Latest attack on Ed Miliband not backed up by the facts

As the cuts debate rages, and strategies for campaigning against them are discussed at today’s Netroots conference, Tony Dolphin looks at whether the latest critique of Ed Miliband’s economic policy is justified

Phil Collins took Ed Miliband to task in yesterday’s Times (£) for not confessing to the hubris that he says afflicted the Labour government ahead of the financial collapse and recession. His charge is that Labour was too optimistic about economic growth at the time and, thus, too optimistic about government revenues. As a result, government spending was too high and the deficit problem that the country now faces is, in part, due to this misjudgement.

Ed-Miliband-Gordon-BrownThere is an element of truth in this analysis – though it must be said that Labour’s hubris was shared by most leading economists and by David Cameron and George Osborne, who promised to match Labour’s spending plans.

In 2007, the UK economy had experienced 15 years of uninterrupted growth, unemployment had fallen by 1½ million from its peak in 1993, inflation was close to its target rate and interest rates were at historically low levels. Things do not get much better than this and if ever a government should have been running a surplus on its current budget, the UK government should have been in 2007.

But, according to the figures in the June Budget documents, the cyclically-adjusted deficit on the current budget – the measure that George Osborne targets to be zero by 2015-16 – was just 0.6 per cent of GDP in 2007-8. If Labour were guilty of fiscal profligacy, it was hardly on a grand scale. There is little doubt that the vast bulk of the deficit problem is the result of the financial collapse and recession.

Ed Miliband is right, therefore, to counter Tory talk of ‘Labour’s deficit’. How much blame he should accept on behalf of Labour when doing so (he did say in his conference speech that Labour was wrong to think that there would be no more boom and bust) is largely a political judgement – and one on which he and Phil Collins clearly disagree.

What matters more, though, is whether the diagnosis of the problem affects the remedies put forward to cure it. The Conservative (and post-election Liberal Democrat) view is that the deficit is too high because public spending is too large relative to revenues.

Their solution, therefore, is a drastic deficit reduction programme tilted heavily (77:23) in favour of spending cuts. Deficit reduction under Labour, if their last budget plans are any guide, would also be achieved largely by spending cuts (accounting for over 70 per cent of the total), though these would be spread out over a longer period.

Both parties, therefore, appear to accept to a large degree that the problem is excessive public spending. But why not increase revenues more?

The Tories, supported by their Lib Dem allies, want to reduce significantly the share of government spending in GDP, Labour’s plans would produce a similar outcome; who, then, will make the positive case for taxation to fund excellence in the state provision of health, education, defence and other services?

Of course, the best – and least painful – way of boosting government revenues, and thus ensuring support for public spending, is to increase the growth of national income. Once it is accepted that the deficit has arisen largely as a result of the recession, it should be clear that more effort needs to be put into public policies that promote economic growth.

George Osborne has spoken about the need to rebalance the economy and generate more growth through investment spending and exports, but he seems largely bereft of ideas to bring about this about.

The failure of the government to come up with enough measures to fill a white paper on growth suggests a new form of hubris has overtaken the Treasury: a belief that deficit reduction, and admittedly some cuts in corporate tax rates, are all that is required to place the economy on a path of strong and sustainable growth. Sadly, this is unlikely to be the case.

Latest attack on Ed Miliband not backed up by the facts

What kind of jobs recovery is going on?

There is some good news in today’s labour market statistics. There were 2,448,000 people unemployed in the three months from July to September, down 9,000 on the figures for April to June. The number of people in employment was up 167,000 from April-June, reaching 29,189,000.

These figures continue a slow trend in the right direction that has now lasted for six months, and the favourable impression they created hasn’t been confined to newspapers that support the coalition; the Financial Times reported a “Surprise fall in unemployment”, with The Guardiansuggesting:

“… the labour market may be in better shape than was feared.”

The figures are positive – and reflect the fact that the economy has been recoveringfrom recession for a year now. What is more worrying is the nature of the recovery – dependent on self-employment, part-time and temporary work. Worse, there is no sign yet of an increase in the number of job vacancies and the number of people flowing in to Jobseeker’s Allowance is higher than the number coming off.

Self-employment grew under the last Labour government and part of the story of the recovery is the extent to which self-employment has been responsible for the growth of overall employment.

In the chart below, the left hand scale shows the number of employees (the unbroken line) while the right hand shows the number self-employed (the dotted line):

Numbers-of-employees-and-self-employed
There has been no recovery in the number of employees – it stopped falling last summer, but the level has been quite steady since then. By contrast, the number of self-employed people has not stopped rising. Of course, some people have always dreamed of being their own boss, so this is not a bad thing in itself. But a weak recovery is a dangerous time to set up your own enterprise and there has to be a question mark about how long the new self-employed will stay in business.

