Cumulative effect of welfare reform revealed – deprived areas hit much harder than the rich

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allowance, austerity, BBC, business, Centre, close, commission, communities, community, cost, cumulative impact assessment, David Cameron, demonstration, deprivation, deprived, disability, Disability Living Allowance, disability news service, disabled, DLA, DNS, economic, EHRC, employment, equalities, ESA, esther mcvey, financial loss, human rights, IB, Incapacity, Landman Economics, mark hoban, Mike Penning, National Institute, NIESR, Personal Independence Payment, PIP, Reform, Regional Economic, report, Revenue, rich, Sheffield Hallam University, shop, Social Research, social security, spending, support, tax, transparent, travel, viability, welfare

Deprived parts of Glasgow were worst-affected by ‘welfare reform’ according to The Courier [Image: thecourier.co.uk].

The headline should not come as a surprise – of course changes that cut benefits for the poor are going to harm them more than rich people.

But do you remember David Cameron’s claim that his government would be the most transparent ever?

Isn’t it interesting, then, that the independent Equalities and Human Rights Commission (EHRC) has found a way to compile information on the effects of tax, social security and other spending changes on disabled people, after the government repeatedly claimed it could not be done?

It seems Mr Cameron has something to hide, after all.

We already have a taste of what we can expect, courtesy of our friends in Scotland, who commissioned the Centre for Regional Economic and Social Research at Sheffield Hallam University to study the relationship between deprivation and financial loss caused by “welfare reform”.

The study shows that more than £1.6 billion a year will be removed from the Scottish economy, with the biggest losses based in changes to incapacity benefits. The Scottish average loss, per adult of working age, is £460 per year (compared with a British average of £470) but the hardest hit area was impoverished Glasgow Carlton, where adults lost an average of £880 per year.

In affluent St Andrews, the average hit was just £180 per year.

Of course, the cumulative effect will hit the poorest communities much harder – with an average of £460 being taken out of these communities it is not only households that will struggle to make ends meet; as families make cutbacks, local shops and businesses will lose revenue and viability. If they close, then residents will have to travel further for groceries and to find work, meaning extra travel costs will remove even more much-needed cash from their budget.

For a nationwide picture, the EHRC commissioned the National Institute of Economic and Social Research (NIESR) and the consultancy Landman Economics to develop a way of assessing the cumulative impact of “welfare reform”.

The report will be published in the summer, but Landman Economics has already told Disability News Service that the work was “not actually that difficult”.

Why, then have Mark Hoban, Esther McVey and Mike Penning, the current minister for the disabled, all claimed that a cumulative assessment is impossible?

Some might say they have a vested interest in keeping the public ignorant of the true devastation being wreaked on Britain’s most vulnerable people by Coalition austerity policies that will ultimately harm everybody except the very rich.

Some might say this is why the BBC – under the influence of a Conservative chairman – failed to report a mass demonstration against austerity by at least 50,000 people that started on its very doorstep.

Misguided conspiracy theorists, all!

Or are they?

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Divisions in Coalition as MPs demand independent inquiry on poverty

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absolute, allowance, austerity, authorities, authority, avoid, bank, bed, bedroom tax, benefit cap, breakfast, capital gains, Chancellor, child, children, Coalition, commission, Conservative, council tax, cut, Daily Mail, David Nuttal, David Taylor-Robinson, David TC Davies, debt, deficit, delay, Democrat, Department, dependency, destitute, domestic, DWP, eastern, economy, electricity, employment, ESA, EU, Europe, european union, evade, evasion, export, families, family, food bank, gas, George Osborne, Gordon Brown, growth, health, homeless, housing benefit, Iain Duncan Smith, immigration, income, industry, infrastructure, inquiry, interview, investment, Jacob Rees-Mogg, Jeremy LeFroy, job, Jobseekers, John Hemming, John Major, joseph rowntree foundation, JSA, Labour, Lib Dem, Liberal, local, malnutrition, Margaret Thatcher, Michael Meacher, minimum wage, mistake, payment, Pensions, poverty, public, Red Cross, regulation, retired, Ronnie Campbell, rule, sanction, Sir Peter Bottomley, social security, spending, Steve Rotheram, Sunday Times, support, tax, Tony Blair, Tories, Tory, Trussell Trust, utility, violence, welfare, work, Work Programme, Workfare, workless

Calls for a ‘commission of inquiry’ into the impact of the government’s changes to social security entitlements on poverty have won overwhelming support from Parliament.

The motion by Labour’s Michael Meacher was passed with a massive majority of 123 votes; only two people – David Nuttall and Jacob Rees-Mogg – voted against it.

The debate enjoyed cross-party support, having been secured by Mr Meacher with Sir Peter Bottomley (Conservative) and John Hemming (Liberal Democrat).

