You know when politicians stand there with pledge boards and cosy up to campaigning organisations promising certain things if they should get into government? And then don’t deliver on those promises? It doesn’t tend to end well. We in the Liberal Democrats know that more than most.
It took almost a decade of hard slog for us to recover from the damage to our reputation from the tuition fees debacle. We learned that voters have long memories when they feel betrayed. You can’t do something bad in the first few months of an administration and get away with it.
Hot on the heels of taking away the Winter Fuel Payment from millions of pensioners on low incomes, Labour have betrayed the WASPI women they have been courting over the past decade. We’ve all seen the pictures of half the Cabinet beaming beside WASPI women. And yesterday DWP Secretary Liz Kendall said that Labour would not be paying them a penny in compensation.
This is a generation of women who started work before the Sex Discrimination Act of 1976. Many were forced to give up work – even in the Civil Service – when they got married. Others were sacked for getting pregnant. They have been at the sharp end of the Gender Pay Gap for their working lives. As well as bearing the brunt of caring responsibilities for the previous and next generations. That hasn’t changed that much in the past half century either.
And now you have the spectacle of a Government admitting that mistakes had been made and maladministration had happened but there was to be no redress.
When you think that Labour was responsible for a derisory 75p pension increase for pensioners the last time they were in power, you could be forgiven for thinking that they really were not that keen on older people.
I don’t think that that is the case for most Labour MPs and I suspect many of them will be feeling incredibly uncomfortable.
Lib Dem MPs have condemned the Government’s announcement. “A day of shame” our DWP spokesperson Steve Darling called it.
Today is a day of shame for the government.
The new government has turned its back on millions of pension-age women who were wronged through no fault of their own, ignoring the independent Ombudsman’s recommendations, and that is frankly disgraceful.
The Conservative party left our economy in a shambles, but asking wronged pensioners to pay the price of their mismanagement is simply wrong.
For years, Liberal Democrats have pushed the government to fairly compensate WASPI women in line with the Ombudsman’s recommendations. Today’s heartless decision cannot be allowed to stand and we will be pressing ministers to give those affected the fair treatment they deserve.
In his response to the Statement in the Commons, Steve said:
First, and for the record, the Liberal Democrats played a significant part in government in introducing the triple lock for our pensioners—it is important that people acknowledge that.
The Government’s decision is nothing short of a betrayal of WASPI women. I know that, as in my constituency of Torbay, across the United Kingdom there will be millions of women who are shocked and horrified at that decision. That the Government have inherited an awful state for our economy is no excuse. That the women are being hit by the mistakes of the Tories and that the Labour Government are now using that as a shield is utterly wrong-headed. Will the Secretary of State reflect on the decision?
The matter went to the ombudsman for its considered review, and the Liberal Democrats have long supported the ombudsman’s findings. I am shocked that the Government are taking a pick-and-mix approach to those findings, and we therefore ask the Secretary of State to seriously reconsider the decision.
Twelve other Lib Dem MPs spoke in the session on the statement:
John Milne:
Last month, the word “WASPI” made it into the Collins English Dictionary, which is a credit to the campaigners behind it. Does the Secretary of State agree that she has gone through the ombudsman’s report with, to use her own words, a fine-toothed comb, in order to get the answer that she always wanted to find in the first place?
Wendy Chamberlain:
It is a gross understatement for the Secretary of State to say that 1950s women will be disappointed, especially given that this new Government are setting a precedent by ignoring an independent resolution process. I signpost constituents to the ombudsman on a regular basis; we all do. It is one of the ways that we hold the Government and Government bodies to account, and it is a core part of our democracy. Can the Secretary of State explain how we can have faith in that process if the Government choose to ignore the ombudsman’s findings? Given the fact that, as a constituency MP, the Secretary of State herself supported the WASPI campaign, can she advise whether the £22 billion black hole has had any consequence on her decision making?
Rachel Gilmour:
I speak on behalf of Helen from my home town of Bampton and the 5,500 WASPI women in my constituency. They are not disappointed; they are devastated, as am I because—mistakenly, as it turned out—I believed that this Labour Government, who were supported by millions of women across this country who rightly turned their backs on the Conservatives, had some probity and decency. Does the Secretary of State agree that it turns out that they have neither?
