Tag Archives: economy

Lord William Wallace

What’s our line on public spending?

By Lord William Wallace | Wed 14th August 2024 - 11:55 am

What should be our overall party line on taxation and public spending? We have a new government that came into office promising not to raise any of the major revenue-raising taxes. It claims that it has now discovered far larger holes in public spending plans than it had expected. The reality is that the Conservatives and their media allies managed to focus attention in the run-up to the election entirely on the level of taxation, without addressing what that implied for public services and long-term investment.

So Labour are now stuck. They knew well before the election (as the Institute for Fiscal Studies (IFS) and even the business pages of the Times were telling them) that government spending projections were unreal, that maintaining Tory plans would necessitate cuts in core programmes, and that Jeremy Hunt’s reductions in national insurance were almost criminally irresponsible. But they didn’t dare to be honest with the voters, for fear of the Tories branding them as a ‘tax and spend’ party.

We have been here before. Tony Blair similarly promised before the 1997 election not to raise overall rates of tax. We Liberal Democrats were braver, promising ‘a penny on income tax’ to raise the quality of education. I was then chairing our manifesto group, and vividly recall a Labour adviser telling me that we were mad to do so; ‘voters will never support a party that talks about raising taxes.’ But voters don’t want to vote for cuts in schools, health services, police numbers, courts and prisons either. It turned out to be the most distinctive theme of our campaign.

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Should Lib Dems rethink our new fiscal rules after our successful General Election campaign?

By Michael Berwick-Gooding and Katharine Pindar | Wed 31st July 2024 - 8:55 am

Following the announcement of the new (so-called) £22bn ‘Black Hole’ in the Government’s finances, Chancellor of the Exchequer Rachel Reeves has announced over £3bn in departmental spending cuts, making the winter fuel allowance mean-tested, and scrapping the previous government’s social care reforms (which set a maximum of £86,000 on a person’s personal care costs) meant to be implemented eventually in October 2025.

During the General Election it was generally recognised that there would need to be cuts to the non-protected departmental budgets, which the Resolution Foundation said could be as much as £33bn and the IMF said could be about £30bn. During the General Election the Labour Party talked of less than £10bn in extra government spending.

In our Manifesto we suggested how £19bn more could be raised from increased and new taxes. These included  buy-backs, increased taxes on social media firms and tech giants and reforming capital gains tax, as well as including one copied by the Labour Party, higher taxes on the energy giants (but raising £900 million less than ours).

There is a way forward, which our pre-Manifesto passed in the Autumn Conference of 2023 proposed. We stated that we would  “safeguard the UK’s economic prosperity while making the investments our country needs. We will make sure that day-to-day spending does not exceed the amount of money raised in taxes over the medium term…”

However, in our Manifesto those words were replaced with, “Foster stability, certainty and confidence in managing the public finances responsibly to get the national debt falling as a share of the economy and ensure that day-to-day spending does not exceed the amount raised in taxes, while making the investments our country needs.”

Why make that change? It would leave us on the same horns of a dilemma as the new Chancellor has. You can’t simultaneously pledge to reduce the national debt AND pledge to make the investment the country needs, in one parliamentary term.

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Lord William Wallace

William Wallace writes.. .Tax Cuts versus Public Investment and Services

By Lord William Wallace | Fri 14th June 2024 - 9:38 am

The Conservative Manifesto confirms that they have dug in on tax cuts as their core offer to the voting public.  They know that this is an illusion, on which they would not be able to deliver if they won.  Opinion polls show that most of the public don’t think it’s realistic.  An IPSOS poll in early June found 68% of the public describing public services as ‘underfunded’ – confirming similar responses in multiple polls over the past year. 

Labour have been so frightened of the Daily Mail that they have committed themselves to holding almost all major sources of revenue to current levels.  They promise instead to fund increased spending out of future growth – a dubious prospect when UK growth is currently minimal and the global economy is being hit by wars in Ukraine and Israel and by the threat of a China/US trade war.  This has made the campaign so far surreal, with the Institute for Fiscal Studies (and the Institute of Government, and BBC Verify) pointing out the widening gap between promise and necessity, and with both major parties refusing to engage on where future cuts must fall.  Happily our manifesto has focussed on fair tax rather than low tax, and received compliments from the business pages for daring to do so.

