On a lunchtime edition for Radio 4 Professor Peter Hennessy, the well-known historian of contemporary British history, recommended taking up the ideas of the Liberal Sir William Beveridge. In 1942 Beveridge wrote of ‘five giant evils’ that must be combatted through the reforms he sought which resulted after the Second World War in the Modern Welfare State and the National Health Service.
There are five evils in our society today that need fighting, said Professor Hennessy, listing what he believes they are, to make the changes necessary after the current health crisis. His ideas were then discussed in the programme, the World at One, by Kenneth Clarke and Alastair Darling. The two well-known retired politicians, from the Conservative and Labour parties respectively, agreed on the principle and several of the five suggested ills, adding modifications of their own.
Perhaps Peter Hennessy had been reading Liberal Democrat Voice. Five great ills of today, matching the Beveridge evils, have been extensively discussed in articles this year. They have placed them in the context of the need for a new Social Contract since the Beveridge-inspired reforms after the Second World War were seen as a social contract between government and people.
The UN Rapporteur on Poverty and Human Rights, Philip Alston, said in 2018, after he visited our country and had done extensive research, that it appeared to have broken down. Articles posted here and here by myself and Michael Berwick-Gooding this year have argued that it must be replaced by a new Social Contract addressing the modern ills. We are now submitting a business motion to autumn Conference asking the party to adopt the proposal as our immediate vision and purpose such as is being called for by the Thornhill review of our General Election performance.
The appetite for changes for the better is obviously in the mood of the country now after the ravages of Coronavirus, just as there was such an appetite after the Second World War. Tories and Labour alike agree that the time of austerity is over, and sense that people will no longer tolerate rising poverty, inadequately financed health and social care, undervaluing and underpaying of essential workers, and extensive underemployment as well as rising unemployment.
However, neither party has the capacity for the clear purposes and policy developments which our party can put forward. The Social Contract proposal is the overarching theme under which we can discuss the five social ills and their broader ramifications, and campaign wholeheartedly together for better social justice and the greater wellbeing of our fellow citizens. These social goods must be sought at once, and September Conference decisions will be none too soon.
* Katharine Pindar is a long-standing member of the Lib Dems and an activist in the West Cumbrian constituency of Copeland and Workington.
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The Beveridge Social Security plan rested on a foundation of full employment. In his 1944 book ‘Full Employment in a Free Society’ he argued for a planned economy for peacetime that drew on the experiences of wartime manpower mobilisation and Keynesian demand management. However, once the war was over (even during it for a good few) the solidarity of all being in it together soon broke down and sectoral interests began to reassert themselves.
Beveridge assumed that full employment and the contributory principle would largely eliminate the need for means-testing of national assistance. That is not what happened. he did not foresee the rise of single-parent households and never tackled the problem of rent. Unemployment benefit is an insignificant part of of welfare spending. Excluding pensions, the largest elements are disability benefits. housing, income support and tax credits https://www.cashfloat.co.uk/blog/money-borrowing/benefits-uk/
Keynes assumed that Nationalisation of the commanding heights of industry would furnish the necessary state investment to buttress demand. The opposite happened with investment declining in the state hands. What happened instead is that the welfare state created an automatic stabiliser that serves the purpose of smoothing the troughs and peaks of the economic cycle most of the time.
We shoud learn the lessons of where things went wrong with the Keynes/Beveridge plans and where they worked and develop our thinking for the 21st century.
Today, we need to be thinking of how we develop an economy that works for all in the way Keynes and Beveridge envisioned it could.
Ideas such as the foundational economy https://foundationaleconomy.com/ that build the economy around a foundation of basic goods and services – health, care, education, housing, utilities and food supply
Reviving the economy after this pandemic is likely to require a policy as ambitious as Ed Davey’s Green Investment and jobs program.
Foundational economy policies based on universal basic services which are a citizen entitlement move public policy away from boosting private consumption to deliver economic growth, and instead ensure the quantity and quality of foundational services. Combined with a Job Guarantee scheme and tax reform such policies offer the possibility of actually realising the vision of Keynes and Beveridge.
Spending on welfare has indeed steadily risen year by year, as your reference shows. thank you, Joseph, but it has not risen enough. The government’s own estimate is that there are 14 million people living in relative poverty in this country, including more than four million children. Of the 14 million, 8.3 m. are working-age adults, 1.3 m. are of pension age, and the rest, 4.6 m., are children. Only pensioner poverty rates have reduced much (by almost half) since the beginning of the 2000s, so therefore the main problem seems to be with the inadequate working-age benefits – along I suppose with inadequately paid or insufficient hours of available work. None of those problems, I would suggest, would in any way be met by meting out a Universal Basic Income.
Rising unemployment is forecast to come to our country as the furlough provision is reduced. I suppose that actually there would have been a re-employment problem seen by the Attlee government as the troops were disbanded and the munitions factories closed. However that was solved (perhaps partly by the house-building programme and the end of women’s work), it seems clear that here and now there will need to be government intervention, perhaps local authority intervention too, to foster local jobs and enterprises. Government investment must not only be on vast projects like HS2.
On the question of inadequate working-age benefits, more than a million people newly signed on for Universal Credit, and will have realised that, even with the extra that the Chancellor provided, and temporary relief in paying mortgages or rents, the amount they receive does not seem enough to be living on for any length of time. Hopefully therefore when we make a pledge that relative poverty must be ended, partly by higher benefit rates whether financed by fairer taxation or more borrowing, and partly by adequately paying jobs, we shall have public support.
What were Peter’s five giants? (I would ask him since his office is in our corridor but not quite possible at a “distance” of 200+ miles!
Tony Greaves 25th Jun – 5:28pm
War is expensive
War is expensive
War is expensive
War is expensive
War is expensive
Good question, Tony. Peter Hennessy’s five modern evils, he said on June 22 in the World at One, were social care, housing, technical education, problems of climate change, and the need to prepare for AI. Ken Clarke then spoke up for the first, social care, and the third, technical education, and enlarged on the need for training quality for the future of the economy. Alastair Darling similarly wanted social care (maybe it’s an age thing!) and technical education, but also the fourth, problems of climate change, saying there was need to help the unemployed with jobs in that area.
I hope my jotting-down of the points as I listened was reasonably accurate. I was interested in the measure of agreement between all three, but shocked that Peter Hennessy didn’t mention poverty.. To me it is the first evil that we have to tackle through our Social Contract, the equivalent of the Beveridge ‘Want’, and I am afraid that little conversation is all too typical of political thinking in the government, that lifting poverty isn’t seen as a priority. I shall be asking our leadership candidates to say that it is a priority for them, and should be for our party.
Katharine,
your memory serves you well. This article sets out Peter Hennesy’s views https://www.qmul.ac.uk/mei/news-and-opinion/items/after-covid19—lord-peter-hennessy.html
“I think there is a hard-edged, not a fudged consensus to be crafted using 5 priorities.”
– social care; something must be done and fast
– a big public/private push on social housing
– getting technical education right at last after 150 years of trying
– combatting and mitigating climate change
– preparing our country and our people for the full impact of artificial intelligence on our productive capacity and our society
He has a fan in Robert Peston https://twitter.com/Peston/status/1275041788219326464
“Peter Hennessy magnificent on World at One on how we must all rally around five post Coronavirus priorities, his equivalent of slaying Beveridge’s 6 pernicious giants. They are solving social care, social housing, technical education, climate change, artificial intelligence.”
In Layla Moran’s booklet a member of Federal Policy Committee, Paul Noblet has an article entitled, “A new social contract”. However, it seems unlike Beveridge and Katharine and me he only has one social ill that he hopes to tackle – poverty. Perhaps, he agrees with Adrian Sanders who wrote in the April 2020 issue of the Liberator (‘Get Liberalism done’), “Our preamble starts with the eradication of poverty as the first action point in the first paragraph. What more could you want to attract public support than a primary purpose to ensure none are enslaved by poverty?” I also agree one of our primary purposes should be the eradication of poverty. I don’t understand how anyone who thinks they are a liberal can want a society in which anyone is held back by poverty including relative poverty.
Joe Bourke,
I don’t think “the welfare state created an automatic stabiliser that serves the purpose of smoothing the troughs and peaks of the economic cycle most of the time”. When unemployment increases by large numbers (as will happen soon) aggregate demand in the economy declines. If the out of work benefits were close to the net earnings of each person made unemployed then the increase in government spending caused by rising unemployment and paying out more benefits would be much closer to the amount that these newly unemployed people were spending. Instead what happens with rising unemployment is that aggregate demand falls, so businesses reduce production and make more people unemployed thus causing aggregate demand to fall further and we are in a downward spiral, which can only be broken by government action.
Joe, I love your facility to find references, thank you! But how odd that Robert Peston should think there were SIX ‘giant evils’ listed by Beveridge. In case anybody else doesn’t know, he spoke of five, and they were Want, Disease, Ignorance, Squalor and Idleness. Michael and I have listed the equivalent social ills of our time, and included a programme for the party to fight against them in our proposed business motion. The first, of course, is poverty, but there are indeed other great and continuing problems to be faced.
Michael BG,
under the Blair-Brown government spending was constrained for the first two years until 1999. Unemployment was around 5% in 2000 and stayed around that level until 2008 when it increased to near 8% after the financial crisis. Unemployment had fallen to 3.8 % just before the onset of this Pandemic and is expected to increase to at least 8% if not higher when the current support schemes are fazed out. Young people are likely to be disproportionally affected and graduates and school leavers will be entering the worst job market in living memory.
Discretionary fiscal stimulus can mitigate reductions in demand but it does little to address the underlying issues or the reallocation of jobs across industry sectors that will be required.
The issues raised by Professor Hennessy are all areas where job creation programs and apprenticeship schemes can be productively employed whether in care services, construction, technical education and training, green jobs or IT services.
Joe Bourke,
The spending of the Labour government in its first two years was not constrained by economics, but by an election pledge made during the general election.
Once the government has increased aggregate demand businesses increase production and so employ more people and we have an upward spiral. During this upward spiral the government needs to take action to assist some people to make them employable again. It is very important that the government does take this action to help people into work and not to leave them unemployed as the economy grows. This is why one of the social ills Katharine and I have identified is that some people have deficient skills, education and training. Meeting these deficiencies is another of our party’s main purposes.
@ Michael BG,
You write that you don’t think:
“the welfare state created an automatic stabiliser that serves the purpose of smoothing the troughs and peaks of the economic cycle most of the time”.
