Posts Tagged ‘debt’

Labour must support George Osborne’s budget surplus law

11/06/2015, 04:15:30 PM

by Samuel Dale

George Osborne is fond of saying that in opposition you move to the centre while in government you can move the centre.

Ed Miliband’s disastrous attempt to move the centre from opposition is the latest example proving this valuable piece of political wisdom.

You can not change the rules of British politics from opposition but you can if you’re sat in the Treasury.

Labour built a new consensus over 13 years.

In the 2002 budget, Labour decided to increase national insurance contributions by 1p to fund higher spending in the NHS.

The Conservatives now back rising NHS spending every year.

The same is true of the minimum wage, devolution and public service reform

And so it’s happening again.

In his Mansion House speech this week, Osborne resurrected his idea to make deficits effectively illegal in “normal” economic times.

The plan is that only the OBR could approve a budget deficit and otherwise a surplus must be run. It shifts the political centre.

It’s an attempt to shrink the state and force future governments to cut spending or raise taxes if it wants to spend more.

Some in Labour argue it makes sense to “borrow to invest”, which justifies deficit spending even in good years. In simple terms it is sensible to take out a big mortgage loan (capital spending) but not a credit card (current spending).

Maybe. But the hard truth is that the economics don’t matter. With Labour’s economic credibility hole only the politics matter.

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Golden Dawn’s neo-Nazis came third and wait in the wings. Europe must remember that when negotiating with Syriza

26/01/2015, 09:36:33 AM

by Ranjit Singh Sidhu

It has been a few years since the great financial crash, which started when the US financial houses saw the products they created out of junk and sold as pure gold turn back to worthless junk. One by one they were either scarified or saved, with a notable survivor being one of the biggest culprits of all: Goldman Sachs.

We can look back and see how the contagion spread across the world leading to government after government instinctively cutting back spending, this in turn leading to an inevitable spiral down first to recession and then to a depression, every area of the globe entering a period of unrest.

In Europe one country, being bound by a financial accord that meant it was dictated economically by others, suffers worst of all.  Unemployment had risen from 8% to 30%, it has also  lost 42% of it’s economic output. With the old political order seen as failing the people turn to alternative radical parties. In just 3 years one party that polled 2.3% now is on the edge of power: It has 1.4 million members and stands on the edge of gaining power with 37% of the vote.

Sound familiar?

The party is the National Socialist Party, the country Germany in 1932 ,the financial crash that of Wall Street 1929 ( and yes, Goldman Sachs was pivotal in selling junk in that crash as well) .

On the 31st of July 1932 the Nazi party received 37.4% of the vote and became the largest party in the Federal Elections.  The German people’s rising anger towards the financial reparations of the Treaty of Versailles had been shown a few years earlier when the referendum calling for the abolition of  the ‘Law against the Enslavement of the German People’ received  94%  of the vote.

As Syriza goes about building a government,  Greece stands with 30% of its economic output gone since 2009, unemployment at 26% and youth unemployment at 50%. We must not be deaf to history and what can arise when economic destruction is imposed on a country.

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Livingstone: still there, still up to his old tricks

18/11/2013, 10:35:00 AM

by Rob Marchant

Now, Labour Uncut has never been a fan of Gordon Brown’s decision to leave the “Golden Rule” behind and stop balancing the books over the economic cycle. He borrowed more than he should have, with the result that Britain was rather caught with its trousers around its ankles when the global financial crisis came.

But it takes a certain kind of front for a politician on his own side to call the former prime minister a coward (although marginally better, one supposes, than asking for him to be tried as war criminal).

Especially if that politician (a) still holds office at national level (albeit on Labour’s NEC and not an office elected by the general public); and (b) wouldn’t know fiscal responsibility if it jumped up and slapped him in the face with a wet kipper.

It really could only be one person, couldn’t it? Step forward, our old friend Ken Livingstone, who told the Labour Assembly Against Austerity last weekend that the raising of debt was “an act of cowardice”.

