The State of Osborne: a visitor’s guide

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A moment of crisis for David Cameron as he realises it is unlikely that George Osborne has the faintest idea what the Autumn Statement means.

If anybody else had prattled on for 50 minutes while hardly uttering a single sensible word, they would have been consigned to a mental hospital forthwith.

But this is Coalition Britain, and the speaker was George Osborne, the man who likes to tell us all that he is in charge of the nation’s finances. Thanks to his government’s Department for Work and Pensions, nobody is allowed to have mental illnesses anymore; after this speech, it seems likely we all have an idea about the reason for that.

A 50-minute speech is a lot of verbiage, and it is certain that worthier journalists across Britain – if not the world – have already analysed it to exhaustion. Allow me to let you into a secret:

They’re probably trying too hard.

Most of the speech was about putting Labour down. The Opposition has made all the headway over the past few weeks, and we all knew Osborne was under orders to change the mood music of the nation in time for Christmas.

Did he manage it? Not really. His speeches always come across as strained events, where he’s making an effort to be clever without ever achieving it. As a result, the message gets lost. We can therefore discount the Labour-bashing.

That leaves us with what he actually said. Even here, his meaning was at times opaque. What follows is an attempt to provide a handy guide to George-speak, for anyone unfortunate enough to have heard him yesterday.

Osborne: “We have held our nerve while those who predicted there would be no growth until we turned the spending taps back on have been proved comprehensively wrong.”/Meaning: “I am lying. Austerity failed miserably and the economy flatlined. A few months ago I realised that we would have nothing to show at election time so I turned the spending taps back on, with Help To Buy and Funding For Lending. I know that these are exactly the sort of Keynesian economic levers that I preached against for three years but I’m hoping that nobody noticed.”

The hard work of the British people is paying off, and we will not squander their efforts./Osborne appears to be celebrating his three years of stagnation. He inherited growth and decided to trash it. (MagsNews on Twitter)

There was no double-dip recession./“Phew! Lucky escape there!”

At the time of the Budget in March, the Office of Budget Responsibility forecast that growth this year would be 0.6 per cent. Today, it more than doubles that forecast and the estimate for growth will be 1.4 per cent./“Please God don’t let anybody remember that three years ago, the forecast for this year was 2.9 per cent.”

Today in Britain, employment is at an all-time high… We have the lowest proportion of workless households for 17 years./These jobs have increased the numbers of the working poor. Too few are full-time; too many are part-time, zero-hours or self-employed, serving up no National Insurance contributions from employers, no holiday or sick pay, or making contractors work long hours for less than the minimum wage.

The number of people claiming unemployment benefit has fallen by more than 200,000 in the past six months—the largest such fall for 16 years./“And we have imposed sanctions on more people on Jobseekers’ Allowance than ever before, in order to produce that figure.”

By 2018-19, on this measure, the OBR does not expect a deficit at all. Instead, it expects Britain to run a small surplus. These numbers mean that the Government will meet their fiscal mandate to bring the structural current budget into balance and meet it one year early./Although of course the books were initially supposed to be balanced by 2015. (Huffington Post live blog)

This year, we will borrow £111 billion, which is £9 billion less than was feared in March./…and £41 billion more than forecast in 2010.

We will cap overall welfare spending./But this will not include the state pension (half the social security budget) or the most cyclical jobseeker benefits./”A living wage would mean less dosh on in-work benefits; letting councils build would mean less subsidies for private landlords.” (Owen Jones on Twitter)

Pensioners will be more than £800 better off every year./But as usual he’s ignoring the VAT elephant in the room. (Mark Ferguson on Twitter)

We think that a fair principle is that, as now, people should expect to spend up to a third of their adult lives in retirement. Based on the latest life expectancy figures, applying that principle would mean an increase in the state pension age to 68 in the mid-2030s and to 69 in the late 2040s./But life expectancy depends on where you live and how much money you have, meaning the poor continue to pay more towards the pensions of the rich./”Current pensioners better off – future pensioners paying for it. What was that about “making our kids pay for current spending” George?” (Mark Ferguson of LabourList on Twitter)

Most wealthy people pay their taxes and make a huge contribution to funding our public services; the latest figures show that 30 per cent of all income tax is paid by just one per cent of taxpayers./Estimates of the amount of tax that is not collected range between £25-£120 billion per year and it is not the poor who aren’t paying up.

This year the rich pay a greater share of the nation’s income taxes than was the case in any year under the last Labour Government./Because they now have more income. Simple really. (Tom Clark of The Guardian, on Twitter)

Today we set out in detail the largest package of measures to tackle tax avoidance, tax evasion, fraud and error so far this Parliament. Together it will raise over £9 billion over the next five years./Including capital gains tax for foreign investors on sales of UK property, which has nothing to do with tax avoidance/evasion, fraud or error.

We must confront this simple truth: if we want more people to own a home, we have to build more homes… The latest survey data showed residential construction growing at its fastest rate for a decade./The rate of house building is at its lowest peacetime level since the 1920s

This autumn statement has found the financial resources to fund the expansion of free school meals to all school children in reception, year 1 and year 2, announced by the Deputy Prime Minister and supported by me./On Wednesday, the Lib Dems and Michael Gove’s education department argued over who had to pay for it.