Joe is essentially right. If a workers lose their jobs they will have lost an income which likely came from money already circulating in the economy. If the Govt then spends on welfare their income comes from additional Govt spending. Joe would perhaps use the term ‘money supply’ which I isn’t that useful IMO. It’s spending that matters. Not the amount of money in circulation. So the Govt is doing some additional spending rather that someone in the private sector.
This is how the automatic stabiliser is supposed to work. It doesn’t mean it’s a perfect stabiliser. Govt needs to decide on what additional measures may be required. The thinking over past few decades is usually that interest rates need to be lowered to encourage more private sector borrowing and therefore more private sector spending. That’s led us to where we are now with almost zero interest rates. Time for another approach! Joe seems to favour negative interest rates. I argue for more of the stabiliser, ie Govt spending/tax cuts added, not automatically, but according to a considered opinion on the needs of the economy rather than some silly notion about what needs to happen to ‘balance the books’.
That inevitably means Govt cutting its own spending and being surprised when its own income falls in consequence. It’s the ‘logic’ of a dog chasing its own tail!
@ Katharine,
“Spending on welfare has indeed steadily risen year by year….., but it has not risen enough. The government’s own estimate is that there are 14 million people living in relative poverty …..”
There’s two approaches we can take:
The first is to accept that somehow we have 14 million people, or whatever is the true number, who are somehow surplus to requirements. They aren’t capable of doing anything better than eking out an existence either on unemployment benefits or in very poorly paid and insecure work at the bottom end of the job market. We can say they are lazy and don’t really want to work and that’s why we need to both import lots of overseas workers. To salve our consciences, we increase their welfare payments, which might include such measures as a UBI, to try to make their lives more tolerable.
The second is to reject the idea of “surplus to requirements” and do what we can to ensure that everyone has the opportunity of earning a living wage . That can seem a difficult prospect. The sad truth of the matter is that unemployment can lead to unemployability. The loss of self esteem can lead to drug and alcohol abuse, a drift into criminality etc.
But we have to make a choice and start somewhere. The second option has to be the better one. This doesn’t mean that we immediately remove welfare benefits. I would agree they need to be raised in the short term but they aren’t a long term solution to the problem.
Peter, that strikes me as an extraordinary and illiberal categorisation of people who sometimes need welfare benefits. I think Liberal Democrats certainly don’t believe anyone is ‘surplus to requirements’, a terrible view, but neither do we think that everyone of working age must just keep themselves by earning pay. There are plenty of people who are caring for children or elderly frail people, plenty of people who have disabilities of one sort or another which prevents them doing so. They need welfare benefits. As Beveridge said, everyone must be assured of having enough to live on in our society, whatever their circumstances. The plain fact is that with the benefit cap and all the problems of universal credit a lot of people have been given inadequate amounts of benefit and have been driven to food banks for temporary extra support with meals. That just isn’t good enough. We have to demand adequate benefits to lift people out of relative poverty if they are unable to find jobs that pay them a living wage.
The term “surplus to requirements” is not a good one, but there is perhaps an underlying truth that we need to confront, even if we find it uncomfortable.
I was reading an article recently, I think it was in Psychology Today, about the way the American military recruit. Apparently all applicants do what is known as an ASWAB test, which is pretty much as IQ test. The bottom third are failed. They do this for a reason. One study showed that a person on the 50th percentile was a third more likely to hit a target with a tank gun than a person on the 20th.
Bottom line is this. There are people who have difficulty learning useful skills. Stuff that is useful to the American army, or to business. And business view them as “surplus to requirement” as far as their business needs are concerned. And we are foolish if we don’t factor this reality into our thinking when formulating welfare policy.
@ Katharine,
“There are plenty of people who are caring for children or elderly frail people, plenty of people who have disabilities of one sort or another which prevents them doing so. They need welfare benefits.”
Why do they? If anyone is doing doing something why not formalise it under the Job Guarantee Scheme? Just as we decide now whether to provide benefits for looking after the elderly etc.
Yes there will be some people who are so badly disabled they won’t be able to do anything. But we are far too quick to write off disabled people in this way. It wasn’t long ago that those suffering like Prof Stephen Hawking were written off and consigned to a nursing home. Of course, most disabled people have much more modest ambitions. For example many people with Downs syndrome are capable of doing something but their unemployment rate is something like 80%.
If all else fails we can put people of permanent sick leave but we don’t have to call it a “welfare benefit”.
https://www.bbc.co.uk/news/blogs-ouch-32613957
I think Peter’s term ‘surplus to requirements’ shows the ‘unacceptable face’ of economics, because it reduces individuals to a number on a page and ends up discounting the talents of millions of people. I think we are pretty near to having a neo Victorian society where a minority have immense wealth and large numbers of people live in poverty. This poverty isn’t as severe as in Victorian times when poverty = destitution but people are going hungry. Beveridge was essentially trying to right the wrongs created by the Industrial Revolution when the economy was also largely free to operate without restraint, which is why he still speaks to us today.
We Lib Dems should be fighting poverty because it reduces an individual’s freedom and turns equality of opportunity into a negative. However, there is a third aspect of our tripartite slogan which is community. There is growing evidence that a community suffers when it lacks compassion. See the ALDES paper Public Mental Health and Covid 19. By concentrating on economics and neglecting social psychology we have created a society with ever increasing mental health problems. Attempting to solve this using the divisive model of society that Labour and the Tories have is going to lead to failure. We are the only party which sees society as interrelated and interdependent, in other words as a community.
This is our unique selling point and we should use it as a basis for our policies because compassion is essential both for individual well being but also for society to operate successfully.
Very good points, Sue. The foundational economy approach takes a similar line to the one you espouse https://www.theguardian.com/business/2019/nov/17/why-is-uk-unemployment-still-low-we-are-working-longer-hours
They advocate a ten-point program of action.:
1. Start with health and care. Health is the activity where it is easiest to build an alliance for change.
2. Housing and energy are the other immediate priorities. Government needs to take responsibility for the availability of social housing which offers quality decarbonised homes with security of tenure at rents geared to local wage levels.
3. Food needs reform. A few supermarket chains have corporate power and a dominant retail position in the national market.
4. Introduce social licensing. All corporate providers of foundational services should have legal social and environmental obligations.
5. Reform taxes on income, expenditure and wealth. The country needs to greatly increase the capacity of the government to raise revenue. Without tax reform the burden of servicing the debt incurred in the Covid-19 crisis will squeeze current foundational service provision and crowd out necessary investment in housing and
health.
6. Investment from pension funds and insurance companies should go directly into the provision of material infrastructure. The foundational economy offers stable, long term, low return investment opportunities which could and should be financed by 5% coupons.
7. Shorten fragile long supply chains in foundational commodities. Foundational services generally have to be locally delivered, and there is scope for increasing
local food production but most manufacturing finished products and their inputs are long-chain and should remain so.
8. Every city, town and rural area should develop a live/work transition plan. The plan should not just be local but integrated into a national enabling framework. Politics is local and foundational provision is grounded in territories, hence the importance of plans which are developed with input from citizens using innovative ways of engaging them.
9. Rebuild technical and administrative capacity at all levels of government.
10. Accept some responsibility for the foundational systems in regions adjacent to Europe.
Peter Martin,
zero or negative interest rates are a desperate measure to fend off debt deflation. They are extremely damaging for those on fixed incomes like pensioners and those trying to save for retirement. They also inflate house prices way beyond the reach of first-time buyers.
Housing and land economics expert, Professor John Muelbaeur advocates index-linked national savings accounts that pay at least the rate of inflation. One driver of the British public’s enthusiasm for owning property (viz continental Europe) is the perceived low returns, risks and complexity of investing in pension funds. Maintaining interest rates to provide moderate levels of return on capital would go a long way to resolving the issue of excessive house price inflation and inter-generational inequality.
As noted in point 6 of the foundational economy plan of action- “Investment from pension funds and insurance companies should go directly into the provision of material infrastructure. The foundational economy offers stable, long term, low return investment opportunities which could and should be financed by 5% coupons. There is nothing new or revolutionary about this because the capital that went into nineteenth-century railways earned 5% or less.
But financialised capitalism brings public companies or fund investors like private equity with expectations of double-digit, 10% plus returns on capital. Double-digit business models are fundamentally unsuited to capital intensive foundational activities where high operating returns can only be obtained at the expense of other stakeholders including the workforce.
Capital should not be free and costless but the case for cutting out intermediaries is overwhelming. The separation of property and operating companies and the issue of 5% direct investment bonds for building new care homes or local energy networks would strike a proper balance between disciplining enterprises and incentivizing the supply of capital by the state or private savers, according to the national settlement on retirement provision.”
@JoeB,
We do, for once, agree on the undesirability of negative interest rates. The MMT position is that interest rates should be set at zero. Inflation using the JG as a stabiliser is also zero. So that just about meets Professor Muelbaeur’s requirement. When that was first suggested, the notion of zero interest rates was poo-pooed by the mainstream!
But once we rule out any significant reduction in interest rates, into negative territory, we are also ruling out conventional monetarist thinking on what needs to be done to stimulate a flagging economy. So what’s the only alternative left?
Chris Cory and Peter Martin. It is true, Chris, that we cannot shut our eyes to the fact that there are people who can’t contribute economically to society, and as Liberals, in the spirit of Beveridge, we expect to give them a sufficient income to live on. I was using ‘disabled’ in its widest sense, Peter, as including those who are not able to contribute economically, whether this has always been the case for them,or whether in the course of life it has become the case. The reason why I am calling your apparent approach illiberal, Peter (and do you consider yourself a liberal, by the way?), is because you continue to view such people as needing to do something for which society will pay them. You suggest that even if they are on permanent sick leave you will pay them something called – what? You dislike the term ‘benefits’ ! But there is nothing shameful about anyone in our society accepting a welfare benefit, because the proud achievement of the Liberals was to create our Welfare State, and everyone will benefit from it at some time in their lives, accepting our free health care, our unemployment insurance and our old-age pensions if not also the part known as a welfare benefit.
Sue is right, we are a national community, and to Liberal Democrats everyone in this community matters. How often , to give a small instance, have we heard someone say how much joy an autistic child or seriously disabled youngster is giving them? But Sue, we need a vehicle to be able to implement our idea of community, of more help for the poorest and most disadvantaged, of fair dealing for everyone, and a new Social Contract is the overarching theme which will enable our party to campaign with purpose to achieve it.
Peter Martin, a Labour Party support who believes large numbers people are surplus requirements is a prime example of exactly what is wrong with latter day socialism; authoritarian and contemptuous of the kind of people they expect to vote for them.