Now, let’s examine that for a second as an exercise in multiple levels of irony.

First up in the irony stakes is the issue that he was speaking at the Labour Assembly Against Austerity. Yes, the anti-austerity movement. The primary function of this body, as far as anyone can understand, is the economic equivalent of the Flat Earth Society; that of fighting of any cut of any kind.

Now, although Livingstone later implied – disingenuously – in the same speech that he is open to cuts, this goes entirely against the whole ethos of the anti-austerity movement. No-one can possibly seriously buy that argument, least of all from him.

So, the equation is pretty straightforward: if you can’t cut and you can’t raise debt, you have to raise taxes. That is the clear conclusion of this kind of policy and the modus operandi which has followed Livingstone throughout his political life.

And there’s the second irony. You can certainly say that Livingstone has always been consistent about not wanting to raise debt and securing all revenue through tax-raising, but let’s look at the facts on that.

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If Labour adopts the proposals of the Fabian spending commission, it will pay the price at the next election

21/10/2013, 11:11:21 AM

by Jonathan Todd

David Cameron – as, for some reason, he is always quick to do – taunted Labour thus in PMQs last week: “More spending, more borrowing, more debt. It is the same old Labour.” On the same day, a Fabian Society commission on the future of public spending reported that Labour could spend £20bn more in 2017-18 than the government currently plans.

If Labour were to adopt the recommendations of the Fabians, then the reaction of the prime minister is all too obvious. What is, though, more important to Labour’s 2015 chances is how the voters would react.

Polling by YouGov to support the book published by Labour Uncut at party conference gives us some indication.

This polling found that if Labour were to promise to keep most of the present government’s spending plans, but to borrow more specifically for public works such as building more homes, those who say this would make them more likely to vote Labour outnumber those who say it would make them less likely by 4% (17% more likely versus 13% less likely).

In contrast, a net 4% of voters say they would be less likely to vote Labour (12% more likely versus 16% less likely) if the party rejected any public spending cuts and instead allowed borrowing to rise.

The difference between these two strategies could be the difference between Labour winning and losing the election.

The Fabian proposal seems to fall somewhere between these two strategies. It doesn’t reject entirely spending cuts – a position that our polling indicates would be likely to cost Labour the election. Nor does it only go beyond the government’s plan exclusively for certain forms of investment – a strategy that our polling sees as compatible with Labour victory.

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Exclusive Uncut poll shows Ed Balls’ position on spending is a vote winner – but we must be ready for the inevitable Tory attacks

23/09/2013, 07:00:48 AM

by Jonathan Todd

Much has happened since early June when both Ed Balls and Ed Miliband made speeches intended to show they can be trusted with the publics’ hard-earned money. Miliband has launched a far-reaching party reform, upsetting some, and disappointed others in his handling of Syria.

As Damian McBride’s memoirs revisit old battles, Miliband does not lack for contemporary ones but in the fog of political war he must remain focused on the economy because this is where the result of the next election will be decided.

There will be many at Labour party conference who wouldn’t welcome a belt tightening message. They’ve heard Nick Clegg deliver free school meals. They’ll want promises of goodies from Miliband too.

Miliband should tune out these appeals and tune in Don Draper. “If you don’t like what is being said, change the conversation”. The economic debate has been stuck on the deficit throughout this parliament. The cost of living is more fertile terrain for Labour. But the Conservatives retort that Labour, with its profligate ways will drive the economy into the debt ditch, squeezing households in years more of recession and austerity.

The conversation won’t be changed till this Conservative claim is rendered absurd. This means the June speeches must not be the end of Labour attempts to build fiscal credibility but staging posts. Promises of largesse to please the faithful in the hall are not what’s required, we need reassurance for those at home who will be paying a little more attention to Labour this week than usual.

These voters want Labour to demonstrate that the long, hard road of the past half-decade can end with something different and better. Miliband should focus on such a future, not refighting past confrontations. Not only with McBride but also the 2010 general election and the “emergency” budget that followed.

