Tag Archives: economy

Productivity isn’t everything: understanding the growth debate

Economic growth is at the heart of the current political debate. And yet growth is a complex aggregate statistic, and few people take the trouble to pick apart what is actually happening to it, as opposed to speculating what in theory might be happening. That has created a vacuum into which think tanks, economic commentators and politicians project their own hobbyhorses without fear of serious challenge. So what really is going on?

The main mistake people make is to assume that the main driver of growth is productivity. This is exemplified by the famous quote from American liberal economist Paul Krugman: ”Productivity isn’t everything, but in the long run it is almost everything.” Cue a furious debate on a “productivity puzzle” or “gap”, especially here in Britain – supported by  unreliable productivity measurements. Productivity is such a heterogeneous and hard-to measure phenomenon that measurements depend heavily on assumptions – and it is hard to understand their significance anyway. Prior to the crash, for example, improvements to Britain’s measured productivity depended almost entirely on two narrow sectors: financial services, whose profits proved largely illusory, and “business services” a shadowy sector the real value of whose output is hard to be sure of.

But help is at hand. American economist Dietrich Vollrath decided to pull apart growth figures to settle the debate on why American growth had slowed so much in the 21st Century compared to second half of the 20th – this debate isn’t just a British thing. As it happened, he had his own hobby horse which he was convinced was behind the issue – the growing market power of large companies. Vollrath found that two thirds of the decline in growth rates (1.25% per annum per capita at the time he was doing the work – a very similar figure to the UK) was down to demographics – the proportion of working people to the population as a whole, which has been declining as the dynamics of the baby boom work themselves out. Nearly half of the rest was down to what economists call the “Baumol effect” – named after an economist who pointed out that increases in productivity lead to a shift to economic sectors with lower productivity. As we get more efficient at making mobile phones, for example, we don’t buy more mobile phones – we spend the surplus on things like healthcare or designer clothes instead. Incidentally, he found little evidence that his own hobby horse, market power, had much effect, and none that tax changes and deregulation did – except changes that restricted worker mobility, and especially restrictions to house building. He called the two principal phenomena the problems of success and published his findings in a book: “Fully grown: Why a Stagnant economy is a Sign of Success.” This was rated as one of The Economist magazine’s books of the year for 2020, though its writers have failed to take its findings to heart.

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Welcome to my day: 26 September 2022 – a bad time to be poor, or vulnerable, or…

High inflation, rising interest rates and a mad scientist approach to economic management do not tend to instil confidence, as the markets indicated on Friday, following Kwasi Kwarteng’s “this is not a budget” statement. The hedge fund guys have already made hay – they obviously had a pretty good idea what was coming – and now the rest of us can find out what is in store.

There is little doubt that there is much that needs to be done in order to build a thriving future for the United Kingdom. From how our country is governed, to the supply of housing or provision of energy, and onto protecting our environment, many tough decisions will need to be taken. And, from a “customer perspective”, some patience is needed too. You can’t turn round the NHS overnight, just as infrastructure projects, especially big, strategic ones, don’t happen just because someone announces the intention no about it.

But the first thing you need is government that can think strategically, and not just about securing its own future in office. The outgoing administration seemed solely focussed on this week’s headline, making it to next weekend without imploding. But you would have to admit that this one does seem to have a strategy, even if it seems hard to credit it.

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The Conservatives no longer stand for a stable economy

Friday’s Kwasi-Budget was not officially a budget, despite being on of the most important fiscal statements since the Thatcher era. Because it was not a budget, it was not scrutinised by the Office of Budget Responsibility. That is yet another example of the Conservatives trying to circumvent processes designed to ensure that government’s act rationally.

This was a budget that will make top earners even more wealthy, while leaving the country and the poorest more impoverished. It was a budget based on the discredited myth of trickle-down economics. It was a budget that will allow wealthier people to dine out in style while those on the breadline scramble for crumbs.

This is an idealist budget driven by a leader who is beginning to make Margaret Thatcher look left wing.

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Davey: We have most right wing government in modern history

In an interview with the Guardian yesterday, Ed Davey discussed Liz Truss’s administration ahead of tomorrow’s budget that is not a budget. He said of Truss:

She is saying some of the most extraordinary ideological things. She has appointed probably the most right wing government in modern history. And it seems completely out of touch.