Extra funding will be provided to science, technology, and engineering courses [in universities]. The new loans will be financed by selling the old student loan book, allowing thousands more to achieve their potential./And pushing thousands into the hands of debt collectors.

The best way to help business is by lowering the burden of tax. KPMG’s report last week confirmed for the second year running that Britain has the most competitive business tax system in the world./KPMG would know – it writes the tax system and also runs some of the larger tax avoidance schemes.

From April 2015 we will introduce a new transferable tax allowance for married couples… Four million families will benefit, many of them among the poorest working families in our country./Osborne says the Tories are backing British Families – but only ones who are married it seems. (Mark Ferguson on Twitter)/While the new tax arrangements bribe families to marry, the benefit cap will bribe big families to split up. (Tom Clark on Twitter)

We are all in this together./The biggest lie of this Parliament.

We are also helping families with their energy bills./Commence the cutting of the “green crap”. This from the “Greenest government ever”. (Mark Ferguson on Twitter)

Next year’s fuel duty rise will be cancelled./This is a cut in a tax that was never imposed in the first place.

We are going to abolish the jobs tax on young people under the age of 21. Employer national insurance contributions will be removed altogether on a million and a half jobs for young people./Young people will therefore have less chance to get contribution-based benefit. National Insurance assures people their pension contributions – except when it isn’t paid. So they will have no contributions to show for any years they worked before 21 and will have to work until their late 60s.

The cost for a business of employing a young person on a salary of £12,000 will fall by over £500./This is a bonus for businesses, not employees.

“Jobs tax” – it’s ludicrous, isn’t it? National Insurance has been a respected part of British life for more than 100 years but Osborne, living as he does in a mythical Victorian-era golden age that never actually existed, thinks it is a “jobs tax”. Either that or he’s still bruised by the fact that Labour’s labelling of the under-occupation charge as a Bedroom Tax caught on with the public.

Shadow Chancellor Ed Balls got on his feet and immediately attacked Osborne’s “breathtaking complacency” for denying the drop in living standards faced by everyone in the country, with families already £1,600 per year worse off. Osborne laughed. He thought that was funny.

The Shadow Chancellor pointed out that we are enduring the slowest recovery in a century, and that average real wages will have dropped by 5.8 per cent by the end of the Parliament (except for fatcat business bosses).

He was having a hard time getting his points across, however, because Tory MPs were heckling him very loudly. Owen Jones tweeted, appositely, “Do the Tories think that a bunch of braying MPs dripping with privilege, while ordinary people’s living standards crash, is good TV?”

Maybe they did. Maybe they thought they had the public on their side.

Let’s have a look at a few comments from the public – courtesy of the Huffington Post:

“Planning to kill more people, George?” (Robin Stacey)

“Spend more you wet lipped monkey.” (Will Moriarty)

“No one has an ounce of faith in anything you say, you parasitic pool of curdled warthog’s puke.” (Anthony Nicholas)

And finally: “Hope you end the speech with your resignation x” (Joanne Wood – and yes, she did mean to end with a kiss).

What a shame Osborne did not follow her advice.

 

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The Magical Land of Os(borne) – fantasy economics

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George Osborne’s claim that his nonsense policies have magically turned the economy around, coupled with his equally-preposterous claim that the UK needs another seven years of austerity before he can balance the books – provides a fine example of the duality at the heart of Conservative economic policy.

He needs to convince you that his choices have made a difference and the nation’s fortunes are changing, but he also need to convince you that we’re in a terrible mess – or he won’t have an excuse to continue cutting more public services and selling them into the private sector so his rich friends can use them to fleece you.

The two claims are not only contradictory of each other – they are self-contradictory. The evidence shows that Osborne’s policies delayed the recovery, rather than encouraging it, and the ‘Starve The Beast’ plan he cribbed from George W Bush has long been recognised as harmful to any country’s economic health; by cutting services he is starving the economy of the liquidity that is its lifeblood.

(This is a point worth remembering: Whenever a TV news reporter says Osborne or the government want to make cuts in order to “save” money, they mean the government will be “taking money out of the economy” – which will consequently be worth less. As a result, some people will have to become poorer. Can you guess who?)

Before we congratulate Osborne in ways that are anything like as effusive as David Cameron’s endorsement earlier this week, let’s look at the facts: According to Martin Wolf in the Financial Times, in three and a half years, the UK’s economic performance has improved by just 2.2 per cent – against a prediction of 8.2 per cent by his pet Office of Budget (Ir)Responsibility. In the second quarter of 2013, Gross Domestic Product was 3.3 per cent below its pre-crisis peak and 18 per cent below its 1980-2007 trend, making this the slowest British recovery on record.

Osborne and the Conservatives point proudly to the strong increase in private-sector jobs but, as Mr Wolf states, “this is hardly something to boast about”. While employment – on paper – is at an all-time high, productivity has fallen back to the level it reached in 2005. What does this say about the quality of the jobs that are being filled? Are they high-quality, long-term, well-paid careers, or are they part-time, zero-hours, throwaway fillers? We all know the answer to that. Average wages have been cut by nine per cent, in real terms, since 2010 – and they are still falling.