Introducing the motion, Mr Meacher said: “It is clear that something terrible is happening across the face of Britain. We are seeing the return of absolute poverty, which has not existed in this country since the Victorian age more than a century ago. Absolute poverty is when people do not have the money to pay for even their most basic needs.”

He said the evidence was all around:

• There are at least 345 food banks and, according to the Trussell Trust, emergency food aid was given to 350,000 households for at least three days in the last year.
• The Red Cross is setting up centres to help the destitute, just as it does in developing countries.
• Even in prosperous areas like London, more than a quarter of the population is living in poverty.
• According to the Joseph Rowntree Foundation, for the first time, the number of people in working families who are living in poverty, at 6.7 million, is greater than the number of people in workless and retired families who are living in poverty, at 6.3 million.
• Child poverty will rise from 2.5 million to 3.2 million during this Parliament, around 24 per cent of children in the UK. By 2020, if the rise is not stopped, it will increase to four million – around 30 per cent of children in the UK.
• The use of sanctions depriving people of all their benefits for several weeks at a time, had increased by 126 per cent since 2010 and 120 disabled people who had been receiving jobseeker’s allowance had been given a three-year fixed duration sanction in the previous year.
• There are now more than 2,000 families who have been placed in emergency bed-and-breakfast accommodation after losing their homes.
• The per cent rise in the overall homelessness figures last year included nearly 9,000 families with children, which is the equivalent of one family losing their home every 15 minutes.
• A third of families spent less than £20 a week on food and that the average spend on food per person per day was precisely £2.10. That is a third less than those families were able to afford three months before that.
• The proportion of households that had to make debt repayments of more than £40 a week had doubled and the average level of debt was £2,250.
• A third of families had council tax debt.
• 2.7 million people had lost out through the Government’s changes to council tax benefit – many of them disabled people, veterans and some of the most vulnerable in our communities.
• Households were having to spend 16 per cent more on gas and electricity.
• There are 2.5 million people who have been unemployed for the best part of two years, and there were 562,000 vacancies when the debate took place (Monday), so four out of five of those who are unemployed simply cannot get a job whatever they do.
• Cuts to local authorities mean many home care visits are limited to 15 minutes.
• The 10 per cent of local authorities that are the most deprived in the country face cuts six times higher than those faced by the 10 per cent that are the most affluent.
• 60 per cent of benefit cuts fall on those who are in work.

Mr Meacher said the biggest cause of absolute poverty was the huge rise in sanctioning, often for trivial reasons such as turning up five minutes late for a job interview or the Work Programme:

• A dyslexic person lost his Jobseekers Allowance because his condition meant that in one fortnightly period he applied for nine jobs, not 10. He was trying to pay his way and already had work, but it provided only an extremely low income.
• The jobcentre didn’t record that a claimant had informed them that he was in hospital when he was due to attend an appointment and he was sanctioned.
• A claimant went to a job interview instead of signing on at the jobcentre because the appointments clashed – and was sanctioned.
• A claimant had to look after their mother who was severely disabled and very ill – and was sanctioned.
• A Job Centre sent the letter informing a claimant of an interview to their previous address, despite having been told about the move. The claimant was sanctioned.
• A claimant was refused a job because she was in a women’s refuge, fleeing domestic violence and in the process of relocating, but I was still sanctioned.

Mr Meacher also quoted what he called a classic: “I didn’t do enough to find work in between finding work and starting the job.”

The latest DWP figures suggest that more than one million people have been sanctioned in the past 15 months and deprived of all benefit and all income. “Given that the penalties are out of all proportion to the triviality of many of the infringements, and given that, as I have said, four out of five people cannot get a job whatever they do, the use of sanctioning on this scale, with the result of utter destitution, is — one struggles for words — brutalising and profoundly unjust,” said Mr Meacher.

Other reasons for the rise in absolute poverty included:

• Delays in benefit payments.
• The fact that it is impossible for many poor and vulnerable people to comply with new rules – for example a jobseeker who asked to downsize to a smaller flat who was told he must pay two weeks’ full rent upfront before getting housing benefit. He does not have the funds to do so and is stuck in a situation where his benefits will not cover his outgoings due to the Bedroom Tax.
• The Bedroom Tax, which applies to around 667,000 households, and two-thirds of those affected are disabled. More than 90 per cent of those affected do not have smaller social housing to move into.
• The Benefit Cap, imposed on a further 33,000 households.
• Mistakes by the authorities; up to 40,000 working-age tenants in social housing may have been improperly subjected to the Bedroom Tax because of DWP error (although Iain Duncan Smith claims a maximum of 5,000).

Mr Meacher said: “The Chancellor’s policy of keeping 2.5 million people unemployed makes it impossible for them to find work, even if there were employers who would be willing to take them, and the 40 per cent success rate of appeals shows how unfair the whole process is.”