@ Glenn,
Can I suggest you read my comment again and this time try to understand the meaning of it?
Peter Martin
I read it. I understand the meaning, but I also understand the way language is used.
@ Katharine,
“You suggest that even if they are on permanent sick leave you will pay them something called – what?”
How about a wage? Or a salary for the more middle class 🙂
The job guarantee applies to everyone of all abilities. What other way is there to employ the 80% of Down’s syndrome people, who are currently overlooked, and will always lose out when they are in competition with the rest of the able bodied workforce?
They don’t want to be given a UBI and told to hide themselves away. They want to be included on the same terms as everyone else.
Sue. to reply to your welcome comment more fully, I agree with you that both major parties seem to maintain a ‘divisive model of society’ and that we alone believe in the interdependence of all people in our country and therefore of society as community. This must be one of the reasons why we cannot sit back and wait for a Labour government to overthrow the present appalling crew. Only our party has the outlook and the unity to be able to declare that societal ills must be dealt with, and fast, under the strategy for action that a Social Contract will enable.
Philip Alston wrote in his Statement that ‘key elements of the post-war Beveridge social contract are being overturned’, and, ‘British compassion for those who are suffering has been replaced by a punitive, mean-spirited an d often callous approach’. Part of the trouble is that our ruling party does not accept the idea of showing compassion (to me, as probably to you also, the greatest of virtues) as a proper objective of political action. Thus poverty has been allowed steadily to rise. Are you aware that besides 22% of the population living in relative poverty, another 19% are believed to be in absolute poverty – 12.5 million people? Or that the total number of children in poverty is forecast to rise steeply, and already 600,000 more than in 2012 are in relative poverty now? (that last figure confirmed by the Office of the Children’s Commission for England this week). This situation cannot be left to governmental indifference and opposition disunity – our party surely needs now to agree on and demand necessary action, within the context so relevant to us.
Joseph, referring to your comment of 1.34 pm, I suggest that quoting the Foundational Economy programme is not to the purpose. It is doubtless a worthy organisation though not one I had heard of before, but its international remit is irrelevant here. I would rather consider the high-ranging ideas of the Nigel Lindsay/Robert Brown essay, or the equally radical open letter of the new director of the Social Liberal Forum, Ian Kearns, if I wanted to widen the scope of this discussion. But I don’t and I won’t.
I too am an internationalist as Lib Dems tend to be, but the proposal of the Social Contract is specifically to make life better for the citizens of our country, and this is its purpose. We have the chance of the current national mood to welcome useful change which tackles our oppressive social ills, and we have as a party the demand from the Thornhill review for us to have a vision, a purpose and a strategy. This is needed to lift us from the consciousness of our awful GE performance, our single-figure standing in the polls and our negligible presence in national media. For our own sake and still more for the country’s, let us concentrate on something useful – the vision of a new Social Contract which I and my colleague Michael BG have worked into an overarching proposal for the party, with a timed programme which our governing body and our leaders can use as a basis for campaigning for real change. Only the Lib Dems can do it, and it will be greatly of service in the months to come.
Peter Martin,
My point is that the automatic stabiliser does not stop the decline in the economy, because the amount paid out in benefits is much less than the net income lost by those made unemployed. As you point out the government has to do more to stabilise the decline in the economy. And even more to reverse the decline.
As Katharine pointed out 4.6 million of the 14 million are children. The majority of the 8.3 million of working age are in work, 2.8 million live in families where the two parents are both in full-time work. If benefits were paid out at the poverty line for each household type then none of these working-age adults would be living in poverty. Of course this is not enough, we need to ensure that everyone is paid a living wage. This is why I support a national living wage of 70% of national medium earnings and a London one set at 70% of London medium earnings.
Chris Cory,
No-one who is a liberal could see another human being as “surplus to requirements”. Do you really see some members of our society as “surplus to requirements”? Each individual is different and should be valued.
I agree with the idea that where someone wants to have paid employment then they should be given all the help and assistance they need to obtain it, even if this means the government has to intervene in the labour market. This does not mean that if a person is of working-age and not in paid employment they should be forced to live on an amount of benefit below the poverty line.
@ Michael BG,
Another effect of the “automatic stabiliser” is to take less tax out of the economy during a downturn. As domestic spending falls so does the Govt’s revenue and therefore its deficit rises. So this is why it was quite wrong to fight against the stabiliser, imperfect though it might be, by trying to reduce the deficit with a combination of tax rises and spending cuts. Joe probably thinks the stabiliser is less imperfect than either of us and should be left to work naturally. This is all the more reason for him to be critical of the Coaltion’s austerity policies but he doesn’t seem to be able to bring himself to do that.
@ Katharine,
“….we alone believe in the interdependence of all people in our country and therefore of society as community.”
This sounds much more Socialist than Liberal. However I would agree that many people do consider they are part of a community but who don’t consider themselves to be either Socialist or Liberal. The present day left often misses the point about what community actually means though. Its not just about dividing up what everyone has created. It’s what everyone needs to contribute too.
This used to be well understood as evidenced by the old Clause 4 of the Labour Party constitution which started off “To secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible…”
So there was an understanding that the workers created the products and then it should be divided up equitably. That’s what tends to happen naturally in all communities. So, in pre capitalist societies, which still exist in some places, berries are picked, animals are hunted, clothes are sewn etc. Everyone is expected to make a contribution if they can.
But Lib Dems seem to have a fundamental problem with this. Somehow you think it’s “illiberal” to expect anyone to actually do anything in return.But this isn’t how most people see it. This is why there has been so little popular opposition to the cuts in welfare spending. The perception, rightly or wrongly, has been that many were working the system for their own advantage. On the other hand when everyone sees the need for us to act as a genuine community, as for example with NHS, there is widespread support for its upkeep.
The point surely is, Peter, that people of working age who are working are already ‘doing something in return’ for the benefits they receive. They are working. They are not being paid enough to cover their basic household expenditure. As Michael just pointed out, 2.8 million people receiving benefits actually live in households where both parents are in full-time work. But many people have to work in the gig economy, put together bits of jobs, never know that they can rely on a full day’s work at the minimum wage, or that there will be a job tomorrow. Some people will set up a little business and try to make ends meet in that way, with all its hazards. Socialists should surely be working for the aim of everyone having reliable employment at a living wage. But it seems left to the Liberal Democrats to want help for everyone who needs it, both consistent sufficiently paid work and upgraded benefits. As for the public’s view, there is probably now far more concern about the under-payment of key workers than about imaginary families who have somehow got handouts for nothing.
For most people austerity means cuts in local government services or working-age welfare benefits or a slowdown in the rate of increase in spendng on health and education. For economists, austerity means overall spending cuts or tax rises neither of which have actually occurred since the financial crisis as this article makes clear https://blogs.lse.ac.uk/politicsandpolicy/austerity-ending-hypothesis/
“Any decent economics textbook would tell you that austerity means balancing the budget through raising taxes as well as cutting spending. ”
“In this sense, austerity is not over. It never really began. But in our heads, it was soooo real. Austerity has never conformed to the textbooks because it was always more about instilling a sense of self-reliance on individuals, and undermining the state as the emblem of democratic collectivism, and therefore its legitimacy to levy taxes.”
The restoration of the social security safety net is largely dealt with in the LibDem 2019 manifesto with the important addition of greatly expanded childcare provision in recognition of the obstacles faced by single-parent families in balancing employment with the care of very young children.
Targeted deficit reduction in the coalition years was based on the structural deficit not the overall deficit. The structural deficit is simply a calculation of what the tax yield and spending commitments would be when the economy is operating at near full capacity.
Tax policy and spending commitments are political decisions not primarily economic ones i.e. the economic impact follows the policy decisions not the other way round.
An economy operating normally at near capacity can rely largely on automatic stabilisers (automatic tax reductions and increased welfare spending on benefits) as well as the natural progression of spending in healthcare and pensions that accompany an aging population. There is no need for additional monetary or fiscal stimulus outside of recessionary periods and it cannot increase economic growth beyond supply capacity.
It is the political decisions around tax and benefits, spending on public services and financial and price stability that are the important drivers. The higher the spending commitments the greater the level of tax and borrowing that is required. Once those political decisions are made the budget and borrowing requirements largely take care of themselves.
@ JoeB,
“For economists, austerity means overall spending cuts or tax rises”
Yes we have had real cuts to local authority spending and tax rises in the form of 20% VAT. But generally speaking austerity, in an economic sense, means a fiscal contraction. This is fine if the economy is overheating and needs cooling down to prevent inflation. It is absolutely not fine if there is an unwillingness to let the automatic stabilisers do what they should be doing. ie Automatically stabilising.
“Any decent economics textbook would tell you that austerity means balancing the budget through raising taxes as well as cutting spending. ”
Any decent economic textbook will tell you that the government’s income is dependent on its spending. Therefore any attempt to balance the budget is likely to be self defeating. Austerity will likely fail even on its own terms.
“There is no need for additional monetary or fiscal stimulus outside of recessionary periods…”
You keep saying this but it is nonsense. Repeating the same thing doesn’t make up for a lack of evidence. I really don’t understand why you cling to the idea that the economy is largely self regulating when you don’t have to. You wouldn’t drive your car with your feet on the dashboard and your hands off the steering wheel. You make continuous corrections as and when they are needed without even thinking about it.
All this “structural deficit” stuff is just so much more neo-liberal mumbo jumbo. Bill Mitchell calls it a “con job”. The Lib Dems won’t ever achieve their goals if they don’t jettison this kind of discredited thinking.
http://bilbo.economicoutlook.net/blog/?p=2326
@ Katharine,
If anyone works for 1 week and has no work for the next 39 weeks they are counted as unemployed for 97.5% of the time. Anyone working one hour per week and who has no work for the other 39 hours that week is counted as employed for 100% of the time. This is rubbish, as I’m sure we both know. I’m sure Joe will find some reason to justify it but then he would, wouldn’t he?
We have to take official figures with a large pinch of salt. The idea of a JG is that genuine full time jobs (35 – 40 hours pw) are offered at a living wage. This means that the private sector will have to offer similar or better to compete. Therefore, there will be much less need for the taxpayer to have to subsidise irresponsible employers who don’t pay their workers properly.
In other words, we aren’t just talking about taking the rough edges of the gig economy by improving social benefits. We want to abolish it completely.
Apologies if this is a little off-topic, but I think it is an important issue for Lib Dems and very much related to the theme of income inequality being discussed here.