He said Truss’s decision to style Friday’s announcement as a “fiscal event” rather than a budget seemed to be aimed at preventing the independent Office for Budget Responsibility (OBR) scrutinising its impact.

The failure to have an OBR assessment shows the economy is being run by ideology, not a plan. They clearly don’t want the evidence, because that would be unhelpful to their argument. And that should trouble everybody.

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Which public services will the Conservatives shrink further?

Liz Truss has just handed Liberal Democrat campaigners a powerful set of questions to put to Tory MPs. She insists that tax cuts are the answer to Britain’s economic problems – amounting to 1-2% of GDP, perhaps more once the full package of proposed cuts emerges. She’s pledged to raise defence spending by 1% of GDP – for which, sadly, there is a case when Russia intervention in Ukraine threatens European security. She’s promising to provide financial support for household and business energy bills, likely to amount to between 2% and 4% of GDP over the coming year, without offsetting the cost through a windfall tax on energy companies of the sort that most of our continental neighbours are levying. Other government programmes will have to be slashed to prevent public deficits spinning out of control.

So what cuts in other public services will Conservative MPs accept in order to prevent government debt spiralling and the pound sinking further on international markets? A squeeze on schools, or policing, or on the already-overstretched NHS? Holding down public service pay, while letting bankers’ bonuses soar? Slashing public investment in hospitals and transport infrastructure, and reducing local authority budgets further, thus saying goodbye to the promises of ‘Levelling Up’ that helped them to win the last general election? Or holding down benefits, leaving the poorest in our society even poorer? Ask every Conservative MP what further cuts they will support – or whether they will oppose this tax-cutting strategy.

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21 September 2022 – today’s press releases

  • Business energy bills announcement: a temporary sticking plaster
  • IFS debt analysis: Taxpayers footing the bill for Truss’s ideological obsessions
  • Conservatives handing banks a £6 billion tax cut, new research reveals
  • Calls for an Investigation into Failed Welsh Government Insulation Schemes
  • Demands Welsh Government ‘Names and Shame’ Property Developers Failing to Act on the Building Safety Scandal
  • Dental Crisis: Only 34% of Patients in Southwark Have Been Seen by an NHS Dentist in Past Two Years

Business energy bills announcement: a temporary sticking plaster

Responding to the government announcement on bills for businesses and the public sector, Liberal Democrat Treasury Spokesperson, Sarah Olney MP said:

This temporary sticking plaster comes too late for the many small businesses that already closed their doors for the last time because they couldn’t afford soaring bills.

The Conservatives have sat on their hands for months while treasured pubs, cafes and high street shops went to the wall.

This delayed announcement will leave our small businesses, schools and hospitals under a cloud of damaging uncertainty. The government have no plan beyond these next six months, paralysing businesses who need to make decisions for the long term. Support for high streets and public services should be in place for at least the next year and include measures to improve energy efficiency and cut bills in the long term.

The announcement shows the Conservatives have no plan and no understanding of the pressures facing our businesses and public services.

IFS debt analysis: Taxpayers footing the bill for Truss’s ideological obsessions

Responding to IFS analysis which shows debt is being left on an unsustainable path by the government, Liberal Democrat Treasury Spokesperson Sarah Olney said:

Liz Truss is asking hard-pressed taxpayers to fund her ideological obsessions in the middle of the biggest cost of living crisis in a generation. This is no way to govern Britain.

The Conservatives are prioritising record oil company profits and bankers’ bonuses whilst families struggle to pay their own heating bills.

This Government has lost all sense of fiscal responsibility. Future generations will be paying off the Conservatives’ debt for years to come with no guarantee of economic growth.

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Another day, another new Conservative Prime Minister to muck up our lives

Boris Johnson and Liz Truss are in for an absolute treat today. It’s more of a faff to get to Balmoral than a quick spin up the Mall to Buckingham Palace, but the journey from Aberdeen through Royal Deeside is absolutely gorgeous. The heather in the hills round about Aboyne is particularly stunning, even if it is, as forecast, tipping it down.

I am so glad that they are going north to see the Queen. The 96 year old monarch has earned the right to say that they should come to her.

I wonder what arrangements have been made for Boris and Carrie to get back from Balmoral. Normally the outgoing PM gets a taxi from Buckingham Palace. Will the estate manager drop them in Ballater so they can get the bus back to Aberdeen to catch the Easyjet back down south? Probably not, but it’s an amusing thought.

