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.

Tuesday, 5 May 2015

"I fear for our people if Cameron gets back in" - John McDonnell

Eve of poll letter in The Guardian (6 May 2015) by LEAP Chair, John McDonnell (Labour PPC for Hayes & Harlington)

Polly Toynbee (The powerful invisibles at the heart of the Tory party, 5 May) refers to the “deep chasm” that divides our society. The consequences of that chasm in my community are profoundly distressing. I never thought I would see shanties being erected or families staying in sheds and garages just to put a roof over their children’s heads. I didn't think that people would be going hungry or would have to rely on charity to eat, but so many in my town now do. And how wrong I was when I believed the days of landlords evicting families to increase the rent or for simply complaining about the damp were over.

I fear for our people if Cameron gets back in, especially in alliance with Ukip. Nothing and nobody but the rich will be safe. There is nothing they won’t sell, nothing they won’t cut, and nobody they won’t scapegoat, no matter what harm they cause to even the most vulnerable in our society. As a minimum safeguard we have to ensure Labour is at least the largest party.

From the socialist left in Labour I beg disaffected Labour voters to come home to Labour. Others, especially new young voters, I urge to stand with us in protecting a new generation against the barbarity of a Conservative/Ukip future.

John McDonnell 
Chair, Socialist Campaign Group

Below is a photo taken by John McDonnell of where someone is living in his constituency: