Tuesday, 21 July 2015

"Poverty is not a lifestyle choice; it is imposed on people"

Full text of LEAP chair John McDonnell MP's speech on the welfare bill

I make this clear: I would swim through vomit to vote against the Bill, and listening to some of the nauseating speeches tonight, I think we might have to.

Poverty in my constituency is not a lifestyle choice; it is imposed on people. We hear lots about how high the welfare bill is, but let us understand why that is the case. The housing benefit bill is so high because for generations we have failed to build council houses, we have failed to control rents and we have done nothing about the 300,000 properties that stand empty in this country. Tax credits are so high because pay is so low. The reason why pay is so low is that employers have exploited workers and we have removed the trade union rights that enabled people to be protected at work. Fewer than a third of our workers are now covered by collective bargaining agreements. Unemployment is so high because we have failed to invest in our economy, and we have allowed the deindustrialisation of the north, Scotland and elsewhere. That is why the welfare bill is so high, and the Bill does as all other welfare reform Bills in recent years have done and blames the poor for their own poverty, not the system.

On Friday I brought together at a poverty seminar welfare advice agencies, local churches and religious groups to talk about why people in my constituency are poor. They are poor because rents are so high. People struggle to keep a roof over their heads. The welfare cap in the Bill will remove £63 a week from those families who are simply trying to keep a decent home over their children’s heads.

The second reason why people are poor is low pay. People in my constituency depend on tax credits to live. Parents choose whether they or their children eat, and the Bill will take £6 a week from every one of those families. The other reason for poverty in my constituency is that people have disabilities—they struggle to work but cannot do it. The Bill will take £30 a week from people with disabilities who are in the work support group and desperately trying to get work. Those are the reasons for poverty in my constituency, and I find it appalling that we sit here—in, to be frank, relative wealth—and are willing to vote for increased poverty for people back in our constituencies.

Some of the benefit cuts will be appalling. One measure not in the Bill but being sneaked through by the Government is a 30% cut in support allowances for asylum-seeker children. We are about to ensure that we push some of the poorest children in our society into further poverty.

We need an honest discussion about the reasons for that poverty and how we can invest to ensure that we lift people out of poverty. It is about some of the things that have been mentioned tonight, such as lifting wages. To come along and describe a derisory increase in the minimum wage as a living wage—we know that a living wage in this country is at least £10 an hour—is a disgrace to English rhetoric if nothing else. It is also rubbing it into the faces of the poor.

Tonight we have seen yet another way in which we blame the individual for the failings of our society. We need a proper debate about how we go forward investing in housing, lifting wages, restoring trade union rights and ensuring that we get people back to work and do not have high pockets of deprivation is areas such as mine and around the country.

Tonight the debate has not served the House of Commons well, but I say to Labour Members that people out there do not understand reasoned amendments; they want to know whether we voted for or against the Bill. Tonight I will vote against it.

Friday, 5 June 2015

The state of the labour market

Andrew Fisher, author of The Failed Experiment ... and how to build an economy that works, analyses the changes in the labour market and finds a worrying picture


Quantity not quality is the story of the UK labour market. The quantity of jobs is at a record high with 73.5% of the working age population in work.

The expected fallout from the 2007/08 crash never hit the jobs market as expected: unemployment never reached the 3 million that many were expecting, but that doesn't mean there hasn't been considerable damage done to the labour market anyway.

While people predicted a downgrade in the quantity of jobs, what has instead happened is a downgrade in quality. This post compares the shape of the UK labour market at the end of 2007 (ONS Labour Market Statistics, Jan 2008), with the its shape today (ONS LMS, May 2015).


The first thing to note is that total employment has increased by over 1.7 million since 2008, but this is due to a similar increase in the working age population (due to demographic change and migration).

This has been a key source of prestige for Cameron and Osborne - their boast of high employment validates there much-vaunted "long-term economic plan". The performance of the private sector is noteworthy in that net additional 2 million jobs have been created there in the last 7 years - an 8.6% increase in private sector jobs.

This is in contrast with the 6.5% reduction in public sector jobs, which has seen the sector reduce by over 370,000 jobs from 19.6% of the labour market to just 17.3%. In mid-May the Financial Times led with a story that an additional 100,000 job cuts would be lost in the civil service alone (currently less than 10% of the total public sector).

