Which kind of equality do the Lib Dems value most?

Considering here just everyone living in Britain, all of whom Liberal Democrats value, what kind of equality should we seek for them? And what matters most for public policy?

Equality of treatment in health and social care, I suppose we expect and the nation demands, not just our party. So far there is no disagreement. But equality of educational opportunity for all children and young people? We haven’t got that in our country, far from it. For Liberal Democrats to campaign for it when we aren’t prepared to reduce the privileges of the private schools perhaps limits our efforts, but we will surely try to help.

Do we seek equality of income for all? Hardly. Or of wealth ownership? Scarcely. But we do want nobody to live in poverty. 

Then, how about equal freedom for everyone to have satisfying lives? Yes, certainly. Equal freedom to ensure our children have good lives? Yes, surely. However, both those last two aspects of equality depend on freedom, which to me is the greatest good.

Well, equality is a Liberal Democrat value as well as freedom. We as a party wanted everyone to have the equal provision of a basic citizens’ income when we passed the UBI motion at the last Conference. However, is it not possible, if that is the only income-related equality we seek, that the nation might in achieving it become more unequal? Because there could be large swathes of the working-age population in future subsisting on the basic income, whether out of necessity or to relish the freedom it represents. Perhaps we will stop trying to help everyone who wants a job to find one. Perhaps we will stop bothering about them not having a home of their own, rented or privately owned? Well, no, you will say, of course we want everyone to have a secure and affordable home – equality in that. So housing benefit must continue.

What if our citizens in receipt of basic income want never again to need to visit a food bank for essential supplies? Will we have to ensure that their basic income is enough to give them some choice of foodstuffs? Do we care if they can’t afford to have a meal out once in a while, or special food for religious ceremonies and anniversaries?

And what if the people can’t ever afford to travel to a holiday? In olden times there would be a charabanc trip on a Bank Holiday. Nowadays citizens at least expect to get a break of a few days at a holiday park. For the matter of that we all expect a lot more than our grandparents ever got. To have all kinds of digital aids, and a choice of clothes and footwear, not to mention of course central heating and hot water on tap and much else that is now taken for granted. Will a citizen’s basic income take care of all that?

Apparently there is in Britain “a general belief that our own efforts are key to getting ahead”, to quote from an arresting new study called Unequal Britain (ifs.org.uk/inequality/unequal-britain) So perhaps the Tories have been right all along, with their attitude that people of working age have to find paying jobs in order to free themselves from poverty, which a basic income won’t automatically give them, depending on the level at which it is set. 

What kind of equality do we Liberal Democrats want most, then? Some of us may care most of all about racial or gender inequalities, or the wealth and opportunities divide between the rich South-east and the poorer areas of the Midlands and North. But for me I think it has to be equality of respect for people’s individual choices, and the equal right of everyone to have the freedom to choose, which in our unequal society many lack because so many live in poverty. And I also want young people in our country today all to have similar educational and job opportunities, and housing choices, as my baby-boomer generation was so fortunate to have.

* Katharine Pindar is a long-standing member of the Lib Dems and an activist in the West Cumbrian constituency of Copeland and Workington.

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141 Comments

  • Little Jackie Paper 6th Mar '21 - 12:43pm

    I suspect that quite soon some people will be more equal than others.

  • Helen Dudden 6th Mar '21 - 1:28pm

    Just days ago, I tested my new Power Wheelchair, this is different, it can electronically make me eye level. Strangely, I felt the same as I used to, I was at the height I used to be. My mobility officer smiled as he saw my reaction, I felt equal.
    Being equal makes you feel more confident and happier.
    Now just the same needs to happen with housing. Stand tall, even it’s with help from the help of other’s.
    I believe in fairer salaries and wages. That’s across all area’s.
    Boris Johnson is being given boxes of expensive food, yet look at what children were being given. School lunches, and I had free milk like other baby boomers, I also remember the orange juice. A good diet is important to growing children.
    There should be a total review of Social Housing, bringing any left behind up to the Decent Homes guidelines.

  • Joseph Bourke 6th Mar '21 - 1:31pm

    Good article, Katherine. You raise the issue of Universal basic income. The economist has a feature on UBI this week https://www.economist.com/finance-and-economics/2021/03/02/might-the-pandemic-pave-the-way-for-a-universal-basic-income
    A narrative or overall framework like Beveridge 2 is a useful starting point, but the party has to put the flesh on the bones of the policies that will be introduced. We may never be in a position to implement them, but the ideas can be taken up by governing parties and influence the public discourse.
    The building block is a Guaranteed Minimum income based on the current level of the Universal credit basic income for over 25’s of £95 per week. It is paid as a tax reducer or direct benefit. So not quite universal (well-off individuals not paying taxes will not receive it). The benefit can reduce taxes to Nil (but is not a refundable negative tax) and is a non-means tested benefit that can be paid immediately to claimants without any waiting times or temporary loans required. It is paid for by replacing the personal tax allowance and NI threshold with a tax reducer. Smaller employers benefit from a £4,000 employment allowance that more than offsets additional employer national contributions on up to 3 full time workers at average wages.
    The 2nd tier is skiils training and job guarantees to address structural unemployment coupled with regional investment in renewable energy projects countrywide.
    The 3rd tier is fundamental tax reform as outlined in the Mirrrlees review to address necessary investment in child care, education and skills, health and social care if we are to future proof the welfare state.
    The 4th tier is housing where reform of the Land Compensation Act 1961 is urgently needed to provide for a public sector land bank that acquires housing land at existing use prices and captures planning uplifts for the public benefit.
    The last (but not least) area is on savings and pensions. ISA’s were introduced to encourage saving for retirement along with auto-enrollment pensions. Both have been undermined by artificially low interest rates. National Savings and Investments should make available an index-linked cash ISA that provides an element of inflation proofing for retirement savings.

  • No mainstream political party believes in equality thought some claim that they do. At most they are willing to concede that everyone should get a vote of equal value but beyond that they tend to believe in so-called ‘equality of opportunity’ which, we all know, does not really exist within an unequal society. Even ‘equality before the law’ does not exist in practice as your chances of winning in court, whether in a civil or criminal matter, is directly linked to your ability to pay for the best legal representation.

  • Katharine Pindar 6th Mar '21 - 10:00pm

    @ Helen Dudden. Helen, you are so right, I believe, to write that ‘Feeling equal makes you feel more confident and happier.’ I was glad to read that your new power wheelchair worked for you like that. It must be the opposite of the feeling which people have when they first have to use food banks – yes, unequal, embarrassed, and with an undeserved sense of loss of status.

    I was also struck by your other comments, especially that about some social housing needing to be brought up to Decent Homes guidelines – thinking of how miserable it must be to be obliged to ‘Stay at home’ according to commands in an inadequate dwelling. Thank you for writing.

  • Katharine Pindar 6th Mar '21 - 10:46pm

    @ Joseph Bourke. That is a very interesting comment, thank you, Joseph. It seems to me that you make a very fair attempt at setting out the Beveridge-2 principles, when as you say (using the very phrase that Michael BG and I used to head our first article on the theme) the party needs to “put flesh on the bones of” the policies needed. We are asking that our Leader now takes up the theme, which is increasingly used by other politicians and people of stature in response to the Covid-19 crisis, and claim it as our own. We suggest that Ed should speak out about this at our forthcoming Conference, and expedite the setting up of a major Working Group to formulate the Plan. It will be the Beveridge-2 Plan in essence, though Sir Ed may like to name it as a National Revival or Revivification Plan for more ready public understanding.

    In your description it is good to read your additions of the necessary tax reforms there will need to be, plus the reform of the Land Compensation Act and work on savings and pensions. However, I am not sure the ‘tier’ system you are setting out here is quite as compelling as working with the five social ills which equate to Beveridge’s ‘five giant evils’, that is, poverty, health and social care, education and training, housing, and unemployment and underemployment.

    On poverty, we agree on the needed citizens’ minimum income, though to relieve immediate and growing poverty, likely to be sadly accelerated by Brexit, there will surely need to be more government grants as well as enhanced welfare payments this year, with UC increase beyond September. On health and social welfare, I think we should take into account the work of Sir Angus Deaton on social care and Sir Andrew Marmot on health equity. Then you make excellent points on skills training, job guarantees and regional investment, and with your thoughts on housing also, show how much planning there will indeed need to be done. I suggest the proposed Working Group should have six sub-units, each concentrating on one of the five proposed areas with their relevant financial implications, and the sixth on climate-change measures specifically. It will indeed be a grand Plan, necessary for an immense subject, and we hope very much that our party will show the way forward now to having it.

  • Steve Trevethan 7th Mar '21 - 10:11am

    Might your excellent efforts and enterprise be aided by the substitution of the word “Equity” for the word “Equality”?
    read://https_www.mentalfloss.com/?url=https%3A%2F%2Fwww.mentalfloss.com%2Farticle%2F625404%2Fequity-vs-equality-what-is-the-difference

  • Colin Brown 7th Mar '21 - 10:51am

    I wonder if we’d be better served by using the concept of fairness rather than equality? We cannot be equal. We can aspire to being fair.

  • Katharine Pindar 7th Mar '21 - 11:52am

    We do back fairness, of course, Colin, but one group’s idea of it is contrary to another – just look at the proposed 1% rise in nurses’ pay. Others say, shouldn’t the more than one million people of working age who have lost their self-employment but haven’t been entitled to the Chancellor’s support receive the next pay-outs? Or, what about the millions on furlough who have lost 20% of their normal take-home pay these many months?

    I suggest there are no clear answers on fairness, but inequality is easier to be seen. As a friend of mine, one of the millions claiming universal credit for the first time, put it,
    ‘It’s fine for a few months, but what about when you’re suddenly faced with a big repair bill for something in your house or the children need new shoes and trainers?’ Or look at the take-home pay even of people in regular jobs, like shop workers, compared with the kind of income of the executives on the boards of the supermarkets.

    And as Little Jackie Paper commented, ‘quite soon’ (I suppose come autumn for a start)
    ‘some people will be more equal than others’. It’s unfair, but inequality is rapidly growing. Thanks to everyone for your comments – Steve, it’s a nice idea to think of equity rather than inequality, but it wouldn’t command such recognition, emotional response and assent from people generally as we can hope for from ‘inequality’.

  • William Wallace 7th Mar '21 - 2:12pm

    Too wide a gap between rich and poor presents a threat to community and to democracy. Part of the argument for higher taxation on highly paid is that wealth buys privilege, and excessive privilege destroys any sense of common citizenship and shared society. There’s plenty of room for political debate on how much ‘excessive’ means, and what are the basic rights of citizenship which the state must provide for all; but we need to re-establish the idea that degrees of inequality matter to democratic society, which the small state right have tried to exclude from political debate.

  • Steve Trevethan 7th Mar '21 - 4:37pm

    Which economic theory does our party use as its guide?
    If it is Neoliberalism then there is a serious matter to be addressed.
    Neoliberalism has the effect, and possibly the covert purpose, of increasing inequality as well as chronic conflict and damage to our World, all of which harm the weak most.
    https://www.globalresearch.ca/neoliberal-globalization-is-there-an-alternative-to-plundering-the-earth/24403

  • Katharine Pindar 7th Mar '21 - 6:48pm

    William, thank you for your comment. You are right, we can’t be indifferent to the gap between rich and poor which has widened so much in the last fifty years, threatening our shared sense of community as citizens. Power and privilege go hand in hand with wealth, and we have to be ever-watchful of the contracts and the grants distribution that go to business friends of the powerful and the towns that do not appear to be badly off but are within constituencies of Tory MPs. I believe our party has to keep on the front foot to confront the bastions of privilege, and with so many ordinary citizens finding themselves newly workless and badly off, propositions of taxing wealth and reform of land value taxation should gain a hearing. The five per cent rise in council tax next month should be a wake-up call for us groundlings at the foot of the Tory towers.

    Steve, as far as I know our party’s general economic disposition is Keynesian, and we reject neo-liberalism as indeed devoted to the protection and freedom of markets and the primacy of profit-making. Thank you for enquiring, but I am no expert.

  • Helen Dudden 8th Mar '21 - 8:32am

    As I read about Boris Johnson looking to fund decoration for his official residence. It seemed very cruel to those who need Food Bank’s.
    The divide between haves and have not grows.
    This is not democracy.

  • Peter Martin 8th Mar '21 - 8:33am

    @ Katharine @ Steve @ Joe

    I’ve made the point before that some brands of supposed Keynesianism are inherently neoliberal. The dominant mainstream narrative up until very recently is that interest rates, monetary policy, has dominance over fiscal policy. This “New Keynesianism” might be better described as Not Keynesianism.

    Then we have Neo Keynesianism plus other variants which confuse the issue.

    So, it’s not that informative to describe any policies as “Keynesian” without specifying which kind.

  • Nonconformitsradical 8th Mar '21 - 10:12am

    “surely, Liberal argument goes further: bought privilege necessitates denial of opportunities to those who do not have such wealth, and likely, very reduced opportuinties for the poor. This implies preventing potential talent to flourish with a consequent loss to the whole of society.”
    Agree

    “Privilege provided Johnson’s route to be PM. If someone less privileged but more able had had the opportuinty, society would have benefitted.”
    Seconded wholeheartedly

  • @ Martin “Indeed, but surely, Liberal argument goes further: bought privilege necessitates denial of opportunities to those who do not have such wealth, and likely, very reduced opportunities for the poor. This implies preventing potential talent to flourish with a consequent loss to the whole of society”.

    Are you suggesting the sale and purchase of peerages and knighthoods as practised by ……………. as basically illiberal, Martin ?

  • Katharine Pindar 8th Mar '21 - 10:19am

    @ Helen Dudden. My particular focus on inequality is much like yours, I think, Helen – thinking about our fellow citizens who are obliged to use food banks. That food banks not only exist, but that the need for them grows, is in my view a scandal and a shame to our society. I would like our party to commit to ending that need and their growth, and pledge to see them eliminated as necessary to poor people within a very few years. No chance of that this year – the expected rise in council tax by 5% next month will make some of the poorest people even poorer, and yet the need for better council services for the community makes the rise I suppose necessary.

  • Katharine Pindar 8th Mar '21 - 10:33am

    @ Peter Martin. I will have to leave the definition of our Keynesianism to the likes of Michael, who isn’t available today, or to other experts like Joseph. But I do know that neo-liberalism has to be denied if our party and yours are going to work together, as we must, to oust the Conservative government in 2024. Clive Lewis, the Labour MP, made it clear in his Beveridge lecture to the Social Liberal Forum last autumn that this was a sticking-point, that Labour are suspicious of neo-liberalism remaining dominant in our party, as we believe it now is not. Whatever the lines each party takes on combatting inequality, it seems that denying free-market dominance as a philosophy is a sine-qua-non.

  • Antony Watts 8th Mar '21 - 11:08am

    Simple, we need a copy of the EU Social Pillar initiative, Look it up

  • Joseph Bourke 8th Mar '21 - 12:12pm

    Katherine/Peter,
    Lloyd George, Keynes and Beveridge were all liberals who shaped Liberal economic policy in the 20th Century. It is often said that Keynes virtually invented macro-economics and Keynesian theory remains as the foundation of mainstream macroeconomics.
    Most academic economists, as well as the IMF and OECD, agree that you use fiscal stimulus (i.e. tax cuts or spending increases) to get out of recessions, leaving monetary policy to control inflation outwith recessions. That means this budget should be all about ensuring a balanced recovery with fiscal consolidation delayed until a robust recovery. This approach is Keynesian economic theory and Liberal Democrat policy.
    Fiscal rules provide a longer-term framework for maintaining economic stability. The proposals set out by the resolution foundation have been referenced as a guide by Ed Davey.
    The resolution foundations recommendations on fiscal policy are in fact the very essence of a Liberal approach to long-term economic growth and sustainability of public finances https://www.resolutionfoundation.org/publications/totally-net-worth-it/
    Key recommendations:
    – A Net Worth Objective: to deliver an improvement in public sector net worth as a share of GDP over five years. This would incentivise prudent investment decisions to address the long-term challenges facing the UK.
    – A Structural Current Balance Target: to achieve a cyclically-adjusted public sector current balance over five years. This require the government to keep receipts and day-to-day spending in broad balance but would also allow it the to borrow to invest; and
    – A Debt Interest Ceiling: to ensure the proportion of revenue spent on debt interest does not exceed 10 per cent. This would ensure that the overall debt burden remains sustainable at all times by taking account of not only the level of debt but also what it costs to service [At current interest rates the debt burden is around 2% of GDP]
    – An ‘escape clause’: to recognise the need for more active fiscal policy given the constraints on monetary policy, the net worth and structural current balance targets would be suspended if the economic outlook deteriorates significantly. [The pandemic has suspended these targets]
    These rules would be reinstated as the economy recovers ensuring a credible fiscal framework even if downside risks crystallise.

  • Steve Trevethan 8th Mar '21 - 12:28pm

    Might it help if H.Q. could be persuaded to make clear and loud which economic/socio-economic theory/model/school of thought etc our party is using/following?