Christine Jardine:
One of the very first constituents who came to me after I was elected in 2017 was Helen, whose decision on her financial future was taken just before she received the letter, which came late—so it did have an impact on her. It also had an impact on the thousands of WASPI women in my constituency who have contacted me over the past seven and a half years. How does the Secretary of State think that any pensioner in this country, regardless of the triple lock, which was the creation of the Liberal Democrats with the Conservatives, can have faith in a Government who have taken away their winter fuel allowance and now do not respect the injustice done to them in not compensating the WASPI women?
Alison Bennett:
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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To declare an interest, I am married to a WASPI woman, who saw her pension age change twice – from 60 to 64, and then again to 66. The point she makes to me (relentlessly!) is that if these changes had affected men, something would have been done about it – but as they only affected women, the problem is being ignored.
It seems odd that Libdems are now supporting this campaign when, as part ofthe coalition, they decided to accelerate the age equality. I think Kendal got it right yesterday, although it does now beg the question of what is the point of the ombudsman. It’s also another unhappy group and another government uturn. I’d actually argue that it’s men who are the losers in the UK pensions stakes. After all, they live 4 years less on average but because of the ban on gender annuity rates discrimination made by European Court of Justice in 2012, they are funding women’s pensions from their graves.
These changes were first announced in 1995. Three years before I was born. They were then sped up in 2011, which was 13 years ago.
As a party we should have the courage to stand up and say that there shouldn’t be compensation for a 30 year old decision and that lobbing £10 billion of taxpayer money at WASPI women when the NHS, Schools estate, armed forces and other public services are crumbling, is irresponsible.
I suspect that U-turns in Tony Blair’s first term were executed more elegantly because Alisdair Campbell was adept at looking in three directions at the same time!
“Labour have betrayed the WASPI women they have been courting over the past decade.
I don’t think that that is the case for most Labour MPs and I suspect many of them will be feeling incredibly uncomfortable.”
Let’s not get carried away. Labour made no manifesto pledge and indeed Reeves said before the election:
“There are lots of things that a Labour government might like to do, but the state of the public finances and the dire need of our public services means that we won’t be able to do everything that we might like to do.”
She went on to say: “We won’t put forward anything that is not fully costed and fully funded, and I haven’t set out any money for this [compensation for WASPI women].”
https://www.retirementline.co.uk/news/what-do-the-2024-general-election-manifestos-say-about-waspi/
@Callum Robertson
“As a party we should have the courage to stand up and say that there shouldn’t be compensation for a 30 year old decision”
That sounds like blaming the victims.
You, aged 26-ish, are referring to a time when it was normal for the woman in the household to remain at home looking after the kids while the man could earn sufficient income through one full-time job to pay for at least the basic needs of the household.
I, being very much older, can recall such tines, when needs were very much more basic. Post-war there wasn’t that much to buy in the way of consumer goods which we now take for granted.
It began to change in the run-up to the late Queen’s coronation which sparked purchases of TVs. My father bought a TV and I recall vaguely some neighbours coming to watch the coronation. I recall a washing machine with a gadget for ringing water out of the west clothes, but we didn’t have a clothes dryer till much later. We had a small fridge which ran on gas. No freezer and I recall a small wooden cupboard which held meat, just to keep the flies off it.
The woman wasn’t accruing rights to her own state pension as she wasn’t in paid employment and didn’t have the time to do a paid job anyway.
@ Callum Robertson
“As a party we should have the courage to stand up and say that there shouldn’t be compensation for a 30 year old decision and that lobbing £10 billion of taxpayer money at WASPI women when the NHS, Schools estate, armed forces and other public services are crumbling, is irresponsible.”
Not to mention the need to boost defence spending in a world of Putin, Trump, Xi Jinping and right wing appeasers generally.
The UK’s commitment to NATO is to put 2 divisions on the ground on the continent of Europe in case of need. As pointed out by Mike Martin (Tun Wells – Lib Dem) in his House of Commons maiden speech – thanks to the Tories the UK can’t even manage half of that.