Any of you who may be going to meetings with Tory candidates in the next three weeks can have a field day over the gap between rhetoric and reality.   Sunak’s party have promised to raise defence spending by 0.5% of GDP, and attacked Labour for its more cautious half promise.  Given the re-emergence of Russian threats to Europe and the current weakness of UK armed forces, such an increase is irresistible. So ask the Tory candidate what other budgets they will cut to fund this significant increase?  Education, when teachers are leaving in increasing numbers, universities in danger of bankruptcy, and apprenticeships less than half of what our economy needs?  Justice and prisons, which are already buckling from court delays, prison overcrowding, and probation understaffing?  Local government, where budgets have been squeezed to the point where key services are disappearing?  Or maybe the NHS, of all things?

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Peter Wrigley

J K Galbraith and the Liberal Society

By Peter Wrigley | Wed 15th May 2024 - 7:55 am

A friend who hoards his newspapers for years has just passed on to me an interview by Roy Hattersley with JK Galbraith in the latter’s 90th  year (1998)

The article is headlined “Sage of the Century”* and there is no doubt that, after Keynes’s  death, Galbraith  was the pre-eminent economist of the second half twentieth century.  He got most things right (including opposition to the Vietnam War) and many of the issues raised in the interview are as relevant today as they were  a quarter of a century ago. Indeed, having ignored his views provides a good explanation as to why we are now in our present  dire predicament.

The following quotes (in italics) are from the article;

To The Affluent Society we owe the prediction of “private affluence and public squalor.” Which we can see all around us, in spades after the Margaret Thatcher inspired dominance of the inadequately regulated market since 1979.

Galbraith’s first success was his analysis of “The Great Crash” of 1929.  In 1998 he predicted: “A sump will surely happen again, sooner or later. . .they are a normal feature of the market.”  

Well, it did happen again, in 2008 and we are still paying for the consequences.  Keynes was in favour of “animal spirits,”  but I think he had in mind investors in the “real economy” rather than manipulators of the financial markets, allowed to over-reach themselves by Mrs Thatcher’s Big Bang.

“The poor are politically emasculated.  They don’t vote so they don’t have a strong expression in Congress or the White House.”  

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Mark Valladares

17 April 2024 – today’s press releases (part 1)

By Mark Valladares | Wed 17th April 2024 - 11:15 pm

Back after a few days on grandparent duty…

  • Inflation figures: Nobody will notice this in their pockets
  • Three in four of worst hit constituencies for sewage dumping held by Conservative MPs
  • Mark Menzies scandal: Sunak must suspend the Whip

Inflation figures: Nobody will notice this in their pockets

Responding to the latest inflation figures, Liberal Democrat Treasury spokesperson Sarah Olney MP said:

Nobody will notice this in their pockets, with mortgage bills still skyrocketing after Liz Truss crashed the economy, and prices still so much higher than last year. By patting themselves on the back for this record, Rishi Sunak and Jeremy Hunt have proved just how out of touch they are.

Conservative Chancellors have presided over the worst cost of living crisis in living memory. The blame lies squarely with their gross economic incompetence.

Three in four of worst hit constituencies for sewage dumping held by Conservative MPs

  • 75 of the the top 100 constituencies for the worst number of sewage spills last year held by Conservative MPs
  • Rishi Sunak’s constituency was the 10th worst hit in England, with the duration of sewage dumping doubling to 42,000 hours in 2023
  • Theresa May’s seat of Maidenhead saw a staggering forty fold increase in duration of sewage dumping
  • Lib Dems warn of a “reckoning at the ballot box” from former Conservative voters furious about the sewage scandal

96% of Conservative held seats in England saw an increase in sewage dumping last year, with the worst constituency for sewage dumping facing 100,000 hours worth of spills, Liberal Democrat analysis of House of Commons Library research has shown.

