As Mr Johnson takes over as Leader of the Conservative Hard Brexit Cult, and by virtue thereof as Prime Minister, it is timely to take a quick look at what his economic and fiscal policy options are - at least in the lead up to DD-Day (Do or Die) on 31st October. It’s equally important to take stock of Mr Hammond’s record as he quietly fades away after three years as Chancellor of the Exchequer.
While updating our data for GDP per head of population from OECD and ONS, and doing some quick calculations, I realised a startling fact. The present age of austerity, starting with the 2010 Coalition government, and on to the Cameron / May Conservative governments, has to date been the worst since records began for average annual change in GDP per head. And if we exclude years of recession, it has been by far the worst.
Although Theresa May has survived to fight another day as Prime Minister, the of her Brexit deal in parliament has blown the debate wide open. The Prime Minister has called on MPs to "put self-interest aside" and "work constructively together" to find a way forward. In this context, the Labour Party’s next steps are critical.
The debate about Lexit is now irrelevant. The only form of Brexit that is possible is one that will entrench the status quo or empower something far worse. The left must unite against it.
This is an extract from a chapter in Economics For the Many (Verso, 2018) edited by Rt. Hon. John McDonnell MP. The chapter was written in August, 2017.
If we are to secure a sustainable, stable and liveable future for the people of Britain, then implementation of the Green New Deal will be vital. Not just for the sake of the ecosystem, but also for the sake of rebuilding a stable, sustainable economy. A sustainable economy will be one dominated by a “Carbon Army’ of skilled, well-paid workers.
The main body of the draft Withdrawal Agreement is certainly long and detailed – a tribute to the efficiency of the EU’s legal services – but it mainly contains the sort of provisions one would expect for the terms of the separation, and for issues that straddle the departure timeline.
But as for the so-called Ireland/Northern Ireland Protocol, that’s another matter altogether. It’s not a backstop for Northern Ireland, but an up-front set of binding rules for the UK as a whole.
It’s budget time. Austerity has severely damaged Britain’s physical and social infrastructure. Coupled with a fall in real wages, austerity has shrunk Britain’s social wage. No wonder British voters are angry and disillusioned. So let’s examine the case for a £50 billion spend. For the NHS, local government, central government services, and unfreezing benefits…
It can be done within the levels of expenditure considered acceptable during the Thatcher era. All it takes is political will – and the overturning of the ‘Treasury View’.
The calls for a “People’s Vote” on the government’s proposed Brexit ‘deal’ (if indeed there is one) grow louder, but are especially contentious for the Labour Party, whose membership is more minded to “remain” than the public at large, which still seems fairly evenly split.
But the call for a People’s Vote is not so straightforward, partly now in terms of timing and Parliamentary arithmetic, but above all since it poses the tough question – what question to ask the People to vote on? Or indeed what questions, plural?
Severe as it has been for the welfare of the British people, eight years of so-called austerity under three Conservative governments are but the most recent manifestation of Tory assaults on public services. Since Margaret Thatcher became prime minister almost forty years ago, contracting the public sector has been a constant theme across Tory governments.
he Financial Times questioned economists for its annual publication of economic forecasts: “With unemployment at a 40-year low, how much of a pay rise will British workers get in 2018?” (See here:) PRIME economists responded thus:
PRIME (Policy Research in Macroeconomics) economists were asked by the FT “How fast do you think the UK economy will grow in 2018 and how will this compare to other countries?” (See here).
Savings are not needed for investment. Ever. There is absolutely no need for example, for the Chancellor to rattle the tax collection box, or cut government spending - to build up savings, before the government is able to invest. No need whatsoever.
For the last several years the media have carried reports of a crisis of low productivity plaguing the British economy, both in terms of level and rate of change. Almost two years ago, PRIME's Jeremy Smith provided what I considered the definitive refutation of the existence of such a crisis. But, far from ending, the “crisis” discussion has gathered pace to become a recurrent media theme.
The British economy is simply not performing the way we need it to. As the Interim Report of the IPPR Commission on Economic Justice shows, the UK has the weakest performance on investment, productivity, trade and geographical imbalances of any major European economy.
It must be about more than the ‘supply side’. There’s little point improving the conditions for investment when demand is so weak. Since the financial crisis private sector investment has flatlined. There’s a vital need for Government to increase public investment to pick up the slack. In our report we call for an injection of £20bn in additional annual public investment spending by 2020-2, or 1% of GDP. This would take net public investment to 3% of GDP, its OECD average.
Yesterday’s increase in interest rates was a big deal. Painful as it might be for many, the real point is that the Bank is signalling the end of a particular phase of monetary policy.
Since 2010 the counterpart to self-defeating austerity policies has been expansionary monetary policies. These have inflated assets - enriching the already-rich, while failing to stimulate wider economic recovery. Yesterday the Bank of England’s Monetary Policy Committee signalled an end of this dangerous game.
But this technocratic realignment makes no difference to the fact that Bank and Treasury economists have failed to revive the economy.
In its latest true-to-form report, “Between a rock and a hard place”, the IFS discovers to its horror that the Tory Chancellor badly missed his borrowing target and is unlikely to balance the central government’s budget. Apparently gobsmacked by the report, the Guardian reproduced many of the IFS charts, sounding the alarm of a “new budget black hole”, its default moniker for a fiscal deficit
The orthodox approach has not prescribed economic policies which have been able to deal with the multiple problems we now face. We desperately need a new approach - both to economic analysis and to policy. You could say, indeed, that we need a new paradigm.
This is the conclusion reached by the Interim Report of the IPPR Commission on Economic Justice, published last month. ‘Time for Change: A New Vision for the British Economy’* argues that the structural problems of the UK economy are so deep that ‘fundamental reform’ of economic thinking and policy is needed. Such reform needs to be of the magnitude of the two economic paradigm shifts of the 20th century.
On 30th June 2016, just one week after the EU Referendum, I wrote this:
It has swiftly become clear, if it were not already so, that neither the government nor the leaders of the Brexit campaigns had anything resembling a plan for what to do if the people voted in favour of leaving the EU.
Alas, over a year later, there is still no plan – and awareness that the Conservative government has simply dumped us here without any idea what to do next is becoming overwhelming.
So we badly need a transitional deal - but what kind?
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.
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.