If Osborne’s critics are wrong, why did the economy do exactly what we said?

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What an embarrassment: George Osborne should be ashamed of the rubbish he spouted in his speech yesterday (Friday).

George Osborne is flailing.

He’s a desperate man, trying vainly to convince us that the current state of the British economy was his plan all along when anybody with half a brain can see it wasn’t.

Yesterday he was in Washington, trying to convince Americans that he knows what he is doing, but US economists are far too canny to accept anything he says at face value.

His principal claim was that critics of what he and the ConDem inner circle still laughably call “the government’s long-term economic plan” have been proved “comprehensively wrong”. Some of us would like to see his proof of that.

Back in 2010, when Osborne took over at the Treasury, trashed a perfectly good Labour-stimulated recovery and sent the economy into freefall, those of us with any sense said the situation would worsen until it hit the point at which the economy would stabilise of its own accord, without any interference from politicians. Then it would start to improve because demand would start to rise again.

We reached the lowest point possible in the British economic cycle; from there, the only way was up. That is why there is a recovery – and a mean, meagre little thing it is, too. We should be 20-25 percentage points above where we are. Instead, we’re 1.4 per cent behind our pre-recession peak and the money is going to the wrong people.

The only question you should be asking is why this Tory illiterate has held us back.

Osborne told America that the British economy was growing faster than any other in the G7 – which means nothing. When an economy has shrunk more than any other, it is easier for it to grow. It doesn’t mean that our economy will be bigger than the others, although that is certainly the impression that Osborne wants to convey.

He said the growth was “despite warnings from some that our determined pursuit of our economic plan made that [economic growth] impossible”. This was a lie.

Osborne knows perfectly well that nobody said growth was impossible. They said Osborne’s policy would delay any recovery, causing misery for millions of medium- and low-waged people and providing a spurious justification for his colleague Iain Duncan Smith’s purges of benefit claimants – actions that have caused many thousands of unnecessary deaths.

Apparently, to quote members of a previous Tory government, that is “a price worth paying”. For what?

He said: “Fiscal consolidation [austerity] and economic recovery go together, and [the economic turnaround in the UK] undermines the pessimistic prognosis that only further fiscal stimulus can drive sustainable growth.” This is not what the data shows. It shows, as already stated, that the British economy hit rock-bottom under Osborne’s guidance and has now started the long climb upward of its own accord. That is not an endorsement of his policy; fiscal stimulus along Keynesian lines would have arrested the decline and boosted the economy back into growth – as evidenced four years ago, when Osborne inherited an economy that had been growing for five consecutive quarters and sent it right back into decline.

Osborne claimed, yet again, that a Keynesian scheme would create more debt – denying the simple economic fact that the boost it would have provided would have put more money into the Treasury and cancelled the debt far more quickly than his cuts.

It’s obvious, really. Any growth is despite austerity, not because of it. If you take money out of a system, it’s harder for anybody to make a profit on which tax can be paid. Economics 101, George. But you studied history, didn’t you? And towel-folding.

We should also remember that in Osborne’s first Budget he promised – promised – a “steady and sustained” economic recovery. Instead, we had three years in which the economy flatlined. Then he brought in ‘Help to Buy’ – a very crude fiscal stimulus scheme that has created a housing price bubble that is hugely damaging for low earners while putting money into the pockets of people who don’t need it. The economy picked up, because housing relies on other industries, but the crash that is to come might create a worse situation than before.

Osborne wants us to believe that wages will start to rise above inflation, even though the experience of the Americans to whom he delivered his speech is that 95 per cent of post-recession growth went to the richest one per cent of the population. He wants us to believe living standards will improve, but there is no evidence for this at all.

It’s all just another big lie.

Just take a look around you and you’ll see the facts. Osborne was charged with keeping the economy on its knees because that is what the Tories needed, in order to suck the cash from the middle-class, working-class and unemployed people of the UK.

Tories need mass unemployment to maintain the UK as a low-wage economy, creating more profit for bosses while keeping the workers under the cosh.

They need stagnation in much of the economy in order to ensure that the deficit does not go away and the national debt rises, thereby making it possible from them to continue selling off the National Health Service and dismantling the welfare state.

They need a housing bubble in places like London, to ensure that it is too expensive for undesirable poor and middle-income people, ship them out to other towns that have suffered the planned decimation of their economic bases (in order to ensure that they could not make a better living there), and make the capital city a playground for the rich.

And they have done it all by manipulating the media into telling you the worst lies about your own well-being – lies like those in George Osborne’s speech yesterday.

The last 40 years of British history represent the worst decline in living standards for the British people in the entire history of our nation. Never before did we have as much as when the Conservatives came to office in 1979; never before did we have so much to lose.

And we gave it away to liars like George Osborne, just because they had honey on their forked tongues.

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Is anyone stupid enough to fall for this Tory tax bribe?

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additional, allowance, Atos, balance, bank, BBC, bribe, burden, Coalition, companies, company, Conservative, cut, David Cameron, debt, deficit, efficiency, employment, ESA, firm, fiscal, government, health, household, Iain Duncan Smith, IB, IFS, Incapacity Benefit, Institute, insurance, Jeremy Hunt, long term economic plan, medical record, Mike Sivier, mikesivier, National Health Service, NHS, OH Assist, people, politics, population, premium, private, privatisation, public spending, spending, Studies, support, tax, Tories, Tory, Vox Political, waste, WCA, work capability assessment

So David Cameron wants us to believe further public spending cuts will be used to ease the tax burden on the proles, does he?

He must think you’re stupid. Are you?

Exactly one month ago (February 5), the Institute of Fiscal Studies reported that Cameron’s Coalition government will be less than halfway through its planned spending cuts by the end of the current financial year, as Vox Political reported at the time.

These are the cuts that the government considers vital in order to bring the nation’s bank account back into some kind of balance in the near future.

If Cameron abandons the “long-term economic plan” his Tories have been touting for the last few months, in a bid to bring voters back on-side, it means he will want to make even more cuts if he is returned to office in 2015.