  • Joseph Bourke 8th Mar '21 - 12:29pm

    Katherine,

    I have much respect for Clive Lewis. When he says that Labour are suspicious of neo-liberalism remaining dominant in our party, he seems to omit to mention that the more Bennite part of the labour party are just as suspicious of the Blairite camp. The Liberal Democtats (being a merger of the Liberal party and social democrats) has encompassed a tension between social and economic liberalism since its inception. There has, however, always been a tension within the labour party as well – between revolutionary socialism and the mixed economy.
    This 1984 article from International Socialism is a socialist critique of the Attlee and post-war labour administrations. It does not appear to consider the Labour goverments of Attlee, Wilson and Callaghan socialist at all and concludes:
    “Attlee’s Cabinet did what all Labour governments have done – it managed capitalism while using the rhetoric in a way that made reforms both possible and even desirable. But once the post-war boom petered out, the bottom fell out of this strategy. Under the Wilson and Callaghan governments, the carrot gave way to the stick: theirs was reformism without reforms.”
    “In other words, the difference between the Labour Party in Attlee’s day and in the 1980s is not one of policies but of circumstances. Capitalism’s greatest boom had given way to its present, protracted slump, but Labour’s commitment to managing the capitalist system is as strong as ever. So is its commitment to parliament, and its hostility to working class struggle as a means of change. The strikebreaking record of the 1945 Labour government shows what Labour’s politics meant when capitalism was relatively healthy. With recession making working class struggle more crucial than ever, we can imagine what it will mean in the future.”

  • Joseph Bourke 8th Mar '21 - 1:20pm

    Steve Trevethan,

    this is the Investopedia article om Macroeconomics https://www.investopedia.com/terms/m/macroeconomics.asp It is both objective and well-written. As the article notes:
    – Macroeconomics is the branch of economics that deals with the structure, performance, behavior, and decision-making of the whole, or aggregate, economy.
    – The two main areas of macroeconomic research are long-term economic growth and shorter-term business cycles.
    – Macroeconomics in its modern form is often defined as starting with John Maynard Keynes and his theories about market behavior and governmental policies in the 1930s; several schools of thought have developed since.
    – In contrast to macroeconomics, microeconomics is more focused on the influences on and choices made by individual actors in the economy (people, companies, industries, etc.
    There is no macroeconomist in the post-war period who does not base much of their analysis on the work of Keynes, regardless of whether it is affirming, questioning or refuting aspects of the general theory.
    As the article notes “Properly applied, economic theories can offer illuminating insights on how economies function and the long-term consequences of particular policies and decisions. It is also important to understand the limitations of economic theory. Theories are often created in a vacuum and lack certain real-world details like taxation, regulation and transaction costs. The real world is also decidedly complicated and their matters of social preference and conscience that do not lend themselves to mathematical analysis.”
    “…it can be invaluable to understand which theories are in favor and influencing a particular government administration. The underlying economic principles of a government will say much about how that government will approach taxation, regulation, government spending, and similar policies.”
    There you have it. The science of macroeconomics offers insights to improving standards of living but the policy choices are ultimately political. As long as we understand that there are a mix of competing policy options at any given time the prospects of a better outcome are much improved. Economic theory guides but does not obviate the need for developing detailed policies that can both achieve electoral support and be delivered in practice.

  • Peter Martin 8th Mar '21 - 2:18pm

    @ Katharine,

    I wasn’t making a party point. I try to avoid doing that! The Labour Party aren’t much better with a lot of silly fiscal rules which cause a lot more trouble than they are worth.

    I know it’s a difficult topic for some but you’ll always have to answer the question of where the money is going to come from. Ask Rishi Sunak where his money has come from!

    Before the Pandemic it was considered to be bad economics to bail out the NHS and social services with a few billion pounds of QE created money. The people saying this didn’t really believe that it is going to create the Weimar Republic mark2. They just didn’t want it done at all. On principle. But afterwards it is perfectly fine to bail out the entire economy with a few hundred billions of QE money. Inflation is still stuck at less than 1%.

    Joe might point to asset price inflation. He’s got a point. But why not just put a windfall tax on anyone who has made large capital gains?

    http://bilbo.economicoutlook.net/blog/?p=38776

    @ Joe,

    “There has, however, always been a tension within the labour party as well – between revolutionary socialism and the mixed economy. This 1984 article from International Socialism is …..”

    Can I suggest “totally irrelevant” ?

    You are either being very disingenuous here, or you are clearly unaware of the history of the Trotskyist group which was once known as the International Socialists and later became the Socialist Workers Party. They may well have had, and possibly still do, a magazine with the title “International Socialism” but they’ve never been connected with the Labour Party. They were just a critical of people like Tony Benn as they were of Tony Blair.

    You’ve completely got hold of the wrong end of the stick if you think that IS/SWP have ever been representative of the Labour left.

  • Peter Martin,

    the article from 1984 highlights the point that those on the far left (the SWP) do not consider the Labour party the torchbearers of true socialism or even left leaning for that matter. There was a concerted effort by so called Trotskyist groups at the time to take control of the labour party that went by the name “entryism”or Militant Tendency. I think Militant is now known as the Socialist party. I realise the effort failed, but its legacy remained a concern for at least some within the labour movement, as we saw with the rows over the development of the momentum group in recent years.

  • Katharine Pindar 8th Mar '21 - 3:06pm

    Joseph, ‘Attlee’s government did what all Labour governments have done’. the quote from 1984 (which seems a telling date!) which you give does not seem accurate, since Attlee’s government in fact followed the recommendations of the Liberal William Beveridge in his great Reform plan. Now it should surely be our hope that there will be such a significant Beveridge-2 Plan drawn up by the Liberal Democrats that a Labour government post 2024 will be glad to follow its recommendations! But to return to the present, thank you very much for taking the trouble now for these long and helpful explanations, to which I can only partly respond to just now. (But please note the correct spelling of my name, with an ‘a’ in the middle not an ‘e’ – the smallest of objections!)

    I believe Clive Lewis was quite aware of the divisions between the Bennite and the Blairite factions of his party, but his lecture was focussing on the similarities and differences between our party and his. I think it is indeed important, as necessary steps to working together, for our parties to consider what is mutually acceptable in tackling inequalities. Neo-liberalism would deny any such imperative at all, I suppose, and we must now firmly in our party deny it, both because it is wrong and because it would hamper any agreement in principle.

    It was very useful, thank you, to read the Resolution Foundation’s recommendations in brief, and to learn that they are acceptable to our party. You write, indeed, that “a balanced recovery with fiscal consolidation delayed… is Keynesian economic theory and Liberal Democrat policy.” This seems a very happy harmony. But can it be the case that both the current government’s actions and the Labour Opposition’s acceptance of them are at present in accord with Liberal Democrat policy? An even happier harmony, but difficult to believe!

  • Peter Martin 8th Mar '21 - 3:23pm

    @ JoeB

    “Peter Martin, the article from 1984 highlights the point that those on the far left (the SWP) do not consider the Labour party the torchbearers of true socialism”

    So what? Neither do, or did, lots of other far left groups such as the now defunct Workers Revolutionary Party.

    The point is that if you want to describe the disputes that go on inside the Labour Party you use references from within the Labour Party or at least make it clear that they are from external sources rather than trying to give a different impression.

  • Katharine,

    I don’t place any credence on the arguments of the International Socialism article. The Attlee administration was indeed a reforming government that set out to address the inequalties of pre-WW2 Britain.
    As you note the welfare state proposals had been worked up by Beveridge during the war assisted by Harold Wilson. His report was released in 1942.
    The 1944 Education Act, which had introduced the concept of selection at 11 and compulsory free secondary education for all, was based on the work of a Tory, Richard Austin ‘Rab’ Butler.
    Beveridge put together a coherent plan for postwar social reconstruction. What he came up with extended hugely the framework of national insurance first put in place before the first world war by David Lloyd George. Child Benefit was enacted in June 1945 under the Families Allowance Act.
    The Conservative minister, Henry Willnik first presented plans for the National Health Service in 1944. This is a Pathe News clip of his broadcast https://www.britishpathe.com/video/a-healthier-britain/query/Willink
    The birth of the National Health Service in July 1948 remains Labour’s greatest achievement. Attlee nationalised the existing health infrastructure by taking existing local authority and charity hospitals into public ownership. The government was forced to retreat from its first grand vision of free, comprehensive health care for all. In the beginning, everything was provided: hospital accommodation, GP cover, medicine, dental care, and even spectacles. But with Britain showing few signs of economic take off, the budgetary burden was enormous. In 1951, chancellor of the exchequer Hugh Gaitskell was obliged to reintroduce charges for NHS false teeth and glasses and we have been debating how to fund the system properly ever since.

  • Peter Martin 8th Mar '21 - 6:15pm

    @ Joe Bourke,

    There are lots of Trotskyist groupings. Pick any combination of words from Socialist, League, Tendency, Marxist, Revolutionary, Communist, Workers, International ,…. and hey presto you have your own party. If there are more than one of you in it, you can find a point of disagreement and have a split. The Life of Brian sketch didn’t come from nowehere!

    I think the Militant Tendency were once known as the Revolutionary Socialist League. Not to be confused with the Labour Party. But you’ve somehow managed to do that!

  • Interesting to read Joe’s mention of Henry Willink, Tory MP for Croydon – a posh Scouser who went to Eton.

    When Labour won the 1945 election, they presented their own plan in preference to Willink’s, which they had supported. The principal difference was that Willink’s plan talked of a “publicly organised” rather than a “publicly provided” service. The Minister of Health, the great Nye Bevan, had a plan that brought hospitals into full national ownership.

    Bevan, however, did make concessions to General practitioners, and he got hospital doctors onside, by, in his famous quote, “I stuffed their mouths with gold”.

  • Again, en passant, after reading Joe’s comment on Lloyd George and the introduction of National Insurance which is now generally well regarded, but back in the Liberal Government days of circa 1912, the ‘Lloyd George Stamp’ was generally unpopular.

    A reason why the Liberal Party lost the 1912 Midlothian By-election (Gladstone’s old stamping ground) was hostility to LLG’s National Insurance. It also didn’t help that LLG (and the retiring MP and former Chief Whip, the Master of Elibank) had both been up to their eyeballs in the Marconi scandal…… plus Catherine Marshall (known of to Katharine Pindar) organised a Labour campaign on the suffrage issue which drained the Liberal vote.

  • Joseph Bourke 8th Mar '21 - 8:18pm

    Peter Martin,

    Militant tendency was the name of a faction within the labour party. See BBC article for brief history https://www.bbc.co.uk/news/magazine-32913465
    This is the from the editorial of the first issue of Militant the magazine of the group. It begins “The MILITANT is being published at the present time because of the need to provide a conscious socialist lead for the labour movement, particularly the Young Socialists”
    The faction did indeed gain control of the party’s youth section, the Labour Party Young Socialists.
    When John Landsmann founded momentum in 2015 there were several Labour Mps that raised concerns that the movement could be used by the far left to infiltrate labour just as the earlier militant movement had from the 1960s to the 1980s.
    The old Liberal party was no stranger to factions and splits, so Labour is in good company.
    Personally, I welcome a diversity of views and opinion while recognising that come the revolution, as a small business owner I might be among the first Kulaks to face the firing squads.

  • Steve Trevethan 8th Mar '21 - 8:40pm

    Many thanks to Joe B. For the time and effort he has put into his comment addressed to me.
    Alas, I do not trust the currently dominant economic theory which I understand to be Neoliberalism. Nor do I trust the objectivity, impartiality and humanitarianism of its present and past proponents.

    This economic theory and its actual practices have resulted in, or not prevented, widespread hunger in the nations which were, and are, it’s leading proponents which are the U.S.A. and the U.K. Worldwide we see 60 million more people undernourished than in 2014 and 77.5 million refugees. Many refugees are in this wretched situation because of the continuous armed conflict encouraged by neoliberalism.

    Many to most of these economists use « rational expectations theory » which states that  all agents use « rational expectations » always. This is demonstrably not so for if it were the advertising industry would not exist. Keynes pointed out that human beings are not deeply or consistently ration in his statement to the effect that economic problems are significantly the result of « animal spirits ».

    Perhaps what we need is more imperts – people who, after reviewing commonly held theories, beliefs and practices, invent new approaches.

    As Yogi Berra may have said,
    « In theory, theory and practice are the same. In practice they are not. »

  • Katharine Pindar 8th Mar '21 - 9:21pm

    Gentlemen, after these enjoyable excursions into the creditable history of the coalition government of the Second World War and the succeeding Attlee government – plus much diversion into explaining Socialist factions – I still want to concentrate on two important matters. One, that Liberal Sir William Beveridge, though evidently surrounded by eminent colleagues, was the man who demanded that the ‘Five giant evils’ of want, disease, squalor, ignorance and idleness be dealt with after the war, as they were, and who therefore got so much to the point of what social ills desperately needed attention that his message is still relevant today, because the equivalent social ills still call out for radical political action to deal with them.

    The Beveridge-2 Plan idea has actually been accepted by a poster on a previous piece of mine published here, who wrote that he had become a Liberal in 1945 as a teenager after hearing about the reforms proposed by Beveridge himself!

    Two (after pausing to gasp again at that comment which made the Beveridge reforms seem contemporary!) I really want to know more about the similarities and differences in the thinking of both our parties today on inequality, so that we can concentrate fruitfully on the similarities in preparing the Beveridge-2 / National Renewal Plan. Joe’s exposition of Keynesian thinking is helpful, but I am still disconcerted by the seeming agreement of all three parties at this time on the correct economic way forward.

  • Joseph Bourke 8th Mar '21 - 10:28pm

    Katharine,

    Ed Davey floated the idea of funding a universal basic income with coronavirus debt-for-shares plan last summer https://www.politicshome.com/news/article/excl-ed-davey-calls-on-ministers-to-fund-universal-basic-income-by-allowing-struggling-firms-to-swap-debt-for-shares
    Christine Jardine set out four priorities for the recent budget https://www.markpack.org.uk/167104/the-four-liberal-democrat-budget-priorities/
    – a small business recovery fund
    – an increase of £1,000 a year – in line with the recent Universal Credit uplift – for carers
    – a ten year resettlement programme to resettle refugees from Syria and other dangerous conflict areas.
    – a £150 billion green recovery package to restructure the UK’s economy.

    Daisy Cooper’s post budget remarks focused on children and education:
    “It’s simply astonishing that the Budget has nothing to tackle child poverty, nothing for children or young people or their early years education or schools.

    “Tens of thousands of childcare providers are at risk of closure, whilst school finances are at breaking point.

    “The Chancellor’s Statement needed to give children and young people the opportunities to regain the learning time they have lost over the last year.

    “He has failed to extend free school meals permanently to ensure no child living in poverty goes hungry, he’s failed to give nurseries and early years providers any certainty and he’s failed to deliver much-needed extra funding for schools to help meet the additional costs of being open safely during the pandemic.”

  • Peter Martin 9th Mar '21 - 1:18am

    @ Joe,

    The BBC article doesn’t get it right on Trotskyist entryism. Many people have joined the Party to promote Socialist policies which includes widespread nationalisation and a large programme of public works. They may well have wanted to also remove the monarchy and move to a Republic. There’s nothing particularly wrong with that. IMO. If that’s what they want they can argue for it.

    But there’s a problem for those who like the SWP who are openly contemptuous of the democratic process. The Labour Party is better off without them IMO. Most militant members that I used to know weren’t of that ilk and should have been kept in the party. The claim that they breached party rules was just a cover story. They weren’t guilty of anything that other groups on the right haven’t been guilty of too.

    The bottom line was that Neil Kinnock decided that there were more votes in getting rid of them than keeping them on. That didn’t work out particularly well though, did it?

    The Lib Dems do have some odd ideas which don’t make any economic sense. Many of these are definitely of the neoliberal category. I’m not sure how to describe this one:

    “Ed Davey floated the idea of funding a universal basic income with coronavirus debt-for-shares plan..”

    Leaving aside the question of whether a UBI is a good idea, any extra “funding” required, by way of extra taxation, is simply to offset the inflationary impact of extra government spending. He’s supposedly outlined plans for a new ‘Sovereign Wealth Fund’ to finance the scheme.This is crazy. A SWF is simply a device to export surplus capital to manipulate the currency downwards. That’s why Australia introduced theirs. They wanted to keep the Australian dollar from going through the roof when the Chinese were buying up anything the Aussies could dig out of the ground.

    We’re not in that position. But if disagrees and wants a lower pound he should say so.

    Even in a neoliberal context, this oddball idea still doesn’t work. If the Govt buys up shares in various companies, which may or may not be a good idea, how does this raise any extra spending money? I’ve heard this kind of argument from those idealistic types on the left who see Nationalisation as a way for the govt to make money. I’m sure Ed Davey would have, at one time, been able to explain to them why this doesn’t quite work in the way they might envisage.

  • Peter Martin 9th Mar '21 - 1:53am

    @ Katharine,

    I’m sorry your thread was diverted on to internal issues of the Labour Party. For some strange reason Joe chose to dig up an obscure 80’s SWP article and try to pass it off as Labour Party opinion. I think he was trying to say that Lib Dems should stay away from that lot!

