Wednesday, 31 December 2014

MOST READ posts of 2014


After a bumper year for the LEAP blog with a record number of posts and a record number of hits, what were the most-read posts of the year?

10. Labour must break with austerity - September
Ahead of Labour Party conference a group of economists and campaigners - including Richard Murphy, Ann Pettifor, and Prem Sikka - wrote to the Guardian, advising Labour to break with austerity

9. Analysis: Osborne's plan for permanent austerity - December
The LEAP analysis of George Osborne's Autumn Statement on 3 December which announced plans to take public spending back to levels not seen since the 1930s.

8. Are we reaching the TTIPing point? - July
The Transatlantic Trade and Investment Partnership (TTIP) - a massive threat to democracy - was one of the big campaigning issues of 2014 and will continue to be in 2015. Also read our Update on TTIP from John Hilary.

7. Labour market analysis: jobs recovery or jobs illusion? - April
We looked behind the impressive headline figures on jobs to reveal the changing shape of the labour market to reveal falling pay levels and rising self-employment

6. What has austerity achieved? - November
A quick post giving a 10-point guide to the 'achievements' of the coalition government's austerity policies ...

5. Five reasons why Labour MPs should oppose the welfare cap - March
In March the House of Commons voted on proposals to bring in an overall cap on welfare spending - we gave five reasons why MPs should have rejected it. Sadly, they didn't but the post generated huge interest

4. Thames Water: a lesson in privatisation - June
We can learn a lot about why privatisation has been a key driver of inequality over the last generation by looking at the experience of individual industries or companies. We looked at Thames Water - and so did lots of our readers!

3. Welfare, tax and the civilised society - April
In April, HM Revenue & Customs announced its proposal to send personalised breakdowns of where your tax goes. We exposed the misrepresentations, but also made the case for tax and for welfare spending

2. LEAP: Books of the Year 2014 - December
We asked some contributors and friends - including Aditya Chakrabortty, John McDonnell MP and Ann Pettifor - to name their books of the year. They made some interesting choices - and you were interested in their recommendations!

1. A Radical Read - The Failed Experiment - April
In April we previewed the publication of LEAP co-ordinator Andrew Fisher's first book The Failed Experiment ... and how to build an economy that works, and the post became your biggest read of 2014.

Tuesday, 30 December 2014

The Year Ahead: prospects for 2015


We look ahead to the big issues for 2015, following our look back at 2014

The UK economy

The consensus of independent forecasters is that the UK economy will grow by 2.5% in 2015. To put that in perspective, new estimates suggest the economy grew by 2.6% this year - but for whom? In 2014, incomes continued to stagnate, personal debt continued to rise, tax revenues only marginally increased, and the economy continued to be powered by the inherently risky forces of consumer debt and financial services. Expect the same in 2015. Growth yes, a bit slower probably, but no great gains for the many, only the few.

We know of course - and the OBR confirmed it earlier this month - that Osborne's pledge to have net debt falling in 2015/16 will have failed. Austerity has failed to close the deficit and reduce the debt. The same austerity policies will continue to fail in 2015-16, and will continue to have negative consequences in terms of rising inequality, poverty and homelessness.

Wage growth is unlikely to shoot up in 2015, with the OBR predicting only a modest 2.0% rise in 2015. Whether this reflects real wage growth is unclear, and will depend on continued low oil prices keeping inflation low in 2015. Even if marginal real wage growth occurs in 2015, it will do little to unravel the 10% drop in real incomes since 2010. However for public sector workers and those on benefits their income rises will continue to be capped at 1% (likely below inflation).

The May 2015 election should be pivotal (and in the longer term it may be) but for 2015/16 both of the major parties capable of playing a leading role in government are committed to exactly the same spending limits - a level of austerity much greater than in the previous two years. If Osborne again takes up residence at 11 Downing Street then we can expect permanent austerity, however, if it is Mr Balls then in the longer term austerity will be present, but considerably milder (as Ben Chu shows).

But by that time, will austerity policies in 2015/16 have driven us towards recession? It's a serious question with signs of economic slowing at the end of 2014. Can low inflation and debt-based consumer spending come to the rescue? That is the UK economic model for 2015.

Eurozone

The Eurozone enters a pivotal year politically and economically, teed-up nicely by the decision of the Greek Parliament to force new elections. If, as expected, Syriza wins those elections and manages to form a government then the European Union enters a new phase - a member state with an avowedly (i.e. not just nominally) socialist government that does not support the dominant neoliberal paradigm.