Labour was right to warn that this budget went too far, too fast but so entrenched was the perception of the party’s profligacy that nearly half of voters, according to YouGov, then blamed the previous government for these cuts. 9 per cent more still do so than blame the incumbent government.

If Labour were to promise, as seems likely, to keep most of the present government’s spending plans, but to borrow more specifically for public works such as building more homes, polling for Labour Uncut by YouGov reveals that those who say this would make them more likely to vote Labour outnumber those who say it would make them less likely by 4 per cent (17% more likely vs 13% less likely).

In contrast, a net 4% of voters say they would be less likely to vote Labour (12% more likely vs 16% less likely) if the party rejected any public spending cuts and instead allowed borrowing to rise.

This could be pivotal at the election. Although 55% say it would not change their vote (either for or against Labour), a 4% rise or fall in Labour’s vote could be worth upto 52 seats in 2015 (source: UK Polling Report Swingometer with a 4% increase in Labour’s 2010 vote share) and be the difference between Labour becoming the government or remaining in opposition

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Letter from Wales: Where has “clear red water” got Wales?

23/06/2013, 12:18:56 PM

by Julian Ruck

Back in 2002 Rhodri Morgan gave his “clear red water speech,” declaring “We’re not old or new Labour, we’re Welsh Labour.” It set the course for Welsh Labour’s approach to government, citing Beveridge and Bevan as the inspirations.

Fine words but more than 10 years later, where has it got us?

Perhaps Morgan would have been more honest had he said, we are going to fight Tony Blair to the death and to hell with modernising public services, the Welsh economy, health and education.

We want the days of old council chamber back-slapping and back-scratching in Cardiff Bay. We want to be welsh and proud of it, no matter what the cost. You boyos in Westminster can pay our bills, no questions asked. We know our devolved rights, so go and get stuffed!

For every Welsh person almost an extra £4,000 is borrowed compared to England. This Welsh Labour dream of an outdated socialist Brythonic Atlantis has bankrupted Wales, bankrupted the education of our young and bankrupted the Welsh health service.

The Welsh Labour party’s obsession (and Plaid Cymru’s) with a tyrannical Westminster Labour party has resulted in a dire attempt to free fall into isolationism without a parachute.

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Osborne’s reputation for economic competence is fatally damaged. Labour must now start restoring theirs

23/04/2013, 12:13:09 PM

by Matthew Whittley

Perceptions of economic competence will largely determine who takes power in 2015. It is well-known that Labour has its work cut out to regain trust with the nation’s purse strings, but if anyone needed further proof that the economy isn’t safe in George Osborne’s hands, the need look no further than today’s economic news.

The latest figures tell us that there has been no improvement in underlying borrowing, which is has been running at almost the same level for the past two years. According to OBR forecasts, it will be around the same this year. As a result of the failure to stimulate any growth in the economy, the government is now set to borrow £245 billion more than planned

George Osborne’s main opportunity to do something about the hole he’s dug for the nation, was in March with the budget. But he blew it: the budget amounted to no more than a “do nothing” series of holding measures.

With household budgets squeezed and business lacking confidence to invest, Osborne should have prioritised growth by borrowing to invest in capital projects, rather than borrowing to finance failure as is currently happening. One doesn’t need a PhD in macroeconomics to know that capital spending has a huge multiplier effect on growth.

However, the derisory £2.5bn of capital investment promised in the budget falls way short of what is required to kick-start the economy. To put this figure in context, the Economist, hardly a bastion of Keynesianism, recommended an extra £28bn of infrastructure investment.

It should have become clear by now to him that the debt can’t be reduced in the absence of growth. The UK has grown only 0.7% since the third quarter of 2010. During that time, Japan and Italy are the only major G20 economies to have performed worse than the UK.

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A gift from Alastair to George

13/11/2012, 07:00:00 AM

by Dan McCurry

The funniest line of George Osborne’s letter to Mervyn King begins with the words, “As you are aware, my predecessor agreed…”

The predecessor is Alistair Darling and the letter concerns the £35 billion of interest payments, or coupons, that would have been paid on the gilts bought up by the Bank of England, under the policy of quantitative easing (QE).

