The decline and fall of real pay under the UK's "flexible labour market" system

Publication this week of the Taylor Review of Modern Working Practices was followed on Wednesday by the latest monthly employment stats from the Office for National Statistics (ONS).  These tell us that the number of those in work continues to rise significantly, but that real wages are falling at their fastest rate for nearly 3 years. Yet the CBI claimed in its submission to Taylor that over decades, the UK's flexible labour market has given rise to strong growth in real wages.  In fact, the opposite is true. 

The Bank of England and the growing credit bubble - a piecemeal response to a systemic problem

In June, the Bank of England dictated to the banks in its jurisdiction that they must hold more capital - £11.4 billion more – in reserve in preparation for the anticipated bursting of the growing consumer credit bubble that is undoubtedly forming. In light of this, this post seeks to answer a question posed in the British media recently – can the Bank get Britain to kick its cheap credit habit? – by discussing the societal issues that are affecting the expansion of the bubble.

Can Britain afford a pay rise of 3% for 5 million public sector workers?

If all five million public sector workers were granted a pay rise of 3%, the EXTRA cost to the Treasury - over and above the government's already-promised 1% - would be just over £3 billion a year. This is not a generous pay rise. It would enable public sector workers to just keep up with inflation. In other words, it would prevent inflation eating into the real value of their pay rise. It would not compensate for years of cuts in real wages.  

Single Market Mythologies

Last week a cross-party group of MPs tabled an amendment to the Queen’s Speech calling on the government to commit to staying in the EU single market.  As a result of their support for the unsuccessful amendment, three Labour shadow cabinet members were forced to resign.

The amendment revealed a possible confusion by its supporters about the nature of the single market and the European Union.  

The gaping contradictions in EU bank bail-out law and policy

The EU’s hugely complex banking resolution framework is generally supposed to have one key goal – to ensure that failing banks are ‘resolved’ without recourse to public bail-outs, thereby breaking the link between banks and sovereigns…  The reality, we have seen today, is quite different – and, it seems, legal. 

The EU can just about argue that technically, the rules have not been broken - but overall, the appearance is of a policy in logical disarray once again.

Economic dogma, George Osborne and Grenfell Tower

What has the horror at Grenfell Tower to do with economists? And what have the lives lost at Grenfell Tower to do with the government’s budget deficit? A great deal, I will argue here. When on Twitter a few days ago I raised the issue of the shared responsibility that economists have for this ghastly tragedy, I was attacked. So let me explain.

"Bribing voters" and all that: neoliberal contempt for democracy?  

Labour’s shock success in the “snap” general election left poll takers more than slightly embarrassed (except YouGov and Survation), and political commentators scrambling to cover their backsides. In their struggle to adjust to a resurgent Labour Party led by the “unelectable” Jeremy Corbyn, the nominal progressives among the pundits provided a textbook guide to the difference between centrist neoliberalism and social democracy.

An Open Letter to Jeremy Corbyn: Labour needs to act fast

After an exhausting and successful national campaign, it is hard for campaign strategists to think of next steps. But we are at a critical historical juncture, and a range of opportunities present themselves. Choosing the right political and economic strategy now is vital. 

If the aspirations of the British people, as expressed in the election result are to be fulfilled by Labour, and to avoid the dissipation of the momentum and energy generated by the campaign, it is urgent that Labour lays out a viable and popular political and economic strategy. We believe that the ideas outlined in this article would attract substantial political and popular support.

Strong and stable? The Conservatives' economic record since 2010

In a recent interview, Theresa May was asked by Andrew Neil how the Conservatives would fund their manifesto commitments on NHS spending. Given that the Conservatives chose not to cost their manifesto pledges, May was unable to answer. Instead she simply repeated that the Conservatives are the only party that can deliver the economic growth and stability required to pay for essential public services.  When pressed, May’s response was simple: ‘our economic credibility is not in doubt’.

But does the record of the last seven years support May’s claim?

OECD ignores deficit hawks, backs higher public investment in infrastructure & people

This morning, the OECD has published its latest Economic Outlook, which includes individual country forecasts. It is pretty downbeat about the UK’s near term prospects, and implicitly critical of the Conservative government’s policy plans. It argues that there is "fiscal space", and that higher public investment should be considered

The policies supported by the OECD, in the context of Brexit, are in essence the same as those which the 130 economists have backed in their letter to the Observer – and whom the FT's economics editor Chris Giles thinks should be “disregarded”.

Observer letter: 130 economists express support for Labour's plans for the economy

Today's Observer newspaper (4th June), publishes a letter signed by 130 economists, under the heading "Labour’s manifesto proposals could be just what the economy needs".  We felt it important to reproduce the contents of the letter here, together with the full list of signatories).  

The Observer letter contends that Labour's Manifesto proposals are much more likely to strengthen and develop the economy, as against the Conservatives commitment to maintaining austerity. 

The letter, together with the full list of signatories, is available online from the Guardian website.

Labour's economic policies are sound - and gaining support

Since 2010 the ideology of balanced budgets has dominated economic policy debate in Britain, from the micro through to the macro (George Osborne’s “living within our means”). 

This policy regime produced its predictable results - slow growth, stagnant wages and for most households falling living standards.  It also confirmed that cutting public expenditure is a slow and ineffective method of reducing a fiscal deficit.  

The 2017 Labour Party Manifesto, which breaks with this failed ideology, is a game changer.

Brookings dance to Trump's tune on US government interest payments

I was looking at my Tweetdeck this morning when I came across this tweet from the Brookings Institution:  "In 2016, 6% of the federal budget went toward paying interest on debt"

Now it is clearly a Good Thing in principle for the US Federal government’s budget to be explained in clear and simple ways, but why – I asked myself – do Brookings choose to concentrate today on interest payments (which form just 6% of outlays) rather than the programs that President Trump wants to cut to shreds? 

Assessing the manifestos - the IFS fails the test

The “gold standard” for analysis of the economic policies of political parties was set by The Netherlands Bureau for Economic Policy Analysis (CPB), established by Jan Tinbergen, Nobel prize winner.

On 26 May the UK Institute of Fiscal Studies held an invitation-only meeting to announce its evaluation of the taxation and expenditure policies of the Labour and Conservative Parties.  

But in place of the rigorous modelling in the tradition of Tinbergen, the IFS presentations gave the audience an exercise in arithmetic that is not fit for the task - no more than educated guesses about budget balancing with no apparent link to broader economic effects.

The IFS: viewing the economy through wrong end of a telescope

Today the Institute for Fiscal Studies produced a review of political manifestos prepared for General Election 2017. Predictably, the respected, and largely independent IFS researchers review the tax and spending proposals of the different parties with little regard for the wider economy.

This skews their perspective, and their approach to analysing the economy. It is as if IFS staff consistently peer at the British economy through the wrong end of a telescope.

Forgotten macroeconomics in the manifesto debate

The assessment of the impact of the policies in the election manifestos in the media is rather static as comments mostly ignore their positive impacts on growth, investment and productivity. This policy brief on the Labour Party's manifesto brings the forgotten macroeconomic principles into this debate.  The manifesto's economic policies can lead to higher private investment and productivity, and help to rebalance the economy.