Wednesday, 29 April 2015

It's grim down south


Andrew Fisher tells Croydon's story

In yesterday's Guardian, Aditya Chakrabortty wrote a typically excellent piece on how 'It's not just the UK left behind by 'booming London'. It's Londoners too'. He focused on his native Edmonton, on the northern edge of London, but what struck me was how familiar this tale sounded at its southernmost edge too - in my native Croydon.

According to Trust for London, Croydon offers the lowest pay rates of any borough south of the river. The light industry that used to exist along the Purley Way is now replaced by retail and warehouses in much the same way as Chakrabortty describes for Edmonton. The only economic plan for the borough is more retail - with a new Westfield promised on the site of an existing shopping centre.

The future of high street retail is by no means secure - retail price deflation continues, sales staff are being replaced by automated check-outs, and consumers are shifting to online retail. Alongside the shopping centre, there will be a housing development, but only 15% will be 'affordable'. On the plus side, the local Labour council is committed to becoming a living wage borough.

In the ward where I live child poverty (after housing costs) is 32.6%, compared to a national average of 25.1%. While in nearby Selhurst - home to the Premier League's booming Crystal Palace - the child poverty rate is 41.4% (full UK data here). Last year Croydon had among the highest number of children (77) living in temporary B&B accommodation.

Housing costs are a major driver of London's poverty. Data compiled by The Economist shows that in Croydon's three parliamentary constituencies house prices under this government have risen by 39.5% in Croydon North, 29.3% in Croydon Central and in Croydon South by 20.8%. Pay across the UK is up only 7.5% over the same period.

House prices are rising six times faster than wages - so that now the average London home costs £502,000, while the UK average is £272,000. For comparison the median inner London wage is £34,500 (in outer London it's £24,200) while the median UK wage is just £22,000. So house price to wage ratios in London are now around 14.5:1 (inner) or an eye-watering 20.5:1 (outer), meaning even a couple both earning the median wage could not feasibly get a mortgage - they are priced out.

The story is no better for the increasing number of tenants renting privately. Last year Croydon had the eighth highest rate of possession orders (when landlords are granted the right to evict tenants) of all English local authorities - and the 2nd highest by number of orders. Around 1 in 20 of all Croydon residents are on the council housing waiting list.

It is no surprise then that due to the government's benefit cap and bedroom tax policies, Croydon residents have been particularly hard hit: with 2,908 hit by the bedroom tax and 400-500 by the benefit cap, which was piloted in Croydon. In recent years, the council has deported its own citizens out of the borough to Essex, Wiltshire, East Sussex and Hampshire.

Despite boasts by the local Conservative candidates - something David Hencke has exposed - in Croydon Central, the unemployment rate (as opposed to the claimant count) has barely moved over the course of the last five years dropping only from 11.6% to 11.0% by the end of 2014 - higher than the London average of 7.0% and the average across the country of 6.2% (data via Nomisweb).

Croydon is by no means alone - even in many leafier central or west London boroughs there are enclaves of poverty - of people damaged by booming house prices, on zero hours contracts, working in low paying, non-unionised industries.

Chakrabortty is right: "London has been painted as a success story: a land of duckers and divers popping champagne whenever their houses go up by a grand a month". That maybe true of the city's voluble elite - championed by London's buffoonish Toff mayor - but for millions of ordinary Londoners their life experiences are closer to those in the rest of country than they are to the City's gilded few.

Thursday, 23 April 2015

George Osborne 2010-2015: Evaluated


Nearly five years ago, George Osborne rose to his feet in the House of Commons and delivered an emergency budget. Although the phrase had not yet been coined, this was where Osborne set out the "long-term economic plan".

So how has that Osborne plan held up? Andrew Fisher crunches the numbers

George said: "Everyone will share in the rewards when we succeed"
The reality: Sustained growth took a while to come through, but there was economic growth in every quarter of 2013 and 2014. However, while the economy grew not everyone has shared in the benefits. In 2010, 61,468 people were given 3 days' emergency food from food banks. By 2014-15 this had risen to 1,084,604 according to the Trussell Trust. The number of people using food banks has risen every year - the rewards of growth are not being shared.