We can therefore draw only two possibilities from his claim:

There will be no tax cuts; he is lying, in the same way he lied about keeping the NHS safe from private companies – the same way Jeremy Hunt has lied about your medical records being kept away from companies who will use them to raise your health insurance premiums, and the same way that Iain Duncan Smith has been hiding the true extent of the deaths caused by the Atos- (sorry, OH Assist-) run work capability assessments.

He will make a few tax cuts (probably in the March budget) but any benefit will be clawed back as soon as the Tories have secured your votes and won another term; the only people they want to help are rich – and you don’t qualify.

According to yesterday’s (March 4) BBC report, “every efficiency” found could help provide a “bit of extra cash” for households.

But we already know from the BBC’s article about the IFS that “additional spending, population growth and extra demands on the NHS meant more cuts were needed”.

Cameron even contradicted himself in his speech! At one point he said, “Every bit of government waste we can cut… is money we can give back to you.” Then he went on to add: “If we don’t get to grips with the deficit now, we are passing a greater and greater burden of debt to our children.”

Which are you going to do, David? Give money back to the people in tax cuts or tackle the deficit? If you want to achieve your goals within the time limit you have set yourself, you can’t do both!

Not that deadlines mean anything to him, of course. As noted in the earlier Vox Political article, it is more likely that the Conservatives have been working to give themselves an excuse for more cuts, rather than to restore the economy and balance the books.

And if he does cut taxes, what public services will we lose forever as a result?

Think about it.

Don’t let this liar make a fool out of you.

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Church v (Secretary-in-a-) State over social ‘reform’

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archbishop, belief, benefit, benefits, budget, canterbury, cardinal, catholic, child, Coalition, Conservative, crisis, debt, Democrat, Department, designate, destitution, disgrace, DWP, families, family, fiscal, government, hunger, Iain Duncan Smith, IDS, IFS, Institute, joseph rowntree foundation, Justin Welby, Lib Dem, Liberal, messiah, Mike Sivier, mikesivier, Pensions, people, politics, poverty, punitive, safety net, secretary, social security, state, Studies, Tories, torn apart, Tory, transform, Universal Credit, Vincent Nichols, Vox Political, welfare, Westminster, work

Cardinal-designate Vincent Nichols, who has attacked fellow Catholic Iain Duncan Smith’s benefit cuts as a “disgrace”. [Image: Liverpool Echo]

Does anybody else have the feeling that Vincent Nichols, the Roman Catholic Archbishop of Westminster, was only waiting for the Pope to name him a Cardinal-designate before sinking his teeth into the UK’s Conservative-led Coalition government?

One gets the impression he feels secure that the new position means his words now carry sufficient weight – and they are weighty words indeed.

“People do understand that we do need to tighten our belts and be much more responsible and careful in public expenditure,” said the Archbishop to the Telegraph.

“But I think what is happening is two things: one is that the basic safety net that was there to guarantee that people would not be left in hunger or in destitution has actually been torn apart.

“It no longer exists and that is a real, real dramatic crisis.

“And the second is that, in this context, the administration of social assistance, I am told, has become more and more punitive.

“So if applicants don’t get it right then they have to wait for 10 days, for two weeks with nothing – with nothing.

“For a country of our affluence, that quite frankly is a disgrace.”

“Hunger”, “destitution”, “crisis” – “a disgrace”. You cannot accuse this man of mincing his words!

They come almost a year after the (Anglican) Archbishop of Canterbury, the Most Reverend Justin Welby, together with the Archbishop of York and 43 bishops, launched their own attack on changes to social security, saying they would have a “deeply disproportionate” effect on children and families.

Mr Welby had himself only recently taken the Church of England’s most senior office.

Speaking to the Telegraph on March 9 last year, 12 days before his enthronement, he said: “As a civilised society, we have a duty to support those among us who are vulnerable and in need. When times are hard, that duty should be felt more than ever, not disappear or diminish.

“It is essential that we have a welfare system that responds to need and recognises the rising costs of food, fuel and housing.

“These changes will mean it is children and families who will pay the price … rather than the Government.”

The Department for Work and Pensions laughed off Mr Welby’s concerns.

But Iain Duncan Smith, the Secretary of (or “in a”) State for Work and Pensions, is – or is at least supposed to be – a devout Catholic. How could he ignore such harsh criticism from the most senior member of his Church in the United Kingdom?

Very easily, it seems.

Iain Duncan Smith has not deigned to respond. Perhaps he has a belief – he does seem to rely on them a lot, now, doesn’t he? – that he is doing more for the people of this country than the Archbishops. There’s a word for this condition that’s slipping my mind for a moment… no – I’ve got it.

A ‘Messiah’ complex – a state of mind in which an individual holds a belief that they are, or are destined to become, a saviour.

‘Messiah’ trumps ‘Archbishop’ so IDS has chosen to ascend above the debate, leaving its resolution to his trusty DWP spokesperson, who came out with the usual lies.

“Our welfare reforms will transform the lives of some of the poorest families in our communities with Universal Credit making three million households better off and lifting hundreds of thousands of children out of poverty,” wittered the spokesperson.

To disprove these words, let’s turn to the Joseph Rowntree Foundation, the social policy research charity that seeks to understand the causes of social problems, identify ways of overcoming them, and show how social needs can be met. This organisation has stated – repeatedly – that Universal Credit in its current form will create “increased risks of budgeting problems, debt, arrears and ultimately financial exclusion”.

The same organisation quotes research from the Institute of Fiscal Studies (IFS) which states that, under current Coalition government policies, rather than hundreds of thousands of children being lifted out of poverty, by 2020 more than one million more children will be in poverty than when the Conservatives and Liberal Democrats slithered into office by the back door in 2010.

So who do you believe? Come to that, what does Iain Duncan Smith really believe?

The DWP spokesperson said: “It’s wrong to talk of removing a safety net when we’re spending 94bn a year on working age benefits and the welfare system supports millions of people who are on low incomes or unemployed so they can meet their basic needs.”