 

This has also been a recovery characterised by temporary employment. Involuntary temporary employment is a clear sign of workers’ weak labour market position, but the growth of temporary employment overall has a more mixed character.

It can be one of the “green shoots” of recovery, where companies take on temporary staff to respond to healthier order books; on the other hand, the fact they are recruiting temporary workers indicates that they are still not entirely confident about the recovery and are hedging their bets. In recent months, the two figures have started to diverge.

The number of involuntary temporary workers has continued to rise, and is now the highest it has been since the summer of 1999, but this month saw the total number in temporary work fall for the third successive month:

Temporary-employment-in-the-recession
The picture for part-time employment is a little different. It is remarkable that, as far as part-time employment is concerned, the recession might never have happened – part-time employment was more than 400,000 higher in today’s figures than at the start of the recession and there has been no change of direction in recent months:

Part-time-employment-in-the-recession
The next aspect of the labour market picture to highlight is what has been happening to the flows on to and off Jobseeker’s Allowance. In today’s figures, the inflows and outflows are both up on last month, but the picture becomes quite clear when we look at the picture since the start of the recession:

JSA-flows
On the left hand side of the chart, we can see the impact of the recession, with many more people coming on to JSA than leaving. Late last year this reversed, but, for the second month running, we see inflows higher than outflows. This strongly suggests a weakening of employment prospects that is confirmed by the picture for vacancies.

In today’s figures, there were 459,000 vacancies, the lowest figure since Sep-Nov 2009:

Vacancies over the past year
Aug-Oct 2009: 432,000
Sep-Nov 2009: 441,000
Oct-Dec 2009: 465,000
Nov-Jan 2010: 481,000
Dec-Feb 2010: 484,000
Jan-Mar 2010: 475,000
Feb-Apr 2010: 472,000
Mar-May 2010: 481,000
Apr-Jun 2010: 489,000
May-Jul 2010: 479,000
Jun-Aug 2010: 466,000
Jul-Sep 2010: 459,000

The trend is clearly down since the late spring. The ONS figures show that there are 5.3 unemployed people for every vacancy – another sign of weakness. In recent weeks we have seen a lot of talk about the:

Workshy … who need an extra push to get them into the mindset of being in the working environment.”

All of which ignores the fact that the number of unemployed people chasing each job has been rising since before the election and rose again this month (from 5.25 to 5.33, disguised by rounding in most reports)

http://www.leftfootforward.org/2010/11/labour-market-stats-november-2010/

 

Spending cuts – the fightback begins

Can this week’s violent protests in Westminster simply be dismissed as the hijacking of an orderly demonstration by a ‘small minory’ of anarchists. Or are they a sign of things to come for an ‘out-of-touch’ government with 18 millionaires in its cabinet?
On and on it went: aerial shots of the heaving crowd, rolling commentary, bursts of stuff shot on mobile phones, and the usual parade of talking heads. While what the BBC was calling a “mini-riot” happened both inside and outside the Millbank tower, the people in charge of its news channel were presumably ecstatic: this kind of stuff, after all, is what rolling news was invented for.
Over there: a fire! Suddenly, on the roof: more protesters! On the phones: frantic office workers, taken aback by the disruption of their day! And in the midst of it all: that delicate and ever-shifting line of police, anxiously trying to do whatever they could, knowing full well that the people they were up against had already – if you’ll excuse the pun – stolen a march on them.

Meanwhile, the president of the National Union of Students did the media rounds. Aaron Porter is 25; he stood for the office as an independent, but is a member of the Labour party, whose dress code – the Nick Robinson-esque glasses are a good example – rather suggests that he’s destined for a career in mainstream politics. Certainly, if you fancy being a high-ranking Labour MP, clambering to the top of the NUS isn’t a bad move at all. His predecessors have included Jack Straw, Charles Clarke, the current shadow defence secretary Jim Murphy, and Phil Woolas, the MP last week suspended from office for making misleading claims in the course of the last election campaign – all of which highlights the fact that NUS presidents are not exactly renowned for being what the French call enragés.

And so it proved. “Let me be clear,” he told yet another camera. “I absolutely condemn the actions of a small minority who have used violent means to hijack the protest . . . if some people think it’s appropriate to use violence, it’s a total disgrace, and they have completely hijacked this opportunity to make a serious point.” In his own way, he was endorsing the view that was subsequently splashed over the front page of yesterday’s Daily Mail: “Anarchists spark violence as 50,000 take to streets over student fees – HIJACKING OF A VERY MIDDLE CLASS PROTEST”.