George said: "We are on track to have debt falling and a balanced structural current budget by the end of this Parliament"
The reality: The OBR this year confirmed that Osborne had failed to have debt falling this year: "public sector net debt (PSND) will rise as a share of GDP this year". Meanwhile, the structural current budget records a £56.9 billion deficit rather than balance. The OBR estimates that balance will not be reached before 2017-18.

George said: "Growth in the UK economy for the coming five years is estimated to be: 1.2% this year and 2.3% next year; then 2.8% in 2012 followed by 2.9% in 2013; then 2.7% in both 2014 and in 2015"
The reality: The economy expanded by just 0.8% in 2011, and it got worse in 2012 at a barely upward 0.2%. Even by 2013, when 2.9% growth was expected  only a modest 1.7% was achieved. Last year the economy grew by 2.8% (marginally exceeding Osborne's estimate), but the OBR estimates a marginally slower 2.5% for this year.

George said: "Public sector net borrowing will be £149 billion this year, falling to £116 billion next year, then £89 billion in 2012-13, and then £60 billion in 2013-14. By 2014-15 borrowing reaches £37 billion"
The reality: Borrowing was confirmed at £87.3 billion for 2014-15 (ONS stats), meaning the deficit this year is 135% larger than forecast

George said: "Public sector net debt as a share of GDP will be 62% this year, before peaking at 70% in 2013-14. Because of our action today, it then begins to fall, to 69% in 2014-15"
The reality: At the March 2015 Budget (see our analysis), Osborne confirmed that debt as a share of GDP would be 80.2% for 2014-15.

George said: "Our package today reduces the costs of Housing Benefit by £1.8 billion a year by the end of the Parliament"
The reality: Housing Benefit cost £21.4 billion in 2010/11, but has risen to £24.5 billion this year (ONS stats, Table 1a)

George said: "This single tax measure [VAT rise] will by the end of this Parliament generate over £13 billion a year of extra revenues"
The reality: Actually VAT revenues are up by nearly £30 billion - a huge and regressive tax increase, while progressive taxes (income tax and corporation tax) have been cut

George said: "All sections of society contribute, but that the richest pay more than the poorest. Not just in terms of cash, but as a proportion of income as well"

The reality: According to the Institute for FiscalStudies, "The poorest have suffered the greatest proportionate losses as a result of the Coalition's changes to tax and benefits, according to the IFS".

Friday, 17 April 2015

A lesson in the unusual.


Luke Thomas on what lurks beneath buoyant employment figures

Today the ONS published a new set of employment statistics which show, once again, that the employment rate has risen. This is always welcome news by itself, and the Tory Party have, as expected, made a great deal of these figures, which have also attracted positive comments from the head of the IMF, Christine Lagarde.

It would be churlish not to welcome rises in employment, but using them as a single totemic example of the economic credibility of the Tory party obscures a great deal of important detail about the poor state of the economy under the Tories.

What goes down …

The Tories would have you believe that rising employment following a recession is some special achievement of theirs, and a ringing vindication of their economic policies. But when you compare the changes in employment rates from the start of the last three recessions the UK has faced, you see that rising employment is no special thing at all.

Indeed, the fall in employment rate in the most recent recession was rather modest in comparison to the previous two. Employment simply rises as a consequence of the economic growth that follows a recession, as employers become more confident of economic conditions. There are many important things to be said about the composition of those new jobs, and Andrew Fisher has written extensively on this subject here, but that's not the subject of this post.



... might not come up.

What then, if anything, is remarkable about the recovery stewarded by the Coalition government over the past 5 years? Quite a lot actually, and little of it is remarkable for the right reasons.

Firstly, productivity has never seen such a prolonged period of flat-lining following a recession, and the ‘productivity’ puzzle has been discussed at some length among economists.



Secondly, wage-growth has plummeted, and were it not for the remarkably low level of inflation, this would have caused much more hardship for Britain’s workers.



Thirdly, the growth in our economy has been almost entirely reserved for the service sector – largely the financial sector – while production, construction and manufacturing have stayed below their pre-recession peak for a full five years.



