the moment. There’s no reason why there shouldn’t be additional benefits – say if a person is looking after children or has other dependents.
The theme of this thread is that the social cohesion that has arisen in our country owing to the necessities of dealing with the health crisis can be utilised and maintained to effect the transformational changes possible and needed now to deal with the deep continuing problems of our society. But the discussion here has, naturally enough, tended to concentrate on specific delivery methods, such as a possible national health care service, and what can be done to face the anticipated growth in unemployment. The follow-up article to this one, which is running concurrently, called Advancing society’s wellbeing after the health crisis and published on April 30, has also as expected helpfully discussed remedying some of the five ills of our society which Michael BG and I have identified as the equivalents of the five evils specified by William Beveridge in the 1940s and which we believe should be faced now as part of a Beveridge-type new Social Contract.
However, we have not in this thread actually discussed the concept of ‘transformational change’ which our society may now be ready and willing to accept. I believe that such change , which may occur whether we like it or not, should be shaped now by our party, along with progressive thinkers in other parties, refusing to have the real and continuing problems of our society swept aside, either by a kind of forgiveness tacitly given to this Tory hegemony which has failed so badly in the past decade but has now shown some generosity for immediate needs, or by concentrating only on the clearly seen remedies. We should, I believe, revive our knowledge of the decline and division of our society, of the increased poverty and inequality, the needed services of local government so badly cut back, the totally inadequate provision of sufficient affordable homes, and of job opportunities unsustainable in all senses. Now I believe we should proclaim the problems, and campaign for solutions to them all.
@Katharine Pindar “The theme of this thread is that the social cohesion that has arisen in our country owing to the necessities of dealing with the health crisis”
What evidence do you have of any increase in social cohesion?
Yes, there has been broad acceptance of and compliance with government-imposed restrictions, but attitudes towards lifting of those restrictions (ie surveys showing that many people will not readily go “back to the (old) normal” even if no restrictions at all) are largely driven by fear for their own personal wellbeing and/or those close to them – basically, fear of death is a powerful behavioural driver.
What evidence is there more generally that the well established fissures between the regions, educated and less so, the retired and those in work, etc etc are reduced?
Peter Martin,
A teacher would not be requested to apply for a supermarket check-out role. Even today, Jobcentres accept that people should apply for roles within their previous experience. As the time a person is unemployed increases the Jobcentre puts pressure on claimants to widen the number of roles they will apply for. With a Liberal Democrat government I would hope the pressure would be removed and replaced with encouragement. And long term unemployed people would be encouraged to take up a job guarantee role only if such a role would assist them to get a long term real job.
I don’t accept your theory of why we have money. The government has given money to people who are not working since the before the First World War and does not require them to pay income tax, but they still pay VAT. Even if there was no taxation there would still need to be money. Most countries have legal tender laws which set out what have to be accepted to pay debts.
I have not heard of anyone proposing a job guarantee scheme which pays the market rate to those on the scheme. I would expect that people on a job guarantee if paid a wage would have the same rights to benefits as those in real jobs.
The temporary social cohesion of this time of shared anxiety about the virus and willingness to accept measures meant to protect us does offer the possibility of general agreement about necessary change which should follow. So I suggest that our party should take the opportunity to press for measures to deal with pre-existing social problems, such as the inadequate level of welfare benefits which leads to some families, even when consistently working, having to resort to food banks.
@ Michael BG,
“I have not heard of anyone proposing a job guarantee scheme which pays the market rate to those on the scheme.”
The “market rate” for the unemployed can be very low. The whole point of a Job Guarantee is to set a floor on the price of labour and not rely on the so-called ‘free market’. It would work in the same way as the Govt might guarantee a price to farmers for their milk. The farmers are free to sell their milk for higher price if they can get it but the govt guarantees a minimum price in case they cannot.
“I don’t accept your theory of why we have money.”
OK but there have only ever been two theories of why money has a value. When money was backed by gold reserves the debate was between those (the metalists) who insisted it had a value because it was convertible into a precious metal and those (the chartalists) who said that was incidental and the reason it had a value was because the government used taxation to create a demand for its currency of issue.
Now that there is no metal connection at all it looks like the chartalists have been right all along. Unless you have a better theory, that is?
@Katharine Pindar if you’re serious about this you need to change the way you pitch it. Not everyone has your mindset, so you need to pitch to self interest. That, after all, was how the original Welfare State was accepted.
Rather than “we must do something to help the less well off”, you should try “we have no idea how the changes brought about from CV will play out.
“It could be YOU who loses your job – we need to make sure YOU will be protected. Pensioner – you might be comfortable now, but if there’s a depression there won’t be the money to support the services you need, so YOU need to contribute some of the wealth in your house to ensure there’s a working age population in work to pay the taxes and provide the labour YOU need.” Etc etc
@ Katharine,
“The temporary social cohesion of this time of shared anxiety……does offer the possibility of general agreement about necessary change which should follow.”