    However, if you’re interested in the idea of increased equality, it surely makes sense to involve the Labour Party too. You aren’t going to get much support in that from the Tories.

  • Katharine Pindar 9th Mar '21 - 10:45am

    Joe, thank you for pointing out Ed Davey’s idea of last summer on helping to pay for UBI. I had thought that the party’s ideas for a Sovereign Wealth Fund revolved round some levy from business which would enable payments to be made to everyone of working age at a certain point of their working lives, to enable them to pause, retrain and change their careers if they wish. A lump sum which might be a universal payout at a certain age, perhaps 35 years. It seemed to tie in with the idea that all young people should be given a lump sum at 21 and another in middle age. I don’t know what happened to those ideas.

    However, your latest post did make me feel, rather despairingly, that our party is too much inclined to go off in several different directions at once, continuing to present too vague an image to a bemused or indifferent public, unconvinced of our usefulness. I much preferred your post on March 6 at 1.31 pm, when you set out a programme for a grand National Renewal Plan, effectively – though you didn’t call it that – which would begin with a not-quite-universal UBI. I and Michael BG and other supporters are calling on Ed Davey to proclaim at Conference that such an over-arching Plan based on the Beveridge-2 principles is needed, and asking him to request FPC to set up the major new working group required to set to work immediately to draw together Lib Dem policies to form the Plan. You should be on it as well as ourselves, so that your ideas could then be utilised.

  • Katharine Pindar 9th Mar '21 - 10:54am

    Peter Martin. Your diversionary Socialist tactics will not divert me, Peter! You must know from my comments above that I am already trying to work out what is the common ground between your party and mine on measures aimed at reducing inequalities. It must be part of the endeavour for the two parties to work together as far as possible in the next few years, to stop the Tory hegemony.

  • @ Peter Martin “They may well have wanted to also remove the monarchy and move to a Republic”. The way things are going, the Royal Family won’t need much help with that. They’re doing it themselves.

    When I was a little lad I used to believe in Father Christmas, I didn’t want Guy Fawkes on the Bonfire because it would hurt him, and I thought Huddersfield Town were “the greatest team in football the world has ever seen”.

    Nowadays I class the notion of a nonsensical hereditary monarchy in much the same category – but, it would be an awful lot of trouble to get rid of it. I won’t bother them if they don’t bother me….. and while HTAFC still cause frequent stress, to be fair to Charlie, he’s done a good job saving Dumfries House.

    I also enjoy a chuckle when I read Lloyd George’s take on the hereditary system. When his 1909 Budget was blocked by the House of Lords, “Should 500 men, ordinary men, chosen accidentally from among the ranks of the unemployed, override the judgement – the deliberate judgement – of millions of people who are engaged in the industry which makes the wealth of the country?”

    It seems the modern Lib Dem Party takes the (mostly selected by chums) House of Lords more seriously than I do (it’s a nice wee extra to the pension, and it’s not just for blokes).

  • Peter Martin 9th Mar '21 - 12:41pm

    @ David Raw,

    I’ve softened a little in my old age re the monarchy. The Queen does a very good job and the monarchists have been very lucky to have her do it as well as she has. I’ve really no opinion on the current hoo-ha. I was a bit more radical on the issue in my younger days. The last time I was involved in a physical punch up was in the late 70s when someone took exception to a “Stuff the Jubilee! ” badge I was wearing. Sharp words, followed by some pushing and shoving, and finally blows were exchanged 🙂 Fortunately friends intervened to quickly separate us and nothing came of it!

    Katharine,

    I hope it wasn’t being too diversionary. If you are discussing equality the word socialism is bound to crop up. Possibly the pandemic has shifted the parameters of what can be discussed but some new thinking is required. Hopefully the left will find a degree of unity before too long. This is going to be needed to present an effective challenge to the Tories aren’t a natural majority but they are very good at keeping the right-of-centre round all to themselves.

    The only worry I have is that if the Lib Dems do get close to Labour you’ll lose too many votes to the Tories.

  • Joseph Bourke 9th Mar '21 - 1:09pm

    Peter Martin,

    A sovereign wealth fund has been mooted by members of all parties in recent years. The Labour party manifesto proposed a compulsory transfer of 10% of shares to employees of companies with over 250 staff. Staff would retain a dividend of up to £500. Any income beyond that level would be redistributed to the government treasury. John McDonald has been calling for a wealth tax since the outbreak of the pandemic https://www.theguardian.com/politics/2020/apr/03/john-mcdonnell-calls-for-wealth-tax-to-pay-for-coronavirus-measures
    Even some Conservatives recognise the longer-term issues to be dealt with and call for a sovereign wealth fund https://www.conservativehome.com/platform/2019/11/johnny-leavesley-why-the-post-brexit-britain-needs-a-sovereign-wealth-fund.html
    “The simple fact is that an ageing population will need increasing pension payments, but a worsening dependency ratio will lead to a smaller pool of productive (and increasingly resentful) workers to pay for it all.”
    “A sovereign wealth fund is the answer…government debt spent on current expenditure is viewed less positively than money raised for investment. A sovereign wealth fund, however, is regarded by markets as an actual investment. The value of the assets held, the income generated, and a government guarantee all change market perceptions positively.”
    “If such a fund is not created there will inevitably be, at some point, unpleasant and politically difficult choices to be made.”
    Vince Cable in 2018 was advocating the build-up of a citizens fund through wealth taxes and the sale of assets, such as the UK stake in Royal Bank of Scotland https://www.bbc.co.uk/news/uk-politics-45539270
    The Citizen’s dividend is a policy based upon the Georgist principle that the natural world is the common property of all people and advocates that all citizens receive regular payments (dividends) from revenue raised by leasing or taxing the monopoly of valuable land and other natural resources. The Alaska Permanent Fund is a case in point.
    The New Physiocratic League https://newphysiocrats.org/platform/ advocates for a form of citizen’s dividend as part of its Three Pillars program of income support.

  • Joseph Bourke 9th Mar '21 - 2:20pm

    Katharine,

    I take your point about the need for a public focus on a single initiative. I would say that should be job guarantees for 18-24 olds. We appear to be approaching something in the region of 1million+ young people unemployed when this years school and college leavers join their ranks.
    The Alliance for Full Employment is made up of the elected Metro Mayors in England, the First Minister of Wales, the Mayor of Bristol and former Prime minister Gordon Brown https://affe.co.uk/uk-wide-alliance-for-full-employment-formed-to-help-economic-recovery/
    The alliance seeks support from political colleagues, from trades unions, from businesses, from voluntary organisations and from citizens and has set out the following priorities:

    – A fully funded Youth Jobs Guarantee, which covers recent education leavers
    – A Green New Deal which emphasises domestic manufacturing and engineering and the transition of the North Sea & other UK coastal waters to the Green Seas
    – Regional growth funds that can support local industrial strategy by investing equity in the industries of the future, ensuring that potential high-growth businesses are not prevented from investing in growth as a result of debt repayments
    – Changing the constitution of the Independent Bank of England to match the new priorities of the US Fed such that it targets low unemployment as well as low inflation

  • @ Peter Martin “I’ve softened a little in my old age re the monarchy.” Mmmmmm

    Funny how self proclaimed socialists swing to the right as they get older – which is why when I joined the Liberal Party way back in 1962 it appeared to be much more radical than the Labour Party of Hugh Gaitskell. How long before it’s ‘Sir’ Peter Martin ?

    Sadly it appears the present post Clegg Liberal Democrats appear to be stuck in the same right wing slough of despond and inertia they inherited before ‘Go West Young Man’ became the moral imperative in Sheffield Hallam. Perhaps there’ll be a sequel on Oprah….. tea and sympathy with the Cleggs ? “The electorate were beastly and nobody understood me”.

  • Joseph Bourke 9th Mar '21 - 3:56pm

    Steve Trevethan,

    I am not sure that we need more economic theories. I think we have a fair idea of what the issues are. Taming unbridled capitalism has always been a problem, but like democracy it may be the worst system ever tried except all the others that have been tried.
    The issues with advocacy of MMT are twofold. First, money has two important functions – as a medium of exchange and as a store of value. Fiat money is fine as a medium of exchange, but not as a store of value and that is the issue that lies behind the erosion of wages and pensions alike. The second is taxes. Taxes have an important role in society. It can be said in a fiat money system taxes help to maintain money as a store of value, but they rarely do over time. An equally important role of taxation is that of redistribution. The transfer of income and wealth within society is just a important a maintaining at least in part the purchasing power of money.
    The public service wage claims and increasing levels of poverty we see around us today are a consequence of the erosion of the purchasing power of money.
    Much of that relates to the excessive share of productive activity that goes toward the payment of rents and the servicing of debts on land purchases. Michael Hudson has frequently written on the topic https://www.nakedcapitalism.com/2021/02/michael-hudson-discusses-the-economic-winds-of-non-change-under-biden-on-radical-imagination.html. He concludes this recent discussion saying:
    “In Europe’s system of parliamentary politics, third parties can arise to promote a social policy of economic resilience. That isn’t possible in the United States, because of the two-party duopoly. Duopolies resolve themselves into monopolies, which is what we really have today: pro-Wall Street and anti-labor, pro-creditor and anti-debtor.”
    I remain hopeful that the Liberal Democrats will be this third party in the UK.

  • Peter Martin 9th Mar '21 - 4:28pm

    @ David Raw,

    Not really. It’s not the right time to advocate pushing the Queen aside. When the time does come I’ll be happy to again say we should have a republic.

    @ Joe,

    “The issues with advocacy of MMT……..Fiat money is fine as a medium of exchange, but not as a store of value and that is the issue that lies behind the erosion of wages and pensions alike.”

    MMT is primarily a description of how the economy functions now. It’s politically neutral. So, for example, if politicians everywhere had actually wanted the GFC crash of 2008 to occur, MMT economists could have advised them to do what they actually did, and totally ignore the build of massive amounts of private debt in their economies.

    If you prefer to hoard Gold bars or bitcoins, or whatever, then no-one is preventing you doing that. But if you are going to criticise something then at least take the trouble to understand it. A fiat currency can be a store of value:

    https://www.huffpost.com/entry/the-umkc-buckaroo-a-curre_b_970447

    “An equally important role of taxation is that of redistribution. The transfer of income and wealth within society is just a important a maintaining at least in part the purchasing power of money.”

    Who’s saying anything different? There nothing in MMT theory to prevent either a progressive of regressive system of taxation. It can even accommodate your pet project of a LVT if that is what is generally agreed to have. But it would have to be accompanied by other taxes too. It wouldn’t work as a Georgist “single tax”.

    If you look around the world you’ll be hard put to find an example of a SWF that wasn’t set up to solve the problem of currency appreciation. Have a look and see what you can find. Norway, Singapore, Australia etc have them.

    We don’t have that particular problem so we don’t need one.

  • Peter Martin,

    not all politicians did ignore the build of massive amounts of private debt in their economies. Labour did under Gordon Brown and the Tories went along with. But Vince Cable was sounding the alarm bells from 2003 onwards.
    What fiat currency can you point to that has retained its purchasing since 1971 or even in the last ten years? The only one that comes close is the Japanese Yen and that is because economic growth has flatlined while wages have stagnated.
    Norway’s sovereign wealth fund, based on its oil reserves, was established in 1990 to provide a pension fund for its citizens. The fund is now moving out of investment in oil and into renewable energy. As the Guardian article https://www.theguardian.com/business/2019/jun/12/worlds-biggest-sovereign-wealth-fund-to-ditch-fossil-fuels notes “The big story in energy economics over the next decade will be the storming of the bastions of fossil fuels by renewable energy sources that are cheaper to build and run, orders of magnitude cleaner and also much easier and quicker to deploy”
    The UK missed the boat on investment of the North Sea Oil bonanza. Perhaps we should not do so again with the next energy revolution and transition to renewable energy while International borrowing costs for this kind of investment are at an all time low.
    Tax redistribution including wealth taxes are a transfer within the macro-economy and has no direct fiscal effects beyond the different levels of propensities to consume or invest between lower earners and higher earners.

  • Richard Underhill.. 9th Mar '21 - 6:06pm

    The Financial Times had a collective noun for economists “A plague of economists”.

  • Peter Martin 9th Mar '21 - 6:19pm

    “Norway’s sovereign wealth fund, based on its oil reserves, was established in 1990 to provide a pension fund for its citizens.”

    They might have said this at the time. The alternative was to be more honest and say that there was more oil money coming in than than they knew what to do with and they had to export it somehow to keep the value of the krone down. It’s always a difficult sell to say something like this. Imagine the UK government saying the same thing.

    Countries don’t have to have SWFs to provide pensions for the elderly. They need to provide the retired elderly with money which isn’t a problem in itself but they also need to ensure that there is something to buy with that money when they go out to the shops. This can only be provided by someone getting up in the morning and doing a decent days’ work to provide what is needed.

    This is why anything less than full employment is a waste of resources. This is why calling for a UBI is a short sighted policy. Decent jobs for all are what is needed to provide for everyone’s needs.

  • Peter Martin 9th Mar '21 - 6:30pm

    “Tax redistribution including wealth taxes are a transfer within the macro-economy and has no direct fiscal effects beyond the different levels of propensities to consume or invest between lower earners and higher earners.”

    Didn’t you say on another thread the concentration of wealth is deflationary? Deflation is a very direct fiscal effect. You can’t have it both ways. You either have to accept the deflation or increase government deficits to compensate or do something to prevent the concentration of wealth in the first place.

  • Peter Martin,

    concentration of wealth at high levels has a deflationary effect or at least is not inflationary in respect of consumer prices. If you take 100 billion pounds and give 10 million middle-class people each ten thousand pounds, they will spend a lot of it, and it’ll have an inflationary jolt on consumer prices. In other words, the velocity of that money will be high, because it goes to people with a big divide between what they want and need, and what they have. However, if instead you give 10 multi-billionaires each ten billion each, their spending patterns are unlikely to change nearly as much, which would not provide a consumer price jolt. The velocity of that money would be low; they already have everything they want, and will likely invest that extra money into financial assets. The difference between what they want and need, and what they have, is nonexistent. They’ll stick in the bank, buy bonds, buy stocks, buy another mansion or yacht, and so forth. Financial asset prices are what would see inflation in this scenario (and likely some high-end luxuries like fine art and yachts); not consumer prices for paper towels or mobiles or cars.
    Tax redistribution is broad based from high and middle income earners to low income earners and has modest fiscal effects based on consumption patterns. QE/Money creation is skewed towards the wealthiest decile who hold the majority of financial and property assets

  • Katharine Pindar 9th Mar '21 - 10:32pm

    Joe, I am sinking under this bountiful shower of helpful information, thank you! – wading through, I do like the Alliance for Full Employment, which we will surely support, but it can’t be OUR project, obviously. Really we do need to have our Beveridge-inspired National Renewal Plan to stick out, bluntly, and revive our poll placing. We have to maintain the delicate position of finding common ground with Labour and yet (as Peter was rightly suggesting) not frighten the present Tory voters. They are welcome to the centre-right positions, though, Peter! (No idea what fiat money may be, and do sadly get somewhat lost in the economic thickets you both flourish in!)

    As for a Sovereign Wealth Fund, I would like our party to think of it again in terms of handouts to young people, maybe at 21 and again at perhaps age 40, to give them a boost. Considering the debt burden which graduates now carry, and their housing and job prospects, they and all our young people today need extra support and special funding. And so do local authority services. But not old people. If Conservative Home worries about pensioners, needing all the extra care and health services as we age, I would suggest they welcome the immigrants and refugees, younger people most of them who can help look after the seniors, pay taxes and help revive economic growth.

  • Peter Martin 10th Mar '21 - 9:57am

    @ Katharine,

    To alter your OP question slightly, we could ask “what kind of equality do Lib Dems value the least “? Or even not at all?

    This has to be any requirement from the individual to make a positive contribution to the collective within the limits of their ability. Equality isn’t just about what we all receive it applies equally to what we contribute.

    Most people instinctively see this. Anyone who has shared some communal household living knows that problems often arise when certain individuals are seen to not pull their weight. They might leave the kitchen in a mess or they are nowhere to be found when it’s their turn to cook, for example. Even LibDems get the idea! Sometimes. For instance, most Lib Dems would say that all non-UK NHS staff should be offered fast track UK citizenship at little or no cost because of their contribution to fighting the pandemic.

    Of course, once you go down this route you’ll start running into problems of where to draw the line. There’ll be anomalies. What about the people who service the ambulances, should they be included too? If we do include them we’ll have the problem of someone doing the exact same job on supermarket delivery vans saying they should have the same benefits.

    So, it would make more sense to say that everyone who is working in the UK doing a legitimate job should have a simple, affordable and rapid route to citizenship if they wish to take it up. But we don’t offer it to everyone. It is a conditional offer.

    Similarly with our own citizens, everyone should be offered a way to make a positive contribution. We don’t want anyone’s talents being wasted.