Much has been said about the new Prime Minister’s bulging in tray. Competing economic, energy, international and health crises require urgent action. I don’t think we are emphasising enough, though, the extent to which all these issues have been made worse by the foolish actions of the Conservative Party in Government since 2015.  From David Cameron’s ill-advised pledge to hold a referendum on our EU membership, to Theresa May’s and Boris Johnson’s choice to pursue the most extreme form of Brexit, they have helped create much tougher economic circumstances than in similar economies.

Sectors like social care are falling apart because of their anti-immigrant ethos. As care workers went back to the EU, our disabled and elderly friends and family found that the help that they relied on disappeared.

Boris Johnson’s boasterish farewell speech this morning didn’t mention this. He didn’t get Brexit done. He left a predictably impossible situation in Northern Ireland and the new PM intends to take the nuclear option of breaking international law rather than find a more pragmatic solution.  Deaths from Covid in the UK are the highest in Europe and the long term consequences of their pretence that the pandemic is over are being felt by too many people.

It takes some brass neck to deliver such a bullish speech when you have been forced from office in disgrace after the resignation of half of your government. Tim Farron summed it up this morning:

Jo Swinson said back in 2019 that the worst thing about Boris Johnson was that he just didn’t care. He simply couldn’t be bothered to understand how his Government’s actions affected people. Liz Truss, similarly, shows no sign of giving a damn and she doesn’t have anything like the charisma of her predecessor.

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Lib Dems comment on dire economic news – but we need to say more

This week has had more than its fair share of dire economic news. The prospect of a deep, prolonged recession at a time of soaring prices means that people on the lowest incomes are really going to suffer. Let’s think about what that looks like. It means that people on the lowest incomes will simply not be able to afford the basics that they need to survive. If they don’t face the prospect of losing their home, heating it to an adequate level will be a challenge.  Putting food on the table will be tough.  Even if they just manage to get by, an unexpected car repair bill, or a washing machine breakdown, could be problems that they can’t cope with. It is quite likely that we will see levels of poverty and suffering that we thought were gone for good.

It’s the most terrifying economic landscape since 2008. And with recession comes the prospect of people losing their jobs. We didn’t have energy and living costs on a steep upward curve then.

I remember only too well the recession of the 1980s. That ITN Jobs round up every Friday showing so many jobs being lost every week. Soaring unemployment as, one by one, our key manufacturing industries crumbled.  Remember UB40’s One in Ten?

At that point though the welfare state met more of your living costs if you lost your job. You at least had some chance of getting by. And students could get help with Housing Benefit and could sign on during the long Summer holiday if they couldn’t get a job. Now, benefits are less generous, and woe betide you if you dared have more than two children since 2017 because you won’t be able to claim any Universal Credit for them.

During the 90s recession, I worked in the civil courts in England and it was heartbreaking to see the huge rise in both mortgage and rent possession cases. Each one of those meant that someone was in danger of losing their homes, and many did.

As interest rates rise, so do mortgages. Already high private sector rents are likely to increase as landlords pay more on their buy to let mortgages.

It all seemed terrible back then, but now the prospects and the pressures on incomes are even worse.

Inflation on its own is bad enough but then you have a nearly £1300 rise in energy costs from their already high level from October with the prospect of further rises every three months. If you are on a low income you are more likely to be on a prepayment meter and will find it more difficult to access help while you pay proportionately higher prices.

And all the time prices continue to rise with the Bank of England warning that inflation could hit 13%.

There is not much in the way of respite coming your way. The extra money already announced isn’t going to go very far if you are low paid.

All of this comes at a time when the Conservative Government have been cutting public services for too long. So where councils might have been able to provide much needed help in the past, they are not able to do so now. Advice agencies also need investment so that they can help people find their way through and advocate on their behalf.

Senior Liberal Democrats have been talking about the crisis. Here’s Ed Davey on the news of the energy price cap rise:

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Is GDP almost everything?

In 1968, Bobby Kennedy made a much-celebrated speech in which he denigrated Gross National Product (GNP, now usually replaced by Gross Domestic Product, GDP) as a measure of America’s well-being. He said:

… counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them … Yet does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials … it measures everything in short, except that which makes life worthwhile …

Financial Times columnist Janan Ganesh voices his disdain for this view in a recent article:

Yes – GDP is almost everything: The recession should kill off the romantic idea that growth is a mixed blessing.