Possibly. There is always more social cohesion when society is faced with an external threat which, in our history, usually has been a war. Speaking to the WW2 generation, I did get the impression that at times that wasn’t always positive. The level of tolerance, for example, towards those who has any kind of conscientious objection was very low. If atomic weapons had been developed a couple of years earlier I have no doubt public opinion would have been all for using them on Germany.
Once the pandemic does come to an end my guess is that we’d be pretty quick to revert to type. But it shouldn’t stop us trying to make society more socially cohesive. Margaret Thatcher famously said “there’s no such thing as society”. I doubt any politician would ever say anything like that again so maybe we are making some progress.
@Peter Martin “Margaret Thatcher famously said “there’s no such thing as society”. I doubt any politician would ever say anything like that again so maybe we are making some progress.”
This is often trotted out, but what you’ve done (which is what most people do) is ignore the full quote and think about what the full quote actually says
Here’s the full quote:
The fourth sentence is self-evidently true – government has to act through people. And the coronavirus gives us ample evidence of why the second clause of that sentence is correct. If medical staff do not look after themselves first (by protecting themselves with PPE), then they will get sick and they will be unable to perform their duty to look after others. This is also a first principle of any first aid – don’t make yourself an additional casualty; make sure you are safe and then help others.
‘We have no idea how the changes brought about by CV will play out.’ Well, TCO, we can be pretty sure that they will not play out in favour of the poorest and most disadvantaged among us unless we insist they are protected. Still, in pointing out that to be successful in our wish for a Social Contract, I and Michael will need to be pitching for people’s self-interest, you make (excuse me saying, for once!) a valid point. Thank you for your suggested words. The UN Rapporteur on extreme poverty, Philip Alston, thought along the same lines, when, concluding his seminal Statement after his visit here in November 2018, he wrote, “a majority of the UK population will use some form of benefits over an 18-year period. In other words, a majority of the British people have a personal stake in the welfare system functioning effectively.!
Thank you for that interesting account of Margaret Thatcher’s address to the Kirk, David. As you say, it’s no wonder that in due course the Tories failed in Scotland, though they have made some headway more recently. Of course, I think it is outrageous that Mrs T. could suggest in effect that the Church should keep out of politics. I am glad that C of E Archbishops, including the present one, think that urging politicians to fight poverty is a right and a duty for the Church. And locally, I’m pleased that my vicar in Keswick is known to have let a couple of homeless men sleep in our church, before the lockdown of course, because they could not get to Workington at the time to find help. I have just been writing to tell him about the Social Contract idea.
@ Jayne Mansfield Great to hear from you, Jayne. You’re a voice for decency and humanity. Hope you’re keeping well and safe.
@ Katharine Thanks for kind words. I thought Boris Johnson very shaky today under forensic but polite pressure from Keir Starmer. The 100,000 testing target by 30 April was a PR process fuelled by the deceptive one off act of postal testing and hasn’t been met since… though BoJo says it will be 200,000 by the end of this month.
The Tories have been incredibly incompetent on both PPE and testing compared to Germany. I hear today that Marie Curie Hospices are desperate for staff PPE, ……. and that 21 homeless people have died in the streets of an Oxbridge county in recent weeks.
It is a voice that LDV deems not suitable to be heard David.
@ David Raw,
On complete lockdown of course.
I hope that you are keeping well . All hospital appointments for myself and husband have been cancelled, even crucial ones. We wouldn’t have attended them anyway because hospitals are the most unhealthy of places at the best of times. Also, the appointments were cancelled before the pandemic so we know that we cannot rely on the NHS service that were once available to patients. There is a certain acceptance and peace from accepting that we may not survive, something that I learned from my work in remote tribal areas.
Very moving coverage on Newsnight earlier tonight, about care workers continuing to go into homes though not feeling well, because they simply can’t afford not to work. Obviously they should not be doing so, possibly infecting the people they are ostensibly looking after, but it does make one realise that the easy government directive, if you are feeling unwell go home and self-isolate for a fortnight, will just have felt impossible for workers such as these, on zero hours contracts. What are they to do? Apply for Universal Credit and wait for weeks for that with no money, and probably a family to feed? One of the obvious necessities for the revived care service that must be brought in, is that workers really must be recognised for the value of the work they do and paid better. But care home chiefs say they cannot pay more without charging residents more. This must surely come back to government long-term subsidies being required.
