I notice the leader of the Scottish Conservatives has resigned. Has any party leader resigned in the middle of a general election before - (excluding Reform whose leader was always a Farage puppet) ?
I can’t see it strongly motivating Scots Tories if their leader just gives up mid-campaign.
It's an odd decision. For years he has been leader while holding down two full time jobs, and part time football referee. And, just as he's about to lose one of those full time jobs, and so have more time to dedicate to the job of party leader, he decides to step down.
Calling the branch managers of unionist parties in Scotland "party leaders" is a bit of a stretch. Sarwar could evaporate tomorrow and it would make not a jot of difference to Labour's election performance.
All these fully costed manifestos from all the parties appear to reply on a combination of
1. Growth
2. Efficiency savings
3. Clamping down on tax evasion
First the the Institute for Fiscal Studies are excellent. The look at data dispassionately and based on the information they use, their output is reliable and meaningful.
However, there is a big caveat that should be attached to that. The IFS doesn't do Macro. What is meant by that is that the IFS looks at the data and adds them up and works out what the answer is. However, and this is a vital point, it is impossible for governments to do anything financial without their being a macro-economic effect. That there is an effect is incontrovertible. This is because the government is such a large part of the economy. Whether it is too large or too small is a matter of debate but it is around 40% of the economy.
If we play the hypothetical game, let's say that the government invested in something really good and it had a big productive effect on the economy, boosting economic growth by over £100Bn per year. The resultant tax-take would be an extra £40Bn, approximately. Let's say this policy cost the government £30Bn per year. Well one way of reporting this would be that there is a £30Bn hole in the government's plans. The reality being that there is actually an extra £10Bn of headroom for the chancellor to work with. It is also true that certain government policies can significantly reduce growth and therefore reduce the expected tax-take and create a 'hole.'
So why does the IFS ignore Macro effects of policies? A couple of reasons. The major one is that it's not part of their remit. It is not how they do their fiscal analysis. There is a softer reason which is that the macroeconomic effects are unpredictable. So whilst an effect can be predicted, the size of the effect is usually unknown with precision. The Office of Budget Responsibility do this kind of work. They get slated by people who either do not understand their predictions or who choose not to. If their central prediction is not spot on then they get called 'wrong' whereas if you look at the ranges they put out, they are very reliable. It's a bit like me predicting that England will beat Germany 5-0 and being called completely wrong if England only managed to win 5-1.
Labour are being very canny and careful here. There is huge potential for growth in the UK economy at the moment because investment is being held back and the UK's productivity is poor. Labour is planning to do some small but meaningful things initially. If by doing that they can unlock the growth potential then the tax revenues that follow will allow much more significant and meaningful changes.
Will it work?
Well, I cannot sit here and tell you it's a certainty but it's sound and reasonable.
If you talk to economists (by which I mean proper economists rather than 'city economists'*) They will tell you that the UK needs more radical changes but that does not mean what Labour is proposing is wrong, just limited.
The judgement we all get to make as voters is simply this; Is it an improvement on what we have had and what the Tories are planning? To which the answer is undoubtedly YES.
There is a lot of held-back private sector investment that Reeves is hoping to unlock. That's why she talks about government-enabling investment. There is a lot of potential to make things better when the trade agreements with the EU come up for review in a year or so's time.
The IFS figures are correct as far as they go but they take no notice of these potential effects. The OBR does. If the OBR then, as a consequence change the growth projections for the second half of this decade, then you'll see the IFS figures move accordingly.
In summary, Labour has a credible plan. Economically it is not what I would wish for. I do acknowledge why it's politically smart though. In terms of GDP/head our economy has been flat for a very long time. A little bit of growth will feel like a massive step up. Labour's plan is to use these benefits to get more ambitious over time. The problem for the UK is that the public sector is so screwed at the moment that this delay is very painful.
AFZ
*City economists are very good at what they do: study the economy to maximise profits for their employers. That is not what academic economists do, which is to study the economy and understand how it works for the benefit (or not) of all. The vast majority of 'economists' in the media are of the former type. I learnt this difference about 15 years ago, and as a consequence I have a much better understanding of the economy than what is presented by our media. Although I am definitely not an expert, I long to get these voices properly heard.
For the record I have read / still read:
Paul Krugman
Joseph Stiglitz
Simon Wren-Lewis
Danny Blanchflower
Mark Blyth
Robert Skidelsky
There's probably others but those are the one's I can remember. All are professors of economics, two are Nobel prize winners. All of them called out austerity and five of them pointed out the dire effects of Brexit. The sixth, I do not know about as I haven't seen Skidelsky view on Brexit either way but he is the one I've read least.
Labour are being very canny and careful here. There is huge potential for growth in the UK economy at the moment because investment is being held back and the UK's productivity is poor. Labour is planning to do some small but meaningful things initially. If by doing that they can unlock the growth potential then the tax revenues that follow will allow much more significant and meaningful changes.
Similarly talk of 'growing the pie' ignores the fact that the link between wages and productivity growth was broken decades ago. The fundamental problem at this point is wealth inequality. Everything else flows from this; the concentration of the economy around a few service industries in the south east, low investment in productivity, asset price inflation, etc.
All these fully costed manifestos from all the parties appear to reply on a combination of
1. Growth
2. Efficiency savings
3. Clamping down on tax evasion
I don't believe any of them
Why not, given that the new government has yet to take office?
Or are you, like Pilate, asking that famous, and possibly, rhetorical question - *What is truth?*...