He says, rightly, that wealthy countries tend to do better on indicators such as homicide rates than poor countries. Yes, poor countries do badly on a range of social indicators. But Kennedy was talking only about America. The richer we are, the less an increase in wealth boosts our well-being.

Ganesh also says:

The looming recession will be painful. But it will also drive a certain kind of post-materialist humbug from polite discourse. Growth will be harder to dismiss as a bean counter’s tawdry obsession when there is so little of the stuff to go round.

Yes, growth will be missed if it’s replaced by recession – growth is good for the feel-good factor and not everyone is post-materialist.

Recession would hit poor people in the rich world hard but we don’t need growth to eliminate most rich-world poverty. We just need to be fairer and more generous to people whose earning power is low.

Ganesh doesn’t mention the costs of growth – such as the demise of the stable physical climate in which our civilisations have evolved. We seem to be getting into a zone where we lose our ability to limit global warming and where our physical environment deteriorates eventually to where the present human population can no longer be supported. The change may be so rapid that, for one or more generations, perhaps in most of the world, human life will be nasty, brutish and short. Whatever the scale of the resulting fall in GDP, the decline in human well-being would be catastrophic.

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Crown Imperial Madness

Yesterday was a day of pageantry, cheering crowds and an unforced display of respect for the monarch from many in our nation. Boris Johnson’s government has now crowned that achievement with proposals that will make the UK a laughing stock worldwide. Proposals to bring back imperial measurements fly in the face of modernity and the needs of enterprise. But they suit the needs of this out of touch government, which seems to believe that if we bring back crowns on beer glasses and allow grocers to sell only in imperial measures it will lift the popular mood.

Although this scheme is the brainchild of Jacob Rees Mogg, who seems to be living in the century before last, business minister Paul Scully is the fall guy who today is presenting the daftest idea to come out of any government’s stable in decades. Not so much Build Back Better as Build Back Backwards.

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Ed Davey highlights “Sunak Scam” and other Lib Dems respond to Chancellor’s statement

Ed Davey was unimpressed with the package announced by Rishi Sunak aimed at helping people with the soaring cost of living.

He described it as the “Sunak Scam.”

The Chancellor is hammering families with a £800 tax hike this year, more than wiping out what he announced today.

It is the Sunak scam, promising you help but picking your pockets while you’re not looking.

Soaring inflation and devastating tax rises have left proud families who never dreamed they would find themselves in trouble struggling to pay the bills.

The British people need help right now, but instead have been left abandoned again for months on end.

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Can the UK recession be avoided?

Just before polling day the Bank of England published the May Monetary Policy Report as well as increasing the Bank Rate to 1%. They expect the Bank Rate to continue to increase and peak at 2.5% by “mid-2023”. They state, “That predominantly reflects the significant adverse impact of the sharp rises in global energy and tradable goods prices on most UK households’ real incomes and many UK companies’ profit margins.” They expect unemployment “to rise to 5½% in three years’ time”.

They state, “CPI inflation is expected to peak at slightly over 10% in 2022 Q4, which would be the highest rate since 1982”.

“Total real household disposable income is projected to fall in 2022 by the second largest amount since records began in 1964 before picking up thereafter” they forecast. Total demand in the economy will fall below total supply by the fourth quarter of this year. They quote an ONS survey of March where 42.5% of people, “said they had cut spending on non-essentials” due to lower real incomes.

This means that people will be able to buy fewer things. Demand for items will decrease. This leads to businesses producing less and unemployment increasing.

The Monetary Policy Committee produce different projections based on different assumptions. Their main projections are based on the assumption that the Bank Rate “rises to around 2½% by mid-2023, before falling to 2% at the end of the forecast period”. However, they also state that, “In projections conditioned on the alternative assumption of constant interest rates at 1%, activity is projected to be materially stronger than in the MPC’s forecasts conditioned on market rates. As a result, unemployment remains close to its current rate over the forecast period, instead of rising by around 1½ percentage points. CPI inflation is forecast to be significantly higher, with inflation projected to be 2.9% and 2.2% in two years’ and three years’ time respectively.” Also economic growth in the second quarter is higher – in 2023, 0.3% compared to 0%; in 2024, 0.6% compared to 0.2%; and in 2025, 0.9% compared to 0.7%. With their main projections they forecast negative growth of 0.2% in the first quarter of 2023 and 0.8% in the third quarter. Also with this forecast it is likely that economic growth in 2023 will be either zero or close to zero.