The ramificiations across Europe could be huge, especially with elections due in austerity-hit Spain at the end of 2015. If socialist governments are elected and sustained, Europe will become the testing ground for modern socialism. Part of that testing ground will be the reaction - what sort of intervention would such a government face? Will putting the Greek people above creditors (essentially the political divide in Greece) lead to the markets and international financial insitutions, or even foreign governments, trying to destabilise the country?

From a UK perspective how will this play in our internal debate about EU membership? Will parts of Europe turning red encourage UKIP and the Tories to push more strongly for separation, or will an overbearing EU intervening in democratic governments.

On the economic front, would debt restructuring in Greece and possibly Spain mean a hit for UK creditors or affect demand for UK exports?

New year, no change?

Fundamentally though the risks and tensions in the UK and Eurozone economies will persist in 2015. The growth and stability pact imposed on individual countries, and the inertia of the European Central Bank, will mean the continuation of austerity for many and a monetarist framework for those with slightly stronger economies. Whether Greece and Spain can begin to overturn this failed experiment is the big question for 2015 ...

And the same question applies in the UK, but will be left unanswered by both Labour and Conservative governments it seems. Neither party is offering a different economic vision - neither will redistribute income and wealth, or rebalance the economy away from financial services, or offer anything like the vision necessary to build an economy as if people mattered.

The challenge in 2015 will not be the debt, the deficit or public spending levels. It will be about creating the political forces here - as has been done in Greece and Spain - capable of dumping a failed economic model that brings only economic instability, inequality and misery.

Monday, 22 December 2014

2014: The Year in Review


As we approach the end of the year, we take a look back through the eyes of the LEAP blog, which has had a record number of posts and of hits in 2014 ...

January
A theme that would be returned to intermittently throughout the year was the contradictory or insufficient policies pushed by Ed Balls and the Labour opposition - also covered this month were rising house prices and a great new book by John Hilary.

February
One of the major political issues of the year was the Scottish indepedence referendum in September, so in advance we gave our economic analysis: Posturing over the pound. On other issues, Prem Sikka analysed the Banking Reform Act, and we continued to scrutinise the misbehaviour of banks like Barclays.

March
We paid tribute to Tony Benn who passed away in March, with LEAP Chair John McDonnell saying "What a world we would have created had we listened to him". We assessed the March 2014 Budget, and the inadequacy of the Labour opposition - this time over the the welfare cap - and we continued to monitor the UK banking sector as Santander was fined.

April
As the financial year ended, we gave our assessment of George Osborne's "long-term economic plan" and analysed the state of the UK labour market. The Treasury also announced their intention to send out pie charts showing where your taxes go. We fact-checked their claims on welfare spending, as well as highlighting Iain Duncan Smith's failures. We also previewed the imminent launch of LEAP co-ordinator Andrew Fisher's book The Failed Experiment ... and how to build an economy that works. As Martin Wolf penned an article on nationalising money creation, we assessed the debate on credit, banks and democracy.


May
The proposed takeover of AstraZeneca by Pfizer hit the headlines, Prem Sikka applied a public interest test and looked at the clash between nationalism and neoliberalism. As the European elections loomed we argued that is was boardrooms not Brussels that had taken our economic sovereignty. And 21 years on from the death of John Smith we assessed his offer on workers' rights. Continuing our updates on the housing market, we penned "Housing is a right, amassing wealth is not".

June
Figures revealed that only the top 20% were sharing in Osborne's 'recovery'. While a nonplussed Andrew Fisher considered the findings of the Living Wage Commission and Labour's latest capitulation on welfare policy. The annual report of Thames Water also gave us a lesson in who benefits from privatisation, while the Eurozone continued to flounder.

July
As mass strike action loomed on 10 July, we used published HBAI data to argue We all need a pay rise. Giving us a break from Eurozone bad news, Germany agreed to introduce a minimum wage. But elsewhere, the EU and US were negotiating TTIP - a treaty threatening democracy. While at its National Policy Forum, Labour and its affiliates decided to stick with austerity, if elected.

August
Danny Alexander used the quiet summer period to set out Lib Dem plans to cut public services and increase inequality (not how he described it, but a more honest assessment). The wider economy continued to add jobs but not increase pay, while Prem Sikka assessed a Bank of England consultation on bankers' bonuses.

September
As conference season fell upon us, we previewed TUC Congress, co-ordinated a Guardian letter arguing Labour must break with austerity. As Labour conference passed we assessed the pledge for an £8 an hour minimum wage by 2020 and Ed Miliband's speech. Osborne kicked off Tory Party conference by calling for a two-year benefit freeze.