But we know that Iain Duncan Smith has inflicted £28 billion of cuts on people receiving benefits from his Department for Work and Pensions. If another IFS statement – that this represents only two-fifths of the Coalition’s cuts plan – is accurate, then the total amount he’ll want to cut is a staggering £70 billion.

And he wants his people to talk about the money he’s spending, rather than the effect he’s having. So, what does he believe?

He believes in Mammon.

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Workers blamed for sinking wages by Tory-controlled BBC

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BBC, blame, Coalition, Conservative, cost of living, David Cameron, Democrat, drop, earning, economy, employment, fall, fiscal, government, House of Commons Library, IFS, inflation, Institute, Jonty Bloom, Lib Dem, Liberal, manufacturing, Mike Sivier, mikesivier, national, office, ONS, part-time, people, plausible deniability, politics, real, self-employed, service, statistics, Studies, Tories, Tory, Vox Political, wage, work, worker, zero hours

Congratulations are due to BBC business body Jonty Bloom, who should get an award for the bilge he blathered to justify the fact that the Conservatives and Liberal Democrats have engineered the longest drop in wages for 50 years.

He blamed employees, saying that they weren’t productive enough.

The Office for National Statistics had reported that real wages have fallen by 2.2 per cent every year since David Cameron took over as Prime Minister in 2010 and, as the Tory’s mass-media mouthpiece, the BBC seem to have tasked Mr Bloom with finding plausible deniability for the Coalition, so that ministers won’t have to take responsibility.

Real wages are worked out by taking the rising cost of living into account while calculating the value of earnings.

The ONS report followed one from the Institute for Fiscal Studies on Thursday, suggesting that a mid-range household’s income between 2013-14 was six per cent below its pre-crisis peak.

Both of these reports were latecomers to this particular party, though. A Labour Party report from August 2013 stated that prices had risen faster than wages in all but one month of Cameron’s premiership – April 2013, when he cut taxes for millionaires and bank bonuses soared. The overall fall in annual real wages was £1,350 at the time that report was written.

The Labour report went on to say that figures from the House of Commons Library forecast that, after inflation, wages will be £1,520 lower in 2015 than in 2010, meaning working people, on average, will have lost £6,660 in real terms during the Coalition Parliament.

You’ll notice the BBC report only provides percentages. Interesting, that.

Over at the BBC, Mr Bloom tried to convince us that “workers have, on average, been working fewer hours during the downturn and that in turn has meant that they are earning less.

“The wage an employer pays… will be based on the productivity of the employee. So if a firm’s output falls, it will respond by reducing either the level of wages or the number of people employed in order to maintain its viability… Many firms seem to have held on to staff but output per hour worked fell, putting downward pressure on wages.”

He also suggested that a shift from higher-paid manufacturing jobs to lower-paid service jobs had contributed.

Sadly for Mr Bloom, we can punch holes through all of his arguments. Firstly, this is the government that insisted private sector jobs growth would outweigh the loss of public sector jobs it was going to inflict on the country. That claim alone suggests that ministers may have pressurised firms to keep employees in-post.

But the downturn meant there was less demand for firms’ products. How could they remain viable? Answer: Cut the hours worked by employees. Could this be the reason part-time and zero-hours contracts have exploded during the course of this Parliament? Part-time workers have fewer holiday entitlements and do not cost employers as much in National Insurance. Zero-hours workers are only called when they are needed and therefore the firm’s overheads are hugely reduced. Bosses benefit while workers go without.

Could this also be why firms have hired outside contractors on a self-employed basis, paying them a set amount per job, no matter how long it takes, in order to bypass the minimum wage law? Contractors earn less than the minimum wage but work far longer hours (without upsetting Mr Bloom’s average).

The productivity of a worker depends on how long they are working; part-time or zero-hours employees work for less time and therefore their productivity cannot be anything but lower than a full-time worker. Self-employed contractors’ pay is fixed in companies’ favour from the start. Mr Bloom’s argument is based on a wages fiddle.

Oh, and that shift from manufacturing to the service industries? Isn’t that something the Conservative-led Coalition has vowed vehemently to reverse, while doing spectacularly little about it? I think it is.

One personal note: My own experience as an employee suggests that firms’ financial woes have far more to do with the idiotic decisions made by executives than with the output of employees. Changes in the market do not lead to inventive and innovative responses; instead, the workers are penalised with lower wages or unemployment. This puts firms in a slow death spiral as continual erosion of the workforce makes managers increasingly less able to cope with the challenges that, unaddressed, rack up against them.

So congratulations, Jonty. You carry on blaming the workers if you want. It won’t make a scrap of difference because the real problems lie with the decisions made by company execs, responding to stupid Tory policies.

What a shame you can’t say anything about that because your employers are so utterly under the Tory thumb.

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The end of free speech and free protest in the UK

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@DeadParrotJCP, @Director_UKJCP, @IDS_MP, @Skip_Licker, @UKJCP, account, ACPO, agent provocateur, Andrew Lansley, Another Angry Voice, assault, association, austerity, BBC, bill, blacklist, Chief, close, co-operation, Commons, company, Conservative, contraction, control, corporate, corporation, crime, criminal, David Cameron, democracy, Democrat, democratic, development, drop, e-petition, economic, economy, expansionary, fall, fell, fiscal, France, Free, free speech, Funding For Lending, gagging, George Osborne, Germany, Glenda Jackson, government, Health and Social Care Act, Home Office, Home Secretary, House of, ideological, information, kettling, legal, Liam Fox, Lib Dem, Liberal, lobby, lobbyist, Lords, Media, member, Michael Meacher, Mike Sivier, mikesivier, mortgage guarantee, mouthpiece, news, OECD, organisation, paper, Parliament, parody, Patrick Mercer, people, Peter Cruddas, Police Officers, policy, political, politics, Pride's Purge, protest, protest group, real, recession, record, register, right-wing, riot, scandal, sheep, sheeple, spending limit, stimulus, student, television, Theresa May, Tories, Tory, trade, Transparency of Lobbying, Twitter, UK, unelected, union, US, violent, vote, Vox Political, wage, water cannon, website

It’s farewell to your centuries-old right to free speech today, after your Conservative and Liberal Democrat MPs won their bid to get the Gagging Bill passed by the House of Lords. It won’t go back to the Commons because the Lords made no amendments.