Jayne, very sorry to hear (though some first comment of yours seems missing) that you and your husband have both had hospital appointments cancelled, but I hope that from now on yours and others’ appointments can be revived. We hear of divided functions of hospitals or parts of hospitals now being separated, the Covid19 patients kept apart (as I suppose TB patients long ago were) which should reduce the risk of attending them. Very best wishes. And David, let us hope Boris Johnson’s inadequacy is now dawning on the country, though that is small comfort for the sad mess of these responses to the virus.
Peter Martin,
The market rate of pay means the rate of pay where people will apply for the role. Jobcentre staff encourage claimants to apply for jobs which have rates of pay that the claimant thinks are too low for them to live on. The Jobcentre staff assume any wage above the standard benefit rates are good enough. This would be true if the benefits were set at the poverty line.
“Money has value because people believe that they will be able to exchange this money for goods and services in the future” (https://www.thoughtco.com/why-paper-momey-has-value-1146309).
“It (money) holds value simply because people have faith that other parties will accept it” (https://www.investopedia.com/articles/investing/092413/how-currency-works.asp).
An alternative to your theory exists and seems to be widely accepted. The faith / belief theory seems to explain why some currencies have to be replaced – because people no longer have faith in the value of the money. The government still tries to create a demand for the currency by requesting its taxes are paid in it but this is not enough.
Philip Alston reported after his visit in 2018, “It became clear from my many meetings and encounters in the UK that people want to work, and are taking hard, low paying, and insecure jobs in order to put food on the table. They want to contribute to their society and communities, support their families, live in safe, affordable housing, and take control over their lives.”
Katharine,
“a majority of the UK population will use some form of benefits over an 18-year period. In other words, a majority of the British people have a personal stake in the welfare system functioning effectively”.
Lots of people have no or little savings and so if they no longer work and have to rely on working age benefits they soon discover that the level of the benefits is not sufficient to meet all their needs. People living on benefits often have to make choices between food and heat or clothing.
In the past there were grants for people so they could buy essential items when facing one of life’s little emergencies such as replacing beds, refrigerators, or washing machines. Now these people get a loan from the DWP and both end up in debt and with even less money to spend each week or month as the DWP reduces their benefit to pay back the loan.
In last night’s Newsnight it was pointed out that most care workers don’t receive sickness pay. I thought it was normal for most people to receive full pay when off sick and then for it to be reduced over time. It seems it is not as normal as I thought. I had the impression from the care home owner that because local government fixes the rate for what council’s pay for a care home place and this rate is too low that he couldn’t afford to pay sickness pay. I think this is a problem caused by central government who don’t give local authorities enough to pay for all of the care required in their local area. It was also stated that this problem could be fixed quickly by central government.
@ Michael BG,
So you are saying that Anne thinks her ££ are worth something because she knows Bob will accept them as payment for cleaning her windows? And Bob knows Catherine will accept them when he buys his pint in the local…. and so on until we get to Zoe who knows the Govt will accept them in payment of her taxes.
So what does this show? That Anne, Bob, Cath …….and Yvonne don’t really know how money works. Only Zoe knows that because she’d the one who has just paid her taxes with the ££. If the Govt didn’t accept them, very quickly the game would be up for the £ !
The continuation of austerity policies is causing more deaths, as can be seen, tragically, now in the care sector, both among people in the homes and among the care workers themselves. Care workers seem to be on zero-hour contracts without sick pay, as Michael noted above, so they go to work even when feeling ill. The government order, ‘If you are feeling unwell stay at home for seven days’ is simply impossible for most care workers. They are not paid enough to be likely to have any savings to support them for seven days. Why are they paid so little? Because care home owners and local councils say they cannot afford to pay them more than the minimum wage, or provide them with jobs with employment rights. Why can’t local councils pay them more and give them secure jobs? Because the government has starved councils over the last few years of the funds they need to keep needed services running properly. This has to be remedied.
All such deprivation and lack of respect for lowly though essential workers was reported by the UN Rapporteur Philip Alston, whose devastating Statement should surely be required reading for progressive politicians. It is summarised and discussed in the current article, ‘Philip Alston and Transformational Change, posted here two evenings ago. Professor Alston also pointed out in detail the deficiencies of Universal Credit, which is likely to continue, being in high demand in the present crisis.
The plain fact about welfare benefits is that they are not being paid at a rate which would allow people to live at the poverty level. So people trying to live on them can easily fall into debt and go to food banks and sometimes become homeless or fall into suicidal despair. To tackle poverty, the first and most essential step is to demand that the rates be increased.
Peter Martin,
If you were correct and all a currency needed was for a government to want its taxes paid in it, there would be no cases in history of the people rejecting their own currency because they have lost faith in it. There have been times where a nation’s currency is no longer accepted in shops and other places and these business demand payment in a foreign currency. This fits the faith / belief theory of money, but doesn’t fit your ‘chartalists theory’.