Even by the standards of other crisis-hit, high-income economies, the UK’s performance has been dismal, says Mr Wolf, pointing to work by Spencer Dale and James Talbot of the Bank of England. This indicates that the Eurozone has performed just as badly – but the difference is that the Eurozone countries do not have control of every economic lever that is available to them; Britain does.

Osborne claims that high global inflation and the performance of the Eurozone have impacted on the UK; Mr Wolf’s assertion is that austerity is the reason for this disappointment – and Osborne was just as much a cheerleader for austerity in Europe as he has been for it in the UK. Furthermore, as the Labour Party pointed out in its report, “David Cameron’s out of touch, you’re out of pocket” (2013), inflation in other G7 countries has been lower than in the UK, indicating that high global prices have little to do with the problem.

“Yes, but,” says Osborne, “austerity has kept interest rates down.” Did it? Did it really? In that case, interest rates would have been kept low because of the promise (in 2010) that borrowing would be brought down by 2015. When the Coalition came to power, Osborne said he expected to borrow a total of £322 billion by 2015. In March this year, that figure had risen to £564 billion – an increase of 75 per cent! Meanwhile the deadline for the national debt to start falling has slipped from 2014-15 back to 2017-18 and the level at which the debt was expected to hit its peak has jumped from 70.3 per cent of GDP to 85.6 per cent. The deficit has been stuck at £120 billion a year for the last two financial years, despite the repeated claims that it has been cut by one-third. None of this has affected long-term interest rates and neither did the loss of the UK’s AAA credit rating in February this year.

Here’s why – as explained in an article on this site in June:

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.

“With interest rates at the zero bound, austerity weakened the economy relative to what might otherwise have happened,” wrote Mr Wolf.

“Nobody thought recovery would never happen under austerity, merely that it would be damagingly delayed… This has been an unnecessarily protracted slump. It is good that recovery is here, though it is far too soon to tell its quality and durability. But this does not justify what remains a large unforced error.”

Looking to the future, Osborne has reacted to the new barrage of Labour policies, all of which have been carefully costed against savings in current budget areas, with a series of rushed measures that are entirely unfunded. Remember that, next time a Conservative accuses Labour of borrowing and spending!

The married couples’ allowance, worth less than £4 per week (and less than £2 if you’re on a low income) is unfunded. The promised fuel duty freeze is unfunded. These will cost more than £2 billion and no source has been identified.

And what about the £12 billion stage two of the housing ‘Help to Buy’ scheme, that Osborne rushed forward to this month?

He has pulled £14 billion out of nowhere, but still expects us to believe he will resume his stalled deficit cuts by £35 billion by 2015, £42 billion by 2017-18 and £43 billion by 2020, in order to create a budget surplus.

All the while, he is promising “improved living standards for this generation and the next”. For whom? These cuts must come from somewhere, and they mean removing a cumulative total of £120 billion from the economy each year by 2020. That has to come from somewhere.

Look at the amount by which bosses’ pay in FTSE100 companies has increased in the last three years – 32 per cent, while average worker pay has dropped by nine per cent.

Do you really think the “Have-yachts” will be paying for these cuts?

Further reading: George Osborne’s credibility gap (Alistair Darling, Guardian)

Have the Tories taken leave of their senses? (Michael Meacher, blog article)

From the DWP to the economy – the Coalition’s growing credibility chasm (Vox Political, June 2, 2013)

Treasury responds to Vox’s austerity challenge (Vox Political, May 13, 2013)

Another Tory ‘bait-and-switch’ scam – shares-for-rights scheme is employers’ tax dodge

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'Starve the Beast', Another Angry Voice, avoidance, bait and switch, budget, capital gains, Coalition, congress, Conservative, Corporation Tax, debt, deficit, dodge, economy, employee owner, employee shareholder, evasion, flexible working, George Osborne, government, Mike Sivier, mikesivier, Mirror, OBR, observer, office, people, politics, redundancy pay, responsibility, rights, shares, social security, statutory, tax, Tories, Tory, trade, training, TUC, unemployment, unfair dismissal, union, Vox Political, welfare, work, workers

“This government is taking action domestically on [tax] avoidance and evasion,” wrote George Osborne in an article for The Observer, back in February. How right he was.

The Tory-led Coalition has done everything in its power to facilitate tax avoidance and ignore evasion, it seems, including the latest wheeze, which is to link it with a feeble attempt to get working people to throw away their rights in exchange for a few shares.

The BBC has reported that the new status of “employee shareholder” has come into force, allowing working people to claim shares in the company that employs them, if they give up the rights to claim unfair dismissal and statutory redundancy pay, the right to request flexible working (except in the case of two weeks’ parental leave), and some rights to request time off for training.

Nobody in their right mind would do this and expert opinion is that take-up will be small. So why do it?

Well, it’s not about the workers at all. It’s about helping company bosses avoid paying their taxes. Even the right-wing-leaning BBC was unable to cover up the facts (although it left them until the end of the article):

“Companies can also claim some corporation tax deductions on the issuance of shares to employees.”

Yes – it’s a tax dodge!