Earlier this year I asked a former Lib Dem Cabinet Minister where the money would becoming from to fund NHS pledges, work to clean up water, repair school roofs, fund defence, etc etc. They looked uncomfortable and muttered about growth.
There are things that can be done to tax the wealthy but there are limits to the amount of money that will raise, and some of that (eg VAT on school fees) is counter productive both politically and practically. Ultimately there are limits to what can be spent.
The betrayal of the WASPI women is not the same as the Liberal Democrat betrayal of students. The Labour Party didn’t make a commitment in their manifesto, nor did individual candidates pledge that they would vote for the WASPI women to get the compensation that the Parliamentary and Health Service Ombudsman had ruled they should get (between £1000 and £2,950). Those of our MPs breaking their written promise to vote against all increases to tuition fees is a much worse thing and our reputation collapsed. The effect was clear our vote share fell from 23% to 7.9% and we lost 49 MPs (nearly 86%). I don’t think a share of the vote of 12.2% is a recovery ‘from the damage to our reputation from the tuition fees debacle’. (In 1979 the Liberals had a vote share of 13.8% and they received over 790,000 more votes than we did this year.)
Respectful disagreement with Caron here: this is the right outcome and I and I know other members have been disappointed by what is presumably an agreed social media line amongst LD MPs. This is not the right way to spend £10bn, and in governance terms occasional disagreement with an Ombudsman is part of the governing process.
I declare an interest as my wife is a WASPI woman. My wife knew very well what was happening, but then she was on a committee with Steve Webb, the pensions minister during the coalition. Mnd you, according to the ombudsman’s report 90% of the women affected knew about what was happening. He nevertheless recommended some compensation, even if it wasn’t the full amount the WASPI women were demanding.
Whatever the rights and wrongs of the case, the big issue is ignoring the ombudsman ruling. And to be clear, if this had been about men, the government would have implemented the ombudsman’s recommendations. This is just one more example, if one were needed, of discrimination against women.
I salute our spokesperson and his LibDem colleagues for slating the government on this issue. Labour are digging a big hole for themselves with pensioners and that will present a big opportunity for us to continue to grow the number of our MPs at Labour’s expense
To those who still try to pretend that a currency issuing government in one of the richest countries on Earth can’t afford this, shame on you.
@Mick Taylor
“To those who still try to pretend that a currency issuing government in one of the richest countries on Earth can’t afford this, shame on you”
Is your suggestion that the compensation money just be printed rather than it be paid out of taxation ? If so that’s appallingly irresponsible. Gladstone must be turning in his grave.
I agree with Mick Taylor in that the key issue is the ignoring of the Ombudsman’s recommendation. And it is a silly thing to fail on, there was plenty of scope to limit the amount offered, either by taking the DWP line that the appropriate compensation was level 3 rather than level 4 (£500-950, rather than £1000-2950), or by scaling it by how close to retirement were when the failures of administration occurred. So the £10billion is a straw man and a one off payment less than 10% of government spending is indeed affordable.
I fail to see how women have been discriminated against. If anyone has surely it’s men.
@ Tristan Ward “Gladstone must be turning in his grave.”
So far as I know, there are no recent reports of an earthquake anywhere near the vicinity of Westminster Abbey. The world has moved on a bit since 1898, Tristan..
Of course, submitting to Gladstonian rules includes opposing female suffrage, something I suspect Caron would be nae happy about.. The GOM opposed the women’s suffrage amendment to the 1884 Franchise Bill – arguing that women would be corrupted by politics and it would threaten the family.
Won’t someone please think about the middle class baby boomers?
@David Raw. As you well know I am not suggesting repeal of female suffrage and to suggest I am is both silly and irrelevant.
What I am suggesting is that the nation does not print money to cover one off expenditure.
That principle has stood the test of time and I am certain Gladstone would support it today. As I suspect you think too – hence your attempt to ridicule it.
The WASPI women claimed £36bn compensation. The ombudsman largely rejected their claim, but judged that a much lower settlement would be reasonable, because there was maladministration, and because some people did suffer. Starmer waffles about “tens of billions”, but the estimated settlement figure is actually “up to” £10.5bn, and that appears to be the estimated maximum.