A recent publication from the Joseph Rowntree Foundation (https://www.jrf.org.uk/report/low-income-voters-2019-general-election-and-future-british-politics) discusses “Low-income voters, the 2019 General Election and the future of British politics”.
Figure 1 shows “Median constituency wage and party support, 2010–2019 (England and
Wales)” and the polarisation between support for Lib Dems in low and high income areas is very striking, both in terms of its magnitude and its growth. Support (vote share) for Lib Dems in high income areas seems to have recovered and exceeded its 2010 level while in low income areas support has dropped in each of the last three elections.
I don’t know the implications of this for party strategy or the development of policy to address the issues discussed here, but surely it is a significant factor.
Peter Watson. Thanks for revealing some of the findings on low-income workers from the Joseph Rowntree Foundation, Peter. I am not surprised at hearing that support for us has dropped in low-income areas, because we already knew that our support according to the pollster surveys tends to come from A, B and higher C population groupings, and drops off in the lower groupings. In other words we tend to gain backing from well-educated middle-class people of every age grouping, and are not recognised as serving their needs by less educated working people, many of whom have now been persuaded that the Conservatives will work for them. The idea that social, economic and health inequalities can be relieved by this Tory government seems rather ludicrous to us, looking at their record, and it is clear enough what we have to do to move into their place, including building up to winning in their constituencies where we come second.
That is, we must meet some of the real needs of ordinary people, relate to the voters as Dorothy Thornhill is urging us to (she a former mayor of Watford, and I have their booklet, Winning the Watford Way, in my collection!). That is what Michael and I hope to do in getting the proposal of a new Social Contract accepted by our party, with the timetabled programme set out there: which will aim to relieve the real ills that people are suffering in our country today, before and beyond the Coronavirus crisis. The Social Contract may be a concept for the educated, but the reforms that can be proposed and campaigned for under that banner will be noticed and welcomed by all the people who will benefit.
Peter Martin,
“Any decent economic textbook will tell you that the government’s income is dependent on its spending.”
This is an oxymoron- the less the government spends the less income it needs. It is self-evident that there are successful high growth economies around the world that are both low-tax low spending states and similarly successful high tax and high spending states. It is not government spending that determines standards of living.
What higher spend and tax states have in common is stronger social security safety nets and public services.
This is what LibDem policy advocates – higher spending on public services and social security funded by higher taxation.
Under the coalition, from 2013 to 2016, UK growth was among the strongest of the G7 until the Brexit referendum. By last year unemployment had fallen to 3.8%, the lowest level since 1974 and significantly below the level prevailing during 13 years of Labour government using the same basis of measurement. These are empirical facts backed by evidence that make a nonsense of stimulus theories, just as the idea that inflation can be controlled by controlling employment with job guarantees was debunked by stagflation in the 1970s. There are multiple factors that drive economic activity and the economy is indeed largely self-regulating outside of recessions simply because the great bulk of economic activity is conducted in the private sector.
Peter Martin. The difference between us, Peter, it seems, is that you insist that people on permanent sickness leave must have a paying job, any job, while I believe that they have a right to a sufficient income without having any paying job. They should have as much freedom as their illness or disability allows them to have, free to choose how to spend their time without being forced into a job. As Beveridge thought, so do Michael and I think – everyone must be provided with an income sufficient to live on. No necessary benefit, whether for permanent sickness or for permanent retirement – when it happens to be called a pension – is anything to be ashamed of needing to have.
Joseph: it’s good that you reiterate what we want – ‘higher spending on public services and social security funded by higher taxation’. I’d just add the adjective ‘sufficient’ before the words ‘social security’. But I’m glad you’ve mentioned the public services. The cutbacks in local authority social services are not likely to be forgotten by you councillors, and some of them, for instance I suppose children’s services and social care, will need to be included for remedying within the roll-out of our Social Contract.
@ Katharine,
I’m not sure where we’re in any real disagreement. I’m not advocating that anyone who is sick should be forced back into work. It’s just that I would prefer to describe any disability benefit for those who are too ill too work as sick pay rather than welfare. It just strikes me as being more inclusive but these are details to be discussed later.
The important idea is that everyone included into society by the provision of a guaranteed job which is an offer and not a compulsion.
@ JoeB,
“….. the less the government spends the less income it needs.”
This is household economic thinking and is applicable to some types of government such as local government.
However, a currency issuing government doesn’t need any income at all. As we’ve seen recently, the Westminster Government, in collaboration with the BoE, creates its own ability to spend. So far it seems to have worked reasonably well but, as I’ve said previously, there is an inflation risk to all this. If there is a build up of spending power which is suddenly released when the lockdown finally does end we could have a problem.
I’d say this probably won’t happen, but if it does, it will be all of us who have been lucky enough to not have a significant drop in our incomes who will be causing the problem by spending too much, too quickly. It won’t be the Govt’s fault per se- but they will need to react to correct the situation.
Peter Martin,
In a recession, with periods of deflation, it is possible to increase the money supply without causing inflation. This is because the money supply depends not just on the monetary base, but also the velocity of circulation (number of transactions).
In the liquidity trap of 2008-2012, the Bank of England pursued quantitative easing (increasing the monetary base) but this only had a minimal impact on underlying inflation. This is because although banks saw an increase in their reserves as they swapped bonds for cash with the BofE, they remained reluctant to increase bank lending until the housing market recovered. When it did asset price inflation took off again. If a Central Bank significantly increases the money supply during a normal period of economic activity when private banks are lendng freely then it is always likely to cause high inflation in asset markets and or consumer prices.
Current government support programs to businesses and households to the extent they flow through to bank loan repayments by firms and households will not spark inflation. It is simply an increase in government debt replacing the paying-down of private debt. Combined private and public sector debt remains largely unchanged,
Discretionary fiscal stimulus will be required to reboot the economy this year. It is a standard mainstream Keynesian response in the form of investment spending. The current government appears to be planning to deliver just this https://www.dailymail.co.uk/news/article-8466783/Boris-pledges-billions-Britain-booming-says-bounce-forward-huge-revival-plan.html The investment will take the form of “a building blitz of hospitals, schools, housing developments and ‘shovel-ready’ road and rail infrastructure projects, while an ‘opportunity guarantee’ will aim to save the jobs of workers who have lost out in the employment market.”
As the economy recovers (and this will take some time) there will be the issue of rising risk premia on debt to counter inflationary pressures and tax rises to meet higher interest costs when this occurs. Tax funding for permanent (not temporary stimulus) increases in spending on public services and transfer payments will be needed. This will need to done in a country that is significantly poorer for some years to come as a result of the damage to so many firms and industries from this lockdown and the looming prospect of a no-deal Brexit.
Joe Bourke,
I am well aware of how the mainstream thinks QE works! As you say the monetary supply isn’t what solely matters – the velocity of circulation matters too. So why not disregard both and think of the total number of transactions x average value of each transaction?
In other words: Total Spending ! So does QE increase TS ?
If I have, say, £20 k in cash and £20k in bonds (paying say 5%) am I more or less likely to spend than if I have £40k in cash? I’ve now lost the 5% incentive to save so I’m probably more likely to spend. The intervention of the BoE has pushed up the value of the bonds so I haven’t actually lost out.
But the effect of the QE has been to also lower interest rates. If I try to buy more bonds, the BoE is in the market too. So I’ll have to settle for a lower yield. So the new position will be £20k in cash £20k in bonds (paying 1%). So this is little different from holding £40k in cash.
If the BoE then makes lowers interest rates further with QE to 0.5% then its all making less and less difference. QE isn’t going to do much to boost demand at all.
So why did the BoE have £200 billion of QE recently? It can only have been to keep interest rates from spiking upwards if there was some turmoil in the bond markets. It was to maintain the status quo on interest rates.
PS I should pick you up on this:
“It (QE) is simply an increase in government debt replacing the paying-down of private debt.”
No. This is not right. The reason we often see this argument is because the monetary base isn’t considered as Govt debt, even though it should be. Cash is government debt paying 0% interest. Bonds are Government debt paying (usually) a small amount of interest. So if we swap one for the other (this is what QE is) the Government’s debt remains the same but interest rates can be affected. ie Lowered. But only if they were high to start with.
So an increase in asset prices following QE is nothing to do with an increase in “money supply” . It happens because interest rates are lower. The private sector is even more in debt than it was previously! Except the interest bill is now less because of lower interest rates.
‘To miss the march of this retreating world into dim citadels that are not walled’, to quote Wilfred Owen, and I think one of the dim citadels for us is increasingly unintelligible economic debate. Friends, we have the policies, the intelligence, the good hearts, the readiness to work, the great values – but the frustration to me is that we lack coherence, consistency, and above all the presentation that would show the country that we are needed. We require, as Dorothy Thornhill has told us, a vision, purpose and strategy to unite behind. If we take the Social Contract as our uniting theme, we can have all of that. I commend it to you.
‘Into vain citadels’ not ‘dim citadels’, I see – even more to the point. I have been rereading Wilfred Owen’s poems. I think after all his youth was not wasted, when he was killed at last in the First World War. He had been able to see something of Truth, and he was able to pass it on to us, in very beautiful poems. I first read that poem, ‘Strange Meeting’, in the year I joined the Liberals party, 1962, and the line came back to me today as appropriate. As good as any church service, a gift. Thanks for reading this.
Katharine,
to engage in politics requires more than a good heart. The phrase “Politics is the art of the possible”, is attributed to the German Chancellor Otto Von Bismarck. Bismarck made the Prussian king, Willian the First, a German emperor. Germany became the first nation in the world to adopt an old-age social insurance program in 1889. The idea was first put forward, at Bismarck’s behest, in 1881 by the German Emperor.
Bismarck was motivated to introduce social insurance in Germany both to promote the well-being of workers in order to keep the German economy operating at maximum efficiency. and to stave-off calls for more radical socialist alternatives
The German system provided contributory retirement benefits and disability benefits as well. Participation was mandatory and contributions were taken from the employee, the employer and the government. Coupled with the workers’ compensation program established in 1884 and the “sickness” insurance enacted the year before, this gave the Germans a comprehensive system of income security based on social insurance principles. (They would add unemployment insurance in 1927, making their system complete.
This was the system that the Liberal government of 1906-1914 introduced in the wake of the Boer war for much the same reasons as Germany.
The art of the possible is not about what’s right or what’s best. It’s about what you can actually get done. It’s associated with Realpolitik, a political philosophy of setting pragmatism over your ideological goals. Getting everything you want is impossible, and often, you have to compromise in order to get anything you want at all. The counntry is facing a tsunami of redundancies in the coming months exacerbated by a 100,000 graduates and 300,000 school leavers entering a job market this summer where there are no jobs. The issues raised by Professor Hennessy are all areas where job creation programs and apprenticeship schemes can be productively employed whether in care services, construction, technical education and training, green jobs or IT services. Unemployment will be the focus of all parties in the coming years.