The agreement struck by the Labour chancellor, is that the treasury would not make coupon payments on the gilts, since it would be pointless for the treasury to pay interest to the Bank of England (the state to pay the state).

The reason the letter is amusing is that Osborne won an election on the promise to reduce the deficit at spectacular speed, but has spectacularly failed to do so. However, he has done a good job of blaming his predecessor for his own failure. In this letter he has been forced to admit that his predecessor has delivered a £35 billion gift to the public purse.

All this means that George Osborne must be tremendously happy. You can picture him getting out the bunting in number 11 Downing street. He’s probably kissing a photo of Alistair Darling at this very moment. There must be a proper spring in his step.

All of his efforts to remove Britain’s debt mountain have failed, but then this one policy of Alistair Darling has delivered a massive contribution to the effort.

In all, one third of the UK’s total debt has been bought up by QE. I can only presume that George will immediately take the air waves to thank the previous administration for their brilliant policy.

Without inflationary pressures, the Bank of England can sit on the gilts in perpetuity. This means that next year and the year after, the Treasury will receive a further £35bn in gifts.

The inflationary pressure expected by the policy has been marginal. Paul Krugman explains this by pointing to the lack of demand in the economy. Few workers are demanding higher wages at present. They are mostly just clinging onto the jobs they’ve got. Shopkeepers aren’t seeing the shelves empty at such a rate that they wish to increase their prices.

It may be that once growth returns there will be too much money swirling around the economy. If that were the case, then inflation would be a prospect. The bank would respond by returning the gilts to the market and the treasury would resume making coupon payments. If that were the case, then the benefit would have been temporary, but much appreciated none the less.

However, the people who do sums on this type of thing tell us that there isn’t too much money in the economy. If they are right then there will be no inflationary pressures once growth returns. At that point, if he wanted to, the Bank of England governor could strike a line through a number on a ledger, and the gilts would no longer exist. More likely he would simply allow them to expire, according to their stated lifetime.

All of this must be music to the ears of George Osborne. You can imagine him, with the prime minister and his cabinet mates, drinking a toast to Alistair Darling and sharing a warm glow of affection towards the Labour party.

We feel a warm glow back. Good luck, George. This one’s on us. We look forward to seeing you thank us publicly.

Dan McCurry is a Labour activist whose photographic and film blog is here.

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The seven-year itch: a cautionary tale of tax, cuts and debt

18/09/2011, 12:00:14 PM

by Rob Marchant

There was this bloke. And there was this girl. They met, fell in love, got married, usual story. It was a big, special wedding, everybody went. A match made in heaven, everyone said. People came out of their houses to wave as they went to the church. The kind of wedding that fills everyone with hope for the future.

She was popular, always a lot of boys round her. But she was smart, knew what she wanted. Sometimes it looked like she wasn’t paying much attention, but she did when it counted. Didn’t stand for any nonsense. He, on the other hand, was a bit of a tearaway. Heart in the right place, but not very together a lot of the time. And a drinker. A long history, in fact. Lots of girlfriends, but in the end, they all went, because of the drink. But not this one: this time it’d be different.

So, on the day they married, he promised to her that that was it with the drinking. And it was true. Never touched a drop. Day in, day out, he would walk home past the pub, think how lucky he was to have found her, and kept straight on walking. Life seemed charmed. (more…)

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The week Uncut

16/04/2011, 10:30:53 AM

In case you missed them, these were the best read pieces on Uncut in the last seven days:

Atul Hatwal presents the shadow cabinet goal of the month competition

Dan Hodges thinks blue Labour needs a spinner

Tom Watson says Rebekah Brooks should resign

Michael Dugher reports back from Leicester South

Stella Creasy says private debt is this government’s public injustice

Nick Keehan reports on Cameron’s immigration speech

Sunder Katwala says Nick Cohen is wrong on religion

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