The shift in employment is not just from public to private sector, but from full-time to part-time and from employed to self-employed. Both these changes are modest: full-time workers have fallen from 75% to 73% of workers; and the proportion self-employed has increased from 13.1% to 14.5% of workers.

However, both shifts are structurally towards low pay. The percentage increases (in a rising overall pool of labour) show the changes more starkly:
  • full-time worker numbers - up 4%
  • part-time worker numbers - up 11.5%
  • self-employed worker numbers - up 17%
George Osborne has made much of rebalancing the economy both sectorally and regionally (as Luke Thomas has previously pointed out, unsuccessfully). The regional employment figures are even more stark: compared with January 2008, employment is lower in every UK region and nation with the exception of London (though the capital's employment rate is still lower than the UK average).


While employment has increased, unemployment has not - with the unemployment rate marginally higher in May 2015 (5.5%) than it was in January 2008 (5.3%). This translates as an extra 178,000 people unemployed.

While total unemployment is higher, the claimant count is lower - with 8,300 fewer JSA claimants now (even adjusted to include those now migrated onto Universal Credit) than in January 2008. It means JSA claimants represent just under 44% of the total unemployed, compared with 49% in 2008 (though this is a long term declining trend, as we've reported before). The sharp increase in sanctioning is certainly playing a role.

Though overall unemployment is relatively stable - long-term unemployment is up over 50% with 588,000 of the total unemployed having been out of work for over 12 months. This again exposes the failure of the Work Programme - on which you are more likely to find yourself sanctioned than employed.

Among the UK's nations and regions, unemployment is higher now than in 2008 in Northern Ireland, Scotland, Wales, the south west, west midlands, Yorkshire & Humber and in the north east (but lower everywhere else. The sharpest rises in unemployment are in Northern Ireland, Wales and the north east, while the sharpest falls are in the south east, east midlands and London.


The real shift comes when we look at wider underemployment measures: combining the unemployed with those working temporary jobs but wanting permanent work (up 57%), those working part-time who want full-time work (up 91%), and those recorded as 'economically inactive' who want to work (up 10%).

This is a much wider problem than the trebling of the number of workers on zero hours contracts to around 700,000 (which receives great attention). What receives less is the number of workers taking second jobs, which has increased over 100,000 from Jan 2008 to May 2015.

Overall, wider underemployment is up 26% from 4.8 million in January 2008 to over 6 million today.

Underemployment tells the story of the structural problems in the labour market


In much of the period between the crash and today, real pay has declined, with average real wages down almost 10% since 2008 (see our analysis: 'The Pound in your pocket: Pay under Osborne').

Back in January 2008, regular pay was growing at 3.6% a year, compared with just 2.2% today - and that itself is a recent high point after more than two years of uninterrupted economic growth!

We know that the shape of the labour market affects pay - with the best pay rates going to full-time employees.

Despite pay having stagnated over this period, hours worked have gone up (by 0.5% for full-time workers, but by a more significant 5.2% for part-time workers) - an indication of lower pay, but leaving a consequence of lower productivity.

Attacking trade unions

A generation ago over 80% of workers had their wages negotiated by trade unions through collective bargaining agreements. Today it is less than a quarter of workers - and, unsurprisingly the share of the nation's wealth going to workers in pay has declined as trade union power has declined.

TUC research shows that between 2008 and 2013 the proportion of union members accessing regular training went up from 36.8 per cent to 38.9 per cent, while the opposite trend occurred for non-unionised employees (down from 23.4 per cent to 22.9 per cent). 

Investing in staff training not only proves productivity, but is a sign of actually wanting to retain staff - and paying them to do so. Enlightened employers cajoled into being so by watchful trade unions - it was a system that delivered investment, growth, full employment and greater equality. And in unraveling it is generating mostly the opposite.


The question today is who is even considering what sort of labour market the UK needs? The race to the bottom is breeding progressively lower pay, lower skill, lower productivity jobs. There are record number of jobs but a crisis of underemployment.

Without some structural change - a revival of industrial policy, strengthening of trade union rights, a substantial and sustained increase in investment - it is hard to see how the UK labour market will not continue its race to the bottom.