Fourthly, household finances have not improved over the last 5 years, with real household disposable income per person still at the level it was in 2008.



Foundations of sand.

There are many more indicators of economic health than employment, and few of them paint a positive picture of our economy. We are a nation that is debt-laden, with an unproductive labour market that is burdened with low wages, who are living in an economy that is reliant on consumer-spending and the growth of an unchecked financial sector, hell-bent on creating another lucrative housing bubble. 

Our economy is very fragile, and good employment figures are only a mask for its trembling foundations. This is the reality of this Tory-led recovery, and a victory for them in May will only bring more of the same danger.

UK labour market update - April 2015


A brief analysis of the ONS Labour Market Statistics published on 17 April
 
 
Commentary

Unemployment has fallen in the last year, but there is still considerable underemployment, with many people looking for additional work.

The number of workers with second jobs continues to increase – up 59,000 on a year ago and 96,000 on two years ago.

Youth unemployment also remains high at around three times the overall unemployment rate.

Compared with a year ago there are an extra 50,000 over-65s in work, and an extra 115,000 compared with two years ago. This rapid increase may be due to the paucity of private pension provision – employment increases may be driven in part by workers simply not being able to afford to retire.

Regular pay rose by 1.8% - still well below pre-crisis trend and low, but benefiting from low inflation depressed by oil prices. House prices are rising at more than four times the rate of wages.

... Longer term analysis will be published later this month 
 

Thursday, 16 April 2015

The Housing Crisis won't be solved by tinkering


Andrew Fisher assesses Labour's housing policies

The Tories' proposal to extend right to buy to housing association homes united almost every policy commentator in opposition, including the CBI and Telegraph columnists, alongside housing associations and homelessness charities.

Pathetic

Outside of this unity stood the Labour Party which insisted, "we support right to buy", but criticised the Tories' proposal for being "uncosted, unfunded and unbelievable". This approach implies depleting the residual level of social housing stock is acceptable if the sums add up.

Labour's affiliated unions oppose right to buy, as does its youth wing (Young Labour), and Welsh Labour will dump right to buy in Wales from next year as it is "forcing many vulnerable people to wait longer for a home". Why is the UK Labour leadership so timid?

Labour's contradictions exist not just in opposition to Tory policies but within their own manifesto too. In the first section they state:
"Our sons and daughters have been shut out of the housing market and too often they are forced to leave the communities where they were brought up"
Yet they also support the benefit cap which has forced sons, daughters, mothers and fathers out of their communities in much the same way as the bedroom tax that Labour is pledged to scrap. But Labour is scared of not being seen as 'tough on welfare', so capitulates to this nonsense.

Hope

The Labour manifesto pledges to build at least 200,000 homes a year, which will go beyond this government's dismal record which has averaged only around 145,000 homes a year. They may also eclipse the insufficient 190,000 that the last Labour government averaged.

Labour is pledged to keep the Help to Buy ISA, but will also ensure that money invested in the ISAs is used to build new housing.

While Labour is not backing a Land Value Tax, it is taking on land speculation by giving local authorities powers to force developers to build or confiscate the land. However, the compulsory purchase powers relating to empty residential properties are underused by local authorities, so a cultural change will be needed too.

Labour also pledges to "get the public sector building again". It will do this "by prioritising capital investment for housing and by reforming the council house finance system". Unlike the overall 200,000 homes a year pledge, there is no figure pledged for the numbers of council homes Labour would build.

While the Tory manifesto was silent on private renters, Labour pledges three year tenancies as standard with caps on rental increases within those tenancies, and banning some letting agency fees. There will also be a register of private landlords.

There's a lot that's good in Labour's manifesto, but it's hard to see what would be truly transformative. Labour pledges only to ameliorate the housing crisis, not to solve it. 

See also:


Tuesday, 14 April 2015

A comprehensive plan for housing crisis


Andrew Fisher assesses Tory housing policy

The Conservative manifesto was launched today and housing was at its centre, with right-to-buy revived and extended to housing association properties.