Responding to a comment from David TC Davies (Conservative) that those who are not looking for work must realise there will be consequences, particularly when a million people have been able to come to the UK from eastern Europe and find work, Mr Meacher said, “Those who come to this country are more likely to be employed and take out less in benefits than many of the indigenous population.”

He asked: “Is all this brutality towards the poor really necessary? Is there any justification in intensifying the misery, as the Chancellor clearly intends, by winding up the social fund and, particularly, by imposing another £25 billion of cuts in the next Parliament, half of that from working-age benefits?

“After £80 billion of public spending cuts, with about £23 billion of cuts in this Parliament so far, the deficit has been reduced only at a glacial pace, from £118 billion in 2011 to £115 billion in 2012 and £111 billion in 2013. Frankly, the Chancellor is like one of those first world war generals who urged his men forward, over the top, in order to recover 300 yards of bombed-out ground, but lost 20,000 men in the process. How can it be justified to carry on imposing abject and unnecessary destitution on such a huge scale when the benefits in terms of deficit reduction are so small as to be almost derisory?”

Suggested alternatives to the punitive austerity programme of cuts came thick and fast during the debate. Challenged to explain what Labour’s Front Bench meant by saying they would be tougher on welfare than the Tories, Mr Meacher said: “As the shadow Chancellor has made clear on many occasions, is that we need public investment. We need to get jobs and growth. That is the alternative way: public investment in jobs, industry, infrastructure and exports to grow the real economy, not the financial froth, because that would cut the deficit far faster than the Chancellor’s beloved austerity.”

He asked: “How about the ultra-rich — Britain’s 1,000 richest citizens — contributing just a bit? Their current remuneration — I am talking about a fraction of the top 1 per cent — is £86,000 a week, which is 185 times the average wage. They received a windfall of more than £2,000 a week from the five per cent cut in the higher rate of income tax, and their wealth was recently estimated by The Sunday Times at nearly half a trillion pounds. Let us remember that we are talking about 1,000 people. Their asset gains since the 2009 crash have been calculated by the same source at about £190 billion.

“These persons, loaded with the riches of Midas, might perhaps be prevailed upon to contribute a minute fraction of their wealth in an acute national emergency, when one-sixth of the workforce earns less than the living wage and when one million people who cannot get a job are being deprived of all income by sanctioning and thereby being left utterly destitute.

“Charging the ultra-rich’s asset gains since 2009 to capital gains tax would raise more than the £25 billion that the Chancellor purports to need. I submit that it would introduce some semblance of democracy and social justice in this country if the Chancellor paid attention to this debate and thought deeply about what he is doing to our country and its people.”

Ronnie Campbell (Blyth Valley, Lab) suggested that the Government might save a lot more if its members “showed the same energy and enthusiasm for getting those who evade their taxes and run to tax havens as they do for going after the poor, the sick and people on the dole”.

Against this, David TC Davies offered insults and distortions of the facts, quoting the Daily Mail as though it provided an accurate account of current events: “Members of the shadow Cabinet might need a boxing referee to sort out their disputes at the moment, as we read today in the Daily Mail.”

He said: “We took office with a deficit of £160 billion and a debt that was rising rapidly to £1 trillion. That was after years of overspending in good times, as well as in bad, by Labour, a cheap money supply and lax banking regulation under the former Government.” Labour’s spending, up until the financial crisis, was always less than that of the previous Conservative administration; Gordon Brown and Tony Blair both ran a lower deficit than John Major and Margaret Thatcher, and at one point actually achieved a surplus, which is something that the Conservatives had not managed in the previous 18 years. While Mr Davies here complained about the “lax banking regulation”, Conservatives supported it at the time and in fact demanded more DE-regulation, which would have made the financial crisis worse when it happened.

“We had disastrous economic decisions, such as that to sell gold at a fraction of its real rate,” said Mr Davies. Yes – the UK lost around £9 billion. But compare that with the disastrous economic decision by George Osborne to impose more than £80 billion worth of cuts to achieve a £7 billion cut in the national deficit. The UK has lost £73 billion there, over a three-year period.

And Mr Davies said: “Worst of all and most seriously, we had a welfare system that allowed people to get into a trap of welfare dependency, leaving them on the dole for many years, but at the same time filling the consequent gap in employment by allowing mass and uncontrolled immigration into this country, which completely undercut British workers.” The first assertion is simply untrue; the second is a legacy of previous Conservative administrations that agreed to the free movement of EU member citizens, meaning that, when the eastern European countries joined in 2004, citizens migrated to the UK in the hope of a better life. Labour has admitted it should have negotiated for a delay in free movement until the economies of those countries had improved, making such migration less likely, but the situation was created before Labour took office.