Here’s how it works, according to the Mirror: “New analysis show[s] it could also allow executives to avoid paying revenue on company shares. Tax experts commissioned by the TUC believe ruthless bosses could classify themselves as ’employee owners’ to escape Capital Gains Tax. And the Office for Budget Responsibility estimates the scheme could cost up to £1 billion, mainly due to tax avoidance.”

This will, of course, involve a drop in tax income to the Treasury, meaning increases in the national debt and deficit, which the Tories will no doubt use to justify further cuts to public service budgets as part of their ‘Starve The Beast’ agenda. Remember, this country has a chancellor who, for ideological purposes, actually wants to harm the British economy.

Meanwhile, as our friend at Another Angry Voice has put it: “If you’re thick enough to cash in your labour rights for a few grand worth of shares in the company you work for, then in a couple of years time when people are calling you ‘feckless’ for being unemployed, you’ll be one of the minority that actually deserve it (and your shares might well be worth only pennies in the pound compared to the value they had when you scrapped your labour rights to get them).”

UK Treasury changes title to ‘Department of Clutching At Straws’

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The economy is growing: The Coalition government will claim credit but there is no reason to believe it has anything to do with current government policy – quite the opposite, in fact.

All right, the Treasury hasn’t really changed its name – but it might as well have, after the joy that greated this week’s meagre growth figures.

The Office for National Statistics is reporting growth in construction, manufacturing, services and agriculture in an estimate based on 44 per cent of actual data on economic activity during the second quarter of 2013 (April-June). That’s less than half of the evidence.

We live in times when the whole of the evidence means a great deal – for example, information on Q1 of 2012 that put growth at a standstill – neither up nor down – meant the UK did not enter a double-dip recession, even though the economy contracted in the periods immediately before and after. In real terms we were backtracking – but on paper, no.

Let’s remember, also, that the organisations that record our economic fortunes are liable to revise their predictions down as well as up – remember when the Office of Budget Irresponsibility changed its mind about the growth figures for 2012? It had predicted growth of 2.5 per cent for that year. In fact, once we iron out the ups and downs, the economy really only bumped along at a roughly steady state.

The International Monetary Fund had predicted a more conservative 1.6 per cent growth for 2012 – but in January of that year revised this down to 0.6 per cent. You get the picture.

The 0.6 per cent figure was in line with market expectations, though – and that is a good sign. But 0.6 per cent is a very fragile figure and the prospects for the rest of the year are “highly uncertain”, as market analyst Richard Driver said in the BBC News website’s report.

We all knew that the economy would start turning upwards again at some point. That it has taken five years to do so indicates the severity of the banker-induced crash – and also the lack of any investment in recovery.

In the past, the upturns arrived comparatively swiftly – but there had been a willingness on the part of both government and businesses to put money into it. The current government has been sucking money out of the economy in the pursuit of Gideon‘s nonsensical “expansionary fiscal contraction” and getting the deficit down – meaning that all the effort has been put into cutting spending and none into actually making a buck or two. Meanwhile, it has been estimated that businesses have been sitting on fortunes totalling six or seven per cent of GDP – around £775 billion, according to Michael Meacher.

In his blog, Mr Meacher said he expected the announcement to be “milked by Cameron-Osborne for all it’s worth” and he was not to be disappointed.

“These figures are better than forecast,” said Osborne in the BBC report – claiming credit for something that had nothing to do with him. “Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend – but there is still a long way to go.”

What will he say if a later revision knocks the figure down again?

Mr Meacher’s blog stated that the growth figures had been inflated “by being talked up by the finance sector”, and stimulated by Osborne’s Help to Buy scheme “which has ploughed taxpayers’ money into mortgages but without increasing the number of houses being built, which can only push up property prices… igniting yet another housing bubble which is the last thing the economy needs”.

He added that the real essentials of recovery are still missing – “an expansion of manufacturing and exports”.

We may have to wait for another government before that happens; the Coalition is too busy exploiting our current economic fragility as an excuse to sell off the family silver – those parts of the NHS it thinks nobody will notice, the Royal Mail, school playing fields, student loans…

I could mention ‘Starve the Beast’ again – but by now you should be on intimate terms with that expression.

(The first Vox Political collection, Strong Words and Hard Times, is now available and may be ordered from this website)

‘Recovery in sight’ says BoE. Oh really?

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Bank of England, BBC, Blockbuster, BoE, Comet, economy, HMV, Jessops, manufacturing, Mike Sivier, mikesivier, OBR, Office for Budget Responsibility, people, Republic, Sir Mervyn King, unemployment, Vox Political

One has to admire the Bank of England for its determined optimism in the face of all the facts. The only organisation that is even more adamant that the UK economy is going to grow is the Office for Budget Irresponsibility, and we all know how rarely that body ever gets anything right.

Today, the soon-to-be ex-governor, Sir Mervyn King, said the economy had “cause for optimism” and there was an “encouraging underlying picture”.

What makes this tragic is the timing. Today, the story appeared on the BBC’s business news web page beneath a revelation that the fashion chain Republic has become the latest High Street name to go into receivership, and an announcement that Blockbuster, which bit the bullet earlier this year, would be closing a further 164 shops – threatening 800 jobs.

Cause for optimism, Sir Mervyn? Really?