Under Thatcher era right to buy, 1.7 million council homes were sold off (over one-third of which are now in the hands of private landlords) and most were never replaced. The proportion of people living in council housing has declined from 30% in 1979 to just 10% today.

Since Cameron's government revived right to buy in 2012 by offering higher discounts, 17,205 more council homes have been sold off. Only 2,712 have been replaced (16%). They promised properties would be replaced and they do again in their manifesto. Fool me once, shame on you ...

While David Cameron repeated Margaret Thatcher's "property-owning democracy" schtick (as if home ownership in some never specified way enhances democracy), but the reality is that right-to-buy has helped home ownership levels fall - along with other Tory policies including the deregulation of credit, rising inequality (which Danny Dorling cites as the major factor), explicit and implicit subsidies for buy-to-let landlords, and the removal of rent control in 1989. Home ownership levels today are lower than when Margaret Thatcher was defenestrated in November 1990.

Cameron and Osborne have had a clear policy to keep house prices high - and therefore out of reach for households on average incomes - through a range of policies. House building has been allowed to sink to a record low, with fewer than 150,000 homes built in every year of the coalition government. Under New Labour, only 190,000 homes a year were built, which was itself a low for a post-war government.

Constraining the supply of housing has helped keep house prices high, as have mortgage subsidies like help-to-buy, which have combined to form a pincer movement: increasing the supply of housing finance while housing supply is constricted.

The Conservative manifesto offers nothing for private tenants. In fact, private tenants are only mentioned once - and that is in the context of their landlord checking their immigration status. And of course by cutting social housing, and keeping house prices out of reach, then more people will be living in private rented accommodation - and claiming more on housing benefit.

Private tenants suffer high rents and often low pay (with the state picking up the tab in housing benefit and tax credits) - those on low or middle incomes have no chance of saving the deposit for a home (which due to inflated house prices is considerably higher than ever before), and likewise little chance of ever getting the security of social housing.

Plans in the manifesto to restrict social housing and housing benefit from young people and from migrants will doubtless increase homelessness and rough sleeping (both up under this government).

So the Conservative policy attacks the safety net offered by social housing (by reducing its supply), offers nothing to increase housebuilding or reduce prices or reduce rents. It is a recipe for intensifying the housing crisis that they have cooked up since Thatcher.

Elsewhere in their manifesto they advocate reducing the benefit cap further, deporting more people from their communities and accelerating the social cleansing of many parts of many cities - assisted by policies such as cutting local housing allowance and the bedroom tax.

The Conservative manifesto is therefore a plan to intensify the housing crisis.


See also:

Saturday, 11 April 2015

The Pound in your Pocket: Pay under Osborne


Andrew Fisher assesses what's happened to wages in the last five years

Sometimes you go to write something and realise that someone else has done it first and done it better. On this occasion I am - and you should be too - indebted to analysis by the LSE's Stephen Machin, who has shown the "real wages of the typical (median) worker have fallen by almost 10% since 2008".

But while his research on both wages (down 10%) and overall household incomes for working age households (down 7%) are useful, there is some other data worth drawing to your attention as well.

An equality of misery

Machin also breaks these figures down to show that men's real wages have fallen by 12% compared with an average 7% drop for women. This in itself casts a new light on the data showing that gender pay gap has narrowed, and the claim made by Equalities Minister Nicky Morgan that:
"Women are a vital part of a long-term economic plan to secure a better future for Britain and this is further proof that the plan is working"
Though Morgan adds that "we should be shouting from the rooftops that these figures are going in the right direction", women workers can really take little cheer from a 7% real terms drop in their wages. Few women will be thinking, "at least it's even worse for men"!

Young people are the hardest hit with a 16% fall in real wages for those aged 18 to 24 - and that's for those in work, with high youth unemployment persisting.

The UK has a pay problem

Machin shows that the UK is unusual in this regard. Of 26 OECD nations, only workers in Hungary, the Czech Republic and Greece have fared worse than UK workers. Of the other G7 nations, workers in the US, Japan, Germany, France and Canada all had real terms increases in their wages since 2008. Italian workers also saw a real terms decrease in wages, though less than a third of the drop of UK workers.