While you, personally, will be allowed to continue complaining about anything you want, you will no longer have the ability to link up with others to protest government actions in any meaningful way as such action may breach Liberal Democrat and Tory government-imposed spending limits. Your personal complaints will be deemed unrepresentative of the people.

You will still be able to have your e-petition on the government’s website – if you win enough signatures to have it debated in Parliament – ignored by the Tories and Liberal Democrats in the House of Commons.

The Liberal Democrats and Tories have even managed to rub salt into the wound by creating a register of all the corporate lackeys who will still be able to influence their policies – freelance lobbyists employed by large companies for the specific purpose of swaying government policy. Lobbyists who are company employees will not be listed as the government says their purposes for meeting MPs should be obvious.

This means the new law will do nothing to restrict the power of corporations to write government policy or prevent lobbying scandals such as those involving former Tory MP Patrick Mercer, along with Tories Peter Cruddas and Liam Fox.

The new law protects in-house corporate lobbying operations from official scrutiny, while preventing the public from enjoying the same privileges of access to the government. That is what your Conservative and Liberal Democrat MPs have fought so assiduously to obtain, over the eight months or so that this legislation, “one of the worst… any government produce[d] in a very long time”, has spent being digested by Parliament.

In a Commons debate in September, Glenda Jackson MP warned that her constituents “know that the Bill… would prevent democratic voices from being heard”.

In response, Andrew Lansley – the Conservative who gave us the hated Health and Social Care Act 2012, another incredibly poor piece of legislation – said; “I look forward to the Honourable Lady having an opportunity… to go back to her constituents, to tell them that the things they are alarmed about will not happen.”

They have happened already. Within 24 hours of the Lords agreeing the Bill in its current form, at least one parody account on Twitter, that was critical of Coalition policies, was closed down: @UKJCP – a satirical account parodying the DWP.

@UKJCP immediately resurrected itself as @DeadParrotJCP and @Director_UKJCP. We’ll see how long they last.

Let us not forget, also, that the third part of this law cracks down on trade unions, enforcing strict rules on membership records to ensure, it seems, that it is possible to ‘blacklist’ any trade unionist who finds him- or herself seeking work.

With free speech flushed away, you may still resort to public protest – but the Association of Chief Police Officers (ACPO) has that covered.

ACPO, which is funded by the Home Office, is lobbying the government for permission to use water cannons on the streets of the UK. This would be of no use at all in quelling violent criminal activities like the riots in 2011 – the police chiefs have already admitted that water cannons would have been ineffective in halting the “fast, agile disorder” and “dynamic looting” that took place during August 2011.

ACPO is an organisation that has tried to put ‘agent provocateurs’ into legitimate protest groups and promoted ‘kettling’ to stop peaceful protests (as used in the student protests early in the current Parliament), among many other reprehensible activities.

Considering its track record, it seems clear that ACPO wants to use water cannons against legitimate political protests, on the assumption that the increasing imposition of ideologically-imposed austerity on the country by the Liberal Democrats and the Conservatives will lead to more political protests, as people across the UK finally realise that the Tories and their corporate lobbyist friends are actually working against the wider population.

ACPO’s report on water cannons makes it clear that “it would be fair to assume that the ongoing and potential future austerity measures are likely to lead to continued protest” and “the mere presence of water cannon can have a deterrent effect”.

The Home Office response? “We are keen to ensure forces have the tools and powers they need to maintain order on our streets. We are currently providing advice to the police on the authorisation process as they build the case for the use of water cannon.”

So there you have it. Take to the streets in peaceful protest and your police service will assault you with water cannons, with the blessing of your government.

There remains one option open to you – your vote. You could get rid of the Conservatives and the Liberal Democrats at the next general election in 2015.

But that leads us to ask why the government has launched its attack on free speech and free protest.

Perhaps it wants to control the information you receive, on which you base your voting intentions?

We already know the unelected Conservative and Liberal Democrat government is using the predominantly right-wing media for this purpose. For example: George Osborne made a great deal of fuss earlier this week, alleging a huge resurgence in the British economy. With help from Tory mouthpiece the BBC, he was able to put out the headline figure that the economy grew by 1.9 per cent in 2013 – its strongest rate since 2007.

Osborne also claimed that Britain is doing better than all comparable economies in the Organisation for Economic Co-operation and Development, and that the upturn is due to his imbecilic “expansionary fiscal contraction” policy, otherwise known as austerity.

All of these claims are false, or intended to create a false impression.

Firstly, his 1.9 per cent of growth started at a much lower level of output than would have been the case if Osborne had not imposed austerity on us all and stopped the 2010 recovery dead. GDP would now be 20 per cent higher than its current levels if not for this single act of stupidity from the stupidest Chancellor in British history.

Secondly: The US economy recovered from an eight per cent fall after 2008 to a five per cent rise above its previous peak by the third quarter of 2013. Germany is the only major European country to enjoy growth of two per cent or higher, after an initial recovery based on increased public expenditure – not austerity. Even France has nearly reached its pre-crisis peak. The UK remains two per cent below its previous economic peak.

Finally, Osborne did not even get to this miserable excuse for a recovery by imposing austerity. He quietly adopted a stimulus policy to avoid going back into recession. What do you think ‘Funding for Lending’ is? Or his mortgage guarantee scheme?

All this is clarified by Michael Meacher MP in his own blog.

If George Osborne, Home Secretary Theresa May, ACPO and the Conservative-Liberal Democrat Coalition in Parliament had their way, you would not have access to any of these facts.

You would be led to believe that the governments policies are working, exactly the way the government says they are working.

You would not have any reason to believe that the government is lying to you on a daily basis.

You would be tranquillised.

Anaesthetised.

Compliant.

Would you vote against a government that tells you such wonderful things, even when your own circumstances might not reflect that story (real wages fell by seven per cent in the private sector and five per cent in the public sector between 2007-13)?