October
At Tory conference David Cameron's speech was a blueprint for further inequality, while disappointing figures arrived for George Osborne on the deficit and housing benefit figures also highlighted just how counterproductive is austerity. We also reviewed a new pamphlet by Richard Wilkinson & Kate Pickett. The banks continued to sack workers for profits (Lloyds this time).

November
As by-elections saw UKIP take a seat, we looked at new figures on the cost on migration and silly Tory targets, to analyse the xenophobia vs neoliberalism tensions straining the Conservatives - while John Hilary updated us on TTIP. New contributor Luke Thomas also explained what Black Friday told us about the UK economy. We also assessed the Mansion Tax and what austerity has achieved, and found that corporate profits were at record highs as the Living Wage Week campaigned for better pay.

December

On the eve of the Autumn Statement, we took another look at the unbalanced labour market, before turning our attentions to assessing Osborne's plan for permanent austerity, and later assessing claims of economic rebalancing. We asked the great and the good to tell us what were their great and good books of the year 2014, while some new analysis found £5 billion in unclaimed tax credits. Finally, we tried to coin a new term: wage avoidance.

Wednesday, 17 December 2014

Time to talk about 'Wage Avoidance'


Andrew Fisher makes the case for a new concept: 'wage avoidance'

Thanks to the likes of Richard Murphy, UK Uncut and the PCS union we are aware of the scale of 'tax avoidance' - with the rich and big business using and abusing loopholes to avoid paying their way. But there's a new phenomenon we should be becoming aware of: 'wage avoidance'.

Although there has been an acute drop in earnings in recent years, down 10% in real terms since 2010, the phenomenon of falling wages is much longer run. In the latter half of the 1970s, total wages were worth about 65% of total national income; in recent years that figure has been only 55%. In contrast profits have risen - and continue to rise.

Like tax avoidance, wage avoidance has social and economic costs. In-work poverty is at record levels (up 59% under this government) causing misery for those in low paid work, and has meant us all sharing the costs through increased bills for housing benefit and tax credits.

Like tax avoidance, wage avoidance also damages the economy by reducing consumer demand. The OECD has this month shown that income inequality damages economic growth.

And like tax avoidance, wage avoidance is facilitated by the government - part of the same neoliberal ideology that believes attracting business and economic growth means enabling employers to get away with dodging their taxes and not adequately paying their workers.

Falling wages in the longer term

The deregulated UK labour market has, as Blair once said (and pledged to maintain), "the most restrictive union laws in the Western world". Nothing thirteen years of New Labour government did changed that.

But the fundamental changes were made under the previous governments of Major and of Thatcher. As her longest serving Chancellor Nigel Lawson said:
"a reduction in union power was an important aim of Conservative policy even though it was couched in the language of checking abuse, democratising procedures, and so on."

In the early 1980s, the Thatcher government ended the closed shop, banned secondary action and flying pickets, and required postal balloting before strike action.

Unionised and skilled industries were closed down or privatised - and the proportion of collective bargaining fell from 85% to around 40% after 18 years of Conservative government. Under Major 25 wage councils were abolished (all except the Agricultural Wages Board which was abolished by the current Prime Minister in 2013).

A similar agenda is being pursued by David Cameron whose government has attacked and threatened further attacks on union strike ballots.

Falling wages post-crash

The post-crash economy has been punctuated by insecure work, and low paid, low skill and low productivity jobs.



The explosion of zero hours contracts have made workers even more exploitable - with an estmated 1.4 million such contracts in existence, having quadrupled since 2012 according to estimates. Workers on temporary contracts are up from 6.2% to 6.5% of the workforce in the last year alone.

Likewise the rise in apprenticeships that the Prime Minister boasts about has meant predominantly young workers being exploited on £2.73 per hour (the legal minimum wage for apprentices) without learning the skilled trade that many of us associate with genuine apprenticeships.

To compound this, there are now the absurdity of traineeships - trainee apprentices in which young workers can train to be an apprentice, for no wage at all. Disgracefully, and in contravention of Congress policy, the TUC has supported this government policy alongside the CBI - a move condemned by member unions.

For the unemployed there is workfare - working full-time hours for free or face losing your benefits. The welfare state is now pimping out free labour to profitable companies - supported by all major Westminster parties.

For many young graduates unpaid internships demonstrate that the scourge of the free labour extends to the professions too - from legal firms, to journalism and MPs' offices.

But rising wages today?

The ONS today (17 Dec) published its monthly bulletin Labour Market Statistics for October, which showed that regular earnings have risen by 1.6%, while CPI inflation has fallen to 1.0% (RPI is still 2.0%).