Relative to other nations our GDP per capita growth is less impressive too. While Germany, France, the US and Japan are all performing better than in 2008, in the UK GDP per capita is down (Eurostat data, Dec 2014).

Osborne thought you would be £2,800 a year better off!

In June 2010, George Osborne's emergency budget set out the government's strategy for the Parliament. According to OBR estimates, UK workers' wages would see a significant rise over the Parliament with average pay rises in excess of 5% this year and last!

The graph below shows what has really happened to wages, compared with what it was estimated Osborne's programme would produce in terms of wages:


So whereas real wages should have exceeded inflation between 2010 to 2015, they have in fact undershot inflation.

What this means in cash terms is that today Osborne predicted in 2010 that the average weekly wage would be £537. Instead, the reality is that it is only £483. So if Osborne's economic strategy had been borne out the average worker would be over £2,800 a year better off.

Thursday, 9 April 2015

5 reasons to now take Labour seriously on tax justice


Andrew Fisher notes 5 ways in which tax justice is now central to Labour Party policy

1) Ending non-domicile status

After years of largely impotent sabre-rattling under Gordon Brown, Ed Miliband has committed Labour to abolishing non-domicile status by April 2016.

As well as the policy change itself, there is significance to what Miliband said in annoucing it - which reflects a shift in Labour: he said the non-dom policy was symbolic of "an idea that says ‘anything goes’ for those at the top, that what is good for the very rich is always good for Britain"

That Labour is moving away from that philosophy - that lauds the rich as entrepreneurs and 'wealth creators' (when few are any such thing) - is very good news.

2) Sanctioning UK tax havens

Ed Miliband is now talking about sanctioning tax havens, that's progress. The UK's overseas territories (including notorious tax havens like the Cayman Islands and Bermuda) and crown dependencies (e.g. Jersey and the Isle of Man) have been warned that they would have six months to compile a public register of offshore companies registered in their domain or face sanctions.

In February, Labour leader Ed Miliband said:
"Billions of pounds is being siphoned off into tax havens where our authorities cannot discover even the true ownership of firms registered there, let alone the scale of wealth hidden away.

"Today, I am putting these tax havens on notice that they will have just six months to open up their books or face international sanction."
This again is a welcome toughening from the New Labour years.

3) Tackling umbrella companies

Labour's 'work manifesto' (reviewed here) states that a Labour government would "tackle bogus self-employment in construction". This is an attack on the umbrella companies which have been set-up by large construction companies to dodge employment rights and tax obligations.

The construction workers' union UCATT has more detail in this document 'The Umbrella Company Con-Trick'. Labour's shadow Exchequer secretary Shabana Mahmood has also taken the issue up in Parliament, alongside many backbench Labour MPs.

4) Restoring the 50% tax rate on the richest 1%

One of the key issues of tax justice is that the taxation system should be progressive - meaning that the rich should pay more not just in cash terms, but as a proportion of their incomes too.

The 50% tax rate on income over £150,000, means those earning wages that put them in the top 1% or so of earners pay a higher tax rate than the rest of us. Combined with the bank bonus tax and the mansion tax - as well as ruling out any VAT rises - it is clear that Labour is keen to make overall taxation more progressive.

5) Setup an independent review into HMRC

A future Labour government is committed to an "immediate independent review into the culture and practices of HMRC with regard to tax avoidance". 

HMRC has a very problematic culture that seems to allow the super-rich and big business to do sweetheart deals rather than to be forced to pay what they owe.

Although announced in the context of the government's handling of the Swiss HSBC data leak, this is about the tax authority being tough with the powerful. In launching this proposed review, Miliband spoke on the theme used announcing the non-dom changes (above):

"Any civilised country is built on the idea of the common good must have common rules, shared and respected by all its citizens. But in Britain today we risk having one rule for the rich and powerful and another for everybody else. What we are seeing is the growth of hugely complex and aggressive tax avoidance schemes, often based offshore."
The fact that a Labour leader is saying this - and acting on all of the issues above - is due to the campaigning efforts of thousands of activists who have made tax justice an unavoidable issue at this election. So well done to the Tax Justice Network, UK Uncut, trade unions (notably PCS) and many more. Let's keep fighting!