Sunday, 31 May 2015

It Can't Happen Here

Andrew Fisher asks: just how much further to the right can Labour's leadership candidates go? 

In March 2007 Gordon Brown delivered his final Budget as Chancellor. By July he would be Prime Minister, and by September the collapse of Northern Rock would be the prelude to the UK's great crash. This tumultuous period is worth revisiting because it is significantly misrepresented in the current political discourse

Responding to the Budget, then opposition leader David Cameron didn't mention the budget deficit once. Not at all. Nada. In fact, six months later, in early September (just days before Northern Rock collapsed), George Osborne declared that the Tories would match Labour's spending for the next three years (as the accompany BBC News website screengrab shows).

This was totally understandable: the deficit was lower at this point than Labour had inherited in 1997 - and this modest deficit came shortly after four years of running a surplus that had seen the New Labour government shrink the national debt from the 42% of GDP they inherited down to little over 30% (for more detail see 'Labour's mess over public spending').

Fast forward eight years and every single contender for the Labour leadership (Andy Burnham, Yvette Cooper, Mary Creagh, and Liz Kendall) all believe that the budget deficit was too high and that Labour was overspending in 2007. This puts them somewhere to the right of then Prime Minister Tony Blair, Gordon Brown, David Cameron and George Osborne.

The one person who spoke in the 2007 Budget debate to accuse Labour of "tax-and-waste", "largesse" and "waste in the public sector" was John Redwood - a devotee of Milton Friedman. So it is incorrect to label these candidates as four shades of Blairite. In fact they should more accurately be described as Redwoodites. That is in whose economic corner they find themselves in their rewritten history.

Chris Leslie, appointed shadow Chancellor by interim leader Harriet Harman, echoes this right turn to Redwoodism. He goes further telling the Observer that without the small deficit "it stands to reason you could have braced yourself more for that crisis". Several Labour leadership candidates have said similar things - but I'm struggling to understand how even totally eradicating a £35 billion deficit would have braced us much for the £1.2 trillion bank bailout.

Of course what might have helped was clamping down on the rampant tax avoidance and evasion, maintaining Major-era levels of corporation tax or saving a few £billions by not embarking on military atrocities in Iraq or Afghanistan.

Tough on welfare, tough on mythical scroungers

Caroline Flint looks on admiringly
The far right shift of Labour's ruling elite transcends both economics and the leadership contenders. In the Deputy Leader race Caroline Flint took to Murdoch's rag to articulate her carefully thought-out view that "Labour needs to start attacking benefit scroungers" who need a "kick up the backside".

Meanwhile interim leader Harriet Harman and Andy Burnham expressed support for the Tories' plan to reduce the benefit cap further even though evidence shows it will put 40,000 children into poverty. Increasing child poverty isn't at all Blairite, it's Thatcherite.

This is of course the party that opposes the bedroom tax because it kicks poor people out of their homes, but supports the benefit cap which does the same.

Tough on migrants, tough on the mythical causes of migrants

Leadership contender Yvette Cooper now believes that Labour's 2015 manifesto commitment to deny all benefits to migrants for the first two years - launched by Rachel Reeves (now backing Andy Burnham) in the Daily Mail - was too liberal, and should actually be doubled to four years.

In 2010 the BNP manifesto supported no benefits, housing provision or pensions to foreigners "who have not paid into the system". Cooper is therefore well to the right of Nick Griffin on migrants' rights to benefits, believing that even if they have paid into the system for years then they should still have no entitlement.

Liz Kendall meanwhile committed Labour to "be doing the best for kids, particularly in white working class communities". Hackney North's Labour MP Diane Abbott described these comments as "Not even dog whistle politics. Blatant".

Those labelling the Labour leadership contest as a return to Blairism or New Labour are vastly underestimating the shift. This is a shift from austerity-lite to far right. It could happen here.
"The only thing necessary for the triumph of evil is for good people to do nothing."