Ignoring the fair conclusions of an independent ombudsman is what Trump would do.
£10 bn here, £10bn there… pretty soon you’re talking real money.
Government expenditure for 2024 was £1.2 Tn, total UK GDp £ 2.7Tn
1% of national income – the proposed increase in defence expenditure – is £27Bn
It’s easy to spend government money when you’re in opposition. I remember a certain Nick Clegg had ideas about student funding.
It’s probably a worthy cause, but how much would you put up taxes to pay for it? Fuel duty, perhaps? That was £25 Bn in 2023, what sort of reaction would a near doubling get?
Sorry, putting it up 40% or so.
Might it be interesting, and possibly useful, to calculate what it would cost to run our country effectively, transparently, equitably and purposefully for as near all as can be achieved, and tax transparently and equitably to pay for it?
I must admit that I was almost astonished with David Langhaw’s comment about his wife’s view of pension equality. Men had always had a higher pension age than women (65 against 60), and received it for a much shorter time on average, but never complained about it.
However, I remember being told when I got married that I had a choice – Did I want to be right or did I want to be happy?
I know I’m happy because Shirley tells me I am, I guess David Langshaw is happy too. 🙂
Definitely happy, @David Evans! My wife’s situation is that she was born in January 1955, and was at school with friends who were born in the autumn of 1954. They got their pensions at 60 – a full six years before my wife. Mary is in the small category of people (born in the first nine months of 1955) who saw their pensionable age raised first to 64, and then raised again to 66. She holds (forcefully) that the changes would not have been made twice for men – once, perhaps, but not twice.
In 1995 the Tory government decided to change WASPI’s retirement age..It was supposed to be incremental over 10 years starting in 2010..
Then the Tory/LibDem government decided to rush it ahead of schedule and failed to send official letters of notification…
In March 2024 the result of the ombudsman’s report was announced and the Tory government ignored it.. (Along with the Post Office compensation scheme and the Contaminated Blood Scandal compensation)…
In December 2024 the Tory and LibDem opposition demand the Labour government ask taxpayers to pick up the cost of Tory/LibDem mismanagement…
Ah, well…
David Langshaw,
‘My wife’s situation is that she was born in January 1955, and was at school with friends who were born in the autumn of 1954. They got their pensions at 60 – a full six years before my wife.’
Your wife is mistaken those born between 6th September 1954 and 5 October 1954 would have got their state pension on 6th September 2020 when most of them were near 66; Those born between 6th August 1954 and 5th September 1954 had a retirement date of 6th July 2020 when most of them where 65 and 10 months or 11 months. All women born after 5th April 1953 had their retirement age put back by the 2011 reforms. A woman born between 6th March 1953 and 5th April 1953 had a new retirement date of 6th March 2016, for most of them before their 63rd birthday (https://assets.publishing.service.gov.uk/media/5a7f02e640f0b62305b84929/spa-timetable.pdf).
Tristan Ward,
I would hope that no Liberal Democrat would not look at the economy and government finances in the same way as Gladstone as he knew nothing about modern economics. If you appeal to him on economics then you should not be surprised if people point out other views of Gladstone which are outdated today such as no votes for women.
The WASPI compensation would cost between £4 billion and £10.5 billion. To fund a one off cost by borrowing would make perfect sense. Increasing taxes to pay for it would not.
In terms of a historical injustice and the need for compensation I have to say my first preference would be addressing this issue of nuclear test veterans and their families.
https://www.bbc.co.uk/news/uk-68611769
Sadly this is not an issue that Lib Dem MPs have been actively taking up, as far as I can see.
A bit more information about the injustice of how we treated our citizens:
https://www.bbc.co.uk/mediacentre/mediapacks/britains-nuclear-bomb-scandal-our-story
@Mick Taylor “…And to be clear, if this had been about men, the government would have implemented the ombudsman’s recommendations. …”
Err no! The normal government approach to compensation is to limit the pay out and the to use the words of a Tory minister speaking about the Horizon compensation scandal (ie. repeated delays in paying compensation) – “ensuring the payout is fair to the taxpayer”, ie. delay and delay and delay.