Geoffrey Cox’s seat of Torridge and West Devon was the worst affected last year by sewage dumping, facing 97,000 hours worth of sewage being pumped into the area’s waterways, a 65% increase on 2022’s figure This was followed by Central Devon, Skipton and Ripon, Penrith and The Border, and Totnes, all of which experienced over 50,000 hours worth of dumps by water companies.

450 of the 508 seats in England saw a rise in the duration of sewage dumping and 456 saw a rise in the number of spills in 2023 compared to the previous year. In a staggering 96% of Conservative held seats in England there was an increase in sewage spills last year.

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Peter Wrigley

Growth: We’re there!

By Peter Wrigley | Wed 20th September 2023 - 8:58 am

I can’t find out when Gandhi said: There is enough for everyone’s need, and not for everyone’s greed,” but it must have been before 1948 because that’s when he died.  Yet, still 80 or so years later, rather than concentrating on better sharing of the world’s munificence, we are still looking for yet more economic growth as a free pass for “enriching” everyone without anybody paying the price.

The measurement of an economy’s growth via its GDP is largely a post 1945 obsession.  When he was the UK’s Chancellor R A Butler alerted us to the fact that, if we could achieve growth at the rate of 3% per year we could double our standard of living in 25 years.  Harold Wilson and the Labour party, in the campaign for the general election of 1964, promised all sorts of wonders, and they wouldn’t cost us a penny: they’d be financed out of growth.

Waring shots about this painless panacea were fired by the Club of Rome and its publication of “The Limits to Growth” in 1972.  The earth’s resources are finite and  more and more production risks poisoning  it .  It’s not a question of “Will the planet survive.” It almost certainly will, but not necessarily life as we know it, or perhaps any life at all.

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Mark Valladares

19 September 2023 – today’s press releases

By Mark Valladares | Tue 19th September 2023 - 10:30 pm
  • OECD Report: UK economy is “stuck in the slow lane”
  • Revealed: Truss taxpayer handouts now reach over £40k
  • Sunak has failed to embrace the industries of the future

OECD Report: UK economy is “stuck in the slow lane”

Responding to the lastest OECD report, Liberal Democrat Spokesperson for Treasury and Business Spokesperson Sarah Olney MP said:

This damning report shows that under the Conservatives, the UK economy is stuck in the slow lane. We’ve had zero apology from Liz Truss for trashing the economy, and now zero plan from Rishi Sunak to fix it.

It’s time for a proper plan to grow the economy and tackle the cost of living. That means boosting apprenticeships to tackle skills shortages and helping exporters by fixing the government’s botched trade deal with Europe.

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Caron Lindsay

Ed Davey calls for action to help those struggling with rising bills

By Caron Lindsay | Wed 16th August 2023 - 8:48 am

As inflation falls to 6.8%, Lib Dem Leader Ed Davey appeared on Sky News this morning to give our party’s reaction:

While it was positive news that prices aren’t using quite so fast, he said, but they are rising fast,  faster than they are in many other countries and faster than they have for many, many years.

Families and pensioners when they go and do their shopping, when they get their energy bill, when they pay their mortgage, their rents, they are still seeing them go up by huge amounts. And what is worrying Liberal Democrats today is that this month’s inflation figures will be used to calculate rail fares for next year and we are calling for a freeze as some way of helping people who are really really struggling.

Challenged that the Government has to balance the books, Ed said that we always do balance the books and go to the country with a fully costed manifesto, compared to the Conservatives who have been reckless with Government money and that’s why the country is in such a mess.

I listen to Conservative ministers and they seem so out of touch with the realities that most families and pensioners are facing. When we talk about these sorts of figures they seem quite complacent and give themselves a pat on the back when families are really struggling out there. I just want a Government that seems to care a bit more and this lot just don’t.

Let’s just pause a minute there. This “families and pensioners” phrase irks me a bit. It isn’t quite as bad as the awful “hard working families”, but it completely ignores a huge swathe of people who are struggling just as much as the soft Tory voters in the blue wall seats we are going after. They like the “families and pensioners” language because it has a comforting ring of deserving poor about it but that’s no excuse.

We need to make sure that the young people struggling to get by on low incomes, earning less and getting less in benefits despite living costs being just as high feel included, or the growing number of single person households with only themselves to rely on.