To me, the problems with the above are that growth is not predictable and might not happen, that efficiency savings have been pursued to the detriment of services (and yes, reorganisation may yet produce more savings but it is hugely disruptive), and that no Government has succeeded in clamping down on tax evasion despite repeated promises to do so.
In my view the truth is that almost any big announcement is only deliverable with a big injection of funds; which either means tax rises or a booming economy.
As we don't have the latter, the options are either taxes rising or little delivery. Politicians always like to talk about efficiencies and trimming the fat to pay for their promises, but for much of the public services it feels like there is little fat left to trim.
Why ? Money is an illusion - a token of exchange for goods and it is created and destroyed all the time within the banking system. Do you think the material resources in the country have dropped substantially ?
That, as previously stated, I don't believe any of them.
Sir Keir Starmer, the former staunch ally of Jeremy Corbyn, has stated that the Conservatives have delivered a Jeremy Corbyn manifesto...a manifesto that he was proud to support in 2017 and 2019.
That, as previously stated, I don't believe any of them.
Sir Keir Starmer, the former staunch ally of Jeremy Corbyn, has stated that the Conservatives have delivered a Jeremy Corbyn manifesto...a manifesto that he was proud to support in 2017 and 2019.
To be clear he said Sunak had announced a 'Corbyn-style manifesto'. Nevertheless you are not wrong that Starmer was being dishonest/disingenuous.
That, as previously stated, I don't believe any of them.
Sir Keir Starmer, the former staunch ally of Jeremy Corbyn, has stated that the Conservatives have delivered a Jeremy Corbyn manifesto...a manifesto that he was proud to support in 2017 and 2019.
To be clear he said Sunak had announced a 'Corbyn-style manifesto'. Nevertheless you are not wrong that Starmer was being dishonest/disingenuous.
Worse than that he's deliberately trashing manifestos that were properly costed to burnish his TINA credentials.
I think quite a lot of people are going to remember that as 'Sunak accuses Starmer of announcing a Corbyn-style manifesto' - if only because the other way around sounds so unlikely.
We're so far down the rabbit hole we can see daylight...
I feel like while this Election is likely to finally see some changes (and I will be delighted to see the Tories get gubbed), I’m also feeling dismal about the choices available.
The ever-useful reliable stalwart The Political Compass shows just how much to the authoritarian right the three main U.K.-wide parties are, which further adds to my gloom. I’m not sure the excellent Vote For Policies updated questionnaire with this Election’s manifestos is going to do much to assuage it.
I will vote - and have looked up the candidates that’ll be standing in our newly reshaped constituency on the handy Who Can I Vote For site as well as on the Parliament pages for those who have a voting history, and will be deciding amongst candidates for SNP, Labour and the much less likely to win here Scottish Greens - but none of them are yet really making me choose them as opposed to just settling for them.
Am I just cynical or are our politicians actually just a flock of utter tubes, more so than previously?
The thing that is missing (or so it seems to me) is VISION. What kind of country do we want? I fully understand Labour's reluctance to commit to too many specific things. It will only be once they are in power that they will be able to see what is affordable and what isn't. But I want to see more being talked about the vision of where the UK might be going - what are the long term aims?
I want people to be talking about making the country a more equitable and just society, where all can receive the health care and education that they need; where all have a chance to prosper and get the jobs they want, not just the privileged few; where the country is known for its peace, justice and compassion.
Specifics about tax cuts, welfare spending etc are all very well but they mean very little without some idea of the vision behind it all.
I’m enormously sympathetic to that @Rufus T Firefly, but also aware of a continuing refrain which says
What are the specifics about tax cuts, welfare spending etc.?
Talk of making the country a more equitable and just society, where all can receive the health care and education that they need; where all have a chance to prosper and get the jobs they want is all very well but it’s just fine promises and it means very little without some idea of the the specifics about budget, borrowing, tax cuts, welfare spending etc.
My son is still registered to vote at this address. He works flexitime, so planned to come home for the day to vote.
His employers have just vetoed that. As it's the Scottish school holidays and the peak week for Scots taking their holidays before the price rises for the English school holidays, they have a lot of staff off anyway. They now got quite a lot of staff hoping to arrange their flexitime to take 4 July off, so they've vetoed it.
He's applying for a postal vote so should be okay, but I wonder if this is happening elsewhere?
So am I ... Whatever happened to "The Common Good"? Or Beveridge's vision of "slaying the five giants" (which I shall refer to in my sermon on 23/6, when the OT lectionary, which we're following, gives us the story of David and Goliath)?
I’m enormously sympathetic to that @Rufus T Firefly, but also aware of a continuing refrain which says
I think this is something relatively recent, especially in terms of providing immediate specifics about a plan that might roll out over multiple years, and across changing economic circumstances. It's got to the point where even reasonable economic forecasts aren't enough, and I don't think that's necessarily a good thing.
Christians used to have a vision for society, as seen in hymn such as "The Kingdom of God is justice and joy", "Sing we a song of high revolt", "The light of the morning is breaking" and (going back a bit) "These things shall be: a loftier race". Apart from in a few URC churches, does anyone sing these today? Has faith become pietistically privatised and given up on the wider world?
Equally ++William Temple said that the Beveridge Report was “the first time anyone had set out to embody the whole spirit of the Christian ethic in an Act of Parliament” even though Beveridge declared his own religion to be “materialistic agnosticism”.
I think many voters would be suspicious of an explicitly Christian vision from a politician - hence Alistair Campbells famous "We don't do God" quote. Conversely many Christians might be suspicious of an explicitly political thrust in church - and if a preacher makes a political suggestion of which the hearer does not approve, fur may well fly!