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“There is a great deal of ruin in a nation” — But how much? And where is it?

When the Chancellor raises National Insurance, are the effects the same everywhere? We don’t know.  But we ought to — regional inequality in the UK is so stark that comparisons to reunified Germany bear out. If fiscal policy plays a role in this, we need to know ‘how much’ and ‘where’.

There’s very good reason to ask for answers: long-established economic theory holds that governments will create poverty through taxation on economic activity:

All economic principles must be tried and proved at the margin. On marginal land there is no surplus above non-land costs, hence there is no taxable

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Christine Jardine: Families need a lifeline to help with impact of inflation

Today inflation reached a 30 year high of 5.5%. Lib Dem Treasury Spokesperson called for the Government to take action to help those facing being cold and hungry as a result:

Families are facing an unprecedented cost of living crisis, with a triple whammy of spiralling energy bills, Conservative tax rises and 30-year high inflation.

People are worried about heating their homes and putting food on the table, yet all we’ve seen from this Government is half measures and a raft of tax hikes in April. That’s not the leadership people need in this crisis.

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What we should have been saying in our response to the budget

On Thursday I received an email from Dan Schmeising giving me a link to an “exclusive budget briefing” setting out our reaction to Wednesday’s budget.

The budget briefing states:

  • Provide at least the full recommended £15 billion to fund the catch-up needed in Education over three years.
  • “Double the Warm Home Discount on energy bills and extend it to everyone on Pension Credit and Universal Credit”.
    Why haven’t we included extending it to the legacy benefits? The Warm Home Discount is currently a £140 refund on a person’s energy bills if they receive particular benefits.
  • Implement (it is implied) our 10-year plan to insulate homes.
  • “Invest £150 billion into a Green Recovery Plan to promote active and zero-emission travel, protect our countryside and clean up our air. This will be paid for by taxing the wealthy and frequent fliers – not the less well-off”.
    We don’t say we want to do this over three years and if we want to split the money evenly into £50 billion a year or invest £30 billion in the first year, £50 billion in the second and £70 billion in the third. We don’t say how much the extra taxes will raise.
  • Restore spending 0.7% of our Gross National Income on Overseas Development Aid.

The budget briefing includes, “The Local Government Authority projects councils will be facing an £8 billion black hole in their budgets by 2024. The Tory Government has responded with… £4.8 billion.”

This £4.8 billion is £1.6 billion a year. But we don’t say we would provide the £8 billion and we should.

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Getting a story out – the Liberal Democrat press team in action over furlough extension

The Press Team at Lib Dem HQ don’t just write press releases and send them out, hoping that journalists will publish them. They actively go out and try and get them published. A great success story is a push on the end of furlough, highlighting a letter written to Chancellor Rishi Sunak by Lib Dem Treasury Spokesperson Christine Jardine asking him to extend furlough for six months to those sectors which are still struggling such as tourism, travel and the creative arts.

Christine says this is important to avoid a “tidal wave” of job losses as the scheme comes to an end.

Christine points out that the cost of six months’ vital support would cost less than last year’s Eat Out to Help Out scheme.

Christine urged the Chancellor to “consider the impact on the lives of those that could find themselves out of a job at the end of the week.” She added it would be “devastating for countless families already facing a winter of spiralling bills and cuts to working benefits.”

Christine said:

The withdrawal of furlough risks having a devastating impact on countless families already facing a winter of soaring energy bills.The government needs to rethink its approach or the country could face a Coronavirus Black Thursday.

The Liberal Democrats are demanding that furlough is extended for the industries that are being hardest hit by the pandemic, to prevent a tidal wave of job losses in the coming weeks.This would support the most vulnerable workers through winter and cost less than what ministers spent on last year’s Eat Out to Help Out scheme.

Thousands of people relying on furlough are worrying about their livelihoods at a time when the impact of the pandemic is far from over. Supporting them and their families is both the right and responsible thing to do.

So where was this covered?