Comet has gone, Jessops has gone, HMV is hanging on by its forepaws after closing 66 stores. Now Republic. We understand more than 100 other chains are facing financial ruin.

What, in this situation, is the “encouraging underlying picture”? A resurgence in manufacturing? What good will that do, if everybody is out of work and unable to buy anything? Who will benefit?

It won’t be the people on the street. Republic had 2,500 employees; Blockbuster is likely to lose 800 staff. Those job losses follow the many hundreds in the other chains mentioned. If manufacturing does improve, it will be selling abroad, and the only beneficiaries will be company bosses.

You and I won’t see a penny of it.

One aspect of this that did make me smile was the fact that the administrators from accountancy firm Ernst & Young (itself no stranger to controversy – see the previous Vox Political article about tax avoidance for details) sacked all 150 staff at the fashion firm’s head office. All the managers lost their jobs, and quite right, too!

“Unfair, incompetent and completely out of touch” – the chance(llo)r’s autumn statement

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Street level: A British street artist’s opinion on the government’s tax strategy.

(Please note: This is a first-glance appraisal; it may contain inaccuracies, gloss over parts that you find important or miss things out entirely. Feel free to mention anything you feel important in the ‘Comments’ column)

In May 2010, the Conservatives asked us to judge them by two yardsticks. The first was that they would cut the deficit – completely – by the 2015 election. The second was that they would protect the National Health Service.

We all know what they did to the National Health Service, and everybody living in England who must now rely on a now-corrupted and degenerate system has my complete and utter sympathy.

Now we know that they have completely failed with the other measure as well. The deficit will not be eliminated by 2015 and the national debt is unlikely to be falling.

That was the main message from Gideon George Osborne in his Autumn Statement as Chancellor of the Exchequer. The announcement adds validity to predictions that the UK will soon lose its AAA credit rating.

Estimates for government borrowing over the course of this Parliament have – of course – risen and it is now estimated that the Conservative/Liberal Democrat Coalition will borrow £212 billion more than stated after the 2010 general election.

Austerity is therefore likely to continue until 2018 and the deficit in 2015 – when it was supposed to reach zero – is now expected to be £73 billion. The message here is that the government will eliminate the deficit in five years’ time.

Wait a minute! Isn’t that what Gideon said in 2010? Have we been taking welfare cut after welfare cut, pay cut after pay cut, attacks on public sector pensions and cuts to economic investment for two and a half years, only to be told that we have been standing still?

This is not just incompetence; it is endangerment. This government is harmful to the UK economy. International readers should note that this entails a knock-on effect, dragging the world backwards as well. You are all endangered by this disaster.

It’s also a breach of a Conservative manifesto promise from 2010 – thanks to the BBC’s Paul Mason for this snippet.

Let’s have a look at the growth forecast from the Office of Budget Irresponsibility. You may recall that in 2012 the economy was initially expected to grow by 2.8 per cent. Don’t laugh! Now the OBR has downgraded that, by a massive 2.9 per cent, to show a contraction of 0.1 per cent. We’re expected to go back into recession for a TRIPLE-dip.

It’s supposed to be the economy, Gideon! Not a rollercoaster ride!

He blames the woes of the Eurozone countries, even though I am reliably informed that it has been comprehensively proven that our economic woes are NOT in major part due to the Eurozone.

So what’s going to happen? Well, millionaires are going to get a tax cut. That’ll help, won’t it? £3 billion, going to the people who need it the least, as Ed Balls said in his response to the Statement.

It’s worth bearing in mind that the 1,000 richest people in the UK are now worth a total of £414 billion – up £155 billion in the last three years. If you were wondering where the money that could stabilise our economy has gone, wonder no more.

What about taxing businesses? We know that the biggest corporations have been hiding their cash in tax havens – is Osborne doing anything about that?

Apparently he is. He’s planning to close tax loopholes and he’s bringing in 2,000 more HM Revenue and Customs staff to do it. Let’s just remind ourselves that he cut HMRC by 15,000 a little while ago.

In the meantime, we have Corporation Tax – is he increasing it? No. He’s cutting it by a further 1 per cent. This means that this tax has been cut by a quarter – 25 per cent – since the Coalition came into power in 2010. And he still can’t get firms to pay up!

Incidentally, Osborne would like us to believe Corporation Tax is keeping the economy weak. However, the US rate is 40 per cent and the economy there is growing.

Where’s the business investment bank we were promised?

Oh! Here’s something: tax relief on pensions slashed for the very high earners. £1 billion expected revenue. Be still, my beating heart.

So: tax cuts for the rich. What do the poor get?

The rise in working-age benefits will be frozen to 1 per cent for the next three years. RPI inflation is currently 3.2 per cent. This means the poor will get six per cent poorer over that period. The Liberal Democrats were crowing about defending inflation-related increases to benefits last year; I notice they have nothing to say today.

The majority of people losing from cuts to tax credits will be people in work.

Disabled people were no doubt completely unsurprised when Osborne wheeled out his tired old line about working people looking at their neighbours’ closed curtains during the ‘scrounger-bashing’ segment of the speech. Let’s all bear in mind that sickness benefit fraud is 0.4 per cent while the government is eliminating 20 per cent of claimants from the welfare bill. That’s 19.6 per cent of claimants who deserve the cash, even if the fraudsters are caught and weeded out (and they probably won’t be).