  • Peter Martin 10th Mar '21 - 10:23am

    @ Joe,

    Yes, you are right that asset prices have been inflated by QE. The process of QE is essentially to lower interest rates. They are now to almost zero. So we’ve cut off one form of rentierism to the rentier class. It is no longer possible to live on interest from saved money. So they’ll look for other ways. Property. Shares. Land. If we took up your suggestion of cutting off land rents there would be more money going into the property that stands on the land. That would go up even more. If we did something about that there would just be more expensive stocks and shares.

    This doesn’t mean that we shouldn’t have QE because we don’t want zero interest rates. We don’t like the rentier class. Remember? Was it Lloyd George or maybe Keynes who advocated the euthanasia of the rentier class? I wouldn’t go quite that far but we don’t need to.

    If asset prices rise there are other ways of addressing the problem than putting interest rates back up to 5%.

  • James Fowler 10th Mar '21 - 10:55am

    What concerns me about these posts is how ‘Labour’ the underpinning assumptions are.

    It starts with Beveridge forever being claimed as Liberal, and this technically correct, but even a glance at his career shows him to be the classic product of Edwardian socialism. His membership of the dying Liberal Party was an aberration, not the mainspring of his beliefs which were obviously founded in Fabianism. Keynes is another case in point, admittedly sympathetic to liberalism and frustrated by Marxist doctrine, his legacy is nevertheless entirely owned by Labour who reified his theories in office.

    When we talk about these people, we’re invoking figures and symbols long since possessed by another Party. It made some sense perhaps to talk up the ‘Social’ part of the Liberal and Social Democrats during both the Blair and Corbyn years, but Starmer has this nailed.

  • Peter Martin 10th Mar '21 - 11:19am

    @ Katharine,

    “No idea what fiat money may be, and do sadly get somewhat lost …..”

    My wife is similar to you. Her eyes glaze if I try to explain why government deficits are only natural and that fiat money is simply the creation of a sovereign government. They are the tax vouchers provided by that government to enable us to pay our taxes providing we work for the vouchers and so work for the government or someone else who has done that. This is what all governments want. They don’t really want their vouchers back.

    Some might think it’s a gender thing. Yourself and my wife vs Joe and I.

    But it doesn’t have to be. When the opportunity arises you might want to consider inviting Prof Stephanie Kelton to your next conference to give her explanation of why an understanding of how it all works is essential for anyone wishing to change how it all works. In the meantime there’s always her book!

    https://stephaniekelton.com/book/

  • @ Peter Martin “My wife is similar to you. Her eyes glaze if I try to explain why government deficits are only natural and that fiat money is simply the creation of a sovereign government”.

    Well, I must say, Mrs Martin is indeed very fortunate to have such a clever chap around to explain all these complicated things to her. Are you sure your real name isn’t Asquith, Peter ?

  • Katharine Pindar 10th Mar '21 - 12:28pm

    @ James Fowler. Thank you, James, for that interesting comment with which I thoroughly disagree! Of course you are referring to the indisputable fact that the Labour party grew and eclipsed the Liberal party from the 1930s onward, but it did not obliterate the Liberals. There was a fruitful if undeclared collaboration in effect between the Liberal Beveridge and the Labour Attlee, whose government carried out the reforms desired by Beveridge.

    I do not deny the roots of social democracy in Fabianism, but to this day the Fabians are scarcely known while the Liberal Democrats comparably flourish. There was a fruitful relationship between our Paddy Ashdown and their Blair before the great Labour victory, with many Lib Dem gains, and though there was no coalition to follow, our party was not destroyed. Why should you not expect the same outcome with the Labour party under Keir Starmer? That our party will survive after a fruitful semi-collaboration with the larger party.

    The underlying truth, I believe, is that our party has continually embodied and represented liberalism, which the Labour party can never do. I was reminded of this by Peter Martin’s post of 9.27 am today. He wrote, “everyone should be offered a way to make a positive contribution.” And I thought, “yes, but your party would soon make it not an offer but a demand.”

  • Joseph Bourke 10th Mar '21 - 1:03pm

    Peter Martin,

    The issue with interest rates is whether they are sufficient to offest inflation. If they are not than money loses its function as a store of value. Wealth creation then becomes a matter of borrowing money at low cost and investing that money in land and financial assets. Wealthy individuals (but not ordinary savers) place surplus cash into money market funds that finance mortgage lending and leveraged private equity and hedge funds.
    In the 1980s, Japan created an enormous property and stock market bubble that made housing in Tokyo extraordinarily expensive and has taken 30 years to deflate and deleverage. The great majority of Japan’s public sector debt is attributable to offsetting this long period of private sector deleveraging that has brought economic stagnation with it.
    A balanced recovery requires increases in investment as well as consumption. It is fortuitous that a desperate need for public investment to help green the economy takes place during a period of historically low real interest rates.
    The application of Fiscal vs Monetary policy can be determined by what is happening to short term interest rates and inflation. Fiscal policy makers should want to hand over macroeconomic stabilisation policy to the Monetary Policy Committee only when the economic has been returned to a stable growth path.
    Targeting inflation alone is not adequate, because monetary policy is designed to keep inflation at target. Looking at interest rates alone is not adequate because we have very little idea of what a ‘neutral’ interest rate would be (i.e. the interest rate that supports the economy at full employment/maximum output while keeping inflation constant). Fiscal consolidation needs to be delayed until both forecast inflation is expected to be above 2% and the Bank’s base rate is above 2%. In the recent OBR forecast, fiscal retrenchment is planned while interest rates are forecast to remain at or below 0.5%. This makes no sense in economic terms.
    That is why I believe LibDem policy should advocate a sound money policy based on a guaranteed minimum income;job guarantees; tax and benefits reform; green investment and strengthened public services; land value capture and normalisation of interest rates at least to a level that maintains the function of money as a store of value. Deficits for investment can be as large as warranted by projects with a high social return.

  • Katharine Pindar 10th Mar '21 - 2:17pm

    Thank you for your intervention, David! I suspect that Peter in mentioning ‘gender’ being possibly involved in myself and his wife not understanding some of his and Joe’s economic explanations was being deliberately provocative, egging me on to accuse him of gender bias. No way, Peter. I have just been listening, first to four clever women discussing the proposed pay ‘rise’ for nurses among other matters on BBC 2, and then to another woman explaining lucidly on the R4 World at One all about the gradations of and variants to nurses’ pay in recent years. There are plenty of women economists and financial experts about, naturally, not to mention the millions of women efficiently managing their own household spending. It’s the explanations of the economists which don’t always enlighten, Peter, but I suspect you probably enjoy exhibiting the odd term only readily understood by your own coterie!

  • My pleasure, Katharine. As to ‘eclipsing’, I would gently suggest 1922, 1923 and 1924 all have a good case, …..though our mutual friend Ms Catherine Marshall would probably argue for 1912, and as you well know she was a very clever and determined woman.

  • PS I’m afraid my eyes glaze over too. Though to be fair ………

    “Fiscal policy makers should want to hand over macroeconomic stabilisation policy to the Monetary Policy Committee only when the economic has been returned to a stable growth path”

    ……. would make a great chant at the John Smith stadium – and surely trigger off a rush to vote Lib Dem in the back streets of Leith and North Lincolnshire next May..

  • Joseph Bourke 10th Mar '21 - 5:48pm

    David Raw,

    as far as I no-one has yet come up with a better voting incentive then free beer. The Scottish Brewery BeerDog offered members of the public a free beer for casting their vote in the 2017 General Election (69.3% turnout). Anyone who took a selfie outside their polling station after voting then shows the picture to a bartender at any of their bars throughout the country to get their free beer. In January this year they made a free beer offer to everyone in the country https://www.thisisoxfordshire.co.uk/news/18997635.brewdog-offering-free-beer-everyone-uk/
    All you need to do is get John Smiths brewery to follow suit and you will have voters queing up to cast their ballot in May.

  • Peter Martin 11th Mar '21 - 4:23am

    @ Joe,

    “The issue with interest rates is whether they are sufficient to offset inflation. If they are not than money loses its function as a store of value”

    This is what we’ve ended up with without anyone deciding or even discussing the matter. Is this the free market at work? I’m not sure whether or not it’s a bad thing. In nature there is always a cost involved in trying to store something. A squirrel doesn’t have more nuts to eat just because it has taken the trouble to save some of them, rather than consume them all as it found them. If a battery is charged then it doesn’t create more electricity in the saving process.

    Living off interest on cash deposits is no different, in principle, to living off rental income from land ownership. Your opposition to rentierism is rather selective.

    “Wealth creation then becomes a matter of borrowing money at low cost and investing that money in land and financial assets.”

    This is speculation rather than wealth creation. Speculation nearly always creates financial bubbles. It isn’t possible that the price of a commodity will continue to rise year in, year out. It looks like it might in the short term because of a herd mentality. This means that if enough people start to swap their currencies for gold the price will rise which gives initial profits to those who have made the right call, and which in turn means that others will follow. It’s a naturally occurring Ponzi scheme which inevitably will crash sooner or later.

    Steve Keen has made the call that this is what has happened in the housing and property markets. So far he hasn’t been proven right. Largely, I would suggest because governments have always been scared witless of the consequences and have been prepared to do what it takes to prevent the bubble from bursting. Just as Rishi Sunak is now with the stamp duty holiday. But that will come to an end shortly. The BoE can’t lower interest rates any further so what next? Maybe Steve will be proved right after all.

  • Peter Martin 11th Mar '21 - 4:25am

    @ Katharine,

    No I wasn’t trying to be provocative. Just trying to prevent accusations that macro-economic theory is a strange esoteric field which is only of interest to ‘anoraks’ like Joe and I. We’re kindred spirits to train spotters. That would be my wife’s take on it! I’d just make the point that Stephanie Kelton doesn’t look like an ‘anorak’ to me!

    @ David Raw,

    The free beer approach has probably had its day politically. I might vote Lib Dem myself if the offer was right but it might not go down too well with the party faithful. Wouldn’t they prefer a Pinot Noir? Sourced from an EU country naturally 🙂

  • James Fowler 11th Mar '21 - 11:17am

    @Katherine Pindar – thank you for your honest and courteous response. I think that the nub of our disagreement revolves around whether Beveridge and Attlee were a partnership with distinct (but very unequal) ‘Liberal’ and ‘Labour’ strands, or a partnership of two patrician socialists of long standing, both with close connections to the Webb’s dating back to before the First World War.

    The Blair-Ashdown years are interesting. My (simplistic) analysis of 1997 and 2001 is that when the ‘Red Tide’ rolls in, the ‘Blue Swamp’ is drained, allowing numerous ‘Yellow Islands’ to emerge because we overwhelmingly face Tory opponents. Therefore I agree that Starmer’s success would help us in a general sense. But it is important to note that this is much more to do the whims of FPTP rather than the basis of genuinely Lib Dem and liberal choices by voters. We have been content to harvest these (undeserved?) constituency windfalls by keeping our position on most matters distinctly opaque, protean, or highly parochial until forced into the (unwelcome to many of us?) spotlight of government – hence the disaster in 2015 with which we are still living.

    Therefore, I respect your and others’ proposal to tie Lib Dem colours to a more clearly distinct programme (Beveridge Two), but I challenge your choice. There is no point imitating Labour-lite Social Democracy in what is already a crowded market and I see little point in direct collaboration with Labour per se. As I see it, the liberalism’s core inheritances are freedom of conscience and equality before the law. While Labour would agree with some of that, their origins and convictions lie in the defensive power of solidarity which necessarily compromises the rights of the individual.

    I’ve always been, and remain, puzzled by the conviction that liberalism and socialism are somehow natural partners representing a (mythical?) progressive majority.

  • Joseph Bourke 11th Mar '21 - 12:26pm

    Peter Martin,

    Interest rates are influenced by the power of Central banks in the developed world to fix interest rates. That distorts the price signals that markets create for the supply and demand for credit in a financial sector that is prone to excessive risk taking at the best of times.
    Martin Wolf in a FT article explains what is meant by rentier capitalism https://www.ft.com/content/5a8ab27e-d470-11e9-8367-807ebd53ab77
    “In this case “rent” means rewards over and above those required to induce the desired supply of goods, services, land or labour. “Rentier capitalism” means an economy in which market and political power allows privileged individuals and businesses to extract a great deal of such rent from everybody else.”
    “We need a dynamic capitalist economy that gives everybody a justified belief that they can share in the benefits. What we increasingly seem to have instead is an unstable rentier capitalism, weakened competition, feeble productivity growth, high inequality and, not coincidentally, an increasingly degraded democracy.”
    According to some proponents of MMT, money creation by the government is cost free when there is anything other than full employment. We can spend £37 billion on a track and trace system or £400+ billion in pandemic support without any consequences because we don’t see CPI inflation. Nurses could get a 12.5% pay rise and it would cost nothing because they would spend the money in the economy and that would reduce unemployment. If we do see inflation, we just raise taxes to offset the inflation.
    The problem with this argument is that money is debt. When the government creates money it is going into bank reserves and that money is a claim on the output of society. CPI inflation is countered not so much by unemployment but by multiple deflationary forces including high levels of private debt (especially mortgage debt) and high concentrations of wealth.
    The government can create as much money as it likes to acquire or create new assets that produce wealth. What is cannot do is create money debt to finance consumption over an extended period without generating the production needed to meet that consumption. Consumption spending has to be met largely by redistribution i.e. via the tax system while investment spending can and should be financed by money debt. Borrowing then finances recessions, periodic fluctuations in the economic cycle and the development of the country’s net worth.

  • Joseph Bourke 11th Mar '21 - 1:23pm

    James Fowler,

    the British labour party has its origins in the Liberal party. Keir Hardie initially supported William Gladstone’s Liberal Party, but later concluded that the working class needed its own party. The Liberal government of 1906-1914 introduced social liberalism with a great sweep of reforms in the years leading up to WW1.
    Labour’s rise after WW1 came out of the ranks of the Liberal party. The Liberal Party had certain core beliefs at its heart, one of which was that the state should intervene as little as possible in everyday life. However, as the war dragged on the government increasingly controlled what people could and could not do. The resulting arguments within the party weakened the organisation and demoralised party workers.
    The Liberal Party was also split by rivalry between Prime Minister Herbert Asquith and his replacement David Lloyd George. The election that followed the war marked the end of the Liberals as a powerful, united party. As the biblical proverb goes – a house divided against itself cannot stand.
    While it may be that classical liberalism and socialism are antithetical it has to be remembered that social Liberalism and social democracy share the same foundations. Under social liberalism, the common good is viewed as harmonious with the freedom of the individual. Part of this belief is that liberalism should address social justice. Social liberalism differs from classical liberalism: it thinks the state should address economic and social issues. Social democracy is an ideological view that seeks to humanise capitalism in the interests of social justice. These two political ideologies would appear to share the same roots and broadly similar aims – hence the merger of the Liberal party and the SDP.
    You may well be right that the modern labour party now occupies this ground, but it retains its core belief in socialist class struggle while liberalism, by way of contrast, seeks to harness the power of community and cooperation for the common good.

  • Katharine Pindar 11th Mar '21 - 1:42pm

    @ James Fowler. I love your colourful metaphors, James – thank you for writing again – but I suggest you should maybe think of a ‘red swamp’ considering how you have had both Beveridge and Keynes apparently eaten up by the Socialists! Maybe they were both what we would call social democrats. But I don’t know what you would in terms of practical politics have our party take our stand on, when you write “There is no point imitating Labour-lite social democracy in what is already a crowded market.” Freedom of conscience and equality before the law are indeed essential liberal principles, but people will not vote for us on principles alone.

    It sounds as if you have written off the chances of our party, unless perhaps we can get rid of FPTP. And I agree with you that there is not a ready share of the voting public waiting for our candidates. The Social Liberal Forum publication, Winning for Victory, analysing the disposition of the voters before the December election, showed rather clearly that the core vote idea does not work for us, because we appeal to many socio-economic groups to some degree but not enough to call any of them our core voters.

    Our viewpoints and policies appeal to millions, in short, but not enough to convince them to vote for us in General Elections except where we can establish good local relationships – as Tim Farron said and proved long ago, our only northern Lib Dem MP. So a Beveridge-2 type plan seems to me essential, to draw together and develop those policies of ours which are of national appeal, and which we can publicise now by demanding a National Renewal/ Revitalisation Plan, encompassing the Beveridge-2 areas of social injustice. The real point of this, though, James, is that our citizens actually need these plans, and the Tory mindset can’t ultimately provide them. But our Liberal Democrats can help to do so, and we can lead the Labour party in this.

  • Peter Martin 11th Mar '21 - 2:14pm

    @ Joe,

    You claim MMT argues that:

    “Nurses could get a 12.5% pay rise and it would cost nothing (???) because they would spend the money in the economy and that would reduce unemployment. If we do see inflation, we just raise taxes to offset the inflation.”

    It would cost everyone else something if Govt had to raise taxes to offset the inflation. Who’s saying anything different? Just as a neoliberal would argue that it would automatically cost something if we have to raise taxes as a matter of principle to “pay for” the cost of the pay rise. The difference is that MMT adopts a ‘wait and see about that’ approach to possible inflation, rather than just assuming it’s going to happen.

    MMT has nothing to say on whether nurses should get this kind of pay rise. This a political rather than an economic decision.