Basically everywhere:

The Independent 

The Standard

Wales online

ITV

The Graun

Sky News

Trade Travel Gazette – article by Christine

Trade Travel Gazette – report

City AM 

The Metro 

The Scotsman 

The Mirror 

The Express and Star

The Torygraph

Planet Radio

Even the Fail

Well done to the press team.

And if you want to see Christine’s letter to the Chancellor, it’s here.

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Christine Jardine: Government breaking promises and backbone of our economy

Christine Jardine slammed the Government’s proposed increase in National Insurance constributions in the debate yesterday.

The full text of her speech is below:

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Observations of an Expat: The High Seas

About the only time the world’s land-based public thinks about seaborne traffic and the globalised trade it underpins is when they look above the parapets of their sand castles and spy a ship on the distant horizon.

Or, when something happens, such as a war or a vital sea artery is blocked and prices creep up and super market shelves start to empty.

The latter is happening.

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An economy for society based on Lib Dem values

We are part of a wide fellowship in search of an intrinsically fairer economy and social outcomes. We stand explicitly for the ‘well-being of the individual’.

We are democrats. Democracy binds our society together, but struggles to do so when our day to day experience of economic life does not accord with our values of mutual support and well-being. A plural democratic society requires a plural economy and politics but we do not have either.

I founded a not-for-profit organisation advocating the use of our existing housing stock to create affordable tenancies, and identified it as an intervention to societise the housing market, correcting its imperfections (homeswithinhomes.org). I realised we need systemic change in favour of society and our common good, a system that co-exists with capitalism and statism in all its forms but is uniquely identifiable and attributable to a philosophy elevating collective values of equality.

These values will appeal to a significant part of the general population, they are core Lib Dem values. We are uniquely placed to give a voice to such market based, societal economic reform and by doing so can help develop a unique economic platform reflecting Lib Dem ideology, of equality and liberty, with l believe, mass electoral appeal.

Our economy developed during a period when there was no universal franchise, nor meaningful women’s or minority rights and little societal perspective. This history, based on outdated notions of ownership and control, of private share ownership on the one hand and state control of production on the other has driven us towards economic and political polarities; we have an economy that is not mixed enough.

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Unforgivable choices – Lib Dems respond to the Spending Review

For the second time in three days, Christine Jardine pressed the Government to do more to help those who have thus far been excluded from Government support. Three million self-employed people have had nothing since March and some have had no income at all because they work in areas that aren’t yet open. In March they were stressed. Eight months on, they are desperate.

Rishi Sunak was dismissive, but not as egregious as Boris Johnson had been the other day when Christine questioned him.

“I hope we haven’t excluded anyone” said the PM. If he doesn’t know that there is a massive All-Party Parliamentary Group fighting for these people, if he hasn’t been aware of the many questions that have been asked in Parliament, then that shows unforgivable ignorance. If he did know of the plight of the three million, his remarks show callous disregard.

Later, Christine talked to BBC News arguing against the public sector pay freeze and the abandonment of the 0,7% aid target.

On that international aid issue, Wendy Chamberlain highlighted how the Government had gone back on its word:

Ed Davey said that the Chancellor had made some unforgivable political choices:

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22 October 2020 – today’s press releases

  • Economic support plans made “on the hoof” are failing millions
  • Tracing failures shows Hancock needs to overhaul test and trace

Economic support plans made “on the hoof” are failing millions

The Liberal Democrats have accused the Chancellor of “making up plans on the hoof” when it comes to financial support for businesses and workers impacted by COVID-19. Responding to the Chancellor’s statement in the House of Commons today, Liberal Democrat Treasury Spokesperson Christine Jardine said:

Yet again the Chancellor is taken by surprise by events unfolding exactly as predicted months ago. He has utterly failed to address the gravity of the economic crisis, with people and businesses facing devastating pressure across the country.

Beyond tinkering around the edges of the Job Support Scheme and correcting some of its blatant errors, he has offered nothing for those slipping into poverty. 67% of salary is just not enough for people to get by on. The Chancellor is making up plans on the hoof and is failing millions of people.

We need real leadership from Government, not a patchwork of ever-changing measures. It’s clearer than ever that the Government should have kept the furlough scheme in place as the Liberal Democrats called for, yet they are too proud to do the right thing and U-turn.