David Cameron is betting his career that you won’t.

He wants you to be a good little sheep.

Is that what you are?

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The Coalition is creating serious problems and distracting you with phantoms

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Annual Survey, ASHE, Bank of England, BBC News, beauty, bedroom tax, benefit, benefit cap, BoE, breasts, bribe, Bulgaria, business, business rate, catastrophe, Child Benefit, claimant, Coalition, Conservative, council, council tax, CPI, Croatia, cure, cut, David Cameron, debt, defence, Democrat, deodorise, earning, earnings, economic, economy, false, falsify, fiddle, figure, fiscal, flood, frack, fund, George Eaton, George Osborne, government, Heathrow, hours, household, housing bubble, IFS, immigrant, Income Tax, individual, industry, inflation, Institute, interest rate, invent, Jill Filipovic, job, jobseeker, Jonathan Portes, Jonathan Wilson, Keith Vaz, Lib Dem, Liberal, low-paid, Matthew Hancock, Mike Sivier, mikesivier, National Institute, national insurance, New Statesman, NIESR, pay, Personal Allowance, politics, pretend, problem, reassessment, retail, rise, Romania, RPI, salary, sanction, self-employed, shale gas, Social Research, storm, Studies, swoob, tax credit, The Guardian, Tories, Tory, unemployment, uprating, upturn, Vox Political, wage, weather, Workfare

According to the beauty industry, women must now start deodorising under their breasts.

I kid you not – it was in The Guardian.

Columnist Jill Filipovic hit the nail on the head when she wrote: “I can already hear your objections: ‘But the area under my boobs doesn’t stink!’ or ‘What kind of marketing genius not only came up with the term “swoob,” but actually thought half the world’s population might be dumb enough to buy into it?’ or simply, ‘This is a dumb product aimed at inventing an insecurity and then claiming to cure it.’

“You would be correct on all three points.

“In fact, inventing problems with women’s bodies and then offering a cure – if you pay up – is the primary purpose of the multi-billion dollar beauty industry.”

The simple fact is that you don’t really need to worry about smells down there – a good old soapy flannel will cure any such problems.

That’s not the point, though. The aim is to get you thinking about it and devoting your energy to it, rather than to other matters.

Now let’s translate that to politics.

We already know that all the scaremongering about Romanian and Bulgarian immigrants storming the country from January 1 was a crock. That bastion of good statistics, The Now Show, told us last week that the total number of Bulgarian immigrants in the last couple of weeks was “around two dozen so far”, according to their ambassador. In the first three months after our borders were opened to Croatians, 174 turned up.

Yet the government wanted you to believe they would flood our immigration service in their millions, “taking benefits and yet simultaneously also taking all the jobs”.

My use of language such as “storming” and “flood” is not accidental. By far the more serious threat to the UK in the early days of 2014 was the weather – and, guess what, not only was the government unprepared for the ferocity of the storms that swept our islands, the Coalition was in fact in the process of cutting funding for flood defence.

This would have gone unnoticed if the weather had behaved itself, because we would all have been distracted by the single Romanian immigrant who was ensnared by Keith Vaz in a ring of TV cameras at Heathrow Airport.

Now the Tories are telling us that our take-home pay is finally on the rise for all but the top 10 per cent of earners, with the rest of us seeing our wages rise by at least 2.5 per cent.

The government made its claims (up) by taking into account only cuts to income tax and national insurance, using data leading up to April last year, according to the BBC News website.

This kind of nonsense is easily overcome – New Statesman published the above chart, showing the real effect of changes to weekly income for people in various income groups, and also provided the reason for the government’s mistake (if that’s what it was).

“The data used … takes no account of the large benefit cuts introduced by the coalition, such as the real-terms cut in child benefit, the uprating of benefits in line with CPI inflation rather than RPI, and the cuts to tax credits,” writes the Statesman‘s George Eaton.”

He also pointed out that other major cuts such as the bedroom tax, the benefit cap, and the 10 per cent cut in council tax support were introduced after April 2013 and were not included in the Coalition figures.

Once all tax and benefit changes are taken into account, the Institute for Fiscal Studies has shown that almost all families are worse off – and the Coalition also appears to have forgotten the five million low-paid workers who don’t earn enough to benefit from the increase in the personal allowance.

Skills and enterprise minister Matthew Hancock compounded the mistake in an exchange on Twitter with Jonathan Portes, director of the National Institute of Economic and Social Research (NIESR). Asked why his analysis “ignores more than four million people in work (the self-employed)”, Mr Hancock tweeted: “Analysis based on ONS ASHE survey of household earnings data”.

Wrong – as Mr Portes was quick to show: “Don’t you know the difference between household and individual earnings?”

Apparently not. ASHE (Annual Survey of Hours and Earnings) is a survey of employed individuals using their National Insurance numbers – not of households or the self-employed.

So the Coalition – and particularly the Tories – were trying to make us all feel good about the amount we earn.

That’s the distraction. What are we supposed to be ignoring?

Would it be David Cameron’s attempt to bribe councils into allowing shale gas companies to frack their land? Councils that back fracking will get to keep all the business rates collected from the schemes – rather than the usual 50 per cent.

He has also claimed that fracking can boost the economy and encourage businesses into the country, in a further bid to talk down dissent.

Or is it the growing threat of a rise in interest rates, which may be triggered when official unemployment figures – which have been fiddled by increased sanctions on jobseekers, rigged reassessments of benefit claimants, a new scheme to increase the number of people and time spent on Workfare, and the fake economic upturn created by George Osborne’s housing bubble – drop to seven per cent?

It seems possible that the government – especially the Tory part of it – would want to keep people from considering the implications of an interest rate rise that is based on false figures.

As Vox Political commenter Jonathan Wilson wrote yesterday: “If the BOE bases its decisions on incorrect manipulated data that presents a false ‘good news’ analysis then potentially it could do something based on it that would have catastrophic consequences.