Thursday, 28 May 2015

Queen's Speech: "We are storing up a greater crisis for the future"

Below are extracts from a speech in the House of Commons by John McDonnell MP, LEAP economics chair, in response to the Queen's Speech

Earlier in the debate, the right hon. Member for Wokingham (John Redwood) suggested that we should have serious discussions in this Parliament about the future of our economy, and I agree with him. In the debate so far, I have found remarkable complacency about the situation that we are facing. In fact, all the structural weaknesses and other factors that were present before the last crash are now reappearing, and many economic forecasts suggest that there is a prospect of precipitating another crash over the next two years. Consumer debt is rising, there has been no sustained pick-up in wages, productivity is stagnating and living costs are vulnerable to rises in interest rates and inflation. If the Budget on 8 July cuts £30 billion as predicted, that could push us back into recession as a result of reducing demand so dramatically.

The fundamentals of our economy remain completely unaddressed: we have an unbalanced economy; production, manufacturing and construction have still to recover to their 2008 levels; and the finance sector is oversized and unregulated. At the last estimate, 60% of the big five banks’ profits since 2011 have been lost as a result of scandals. There is now a current account deficit of 5.5%, and a massive outflow of capital from this country. We have a debt of 80% of GDP, the bond markets are extremely volatile and the eurozone is unstable. These are all the ingredients for another crash, yet we do not seem to be debating that at the moment.

The Prime Minister wants us to believe that economic recovery is under way and that the crisis is behind us. At the micro level, for my constituents, the economic crisis appears every payday. Many of them are experiencing economic crises, hardship and insecurity on a regular basis. As a London constituency representative, I believe that housing market failure is at the heart of our economic crisis. We knocked on every door in my constituency during the election, and I know that we are now facing the worst housing crisis since the second world war. I have 4,000 people on the housing waiting list. There were 10,000 last year, but a manoeuvre by the Conservative council simply wiped 6,000 of them off and denied them eligibility to be on the list. Tonight, I have 200 families in bed-and-breakfast accommodation. I have families living in appalling housing conditions, with overcrowding, damp and insanitary conditions. I have families living in sheds. Shanties are now being built in my constituency to house families.

Rents in the private sector are between £1,200 and £1,600 a month for a little house. We have reinvented the back-to-back in my constituency, with some families living in the front of a property and others living in the back. The landlords of those properties are reaping something like £3,000 a month in rent. The buy-to-let landlords are making a fortune out of exploitative rents in my constituency. They fail to maintain their properties, but if the tenants complain, revenge evictions take place on a regular basis. This week, however, we have discovered that buy-to-let landlords have been given a £14 billion tax concession each year in recent years. Why? It is because, as the right hon. Member for Haltemprice and Howden (Mr Davis) said, successive Governments have failed to build council houses. It is also because they have sold off council houses. The sell-off of council houses in my area has resulted in the bizarre situation of a Conservative council now having to rent back some of the council houses that it sold off 30 years ago, in order to house families in desperate need.

Affordable properties are being built at a minimal level. At the same time, affordability has now been redefined as 80% of the market rent, so “affordable” properties are now unaffordable to most of the population in my area. We were told that there would be a cap on benefits, and that that would reduce rent levels as the message went out to landlords, but it has had no effect whatsoever because supply is not matching demand.

The legislation proposed in today’s Queen’s Speech on selling off housing association properties will simply exacerbate the problem. I fully agree with the housing associations’ view that it will simply deplete their stock. Worse, it will undermine the asset base against which they can borrow to build new properties. We are told that this proposal will be funded by the sell-off of councils’ higher-value properties, but that is absolutely unrealistic. The sell-off of more council properties will mean a greater depletion of council stock. In addition, the record of reinvestment and rebuilding following the sell-off of council properties has been abysmal: it is a record of non-delivery over decades.

The Government’s legislation announced today will permanently embed the crisis in our housing market for future generations. We are storing up a greater crisis for the future. My hon. Friend the Member for Islington North (Jeremy Corbyn), who is no longer in his place, said that these policies are socially cleansing whole areas of our city. Properties are being sold off, then sold on again to speculators and overseas property developers. Even those in the professions—the teachers, the firefighters, the police officers—can no longer afford to keep a roof over their head in London. As a result, working-class people and what could be described as middle-class professionals are being forced to move out. Alternatively, they live in an asset that they cannot sell because they are trapped and cannot find an alternative. Their sons and daughters are unable even to get on to the property ladder.