Well, Labour are so terrified of being pilloried by the gutter press that they've ended up with a one-word slogan, which if you put it on the front of a campaign leaflet like the one I just got through the door, you get:
Change ... [Labour candidate's name].
Possibly not the effect they were aiming for, especially in constituencies with a Labour MP.
On the bright side, Labour have been canvassing in our village for the first time in 20 years, so they must think they stand a chance of overturning the Tories' 20,000+ majority.
I think many voters would be suspicious of an explicitly Christian vision from a politician - hence Alistair Campbells famous "We don't do God" quote. Conversely many Christians might be suspicious of an explicitly political thrust in church - and if a preacher makes a political suggestion of which the hearer does not approve, fur may well fly!
Well, I certainly wouldn't want to go down the "Evangelicals for Trump" line which I not only abhor but struggle to understand. However we shouldn't forget the left-wing/liberal "nonconformist conscience" of the late 1800s which certainly had a huge influence in English and Welsh society; nor should we ignore Jesus' powerful "manifesto" - quoted from Isaiah - in Luke 4.
As for fur flying - surely part of the preacher's task is to bring the challenge of potentially uncomfortable and discomfiting Biblical themes to their congregation?
As for fur flying - surely part of the preacher's task is to bring the challenge of potentially uncomfortable and discomfiting Biblical themes to their congregation?
Absolutely, but the difficulty these days - post the age of deference - is what the avenue is for challenging the preacher back (unless we are to assume that, whatever their challenge is, they're in the right)? Assuming you don't just get up and leave, in the pub, a shop, the bus queue, challenge is met with debate, or challenge back. To expound without challenge is privilege that needs to be handled wisely, and with discretion IMO.
The "practical considerations" are chiefly that the places are underfunded, meaning hardly any nurseries can afford to take children with only "free" hours. The free hours also don't cover working hours for many parents so top-up hours have to be purchased to make up the difference both in time and in the cost of providing the care vs what the government fund.
Why are you (is the government) providing a nursery school? Is the goal the early education of the child, or is the goal providing childcare to enable the child's parents to work? Because these aren't at all the same goals, and don't have the same solutions.
The "practical considerations" are chiefly that the places are underfunded, meaning hardly any nurseries can afford to take children with only "free" hours. The free hours also don't cover working hours for many parents so top-up hours have to be purchased to make up the difference both in time and in the cost of providing the care vs what the government fund.
Why are you (is the government) providing a nursery school? Is the goal the early education of the child, or is the goal providing childcare to enable the child's parents to work? Because these aren't at all the same goals, and don't have the same solutions.
In Scotland the funding is for "early learning and childcare", so it is both. I think most would agree that 1140 hours per year isn't really sufficient as childcare, however.
Will the fully funded Labour manifesto state how much they will pay the junior doctors to stop striking. It might even stop their strike days later this month
Rory Stewart, the ex-Tory, says that Labour cannot meet their manifesto pledges without somehow increasing taxes. As they have already ruled out increasing income tax and NI, he (Stewart) guesses that somehow the Labour Treasury will have to have a new, separate tax on top.
Of course, Stewart is very critical of Sunak and the Tories. So make of that whatever you like.
Rory Stewart, the ex-Tory, says that Labour cannot meet their manifesto pledges without somehow increasing taxes. As they have already ruled out increasing income tax and NI, he (Stewart) guesses that somehow the Labour Treasury will have to have a new, separate tax on top.
If that was the clip of him talking to Reeves it was painful watching two people talk who didn't know anything about economics or were pretending not to know. He repeated the canards about 'running out of money' and austerity as the means of getting the deficit down.
Rory Stewart, the ex-Tory, says that Labour cannot meet their manifesto pledges without somehow increasing taxes. As they have already ruled out increasing income tax and NI, he (Stewart) guesses that somehow the Labour Treasury will have to have a new, separate tax on top.
Of course, Stewart is very critical of Sunak and the Tories. So make of that whatever you like.
Stewart is still a tory, by politics if not by affiliation.
Rory Stewart, the ex-Tory, says that Labour cannot meet their manifesto pledges without somehow increasing taxes. As they have already ruled out increasing income tax and NI, he (Stewart) guesses that somehow the Labour Treasury will have to have a new, separate tax on top.
Of course, Stewart is very critical of Sunak and the Tories. So make of that whatever you like.
Labour have vowed that they will not raise taxes on working people. As I am retired, it gives me no comfort whatsoever
You don't have to be conservative by inclination or affiliation to ask how Labour - or any other political party - are going to fund their electoral pledges.
I'd like more detail but wouldn't regard a certain amount of vagueness or open-endedness about the means as a deal-breaker.
As long as they tax the rich and the big corporations, and not those least able to bear the burden ...
I'd like to see some more of that. Tax the rich buggers first.
Close the tax evasion loopholes.
I'm a simple soul and don't understand economics.
Perhaps someone could explain how Labour will fund their pledges without taxing somebody or other or printing more bank notes.
Not a facetious question. I'd like to know how these things work without having to ask my economist brother-in-law to explain using language I don't understand.
The theory is that, by being less shit in general and by pursuing some specific policies (possibly including closer ties to the EU), a Labour government will grow the economy and hence existing taxation will bring in more revenue. They can also borrow money if they can convince markets that the borrowing is for specific purposes that will pay for themselves in the medium term.