What’s wrong with just using people? Our mission as Liberal Democrats is to build a fair, free and open society where NO-ONE is enslaved by poverty, ignorance and conformity and our language should reflect that universality. We have so many good ideas that would help all people who are struggling so it seems a shame to limit our language.

Rant over and back to the interview. Ed was challenged that our plans to help people were not realistic. He said:

The real world is that the economy is struggling and we need to get people back to work. If you took up Liberal Democrat ideas to boost the economy, you would get more people using public transport which is more important for our economy, for the environment and so you have many benefits.

I just think the Government is so out of touch. They don’t seem to get how the combination of  price rises, mortgages, rents, energy bells railway fares, is hitting people.  We’ve calculated that a commuter family is going to be clobbered by an extra bill of £300 every month due to the combination of mortgage, food and rail fares. This is a huge amount and when I hear government ministers saying they can’t do anything. They could do something but they don’t. The fact that they don’t backs up my argument that they are out of touch and don’t care.

He was asked whether the energy price cap should be rethought as it harmed competition:

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Michael Taylor

Reflections after a Conference – a challenge to the Lib Dems

By Michael Taylor | Wed 28th June 2023 - 8:22 am

Editor’s Note: Mick wrote this piece after the Brighton Conference in 2018 and sent it to me recently as he felt it was still relevant today. Apart from the fact that Brexit is now an (at least for now) inescapable reality, he’s right.  We need to be radical and punchy to deliver the liberal, fair, more equal society that we want to see. I’m reminded of the Liberal not Moderate t-shirts that some of us wore proudly around that Conference…

After a short period at the Lib Dem conference I am still in Brighton for a couple of days. Brighton is quite a good place to reflect on the state of the UK.

Thinking back, Brighton used to be in much better nick than it is now. Many pavements are cracked and broken, many of the houses and hotels look run down and in need of repair and renovation. The seafront is not particularly special and the West Pier is still a burned out shell. Here, in one of the UKs premier resorts, there are many homeless people on the streets and many beggars as well. Hardly the sort of Britain that we Liberal Democrats want to see!

Recycling largely takes place by means of unsightly bins strewn around the streets and the former green-run council’s recycling policies made a mockery of recycling anyway.

I suspect that much of this is the result of austerity, especially the massive cuts to the finances of the local council that no longer enable it to respond to the needs of the Brighton and Hove Community.

Brexit will hardly improve matters, because hotels and restaurants here rely heavily on European workers and they may not be available after March 2019.

Although I have no direct information, I suspect that housing is expensive and that many people, especially the young, have no hope of getting on the housing ladder and live in the private rented sector with its high prices and insecurity of tenure.

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Caron Lindsay

Davey: Sunak asleep at the wheel

By Caron Lindsay | Wed 4th January 2023 - 9:56 pm

Listening to Rishi Sunak speak today, you wouldn’t think that the country is in the grip of economic turmoil and crisis in the NHS. You don’t have to go far to read of NHS trusts and boards calling major incidents, or London Ambulance saying they will only wait 45 minutes before leaving patients in hospital corridors. Everywhere there are accounts of traumatised, stressed nurses, doctors and patients in A and E departments up and down the country.

It is all very grim.

Sunak’s five priorities would fail the SMART objective test on any work training day.

He could claim he had done them without alleviating much suffering. I mean what does “NHS waiting lists will fall” actually mean for someone who has been told that they can have an appointment for their hernia in mid 2024? What does “the economy will grow” mean? A tiny decimal point which makes no measurable difference? Reduce national debt – to what, how and what will that mean for public services? And a piece of red meat for the xenophobic right about getting rid of asylum seekers. The one specific pledge, to halve inflation, seems to be going to happen anyway according to the Bank of England forecasts.

It’s all very cynical.

Ed Davey was unimpressed, saying:

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Steve Trevethan

A socio-economic impert’s thoughts on the OBR’s report and the Autumn Statement

By Steve Trevethan | Wed 23rd November 2022 - 12:33 pm

An impert is interested in a subject and tries to find out more about it. The writer aims to become a socio-economic impert because the writer considers it impossible, in reality, to separate “economics” from its inevitable social consequences.