Wednesday, 8 April 2015

Clear Red Water - the gap between Labour and the Tories has widened


Andrew Fisher looks at the choice facing us at the General Election – and what we can do
(This article appears in the April issue of Labour Briefing)

WE HAVE TO BUST THE MYTH THAT THERE IS “LESS MONEY AROUND” and the next Labour government “will have to govern with less money around”, as Ed Balls is fond of saying. There is no less money around, it’s just in the wrong place.

There is no austerity in corporate Britain. Last month, official figures showed that UK company profits are at a record high.

So a Labour government will fail to challenge the fundamentals of austerity which, starkly put, means we have to pay for the crisis the rich created by cutting the jobs, pay and public services of the rest of us.

Nevertheless, Labour offers a concretely less severe form of austerity than the Conservatives propose. According to analysis by the Resolution Foundation, Labour austerity would mean £4 billion in annual cuts, compared to £37 billion implied by Conservative plans. The Institute of Fiscal Studies says Tory plans mean a 6.7% cut to departmental spending, whereas Labour’s plans mean a 2.4% cut.

While those differences are significant, how Labour addresses the fundamental structures of our economy is more important. The economy is in crisis because it has been built to generate inequality through the privatisation and deregulation that institutionalises profiteering, our dysfunctional housing system, regressive tax system, exploitative labour market, and through the financialisation of our economy.

Does Labour have a plan to fundamentally change this? No. But we have to acknowledge that Labour has identified the right issues and has some proposals to at least ameliorate these problems. Let’s look at each area in turn:

On privatisation and deregulation, Labour has pledged to freeze energy prices and regulate the sector more aggressively. It will also allow the public sector to bid for rail franchises (and drops hints it may go further), representing a departure from New Labour by intervening in oligopolistic markets.

The proposal to build 200,000 homes a year is important. We know that if we invest (and Ed Balls has dropped his silly announcement at Labour Party Conference that there would be no extra capital spending), it creates decent skilled jobs and apprenticeships – and we need homes for people to live in. The timid proposed regulations on landlords on tenancies and rent increases, and on letting agency fees, are at least steps in the right direction.

In the labour market, Labour proposes to raise the minimum wage to at least £8 a year by 2020 – the minimum wage has lost value in real terms in recent years due to successive below inflation rises. LEAP analysis last year found that for a worker on the minimum wage this be would be around 60p real terms increase an hour. If they worked full-time, it would mean being over £1,000 a year better off than would otherwise be the case. There will also be tax breaks for companies that pay the living wage.

On taxation, Labour has pledged to restore the 50% tax rate at £150,000 and, perhaps more significantly, introduce a mansion tax. This is a welcome incursion into taxing wealth. Corporation tax will also rise to 21% from its April 2015 rate of 20%. Miliband has also threatened sanctions against the tax havens that are UK overseas territories – and perhaps there is a chance that the perennial tough talk (from whoever is in government) could actually translate into meaningful action.

On financialisation, Labour is proposing to restore the bank bonus tax (to fund the ‘workfare-lite’ compulsory jobs guarantee) and increase the bank levy. It will also create a British investment bank to help fund a new industrial strategy.

While they may do little to set the pulse racing for socialists, these reforms do put some clear red water between Labour and the turbo-charged Thatcherism that Cameron and Osborne would impose if re-elected. These largely modest reforms, however, do correctly identify the problems in the economy, and seek redress. For socialists in the Party, this is a narrative base on which to build, push further and ensure that there is not any backsliding on even these measures.

Ultimately though these policies are ameliorative rather than transformative, so the issue of systematic inequality will remain. When that reality intrudes, we must have the answers and campaigns to push for the policies to build a more equal and democratic economy.



Friday, 3 April 2015

The debate we nearly had.


Luke Thomas reflects on what the leaders' debate told us about the austerity debate

I have in my hand a piece of paper ...
During last night’s second election debate, David Cameron produced a copy of the now infamous note left for the incoming Coalition administration by Labour’s Liam Byrne in 2010. It was widely circulated online during last night’s debate, and has been repeatedly used in an attempt to discredit the Labour Party’s handling of the economy while in power.