Challenged on the Coalition’s record, Mr Davies fell back on the Tories’ current trick question, which is to counter any criticism by asking: “Is he suggesting that we are not doing enough to pay down the national debt? Is he suggesting that we should cut further and faster? If so, and if we had the support of other Opposition Members, that is exactly what the Government could do and, indeed, possibly should do. I look forward to seeing that support for getting the deficit down.” This disingenuous nonsense was batted away by Labour’s Hugh Bayley, who said “investing in the economy, creating jobs and thereby getting people off welfare and into work” was the way forward.

Mr Davies’ Conservative colleague Jeremy Lefroy took a different view, agreeing that increasing numbers of people are finding it impossible to make ends meet, and that job creation and apprenticeships were a better way out of poverty than changing the social security system alone. He agreed that sanctions were applied to his constituents “in a rather arbitrary manner”. He spoke against George Osborne’s suggested plan to remove housing benefits from people aged under 25, saying this “would have a drastic impact on young people who need to live away from home and who have no support from their families”. He spoke in favour of councils increasing their housing stock. And he admitted that disabled people faced severe problems when unfairly transferred from ESA to JSA: “A lady in my constituency says, ‘I am simply not fit for work, but by signing on for JSA I have to say that I am available and fit for work.’ She does not want to tell a lie.”

Steve Rotheram (Liverpool Walton, Labour) spoke powerfully about the effect of being on benefits: “Lots of people in my city are on benefits for the very first time. Far from being in clover — it beggars belief what we read in the right-wing press — they are struggling to make ends meet, and the problem that thousands of Liverpudlians are facing is new to them. For many, the idea that they might miss a rent payment is totally alien. They have not done that in the past 20 years, but since May 2010, their individual household incomes have been on such a downward trajectory that they now find themselves in rent arrears, seeking advice on debt management and unable to afford the daily cost of travel, food and energy. Figures suggest that 40 per cent of the adult population in Liverpool are struggling with serious debt problems.”

And he said poverty had health implications, too: “David Taylor-Robinson of the University of Liverpool and his fellow academics have highlighted the doubling of malnutrition-related hospital admissions nationally since 2008.”

John Hemming (Birmingham Yardley, LD) raised concerns about “the interrelationship between the welfare cap and victims of domestic violence, and whether there are situations that need more attention. I believe that people can get discretionary housing payment to leave a violent home, but it is important that we ensure that there is a route out of domestic violence for women. I am worried about that issue, just as I am about some wrongful sanctioning that I have seen. That does not help at all, because it undermines the whole process.” He also called for “a substantial increase in the minimum wage, because as the economy is improving the Government should look at that, rather than maintain things as they are”.

The vote gave huge endorsement to the call for an independent inquiry into poverty under the Coalition.

But with an election just 15 months away, how long will we have to wait for it to report?

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Don’t lose your right to vote because of apathy

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agent provocateur, apathy, commission, election, electoral, fraud, general, individual, Mike Sivier, mikesivier, propaganda, register, registration, Stephen Twigg, suffrage, universal, vote, Vox Political

Individual voter registration will replace the current system in time for the general election in 2015, according to a government minister.

It will replace the current system in which households are asked to declare the identities of everyone living there who is qualified to vote.

Instead, it will be up to the individual elector to ensure that his or her name remains on the electoral register.

The Electoral Commission has welcomed the announcement, claiming that the measure will cut fraud and “lead to a more secure electoral register” – but Labour has raised concerns that some voters will be left out.

This is a genuine fear – that pressure of other commitments will push electoral registration out of mind. Most working people, along with the unemployed, are confronted with a multitude of matters that fight for their attention every day; registering for an event that won’t take place for several months is likely to slip their minds. There is also the threat of creeping apathy; the feeling that voting won’t change anything, that has been carefully promoted by right-wing propaganda and agents-provocateurs in the social media.

There is a very deep concern that this is exactly why Conservatives and Liberal Democrats are bringing in the new system.

Tory voters are well-regimented. They will make sure they stay on the register, and they will vote according to their instructions, on a regular basis. It is a gross generalisation, but they are generally less stressed than other voters, with fewer commitments. Liberal Democrats could face electoral annihilation in 2015, so this will add urgency to their attitude.

Labour voters – supporting the main opposition to the two Coalition parties – are often less committed to the process. It can be hard to motivate them to come out and vote, and individual voter registration adds a new layer to this difficulty.

It seems likely that people who have not registered under the new system will still be able to cast a ballot in the 2015 general election, under transitional arrangements – but the Shadow minister for constitutional reform, Stephen Twigg, has warned that 8.7 million voters are “on course” to fall off the register because of the way the government is rushing the change through.

Here at Vox Political, we believe that everyone in the UK should continue to enjoy – and exercise – the right to vote. In fact, ever since universal suffrage was introduced (as recently as the 20th century), it should be the duty of the government to ensure that this happens. Nobody should be turned away from a polling station.

This measure does not ensure that – in fact it makes such a situation less likely. That is why this blog will endeavour to ensure that all our readers are made aware of when the arrangement changes and what they need to do – and we will issue reminders, to ensure that you do not lose the right that your forebears suffered and died to win for you.