The foundational OBR’s report is in error because it omits sectoral balances. Whenever a government has a debt, the non-government sectors of the domestic, the business and the foreign, must have a surplus. The valid question is the size of the difference between governmental expenditure and its tax gathering. Too much is harmful as is too little. Without this surplus of money, homes and businesses do not have enough money with which to function. As currently presented, “Balanced Books” are a disaster for regular people.

By extension, sectoral balances tell you where money has come from and where it goes, but not necessarily in that order!

Another hidden truth is that inflation is a year on year calculation. This year, pre-conflict inflation is used as the basis for this year’s conflict affected calculation and so is high. Next years will be based on conflict affected inflation figures and so is incredibly unlikely to be other than less.

The Autumn Statement does not differentiate between the causes of inflation. There are various internal and external causes. The current inflation has significant external causes, such as the Ukraine conflict and the opportunistic raising of prices by power companies. The latter are invalid profits because they are out of proportion to actual research and development, production and distribution costs. Again using the sectoral balance model, we  can see that these extractive “profits”  come not from worth or need, but from the exploitation of fellow human beings.

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Mark Valladares

22 November 2022 – today’s press releases

By Mark Valladares | Tue 22nd November 2022 - 10:35 pm
  • Debt figures: Conservative Chancellors have blown black hole in Britain’s finances
  • Welsh Liberal Democrats to Vote to Withhold Legislative Consent on the Northern Ireland Protocol Bill
  • OECD forecast: Damning verdict of the Government’s economic record
  • Sewage: Budget means almost £500 million less to tackle the sewage crisis
  • Levelling Up Bill: Conservative chaos to blame for cancellation of vote

Debt figures: Conservative Chancellors have blown black hole in Britain’s finances

Responding to new ONS figures showing the scale of UK government borrowing in October, Liberal Democrat Treasury spokesperson Sarah Olney said:

These figures reveal just how badly the long list of Conservative Chancellors have trashed our economy. This Government has blown a massive black hole in Britain’s finances and is now expecting hardworking families to pick up the bill.

It is a national scandal that big banks are getting massive tax cuts whilst the squeezed-middle gets clobbered with endless tax rises.

The sensible way to solve this is surely to tax the richest companies making bumper profits. We can’t trust this Conservative Government to clean up their own mess. They should never be trusted to run our country’s economy.

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Mark Valladares

15 November 2022 – today’s press releases

By Mark Valladares | Tue 15th November 2022 - 11:15 pm
  • ONS earnings figures: Economic mismanagement is leaving pay packets stretched further than ever
  • Vaughan Gething Qatar Press Briefing – More Soundbites Rather than Real Solidarity
  • Liberal Democrats Raise Concerns Over the Impact of Australian and New Zealand Trade Deals on Wales
  • Conservatives failing to count cost of windfall tax loophole

ONS earnings figures: Economic mismanagement is leaving pay packets stretched further than ever

Responding to the latest ONS labour market and earnings figures which show pay falling in real terms, Liberal Democrat Treasury spokesperson Sarah Olney MP said:

This Government’s economic mismanagement is leaving pay packets stretched further than ever before just as bills spiral out of control.

This is the worst cost of living crisis in a generation and Thursday is judgement day for the latest Conservative Chancellor in post. He cannot make the same mistakes as his predecessors who crashed the economy and left families to pick up the bill.

Thanks to the Conservative party’s botched budget and reckless mismanagement of the economy, homeowners are being forced to pay hundreds of pounds more a month on their mortgage whilst their take home pay is eaten away by inflation. The public will never forgive Conservative MPs for this.

Vaughan Gething Qatar Press Briefing – More Soundbites Rather than Real Solidarity

Responding to Vaughan Gething’s press conference where he continued to defend the Welsh Labour Government sending a delegation to Qatar during the World Cup, Welsh Liberal Democrat Leader Jane Dodds said:

I am not convinced by the arguments set out today by Vaughan Gething nor previous arguments from the Welsh Labour Government seeking to justify this morally unjustifiable trip.