The ‘art of the possible’ was evident in post-war Britain. When the Labour government introduced the Beveridge report it made the pension entitlement more generous. The report had recommended that the new pensions should be phased in over a period of 20 years to allow people to build up their contributions. The decision was taken instead that higher pensions should start being paid straight away and all payments from the contributory scheme were reduced proportionally including pension payments, below the minimum needed for subsistence. The result was that national assistance (income support) – and its associated intrusive and inquiring bureaucracy of means-testing – over the years became more important, rather than less important as Beveridge had intended.
One reason why the Beveridge scheme did not ultimately abolish poverty was that the full employment assumption was not sustained indefinitely. Unemployment doubled between 1979 and 1981, hit a peak of over three million in the middle of the decade, and rose again in the 1990s recession.
The other Key problem with Beveridge is that he never solved the problem of rents https://www.theguardian.com/housing-network/2012/nov/22/beveridge-problem-rent-welfare-reform
But there were also other changes that put pressure on the underlying principles of the scheme. Some of the social changes that put pressure on the post-war settlement were:
– a growing rate of divorce
– rising numbers of lone parents
– growing proportions of people over retirement age.
Beveridge emphasised the importance of both full employment and the insurance principle. This together with the provision for health and education through progressive taxation commanded high levels of public support. But, It was based on assumptions of continuing high employment and a stable family unit – hence economic and social changes ultimately put the welfare state under pressure.
This is why the focus has to be first and foremost on full employment today. Conservatives will say social security is unaffordable, Labour will try to say economic growth will pay for it. It never has and never can address relative poverty only destitution. Only LibDems are honest enough to say we have to fund a stronger and more resilient safety net with increased progressivity in taxation (particularly land taxation) in a fully employed economy.
@Joseph Bourke “Only LibDems are honest enough to say we have to fund a stronger and more resilient safety net with increased progressivity in taxation (particularly land taxation) …”
This is the sort of thing I had in mind when I linked to the Joseph Rowntree Foundation report which suggests that Lib Dem supporters come disproportionately and increasingly from the group which would presumably pay more tax in order to fund this. Will such voters, particularly the Tory Remainers and the socially liberal comfortably-off, stick with the party and be attracted to it if expected to pick up the bill? Will a desire to keep these target voters onside restrict the sort of policies the party will be prepared to develop or limit the support it can expect for them?
It’s why I had some sympathy for Wera Hobhouse’s explicit courting of a left-of-centre vote. Despite using the words “centre-left”, I’m not sure that Ed Davey and Layla Moran see the centre as being in the same place as I do.
Joseph, I am not quite sure what points you were making at 2.27, unless you were trying to suggest that a Social Contract is impractical. On the contrary, if we take this as our theme, all the needed improvements are possible, from the enhanced welfare benefits which will increase demand, to the greater supply of affordable homes which will again free up spending money, to the likelihood of employment opportunities for young people given sufficient relevant technical training for our digital age. What we are proposing is to ensure concentration on fulfilling the requirements of our citizens today, that is concentration on achievable outcomes, not just discussion of economic theory.
This will include enhanced learning for ourselves, with discussion groups and expert panels as well as policy ‘pods’ and interaction with progressives in the other parties. Thankfully, we can also learn from the positive actions and achievements of our Liberal forebears. You may not perhaps be aware that Lloyd George visited Germany in 1908 to find out about the new system of social insurance introduced, as you remark, by Bismarck. Then, as Chancellor in that great reforming Liberal government of 1905-15, he ensured that British workers would by the National Insurance Act of 1911 be for the first time and ever after through a contributory scheme of insurance be protected against illness and unemployment. We Liberal Democrats now have a great chance to try to be as progressive and effective in our plans and proposals as were our Liberal forebears.
Peter Martin,
Historically there was no assumption that everyone had to contribute something to society. Also contributing to society meant doing something to benefit the whole community. It did not mean having and bringing up children and being economically active. There have often been people who have been not been economically active, or involved in bringing up children or doing something for the community. These people have been supported by others and sometimes by the community as a whole. In the nineteenth century there was an increase in the idea that society should not support people. This was rejected in the twentieth century. Most people in the UK accept there is a need for there to be a safety net to support those in need. Most people think they are entitled to this help because they paid national insurance and income tax.
However, you are correct most people expect most people of working age to be in employment or to be kept by a family member and not by relying on state provided benefits. It was Liberals in the UK who advocated that the government should run the economy to ensure everyone of working age would be in paid employment.
In the past the wealthy were not expected to work. It was the wealthy who could afford to get involved in politics. This was true both for the Roman Republic and Britain before MPs were paid a salary. Some people believe that there will be a need for some people not to work in the future and therefore each person should be free from the need to work to meet their basic needs. Work would then become a free choice and not an economic necessity.
Katharine and I want to abolish the social ills of unemployment and underemployment. We believe that the economy should be run to achieve full employment which would mean unemployment being under 3% and there would be little underemployment.
Joseph Bourke,
It would seem that you believe that the economy works fine without the need for the government to manage it. I believe this is not true. If left to itself the economy does not work as economic models pretend that it does.
The Coalition government changed is economic policy after the British economy was recorded to be having a double dip recession. It pretended that it hadn’t changed its economic policy but it did. I expect this is why the economy recovered after 2013.
While an unemployment rate of 3.8% is better than 4 or 5% it does no compare well with the rates achieved in the 1950s and 60s.
I was happy to read that you think the government should focus on full employment. I just wish you defined it as less than 3% unemployed.
The question whether increased benefit levels should be paid for by increased borrowing or by increased government revenue depends on the economic circumstances. Once the economy is growing at the maximum it can grow at there might be a need to increase taxes to control inflation, but until then the increase in benefit levels to remove people from living in poverty can be financed from government borrowing.
Michael BG,
you need to look at what actually happens in practice. Sticky prices and wages are relevant in deflationary conditions as prevailed in the 1930s, They do, however, adjust in real terms when inflation is present as was seen in the wake of the 2008 financial crisis with wage growth well below inflation. This is why the economy self-corrected and grew strongly from 2013-2016. With modern flexible labour markets, It has become cheaper for firms to hire labour and less risky than committing to capital investment in a global low growth environment. This is one of the principal reasons why unemployment has continued to fall even after the Brexit referendum.
The UK is in a deep recession and most analysts think it will take some years to get back to where we were before the Pandemic. Even then we are most likely to be in a low growth (circa 1%) environment as Japan has been for several decades. If economic growth does recover above this level than interest rates will start to rise.
Reliance on borrowing to fund a policy of more than doubling welfare benefits when unemployment is expected to exceed 3.8m+ is unlikely to be received as practical when resources have to be devoted to job support and retraining. Such a policy would leave millions marooned long-term on benefits as happened in the 1980s.
This paper outlines a Keynesian approach to full employment http://www.levyinstitute.org/publications/keyness-approach-to-full-employment
“John Maynard Keynes had a targeted (as contrasted with aggregate) demand approach to full employment. Modern policies, which aim to “close the demand gap,” are inconsistent with the Keynesian approach on both theoretical and methodological grounds. Aggregate demand tends to increase inflation and erode income distribution near full employment, which is why true full employment is not possible via traditional pro-growth, pro-investment aggregate demand stimuli. This was well understood by Keynes, who preferred targeted job creation during expansions. But even in recessions, he did not campaign for wide-ranging aggregate demand stimuli; this is because different policies have different employment creation effects, which for Keynes was the primary measure of their effectiveness. There is considerable evidence to argue that Keynes had an “on the spot” approach to full employment, where the problem of unemployment is solved via direct job creation, irrespective of the phase of the business cycle.”
Joseph Bourke,
I believe that one of the problems of our economy is low wages. This has led to businesses employing more people rather than investing in new equipment to increase production.
Indeed we are experiencing a deep recession and with the reductions in government financing for the furlough scheme most analysts think unemployment will increase dramatically, as do I now. (I had expected the furlough scheme to continue until lockdown was completely over so unemployment would not increase so much and the economy would bounce back quickly. There is still the possibility that the majority of people will spend their increased savings caused by the lockdown and businesses will quickly discover they don’t need to make so many workers unemployed.)
Increasing benefit levels would go some way to keeping aggregate demand higher than other wise. This was one of the aims of the furlong scheme. As aggregate demand falls businesses will reduce their production and the number of people they employ. Resulting as I have already pointed out to a downward spiral. By increasing benefit levels the government will be targeting money into the areas with the highest unemployment rates, this is much better than cutting income taxes where the money ends up where people are in work not areas of high unemployment rates.
This would work much like targeted job creation schemes which are preferred because the money to boost the economy is targeted to where the demand has fallen. Increasing benefit levels does not mean that targeted job creation schemes could not be created. It is important that those made unemployed have the money they once had to spend. It is important that the boost given to the economy by government is targeted into the areas which are worse hit and not generally across the whole economy.
I see no evidence that economic growth above 2% would result in increased interest rates. As the government will have increased debt it will want to keep interest rates low, not only to keep the cost of servicing the debt at it its all-time historical low but also to encourage businesses to borrow to invest and remove the amount needed to be done by the government. I would also expect there to be more quantitative easing which would help keep interest rates low.
@ Joe B,
Michael BG has written: “It would seem that you believe that the economy works fine without the need for the government to manage it.”
I’d add ‘most of the time.’
Question: Why assume even ‘any of the time’ when you don’t need to? Is this some point of ideology?
Also you are being a little disingenuous in quoting an MMT author as giving a ‘Keynesian Approach’ ! Pavlina R. Tcherneva differs from most modern Keynesians in advocating a Job Guarantee. This isn’t considered to be Keynesianism as Keynes would have understood it himself. I’m sure you already know this.
@ JoeB,
“…..you need to look at what actually happens in practice”
That’s good advice for all economists who are often much more inclined to try to match the facts with their fixed theories rather than the other way around. As this Bloomberg editorial put it:
Before the 2008 financial crisis, for example, the standard models more or less ignored finance. No banks, no indebtedness, no leverage. As a result, they couldn’t make sense of the worst global recession since the 1930s.
And that’s your problem too. You have your view of how the economy works based on some 19th century Georgian political preconception which is essentially a hangover from a old rivalry between the emerging capitalist class and the aristocracy. There’s not much chance of much modification
https://www.bloomberg.com/opinion/articles/2017-02-06/why-not-make-economics-a-science
.