    ” CPI inflation is countered not so much by unemployment but by multiple deflationary forces… ”

    I’m not sure what you’re arguing here. The standard neoliberal line is that there is a NAIRU which dampens down inflation. MMT has some problems with the concept that the working class should be deliberately targetted this way. So, IMO, should Lib Dems! Especially as politicians are too cowardly to acknowledge the mechanism. I’d make it NAIRUU with an extra U to represent underemploymeet.

    https://www.investopedia.com/terms/n/non-accelerating-rate-unemployment.asp

    “The problem with this argument is that money is debt.”

    It’s only a problem because there is a general tendency to think debts have to be repaid by future generations and all the other neoliberal nonsense we often hear. There may have been half a dozen occasions since WW2 when Govt debt has actually been repaid. So if we add up all the deficit years we’d find that something like 98% percent had not been repaid and 2% had. In any accounting system all financial liabilities have to match financial assets. So if the rest of us want to hold those assets, represented by positive numbers, someone else has to hold the liabilites, represented by negative numbers. That can only be the currency issuer. ie Government.

    As always, we need to make the point that this doesn’t mean Govt can spend without limit. If the resources aren’t there in the economy they can’t be created, at least not immediately, by extra spending. That will simply create inflation as a rationing mechanism. But if they are there ……

  • Peter Martin 11th Mar '21 - 2:37pm

    @ Katharine,

    “Our viewpoints and policies appeal to millions”

    OK, but how many people vote in UK elections? 30 million or so. So, you could still get a couple of million votes and no seats. So millions isn’t anywhere near enough.

    You also indicated (10th Mar ’21 – 12:28pm) that the Lib Dem position is that unemployed workers shouldn’t have to take up any reasonable of offer of work. They’d still qualify for unemployment benefit. You’ve “continually embodied and represented liberalism”. Really? I’d say you haven’t been quite as liberal as you might have imagined. And that the reason for this is that there just aren’t anywhere near the numbers of voters who are as liberal as you might like them to be.

    The rule at the moment is that a Jobseeker allowance is payable to those who are “available for work” and are “taking reasonable steps to look for work.”

    But maybe I have missed Lib Dems saying that taking up a job should be just a optional extra? Do you have a reference or link on this point?

    https://www.gov.uk/jobseekers-allowance/eligibility

  • Joseph Bourke 11th Mar '21 - 3:18pm

    Peter Martin,

    It is the reduction of interest rates to near zero that inflates the level of public and private debt that in turn regenerates the cycle of financial instability that Minsky wrote off and led to the financial crash in 2008.
    In any accounting system all financial liabilities have to match financial assets. So if the financial sector, overseas investors and wealthiest households want to hold those assets, represented by positive numbers, someone else has to hold the liabilites, represented by negative numbers. That can only be net borrowers in the general public (households and non-financial firms) and the government as the agent of the public.
    This Resolution foundation paper https://www.resolutionfoundation.org/app/uploads/2020/12/The-UKs-wealth-distribution.pdf concludes:
    “Household wealth has grown in the UK and is very unequally held. These trends have been particularly stark since the financial crisis. Much of the gains in household wealth have been in rising financial asset prices (with associated increased in pension wealth) leading to a small shift in wealth shares towards the top of the wealth distribution. For those households who have become richer over the past decade, most of these gains were not as a result of active saving, rather passive accumulation in the value of wealth for those families who were already lucky enough to be well-off. This has profound implications for any policymaker thinking of introducing a net wealth tax in the wake of the coronavirus crisis.”
    “The past decade has seen wealth levels rise remarkably as interest rates have fallen. The current economic crisis suggests interest rates are unlikely to revert to the average levels seen in the second half of the twentieth century. This means policymakers need to grapple with the now embedded gaps between richer and poorer households.”
    The housing market is where the effects are at their most dramatic https://www.independent.co.uk/news/business/news/uk-house-prices-average-earning-ratio-latest-unaffordable-housing-crisis-a8323086.html#r3z-addoor. It is also housing costs, particularly in London, that is the key driver of increasing levels of poverty.

  • “but I suggest you should maybe think of a ‘red swamp’ considering how you have had both Beveridge and Keynes apparently eaten up by the Socialists! ”

    Well, actually Katharine, they were both active at times in the Fabian Society whatever label we stick on them today. Beveridge was Director of LSE (set up and in the gift of the socialist Webbs) between 1919-1937….. and before 1936 Beveridge’s analysis of cyclical unemployment made him very hostile to Keynes ‘General Theory’.

    They weren’t always the best of Buddies…… indeed they could both be a tad difficult. Plus ça change, plus c’est la même chose.

    Here’s a nice little read from the modern Fabian Society to put it all in context.

    BEVERIDGE AT 70 – Fabian Societywww.fabians.org.uk › uploads › 2012/12 › Beveridge …
    PDF

  • Peter Martin 11th Mar '21 - 5:48pm

    @ Joe,

    “It is the reduction of interest rates to near zero that inflates the level of public and private debt that in turn regenerates the cycle of financial instability that Minsky wrote off and led to the financial crash in 2008.”

    No. The crash came first and ultra low interest rates followed afterwards. Both in the UK and USA there was general concern about the levels of private debt (not public debt) which led to increases in the level of interest rates to try to bring it down. Not the smartest move! Higher interest rates simply made the existing debts less able to be repaid than previously! Just what was needed to turn a crisis into a crash.

    https://static.independent.co.uk/s3fs-public/thumbnails/image/2020/03/11/12/boe.jpg

    I’d be OK with the idea of a wealth tax. There’s no need to throw widows out of their homes if they can’t pay but a levy on the property, to be paid on completion of a sale, can be imposed.

    The problems of London are largely self imposed. There’s too much spending in London and the SE which causes property inflation and doesn’t do anyone any good. The same spending in Leeds, and the regions generally, would produce a much more even outcome in wealth nationally.

  • Katharine Pindar 11th Mar '21 - 8:54pm

    @ David Raw. Hi, David, I bow as always to your deeper knowledge of Liberal history – as when you pointed out that the Labour eclipsing of the Liberals was most evident in the ’20s – but I did write that I accepted the Fabian roots of William Beveridge, and I knew about his directorship of the Webbs’ LSE. As for his disagreements with Keynes, I haven’t studied those, but I still reckon they were both Liberals not Socialists. I believe there were criticisms by the Liberals of the rollout of the Attlee reforms, not a perfect partnership there either, but none of this, I submit, affects my basic point, that Liberalism and Socialism are different, so we won’t be swallowed up by Keir Starmer’s Labour party. It’s good, though, that he is leading them towards social justice as we are doing. As I have suggested, we have the chance now to seize the Beveridge mantle and lead the progressives of all parties towards a great national renewal plan. Let’s not allow Sir Keir or liberal Tories (as I guess she is) like Louise Casey to beat us to it! We should lead on this, and Michael and I and other supporters (Neil Sandison, you were enthusiastic in a January thread?) are asking Ed Davey to take up the baton at Spring Conference.

    @Peter Martin. Ah, Peter, you and I and Michael have discussed this before. We agree that there should be a Job Guarantee scheme, as I think so does Joe, but people can’t be obliged to take up jobs, and I remember you agreeing at one point with Michael that there can be No Compulsion. But as I’ve suggested above, this is one of the points where Liberalism and Socialism part company. You may well be right, there may not be many millions who would entirely agree with us on this, but our overall policies when known will have broad appeal to our suffering country.

  • Peter Martin 12th Mar '21 - 12:32am

    @ Katharine,

    Yes we did discuss this. We all agree that everyone is free to turn down any job they choose not to do. The question is: should they get paid their Job Seekers allowance if they refuse it? Under the present rules which are supported, as far as I know by all the main political parties, including the Lib Dems. they would not.

    So at what point point does “Liberalism and Socialism part company?” A requirement for unemployed workers to attend work and training centres was part of the original Beveridge proposals. Wasn’t he a Liberal? There’s really no disagreement at all. You’re making this up.

    There would have to be some common sense applied to the process. If workers have built up many years of NI contribution there wouldn’t be an immediate need for such attendance. For workers close to retirement age there would be none at all. But these are just my opinions. Under the present rules, JSA would stop.

  • @ Katharine Pindar And, hi to you too, Katharine. As you know I fully support what you and Michael are campaigning for. I very much hope you succeed. Yes, I agree B & K (sounds like an upmarket hardware store ?) have every right to be claimed as Liberals.

    But, as my late Mum’s local MP once so poignantly said in her maiden speech, “We have more in common”.

    Liberal Democrats should reflect on this and work with allies throughout the UK and in all parties if progress is to be achieved. The recent Holyrood Budget is a good example of that.

  • Katharine Pindar 12th Mar '21 - 9:40am

    Peter, there is much in what you say, but there has to be some disagreement between Liberalism and Socialism, otherwise the Liberals would have been swallowed up by Labour and the Lib Dems won’t thrive if Labour makes a great comeback. Yes, we need co-operation – David is right, and the Holyrood Budget does indeed seem a good example. Good people in all the parties do indeed need to work together. But I do believe there is a substantial difference in philosophy between Liberalism and Socialism, and that the belief systems have led to the continuance of the separation of our two parties. There are still deep divisions in the current Labour party which may delay their progress, and I believe our own party could show them the progressive way forward if we will.

  • Peter Martin 12th Mar '21 - 10:17am

    @ Katharine,

    Is it possible to be liberal and socialist? It depends on how those terms are defined but I’d say yes. When I do the “political compass test” I’m very much down in the bottom left hand corner which would indicate that I’m both.

    The question we were discussing of the Job Guarantee does present some difficulties. At present, if someone is determined not to work, they’ll need to present a very bad impression at any job interview, to ensure they aren’t offered anything, but still jump through all the hoops required by DWP. It’s difficult though not impossible.

    The introduction of the JG changes that. If the State offers anyone a job, which as I’ve said should be at a living wage with a large measure of training involved, then they’ll need to take it. If they refuse they will demonstrate that they aren’t available for work and so their JSA stops.

    Also, what do we do about those who might agree to the job but don’t actually do it? Or behave so badly they get themselves fired?

    How do those LibDems, like Joe, who also advocate a JG resolve these issues?

  • @ Katharine ” the Liberals would have been swallowed up by Labour”.

    A great many of them jumped before they were swallowed, Katharine, including our mutual friend Miss Marshall. Harold Wilson was Treasurer of the Oxford University Liberal Club in 1935.

    See : ‘Recruits to Labour: the British Labour Party, 1914-1931’, pub. 1 Jan. 1963, Catherine Ann Cline (Author)

  • Joseph Bourke 12th Mar '21 - 12:08pm

    Peter Martin,

    you write “The problems of London are largely self imposed. There’s too much spending in London and the SE which causes property inflation and doesn’t do anyone any good.”
    While we are talking about how the Fabian movement influenced Beveridge, it as well to recall Beatrice Webb’s minority report that argued that poverty had structural causes and was not the fault of the poor whether they live in London or elsewhere in the UK. No governments since MacMillan time have been able to effectively address the housing issue and never will until the land issue is addressed.
    Sidney and Beatrice Webb argued that what was required was poverty prevention, not poverty amelioration – and to do this a ‘national minimum’ was required: a national minimum wage, and a national system of benefits for those out of work to replace the locally organised Poor Law. The Webbs argued for services which didn’t discriminate between the poor and the non-poor, as only universal education and health care could prevent the conditions for a permanent pauper class.
    It was this vision which was finally enacted during and after the Second World War and which underpinned the welfare state during most of the second half of the twentieth century. The enactment of universal education, health care and social security came about as a consequence of the work of Conservative Labour and Liberal ministers.
    Today, we have a national minimum wage. We need a national guaranteed minimum income (a Universal basic income) set at the subsistence level supplemented by disability and housing benefits. The job guarantee supplements the basic income and gives any individual an opportunity to improve their lot, if they so choose. It is voluntary not compulsory. There are no end of social jobs that need doing not least in beginning to address some of the pressing climate change and environmental imperatives. In this regard, I fully agree that using idle labour resources to produce much needed social outcomes is an economically fruitful policy for all concerned.
    Any job comes with rights and responsibilities. A guaranteed job is an opportunity to gain work skills doing useful work that get you into the labour market while earning a minimum wage. If you behave so badly, you get yourself fired that is part of the training and development needed for individuals to understand that they too have responsibilities for their own welfare.

  • Peter Martin 12th Mar '21 - 12:15pm

    @ Joe,

    If everyone was guaranteed a job at a living wage why would there be any need for a UBI?

    A living wage also implies there would be no need for additional social benefits except perhaps for dependent children and elderly relatives.

  • Peter Martin,

    a welfare system is required for the same reason it always has been. There are many reasons why someone is out to work. Temporary unemployment while looking for new work; Illness; disability; caring responsibilities; single mothers caring for very young children, depression or other mental incapacity.
    A guaranteed minimum income at subsistence level means people are not forced to work to survive. There is a choice but that choice is yours it is not forced on you.

  • Peter Martin 12th Mar '21 - 12:50pm

    “No governments since MacMillan time have been able to effectively address the housing issue and never will until the land issue is addressed.”

    It’s not just the land issue. What’s the point of having houses and flats on whatever land is available if they are then kept empty? Look at taxing land in a different way if you like, but if you are serious about fixing the housing shortage you have to look at all other factors too.

    One other factor is that the centre of gravity of UK population is continually shifting towards the SE. There’s no need for us all to crowd into one corner of the island.

    We don’t have to allow the rich to own as many homes as they like, and keep them empty, if they like. What they might like isn’t what the rest of us might like! But this is where Liberals have a problem. The rich, as you see it, should be “free” to do with their money as they see fit. We socialists don’t share that hang-up!

    https://www.theguardian.com/a-place-called-home/2021/jan/11/the-housing-crisis-and-the-scandal-of-empty-homes-you-do-not-grasp-how-key-this-is

  • James Fowler,

    Have you not heard of “New Liberalism” of the late nineteenth century and early twentieth and the great Liberal election victory of 1906? According to the BBC they, “abandoned the idea of ‘laissez-faire’:
    • they wanted to use governmental power and money to help the poor
    • they argued that there were circumstances in which it was right for the state to intervene in people’s lives
    • they felt that the social problems the poor faced were out …” of the control of a poor person.

    Do you not know what type policies the Liberal Party advocated in 1929?
    Have you heard of the Yellow Book of 1928?

    Do you know that Liberalism has always stood against Conservatism?

    It is this social liberal idea that the state should do things to make the lives of the people better which is at the heart of my liberalism. This social liberalism was at the heart of the Liberal Party and the Liberal Democrats until it was gradually ditched after 2004 and the publication of the Orange Book which moved our party to the right and the election defeats of 2015 and after.

    Conrad Russell a historian and Liberal Democrat peer stated that the core of liberalism is the control power and those with power and the sharing power. He wrote in 1999, “Liberalism has always been about power – how it is controlled and dispersed and used to help the powerless and the underprivileged …” The core of Liberalism is not the uncompromised right of the individual. Liberals believe that individuals should be able do they want, as long as they do not harm anyone else.

  • Peter Martin,

    Over the last 50 years we have created a system where almost every scrap of land for new communities and homes is maximised to deliver the highest possible return for the landowner. Almost all land value—which is created by infrastructure, communities and the granting of planning consent—flows to the landowner. But if we shared that value more evenly between communities and the landowner we could address our housing emergency and get back to doing development better.
    The housing charity,Shelter, put together a collection of essays from leading thinkers on housing, answering one simple question from many points of view.
    The question is: What could be achieved in a world where land comes into development at a lower value?
    This is their answer: https://assets.ctfassets.net/6sxvmndnpn0s/qI7KMBFe3K2wznF4HOf9G/d4022217846f9e393da291375a8d0303/Grounds_For_Change.pdf
    In the last 20 years the value of land has risen by 544%. And high land prices have very real consequences for people and communities. They mean:
    ■ It is almost impossible to build the social homes we desperately need;
    ■ New developments are less likely to have community infrastructure like schools and parks;
    ■ Homes get delivered slowly at a time when they are so urgently needed;
    ■ Design and quality suffer—meaning we create places that local people resent rather than appreciate;
    ■ Public money for homes is diverted into landowners’ pockets when it could create public assets that appreciate and earn income through rent.
    For Shelter, with 127,000 children spending last Christmas homeless and 3.1 million families now bearing the brunt of the housing crisis, we desperately need a long-term
    programme of social housebuilding. And land reform is a key element to making this a reality. In the final essay of the Shelter report, Rose Grayston explains precisely what needs to change, with a clear call for reform of the 1961 Land Compensation Act. This is the outdated law that explains why land prices in England are so high today, and it is having an impact that the politicians who created it 60 years ago would never have expected or intended.

  • Peter Martin 12th Mar '21 - 2:16pm

    @ Joe,

    So it all to do with how land is taxed, or not taxed, and nothing to do with homes being deliberately kept empty?

    OK if that’s your view…..