The theory is that, by being less shit in general and by pursuing some specific policies (possibly including closer ties to the EU), a Labour government will grow the economy and hence existing taxation will bring in more revenue. They can also borrow money if they can convince markets that the borrowing is for specific purposes that will pay for themselves in the medium term.
Good summary.
I might have a bit of time later to do a pencil sketch of fiscal rules and macro economics....
The effect of printing money as I understand it is that it makes the money already in the economy worth less and so increases inflation. This is not a good thing, under most circumstances, but may well be better than other options.
It is especially not a good thing for people who receive a fixed income, such as pensioners, or people whose wealth consists of large quantities of money rather than other productive investments. Since people with lots of money tend to be influential printing money may get a worse press than it deserves.
Some economists, as I understand it, mostly left-wing, think that all government spending is effectively printing money - in which case taxation and government borrowing are effectively just deleting money. The government has not got a big pile of banknotes under its mattress and its gold reserves are not enough for all of its spending. On this model the point of taxation is not for the government to cover its debts but to make sure there isn't too much money sloshing around. I think that is still a controversial way of modelling the economy but it's worth mentioning.
OK. Apologies if I am teaching anyone to suck eggs but I think these concepts are important and they are never taught properly outside of economic courses, yet the terminology is banded about by journalists and politicians all the time.
I am not an economist. I do not claim to be, but since around 2008, I've read a lot of economists and tried to grasp all this stuff. I think I've got the basics. I struggle with the Phillips Curve and some more technical bits but hopefully the following will be helpful... (It will by necessity, be quite simplistic).
1. Money
I think it's important to understand that money isn't real. It is merely a means of keeping score and a method of exchange. https://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm
Central banks run fiat currencies. They literally create money for all of us to use. Monetary policy is aimed at making the economy function as best as possible. If inflation is too high they reduce the money supply and increase interest rates to reduce demand (how much all of us are trying to spend). If the economy is not doing so well, they reduce interest rates and increase the money supply.
2. GDP
GDP - Gross Domestic Product, is simply an estimate of the total of what all of us are doing in the economy. Every shop and factory, every consultancy service, every restaurant etc.
3. Growth
Since the Industrial Revolution, the economy has grown by a very large amount. This is in part because our population is much bigger. It is to a large extent due to all of us doing much more. Modern economies are complex with so many goods and services that we get to partake in. In general, there has been and remains an expectation that the economy needs to grow and should grow.
Here's where it gets interesting in a philosophical sense. We live in a world of finite resources, hence many argue that eternal growth (on which our prosperity depends) is not possible. The question then becomes one of when do we reach this limit and what happens then?
FWIW - not much - I am sanguine about this. For the past century or so, the growth in the world economy has to a large extent been built on consumption of raw materials - most notably oil. There are clearly two limits to this; the supply of oil is running out and the environmental damage of fossil fuels is mounting up. So in that sense, growth may well be coming to a grinding halt. However, so much of what we use in the modern economy is a service. Increasingly (although not fast enough) we are learning to reuse raw materials rather than just use them once and throw them away. Sources of energy are now available that are renewable. A lot of growth is due to increased productivity rather than increased consumption per se. It is worth remembering that in one sense the cost of anything is the labour costs of producing it. You want to buy a car? Well you pay for the components and for the people who put it together. Where is the cost of the components? In their raw materials and the people who design them and put them together. And the raw materials? The cost is paying someone to dig them out of the ground. There are other costs though, like the cost of land and the cost of capital, but you get the idea.
There's a key concept here of 'rent-seeking' in an economy rather than 'productive' activities but I'm going to leave that for now.
https://www.kateraworth.com/doughnut/ - if you're interested in the arguments about the dangers of on-going growth and how to make our finite world work for us.
For me, it comes back to the fact that money isn't real but a means of keeping score and the things that make for real growth are innovation and productivity and paying people to do things. It's an interesting and important area but for our purposes here, I want to stipulate that the UK economy has a lot of room to grow. The question is about the fundamentals that are needed for growth but we're come back to that.
The definition here of growth is simply the size of the national economy compared to the previous year. The UK GDP has, on average grown by around 3% year on year since World War II.
I will just note here that the population has increased as well and the most-meaningful statistic in terms of prosperity for most of us is the per-capital GDP.
3. Recession
In general, everyone knows what a recession is - it's a period of time when the economy is not doing well and people are worse off. It has a precise definition which is two consecutive quarters of negative growth. I.e. In the period January to March the total GDP is smaller than the previous year's first quarter and the same thing happens April-June.
A recovery has a precise definition as well, which is above trend-level growth that brings the economy back to where it would have been if the recession had not happened.
There's a good reason why this happens. In a recession, people become unemployed and investment (i.e. in new equipment) is held back. As an economy recovers these things are reversed and unless something fundamental has changed, the economy bounces back to where it was before.
This is a very helpful graph: It shows three things. 1) The UK GDP/head has grown at ~2.2% year on year since 1955. 2) With each recession up to 2008, the economy experienced a post-recession period of above-trend growth and returned to its trend line. Following the 2008, recession the UK economy never had a recovery.
=======
So, in terms of the government's fiscal position where are we?*
Well, these things are not disconnected but for our purposes here we'll talk about them as though they were.
The government raises taxes, borrows money and then spends money over the multiple departments. If the government spends more than it gets in tax revenue, then the gap is filled with borrowing and the total stock of government debt goes up. Conversely, if the government spends less than it takes in tax, the borrowing goes down.**
How much tax the government can take going forward is a matter of complex modelling by the treasury and especially the OBR. We can make some crude estimates though, very easily.