The Welsh Government should be upfront about its intentions going to Qatar, it is not to ‘support Team Wales’ but is to seek investment.

These tainted investment opportunities are going to come at the cost of providing diplomatic legitimacy to Qatar’s hosting of this tournament despite the country’s atrocious human rights record that has left over 6,500 migrant workers dead, punishes being gay with execution or imprisonment and treats women as lesser human beings.

Vaughan Gething has stated that the Welsh Government will “proactively use Wales’ place in the World Cup in Qatar to promote our strong Welsh values”, yet today has again not provided any evidence on how the Government will do this.

The last time I checked, unless the three ministers have been promote to Team Cymru itself and are going to be on that pitch, their presence isn’t going to affect how our national team performs and our national team are already upholding our values.

If Labour actually wanted to show solidarity with those living under Qatar‘s poor human rights record, or the families of the victims that have died during the construction of World Cup stadiums, they would cancel their unjustifiable trip immediately and instead join the vast majority of fans who will be watching the games from home, and to show some consistency on “saving them air miles” that was used to justify the Welsh Government not attending COP27 last week.

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Kevin Langford

We should not oppose some stealth taxes

By Kevin Langford | Wed 2nd November 2022 - 7:30 am

The autumn statement on 17th November will probably provide reassurance for the markets, but bad news in other respects.  We don’t yet know how the unpleasant ‘medicine’ will be mixed, but it will include higher taxes (including stealth tax rises through long term freezes to personal allowances), cuts to services and to government investment, and real terms cuts to some welfare payments.

Elements of our response to the forthcoming statement are easy.  1 The Tories got us into this mess through the Truss shambles, through Brexit, and through the lack of policies to build a decent economy over many years of poor stewardship.  2 We don’t want cuts to services and to welfare.  3 We should increase levies on companies which have happened to have benefitted from the war in Ukraine.  But when it comes to any tax rises that may be proposed in the statement, we need to think carefully.  We need to balance the short term expediency of pointing out everything the government is doing which could be unpopular, against longer term considerations of how to deliver a better society.

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Caron Lindsay

Olney: PM’s apology brings nothing but cold comfort

By Caron Lindsay | Tue 18th October 2022 - 9:38 am

Yesterday afternoon, Penny Mordaunt was given an impossible job – defending the indefensible. She was asked to deputise for the Prime Minister in the Commons for Labour’s urgent question on the sacking of the Chancellor.

Mordaunt did much better than Truss ever could have done. She had a reasonable balance of “**** you”, humility, and even a bit of sincerity in the face of quite an onslaught from opposition MPs. It is hard to imagine anyone having a go at the opposition when they were part of a government that had made a crap economic situation much worse.

Labour missed a trick …

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Caron Lindsay

Olney: Jeremy Hunt expects people to pay for Conservative mistakes

By Caron Lindsay | Sat 15th October 2022 - 12:15 pm

Jeremy Hunt’s media round this morning was sobering stuff. Tax rises and public spending cuts seem to be the order of the day.  While he might talk about protecting the most vulnerable, Conservatives have never been good at understanding how to do that.

Our Treasury spokesperson Sarah Olney had this to say:

This may be a new Chancellor but it’s still the same old Conservative party whose failed economic experiment has cost this country billions.  Now Jeremy Hunt expects struggling families and pensioners to pay the price for those mistakes.

Thousands of families are facing increased mortgage costs and rising prices at the checkouts while our struggling public services will have their spending slashed.

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Why our Country and our Party need an Emergency Lib Dem Special Conference – Now

By Cllr David Evans | Wed 12th October 2022 - 12:15 pm

In less than 26 minutes on Friday 23 September Liz Truss and Kwasi Kwarteng took an axe to what remains of the British Economy and the hopes and prospects of so many ordinary people, and totally destroyed the last vestiges that the Conservatives are the party of Economic competence. By the end of the day the pound had crashed over 4% in value (and is still falling) and the FTSE a further 2%, undermining the savings, pensions, and prospects of workers, the retired and the unemployed, be they Teachers, Doctors, Farmers, workers in industry or workers in entertainment. It affects them all.