This all adds to the precarious nature of living in London at the moment, as incomes fail to match basic living costs. Professor Guy Standing defined the “precariat” as people on zero-hours contracts or on the minimum wage, but many people on middle-range incomes—teachers, firefighters, the police, middle managers and small businesspeople—are now cascading into the precariat because they cannot afford the housing costs in our city. They are also faced with unstable employment, threatened by outsourcing or privatisation. They are no longer able to find a voice for their frustrations, either at work as a result of the undermining of trade union rights or, to be frank, within the political system.

Sunday, 17 May 2015

Labour's mess over public spending ...

Labour's leadership candidates (so far announced) don't even understand the mess they're talking about, says Andrew Fisher ...

At the Leaders' Question Time programme, Ed Miliband was met with groans when he said that Labour did not overspend in the Blair/Brown years.

Of course, by most measures it didn't and Miliband was right. Labour under Blair and Brown spent less as a percentage of GDP (a smaller proportion of what the nation generates in total) than did the governments of Thatcher and Major - as the graph below shows:

And as the graph below by Michael Burke shows, Labour ran a surplus for more years than either Thatcher or Major managed:

However, Labour let the lie that they overspent get established. They didn't, but they never had a strong message for challenging it - and Miliband was derided when denying the overspending myth.

Miliband's muddle

The problem for Miliband went deeper though. Osborne said that Labour spent too much so that he could justify the slashing of public spending especially on social security, but also in other areas like further education, criminal justice, and social care. He did this alongside an attack on the pay and pensions of the staff who delivered those services too.

Miliband was always in a pickle since he and Balls stated categorically that they would not reverse any of those cuts, and would actually impose further cuts if elected. That's a strange policy if you don't believe Labour spent too much. It is implicitly saying to voters, "Labour [under Blair/Brown] wasn't spending too much, but it should be lower" - and that's why Labour didn't have any credibility.

From muddle to capitulation

Labour's capitulationist tendency - now vying for the Labour leadership - have a clear solution: denounce Labour's spending, capitulating to the myth that it was too high. These candidates are often described as Blairites, but in fact they're renouncing Blair - a more accurate description for their economic policies would be Tory (and probably the right of that party since Osborne and Cameron backed Labour's spending plans in 2007/08).

So when those like Liz Kendall, and the since-departed Chuka Umunna, say that Labour spent too much they are taking a position in the company of John Redwood and his ilk.

While Burnham and Cooper don't take that line - they carry on the Miliband muddle.

Can't we aspire to better?

Labour did spend more than it received in revenue (as the second graph above shows) and during an economic boom - Keynes would disapprove, but that doesn't inevitably lead to the conclusion that spending was too high. Instead of slashing corporation tax or even the basic rate of income tax, Labour could have increased revenues by leaving those tax rates where they were under John Major (lower than under Thatcher).

But this all rather misses the point - and that's about whether New Labour's economic model was sustainable in the first place. As John McDonnell wrote in The Guardian:
"When the Tories shamelessly accused the last Labour government of crashing the economy, they were right, but for the wrong reasons. The crash was not down to over-spending and over-borrowing, but down to the policy of lifting virtually all lending controls off the banks and finance sector; a policy promoted by both New Labour and even more virulently by the Conservative party."
Sadly that is not an argument likely to be heard in Labour's leadership debate, precisely because the parliamentary Labour party is either wedded to the the Miliband muddle or wants to jump into bed with the Tories. The left has been divorced.

Thursday, 14 May 2015

UK labour market update - May 2015

A brief analysis of the ONS Labour Market Statistics published on 13 May


Unemployment has continued to fall modestly, but there seems to be some level of displacement into underemployment - and the recent rises in vacancy numbers appears to have ended.

It may be that this points to a plateau-ing in the numbers, rather than an imminent downturn. However, unemployment among 18-24 year olds rose again on the quarter, up 4,000 and up 8,000 on six months previously. Having said that, it is still down over 100,000 on a year ago.

There is also a more disparate regional picture emerging with unemployment rising in the last quarter in Scotland, Northern Ireland, Yorkshire & Humber, the East Midlands and West Midlands.

Pay increased a little more strongly, with 2.2% now the average annual rise. If this continues and coincides with low inflation then this could feed through into more consumer confidence and stronger growth. However, housing costs are still running high and show no signs of dropping.