If all other things are equal and the economy grows by 3% in a year, then the tax take will be 3% higher.
Labour's fiscal plan is based on keeping tax rates mostly unchanged but being able to spend more because the increased growth in the economy brings more revenue into the treasury.
AFAICT, all economists believe that there is huge growth potential in the UK economy. The debate is how much can be stimulated without big investment (i.e. in infrastructure and training) by the government.
FWIW (not much), I think Labour need to be braver. That's not to say what they plan to do won't work. I think it will - not least because there's a lot of private investment being held back by uncertainty about the government (i.e. think Truss!) - but that it will only be a small benefit when the UK needs a lot in order to fix the public realm. Labour's plan is to build from this small base and do more as some growth allows confidence to do more.
It's a helluva lot better than what the Tories have done and plan to do, let's be clear on that. I long for more though as the public sector is falling apart.
AFZ
*I am deliberately ignoring MMT and the Quantitative Easing here. I am aware of them but they do not help to make things clearer, for the purposes of our discussion here.
**I will leave the discussion of government debt for another time.
On this model the point of taxation is not for the government to cover its debts but to make sure there isn't too much money sloshing around. I think that is still a controversial way of modelling the economy but it's worth mentioning.
Also, requiring tax to be paid in the currency issued by the government gives that currency value that a "free market" might not otherwise give it. There's nothing stopping shop keepers from accepting any thing they want in exchange for what they're selling - whether that's a barter system using other goods or services, or different currencies - though they would almost always insist on something that they consider to have equal or greater value than what they're selling. It happens in many nations where the local currency fails and people prefer to buy and sell using a stronger international currency (US dollars, Euros etc). The government insisting that taxes are paid in the currency they issue prevents that from becoming totally worthless (of course, it also creates an opportunity for anyone with excess of that currency to sell it for more than it's face value to allow others to pay their taxes).
This use of currency is far older than our modern capitalist societies and monetary theories. In the Roman Empire, practically all sources of precious metals (gold, silver, lead etc) were in the direct control of Caesar or regional governors appointed by Caesar - many of the mines were run by the legions, paid by Caesar. If something needed to be paid for (wages for legions, a new military road, gladiatorial games to please the citizens of Rome, buying the loyalty of someone ...) then Caesar would dip into his own personal treasury and produce the money - even if that meant stamping a whole new set of coins. Money issued by Caesar carried his image because it was quite literally his gold/silver/copper that was used to make the coins. And, of course, taxes were paid with the same coins and that wealth eventually came back to Caesar ... taxation was "giving to Caesar what is Caesar's". Other rulers in the ancient world did much the same, and even some Roman governors issued coinage from their own personal wealth.
That system in various forms persisted throughout the Medieval period in Europe, with basically all the wealth of a country owned by a King who then gives that wealth out to his supporters, and takes it back from any who fail to support him. That's slowly eroded as others slowly accumulate their own wealth and the ability of the King to take back property is eroded, and as the wealth of a nation gets dispersed among more and more people then the personal property of the King becomes insufficient to bankroll the upkeep of the military and national infrastructure. At which point economies move from being based on the individual wealth of the monarch to a national treasury supported by taxation. But, national governments still hold that power to issue currency, and as currencies are no longer linked directly to tangible wealth (eg: gold reserves) there are no theoretical limits to how much money a government issues to fund government programmes - though there are other significant economic impacts of doing so.
Truss' tenure would - in the ideal world - see the end of the constant platforming of the Tufton Street mob in the media. It won't of course.
The bigger blame attaches itself to her peers, especially the first coalition government who carried out an act of vandalism of the public realm under the cover of austerity. A period of low interest rates which could have been used to invest in the countries infrastructure was criminally ignored. The economics profession started to sound alarms relatively early on, and at this point wider expert opinion (outside, it seems, the current Labour Party) has arrived at a consensus that the deep cuts were counterproductive and goes a long way towards explaining the UK's current economic woes as well as the Brexit vote.
Comments
I can’t see it strongly motivating Scots Tories if their leader just gives up mid-campaign.
1. Growth
2. Efficiency savings
3. Clamping down on tax evasion
I don't believe any of them
First the the Institute for Fiscal Studies are excellent. The look at data dispassionately and based on the information they use, their output is reliable and meaningful.
However, there is a big caveat that should be attached to that. The IFS doesn't do Macro. What is meant by that is that the IFS looks at the data and adds them up and works out what the answer is. However, and this is a vital point, it is impossible for governments to do anything financial without their being a macro-economic effect. That there is an effect is incontrovertible. This is because the government is such a large part of the economy. Whether it is too large or too small is a matter of debate but it is around 40% of the economy.
If we play the hypothetical game, let's say that the government invested in something really good and it had a big productive effect on the economy, boosting economic growth by over £100Bn per year. The resultant tax-take would be an extra £40Bn, approximately. Let's say this policy cost the government £30Bn per year. Well one way of reporting this would be that there is a £30Bn hole in the government's plans. The reality being that there is actually an extra £10Bn of headroom for the chancellor to work with. It is also true that certain government policies can significantly reduce growth and therefore reduce the expected tax-take and create a 'hole.'
So why does the IFS ignore Macro effects of policies? A couple of reasons. The major one is that it's not part of their remit. It is not how they do their fiscal analysis. There is a softer reason which is that the macroeconomic effects are unpredictable. So whilst an effect can be predicted, the size of the effect is usually unknown with precision. The Office of Budget Responsibility do this kind of work. They get slated by people who either do not understand their predictions or who choose not to. If their central prediction is not spot on then they get called 'wrong' whereas if you look at the ranges they put out, they are very reliable. It's a bit like me predicting that England will beat Germany 5-0 and being called completely wrong if England only managed to win 5-1.