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More dodgy numbers on jobs for the disabled from the fake statistics machine

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Access to Work, aid, avoidance, benefit, benefits, business, Coalition, commission, competitive, Conservative, Democrat, Department, Department for Work and Pensions, disability, disabled, discriminate, DWP, economy, electorate, Employment and Support Allowance, equipment, ESA, firm, government, Group, haven, innovation, insolvent, job, Jobseeker's Allowance, judicial review, Lib Dem, Liberal, mental health, Mike Sivier, mikesivier, Pensions, people, Plan for Growth, politics, private sector, provider, self employ, skills, social security, support, supported internship, tax, tax system, Tories, Tory, trainee, travel, Treasury, unemployment, Vox Political, welfare, work, work experience, Work Programme, work-related activity, WRA, WRAG, young, Youth Contract

Making up the numbers: Thousands more disabled people are becoming self-employed, contributing to a huge boost in the number of private businesses – or are they?

Someone in the Coalition government needs to watch what they’re saying – otherwise people all over the UK might come to unintended conclusions.

Take a look at this: “Over 2,000 more disabled people got the support they needed to get or keep their job, compared with this time last year, official figures released today (22 October 2013) show” – according to a Department for Work and Pensions press release.

It goes on to say that the number of people receiving support under the Access to Work programme between April and June this year increased by 10 per cent on the same period last year, to 22,760. Access to Work “provides financial help towards the extra costs faced by disabled people at work, such as support workers, specialist aids and equipment and travel to work support”.

Apparently the new stats show the highest level of new claims since 2007 – 10,390; and more people with mental health conditions than ever before have taken advantage of Access to Work.

The press release also states that young disabled people can now get Access to Work support while on Youth Contract work experience, a Supported Internship or Traineeship; and businesses with 49 employees or less no longer have to pay a contribution towards the extra costs faced by disabled people in work. It seems they used to have to pay up to £2,300 per employee who uses the fund.

Now look at this: According to a press release from the Department for Business, Innovation and Skills, the number of private sector businesses in the UK increased by 102,000 between the beginning of 2012 and the same time in 2013.

There are now 4.9 million private businesses in the UK, with those employing fewer than 50 employees comprising nearly half of the total.

Some might think this is brilliant; that the DWP and BIS are achieving their aims of boosting private-sector business and finding work within those businesses for disabled people.

But dig a little deeper and a more sinister pattern emerges.

Doesn’t this scenario seem odd to anybody who read, earlier this year, that the DWP was having deep difficulty finding work for disabled people from the ESA work-related activity group?

Or, indeed, to anybody who read the BBC’s report that work advisors were pushing the jobless into self-employment?

Isn’t it more likely that the DWP and Work Programme providers, faced with an influx of disabled people into the programme from the ESA WRAG at the end of last year, encouraged them to set up as self-employed with their own businesses in order to get them off the claimant books?

Does it not, then, seem likely that a large proportion of the 22,760 getting help from Access to Work were offered it as part of a self-employment package that also, we are told, includes start-up money (that admittedly tapers away over time) and tax credits. The attraction for WP providers is that they would earn a commission for every claimant they clear off the books in this way.

So it seems likely that a large proportion of the 22,760 may now be self-employed in name alone and that these fake firms are included in the 102,000 new businesses lauded by BIS.

Is it not logical, therefore, to conclude that these are not government schemes, but government scams – designed to hoodwink the general public into thinking that the economy is improving far more than in reality, and that the government is succeeding in its aim to bring down unemployment?

The reference to jobs for people with mental health problems would be particularly useful for a government that has just appealed against the result of a judicial review that found its practices discriminate against this sector of society.

Some might say that this conclusion is crazy. Why would the government want to release information that directly indicates underhanded behaviour on its part?

The answer is, of course, that it would not. This government wants to convince an undecided electorate that it knows what it is doing and that the country’s future is safe in its hands. But its right hand doesn’t seem to know what its left is doing – with regard to press releases, at the very least.

And let’s not forget that, since the Coalition came into office, 52,701 firms have been declared insolvent and 379,968 individuals. Around 80 per cent of new self-employed businesses go to the wall within three years.

Therefore we can say that, in trying to prove that it is competent, the Coalition government has in fact proved the exact opposite.

So someone really needs to watch what they’re saying – if they don’t want people all over the UK to come to unintended conclusions!

AFTERTHOUGHT: The BIS press release adds that the government’s ‘Plan for Growth’, published with the 2011 budget, included an aim to create “the most competitive tax system in the G20”. By “competitive” the Treasury meant the system had to be more attractive to businesses that aim to keep as much of their profits away from the tax man as possible. It is a commitment to turn Britain into a tax haven and the VP post earlier this week shows that the government has been successful in this aim. What a shame that it also means the Coalition government will totally fail to meet its main policy commitment and reason for existing in the first place: It can’t cut the national deficit if the biggest businesses that operate here aren’t paying their taxes.