  • Katharine Pindar 12th Mar '21 - 4:07pm

    Great collection of thought-provoking comments this morning, thanks, colleagues! Joe, just one query to you. You wrote at 12.50 to Peter, “A welfare system is still required for the same reason it always has been. There are many reasons why someone is out of work.” Indeed, so why do you think a UBI (especially one which you admit lacks the U bit) is such an imperative and encompassing answer for poor people of working age? The circumstances you go on to suggest won’t just be solved by tackling housing and disability benefits on to (U)BI. I agree with your posts on housing, though, the present housing situation in our country being such a contributor to poverty.

  • Peter Martin,

    If wealthy investors want to keep empty apartments around Hyde park and pay an annual land value tax of £10,000+ for the privilege so be it. It’s a free country. The inward investment by overseas investors helps in financing the trade deficit and the tax receipts can help support those in need.

    Katharine,

    I support a guaranteed income because it is not means tested. It is automatically available to any taxpayer or benefit claimant without delay. Beveridge assumed the need for means tested national assistance would fade away as people developed a contribution record that insured them against unemployment. He was wrong on that point. National assistance (income support) did not fade away. It grew exponentially and the attitudes that prevailed in the immediate post-war period hardened as people turned against what they saw as abuse of the welfare system. Strong support was maintained for Universal education and healthcare because they are universal – available to all whether you choose to use them or not. A guaranteed minimum income is simply a tax allowance or a non-means tested benefit available to any working age adult taxpayer or benefit claimant.

  • Katharine Pindar 12th Mar '21 - 8:06pm

    Joe, thank you for that. Now we come to the nub of the UBI question, it seems to me. You wrote of ‘a guaranteed minimum income’, and I want that to be guaranteed to everyone as much as you do. But you add, ‘available to any adult working age adult taxpayer or benefit claimant’. That suggests you think it is an amount which will be claimable if people ask for it, not issued to every working-age person automatically? Surely it won’t be universal if the working-age person must be a taxpayer to claim it? As for benefit claimants, what if they are generally taxpayers and only temporarily claiming benefits, as is the case of millions of new claimants in the past twelve months? And will the public accept that people can go on claiming universal credit as well as disability allowance and housing benefit, in addition to the ‘minimum income amount’
    everyone (if a taxpayer) will be entitled to claim? Indeed I hope so, since universal credit payments at present are insufficient to keep people at the poverty level, but it seems unlikely to be acceptable. I am somewhat puzzled.

  • Peter Martin 12th Mar '21 - 8:43pm

    @ Joe,

    The question was “If everyone was guaranteed a job at a living wage why would there be any need for a UBI?” You’ve misread that as ” ..a need for a welfare system”.

    To meet your objective of “A guaranteed minimum income at subsistence level” and also that “people are not forced to work to survive” isn’t it much cheaper and simpler to just pay those who neither want to find their own job nor take up a guaranteed job?

    You could argue the case for it now, with the Job Seekers Allowance which you could rename as the Job Seekers or Non Seekers Allowance. Just pay the same amount to everyone who applies for it whether they want a job or not providing they aren’t earning over a certain amount.

    Of course you won’t because you’ll know it will go down like a lead balloon electorally.

  • Peter Martin 12th Mar '21 - 9:01pm

    @ Joe,

    “If wealthy investors want to keep empty apartments around Hyde park and pay an annual land value tax of £10,000+ for the privilege so be it. It’s a free country.”

    For a start it’s not such free country. The Parliamentary archives are crammed full of rolls of vellum filled with laws detailing what we can, and more usually, cannot do.

    “The inward investment by overseas investors helps in financing the trade deficit and the tax receipts can help support those in need”.

    The inward flow of capital creates the trade deficit. Imports displace home manufactured products and workers in the industrial reasons lose their jobs. They get very hacked off. They don’t like being the ones in need. They then blame the EU and vote for Brexit!

    And all because you’d rather sell off our capital assets for rich foreigners to use a bank safety deposits than let families who need somewhere to live use them.

    You reap what you sow, as they say, but this still doesn’t help the homeless who are living on the streets just a stone’s throw away from empty apartments.

  • Katharine,

    the universal credit basic allowance is currently about £95 per week for over 23’s. The personal tax allowance and NI threshold (Employer and Employee) is also equivalent to around £95 per week of basic rate tax and NI contributions.
    The guaranteed income is paid to all working age adults as either their Universal credit basic allowance or via their PAYE tax code as a tax reducer. Higher rate taxpayers will get the same flat rate allowance as basic taxpayers i.e. not relief at higher marginal rates.
    Any working age adult with taxable income below the personal allowance of £12,570 will be able to elect for direct payment of the Universal credit basic allowance in place of the tax reducer without a means test of either themselves or their partner. The payment should also be made available to students in full-time education.
    The payment is made to every adult who is either claiming benefits, paying taxes or in full-time education or training. Universal credit benefit payments are currently automatically adjusted based on reported weekly earnings. That system provides for automatic switching to or from a PAYE code to direct payment on request.

  • Peter Martin,

    you used to say we could just pay for imports by creating money and overseas investors have to accept it.

    That money, however, has fluctuating purchasing power compared to other currencies and may dilute the value of each unit of money depending on various global supply/demand characteristics of that currency.

    A country with a consistent trade surplus and current account surplus builds up larger amounts of wealth in the form of bonds of other currencies, gold, luxuries, equity stakes in various companies and properties around the world, and so forth. A country with a consistent trade deficit and current account deficit builds up debts to other countries, finds its reserves depleted, and sells off some of its assets to foreigners including property assets.
    Countries with trade surplus and current account surplus generally find that their currencies go up in value. More money flows into the country than flows out of the country, year after year, and some of this wealth essentially gets “stored” in the strength of its currency. Due to its stability and sustainable wealth, more people from all over the world want to own its currency. In addition, more people want to buy properties and business stakes in that country, which means they have to convert their currency into units of that rich country’s currency. Hence, there is substantial demand for that currency. This increased demand pushes up the value of that currency, all else being equal.
    People from that rich country now have more global purchasing power. They can easily travel the world and buy expensive things from other countries.This has a self-correcting effect, however, because a more expensive currency means that the products and services of that country are more expensive for people in other countries to buy, and they might therefore buy fewer goods from that country. Their trade surplus and current account surplus may slowly diminish or level out. Sometimes wealthy nations intentionally try to devalue their currencies to present their exports from becoming noncompetitive.
    The same self-correcting force happens for countries on the other side of the balance. Countries that run chronic current account deficits eventually have a crisis that results in a weakened paper currency. This means they can’t buy as much foreign goods, and their exports become more competitive and attractive to other countries. In other words, it forces them to consume less and helps them produce more, which brings the balance back towards a sustainable level.
    The UK still has a relatively strong net investment position, but can no longer rely on inward investment and must sell off overseas investment holdings as well as domestic property assets to finance its trade deficit.

  • Peter Martin 13th Mar '21 - 10:57am

    @ Joe,

    Look, I don’t mind having a sensible discussion with anyone but this does mean they don’t just make stuff up. Like this:

    “you used to say we could just pay for imports by creating money and overseas investors have to accept it.”

    Have you ever heard of copy and paste? If I’ve said something with which you might want to take issue on then this function saves you having to type it all out again and makes sure you get it right.

    I think I might have said was that if a country like Germany wants to export more to us than it is prepared to buy from us than it is going to have to accept our pounds. This is simply because we don’t use anything else. Of course if Germany doesn’t want to swap its VW and Audi cars etc for our pounds, or similarly in the USA for US dollars, it doesn’t have to.

    You recently used the phrase “it’s a free country”. Maybe that’s not quite right but, rightly or wrongly, we are a lot freer than most when it comes to trade.

  • Joseph Bourke,

    According to Bill Mitchell the IMF and the OECD are not run by Keynesian economists. They want to see government budgets balance over the economic cycle. The problem in the UK is we don’t achieve full employment and there is always spare capacity in the economy. Since 2010 the UK government has tried to reduce the budget deficit before the economy is strong enough to grow and achieve full employment. Keynesian economics is about achieving full employment not about balancing the government budget. The only Keynesian fiscal rule a government can have is to provide full employment by managing aggregate demand in the economy while controlling inflation. Any other fiscal rule is by its nature replacing the aim of Keynesian economics – full employment, with an alternative aim. If full employment can only be maintained if there is a budget deficit then it is legitimate for government day-to-day spending not to be fully funded from government income.

    My type of Keynesian economics doesn’t talk of “fiscal consolidation”. It states that when the economy is below full capacity the government should provide extra demand in the economy to reach full capacity. When full capacity is reached the government should remove demand from the economy so does not over-heat. Even when removing demand from the economy the government might still have a budget deficit (but it is less than the previous year).

    To believe that the Resolution Foundations rules will ensure the economy is at full capacity is to reject Keynesian economics idea that the economy has to be managed by government’s policies. It would be a return to the past when economists believed that the economy naturally achieves full capacity.

    The government should only give up the macroeconomic aim of full employment when it has been achieved. In the UK a stable growth rate of 1.5% is economic failure. Monetary policy should be determined by inflation and economic growth, short term interest rates are part of a countries monetary policy not something for it to react against.

  • Katharine Pindar 13th Mar '21 - 11:33am

    Joe, thank you for your clarification to me about the Guaranteed Minimum Income, as it seems to me we both want rather than the Universal Basic Income, so I shall start referring to it as a GMI for brevity. You say that it should be available to all adults who are claiming benefits, paying taxes, or in full-time education – not just to tax-payers as you had formerly suggested – and I take your explanation that it should be paid to all working-age adults ‘as either their UC basic allowance or via the PAYE tax code as a tax reducer’. You view it, it seems clear, as not entirely universal, and if we think of a GMI instead, that makes sense. But you have expanded the categories, and I am wondering now about the non-working spouses of tax-paying adults, who I suppose we would want to receive it, and about people who are neither paying taxes nor receiving benefits nor in full-time education. Perhaps you would have to be a permanent British resident for a start.

    No doubt all that will be gradually worked out, since our party has committed us to a UBI. For the moment, however, and I suspect forever, we must demand that the state pays increased welfare benefits, whether UC or legacy and other, because £95 a week is not enough for any more than the short-term to enable people to reach or stay at the poverty level. This is certainly an equality that I want to see, and therefore for us please to demand.

  • Katharine Pindar 13th Mar '21 - 11:51am

    Michael, I see that we were writing at about the same time, and it is great to have your thinking on Keynesian economics here, in addition to your useful earlier contribution on liberalism. I have one query as a non-economist. What is the meaning of ‘full capacity’ in the national economy? does it mean full productive capacity, as in full capacity to produce maximum economic growth? Does that depend on full employment? What is ‘spare capacity’ exactly? I should like to know more, as always! Thank you for joining in.

  • Joseph Bourke 13th Mar '21 - 12:45pm

    Katharine,

    A guaranteed minimum income is a modified version of UBI. All adults are entitled to tax personal allowances. Unemployed (temporarily or permanently through disability) can claim universal credit and students can claim maintenance grants/loans. The minimum income would replace these allowances/benefits.

    Anna Koote has a good piece in the guardian https://www.theguardian.com/commentisfree/2021/mar/11/post-covid-britain-new-social-guarantee-universal-basic-income-pandemic. A guarantee minimum income is one form of UBI that sits alongside Universal basic services. She writes “Ensuring everyone has decent public services and a guaranteed income could transform the UK after the pandemic.”
    “It’s not a matter of which option is preferable, but rather how each of them is realised in practice, and how they fit together and support each other. A guaranteed income floor (one version of UBI) can be combined with more and better public services to provide secure foundations for everyone to flourish. For that to work, the income floor must be set at a level that is sufficient, without absorbing public funds needed to maintain and improve services.”
    “There’s no “magic bullet” for solving problems such as deepening poverty, widening inequalities, rising unemployment and the threats of future pandemics and climate breakdown. But we can make a decent start if we enhance public services and integrate them with a basic income as part of a new social guarantee. This guarantee would give everyone the right to a secure and sufficient income and to the services that meet their needs, regardless of their ability to pay.”

  • Michael BG,

    The Office for Budget Responsibility (OBR) forecast a budget deficit of £394 billion in 2020/21. This is equivalent to 19% of GDP, the highest level since 1944/45. The OBR say that around £280 billion of the deficit arises from Government steps to tackle the virus, and to support businesses, workers and incomes. The government deficit will be reduced dramatically in 2021-22 even as unemployment increases.
    Robert Skidelsky is perhaps the leading Keynesian economist in the UK today. He has thrown his support behind the youth job guarantee scheme promoted by the Alliance for Full Employment https://affe.co.uk/leading-economist-robert-skidelsky-joins-affe-call-for-a-youth-job-training-guarantee-scheme/#:~:text=One%20of%20the%20world%E2%80%99s%20most%20renowned%20and%20influential,keen%20advocate%20of%20public%20sector%20job%20guarantee%20scheme.
    In a recent article Skidelsky writes: “Given that we are suffering from both a demand and a supply shock, recovery policy will also have to address issues of supply. In other words, the Keynesian demand-side remedy of paying people to dig holes and fill them in again is inadequate. Although any direct boost to demand will also indirectly boost supply by increasing national income, a serious lag in the supply response risks causing inflation. For this reason, if for no other, investment in new capacity should be an important part of any fiscal stimulus.”
    “This imperative will, in turn, direct policymakers’ attention to the nature of the supply that the economies of the future will require. In view of the long-term challenges of automation and climate change, any post-pandemic recovery policy should aim to secure the economy’s sustainability, not just its cyclical stability.”
    “The case for fiscal policy is not only that it is a more powerful, because more targeted, macroeconomic stabiliser than monetary policy, but also that government is the only entity apart from the financial system capable of allocating capital. If we are not willing to allow investment in technology and infrastructure to be shaped by a purely financial logic, then the need for what Mariana Mazzucato calls a “mission-oriented” public investment strategy that includes taxation policy becomes inescapable.”
    “If the government is to be the active macroeconomic player, we need to work out how or whether the central bank should revert to its traditional role of checking fiscal excesses. But the fiscal rules themselves should be rewritten to allow for both more active countercyclical policy and a much larger government role in allocating capital than has recently been fashionable.”

  • Peter Martin 13th Mar '21 - 1:30pm

    Let’s conduct a simple thought experiment.

    Suppose we have three indivduals. One very wealthy on an income of £1 million p.a. One on a median income of £30k pa. One who is unemployed who picks up JSA and other benefits totalling £5k p.a.

    We decide to give everyone a UBI of £5k pa and to replace JSA and other benefits. So we need to alter the tax arrangements so the wealthy and the middle class end up with approximately the same spending money.

    So everyone ends up much as they were before, except now there is now no requirement for the unemployed person to have to seek work. There’s no requirement to have to apply for 10 jobs per week, or whatever. No requirement to have to attend interviews at the DWP. No being sanctioned for missing them.

    So why don’t Lib Dems, as a simple and cost free first step towards a more generous UBI, advocate that the JSA, and possibly other allowances and benefits, should all be unconditional, at least as far as having to seek work is concerned, and renamed accordingly?

  • Peter Martin 13th Mar '21 - 2:00pm

    @ Joe B,

    “The Office for Budget Responsibility (OBR) forecast a budget deficit of £394 billion in 2020/21. This is equivalent to 19% of GDP”

    Blimey! It sounds awful. How do you possibly sleep at night?

    But let’s look at it another way. If the Government is borrowing to spend more someone else is lending to spend less. Total spending is therefore no higher than what it previously was. I can say I’m spending less and my bank account is looking healthier than usual. I’m not going to the pub, restaurants or football matches. We aren’t able to go off on holidays. So if we are all spending less then the Govt has to spend more to keep the economic wheels turning – at least as much as it possibly can.

    The future problem might be that those of us who been lucky enough to not suffer too big a fall in our income will accumulate extra spending money which we’ll unleash in a frenzy of inflationary economic activity as soon as we get the chance. It’s possible but I’d say unlikely. Let’s wait and see what happens.

    Try not to worry too much about the future generations. They won’t have to repay our debts. Their standard of living will be determined by the goods and services they produce in their lifetimes. Just as our were after the high debt years of the wartime. These didn’t seem to cause us too many problems as far as I can remember. We will, however, stuff up things for them if we leave the planet in an unstable state.

    That is something that might cause you to reach for your Mogadons!

  • Joseph Bourke 13th Mar '21 - 3:22pm

    Peter Martin,

    ” If the Government is borrowing to spend more someone else is lending to spend less. Total spending is therefore no higher than what it previously was”

    Total spending in the economy is no higher. It is in fact much lower. With a GDP decline of 9.9% for 2020 total spending in the economy has fallen precipitously, but rising unemployment has been contained to-date.

    Increased government spending has provided relief support across the economy. That support includes both an element of direct purchases (imported goods like PPE, Ventilators, Vaccines and other drugs and equipment , recruitment of nursing staff, track and trace etc) and support for firms and household spending and saving. Household saving includes both debt repayment and cash savings.
    As economic activity and spending begins to recover this year, the deficit will start to reduce. The level of unemployment is, however, expected to remain higher than the pre-pandemic level of 3.8% for several years to come.
    That is a consequence of both long-term scarring and supply issues and why direct job guarantee programs are needed.
    As Skidelsky writes “recovery policy will also have to address issues of supply…investment in new capacity should be an important part of any fiscal stimulus”. On fiscal rules he writes: [they] should be rewritten to allow for both more active counter-cyclical policy and a much larger government role in allocating capital than has recently been fashionable.” This is precisely the kind of flexible policy the Resolution foundation proposals provide for.