Labour are being very canny and careful here. There is huge potential for growth in the UK economy at the moment because investment is being held back and the UK's productivity is poor. Labour is planning to do some small but meaningful things initially. If by doing that they can unlock the growth potential then the tax revenues that follow will allow much more significant and meaningful changes.
Will it work?
Well, I cannot sit here and tell you it's a certainty but it's sound and reasonable.
If you talk to economists (by which I mean proper economists rather than 'city economists'*) They will tell you that the UK needs more radical changes but that does not mean what Labour is proposing is wrong, just limited.
The judgement we all get to make as voters is simply this; Is it an improvement on what we have had and what the Tories are planning? To which the answer is undoubtedly YES.
There is a lot of held-back private sector investment that Reeves is hoping to unlock. That's why she talks about government-enabling investment. There is a lot of potential to make things better when the trade agreements with the EU come up for review in a year or so's time.
The IFS figures are correct as far as they go but they take no notice of these potential effects. The OBR does. If the OBR then, as a consequence change the growth projections for the second half of this decade, then you'll see the IFS figures move accordingly.
In summary, Labour has a credible plan. Economically it is not what I would wish for. I do acknowledge why it's politically smart though. In terms of GDP/head our economy has been flat for a very long time. A little bit of growth will feel like a massive step up. Labour's plan is to use these benefits to get more ambitious over time. The problem for the UK is that the public sector is so screwed at the moment that this delay is very painful.
AFZ
*City economists are very good at what they do: study the economy to maximise profits for their employers. That is not what academic economists do, which is to study the economy and understand how it works for the benefit (or not) of all. The vast majority of 'economists' in the media are of the former type. I learnt this difference about 15 years ago, and as a consequence I have a much better understanding of the economy than what is presented by our media. Although I am definitely not an expert, I long to get these voices properly heard.
For the record I have read / still read:
Paul Krugman
Joseph Stiglitz
Simon Wren-Lewis
Danny Blanchflower
Mark Blyth
Robert Skidelsky
There's probably others but those are the one's I can remember. All are professors of economics, two are Nobel prize winners. All of them called out austerity and five of them pointed out the dire effects of Brexit. The sixth, I do not know about as I haven't seen Skidelsky view on Brexit either way but he is the one I've read least.
The reason investment in productivity is 'held back' is that the rentier economy pays so well. At the smaller scale this is behind the Brexit/Johnson/Reform voting coalition: https://www.perc.org.uk/project_posts/englands-rentier-alliance/
Similarly talk of 'growing the pie' ignores the fact that the link between wages and productivity growth was broken decades ago. The fundamental problem at this point is wealth inequality. Everything else flows from this; the concentration of the economy around a few service industries in the south east, low investment in productivity, asset price inflation, etc.
Why not, given that the new government has yet to take office?
Or are you, like Pilate, asking that famous, and possibly, rhetorical question - *What is truth?*...
As we don't have the latter, the options are either taxes rising or little delivery. Politicians always like to talk about efficiencies and trimming the fat to pay for their promises, but for much of the public services it feels like there is little fat left to trim.
To excess it is. The question is what constitutes excess.
Sir Keir Starmer, the former staunch ally of Jeremy Corbyn, has stated that the Conservatives have delivered a Jeremy Corbyn manifesto...a manifesto that he was proud to support in 2017 and 2019.
To be clear he said Sunak had announced a 'Corbyn-style manifesto'. Nevertheless you are not wrong that Starmer was being dishonest/disingenuous.
Worse than that he's deliberately trashing manifestos that were properly costed to burnish his TINA credentials.
We're so far down the rabbit hole we can see daylight...
The ever-useful reliable stalwart The Political Compass shows just how much to the authoritarian right the three main U.K.-wide parties are, which further adds to my gloom. I’m not sure the excellent Vote For Policies updated questionnaire with this Election’s manifestos is going to do much to assuage it.
I will vote - and have looked up the candidates that’ll be standing in our newly reshaped constituency on the handy Who Can I Vote For site as well as on the Parliament pages for those who have a voting history, and will be deciding amongst candidates for SNP, Labour and the much less likely to win here Scottish Greens - but none of them are yet really making me choose them as opposed to just settling for them.
Am I just cynical or are our politicians actually just a flock of utter tubes, more so than previously?
I want people to be talking about making the country a more equitable and just society, where all can receive the health care and education that they need; where all have a chance to prosper and get the jobs they want, not just the privileged few; where the country is known for its peace, justice and compassion.
Specifics about tax cuts, welfare spending etc are all very well but they mean very little without some idea of the vision behind it all.
His employers have just vetoed that. As it's the Scottish school holidays and the peak week for Scots taking their holidays before the price rises for the English school holidays, they have a lot of staff off anyway. They now got quite a lot of staff hoping to arrange their flexitime to take 4 July off, so they've vetoed it.
He's applying for a postal vote so should be okay, but I wonder if this is happening elsewhere?
I think this is something relatively recent, especially in terms of providing immediate specifics about a plan that might roll out over multiple years, and across changing economic circumstances. It's got to the point where even reasonable economic forecasts aren't enough, and I don't think that's necessarily a good thing.
Equally ++William Temple said that the Beveridge Report was “the first time anyone had set out to embody the whole spirit of the Christian ethic in an Act of Parliament” even though Beveridge declared his own religion to be “materialistic agnosticism”.