Jobseekers and the self-employment trap

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benefit, bounty, budget, business, commission, Conservative, Democrat, Department, DWP, election, esther mcvey, firm, fund, general, insolvent, jobseeker, Jobseeker's Allowance, Labour, Lib Dem, Liberal, loan, Mike Sivier, mikesivier, Pensions, self employ, social security, tax relief, Tories, Tory, Vox Political, welfare, work

Yesterday’s outburst against Esther McVey and her innovative way of interpreting the benefit claimant statistics proved very popular as readers clamoured to suggest alternative reasons why people who deserve benefits are no longer getting them.

One of these deserves an article of its own, because it really is ‘The One That Got Away’ – and doesn’t deserve to. As the commenter who raised it pointed out, it could be a huge scandal.

We refer, of course, to the fact that people on Jobseekers’ Allowance are being, let’s call it, ‘persuaded’ to go self-employed and start new businesses.

How are these businesses funded? Do these people get a share of a different DWP budget? Do they get loans? Do they get tax relief to support them while they are setting up these firms?

Meanwhile, some believe the DWP officers who force jobseekers to go self-employed get a commission for doing so – an extra payment on top of their salaries. Or is it a bounty, for taking one more name off the books?

Can anyone shed light on this? Do they get paid for creating, in effect, fake jobs?

Some of these new firms will succeed. Current statistics mean around 10-20 per cent of new small businesses last more than three years. But this means at least 80 per cent will go under.

Our commenter who mentioned the issue raised fears that funding will be withdrawn, right around the time of the 2015 general election.

Wouldn’t that be shocking – if Labour took office only to be faced with headlines that the new government was sending businesses to the wall and unemployment through the roof in its first year of government?

My commenter wondered if this was “another Tory elephant-trap for Labour”. Good question.

If so, it will be time to remind everyone that, since the Coalition came into office, 52,701 firms have been declared insolvent and 379,968 individuals.

Even with ‘help’ from the Coalition, it would take a lot of effort for Labour to equal that dismal record.

Treasury responds to Vox’s austerity challenge

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Ash, austerity, bank, benefit, benefits, Boskin, business, Cecchetti, Chancellor, co-operation, Coalition, commission, Conservative, debt, deficit, development, economic, economy, Egert, European, fiscal, fund, Furceri, George, George Osborne, Gideon, government, Herndon, IMF, international, investment, Kumar, Mike Sivier, mikesivier, Monetary, multiplier, OECD, Olli Rehn, organisation, Osborne, people, politics, Pollin, public, reinhart, Revenue, rogoff, settlements, spending, tax, Tories, Tory, Treasury, Vox Political, Woo, Zdzienicka

Last month, Vox Political wrote to the Chancellor of the Exchequer, a Mr Osborne, politely asking him whether he had any other documentary justifications for his disastrous programme of austerity after the previous principal pillar of his faith – a paper by Harvard economists Reinhart and Rogoff – had been disproved by a student at a rival university.

Today we received a response! A lengthy, well-considered one at that.

What a shame that we found a way to trash it before we reached the end of page one.

But we’re getting ahead of ourselves. Let’s all read the letter together, shall we? It begins:

“Thank you for your letter dated 22 April about the recent publication by Herndon, Ash and Pollin, a critique to the paper ‘Growth in the time of Debt’ by Reinhart and Rogoff.

“You asked for the Treasury’s views on the recent criticism of the paper by Carmen Reinhart and Kenneth Rogoff which concluded that public debt above 90% of GDP could prove a significant drag on economic growth.

“As you will be aware, the Coalition Government inherited the largest deficit in post-war history due to unsustainable increases in Government spending by the previous Government and the effects of the financial crisis [We don’t know that at all. The largest deficit in post-war history is something to which this writer cannot respond – I only know that the national debt at the end of WWII was 250 per cent of GDP, or very nearly four times as much as it is now. Spending by the Labour administration was less than that of the Conservatives until the financial crisis took place, so the writer is effectively admitting that Conservative spending between 1979 and 1997 was even more unsustainable. As for the financial crisis, the Tories would have done the same as Labour at the time, as is borne out by the history books]. In order to address these problems the Coalition Government set a clear and credible consolidation plan to reduce the risks of a costly loss of market confidence in the UK, to restore confidence and underpin sustainable growth.

“As noted by the OECD in their Economy Survey of the United Kingdom February 2013, ‘global developments have shown that the consequences of loosing [sic] market confidence can be [a] sudden and severe and sharp rise in the interest rates [that] would [be] particularly damaging to an economy with the United Kingdom’s level of indebtedness.’ A 1 percentage point increase in government bond yields would add around £8.1 billion to annual debt interest payments by 2017-18.