Peter Martin,
economics is the study of how society uses its limited resources. It is a social science that deals with the production, distribution, and consumption of goods and services. …
The pertinent word here is ..studies. Economics looks at what happens e.g. why was the economy growing robustly from 2003-2006 and why did growth slow precipitously after the Brexit referendum? Why had unemployment fallen by the end of 2019 to levels not seen since the early seventies? The reasons as are stated above – the fall in real wages.
Michael BG suggests that dramatic increases in social security will act as a fiscal stimulus to reboot the economy and that borrowing can be used to fund such stimulus to boost low pay and incomes until the economy is growing at a maximum (unspecified) capacity. He suggests QE can be used endlessly to keep interest rates low. This flies in the face of real-world experience. We can look to Japan’s low growth, low return and stagnant wage economy to see what to expect if such policies are followed in the wake of a balance sheet recession. Japan has many of the same problems as the UK faces. Over-indebted firms and households going back decades to the property boom. A ballooning of the central bank balance sheet. The fiscal budget has been running deficits for 26 years, implementing countless fiscal packages to stimulate the economy with little success beyond the construction of empty airports and bridges to nowhere. An aging population putting pressure on state pensions and healthcare budgets (and decimated pension fund returns from negative interest rates) with a dwindling workforce to produce the goods and services required by the population.
Japan has several advantages that the UK does not have. It has run trade surpluses for many years and has built up a significant stock of overseas investment that serves to offset a large part of its gross debt position. It has a relatively high domestic saving rate, so much of the government’s borrowing is from its own citizens. Robotics and automation is well-advanced in Japan, keeping GDP per capita at high levels. For the UK, without these benefits, stagnation could easily turn into stagflation.
Pavlina R. Tcherneva’s paper is titled ”Keynes approach to full employment” A job guarantee approach was outlined by Hyman Minsky and long predates the work of MMT economists nor does it rely on MMT.
Michael BG,
one of the problems with the UK economy is low wages and it has been for sometime. This is tied inextricably to productivity levels. The average wage of a British worker is 2 to 3 times that of a Chinese worker but less than an American worker. The reason for the difference is productivity and that is a factor related to technical skills and stock of capital investment in private companies. In a service-based economy, technical skills are the predominant factor rather than industrial equipment as in a manufacturing based economy.
The unemployment crisis caused by the Pandemic is sectorally based. The worst affected firms are those in the hospitality, leisure, retail and tourism/airline industries with a heavy concentration in London. This is where retraining and job guarantee schemes will need to be concentrated as well as some areas of the North where there is persistent long-term unemployment.
A stimulus is temporary and has to be withdrawn as the economy recovers, This is why temporary increases in spending such as helicopter money or accelerated investment spending are proposed as stimulus measures. Permanent increases in spending need permanent funding.
This is where the “the art of the possible” comes in. A resilient safety net needs the foundations of a competitive economy and full employment. Surprisingly, the current Chancellor seems to grasp that. Whether he is just smarter than his predecessors or, as the report Peter Watson links to shows, Conservatives are catering to their newly acquired voting base of low-income workers is hard to tell at this point. Only time will tell.
Rejoice in heaven, friends, this government is apparently, unwittingly, about to begin enacting our Social Contract demands without our prompting! Chancellor Rishi Sunak has apparently told his cabinet colleagues that ‘opening up the economy is a matter of social justice’, particularly for the young and BAME people most likely to be hit hardest by the results of the health crisis. And it seems that he believes, just as Michael and I do, that households will have money to spend that can restore demand and so boost business.
” This is not a typical economic crisis where incomes are largely impaired’, he is reported in Saturday’s Times as saying (Joe, are you listening?). “Because of the furlough scheme protecting incomes, and because we’ve essentially stopped people from going out, we’ve shut down large elements of discretionary consumer spend.” He apparently thinks that people’s psychology, a question of confidence , is ‘the challenge’ rather than insufficient income in persuading consumers to go out and spend money as the economy will require.
Ah, but will the government then spend the increased tax income on the objectives Liberal Democrats want? Well, Boris Johnson and his Chancellor are said to be ‘in lockstep’ (rather different from lockdown!) and that the PM will say in his speech tomorrow that we must ‘build, build, build’ with an emphasis on jobs, health and homes. Three of the five objects that Michael and I want focused on in our proposed Social Contract! Rejoice! I’ll write a bit more on this in another comment shortly.
Well, yes, there are several doubts raised by this apparent conversion of a sinning Tory government. These are the people who brought in austerity and stuck with it for ten years. They don’t have the consciousness that we do (yes, partly because of regrets from the Coalition) that the severe social ills we want to address in the Social Contract preceded the present health crisis and are only brought more into focus and worsened by it. Inadequate health spending, not enough affordable homes, not enough decently paid and continuing employment, not enough technical training for jobs in the digital economy, these were ongoing problems not addressed by the Conservative government and they will not be soon or easily remedied.
What. above all, about poverty? Is ending relative poverty by in the first place increasing benefits going to be a priority for this government? They will soon be remembering their donors. They will not be considering offending the wealthy property owners and hedge-fund managers and the like by bringing in the wealth and land tax reforms that we believe will be necessary. No, the Social Contract will remain the rightful project of the Liberal Democrats, rooted in our history and our values, and will still need to be the overarching theme of our campaigning for months and years ahead.
@ Michael BG, @ JoeB
“one of the problems with the UK economy is low wages and it has been for sometime. This is tied inextricably to productivity levels.”
But are low wages caused by lower productivity or is lower productivity caused by lower wages?
We all know which way around the mainstream think it is. But by their own admission they are puzzled on the question of productivity. So even they can’t be confident they have it right!
Employers won’t pay higher wages than they have to, no matter how productive their workforce might be. But on the other hand, if wage levels are high, they are more likely to invest in extra capital equipment to make the most of the labour power they are paying for.
https://neweconomics.org/2019/04/tackling-the-productivity-puzzle#:
@ Katharine,
“Rejoice in heaven, friends, this government is apparently…..”
I’ll not be cracking open any champagne just yet! I’ll believe it when I see it. We’re talking about a Tory govt after all!
Having said that, I quite like Rishi Sunak’s pragmatic approach. He’s quite right to think the psychology of the private sector is going to be a big factor. But he shouldn’t try to second guess what that psychology should or will be. He’ll need to carefully watch people actually do after the lockdown and react accordingly.
Your comment/ question “will the government then spend the increased tax income on the objectives Liberal Democrats want?” shows how even well meaning people can get it all wrong and come across as heartless austerians.
If the tax revenue doesn’t come in as hoped, that will be a sign of low demand and Govt will then need to spend MORE on those type of objectives. If the tax revenue does come in, faster than expected, it will be a sign that there has a been a build up of demand during the lockdown period which is being released too quickly and we could have an inflation problem looming. Then he needs to spend LESS.
My guess is that Rishi Sunak will be right and low demand will be the problem but no-one knows for sure just yet.
Joe Bourke,
I have never suggested that any measure to stimulate growth can continue for ever. When the economy reaches near full capacity inflationary pressures develop and action should be taken to remove excess demand from the economy. We both state most analysts think unemployment will increase. It is in this environment in which I advocate the expansionist policies above. However, I have noted that most analysts might be wrong and there might be huge pent-up demand that will be unleashed when lockdown is over and consumer spending returns to its pre-coronavirus spread.
We are not experiencing a balance sheet recession. This recession was caused by lockdown. I don’t think our economy is structured like Japans. Economic growth for Japan has been poor since 1992 compared to the period 1975 to 1991. It has been worse than the UKs.
I think that our low wage levels leads to our low productivity not the other way round, just like Peter Martin. I think businesses will increase their labour force rather than invest to increase productivity because it is the cheaper option. The article by Alfie Stirling and Sarah Arnold seems to be saying that low wages lead to lack of business confidence that demand will exist over the long-term so businesses will not invest to increase productivity for the long-term.
A lot in economics depends on confidence, this s why businesses would be more likely to plan to increase production if the government announced plans to increase aggregate demand.
Indeed it seems that the recession will be based on particular sectors – leisure, hospitality, tourism/airline industries, retail, entertainment and personal services. Most of these sectors should recover if the coronavirus was not a threat. The unknown is how far these declines are permanent. However these declines have a knock effect on the rest of the economy. If everyone who was made unemployed in the particular sectors we named were paid their pre-unemployed wage then there would be no knock on effect. This is why increasing benefit levels would lessen the effects of the recession.
I agree with you that the government should set up re-training and job guarantee schemes in the areas worse affected. This is where a huge regional Rebalancing Fund would be useful to provide economic assistance to the regions with the highest rates of unemployment.
Peter Martin,
It seems that only you and I think there is a possibility of increased demand after things get back closer to normal. If this happens the government will not need to stimulate the economy and if the pent-up demand is too large the government will also need to take money out of the economy to control inflation.
Thanks, Peter, what an interesting paper from the New Economics Foundation. I had been wondering myself whether a shorter working week with higher pay per hour might be considered. Sharing out the jobs, giving everybody a bit more to spend – including of course the people on benefits – so that demand is kept up nationally would seem desirable.
I of course as I have suggested share your doubt about the good works this government is capable of continuing to carry out. Whether the PM and his Chancellor continue to see eye-to-eye for very long will be an important question. There seem to be only three people who count in this government, and the third man is apparently in favour of the Chancellor’s actions, so maybe the question really is whether he continues so. However, there remains the necessity for the pressure from the centre-left to grow powerfully, building on popular assent.
Michael/Peter. The word is that the Chancellor doesn’t see the need for cutting VAT or other taxes at present, so it seems he too is hopeful that enough people including the rich will spend enough to increase demand without his intervention, though it may not happen instantly.
@ Joe B,
“A job guarantee approach was outlined by Hyman Minsky and long predates the work of MMT economists nor does it rely on MMT.”
The US Federal Govt ran a successful Job Guarantee scheme in the pre-war period, known as the Works Project Administration, employing over 3 million people in 1938. So, unless he came up with the idea when he was in his teens, the JG concept predates even Minsky.
I’ve not seen anyone else other than MMT economists describe how the JG can also used as a counter inflation measure, so that would be the main MMT contribution.
@ JoeB,
“We can look to Japan’s low growth, low return and stagnant wage economy to see what to expect if such policies are followed in the wake of a balance sheet recession. Japan has many of the same problems as the UK faces. Over-indebted firms and households going back decades to the property boom. A ballooning of the central bank balance sheet…”
I largely agree. Japan has tried to solve its problems with monetarist policies. The fiscal deficits run by Govt and the large debt built up are simply a sign that the Private Sector is saving. It’s the old story of the paradox of thrift!