Disability benefits will be exempt from the freeze, he said, trying to make it seem that the disabled won’t take a hit. This was a lie. Employment and Support Allowance will be affected, and since two-thirds of those who claim ESA long-term are also on the disability benefit, DLA, those most disabled will be hit the hardest.

Scrapping the worse-than-useless Work Programme and Universal Credit would save more than £10 billion, but apparently this won’t happen for fear of upsetting Iain Duncan Smith. As Ed Balls pointed out, though, “You can’t have a successful Welfare to Work programme without work!”

Child benefit remains frozen at the moment, but will increase from 2014. We all know why, I hope. Electioneering. Osborne is hoping that families with (two or fewer) children will support the Tories in the 2015 elections, because of this increase. Pathetic. And anyone who falls for it will be even worse.

Hardly any new infrastructure projects were announced; no new road schemes, no new housing schemes. There’s no repeat of the bankers’ bonus tax.

I could go on and on. You’ll probably hear more about the Statement than Kate’s baby over the next day or so, though; therefore I’ll stop.

One last point: Osborne’s 1.2 million figure for new private sector jobs is a complete fiddle. He is including jobs that have been reclassified from the public to the private sector, also part time jobs and people on the work programme/Workfare, who are working for no pay other than Jobseekers’ Allowance.

Oh, and the government’s borrowing figures may have been fiddled as well; according to Andrew Neil on the BBC it could be £56 billion higher than claimed, by 2017-18.

In March, we had Pasty-gate the day after the Budget Statement. I wonder what we’ll have tomorrow?

Get a clue, George! (Or: Saving the economy, part two)

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Andrew Marr, autumn statement, benefit, benefits, building, change, climate, Coalition, Conservative, crisis, debt, deficit, Department for Work and Pensions, DWP, economy, Ed Balls, energy, financial, GDP, George Osborne, government, house, housing, infrastructure, justification narrative, Labour, Mike Sivier, mikesivier, OBR, Office for Budget Responsibility, politics, tax, Tories, Tory, unemployment, Vox Political, welfare, Work Programme

Don’t get your hopes up! The box is probably as empty of good ideas as his head.

What a lot of twaddle Gideon George Osborne was peddling to Andrew Marr yesterday!

Speaking in advance of his Autumn Statement (or mini-budget) on Wednesday, Gideon told us all that cutting the UK’s financial deficit was “taking longer” than planned. This is because his government hasn’t invested in any infrastructure projects worth mentioning, or created jobs any other way. Where projects have been identified (HS2, new airport/runway), his political party has descended into squabbles over price and place.

He said “to turn back now would be a complete disaster”, which is true but pointless, as nobody is contemplating it. If Labour were to take over in 2015, they would have to look at the situation then and find a way to progress from there – they wouldn’t try to turn back the clock; that’s not possible.

He said richer people would “pay their fair share”, which means nothing when we don’t know what Mr Osborne considers is fair to richer people. What we’ve seen so far would suggest he likes to hammer the poor while handing richer people a tax rebate. Do you think that’s paying their fair share?

But I’ve already tackled what I would do with taxation.

He said the deficit was down by a quarter. This is a statistic that the Tories like to peddle but it is utterly meaningless when you see that borrowing for October hit £8.6 billion – £2.7 billion more than in October 2011. How is this an improvement?

He did show one flash of wisdom; he wisely refused to divulge any of the Office for Budget Irresponsibility’s economic forecasts in advance of Wednesday’s Statement. This is an organisation that has been consistently wrong, ever since it was set up. I wouldn’t trust it to speak my weight.

His worst transgression, though, was this: “To go back to the borrowing and the debt and the spending that Ed Balls represents would be a complete disaster for our country.”

Get a grip, Gideon! Borrowing during the Labour years was around 2 per cent LESS than during any preceding Conservative administration over the last 40 years! As for debt, even after the financial crisis and the bank bailout, the UK’s debt was a lower percentage of GDP than it had been for most of the 20th century! You are peddling an infantile justification narrative that even a child can see is nonsense!

I think the biggest problem here is one of perception. Gideon‘s idea of borrowing and spending involves borrowing money to give to his party’s fatcat business friends through government schemes like the work programme (don’t let them tell you it’s payment by results – even the DWP has admitted it isn’t). If he actually got down to proper investment, in proper infrastructure projects, the economy would start to rally.

Government investment of this kind would, in fact, pay for itself – and help pay off the deficit.

Any spending has a greater impact on the rest of the economy than the initial outlay; this is known in the jargon as the ‘multiplier effect’. There are a variety of multipliers depending on the sector. The highest multiplier is attached to construction at 1:2.06, meaning that every £1bn invested in construction will actually generate £2.06bn in new activity.

The government could, for example, embark on a massive programme of publicly-owned housing, to help reduce the deficit. It can do so much more efficiently than the private sector for three reasons: First, government has a return in the form of taxes; secondly, welfare spending falls as people are brought into work; thirdly, government borrows at much lower interest rates.