Change ... [Labour candidate's name].
Possibly not the effect they were aiming for, especially in constituencies with a Labour MP.
On the bright side, Labour have been canvassing in our village for the first time in 20 years, so they must think they stand a chance of overturning the Tories' 20,000+ majority.
Well, I certainly wouldn't want to go down the "Evangelicals for Trump" line which I not only abhor but struggle to understand. However we shouldn't forget the left-wing/liberal "nonconformist conscience" of the late 1800s which certainly had a huge influence in English and Welsh society; nor should we ignore Jesus' powerful "manifesto" - quoted from Isaiah - in Luke 4.
As for fur flying - surely part of the preacher's task is to bring the challenge of potentially uncomfortable and discomfiting Biblical themes to their congregation?
Absolutely, but the difficulty these days - post the age of deference - is what the avenue is for challenging the preacher back (unless we are to assume that, whatever their challenge is, they're in the right)? Assuming you don't just get up and leave, in the pub, a shop, the bus queue, challenge is met with debate, or challenge back. To expound without challenge is privilege that needs to be handled wisely, and with discretion IMO.
Why are you (is the government) providing a nursery school? Is the goal the early education of the child, or is the goal providing childcare to enable the child's parents to work? Because these aren't at all the same goals, and don't have the same solutions.
In Scotland the funding is for "early learning and childcare", so it is both. I think most would agree that 1140 hours per year isn't really sufficient as childcare, however.
Of course, Stewart is very critical of Sunak and the Tories. So make of that whatever you like.
If that was the clip of him talking to Reeves it was painful watching two people talk who didn't know anything about economics or were pretending not to know. He repeated the canards about 'running out of money' and austerity as the means of getting the deficit down.
Stewart is still a tory, by politics if not by affiliation.
It consisted simply of the text, "Britain is broken. Britain needs Reform" on a black background without any sound or movement.
I could hardly contain my excitement!
(At least it didn't feature You-know-who in the pub).
Labour have vowed that they will not raise taxes on working people. As I am retired, it gives me no comfort whatsoever
I'd like more detail but wouldn't regard a certain amount of vagueness or open-endedness about the means as a deal-breaker.
As long as they tax the rich and the big corporations, and not those least able to bear the burden ...
I'd like to see some more of that. Tax the rich buggers first.
Close the tax evasion loopholes.
I'm a simple soul and don't understand economics.
Perhaps someone could explain how Labour will fund their pledges without taxing somebody or other or printing more bank notes.
Not a facetious question. I'd like to know how these things work without having to ask my economist brother-in-law to explain using language I don't understand.
Good summary.
I might have a bit of time later to do a pencil sketch of fiscal rules and macro economics....
It is especially not a good thing for people who receive a fixed income, such as pensioners, or people whose wealth consists of large quantities of money rather than other productive investments. Since people with lots of money tend to be influential printing money may get a worse press than it deserves.
Some economists, as I understand it, mostly left-wing, think that all government spending is effectively printing money - in which case taxation and government borrowing are effectively just deleting money. The government has not got a big pile of banknotes under its mattress and its gold reserves are not enough for all of its spending. On this model the point of taxation is not for the government to cover its debts but to make sure there isn't too much money sloshing around. I think that is still a controversial way of modelling the economy but it's worth mentioning.
There aren't that many pledges to start with.
OK. Apologies if I am teaching anyone to suck eggs but I think these concepts are important and they are never taught properly outside of economic courses, yet the terminology is banded about by journalists and politicians all the time.
I am not an economist. I do not claim to be, but since around 2008, I've read a lot of economists and tried to grasp all this stuff. I think I've got the basics. I struggle with the Phillips Curve and some more technical bits but hopefully the following will be helpful... (It will by necessity, be quite simplistic).
1. Money
I think it's important to understand that money isn't real. It is merely a means of keeping score and a method of exchange.
https://www.imf.org/external/pubs/ft/fandd/2012/09/basics.htm
Central banks run fiat currencies. They literally create money for all of us to use. Monetary policy is aimed at making the economy function as best as possible. If inflation is too high they reduce the money supply and increase interest rates to reduce demand (how much all of us are trying to spend). If the economy is not doing so well, they reduce interest rates and increase the money supply.
2. GDP
GDP - Gross Domestic Product, is simply an estimate of the total of what all of us are doing in the economy. Every shop and factory, every consultancy service, every restaurant etc.
https://www.bankofengland.co.uk/explainers/what-is-gdp
3. Growth
Since the Industrial Revolution, the economy has grown by a very large amount. This is in part because our population is much bigger. It is to a large extent due to all of us doing much more. Modern economies are complex with so many goods and services that we get to partake in. In general, there has been and remains an expectation that the economy needs to grow and should grow.
Here's where it gets interesting in a philosophical sense. We live in a world of finite resources, hence many argue that eternal growth (on which our prosperity depends) is not possible. The question then becomes one of when do we reach this limit and what happens then?
FWIW - not much - I am sanguine about this. For the past century or so, the growth in the world economy has to a large extent been built on consumption of raw materials - most notably oil. There are clearly two limits to this; the supply of oil is running out and the environmental damage of fossil fuels is mounting up. So in that sense, growth may well be coming to a grinding halt. However, so much of what we use in the modern economy is a service. Increasingly (although not fast enough) we are learning to reuse raw materials rather than just use them once and throw them away. Sources of energy are now available that are renewable. A lot of growth is due to increased productivity rather than increased consumption per se. It is worth remembering that in one sense the cost of anything is the labour costs of producing it. You want to buy a car? Well you pay for the components and for the people who put it together. Where is the cost of the components? In their raw materials and the people who design them and put them together. And the raw materials? The cost is paying someone to dig them out of the ground. There are other costs though, like the cost of land and the cost of capital, but you get the idea.