“For example if its unemployment rate test is reached, and wages were going up by X per cent against a Y per cent inflation rate which predicted that an interest rate rise of Z per cent would have no general effect and not impact on house prices nor significantly increase repossessions (when X per cent is over-inflated by the top 1 per cent of earners, Y per cent is unrealistically low due to, say, the 50 quid green reduction and/or shops massively discounting to inflate purchases/turnover and not profit) and when it does, instead of tapping on the breaks lightly it slams the gears into reverse while still traveling forward… repossessions go up hugely, house prices suffer a major downward re-evaluation (due to tens of thousands of repossessions hitting the auction rooms) debt rates hit the roof, people stop buying white goods and make do with last year’s iPad/phone/tv/sofa, major retail goes tits up, Amazon goes to the wall, the delivery market and post collapses… etc etc.

“And all because the government fiddled the figures.”

Perhaps Mr Cameron doesn’t want us thinking about that when we could be deodorising our breasts instead.

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Don’t believe Cameron’s claims; there is no need for austerity – and there never was

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austerity, banquet, beast, break, budget, Coalition, Conservative, corporation, David Cameron, debt, deficit, economic, economy, esther mcvey, fair, fiscal, George, George W Bush, Gideon, health, Iain Duncan Smith, income, lord mayor, millionaire, National Health Service, NHS, Osborne, programme, propaganda, public services, social, social security, spending, starve, tabloid, tax, tax cut, threshold, Tories, Tory, Treasury

Flinging around the bling: Someone should have told David Cameron that he shouldn’t surround himself with gold when he’s rubbing the proles’ noses in unlimited austerity. The horse impression may also have been ill-judged.

David Cameron must think we are a nation of fools.

He came into office by the back door after failing to convince a majority of British citizens that his pal Gideon’s George’s plan to starve the economy of money would magically refill the Treasury’s empty coffers. Three and a half years of relentless pro-Tory propaganda from the tabloids later, and he tells us – at an opulent banquet, no less! – that austerity is here to stay.

Isn’t that because his policies have been a disaster, then?

Yes. But a disaster for us, not him or his bankster/financier/corporate masters.

As this blog stated more than a year ago, “people need to understand that the Coalition government’s fiscal strategy isn’t about reducing the national deficit at all. If it was, we would not have had a big tax break for the richest in society as part of the last budget. It’s a strategy to axe public services, selling off to rich corporations any that might be capable of yielding a profit. George W Bush followed this policy in the United States a few years ago; it’s called ‘starving the beast’.”

Look this up on Wikipedia and you will find that it involves cutting taxes in order to deprive the government of revenue in a deliberate effort to force reduced spending. In the USA, we are told, “the short- and medium-term effect of the strategy has dramatically increased the United States’ public debt rather than reduce spending”.

Republican presidential candidate Fred Thompson’s tax-cutting plan was expected to be funded by lower government spending on social security and healthcare – and it is important that people here in the UK should see the similarities between that and the Coalition government’s privatisation of the National Health Service (we’re told the NHS is a registered company now), along with its many attacks on people who claim social security benefits.

We’ve had tax cuts for the very rich – the so-called “millionaire’s tax cut” that brought the top rate of Income Tax down from 50 per cent to 45 per cent. Corporation Tax is coming down from 28 per cent to 21 per cent while the corporations that write UK tax policy are using it to facilitate tax avoidance schemes. And the poorest workers in the country are being fooled into believing they are getting a good deal out of the policy of raising the tax threshold to £10,000 per year.

Let’s look at that. Nick Clegg wants to raise it still further, so that nobody is taxed on earnings below £10,500 per year, but this means the Treasury will be starved of £1 billion. That’s a lot of money. Meanwhile, the deficit – and the debt – keeps rising.

We’ve had almost no change in the national deficit, year on year. Michael Meacher’s latest blog entry tells us, “the UK debt overhang is growing, not reducing… the budget deficit is not going down appreciably either. In 2011 it was £118bn and in 2012 this had hardly fallen at all at £115bn. The 40% cut in public spending budgets and the £18bn cut in benefits and hence in consumer demand, plus the £40bn further intended cuts after 2015, has produced searing pain, yet next to [no] improvement in the national accounts which was supposed to be the whole aim of the exercise.”

It is also important to note that the effect of raising the tax threshold for poorer people has been completely negated by other changes in government benefits for people on low incomes, unemployment or incapacity support; in fact they are worse off.

It is against that background – tax cuts for the very rich and the corporates, “searing” pain for the poor and worsening national debt – that David Cameron announced, at the gold-trimmed Lord Mayor’s Banquet, “We are sticking to the task. But that doesn’t just mean making difficult decisions on public spending… it means building a leaner, more efficient state. We need to do more with less. Not just now, but permanently.”

At last he has admitted the point of the last three and a half pointless years. He has been starving the Treasury of the cash it needs to balance the books, and now he feels able to tell us that it isn’t going to happen unless public services are cut drastically.

He must be so happy.

Presumably he hasn’t realised that he has just told the British public that his policies, those of his political party and the Coalition of which it is a part, have been an abject disaster for the people of the United Kingdom.

He promised that he would get the deficit down; he failed.

He promised that the measures he took would be applied equally to everyone, from the highest-earners to the lowest; they weren’t.

Now he has promised to build a leaner, more efficient state, using examples from education and health, whose funding has been ring-fenced throughout his period in office; he is lying.

It is time, now, for serious-minded people to draw a line below the selfish policies of the last 30 years and start thinking about government for all the people once again.

When governments talk about making cuts, they’re not talking about help for the rich. Social or economic programmes, supported by taxes, are only ever put in place to level a playing field that would otherwise be tilted against the poor or disadvantaged. Removing such programmes means a less equal society; one that is more UNfair.

Remember that when Cameron and his cronies – especially people like Iain Duncan Smith and Esther McVey – talk about making Britain a fairer place to live and work.

Their words carry about as much weight as their leader’s 2010 election promises.

From the DWP to the economy – the Coalition’s growing credibility chasm

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All the wrong choices for all the wrong reasons: The evidence fails to support George Osborne’s economic austerity policies – the only likely explanation seems to be an intention to rob this nation of everything possible before 2015.