“Fiscal consolidation also reduces the risk of adverse feedback between weak public finances and a strained financial sector. This feedback can be very damaging, as evidenced by recent events in the euro area. Globally, the UK has one of the largest financial systems relative to the size of its economy, meaning that any loss of investor confidence in the UK’s fiscal position would not only affect the UK, but also the global economy. As the IMF has stated in their United Kingdom – 2011 Article IV Consultation Concluding Statement of the Mission, ‘the UK financial system thus serves as a global public good’. It is the IMF’s view that the UK’s economic and financial sector policies have a systemic impact on the global economy.

“The Government’s approach is supported by a large body of academic and professional literature which finds that there are strong theoretical and empirical grounds for a relationship between high levels of debt and slow growth, including:

“1. Work by staff of the Bank for International Settlements:

“* ‘The Real Effects of Debt’ by Cecchetti et al, 2011 (published as a Bank of International Settlements working paper in September 2011), found that government debt above 85% had a negative impact on growth.

“2. Research by staff of the International Monetary Fund:

“* ‘Public Debt and Growth’, an IMF 2010 working paper prepared by Kumar and Woo, found that an increase in debt ratio of 10& resulted in an annual decrease of 0.2% in per capita GDP growth, with a stronger effect at higher levels of debt. The paper found some evidence of nonlinearity with higher levels of initial debt having a proportionately larger negative effect on subsequent growth. Analysis of the components of growth suggested that the adverse effect largely reflects a slowdown in labour productivity growth mainly due to reduced investment and slower growth of capigal stock.

“* ‘How costly are debt crises’, an IMF 2011 working paper prepared by Furceri and Zdzienicka, finds that debt crises produce significant and long-lasting output losses. This study also provides support to the idea of a threshold for the debt-to-GDP ratio above which output growth starts to decline.

“* The IMF 2013 WEO box 1.2 ‘Public Debt Overhang and Private Sector Performance’, cites studies that have found a threshold beyond which public debt harms growth. It also lists several reasons why a debt overhang can affect economic activity.

“3. Work by staff of the Organisation for Economic Co-operation and Development:

“* ‘Public Debt, Economic Growth and Nonlinear effects, Myth or Reality?’ Egert, OECD 2012, finds ‘some evidence in favour of a negative nonlinear relationship between debt and growth using a variety of econometric models.

“4. Work by staff of the European Commission:

“* Report on Public Finances in EMU 2012 supports the statement that public debt can trigger economic growth: ‘higher debt levels and interest rates might weigh on economic growth, especially when debt exceeds a certain threshold level as a number of papers suggest.’

“There are also theoretical reasons, highlighted in Boskin, 2012 and OECD, 2012 for believing that higher levels of public debt will damage medium-term growth prospect:

“* First, tax hikes needed to service a higher public debt may crowd out private investment by reducing disposable income and saving.

“* Second, if the higher debt servicing costs associated with increased debt levels are financed by increasing tax revenue, they also imply a deadweight loss on the economy as a result of distortionary effect of raising tax revenues.

“* Third, there is broad agreement that large deficit and debt levels are associated with a higher level of long-term Government bond yields which may crowd out productive public investment and reduce private investment through an increase in the cost of capital. Reduced investment in research and development will have long-lasting negative impacts on growth.

“The approach is also supported by international organisations. The OECD, for example, noted in its November 2012 Economic Outlook that ‘With the budget deficit (excluding temporary factors) at over 8% of GDP and gross government debt at over 80% of GDP, fiscal consolidation is necessary to restore the sustainability of public finances and will strengthen medium-term growth prospects. The fiscal stance remains appropriate, and is supported by the strong institutional framework.’

“Olli Rehn, Vice President of the European Commission, on the speech of the Spring Forecast in May 2013 noted: ‘It is important that the UK follows through with consistent consolidation of public finances with a view to achieve (sic) a more sustainable fiscal position.’

“At the end of this letter you can find the papers referred to above online.”

I shan’t embarrass the letter’s author by naming that person.

The online papers are:

Cecchetti, Bank of International Settlements, 2011. ‘The Real Effects of Debt’ http://www.bis.org/publ/work352.htm

Kumar and Woo. ‘Public Debt and Growth’, IMF 2010 http://www.imf.org/external/pubs/ft/wp/2010/wp10174.pdf

Furceri and Zdzienicka. ‘How Costly are debt crises’, IMF 2011 http://www.imf.org/external/pubs/ft/wp/2011/wp11280.pdf

IMF April 2013 World Economic Outlook (WEO) http://www.imf.org/external/pubs/ft/weo/2013/01/

Egert, OECD 2012. ‘Public Debt, Economic Growth and Nonlinear effects, Myth or Reality?’ http://www.oecd-ilibrary.org/economics/public-debt-economic-growth-and-nonlinear-effects_5k918xk8d4zn-en