With clear evidence of criminal intent, when are we going to start seeing PO executives getting the just reward for the risks they took and have their wealth forfeited as proceeds of crime; but that is digressing…
The whole WASPI issue is about technicalities, any one who was alive in the mid 1980’s and living in the UK can’t have missed all the changes in pensions, when the whole thing was set in motion and the take away was: womens pensions would increase to be in line with men’s pension and the pension age would rise from 65 to 70; hence plan accordingly.
@Michael BG. Not quite. Funding a one-off cost by borrowing makes perfect sense if the thing you are paying for is an investment which will then give you a return, allowing you to repay the amount borrowed. That’s why paying for – for example, HS2, or for some technological research – by borrowing makes some sense. Paying WASPI women is one-off but it’s not an investment: It’s current spending and will not gain any return. It would need to be paid for out of taxation.
I would agree with most here that the redress cannot (alas) be afforded – but it beggars belief the ignorance about lack of opportunities for women in the era under consideration.
The government have made the right decisons on WASPI women and the winter fuel allowance. The ridiculous £10 Christmas bonus should have gone as well! I have been disappointed with our positions on these issues which amounts to grandstanding from the comfort of opposition. We can and should do better than this.
I tend to agree with Robert Hale. According to the Ombudsman 90% of women affected by the 1995 decision, revised in 2010, were aware what was coming. Neither recent Tory nor Labour election manifesto mentioned the kind of support now being sought, probably because they realised how much compensation was likely to cost. As an 81 year old income tax payer I would rather that money be invested in future projects to help to drag this country out of the mire into which it has been cast over many decades by governments of ALL colours, which I think is what ‘Simon R’ is implying.
@MichelBG
Gladstone was and is known for fiscal prudence. That is not out of date.
I pointed out an implication that government should print money to pay compensation. That would be irresponsible. You suggested that compensation should be paid for by borrowing. That would be irresponsible too. Gladstone would not approve of either approach. Deflections about suffrage are both silly and irrelevant.
Compensation could be paid for responsibly out of taxation. if so, it would be good to explain:
what/who could be taxed to pay for it
Or what services or investment would be cut instead. Options include:
education
health
net zero
care services
armed forces
LibDems (mainly) want WASPI women to be paid com pensation ..All of us want the victims of Post Office and the Contaminated Blood scandals compensated…
I’m sure, as they want all these payments, they will not object to bringing Capital Gains Tax )most of which is paid by the super rich) into line with income tax…At present, the top rate of income tax is 45%, but most types of capital gain are taxed at 20% and can be as low as 10%. The government could raise up to £14bn by bringing the rates into line with income tax bands…
This would be for two years and ‘ring fenced’ for the compensation that the opposition parties are demanding…Would the opposition parties support any such move? No chance..
My wife was born in the 1950s and is among those women who’s pension age was moved fron 60 to 67. She has not worked in her sixties. To compensate for the family finances, I plan to continue working to age 72, when she will reach 67. I expect many other couples will do something similar, if they can. Single women may not have such options.
On the issue of “To those who still try to pretend that a currency issuing government in one of the richest countries on Earth can’t afford this, shame on you” If you take the MMT view you would seek to raise taxes when inflation is above target as it currently is (even before any spending increases) UK interest rates set to be held at 4.75% after inflation rises again
Russia is a currency issuing government with high inflation driven by war spending. Even in this case the country has to raise taxes to address fiscal deficits and is maintaining very high interest rates to curb consumer spending.
Argentina is doing the opposite with major cuts in public spendding to fight inflation that are driving up poverty. It has recently begun to recover from recession and we will have to see if the recovery can be sustained Argentina’s economy exits recession in milestone for Javier Milei.
The UK should avoid economic policies that would push us to emulate the examples of Russia or Argentina. A policy of controlled public spending and borrowing in line with realistic growth targets shouid be maintained, with tax reform primarily aimed at addressing inequality. In the case of Waspi women that would focus compensation on only the most needy cases.
“with tax reform primarily aimed at addressing inequality”
Indeed. But I’m not holding my breath.