The more we learn of the Tory-led Coalition’s policies, the wider the gap grows between what it is doing and what it should be doing.

Look at the sham psychometric tests, exposed by fellow blogger Steve Walker in a series of articles on his Skwawkbox site. It is now firmly established that the DWP – aided by the Cabinet office ‘nudge unit’ – set out to pressgang put-upon benefit claimants into taking part in a crude piece of neuro-linguistic programming – no matter what answers you provided, the test always pushed out a ridiculously upbeat appraisal of your character and then tried to get you to act according to this verdict in your jobsearching activities. The theory is that this will make a jobseeker more confident and finding a job easier. The problem is that it’s quite utterly ludicrous.

If you haven’t already, you can read the Skwawkbox exposure of this particular caper on that site – there are plenty of links to it from this one. The reason it is mentioned here is that it provides a useful set of questions with which to analyse any government activity: First, is the theory behind this activity sound? Second, if that theory is being used to support a particular course of action, is that action justifiable?

So let’s turn once again to George Osborne’s reasons for pursuing economic austerity, as described in the letter Vox Political received from the UK Treasury last month.

Firstly, the letter warns against the perils of losing market confidence. By this, we can see that it means we should fear any downward revision of our credit rating by the credit agencies, as “a one percentage point increase in government bond yields would add around £8.1 billion to annual debt interest payments by 2017-18”.

What’s being said is that a drop in our credit rating would mean the people and organisations that have invested in UK government debt (by buying our bonds) might move their funds to others, meaning the government could be faced with an interest rate rise, leading to increased difficulty in borrowing.

But we know that this isn’t true. The UK’s credit rating was downgraded only a few months ago. Did interest rates rise? Was our ability to borrow hindered at all? No. There’s a reason for that.

As Professor Malcolm Sawyer notes in Fiscal Austerity: The ‘cure’ which makes the patient worse (Centre for Labour and Social Studies, May 2012), “It is well-known that a government can always service debt provided that it is denominated in its own currency. At the limit the UK government can ‘print the money’ in order to service the debt: this would not take form of literally ‘printing money’ but rather the Central Bank being a willing purchaser of government debt in exchange for money.” This is what is happening at the moment. Our debt is in UK pounds, and we can always service it. Our creditors know that, so they remain happy to continue financing it.

This means that the Treasury’s next point, that “any loss of investor confidence in the UK’s fiscal position would not only affect the UK, but also the global economy” is also meaningless. There won’t be a loss of investor confidence, so there won’t be an effect on the global economy.

We move on – to the Chancellor’s claim that fiscal austerity is required to prevent the slowing of economic growth that happens when the national debt hits 90 per cent of gross domestic product (or thereabouts).

You’ll recall that my letter to the Chancellor was prompted by the revelation that the academic paper on which he relied most often, by Reinhart and Rogoff, had been proved to be mistaken. The Treasury’s response pulled out a series of references to other academic works suggesting a fiscal cliff similar to the Reinhart-Rogoff model, off which we would drop if the national debt passed an arbitrary level around 85-90 per cent of GDP. These were published by the International Monetary Fund, which we know isn’t quite as keen on austerity as it used to be; the Organisation for Economic Co-operation and Development, which this blog marked out as “schizoid” only a few days ago; and others.

Obviously I haven’t had time to look up eight academic works to support any opposing theory I may wish to create – and I think I would be foolish to try. I don’t have any grounding in economics beyond what I’ve been able to pick up by following the national and international debates.

But, then, according to Dean Baker of the Center (yes, it’s American) for Economic and Policy Research: “As a general rule economists are not very good at economics.”

He writes: “Most economists are unable to conceptualize anything that someone with more standing in the profession did not already write about. This is the only reason that the Reinhart-Rogoff 90 per cent debt-to-GDP threshold was ever taken seriously to begin with.”

That prodded my curiosity to check some of the papers listed by the Treasury in support of its stance, and the three that I checked (The Real Effects of Debt, Public Debt and Growth, and How Costly Are Debt Crises?) all listed the Reinhart-Rogoff paper in their supporting references. So Mr Baker is right.

“Debt is an arbitrary number,” he continues. “The value of long-term debt fluctuates with the interest rate… The value of our debt will plummet if interest rates rise… This means that we could buy back long-term debt issued today at interest rates of less than 2.0 percent for discounts of 30-40 percent. This would sharply reduce our debt-to-GDP ratio at zero cost.

“Bonds carry a face value, meaning the amount that will be paid off when they reach maturity. This is what gets entered in our debt figure. However bonds also carry a market price, which fluctuates inversely with interest rates. The longer the term of the bond, the more its price will vary with interest rates.

“If interest rates rise, as just about everyone expects over the next three-to-five years, then the market price of the bonds we have issued in the current low interest rate environment will fall sharply. Since we count our debt at the face value of the bonds, not their market price, we could take advantage of the drop in bond prices to buy up… bonds at sharp discounts to their face value.

“The question is why would we do this, we would still pay the same interest? The answer is that the policy would make no sense for exactly this reason.

“However, if we accept the Reinhart-Rogoff 90 per cent curse, then reducing our debt in this way could make a great deal of sense. Suppose we can buy back debt with a face value of 60 per cent of GDP at two-thirds its face value, or 40 per cent of GDP. In our debt accounting we would have reduced our debt-to-GDP ratio by 20 percentage points. If this gets us below the 90 per cent threshold then suddenly we can have normal growth again.

“Yes, this is really stupid, but if you believed the Reinhart-Rogoff 90 per cent debt cliff, then you believe that we can sharply raise growth rates by buying back long-term bonds at a discount. It’s logic folks, it’s not a debatable point — think it through until you understand it.”

I found Mr Baker’s piece after asking Jonathan Portes of the National Institute for Economic and Social Research (NIESR) for his opinion on the Treasury letter. He described it as “Predictable and largely irrelevant”.

So despite my lack of economic education, we have a working theory that suggests the Treasury has built its economic castle on the sand; that its justification for austerity is unsound. What about the austerity measures themselves? Are they justifiable on any level at all?