  • Peter Martin 13th Mar '21 - 8:34pm

    @ Joe,

    Yep. You’re right. GDP has fallen by 10% for obvious reasons. It should recover fairly quickly providing the Government doesn’t set about trying to “repair the public finances” and all the other nonsense we used to hear during the Coalition years.

    The only danger is overheating and inflation as mentioned often enough. If that starts to become apparent then some tax rises will be in order. The mistake would be to raise interest rates significantly which will probably crash the housing market and the economy with it – 2008 style.

  • Joseph Bourke 13th Mar '21 - 9:41pm

    The OBR forecasts that the UK economy will grow this year by 4 per cent, by 7.3 per cent in 2022, then 1.7 per cent, 1.6 per cent and 1.7 per cent in the last three years of the forecast. The UK’s GDP is expected to return to pre-crisis levels by the middle of next year with unemployment peaking at 6.5%. Public sector net borrowing forecasts are:
    2020-21 355 billion
    2021-22 234
    2022-23 107
    2023-24 85
    2024-25 74
    2025-26 73
    That is predicated on no more big shocks like a resurgence of the pandemic, Brexit export collapse, major flooding and disruption across the country or sterling crisis.
    If the Biden stimulus package in the USA proves successful in driving a fast paced recovery there; it is quite possible that the Fed may need to raise interest rates and the UK will have to follow to stem capital outflows.

  • Peter Martin,

    Indeed, “We don’t want anyone’s talents being wasted”. However, we don’t restrict their contribution to paid employment only. And as liberals we believe that each person is the best person to decide what their talents are and what they do with them. This is why I oppose compulsory Job Guarantee schemes. The government does not know what is best for each individual person.

    It is party policy to scrap the sanction regime. In our 2019 manifesto we had, we would “Introduce an incentive-based scheme to replace the current sanctions system, which does not encourage people into work, penalises people with mental health issues and deters people from claiming support” (page 65). I have stated that I do think unemployed people should be actively seeking work and are available for work as it was in the 1980s. However, as a liberal I believe a person should have the freedom to choice if a job is suitable for them after the interview and not be forced to take the job just because it is offered to them. This freedom of choice is as important when the government is saying that a particular training opportunity and employment placement would be beneficial for the individual. The state should not be able to force someone to do something they don’t wish to do unless they have been convicted of a crime. Ensuring someone has a choice between no money and complying is not a choice which is acceptable to liberals. This is why the sanction regime is not supported by liberals, even if in public the party emphasises it is because it doesn’t work.

    You continue to ask questions which liberals do not ask. Part of being a liberal is a belief that people will act in their best interests. Therefore no-one who is happy with their employment would try to get themselves fired.

    I thought the article in the Guardian you provided the link for was interesting when there was the statement, “the 2010-2015 coalition government’s empty homes programme, which revitalised more than 9,000 vacant properties thanks to investment of £216m, but which ended in 2015”. I wonder if such a programme is party policy?

  • Joseph Bourke,

    Robert Skidelsky is a historian and especially an economic historian and does not seem to have a degree or post degree qualification in economics. You quote him as writing, “For this reason, if for no other, investment in new capacity should be an important part of any fiscal stimulus”, which sounds Keynesian. He also writes you say that the government should have a larger role in allocating capital. I don’t disagree in principle. Perhaps Vince’s ideas on investment policy are better in this area. However, the government now we have left the EU can provide financial incentives for businesses to setup in a particular region.

    I also agree that a job guarantee for young people should be set up to provide “paid activity for one million young people, whether through the private, voluntary, or public sectors”. As I have written many times I think a voluntary job guarantee scheme should be setup in north east England for all working-age adults which pays an extra £50 a week and a person’s travel expenses on top of their current benefits (without any cap being applied).

    Increasing working-age benefits to the poverty level would provide a small targeted economic stimulus to those areas with the highest number of people living on benefits and should reduce unemployment in those areas.

    The growth forecasts given after 2022 by the OBR are too low. With unemployment between 4.4 and 5.1% there has been no economic recovery, it is still getting there. This means that not enough is being done to expand the economy in 2023, 2024 and 2025.

    Joe, is anyone forecasting high inflation in the USA following the Biden stimulus? As Peter Martin has said increasing interest rates here would be a mistake. We need to do as much as possible to encourage businesses to invest to increase productivity and production. However, we do need to manage any devaluation of the pound so UK inflation does not take off because of the rising price of imports.

  • Peter Martin 14th Mar '21 - 6:15am

    @ Joe,

    “The OBR forecasts that the UK economy will grow this year by 4 per cent……The UK’s GDP is expected to return to pre-crisis levels …with unemployment peaking at 6.5%. Public sector net borrowing forecasts are: 2020-21 355 billion…… ”

    What does Old Moore’s Almanac have to say?

    It would be just as relevant. The mistake is to think that the Government is actually in control of its own deficit. The last time there was a big hoo-ha about this, after the 2008 GFC, the Govt deficit was something like 11% of GDP. This wasn’t because they decided to go out and borrow lots of money. It was because everyone else had stopped borrowing after the GFC , therefore spending less and saving more. So, if everyone else is net saving the Govt will be net borrowing.

    If, like in the EU, there are stupid fiscal rules in place to try to prevent this, the situation spirals downwards very quickly.

    So, unless the OBR know what you and I are likely to do in the next few years, such as will we take out loans for new cars or want to borrow to move house, they, like Old Moore, are just guessing.

    “If the Biden stimulus package in the USA proves successful in driving a fast paced recovery there; it is quite possible that the Fed may need to raise interest rates….”

    Why? Why not just back off on the stimulus package if the economy is overheating? What’s the point of having a monetary policy which is fighting the effects of your fiscal policy? It’s like putting down the flaps when you should be easing off on the throttle. This is no way to fly a plane!

  • Peter Martin 14th Mar '21 - 7:58am

    @ Michael BG

    “Robert Skidelsky is a historian and especially an economic historian and does not seem to have a degree or post degree qualification in economics.”

    Maybe not, but I wouldn’t hold that against him! It could just mean that he hasn’t been brainwashed with the mainstream neoliberal claptrap.

    “Joe, is anyone forecasting high inflation in the USA following the Biden stimulus? ”

    The answer is yes. Some people are. Even some MMTers too. I agree it is a risk. But a risk isn’t the same as saying it will happen. If and when it does it can be dealt with. The problem is that the mainstream view is that this will require an increase in interest rates.

    I really don’t follow the thinking. If an excessively loose fiscal policy tends towards producing higher inflation why not simply just tighten it up?

  • “Robert Skidelsky is a historian and especially an economic historian and does not seem to have a degree or post degree qualification in economics.”

    I’m not sure what that is supposed to prove.

    Professor Skidelsky read history at Jesus College, Oxford. From 1961 to 1969, he was successively a research student, senior student and research fellow at Nuffield College, Oxford. He was later appointed Professor of International Studies at the University of Warwick – and joined the Economics Department as Professor of Political Economy in 1990.

    His first book, Politicians and the Slump, (1967), is based on his D.Phil. dissertation. It is an excellent resume of the Lloyd George led 1929 Liberal Party’s campaign to implement Keynesian economics – on how Macdonald and Snowden didn’t have a clue how to deal with unemployment and the crash….and on how the Simonite Liberals supported Tory austerity,

    Just wish Clegg had read it before 2010.

  • Katharine Pindar 14th Mar '21 - 11:55am

    David, I am fascinated to know whether the ‘Lloyd George-led 1929 Liberal Party’s campaign to implement Keynesian economics’ would have been successful, in Robert Skidelsky’s view, if the government of the day had accepted it. I was intending to opt out of this feast of our amateur economists here, but this is useful new (albeit old!) information you can provide on the relevance of the Keynesian thinking that everyone now seems to accept. Except that they don’t agree on what it involves, of course, but that’s economists for you – amateur or expert, I suppose, since experts also disagree!

  • Joseph Bourke 14th Mar '21 - 12:43pm

    Michael BG,

    the link to the Alliance for Full Employment press release describes Skidelsky as:
    “One of the world’s most renowned and influential economists and philosophers, Robert Skidelsky, has given his backing to the Alliance of Full Employment’s call on the government to fully fund a youth job guarantee scheme. ”
    “Lord Skidelsky, a crossbench peer, a fellow of the Royal Academy and celebrated biographer of John Maynard Keynes is a keen advocate of public sector job guarantee scheme.”

    Peter Martin,

    the mistake is to think every recession is the same. It is not. The government has a great deal of control over its level of spending and borrowing. Many countries simply do not have the capacity to provide the level of support to the economy that the UK and other developed countries have been able to do.
    During this pandemic it has not been possible to target support only to where it is most needed. As a consequence, high levels of excess saving have built-up. This article discusses the issues https://www.hellenicshippingnews.com/excess-savings-accelerant-or-mirage-mike-dolan/
    This absence of targeting makes the US stimulus package something of a gamble. If it is successful, America will avoid the miserable low-inflation, low-rate trap in which Japan and Europe look stuck. The risk, however, is that America is left with rising debts, an inflation problem and a central bank facing a test of its credibility. The inflation problem, if it arises, comes down the road as lending ramps up on the back of low interest rates and money creation, well after the stimulus checks have gone out.

    Katharine,

    this is an earlier article referencing the ‘Lloyd George-led 1929 Liberal Party’s campaign to implement Keynesian economics’:
    https://www.libdemvoice.org/opinion-we-can-conquer-unemployment-38960.html

  • Katharine Pindar 14th Mar '21 - 12:44pm

    However, today’s news of how intended peaceful remembrance of and protest against the circumstances surrounding the tragic death of Sarah Everard became utterly distorted at Clapham Common yesterday has got me thinking further about inequality. The inequality of the powerless, whether they be lone women going outside or young people seeking security in gangs or maybe people of colour abused in a white society or people trapped in abusive relationships in their houses. How can they be helped?

    I suppose most politicians of the Left, and some of the Right too, do want the attain power in order to do good as they see it. If, as Michael BG recorded above, Liberal Democrat peer Conrad Russell believed in 1999 that “Liberalism has always been about power – how it is controlled and dispersed and used to help the powerless and the underprivileged”, I am glad that our Liberal Democrats today follow this and do believe in sharing power and actively helping the powerless to share in it in our country in our time. It’s a good reason for us and our activism to carry on.

  • Katharine Pindar 14th Mar '21 - 4:57pm

    I have now been wondering what powers we think everyone in our country should equally possess, whatever their gender. The power to stay safe and live secure from physical and mental harm is I suppose fundamental, which Liberal Democrats collectively and individually will try to ensure for everyone. The power to have a vote in our democracy that counts as much as everyone else’s isn’t a given, nationally, in our electoral system, but I suppose that wouldn’t be uppermost in most non-politicians’ minds.

    The power I think myself that everyone should have equally is power to have a home of their own if they want one, to have a job that suits them and pays enough to live on without resorting to charity, to have good education and training for their children to enable them to get on in life, to have all the health and social care they need throughout life, and to have a chance to lead a life that makes the most of their talents and is fulfilling for them.

    But not everyone can be allowed equal power. The strong can’t be allowed to oppress the weak, or the fortunate the unfortunate, or the rich the poor. In our country and in the West, women now expect to have the same power as men, but that is not a human right that men are yet brought up universally to accept. And it isn’t easy to share power that you and your forebears have got used to. Possibly men in general want personal power more than women do, because of our competitive culture. I don’t know if that is the case.

  • Peter Martin 14th Mar '21 - 4:59pm

    @ Katharine,

    ” Liberal Democrat peer Conrad Russell believed in 1999 that ‘Liberalism has always been about power – how it is controlled and dispersed and used to help the powerless and the underprivileged’ ”

    Sadly he died just a few years later and didn’t see Nick Clegg laughing and joking with David Cameron in the Rose Garden, nor the years of economic austerity that followed. That didn’t do much for the powerless and underprivileged. So would he have changed his mind or would the achievement of a 5p charge on plastic bags have been enough to keep him onside?

  • James Fowler 14th Mar '21 - 5:55pm

    I think that it’s politics itself, not liberalism, which is all about the distribution of power. Liberalism has one perspective on it, that’s all. Liberalism’s association with the diffusion, rather than the concentration, of power relies its commitment to the sanctity of the individual. Liberalism also has things to say about who and how power should be wielded, where rationality and merit feature prominently. This all sounds good, but the powers of national or social solidarity, tradition and belief have little or no place in this schema, which means that they will always be better expressed by other ‘isms’ and Parties.

  • Katharine Pindar 14th Mar '21 - 9:04pm

    You make a good point, James – thank you for re-engaging with this discussion. I can see what you mean, that our party’s Liberalism does not naturally seek power for the nation (because we are internationalists) or social groupings (because we care about the individual most). But we do care about individuals in their communities. Tradition? Should we care about preserving the power of tradition? Seeking radical changes for the better does usually involve ditching tradition, I suppose, and leaving it to the Conservatives. Belief? I suppose we must respect the power of belief for certain communities, but indeed not identify with any traditional belief system ourselves.

    However, in addition to the positives for Liberalism you identify, I believe we Liberals care more about the inequality of the powerless than do either the Conservatives or Socialists. We want them to take power, for the powerful to diffuse power downwards, a concept of true democracy.

    Peter, thank you for your latest comment. I am afraid my party is failing again, when I read in the Observer about the disastrous effect of the new benefit freeze on low-income tenants. I would like us to be shouting to the rooftops about the need for the reform of council tax and an end to benefit freezes – all part of the Beveridge-2 / National Renewal Plan which Michael and I continue to ask Ed Davey to back at Conference.

    Joe, thank you for the reference back to your 2014 article, in addition to your earlier helpful references. I was interested to see that you had included voluntary work in the Job Guarantee scheme, as should surely be included. The Job Guarantee scheme plus a Guaranteed Minimum Income seem imperatives for us to aim for, with of course Land Tax Reform to help pay for it all. Meantime, upping existing benefits is the only real hope for our poorest citizens that I can see. I don’t know if Conference will help – especially hoping Ed will put his Carers’ Campaign in the wider context. We shall see.

  • Katharine,

    It is strange to read that you have written, “but I am still disconcerted by the seeming agreement of all three parties at this time on the correct economic way forward”. This is only for the short term and then the Conservatives will bring back austerity. Joe Bourke often seems to support the Conservative economic policy which imposes austerity for 2023 and onwards with his support for fiscal consolidation. If Joe is correct Ed Davey also supports this. The party should not be supporting this. The UK economy will not be at full capacity in 2023.

    As far as I remember party policy is to provide sums of money for people when they reach certain ages. In the 2019 manifesto we called them “Skills Wallets” and said they would be about £10,000 throughout someone’s life. An inadequate amount. At today’s prices I don’t think £50,000 would cover the cost of my education and training from when I went to university. This is why I want us to change our policy and scrap “Skills Wallets” and provide free first degree education and free employment training to everyone, just like the UK provides free education for all children.

    Full capacity is where there is full employment (which I define as unemployment below 3%) and there is no spare capacity for businesses to produce any more (which you might call “full productive capacity”). At full capacity there is little scope for economic growth. Where there is spare capacity in the economy this means there is no full unemployment, some businesses are not at full production and there are resources to be invested which are not being invested.

  • Peter Martin 15th Mar '21 - 9:02am

    @ Joe,

    “…..the mistake is to think every recession is the same. It is not.”

    Another mistake might be to think the degree of difference is going to be much larger than it turns out to be. So you’ll likely be ignoring valuable lessons that are there to be learnt.

    ” The government has a great deal of control over its level of spending and borrowing.

    It has full control over its spending. It isn’t constrained by its income in the way we are. It isn’t at all in control of its income for any given level of its own spending. If everyone else has a mind to save then it will be borrowing. If you or I choose to buy a Premium Bond then we’re saving and the Government is borrowing. It can’t force us to either buy or not buy the bond. All it can do is alter the prize money to make the bonds more or less attactive. With other bonds it is, of course, the yield or interest rate.

    The lesson that should have been learned from previous recessions is that the Govt need to be ultra careful when raising interest rates. The monetarists concept that they can be slid up and down to regulate the economy is a dud. You seem be under the misapprehension that the 2008 recession was caused by rates being too low. That’s what everyone was saying 2 or 3 years prior to that. So, central banks tried to push them up. Just look at the record of the US Fed and BoE.

    It obviously didn’t work. It just created a whole tranche of unrepayable debt in the private sector and brought about the crash. Then interest rates had to be lowered faster than they’ve ever been before to even lower levels than they were before.

    So, naturally, we see people like yourself saying they need to go up now. But that’s going to have to be done ultra slowly otherwise we’ll have another crash. This is the danger now. We’ll possibly see an inflation problem in the USA due to the fiscal stimulus which will give the monetary hawks, who are ideologically averse to learning anything frome experience, the excuse to jack up interest rates. They’ll likely do that far too quickly and crash the economy.