It was politically illiterate of Byrne to write the note, but it is economically illiterate for anyone to believe a word of it was true. Despite this, both Cameron and Clegg used the note as an opportunity to attack Ed Miliband last night for bringing the country close to bankruptcy. This claim is part of that much broader narrative used to justify austerity, but it is totally untrue.
Not near ...

The UK was never close to bankruptcy because there were and are vast sources of money available to the government that are rarely discussed. These include:

1.      A Sovereign currency. This means we are able to print our own money when needed, as we did in 2009 when £375bn was made out of thin air by the Bank of England to keep the commercial banks afloat, and try and stimulate the economy.

2.      Borrowing. The Tories would have you believe that borrowing is a great evil that must be curtailed at any cost, and it was Labour’s profligacy in borrowing that was in part responsible for the last recession. The truth of the matter is that every government since WWII has borrowed, and the Coalition borrowed more in 4 years than Labour did in 13. Growth hasn’t happened in spite of borrowing, but BECAUSE of borrowing, as the money has been used to fund the sorts of infrastructure and public services that keep a civil society prosperous.

3.      Taxation. While tax revenues dropped off during the recession, they weren’t close to drying up. Taxation in the UK is shamefully regressive, with the poorest 10% paying a greater proportion of their income in tax than anyone else. Nevertheless, taxation is a fundamental investment into, and repayment from a prosperous society.

4.      Asset sales. Governments own certain things, including buildings, land, banks and organisations. The Coalition has been very ready to offload otherwise profitable assets like Royal Mail and the East Coast Rail franchise for the sake of short-term boosts to the government finances.

While private individuals can borrow like governments can, and sell assets like governments can, we don’t have the right to print our own money, nor can we tax people as we wish. Governments have sources of money not available to private households, and talking about them as though they are entirely the same is another of those unhelpful lies.

... and yet so far.

Last night represented the first time for many millions of people to hear a political message that opposed austerity, from the three female party leaders. Each one was forthright in calling for an end to austerity and quick to condemn austerity policies as wrong. What we missed however was any debate as to WHY the austerity narrative is wrong.

Let me help:

1.     Labour didn’t cause the recession. It was caused by unpayable PRIVATE debt in the USA, not public debt in the UK.

2.     The country was not near to bankruptcy for the reasons detailed above.

3.     The rising deficit was not a special feature of the last recession, but is a common feature of ALL recessions.

4.     Austerity slowed economic growth, and easing of austerity was required for growth to pick up again.

5.     Spending and investment is needed to stimulate economic growth, not more austerity.


The case for austerity is built not on one lie, but on a wealth of them. These lies have caused suffering and death, and have done untold damage to our society’s fabric. Cameron has nothing to be proud of.

Wednesday, 1 April 2015

Labour for labour?


Andrew Fisher assesses Labour's Work Manifesto, 'A Better Plan for Britain's Workplaces'

The Labour Party's 'work manifesto' sets out to create "a higher skill, higher wage economy" to provide "a bedrock of security for working families" - as Ed Miliband, Rachel Reeves and Chuka Umunna put it in their joint foreword.

Much of the focus is on zero hours contracts (ZHCs) - which provides a clear dividing line with their Conservative opponents. Cameron confessed he couldn't live on one, Miliband promised to do something about it.

Before getting lost in the not-entirely-clear detail of Labour's policy on ZHCs, it's first worth flagging up some of the other notable policies that are clear - most of which have been heavily trailed in the long campaign:

  • 25 hours (up from 15) free childcare for 3 and 4 year olds
  • 4 weeks paternity leave (up from 2) for fathers and doubling the rate of paternity pay
  • ensuring all primary schools offer access to wraparound childcare from 8am to 6pm
  • abolishing the coaltion government's £1,200 employment tribunal fees; and
  • scrapping the 'shares-for-rights' schemes
  • banning employment agencies from exclusively recruiting from abroad
  • make it illegal to use agency workers to undercut permanent employees
  • require companies to publish the salaries of their ten highest paid non-board member employees; and
  • require companies to publish pay ratio between their top earner and their average worker
  • the offer of a high quality apprenticeship for all 18 year olds with qualifying grades

In a change of style over substance, the phrase 'compulsory jobs guarantee' has been binned in favour of the more prosaic "Labour will guarantee a job for all young people who have been out of work for a year", adding separately "it will be a job they will have to take or lose benefits". Whether this will be a job or a choice of jobs is not known. It's a move away from workfare (the jobs are paid), and should see the abolition of the discredited Work Programme, but we are left hoping that the softened phraseology is reflective of more.