It seems to me the present situation suits the better off and powerful just fine.
But then it appears they don’t care about public services.
Irresponsible, me? We can apparently do many things that Labour like, many of which cost a lot of money, but we can’ t find up to £10.5 billion to right a wrong against WASPI women as recommended by the Ombudsman. We can for example recruit lots of driving test examiners.
When will LibDems wake up to the falsehoods being peddled by too many economists about debt and black holes. Govt can spend money as long as it keeps inflation under control and recoup much of it by the subsequent tax on income and spending that the spending creates
Taxing capital gains as income would be unfair and bad for the economy unless inflation indexed and you could spread capital gain over the life of the asset. Capital and income are not the same it’s right that they aren’t taxed the same.
“In 1995 the Tory government decided to change WASPI’s retirement age..It was supposed to be incremental over 10 years starting in 2010..
Then the Tory/LibDem government decided to rush it ahead of schedule and failed to send official letters of notification…
In March 2024 the result of the ombudsman’s report was announced and the Tory government ignored it..
In December 2024 the Tory and LibDem opposition demand the Labour government ask taxpayers to pick up the cost of Tory/LibDem mismanagement…”
To be fair our party, our 2024 manifesto said a Lib Dem Government would abide by the Ombudsman’s report. I have no problem with supporting that manifesto commitment provided it was all properly costed and comes out of taxation. And our manifestos are costed.
” Govt can spend money as long as it keeps inflation under control and recoup MUCH of it by the subsequent tax on income and spending that the spending creates” (my emphasis)
What about that part of the money government can’t recoup out of subsequence tax? Where does that come from? What happens if inflation gets out of control (which may be for reasons nothing to do with the government) ?
Tristan Ward 19th Dec ’24 – 2:44pm….To be fair our party, our 2024 manifesto said a Lib Dem Government would abide by the Ombudsman’s report. I have no problem with supporting that manifesto commitment provided it was all properly costed and comes out of taxation. And our manifestos are costed….
So, which extra taxes would you introduce to pay this £10 billion?.. Bearing in mind that a 1% increase in basic tax would raise just £7.5 billion..
expats 19th Dec ’24 – 10:03am:
…they will not object to bringing Capital Gains Tax (most of which is paid by the super rich)…
Only 45% of CGT is paid on gains of £5 million or more (Source: HMRC).
The government could raise up to £14bn by bringing the rates into line with income tax bands…
The way to increase revenue from CGT is to reduce the rate. The way to increase overall tax revenues in the future would be to abolish it, at least on business investment…
‘Trimming Taxes: The Case for Cutting Capital Gains Tax’ [October 2024]:
https://www.adamsmith.org/research/qns3z5vd5jhs0nrvgvbwl5kdhacquh
@expats
So, which extra taxes would you introduce to pay this £10 billion?”
A perfectly fair question. As set out in the costed Lib Dem manifesto.
Starmer says we “can’t afford” to compensate the WASPI women. Affordability is, indeed, always an issue when a tax-and-spend policy is proposed. If Government decides to spend £10bn on, for example, launching a new moon rocket, then that £10bn must be extracted from the pockets of many people – People who would have chosen to spend that money on something different. So the tax-and-spend policy needs to be justified in terms of demonstrating that the moon launch was a great project, and its benefits were bigger than what was lost by preventing all those taxpayers from spending their own money.
Compensating the WASPI women is completely different. No moon rocket is being constructed, no money is being directed toward a Government objective. It is purely a transfer payment. Money is being given to women who (it is argued) deserve it. That money must be taken in taxes from everybody else. The likes of Tesco will not notice much change, because some women will have more to spend on their groceries, while other people will correspondingly be spending a bit less. It won’t be like the moon launch, which would have been bad news for Tesco, as we would all have less money to spend in their stores.
Did the ombudsman get it right? Well, of course, one can argue with their decision, in much the same way as one can swear at a referee and tell him to get new glasses. The ref will probably send you off the pitch. Pity the ombudsman can’t do likewise!
Tristan Ward 19th Dec ’24 – 4:07pm…Tristan Ward 19th Dec ’24 – 4:07pm
@expats…So, which extra taxes would you introduce to pay this £10 billion?”…
A perfectly fair question. As set out in the costed Lib Dem manifesto..
I read the bit about …Ensure that women born in the 1950s are finally treated fairly and
properly compensated…
I also read…Guarantee access to an NHS dentist for everyone needing urgent and
emergency care, ending DIY dentistry and ‘dental deserts’…
Both are laudable ambitions but ‘the devil is in the detail’..So EXACTLY HOW?
After all, I’m still waiting for the umpteen thousand extra nurses, umpeen thousand extra police and 40 new hospitals from the last lot..
Please don’t say, “But you can trust us”; I voted LibDem in 2010 on the promise of ‘Say goodbye to broken promises”
As I understand it, there are 3.6m women affected. The ombudsman recommended that those entitled to compensation (presumably not all) should get between £1000 an £2950. Where are you getting £10bn from?
” Where are you getting £10bn from?”
“… which extra taxes would you introduce to pay….?”
If a government increases its spending it increases its taxation revenue. If it reduces its spending….
When the economy needed rescuing after the 2008 GFC and later, in 2020, when the Covid crisis hit, some did indeed ask where the hundreds of billions ££ that were needed were “going to come from”. Most seemed to work it out for themselves rather quickly afterwards.
The first obvious point to make is that the scale of the problems caused by the so-called “black hole” of £22bn, or this £10bn, are rather small by comparison to previous problems.
As we saw during the Covid spending the loose fiscal policy of “finding” the £300 bn, or so, needed for the Covid emergency did cause some problem of inflation. Though just how much was caused by this rather than other factors is debatable. A reasonable estimate might by 5% added to inflation.
How much would “finding” £30bn cost? 0.5% maybe?
It would depend on what else is happening in the economy and how many spare real resources we have. If we are on the verge of a recession the government can afford to run a looser fiscal policy than if we are in a ‘boomtime’.
There’s no growth at the moment. Rachel Reeves’ last budget was probably deflationary overall. Recession is likely to be more of a problem than an overheating economy in the immediate future.
@ Joe
“If you take the MMT view you would seek to raise taxes when inflation is above target as it currently is”
This isn’t quite right.
You’d raise taxes if the economy was overheating and demand needed to be restrained to bring the two into balance.
There’s no evidence that it is overheating now. Prices do of course rise when tax increases are applied. Clearly it doesn’t make any sense to raise taxes further to lower prices in these circumstances.
We could make the same argument if price rises are caused by factors outside anyone’s control in the UK such as a worldwide increase in energy prices.
” If you take the MMT view you would seek to raise taxes when inflation is above target as it currently is”
However, i f you remove tobacco products from the inflation figures…
Which does beg the question: Why are tobacco products still included, if we really want people to give up smoking…
The economic conumdrum facing the UK is stagflation – a combination of lower output, higher unemployment and cost-push inflation Britain is being stalked by the spectre of stagflation..
“It presents a tough challenge to a central bank focused on inflation targeting. On the one hand, it should tighten policy by increasing interest rates to contain the second-round impacts of rising prices. But on the other hand, it will feel political pressure to keep interest rates low — or even cut them — in order to ease borrowing costs and thereby assist businesses and mortgage holders in the short term. ”
“The MPC already expects inflation to rise moderately in the next few months. But it now needs to reconsider the future trajectory of policy and to recognise this new, and unwelcome, stagflation scenario. The risks of a resurgence in inflation are too great to continue cutting interest rates while inflationary pressures are so strong.”
We can see the squeeze on discretionary spending increasing as obtaining energy becomes more energy-expensive. fHospitality, tourism, subscriptions , car pcps, disposable clothing… So the economy is tending to shrink, as a larger fraction of our resources goes into non-descretionary. mortgages, rent, Food and fuel for households, NHS, pothole fixing, social security for the government. Less for nice to have projects.
I can’t help wondering why the owners of Heathrow and Gatwick think building extra runways makes sense.
The last time the UK had stagflation was in the 1970s when the USA lost its position as swing oil producer, and OPEC restricted crude supply in an attempt to raise prices. North Sea and Alaskan crude came to the rescue then.