So we’ve had a battle between the Japanese central bank which wants the private sector to borrow and spend more and the private sector which wants to save. So interest rates are into the negative but so is inflation in some years. It’s now about 0.4%. As you say, Japan has a relatively high domestic saving rate, so much of the government’s borrowing is from its own citizens.
This is obviously not working to anyone’s advantage. Time for some new thinking!
PS On your last point, I’d be surprised if the the Japanese Central Bank’s balance sheet doesn’t actually balance. When it issues Yen it does buy up assets to balance the books.
Hurrah! The motion, Social Contract vision and purpose, proposed by Michael BG and myself for consideration by our September Conference, has now passed through the useful Drafting Advice system and will be submitted tonight. We are asking for Conference to recommend that, as required by the Thornhill review, the party adopt the clear vision and purpose of a new Beveridge-type Social Contract which will seek to remedy the social ills suffered by the British people. We spell out the social ills under the five headlines, and suggest how the party can work to remedy them.
I’ll offer a fairly straightforward way to assess the popularity of a social welfare spending policy: What is the balance in the policy remedy between dealing with misfortune and improvidence? I posit that most people are happy enough to assuage adversity, but they get very cross if they suspect that they are paying for improvidence. The issue is the degree of agency of the recipient in the situation – hence the anger over large families obtaining large council houses, but the rapid and uncontroversial increase in the size of the cap on wounded veteran’s payouts.
Beveridge is interesting but not I think relevant to our times. He envisaged high, well paid, long term single career (male) employment, stable ‘nuclear’ families and most people dead at 70. All long since changed, and a return would not be entirely welcome to everybody – not least pensioners.
It was announced today that 9.3 m jobs are being supported by furlough and a further 2.6m through the self-employed scheme. In his speech, Boris Johnson spoke of an ‘opportunity guarantee’. He says the government will guarantee every young person an apprenticeship or in-work placement.
“We all know that [unemployment]is our biggest and most immediate economic challenge and so we will offer an opportunity guarantee so that every young person has the chance of apprenticeship or an in-work placement.”
This sounds similar to The Future Jobs Fund introduced in 2009 which aimed to help long term unemployed people back into employment and provided subsidised temporary jobs to 18-24 year olds reaching the six-month point of their Jobseeker’s Allowance claim . They were guaranteed an offer of a job, training or work experience and achieved good results in the time that it was run.
We will have to wait for the Chancellor’s economic statement next week for more details.
James Fowler. The relevance of Beveridge is that he wrote at a time of deep crisis for our country, in the middle of the Second World War, explaining the huge social problems of the time that might well worsen when the war ended, and proposed brilliant remedies to fix them. Above all, he demanded, there would be a comprehensive scheme for everyone to be assured of an income, whether they were in paid work or not. They would be provided with enough to live on, and although there would be a flat-rate contribution asked of the worker, the employer and the state, anyone losing their job, or if disabled or ill, and everyone retired, would be entitled to the same payment. In addition, everyone would be entitled to comprehensive free medical treatment.
So the fear factor went. The troops disbanded after the war wouldn’t starve if they couldn’t find jobs, and their families would get free medical attention for sick children. It was a new social contract, a pledge from the government – carried out by the post-war Attlee government – to care for everyone in our battered nation.
So now Michael and I ask for our party to take up the comparable challenge, and declare that there must be a new social contract after this health crisis and disaster to deal with our own great societal problems. That this government must be told to rethink its indifference to the social ills which, like those in the war, were there before the crisis and will persist and sometimes worsen after it. It shouldn’t be a question of how to shore up support for the government among the workers who have lent it their votes, but its neglect of the poorest and most disadvantaged people over the last decade should be pointed out, and its duty now to make things better for everyone. It’s for the Liberal Democrats to show them the way, building on the example of our great forebears, and demanding the remedies for today’s social ills, of poverty, poor health care, inadequate skills training and education, homelessness and lack of sufficient housing, unemployment and underemployment. The overarching vision, the concept and demand for a new Social Contract by right of the people, is the one under which we should gather our plans, proposals and policies.
Katharine,
Cutting taxes would be the wrong way to stimulate the economy as it is not targeted, and there is no guarantee all of it will end up being spent. This is why I prefer giving the money to those who were made unemployed either as extra benefit or as a new government created job
Joe Bourke,
Boris’ ‘opportunity guarantee’ for young people is not a job guarantee. It is important that young people are employed, but what is needed are jobs for everyone made unemployed not just young people.
Boris is only talking about £5 billion of infrastructure projects which the BBC are saying is only “a quarter of one percent of GDP if it were spent in a single year (which is unlikely)”. The government needs to think about spending in the region of £25 billion for every one million of extra unemployed people (maybe to a maximum of 60 billion). It would be better not to allow them to be made unemployed in the first place. This would mean re-instating the furlough scheme at the 80% level for those businesses who are not being allowed open.
James Fowler,
It does not matter to liberals why a person needs assistance from the state. Each person is of an equal value. For liberals no-one should be allowed to live in poverty. If people do not agree that everyone should be valued and provided by the state with enough to live on without going into debt then we need to engage with them to convince them of our values.
What seems to be missing in your comments is in fact that all human beings want to feel they are of some value be that in the business economy ,the social economy where despite their limitations they are making a contribution either supporting themselves or others in a peer group ,or adding to community cohesion .The other aspect is most of these states are transitional and not fixed and you can spend time moving from one to the other which is why our policy on life long learning has to compliment any social contract.
Absolutely, Neil, every human being is of value and we would encourage them in their wanting to feel that they are. As you suggest, people can make a contribution to society in many ways, and we are not suggesting everyone must have a paid job, but that everyone who wants a job should be able to have one. Some feel that their self-valuing depends partly on their success in a career, but for those who don’t or who don’t succeed in that, they shouldn’t be forced to take a job guarantee offer.
You are also right to mention our Lib Dem commitment to lifelong learning, and that goes along with our ideas of making gift sums available to everyone at certain stages of their life, so that they can retrain or choose a different path. With the rapid growth of the digital economy and the rise of robots, it will certainly be necessary to prepare people for extra training and make a variety of job-focused training courses available. The other reason why lifelong learning should be part of the social contract (one of the five spurs for action on social ills being as I have indicated the need for better training and education) is that dealing with the environmental demands of climate change is also going to alter the nature of work and of enterprises employing workers for many people of working age.
@ Michael BG, @ Katharine,
“..everyone should be valued and provided by the state with enough to live on”
“but neither do we think that everyone of working age must just keep themselves by earning pay. ”
Michael might say that it should be “…..anyone of working age….”
This all sounds very nice but someone, somewhere has to do something to provide the things that everyone, and anyone, needs to live on. As Joe would perhaps put it, creating ££ in a computer doesn’t create wealth. It doesn’t, in itself, put bread on the table or change the bedpans of a doubly incontinent elderly person. To some extent, but not to the extent he thinks, he is right about that.
Instead how about trying “to secure for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible” but at the same time accepting there can only be any fruit to gather because there is
some industry going on. That is, someone is actually doing something! Often that will be someone who’d rather be doing something else!
Or is “doing something” going to be solely left to migrant workers?
In watching Prime Minister’s Questions on TV just now, I was disappointed to hear our Home Office spokesperson, Christine Jardine MP, use her minute of time to ask for support for a Universal Basic Income, apparently to help the people, self-employed or other, who are sadly outside the Chancellor’s current safety net. A prospect of UBI, however desirable in the long run, is of no use whatsoever to people currently deprived of income support. It was left to a Labour MP, Stephen Timms, chair of some relevant House committee, to say he was pleased at the (almost) £20 increase in Universal Credit weekly payments and to ask for other welfare benefits to be further increased. The Prime Minister rejected that. Yet it is the permanent increase in benefits that people on the lowest incomes need, which is the first answer to poverty, and which therefore will be a priority in the roll-out of our campaigning for a new national Social Contract.
I shall be writing to Ms Jardine with a copy of our motion on the Social Contract, and also with a copy of the companion motion on Increasing welfare benefits which Michael BG and I agreed on and which we also submitted last night requesting consideration at the September conference. This second motion of ours is based on the letter which our Acting Leader Ed Davey MP wrote to the Chancellor in March, asking for benefits to be increased to £150 a week for single people not in work and £250 for couples, and for statutory sick pay to be increased to £220 a week. We have endorsed his requests in our motion.
Neil Sandison,
When did most people in Britain start to believe that they needed meaning to their lives, or in your words “they are of some value”? Did it come about after the Second World War? Did my great aunts feel their lives had to have some value in the 1930s? Do people living in the whole of Asia, America and Asia feel their lives have to have some value?
As I wrote above, “There have often been people who have not been economically active, or involved in bringing up children or doing something for the community.” It is possible this will become more common. If this happens, then people will need to feel they have value from other things.
Life-long learning is important, but it needs to be free for those who can’t afford it. Capping it at an amount given to each person is not good enough.
Peter Martin,
I didn’t recognise those statements without their context. There was context for both of them.
“For liberals no-one should be allowed to live in poverty. … everyone should be valued and provided by the state with enough to live on without going into debt”. This does not mean everyone will be provided by the state with enough to live one, because the majority have incomes from other means.
“but neither do we think that everyone of working age must just keep themselves by earning pay. There are plenty of people who are caring for children or elderly frail people, plenty of people who have disabilities of one sort or another which prevents them doing so. They need welfare benefits”.
Neither of us has said we want to abolish the capitalist system and replace it with a different system of running the economy. We both hope the system can be changed so no one lives in poverty including those who have caring responsibilities or are unable to work. We are talking of a more equitable distribution.
Katharine Pindar,
It is very odd that the same person (i.e. Christine Jardine) who was a member of the “A fairer share for all” policy working group which clearly rejected a UBI, is now advocating it. As she was our welfare spokesperson last year when Vince was leader, she should understand the huge cost of introducing a meaningful UBI compared to the cost of increasing benefits to the poverty line. Recently I compared the two. Increasing benefits rates to £160.30 for a single person and £276.20 for a couple I calculate would cost £63.01 billion.
Malcolm Torry a leading proponent of a Universal Basic Income has suggested a Recovery Basic Income of £196.59 per week for everyone. To pay for it, he suggests increasing all Income Tax rates by at least 5% and National Insurance rates for those earning more than £50,000 a year. Even after these tax rises he states it would cost a further £236.6 billion a year.