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5 October 2020 – today’s press releases

  • Chancellor’s speech will have disappointed millions in need
  • Lords defeat Government on Immigration Bill

Chancellor’s speech will have disappointed millions in need

The Liberal Democrats have claimed the Chancellor’s speech at the Conservative Party’s virtual conference will have “disappointed millions who were hoping to hear how he plans to help them through this crisis.”

Liberal Democrat Treasury Spokesperson Christine Jardine said:

The Chancellor’s speech will have disappointed millions who were hoping to hear how he plans to help them through this crisis.

Instead of an extension to furlough, measures to help the millions excluded from help or a boost to universal credit, we were instead given

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On blood letting, Covid economics and Goldilocks

“It ain’t what you know that gets you into trouble. It’s what you know that just ain’t so.” (Mark Twain)

Blood letting is the withdrawal of blood from a patient to address illness, used for about 2,000 years. It harmed patients! William Harvey disproved its theory in 1628. Practice and professional endorsement continued into the 20th century via expert endorsement, “official” endorsement, public trust, inertia, fashion and lack of analytical thinking.

How powerful expert ignorance, endorsed by the powerful, politically and socially, and accepted by an insufficiently educated and ill-informed public can be! And this includes current economics and its “Deficit Myth”. (See Stephanie Kelton’s book of this title which informs this article.)

Our alleged deficit is a myth. We are a currency issuer, not a currency user. Our government does not function like a household which cannot issue its own currency. It cannot run out of money and is not solely dependent upon taxes and borrowing for its spending. “Book balancing” is a theoretical restraint. Real restraints are inflation, employment levels, natural and social resources and infrastructure efficiencies.

Efficient economy balance matters more than budget balance. Increasing “deficits” will not make future generations poorer nor will reduction increase their wealth. Such will depend upon our management of the actual economy.

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GDP share; a more timely and effective alternative to Universal Basic Income

That’s your bloody GDP. It is not ours’. Thus a Brexit supporter expressed their detachment from the national economy in 2016.

This proposal addresses both the perception and reality behind this comment. It provides poorer households with a bigger share of GDP, achieving a more deliverable redistribution of income than a Universal Basic Income. It makes more people feel that this is ‘our GDP’. It also steers the national conversation about growth towards ‘net zero’.

UBI and its problems

A conference motion calls for the party to campaign for UBI.

But the practicalities mean we are doomed to deliver a very small and disappointing version of a very big and (somewhat) controversial idea. The UBI promise of a reasonable income for everyone is not achievable. Recent work by sympathetic academics has shown how far we can (and can’t) get. Even if we raise higher rate taxes a lot and get rid of personal allowances (so that for most people there is no net benefit) to fund a UBI, we cannot sustainably pay a UBI of much more than £3000. At this level, many poor people would lose out unless all or most current means-tested benefits stay in place – thus forgoing one of the significant supposed advantages of UBI. And even to get to £3000, we would likely have deployed the money from all of our tax-raising ideas on this one concept cutting out anything else we might want to do.

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21 August 2020 – today’s press releases

  • The Chancellor needs an ambitious plan to save the economy
  • Government continue to threaten economic recovery
  • “Shameful” that bereaved families of NHS and care workers risk losing access to welfare benefits
  • Extending eviction ban nothing more than kicking the can down the road
  • Brexit reality falls short of rhetoric again as “no deal” threat looms

The Chancellor needs an ambitious plan to save the economy

Responding to reports that debt has increased to over 100% of GDP for the first time since 1961, Acting Leader of the Liberal Democrats Ed Davey said:

This news must not be used as a reason for the Government to make cuts or return the country to austerity.

We know that borrowing is historically incredibly cheap, so it is absolutely clear that borrowing money to boost the economy is the best way to get public finances back on track.

The Chancellor must be far more ambitious in his plans to rescue the economy. The Liberal Democrats have called for a £150bn Green recovery plan to boost the economy and create thousands of new jobs.

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Lib Dems: The party of wellbeing?

Lib Dem leadership elections often bring up the same criticisms of the party:

  1. People don’t know what we stand for.
  2. We aren’t radical enough.
  3. We need to advance a “core voter” strategy based on values, not just on being “hard working local people”.

I agree with all of these criticisms, but get weary when they are repeated ad infinitum without solutions. Both Davey and Moran talk about the importance of building a distinctive liberal message without saying what this distinctive liberal message should be. What I’m seeing from both candidates is a list of reasonable policy ideas which aren’t meaningfully linked (except by the vague claim that they are “liberal” or “evidenced-based”).