There were also some notable wins for some labour movement campaigns that have picked up substantial support and have been recognised by the Labour leadership:

  • "we will release all papers concerning the 'Shrewsbury 24' trials"; and
  • "we will set up a full inquiry that is transparent and public to examine the issue of blacklisting"; and a little less concretely 
  • "reviewing specific issues such as excessive workplace temperatures"

Many thousands of trade union activists and Labour MPs (not least LEAP's own John McDonnell) have carried these campaigns - in some cases for decades - and can at last see some light at the end of the tunnel. A Labour government promises to make the difference.

Zero hours contracts

Labour's policy on ZHCs  raises as many questions as it answers. The manifesto states:
"If you work regular hours, you will get the right to a regular contract. This will be measured over the first 12 weeks of employment"
So only if your hours are regular in the first 12 weeks? If they're irregular in the first 12 weeks but regular in the next 12 then no right is applicable? And how do we define regular? Is it the same number of hours, the same specific shift patterns?

This language will need to be tightened significantly to make meaningful legislation or Labour will simply create a giant loophole presented as a bow.

Perhaps more clearly, Labour also pledges to ban contracts that enforce "hours of availability" with no guarantee of work and ensure compensation for ZHC workers whose shifts are cancelled at short notice (though again no detail of what constitutes 'short notice').

Good, but we need detail

It is not only on ZHCs where Labour seems to be heading in the right direction but failing to provide sufficient detail. It's pledge to put "employee representatives on remuneration committees" is welcome but in what proportion. Will they be a majority?

More surprisingly, Labour says it "will ensure UK compliance with international obligations on labour standards". Does this mean that Labour will sign up to ILO conventions that the UK has to date refused to sign, including significantly 94, 95, 118, 143, 156, 158 and others? (see TUC for full briefing).

There is also the promise to look at extending the remit of the Gangmasters Licensing Authority (the TUC has called for construction, hospitality and social care sectors to be included) so we await the consultations and reviews.

The '£8 minimum wage by 2020' pledge announced at Labour Party conference 2014 (see analysis here) is extended somewhat by saying "more than £8 before 2020" and that it will be "closer to average earnings" - with the Low Pay Commission given a new remit to make this happen. This remit must logically also involve helping to deliver Labour's pledge to "halve the number of people in low pay by 2025".

It also seems that sectoral minimum wages will be considered, and although detail is light, this could be the re-emergence of something like the sectoral wage boards that were abolished by Thatcher (except the agricultural wages board that was abolished under Cameron). Minimum wage enforcement will also be toughened both through HMRC (as now) and through local authorities (with what resources?)

Government procurement will also be used to "promote the campaign for a living wage", which is rather more woolly than simply saying, the government will only procure from living wage employers. All companies in Labour's first year in office will be offered a tax offset if they pay the living wage.

On tax policy, the commitment to reintroduce the 10% starting rate of tax is confirmed, but with no detail on what banding of income, though it will "benefit 24 million people on middle and lower incomes".

Clear red water

Despite the need for more detail in some areas, and the need to go further in places, this manifesto contains enough meat on the bones to put clear red water between Labour and the Tories. Even where the detail is lacking, the direction of travel is infinitely better than the Tory alternative and significantly more so than under New Labour

However, these proposals do lack the defining simplicity and boldness of John Smith's 'charter for employment rights', to "give all working people basic rights that will come into force from the first day of employment. We will give the same legal rights to every worker, part-time or full-time, temporary or permanent". Now that really was a rallying cry.