Even just introducing a UBI of £85.71 a week on top of existing benefits I calculate would cost about £192.81 billion.
Michael BG and everyone. I duly sent the proposed motions to Christine Jardine, in an email saying how disappointed I was at her performance in PMQs today. She did reply, and we have had some dialogue since. She said that she also had signed the letter from Ed Davey asking the Chancellor for increased welfare benefits, which forms the basis for the policy motion which you and I, Michael, have now submitted along with the Social Contract (business) motion.
So I took another look at the Ed Davey letter. It does ask for ‘a targeted minimum guaranteed income’ named as a Citizen’s Income, but continues, ‘that can be introduced rapidly through existing mechanisms with four measures’. Of these four measures, two are the specific requests for sickness pay to be increased to £220 a week and for single people of working age to have an increase to £150 a week or £260 for a couple. (The other two are, a subsidised salary scheme and a self-employed income guarantee.) In other words, Ed was asking for welfare benefits to be increased, not for some grand new universal benefit to be magically provided.
I suggested to Christine that it is not helpful to talk in terms, either of Universal Basic Income or of Citizen’s Income, long-term possible provisions, when we are trying to get increased welfare benefits from this government which has generally lacked compassion, as a start to ending relative poverty, the first requirement of the Social Contract proposal. In other words, give the people in poverty sufficient support from the welfare benefits as a first and necessary step.
A really interesting article – Katharine and Michael BG are right that this is a real opportunity to revisit the social contract and tackle the modern 5 ills.
Michael, I agree with Adrian’s comments (he was the first MP I worked for twenty years ago) – if I’d had more words to work with I would happily have addressed the issue of affordable housing, and the need to provide greater employment opportunities (particularly outside London and the Sout East), in the book which Layla Moran recently edited.
A more generous benefits system would be expensive, and would involve tax rises in some form – but as I write in Layla’s book income tax is currently lower than it was under even the Conservative government of the 1980s and 1990s. In focussing on tackling the five ills you outline, there may also be room to reassess current spending in some areas to see where existing public spending could be reallocated.
I should also clarify that I’m not a member of FPC, I merely chaired last year’s policy working group A Fairer Share For All.
Katharine,
It is good that Christine Jardine has replied to your email and you are having an email discussion. Hopefully she will support our motions and be an advocate for them in the Parliamentary party.
Perhaps we should be turning our efforts to writing to the Chancellor of the Exchequer Rushi Sunak before his statement next Wednesday. Perhaps we should be writing to him to tell him what actions he should take to assist the economy.
Paul Noblet,
Thank you for commenting. I am sorry, I thought I read somewhere that you were a member of FPC. I am happy to read that you agree with what Adrian Sanders wrote in Liberator in April. But ending poverty does not seem a priority for our party. Hopefully, we can work together to change this.
Last year a case could have been made for the need to increase taxes to pay for increased benefit levels. This would mean that income would be re-distributed. In August I proposed that we could increase benefit levels over 15 years by just increasing spending on working-age benefits by just over £5 billion each year. This was after I proposed to the “A Fairer Share for All” working group increasing them over 8 years paid for from economic growth.
Now the party is talking about increasing working-age benefits to near the poverty line without the need to increase taxation to pay for it. Perhaps the Parliamentary party understands that decisions on the level of government revenue should be made depending on the economic conditions and at the moment they are wrong for tax increases and the government removing demand from the economy.
Working-age benefits need to be increased now to start to relieve the poverty in our country, and actually ending relative poverty within a very few years must be the clear intention of a new Social Contract. Poverty is the first of the five social ills that should be urgently tackled, and it is right for our party to lead other progressive voices with this proposal, since our Preamble states, ‘no-one shall be enslaved by poverty, ignorance or conformity’. We now have the chance, given the current national mood for change, to show the country that our great social ills should be tackled directly with a comprehensive programme under the banner of the Social Contract.
Our people, held back by the ten years of austerity and battered now by the health crisis, need and deserve such a restorative programme. But they are not going to get it from his government without massive campaigning. This week the work and pensions secretary Therese Coffey told MPs that now that job centres are re-opening, benefit sanctions will be reintroduced immediately, after the three-month break . This cruel system, opposed by our party, drives people further into poverty by docking their meagre payments for at least four weeks. Sanctions are imposed if people miss a job interview, if they are not deemed to have spent enough time looking for a job, and even when accidental difficulties temporarily prevent compliance. They should be scrapped.
This is the situation our country will go back to, if we do not demand better. The state the country is in regarding poverty is starkly illustrated also this week by a new finding from the Social Metrics Commission. There are now 4.5 million people in deep poverty, that is at least 50 per cent below the poverty line, a rise from 2.8 million in 2000.
Further thinking on the modern equivalents of the ‘five giant evils’ which Sir William Beveridge wanted tackled after the Second World War was, interestingly, contributed by Sir Simon Stevens, Chief Executive of the NHS, on the Andrew Marr BBC1 show this morning. Sir Simon said he thought Beveridge would have mentioned a sixth evil if he were alive today – the need for proper provision for healthy living and care for the older generation. I did not catch his exact words, but that was their purport. I am commenting on this thread, first posted on June 25, because of its relevance to the discussion there.
In proposing that our party provide solutions to the modern equivalents of the ‘five giant evils’ within the overarching theme of a new national Social Contract, Michael BG and I suggested ‘poor health’ was the equivalent of Beveridge’s ‘disease’. For all of the five social ills we trust there will be discussions in the party of their extent in modern life, with appropriate specification of remedial actions that should be taken. For our part in this, Michael and I have asked, in the motion we have submitted which we hope will be accepted for debate at the September Conference, that our Federal Board should in its Strategy document include the vision of the Social Contract dealing with the five social ills. The one relevant to this comment is there specified as ‘poor health and health care’. So we begin to suggest in this way the wider applications of the ‘poor health’ social ill, in a way which perhaps could be acceptable to Sir Steven. It is, of course, an enormous subject which will require much thought about ways of progressing it, to which we hope the party will firmly commit.
Having listened to the excellent interview with Sir Simon Stevens again, courtesy of BBC I player, he was linking the idea that Beveridge would want ‘healthy ageing – dignity in old age’ firmly to social care provision. He said that 72 years after the National Assistance Act which began social care provision at the same time as the foundation of the NHS, ‘we do not have a fair and properly resourced adult social care system with proper workface support’, and went on to demand it, saying that the health crisis should be used to ‘once and for all properly resource and reform the way social care works in this country’.
It may well be that, as been suggested elsewhere, the NHS and the social care system need now some integration. Certainly it would seem, from the point of developing our party policies, we will need to consider ‘health care’ in its widest sense as encompassing social care as well. The shade of Sir William could thus be mollified at the same time as we satisfy the demand of the NHS Chief Executive! There is indeed much work to be done.
Katharine Pindar 5th Jul ’20 – 7:16pm
Yes, and conveniently the politicians who made the decision to omit social care from the NHS are all dead, even Harold Wilson, whp worked for Beveridge as a war-time civil servant.
@ Richard Underhill “conveniently the politicians who made the decision to omit social care from the NHS are all dead, even Harold Wilson”.
I’m not sure what your point is Mr. Underhill, but the NHS is for sickness and health. Social Care is for people who are frail or disabled but otherwise in good health….. though it has been on the for profit (but fragile) privatised route – which was nothing to do with Harold Wilson – for some time – particularly in England. The Attlee government, including Mr Wilson wished social care to be properly funded via local government.
The National Assistance Act 1948 abolished the last vestiges of the Elizabethan Poor Law 1601, and with it the workhouses – set up by the predecessors of the Liberal Party in 1834 on Utilitarian (and often cruel) principles. It’s time you read Oliver Twist again…… and Harold Wilson was no Gradgrind figure.
@David Raw.
It would seem to me that the difference between “sickness and health” and “frail or disabled” is largely one of semantics. We know that if a elderly person develops dementia they will in all likelyhood end up in a care home (and have to sell their home), if they get cancer the NHS will deal with it free and for gratis. I would suggest that most people in care homes have some kind of health issues. If a person can not live alone as they are starting to fall regularly, is that a medical issue ? As I say, it’s a matter of semantics.
I agree with those like Katharine P who suggest that some kind of integration into a better funded NHS is the long term answer to the crisis in care.
@ Chris Cory,
‘ “frail or disabled” is largely one of semantics…if a elderly person develops dementia they will in all likelyhood end up in a care home (and have to sell their home), if they get cancer the NHS will deal with it free…. ‘
So you’re pointing out there is an anomaly to be fixed here?
Be careful about that! There are two possible ways it can be done. 🙂
It’s possible to be frail and disabled without needing medical treatment, although I’m glad Mr Cory agrees with me that it’s time the for profit (but financially fragile) privatised care system should be phased out.
It’s instructive to realise that one of the successes of the Attlee Government’s welfare reforms has been to increase longevity by over twelve years since 1948….. although it stumbled and regressed as a result of austerity post 2010. Increased longevity of course has increased the need for social care. The big question is how the political parties respond to it. The much repeated Lib Dem penny on income tax for whatever the passing fancy may be won’t do it. Radical reform and realistic funding is needed.
Peter Hennessy’s tomes also document the decisions of the Conservative government of the 1950s on atomic weapons. The PM set up an inner cabinet to make the key decisions. There was later a decision in favour of a British system of producing nuclear energy, which was an expensive failure. France under De Gaulle also wanted nuclear systems with their patriotic name on, and refused to accept technical help to minimise risks of pollution.
The sad scandal of the unprotected care homes in which so many have died before their natural time will not be put right by any of the Chancellor’s handouts. The vulnerability of the inmates in many homes, and of some of the staff looking after them as well, was exposed, not only by the practice of letting the hospitals return patients to care homes before testing them, but also by the fact of temporary care assistants on zero -hour contracts and the minimum wage going in and out of the homes. Sir Simon Stevens, the NHS Chief Executive, mentioned this on the Andrew Marr show, when he demanded ‘a fair and properly resourced adult social care system with proper workface support.
I have been slightly heartened in thinking about this by recalling our party’s Manifesto commitment to establish a cross-party social care convention, to build on previous conventions and other work already done to reach agreement on the long-term sustainable funding of a joined-up system of health and social care. We hope to work to having ‘a dedicated and progressive Health and Care tax’ for the sought-for system. Let us hope indeed that our parliamentarians do now take up this challenge, which seems likely to require major reform of the social care system, and provide for it to include due reward for its dedicated workers.