For these reasons, government can actually build the same house for a much lower net outlay than the developer and so offer affordable housing which contributes to reducing the deficit.

Also, there are 1.8 million families (representing over five million people) on council house waiting lists. There is an urgent need to build affordable housing for these people, which would also help reduce housing benefit payments.

There is no obstacle to increasing borrowing in order to fund investment. The interest rate on 10-year government borrowing is currently well below the level of inflation – meaning the government can borrow at interest rates that are less than zero in real terms. Why doesn’t anyone ask Gideon why he isn’t taking full advantage of these amazingly favourable opportunities?

This is the kind of investment that creates real jobs. You don’t create jobs by bullying people on benefits into work that doesn’t exist, Gideon! Here are a few more examples of where public sector jobs would benefit the economy as a whole:

It has been estimated that over a million ‘climate jobs’ could be created if the government was serious about tackling both climate change and unemployment – these would include areas like housing, renewable energy and public transport investment including high speed rail, bus networks and electric car manufacture.

Much of the country outside of London also needs huge investment in bus services – and, just as we should invest in electric car technology, we should also invest in electric buses and tram networks.

Only 2.2% of UK energy comes from renewable sources compared with 8.9% in Germany, 11% in France, and an impressive 44.4% in Sweden. If we are committed to tackling climate change and ensuring domestic energy security there needs to be investment in renewable energy technology.

Are you going to mention any of those in your Autumn Statement, Gideon?

I think not.

How can unemployment be dropping at the same time as claims for joblessness are rising?

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avoidance, Bank of England, BBC, benefit, benefits, business, claimant, CPI, disposable, economy, George Osborne, government, haven, income, inflation, infrastructure, Irresponsibility, job market, jobless, Jobseeker's Allowance, living wage, Mervyn King, Mike Sivier, mikesivier, OBR, Office for National Statistics, Office of Budget, Olympic, ONS, people, politics, responsibility, RPI, spending, tax, The Guardian, Treasury, unemployment, Vox Political, welfare

Today, the government was very pleased to announce, on the BBC and in all the usual right-wing rags, that the number of people out of work in the UK has fallen to its lowest total for more than a year – 2.51 million or 7.8 per cent of the working-age population.

But the claimant count – which tracks the number of people receiving Jobseekers’ Allowance and is the most timely measure of employment – rose by 10,100 last month, the largest increase since September 2011, as reported by the BBC and The Guardian.

Both figures were released by the Office for National Statistics, which seems to be treading on territory that is practically owned by the Office of Budget Irresponsibility.

Are you as confused as I am?

How can unemployment be down when more people are claiming for it?

No explanation.

It’s interesting that long-term unemployment has increased by 12,000, meaning those out of work for over a year now number 894,000.

Part-time employment rose by 49,000 to 8.1 million, more than a quarter of the workforce and close to a record high.

The fall in unemployment has been attributed to a reduction in youth unemployment, but that still leaves 963,000 people, aged between 16 and 24, looking for work.

Most tellingly, average incomes rose by 1.8 per cent for the year to date, while inflation measured according to CPI is now 2.7 per cent. According to RPI, it’s 3.2 per cent. That means the spending power is falling.

Economists say the job market is worsening, possibly as people who were hired for the Olympics, and other summer events, come off firms’ books.

Bank of England supremo Mervyn King said the figures suggested the labour market was “pretty strong” but said it was hard to reconcile this with the economy’s weak growth.

I’ve got a pretty good idea about that, Mervyn.

The economy is growing slowly because the vast majority of people aren’t being paid reasonably by their employers. Wages have grown by almost (or more than, depending which yardstick you use) a whole percentage point less than inflation. People don’t have the money to spend!

If the economy is to enjoy real growth, then the government needs to launch a major attack on tax avoidance and tax havens, get that money back into the UK Treasury where it belongs, and then use it to invest in British infrastructure and British business. That way, firms can get back on their feet and will have no excuse not to pay a living wage to workers. Then working-class people – the vast majority of the population – will have a higher disposable income and therefore more spending power (they’ve hardly got any to spare at the moment). They will use that money; it will go around the system again, and the economy will grow again.

If I can see that – and I’m no economist – why can’t you? Why can’t Gideon George Osborne?

I think we all know the answer to that. He can.

But it suits his purposes to ignore it.

Smaller recession won’t stop the agony for the sick, disabled, unemployed, low-waged…

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austerity, benefit, benefits, Coalition, Conservative, contraction, council tax, cuts, David Cameron, debt, deficit, destitute, disability, disabled, DLA, double-dip, economy, Employment and Support Allowance, ESA, GDP, George Osborne, government, growth, Incapacity Benefit, job, Jobseeker's Allowance, Labour, Lib Dem, Liberal, Liberal Democrat, Localism Bill, Mike Sivier, mikesivier, Nick Clegg, OBR, Office for Budget Responsibility, Office of Budget Responsibility, Parliament, people, politics, poverty, private sector, public sector, Rebekah Brooks, recession, sick, suicide, tax, tax avoidance, Tories, Tory, Treasury, unemployment, Universal Credit, Vox Political, WCA, welfare, work capability assessment

UK GDP changes over the last few years. You can see that, after the Coalition took over, we have had just two quarters of growth and no less than FIVE of contraction. The graph was created before the new revision came in so the last block is in fact -0.4, rather than what is shown. (Graph from economicshelp.org)

Official figures have been revised to show the UK economy contracted by less than thought in the second quarter of 2012. Apparently the recession only deepened by 0.4 per cent, rather than the 0.5 per cent to which it was revised last month. The original estimate was 0.7 per cent.