There's a key concept here of 'rent-seeking' in an economy rather than 'productive' activities but I'm going to leave that for now.
https://www.kateraworth.com/doughnut/ - if you're interested in the arguments about the dangers of on-going growth and how to make our finite world work for us.
For me, it comes back to the fact that money isn't real but a means of keeping score and the things that make for real growth are innovation and productivity and paying people to do things. It's an interesting and important area but for our purposes here, I want to stipulate that the UK economy has a lot of room to grow. The question is about the fundamentals that are needed for growth but we're come back to that.
The definition here of growth is simply the size of the national economy compared to the previous year. The UK GDP has, on average grown by around 3% year on year since World War II.
I will just note here that the population has increased as well and the most-meaningful statistic in terms of prosperity for most of us is the per-capital GDP.
3. Recession
In general, everyone knows what a recession is - it's a period of time when the economy is not doing well and people are worse off. It has a precise definition which is two consecutive quarters of negative growth. I.e. In the period January to March the total GDP is smaller than the previous year's first quarter and the same thing happens April-June.
A recovery has a precise definition as well, which is above trend-level growth that brings the economy back to where it would have been if the recession had not happened.
There's a good reason why this happens. In a recession, people become unemployed and investment (i.e. in new equipment) is held back. As an economy recovers these things are reversed and unless something fundamental has changed, the economy bounces back to where it was before.
This is a very helpful graph: It shows three things. 1) The UK GDP/head has grown at ~2.2% year on year since 1955. 2) With each recession up to 2008, the economy experienced a post-recession period of above-trend growth and returned to its trend line. Following the 2008, recession the UK economy never had a recovery.
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So, in terms of the government's fiscal position where are we?*
Well, these things are not disconnected but for our purposes here we'll talk about them as though they were.
The government raises taxes, borrows money and then spends money over the multiple departments. If the government spends more than it gets in tax revenue, then the gap is filled with borrowing and the total stock of government debt goes up. Conversely, if the government spends less than it takes in tax, the borrowing goes down.**
How much tax the government can take going forward is a matter of complex modelling by the treasury and especially the OBR. We can make some crude estimates though, very easily.
If all other things are equal and the economy grows by 3% in a year, then the tax take will be 3% higher.
Labour's fiscal plan is based on keeping tax rates mostly unchanged but being able to spend more because the increased growth in the economy brings more revenue into the treasury.
AFAICT, all economists believe that there is huge growth potential in the UK economy. The debate is how much can be stimulated without big investment (i.e. in infrastructure and training) by the government.
FWIW (not much), I think Labour need to be braver. That's not to say what they plan to do won't work. I think it will - not least because there's a lot of private investment being held back by uncertainty about the government (i.e. think Truss!) - but that it will only be a small benefit when the UK needs a lot in order to fix the public realm. Labour's plan is to build from this small base and do more as some growth allows confidence to do more.
It's a helluva lot better than what the Tories have done and plan to do, let's be clear on that. I long for more though as the public sector is falling apart.
AFZ
*I am deliberately ignoring MMT and the Quantitative Easing here. I am aware of them but they do not help to make things clearer, for the purposes of our discussion here.
**I will leave the discussion of government debt for another time.
This use of currency is far older than our modern capitalist societies and monetary theories. In the Roman Empire, practically all sources of precious metals (gold, silver, lead etc) were in the direct control of Caesar or regional governors appointed by Caesar - many of the mines were run by the legions, paid by Caesar. If something needed to be paid for (wages for legions, a new military road, gladiatorial games to please the citizens of Rome, buying the loyalty of someone ...) then Caesar would dip into his own personal treasury and produce the money - even if that meant stamping a whole new set of coins. Money issued by Caesar carried his image because it was quite literally his gold/silver/copper that was used to make the coins. And, of course, taxes were paid with the same coins and that wealth eventually came back to Caesar ... taxation was "giving to Caesar what is Caesar's". Other rulers in the ancient world did much the same, and even some Roman governors issued coinage from their own personal wealth.
That system in various forms persisted throughout the Medieval period in Europe, with basically all the wealth of a country owned by a King who then gives that wealth out to his supporters, and takes it back from any who fail to support him. That's slowly eroded as others slowly accumulate their own wealth and the ability of the King to take back property is eroded, and as the wealth of a nation gets dispersed among more and more people then the personal property of the King becomes insufficient to bankroll the upkeep of the military and national infrastructure. At which point economies move from being based on the individual wealth of the monarch to a national treasury supported by taxation. But, national governments still hold that power to issue currency, and as currencies are no longer linked directly to tangible wealth (eg: gold reserves) there are no theoretical limits to how much money a government issues to fund government programmes - though there are other significant economic impacts of doing so.
The bigger blame attaches itself to her peers, especially the first coalition government who carried out an act of vandalism of the public realm under the cover of austerity. A period of low interest rates which could have been used to invest in the countries infrastructure was criminally ignored. The economics profession started to sound alarms relatively early on, and at this point wider expert opinion (outside, it seems, the current Labour Party) has arrived at a consensus that the deep cuts were counterproductive and goes a long way towards explaining the UK's current economic woes as well as the Brexit vote.
Sauce for the goose...
The damage the Conservatives have done is certainly going to take longer than one term to fix.