  • Peter Martin 15th Mar '21 - 9:08am

    @ Michael BG,

    “…This is only for the short term and then the Conservatives will bring back austerity.”

    This remains to be seen. If you read people like John Redwood they are sounding remarkably Keynesian at the moment in the good old fashioned sense. Not the New Keynesian nonsense which forms part of the economic mainstream. From their perspective they need Brexit not to be an utter flop, which it will be if we have high levels of unemployment and a deep recession as we had after 2010. The Tories also need to look after their newly won working class supporters in the Red Wall.

    There’s nothing like having to win the next election to force a government to do the right thing. Even Cameron and Osborne had to let up on the austerity from 2013 onwards.

    “Joe Bourke often seems to support the Conservative economic policy”

    He certainly supports a very neoliberally inclined economic policy. The main danger at the moment comes from the political centre. ie From the Labour and Lib Dem Parties. They are much more neoliberally inclined with their nonsensical fiscal rules. I can’t imagine the Labour Party would have managed the Covid crisis any better. They’d have been having kittens over the size of the deficits.

    If they were to suddenly find themselves in Govt, would they be cynical enough, to deliberately crash the economy and blame it all on the Tories and Brexit?

  • Thank you both Peter Martin and Joseph Bourke for saying some people are predicting increased inflation in the USA. Once lockdowns are ended there is the risk of inflation if the people who haven’t been able to spend as much as they want spend their savings faster than the suppliers can provide the goods. It is hard to target just these people with a tax to reduce their spending power, but increasing interest rates would be the wrong policy. That was why my idea for getting people to lend the money they were not spending because of lockdown to the government was a good idea because the government could control the percentage a person could access each month.

    David Raw and Joseph Bourke,

    I don’t know what courses Robert Skidelsky taught or teaches as a professor of Political Economy but they might be more economic history teaching about the policies government followed. I recall studying historic subjects in the politics part of my degree course. My point was that it does not seem that Robert Skidelsky has studied economics. The implied question is how far someone who has studied the economic policies pursued by governments is an economist.

    Perhaps Joseph and Robert Skidelsky should discuss the economic policies of the National Government because Joseph has defended them in the past and suggested they were the correct policies.

    Joseph,

    I was very surprised to read that in your 2014 article you make the case for full employment to be the aim of Liberal Democrat economic policy. Why don’t you support this now?

    You even supported giving extra money to the unemployed. It would therefore be logical for you to support increasing the benefit level to the poverty level.

    Peter Martin,

    Indeed it was very sad that Conrad Russell died in 2004 and was not around to oppose the changes to policy made after the 2005 general election and the move to the right. In was always an inspiration to me when he spoke at conference where he always seemed to base his position on liberal principles, something which I think is very lacking today at conference. I expect if he had lived during the Coalition years he would have opposed government policies and spoken out at our conferences.

  • Peter Martin 15th Mar '21 - 11:31am

    @ Michael BG,

    “That was why my idea for getting people to lend the money they were not spending because of lockdown to the government was a good idea because the government could control the percentage a person could access each month.”

    They already are. If you put your money into any kind of term deposit, the bank won’t know what else to do with it other than buy Government bonds. There’s just not enough appetite for the private sector to borrow and invest at the moment.

    Even if you put money into a piggy bank or keep bank notes in a safe you are still effectively lending it to the Government. If you aren’t spending it, they can without creating an inflation risk.

    There have been forced saving schemes during wartime. There’s a promise to pay the lent money back with interest after the war is won. They are largely just hidden taxation schemes. In any case if the money is truly counted as a loan then it has to appear on the books as a debt. And, as we know, neoliberals don’t like having debt show up on the books.

    They would rather try to hide it as a Public Private Partnership Scam. Sure it keeps the loan off the books but the Govt ends up paying high levels of interest to the scammers when they don’t need to.

  • Peter Martin,

    the 2008 financial crisis was a result of excessive leverage in the banking system. The underlying causes were a global savings glut that drove down real rates in large part arising from excessive trade imbalances between the USA and China. Those excess savings fueled a lending spree that saw private debt reach unsustainable levels and brought us to the ‘Minsky Moment.”

    Michael BG,

    I am saying the same thing now as in 2014. Structural unemployment has to be reduced by job guarantees. Stimulating aggregate demand is ineffective when the output gap is relatively low and counter-productive to the extent it increases inflation expectations. Keynes referred to this as effective demand i.e. the policies required when the economy is operating at near normal levels.
    Economic growth comes from three principal factors labour, capital and total factor productivity i.e. the efficiency of labour and capital inputs that is enhanced by factors such as knowledge and skills development, technology efficiency of management and organisations etc. Total factor productivity is what accounts for the difference in GDP per capita between countries. Two counties deploying the same level of labour and capital can have very different outcomes and hence standards of living depending on the efficiency with which labour and capital is used. In the end you cannot escape the basic need to increase productivity to enhance living standards. That requires strategic investment in productivity enhancing infrastructure, research and development and skills development.

  • Peter Martin 15th Mar '21 - 8:42pm

    @ Joe,

    Others have written whole books on the causes of the 2008 GFC. But you’ve explained it all in little more than 50 words! And with no mention of the underlying flaws in the neoliberal orthodoxy that led to it all. That’s quite an achievement!

  • James Fowler 15th Mar '21 - 9:41pm

    Thank you Katherine – I appreciate your courtesy. I just wanted to say that when I talked about tradition, belief, national or social solidarity I didn’t mean that we should try and claim them – far from it. Others do them better, and they will always be weak points for us.

  • Joseph Bourke,

    Do you accept that the economy can be in equilibrium with lots of spare capacity in economy?

    If there is no region in the country with less than 3% unemployed then a national stimulus can be implemented. If there is a region with less than 3% unemployment then the stimulus has to be targeted. This is why increasing the benefit level to the poverty level is such a good policy as it targets the small stimulus to the areas where there are large numbers on benefit. This is why I want there to be a trial of job guarantees in the north east of England which has the highest rate of unemployment to discover how it can be implemented and whether those who had a job guarantee gain anything which leads them into getting a normal job afterwards. The government should also create jobs in the regions with high rates of unemployment.

    I have stated that if economic growth is predicted to be 1.7% then there is spare capacity in the economy which needs to be brought into production by creating extra demand. This extra demand can be created by employing people to do beneficial things and paying them the market rate. If there is not the extra demand for any increased production that increased production will be short-lived. This is why providing the demand is so important.

  • Joseph Bourke 16th Mar '21 - 1:12am

    Michael BG,

    There are only two ways to generate an increase in real growth. That is a larger workforce with the requisite level of basic skills needed by employers or increased levels of productivity.
    The proportion of the working age population relative to the total population is declining as the number of retirees in the population increases and inward migration goes into reverse. That rules out a larger workforce with the requisite work skills and leaves increased productivity as the only means we have of generating real economic growth. Real wage growth is closely related to productivity growth. The reason most commonly cited for the UK’s lower economic growth and low wage growth is under-performing productivity levels compared to other developed economies. The only policies that can change that are significant investment in technology and skills development.
    Benefit levels do need to be increased, but the greatest proportion of additional welfare spending will go to where the largest numbers of unemployed workers and benefit claimants are i.e. London.

  • Katharine Pindar 16th Mar '21 - 2:18am

    I’m mostly devoting myself to preparing for Conference this week, but I can’t resist putting in the 130th comment here, amazed as I am at the growth of this thread. I really have to thank Joe and Peter for entering on one of their endless economic dialogues to keep it going till now, a day after it left the Most Read column. It reminds me so pleasantly of Pooh and Piglet patiently going round and round that tree of theirs – and then, would you believe it, finally joined by my friend Michael! He must be Eeyore of course, gently meandering round in economic chat with them. Thanks, chaps, and to James also who contributed interestingly without joining in the meander, and so, a happy goodnight to you all!

  • Joseph,

    I note you didn’t answer my question.

    I refer you to Bill Mitchell’s explanation of Keynesian economics – http://bilbo.economicoutlook.net/blog/?p=14153 again.

    C + I + G + X = C + S + T + M

    Spending
    • Household consumption (C)
    • Private Investment (I)
    • Government spending (G)
    • Export revenue (X)

    Income
    • Taxation payments (T)
    • Household consumption (C)
    • Household saving (S)
    • Import spending (M)

    Any change in one effects all of the others. This is why increasing government spending without increasing government income T will increase the size of the economy when there is spare capacity in the economy. This is the basis for how Keynesian economics works.

    According to the OBR the UK unemployment rate will rise to 5.9% in 2022 and then decline slowly in the following year to 5.1%, 4.5% and 4.4% in 2025. Therefore even in 2025 there will be plenty of people who need to be employed. This doesn’t include those who are economically inactive because of a health issue or disability who could be employed. Employing these people will increase the size of the economy. There is not going to be any lack of people who could be employed over the next four years.

    Turning to unemployment according to the ONS the unemployment estimates for October to December 2020 have no regions with the unemployment rate under 3%. This is because the whole country has been adversely affected by the lockdown and the decline in the economy. And indeed you are correct the highest rate of unemployment was London at 7%. The north east rate was 6.5%. However the year before it seems the rates were London 4.3% the north east 6.2%. The size of any stimulus is important not in its total but how large it is compared to the economy.

  • Joseph Bourke 16th Mar '21 - 11:23am

    Michael BG,

    unemployment fell to 3.8% before the pandemic and employment participation rates were at their highest historic levels as many retirees came back into the workforce to undertake part-time work.
    As you get to these low levels of unemployment, it becomes more and more difficult to reduce the levels further. When you have a large number of school leavers who are functionally illiterate there are not the jobs for them that there were in the past. In the past, nationalised industries employed a proportion of workers that did not have the basic numerate or literacy skills for general work tasks. Private companies will not do so.
    There will be many jobs that go as a result of the pandemic, particularly in retail and bars and people will have to retrain to find new work. This is expected to increase structural unemployment for a few years, so that the unemployment rate settles at around the 4.4% to 4.5% level that the OBR is forecasting. The only way to address that is with targeted training and job guarantee schemes. That includes remedial numeracy and literacy training when required.
    London not only has the highest % of unemployed it has by far the greatest numbers of benefit claimants of any UK region. Stimulus is a temporary cyclical boost to the economy when needed normally provided by automatic stabilisers. Investment levels need to be maintained at consistently higher levels than historically to maintain continual improvements in productivity and international competitiveness. This is the urgent task of a government fit for purpose.

  • Peter Martin 16th Mar '21 - 5:52pm

    @ Joe,

    “unemployment fell to 3.8%….”

    So are you saying that the economy is running at 96.2% efficiency?

    If not, what figure would you give?

  • Peter Martin 16th Mar '21 - 6:10pm

    @ Michael BG,

    In your response to Joe you said:

    “I note you didn’t answer my question.”

    He doesn’t answer mine either! So at least we both know it’s nothing personal! 🙂

    @Joe,

    ” is expected to increase structural unemployment ”

    The adjective “structural” is quite superfluous. If you need a job, you’ve either got one or you haven’t. There aren’t any other logical options.

    By ‘job’, I mean a job which pays a living wage, is relatively secure, and provides for pension contributions, plus time off for holidays and sickness.

  • Joseph,

    I don’t accept 3.8% unemployed is an acceptable level of unemployment. I don’t understand why you think 4.4% is an acceptable level that means that the government should not use fiscal measures to reduce this rate.

    There are not huge numbers of school leavers who are functionally illiterate. According to the Local Schools Network (https://www.localschoolsnetwork.org.uk/faq/are-20-school-leavers-illiterate) in the summer of 2012 only 0.7% failed to make the grade. Of those who did resits in November only 0.2% failed to make the grade. Of course there were others who didn’t sit the exam and some of them have severe educational needs, are profoundly disabled, were too ill to sit the exam or to cover enough course work to take the exam. In 2009 the figure for those who didn’t obtain the qualification needed was 18% the same level as Ireland, Sweden, the USA, France and Germany. The Local Schools Network also point out that this level is set by academics and not by real-life requirements.

    Not being successful in an exam does not mean that the person is unemployable or can be successful tutored to pass it as some future time. I believe that every unemployed person should be provided with the education and training they need to obtain a job suitable to them.

    The so called automatic stabilisers are not enough to turn a recession round. There has to be other actions by the central bank or government or both. There is nothing in the formula C + I + G + X = C + S + T + M to suggest that any increase in government spending G is worse than an increase in spending on business investment I or the result is a less than permanent increase in the economy.

    Businesses will not invest to improve productivity if there are large numbers of unemployed people who can be employed and especially if the government has not created enough demand for their products. Indeed economic growth needs to return to its pre-2008 levels. There is no reason why one region should have a lower rate of unemployment than another with regard to the general skills of the people in each region.

    As I have already stated the actual number of people on benefit in each region is not the issue, what is important is what proportion of the people in each region are on benefits. Do you have the regional rates?

  • Peter Martin 16th Mar '21 - 9:45pm

    @ Michael BG,

    C + I + G + X = C + S + T + M

    That’s true. But why not cancel C?

    I + G + X = S + T + M

    You could make C anything you like besides Household Consumption in the UK. It could be Household Consumption in China. It even could be the number of goals scored by Brentford FC since its formation. Leaving it in doesn’t tell you anything.

  • Joseph Bourke 17th Mar '21 - 2:12pm

    Michael BG,

    the purpose of job guarantees and training is to address structural unemployment. There will always be an element of frictional unemployment between 2% to 3%. During recessions, when there is a deficiency of demand, there may be cyclical unemployment that can be addressed by temporary fiscal stimulus. When the economy is on a relatively stable path, automatic stabilisers do the job of smoothing the economic cycle.
    We do not have a cyclical recession today, we have a lockdown. The economy is predicted to grow 4% this year and 7.3% next year (the highest level of growth since 1948) before settling to a stable growth pattern in 2023. The level of growth this year and next is as a consequence of high levels of demand that can be met by supply. The projected unemployment from 2023 (when the output gap is largely expected to have closed) includes both frictional and structural unemployment, but not cyclical unemployment.The projected level of structural unemployment is higher than pre-pandemic due to the disruption and scarring effects of the pandemic. This is best addressed by targeted job guarantees and retraining programs as the Alliance for Full Employment recommends
    To grow the economy in the future requires maintaining a balance between supply and demand through automatic stabilisers, while improving the efficiency of firms use of labour and capital. That requires strategic investment in productivity enhancing infrastructure and skills development, together with rapid and widespread adoption of new technologies throughout the economy.

  • Peter Martin,

    The equation when household consumption is included represents the economy. In the context of Keynesian economics it is vital that C is included. For when either G or I is increased all the values on the other side of the equation are increased and the increase in G or I has to work through the economy and will result in a larger value for C and a larger economy. This equation when C is included shows that an increase in government spending will grow the economy. It shows how a Keynesian stimulus leads to a permanent increase in the size of the economy, a point Joseph Bourke seems to deny happens.

    Joseph Bourke,

    I am disappointed that you accept Conservative fiscal policies for 2023 and after. I am disappointed that with an unemployment rate of 4.4% you believe there will be no output gap and you believe there will be no cyclical unemployment. I don’t understand how you can believe such things when you recognise that the unemployment rate had fallen to 3.8% before the pandemic. The OBR even said that with this rate of unemployment there was spare capacity in the economy. With inflation at such low levels there is no evidence that the unemployment is not cyclical.

    I agree the government should increase spending on training and skills development. The government needs to support people to obtain new skills and gain the relevant experience. This is why I support free employment related training and job guarantees so people can keep their skills up to date or to gain the necessary experience after being newly trained. I am not convinced you see job guarantees in this way.

  • Peter Martin 18th Mar '21 - 5:18am

    “This equation when C is included shows that an increase in government spending will grow the economy.”

    Except it doesn’t include the size of the economy.

    If you want to look at that you need:

    GDP = C+S+T

    GDP = C+I+G+(X-M)

    So we can say that Government spending will increase GDP in monetary terms – if everything else remains the same. Which is always a questionable assumption.

    The equation does show that it is impossible for the Government to run a surplus, and for us all to be saving and at the same time for international trade to be approximately in balance.

  • Michael BG,

    as far as I am aware the Conservatives reject job guarantees and a guaranteed basic income. Libdems have adopted basic income as a policy. I would advocate the party also supporting the call of the Alliance for Full Employment for the immediate introduction of a youth job guarantee program.
    You don’t need GDP algebra for that, you just need LibDem members and parliamentarians to make the case whenever the opportunity arises.

  • Peter Martin,

    As I said the equation in the form given by me is useful for demonstrating how a government Keynesian stimulus works through the economy and assuming nothing else changes grows the economy. Something which Joseph seems to not accept.

    Joseph Bourke,

    My point was that you accept Conservative fiscal policies, not that you don’t think the government should allocate the money differently. I also pointed out that there will be spare capacity in the economy after 2022 when you want the government to stop using fiscal measures to increase aggregate demand. Therefore if fiscal policies are used to stimulate the economy the economy will grow faster than 1.7%.

    I will continue from time to time to post the GDP algebra to demonstrate to you the need to accept that a government stimulus works at any time, if there is spare capacity in the economy.

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