However only a few days before, Federal Board and Federal Conference Committee decided to completely cancel Party Conference and put everything on hold until Spring Conference is held In York next March. While the decision that it would be seen to be inappropriate to hold conference during the period leading up to the Queen’s funeral was totally justified, it was totally misguided to think that the Lib Dems, as a party, should have no opportunity to say anything about the new prime minister and her deeply damaging new ideas for six months.

Every Lib Dem who met Liz Truss when she was, temporarily, a member of our party, seems to have quickly formed the view that she was a young lady with an eye for self-publicity and an extremely radical view on things – but it wasn’t a Liberal Democratic view, as she quickly found out as they began to question the reasoning behind her vision.

Everyone who works in Business knows that real growth and progress comes slowly, and need careful planning and sustained amounts of effort over years and sometimes decades.  The desire for a quick fix, a dash for growth based on throwing vast amounts of borrowed money at its supporters, underpinned by a total lack of understanding of simple economic realities is no substitute for hard work and effort.  Sacking a Permanent Secretary on Day One and calling the most outrageous gamble with our nation’s economy “A Fiscal Event” in order to avoid OBR scrutiny shows linguistic cunning that Vladimir Putin would be proud of.

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Lord William Wallace

Public spending and the social contract 

By Lord William Wallace | Wed 5th October 2022 - 12:43 pm

Raising the rate of domestic economic growth, against the background of a global economic recession which may well be worsened by the current downturn within China, cannot have been the main rationale for the Truss and Kwarteng’s ‘fiscal event’.  The underlying purpose was to force public spending cuts, to shrink the size of the state and to make it more difficult for a successor government to raise taxes sufficiently to restore the social democracy that adequate public spending underpins.  Simon Clarke, now ‘levelling up’ minister, has specifically remarked on what he sees as the over-extension of the UK’s welfare state.

If current ministers were serious about introducing supply-side reforms they would recognise that public investment is needed to repair current inadequacies.  Low productivity is partly the result of inadequate education and training, most evident in basic skills for our domestic workforce.  Years of under-funding for pre-school support (yes, we should have fought harder against the coalition’s killing of the ‘Sure Start’ programme), for state schools and further education colleges, are to blame.  But as the Conservative chair of the Commons Education Committee has just protested, the new government has only talked about grammar schools and entry to Oxbridge so far, leaving education and training for the vast majority of British citizens to one side.

The UK has a lower proportion of its population in work or looking for work than many other advanced countries.  That’s not just due to the rising number of retired; it’s also because we have such a high proportion of people under 66 who are unfit for work or long-term unwell.  Underfunding of the NHS, and in particular of public health programmes that focus on healthy lifestyle, explains a good deal of this.  Lengthy waiting times for treatment translate into absence from the workforce.

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Matthew Green

Productivity isn’t everything: understanding the growth debate

By Matthew Green | Fri 30th September 2022 - 7:31 pm

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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Mark Valladares

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

By Mark Valladares | Mon 26th September 2022 - 7:45 am

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

By Andy Boddington | Sun 25th September 2022 - 9:30 am

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

By Andy Boddington | Thu 22nd September 2022 - 7:30 pm

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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Lord William Wallace

Which public services will the Conservatives shrink further?

By Lord William Wallace | Thu 22nd September 2022 - 10:34 am

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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Mark Valladares

21 September 2022 – today’s press releases

By Mark Valladares | Wed 21st September 2022 - 10:30 pm
  • 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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Caron Lindsay

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

By Caron Lindsay | Tue 6th September 2022 - 9:15 am

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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Caron Lindsay

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

By Caron Lindsay | Fri 5th August 2022 - 9:41 am

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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John Medway

Is GDP almost everything?

By John Medway | Sat 25th June 2022 - 12:24 pm

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

By Andy Boddington | Fri 3rd June 2022 - 10:57 am

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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The Voice

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

By The Voice | Thu 26th May 2022 - 6:49 pm

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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Michael Berwick-Gooding

Can the UK recession be avoided?

By Michael Berwick-Gooding | Fri 13th May 2022 - 10:42 am

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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