Boskin, M. Stanford Institute for Economic Policy Research, 2012. A Note On the Effects of the Higher National Debt On Economic Growth http://siepr.stanford.edu/publicationsprofile/2491

OECD Economic Outlook, November 2012. http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-outlook-volume-2012-issue-2_eco_outlook-v2012-2-en

European Council, 2012 UK Country Specific Recommendation (CSR). http://ec.europa.eu/economy_finance/economic_governance/sgp/pdf/20_scps/2012/04_council/uk_2012-07-10_council_recommendation_en.pdf

… all of which can be picked apart with one observation and a couple of attached questions:

Mr Osborne demanded in 2010, that cuts to welfare benefits alone should total £18bn per year by 2014-15 (meaning a total of £90bn over the five years of Coalition government). Other government departments have had to take huge hits as well.

So why is the total drop in the deficit this year just £300 million? And why is the national debt now more than 88 per cent of total GDP – well inside the danger zone that Mr Osborne has been trying to avoid?

Could it be that, once put into practice, the theories outlined above aren’t actually worth a farthing?

Expect much more on this subject as we really get our teeth into the material the Treasury has kindly provided.

Lord Young – a talking example of why working people should never vote Conservative

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Unrepentant: Ignorant old Tories like Lord Young cannot see anything wrong with starving workers – and, through lack of tax revenue, the benefit budget – to make fat profits for greedy business bosses. The families of all those who have died because of these policies might have a different point of view.

Apparently we are living in an excellent time for businesses to boost their profits – because labour is cheap.

That is what Lord Young, who advises David Cameron on enterprise, told the cabinet yesterday (May 11). His words make it crystal clear that working people who vote Conservative are classic examples of turkeys voting for Christmas. They beg to be exploited.

He said low wage levels in a recession made larger financial returns easier to achieve – in other words, he actually admitted that bosses could use the current state of the UK economy, as caused by his own government (not the previous Labour administration, for reasons we’ve covered in the past), to push workers’ wages down and keep more moolah for themselves.

Vox Political has accused the Conservatives of exactly this behaviour in the past, but we never expected to see a member of the government admit it so brazenly.

Perhaps this is more of the government’s pet ‘nudge’ theory at work. We have seen that benefit increases have been lowered in order to instil fear of destitution in the jobless, and in those who have low-paid jobs. Now, businesses are being urged to capitalise on this, exploiting their workforces with the obvious threat: “There are plenty of other people out there who’ll do it for less!”

Let’s just back this up with some statistics, courtesy of The Guardian , shall we? UK employees’ average hourly earnings have fallen by 8.5 per cent, in real terms, since 2009. That’s adjusting for inflation, and the newspaper got its figure from the Office for National Statistics.

Meanwhile, the 1,000 richest people in the UK are now worth more than £414 billion – up more than £155 billion in the three years to December 2012. And in April, the Tory-led government gave those people a £100,000 per year tax cut.

Lord Young is not to be confused with Sir George Young, the Tory Chief Whip who once famously said “the homeless are what you step over when you come out of the opera” – but he is cut from the same cloth.

He had to apologise after telling the Daily Telegraph that “for the vast majority of people in the country today, they have never had it so good, ever since this recession – this so-called recession – started”.

For this reason it is easy to suggest that he would have stepped over the body of Stephanie Bottrill, had he been the first to find it.

Oh – do you think that statement goes too far? Please, reserve your judgement until I have explained my reasoning.

Like so many members of the Tory government, this is a man who absolutely point-blank refuses to understand the relationship between the decisions he makes and the conditions in which the majority of us are forced to live.

This former advisor to the Prime Minister on health and safety laws has advocated relaxing them, ignoring the fact that this will increase the likelihood of work-related injury that makes it impossible for people who need the money to go to work.

This enterprise advisor was asked to conduct a “brutal” review of the relationship of government to small firms, presumably with a view to cutting off as much public assistance for small businesses as possible.

This former chairman of the Manpower Services Commission advised the late Baroness Thatcher on unemployment, and we may take it that it is due to this advice that joblessness skyrocketed during the Thatcher years.

He refuses to see that his attitude is causing the problem: By ensuring that Britain’s labour market remains “flexible” (read “low-wage”), he ensures that the national tax take remains far lower than it should be; low-paid workers form the overwhelming majority of the workforce. In turn, the low tax take means the government cannot pay off its debts and provides it with an excuse to cut public spending – especially on benefit payments.

Stephanie Bottrill had an auto-immune system deficiency, Myasthenia gravis, which meant she was permanently weak and needed constant medication. Doctors said she was too ill to hold a job, but she never qualified for disability benefits.

She committed suicide because she could not afford the cost of living after the Bedroom Tax was forced on her, and it has been said by others that she died for want of £20 per week.

It is the attitude of Tories like Lord Young that has deprived her of that money – and ultimately, of her life.