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14 July 2020 – today’s press releases

  • Government must be more ambitious to save the economy
  • UK needs a Green Recovery plan to deal with biggest recession in 300 years
  • Liberal Democrats welcome Government’s “screeching u-turn” on Huawei

Government must be more ambitious to save the economy

Responding to this morning’s monthly GDP estimate from the ONS, showing that the economy grew by only 1.8% in May – lower than the 5.5% forecast by economists – Acting Leader of the Liberal Democrats Ed Davey said:

Regrettably this dashes any hope of an early recovery and is bad news for millions of people experiencing real financial hardship. It confirms fears that

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Who gains from Rishi Sunak’s Summer Economic Statement?

It is easy to criticise Rishi Sunak’s Summer Economic Statement for not doing enough. The Chancellor had a difficult task to assess what size of economic stimulus would be effective.

His main aim was apparently to create jobs for those who had lost them or will be losing them soon. But the Statement.is very disappointing because it doesn’t deal with the realities of the situation for lots of businesses. Social distancing is very likely still to be in place after October, so it just will not be possible for many businesses to provide their services to as many customers as before lockdown.

He should have included a new coronavirus staff retention scheme (turnover based). It should have provided a proportion (say 80%) of the difference between the takings of a business in a month compared to the relevant month in 2019, for businesses that can demonstrate that because of social distancing they can’t deal with the same number of customers.

Rishi Sunak reported that £4.6 billion of consumer debt has been paid off and households have increased their bank deposits by £25.6 billion. This means there is the potential for more than £30 billion (about 1.5% of last year’s GDP) to be spent into the economy when households have confidence restored.

With an economy valued at £2000 billion I believe the maximum economic growth per year with which the UK can normally cope is about £60 billion. Therefore an economic stimulus of £30 billion at this stage is about right.

Instead of allocating up to £9.4 billion for his Job Retention Bonus scheme, I think Rishi Sunak should have used the amount to increase all working-age benefits such as Universal Credit, Family Tax Credit, Jobseekers Allowance and Employment and Support Allowance by £20 a week, the same value as his temporary increase of Universal Credit and Family Tax Credit in March. This would have targeted the money to the poorest in society who are most likely to spend it and to the areas where more of these people live. Giving employers £1000 per worker retained is not going to do much to encourage them to retain the most marginal workers, and will do very little if anything to increase demand in the economy.

A lot of the £5.6 billion for infrastructure projects is not new money and includes maintenance projects. £900 million is for shovel-ready projects in England in 2020-21 and 2021-22. But some of this, maybe the majority, will not be spent until the next financial year. We must hope that most of the £5.6 billion will go into the areas worst affected by job losses.

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Transforming our economy while remedying our environmental crisis – Part 2

In a previous article, I started to highlight policy areas that could advance our fight against the climate emergency and looked at legislation and taxation. This article continues the discussion and looks at additional policy measures to drive change in the way we treat the world we live on.

3. Education – all schools should have climate crises as a part of their social learning – this can be written into the personal, social education time which schools use to address and educate on issues. For adults, continued government promotion on single-use plastics, diets and other life choices is essential, and each individual must take responsibility for their actions. The crisis is unfathomably large but broken down into a single person among 8 billion, and a single footprint to wipe clean, if we all clean up after ourselves, it is possible.

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Transforming our economy while remedying our environmental crisis – Part 1

The fight against climate change is a global one; we understand the issue and science. We also understand the urgency, and in the Paris Agreement, every country committed to reducing emissions to target a significantly lower than a two-degree rise over pre-industrial temperatures. While the complexities are significant, the issue is that globally we continue to put too many greenhouse gases into our atmosphere. The wealthy western countries have been the leaders of this pollution which are making the entire planet suffer, and the poorer countries are suffering more than the wealthiest; we need to lead the recovery.

The good news is that solutions do not have to be complex. For a start, we can put less harmful gases in and take more out. To achieve net-zero means that whatever we put in, we take out, essentially like wiping a footprint in the sand clean, so it looks like you were never there. At net-zero we, as humans, stop making the problem worse. However, we can strive to be better and to take more out than we put in, to allow the planet to get back to its natural cycles of carbon release and absorption.

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