Evidence suggests not.

Let’s go back to our other friend in this matter, Prof Malcolm Sawyer. “Fiscal austerity and cuts in public expenditure do not work – there is a limited, if any, effect on reducing the budget deficit, and any return to prosperity is severely undermined.” We can see that this is true, using the government’s own figures. It managed to cut the deficit from £150 billion to £120 billion in 2011-12, mostly by axing large projects that invested in the UK economy. How much did it cut from the deficit in 2012-13? Less than £1 billion. The benefit cuts that created much of the fuel for this blog have not helped to cut the deficit at all.

“The reduction of the budget deficit can only come from a revival of private demand which is harmed by an austerity programme,” Prof Sawyer continues. Again, we can see that this is true. Austerity measures such as benefit cuts and the axing of infrastructure investment projects means there is less money available to the people who are most likely to spend it – the working- and middle-classes, and those who are unemployed. People with less money have to spend just about everything they receive in order to cover their costs. That money passes into circulation and the economy grows, through the fiscal multiplier effect. An attempt to explain this effect appeared on this blog within the last few days. The point is that demand increases when the people who earn the least have more to spend.

Therefore we see that Prof Sawyer’s next statement, “Deficit reduction requires investment programmes and reduction of inequality to stimulate demand”, is already proved.

So the answer is to reduce the unemployment rate by creating more jobs and closing the jobs deficit, as highlighted in this blog only a few days ago; to raise incomes by significantly increasing the minimum wage and adopting the proposed ‘living wage’, as promoted in this blog frequently; and investment in infrastructure projects.

What has Osborne done, along with his economically-illiterate chums?

He has created high unemployment.

He has depressed wages.

He has cut infrastructure projects.

He has, therefore, sucked all the demand out of the economy. What effect has this had?

Economic growth has, in the single word of Shadow Chancellor Ed Balls, “flatlined”, borrowing has remained high and the national debt is continuing to rise.

In other words, this part-time Chancellor’s strategy – a plan on which we have all been asked to judge the entire Coalition government, let’s not forget – has failed. Hopelessly.

I return you to Prof Sawyer, one last time [bolding mine]: “The austerity programme is economically irrational, socially irresponsible, and lacks credibility that it can reduce the budget deficit and secure any return to prosperity. The time has come to rebuild through investment and through a major assault on inequality.”

Treasury responds to Vox’s austerity challenge

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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.

GDP figures due – will Gideon have anything to show for his austerity idiocy?

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Triple-dip breakfast: Will we all be dining on the sour cereal of recession again, when GDP figures are published on Thursday morning?

Thursday will be another ‘crunch’ day for our part-time Chancellor of the Exchequer – he’s having quite a lot of those lately, isn’t he?

Only last week, the academic justification for his austerity policy was disproven by an American student (oh, the shame!), and then his former allies at the International Monetary Fund distanced themselves from him (oh, the betrayal!) saying he should calm down a bit.

That’s the best advice this columnist has ever heard the IMF provide; if not for his own health, then for the nation’s.

Thursday, though, is a really big day. On Thursday, GDP figures for the first quarter of 2013 will be published.

It is a sign of how low expectations have fallen, that all the economic commentators are saying the best we can expect is to have kept out of a triple-dip recession – with falls in output due to the weather, among other things, making that unprecedented outcome more likely.

There is a problem with all of these predictions, which should be obvious to those of us living in the real world: Short-termism.

It’s all about how the UK managed in the last quarter, how it will manage in the next; what the situation is today. What about six months from now? What about next year? What about 2015, when we’re all expecting an election and the chance to banish this nightmare? What about 2017-18, when 0sborne still reckons he’ll have eliminated the budget deficit (fat chance)?

The fact is that the only options open to a Chancellor in the current climate are unpalatable to the Boy.

He could boost investment in infrastructure, in a bid to make this country a better place to open – and carry out – business. The trouble is, this tends to be a long-term project and he no longer has the time. His chances would have been better if he had started this in 2010, but his government cancelled as many such projects as they could back then, claiming it was more important to cut public spending in order to balance the books.

That was a vain hope. Without new investment, the country has lost revenue.

But if that is unpalatable, the other alternative is likely to make him choke on his pate de foie gras (or whatever it is these posh boys ingest): Increase the spending power of the poor.

It is known that the ‘trickle-down effect’ is a myth – giving all of a country’s money to the very rich, in the belief that they will spend it, boosting the economy and the income of the poor, is nonsense. What they actually do is bank it – in offshore tax havens, most likely. That is what 0sborne has been doing; it is another reason the economy has bombed.

It is also a rock-solid fact that poor people do spend their money – or as much as they can get their hands on. When you are constantly struggling to make ends meet, it’s very hard to keep cash in the bank – you have to spend it on food, clothes, rent, heat, light, water… the list is endless, because it constantly repeats.

When you don’t have much cash, as Edmund Blackadder once said, you feel like a pelican. Everywhere you turn, there’s a large bill in front of you.

That money does work for society. It reinvigorates the economy as it filters through different hands. And it brings with it the extra joy of fiscal multipliers – every pound that gets put into the economy is worth more after it has been through.

The trouble is, Gideon shut off that money supply. He raised VAT, making it harder for working-class people and those on benefits to buy certain economy-boosting products, and then he and Iain Duncan Smith spent the last few years on their project to depress wages.

(For clarity, it goes like this: The DWP makes the benefit system so difficult to navigate that people in receipt have to do their utmost to get off-benefit as soon as possible. This means they are constantly looking for jobs, which in turn makes it possible for employers to refuse pay rises for their workforce, with the classic line that “there are plenty of other people who’d be happy to have your job, you know!” You didn’t really think the benefit cap was about making work pay, did you?)

Say what you like about Labour, but they’ve got the right idea when it comes to the money supply. Ed Balls wants to cut VAT; he wants to bring back the 10 per cent tax rate for the lowest-paid; he wants to bring in a National Insurance holiday for companies that agree to take on new employees.

These are measures that will help.

What is Gideon going to do?