Big deal.

It’s a far cry from original Office of Budget Irresponsibility estimates for 2012, which had the economy growing (if you can believe it) by 2.5 per cent during the year. Instead it has contracted by around 1 per cent. That’s a huge error margin – around 1/28 of GDP.

And it’s a far cry from what the Coalition were predicting in 2010, when public sector job losses were going to be offset by a huge inrush of private sector jobs that never came. David Cameron can swan off to New York (incidentally avoiding the reappearance of his friend Rebekah Brooks in court) and talk about a million jobs being created, but that doesn’t even begin to cover the harm that his austerity measures have perpetuated.

And of course it means that we’re all still in the longest double-dip recession since the end of World War II, thanks to the Coalition – they can blame Labour all they want, but the figures tell the truth: GDP started dropping after the Tories and the Liberal Democrats took the reins of power.

What does this mean for the less well-off in society? Well, it’s obvious…

Continued recession means that there will be less tax money available to the Treasury (and there’s still no real effort being made to track down those tens – maybe hundreds – of billions being kept away by tax avoidance).

This will allow Messrs Cameron, Osborne et al to continue their persecution of the poorest in society – those who had nothing to do with the causes of the recession – and their programme of rewards for those who made this possible – the bankers and financiers who did dump us all in it.

So we will see further deep cuts in the welfare budget. More sick and disabled people will be driven to suicide. We have already seen news stories in which it has been admitted that failed ESA claimants have ended up destitute – expect many more in the future.

The Universal Credit will come in, capping the amount of benefit families will be able to receive and ensuring that they are plunged into poverty, through no fault of their own.

The Localism Bill will come in, forcing councils to create council tax relief schemes that will force the lowest-paid in society out of their homes to search for accommodation in less “attractive” parts of the UK – if they can find anywhere at all.

And as I’m typing this, in the back of my mind I can hear Nick Clegg, leader of the Liberal Democrat Party, whose coalition with the Conservatives has made all this possible, saying: “Only the Liberal Democrats can be trusted with the economy and relied upon to deliver a fairer society too.”

And that’s the funny part!

Government borrowing: Insanity, explained with nonsense

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The Coalition government has no intention of reducing the UK’s debt burden as it provides an excuse to cut spending on public services and shrink the state. Messrs Cameron, Osborne et al know that, when the public becomes sick of all the nonsense they have been spouting about it, they can hand the mess over to the next government and laugh all the way to the (offshore) bank.

Government borrowing figures for August have been released and the Treasury has been talking nonsense about them. Again.

Let’s start with the facts: UK public sector net borrowing was £14.4bn in August – slightly higher than the same month last year, and therefore the biggest deficit for the month since records began. Corporation tax receipts fell by 2.1 per cent; benefit payments rose by 4.9 per cent.

Barring the effects of one-off transactions like the raid on the Royal Mail Pension Plan that I mentioned last month, borrowing from April to August increased by £12.9bn, or 22 per cent, on the same period last year – to £61.3bn.

The British Chambers of Commerce reckon that at this rate, total borrowing for 2012-13 will be £20bn+ more than estimated by the misnamed Office for Budget Responsibility at the time of the last budget.

Public sector net debt stood at £1.04 trillion at the end of August 2012, equivalent to 66.1 per cent of gross domestic product (GDP) – that’s up from 1.032tr at the end of July, or 65.7 per cent of GDP.

The BBC, reporting on its website, has stated that the figures make it more likely the government will fail to wipe out the structural budget deficit by its deadline – and I think it won’t make a difference whether that’s 2015 (already long-abandoned) or 2017.

The Treasury, on the other hand, is still telling us it is getting the deficit down. Exchequer secretary to the Treasury David Gauke said new figures showing borrowing for 2011-12 came it at £119bn, rather than the OBR’s forecast of £126bn meant the government was dealing with its debts.

This is particularly rich, coming from him. Everybody now knows that the best way for the government to pay down its debts is to tax all the rich Brits who have stashed their cash in offshore tax-havens. Mr Gauke used to work for a tax avoidance firm and his wife is a tax avoidance lawyer. He is exactly the wrong man to lecture us on getting the deficit – the difference between government spending and tax receipts – down.

Some, like Sir Mervyn King, governor of the Bank of England, are now saying that overshooting the deficit reduction target would be acceptable if the reason was slower economic growth across the world, and the government has been happy to play its ‘Eurozone Strife’ card many times in the past.

But I’m not convinced. I tend to agree with The Guardian’s summary of the Coalition’s non-achievements so far, which states: UK exports to the EU have been growing, at least until early 2012; the deepening Eurozone crisis was mainly due to the same austerity policies employed in the UK; therefore austerity should have been cut back and demand revived.

What we’re left with should be no surprise to anyone: Numbers that don’t add up and explanations that don’t make sense.