As the Telegraph's Associate Editor posted today:



To put the CPI vs weekly earnings figure in perspective, it is the first month since 2009 that this has been the case. The ONS itself says the decline in CPI is substantially due to the falling cost of motor fuels - so if you feel a bit better off, you probably owe any thanks to OPEC rather than to your employer or this government.

So what is needed to boost wages?

Given we can't rely on the Saudis and the geopolitics of oil to save our living standards, what can be done to boost wages?

Here's some quick modest suggestions:
  1. Invoke the John Smith doctrine of 1993 for a "charter of employment rights will give all working people basic rights that will come into force from the first day of their employment. We will give the same legal rights to every worker, part-time or full-time, temporary or permanent". It would mean workers on flexible contracts (be they temporary or zero hour) would have rights they don't now possess
  2. Raise the minimum wage immediately to the level of the living wage. This could be subsidised in some way initially (as Labour proposes) but should be compulsory not voluntary, and applied at the same level for all workers alike. The minimum wage lost 7% of its value in real terms between 2008 and 2013.
  3. Restore trade union rights and promote collective bargaining - the surest way of creating and sustaining wage gains. Strong trade unions are inequality busters, as we've noted before
  4. Have an industrial strategy to invest in the creation of well paid skilled jobs and to expand the productive sectors of the economy do maintain skilled jobs
  5. Cap and deter high pay - using employer ratios to limit the differentials between top bosses and their workers; with higher punitive tax rates on the highest pay rates to deter corporate revenues being eaten up by the greediest rather than the most productive.
  6. Ensure the minimum wage is enforced for internships (as it should be), and legislate to make all work experience schemes through the welfare system voluntary and paid (at least at the level of the minimum wage) with no loss of benefits for participation
If we are to tackle wage avoidance it will take action and a restructuring of the power relationships in the labour market - between workers and employers; and companies and government.

N.B. This article was updated on 23/12/14 to add point '6' - as it was pointed out to us that there was no remedy to the points we made regarding workfare and internships.

Wednesday, 10 December 2014

Shooting Tory Fish in the Twitter Barrel - part 1


Luke Thomas begins a rolling series of posts in which he analyses tweets from Tory sources on a given topic, and shines some light on the reality that has been overlooked and sidestepped ...  

With the General Election just around the corner, it is increasingly important to challenge the political and economic narrative that has been so completely commandeered by the Tory Party (with the unswerving aid of the right-wing dominated press). Thankfully, the tweets of the Tory Press Office, the Conservative Party and various MPs are such a rich source of spin, obfuscation and downright untruths, that finding examples to unpick is a simple game.

So first off ...










The Prime Minister and the Tory Party have paid a great deal of lip-service to the idea of rebalancing the economy, firstly away from services, and secondly away from London and the South East. Indeed, in his first major speech after becoming Prime Minister, David Cameron said: 

Our economy has become more and more unbalanced, with our fortunes hitched to a few industries in one corner of the country, while we let other sectors like manufacturing slide.”
and
“… we will help to rebalance our economy, ensuring that success and prosperity are spread more evenly across regions and industries.” 

How has he done? Well on both counts his pledges have been an abject failure.

 

Services Well Served


Firstly, our economy is still heavily dependent on services – in fact more dependent than ever - while production and construction indices have been flat, have still not reached their pre-recession peak, and were clearly harmed by the austerity measures introduced in 2010.

Streets paved with gold

How about rebalancing our economy away from London and the South East? One way this can be measured is by looking at the gross-value added (GVA) to our economy in each region, and comparing them with the UK average to see which regions are contributing the most or least. If you compare the figures from 2009, a year before the Tories came into power, and those from 2013 (the latest data available), you see almost no change whatsoever. 


London and the South East still contribute the most to our economy, with London well ahead per person than any other region, and Cameron and the Tories have done nothing to change that. This isn’t in the least bit surprising in light of the sources of Tory Party funding, which comes largely from the financial sector that is so deeply entrenched in London, and the heartlands of Tory voters in the Home Counties.

 

A Divided Union

When you compare the GDP per inhabitant of the capital city of various countries to the other regions of those countries, one country clearly stands out – the UK. Indeed, the UK has both the richest, and poorest regions in Northern Europe.

This goes to show that the vast economic gulf between our regions has real consequences for the lives of the people of this supposedly United Kingdom. 

It was the depth of our reliance on the banking sector and services which meant that our recession was so severe, and Mr Cameron and his Party haven’t the slightest intention of changing anything any time soon. If they don’t, our shameful regional poverty will go unchanged, and we will almost certainly barrel headfirst into another crushing recession.

*BANG BANG*

Another two of the Tory Party’s fish shot dead.