On the BBC, there was a particularly priceless moment. When Porter once again talked about “hijacking”, the coverage cut to the mass of people outside Tory HQ, the presenter made the point that this was not what “a small minority” would look like – and Porter seemed momentarily lost for words. You had only to look at the crowd to know that the vast majority of them were not anarchists, but reasonably regular twentysomethings. As if to illustrate the point, when one of the people on the roof made the stupid decision to hurl down a fire extinguisher”>stupid decision to hurl down a fire extinguisher, they were met with an outraged chant of “Don’t throw shit! Don’t throw shit!”

Long after the fires had burned out, and the riot police had belatedly arrived, I spoke to a Guardian colleague who had spent most of Wednesday at the scene. Talk of cynical provocateurs, he said, was “nonsense”: the crowd was made up of “ordinary students who were viscerally angry”, but also mindful of what was ill-advised, or plain daft. When one of their number had prised up a cobblestone and moved to lob it at the police, he had been roundly told to “stop being an idiot”; moreover, the attempted occupation of Millbank had seemingly started on a whim, when a handful of people had walked into the foyer, not quite believing they had been allowed to do so, and decided to stay put. He was also unimpressed by talk of an assembly of self-indulgent, bourgeois moaners: time and again, he said, he had bumped into people from such northern towns as Bradford and Wakefield, who were students at FE colleges, angered to the point of fury by the government’s axing of the educational maintenance allowance – the means-tested benefit that has enabled so many people to take up post-16 education without being a drain on the family budget.

His basic point – and mine – is simple enough. What happened on Wednesday afternoon was not some meaningless rent-a-mob flare-up, nor an easily-ignored howl of indignation from some of society’s more privileged citizens. It was an early sign of people growing anxious and restless, and what a government pledged to such drastic plans should increasingly expect.

If you hadn’t noticed already, these are strange, tumultuous times. We are still in the midst of the uneasy period of phoney war before the cuts actually bite, but we now know what’s coming: the deepest and quickest reductions in public spending since the 1920s – which, according to an under-reported quote from David Cameron, will not be reversed, even when our economic circumstances improve (2 August, at an event in Birmingham: “Should we cut things now and go back later and try and restore them later? I think we should be trying to avoid that approach”).

The welfare state is in for an unprecedented reinvention, as ministers get dangerously close to reviving the nasty old trope of the undeserving poor; yesterday, as if to try to neutralise recent fretful noises from the Archbishop of Canterbury, Iain Duncan Smith talked about supposedly self-imposed worklessness as a “sin”. Changes to housing benefit look likely to drastically change the social makeup of our cities, and London in particular; even Boris Johnson has talked about the danger of “social cleansing”.

Meanwhile, just about every area of our lives will soon feel the pinch: travel anywhere in the country, pick up the local paper, and it’s all there – the imminent hacking back of youth centres, social care, school buildings, libraries, parks . . . you name it. Everyone will be affected: as ever, the most vulnerable will take the biggest hit, though it is no accident that the idea of the “squeezed middle” is being talked about as never before.

Of late, my mind has returned time and again to a celebrated article from 1999 by the Oxford academic Ross McKibbin, and one passage in particular: “The middle classes make more use of the NHS, public transport, public libraries, local swimming pools, public parks and their right to state welfare than anyone else.”

Underneath the coalition’s plans, there is an obvious enough agenda: not just the brutal cutting of public spending, but a decisive rolling-out of the market-obsessed, “choice”-fixated ideas that took root while Margaret Thatcher was prime minister, were revived and retooled once Tony Blair decided he had to define himself against the Labour party – and now look set to be taken to their logical conclusion by the Tories, and the like-minded Lib Dems who took their party into the coalition. Here lies another reason why Wednesday’s events were so significant – for within the government’s plans for higher education lie not just the hiking-up of fees, but an entire reinvention of the very ethos of our universities, whereby the idea of education as a public good takes yet another kicking, and everything comes down to “choice”, and whatever is meant to be good for business.

A recent issue of the London Review of Books featured an inspired demolition of the Browne review, the report into higher education by the former chief executive of BP that was hailed by the government as setting its “strategic direction”, and thereby opened the way for the lifting of the cap on fees, and much more besides. The LRB piece was written by a Cambridge don named Stefan Collini, and it quickly got to the heart of the problem: “Overwhelmingly, the general statements announce, with startling confidence, the real point of higher education: ‘Higher education matters because it drives innovation and economic transformation. Higher education helps to produce economic growth, which in turn contributes to national prosperity.’ . . . This report displays no real interest in universities as places of education; they are conceived of simply as engines of economic prosperity and as agencies for equipping future employees to earn higher salaries.”

Meanwhile, where are the public? When it comes to tuition fees, do not believe the voices who tell us that the average Briton thinks students are a pampered lot who should get with the government’s plans and count themselves lucky. A recent YouGov survey commissioned by the Sun found that the public opposed the Browne proposals by 45% to 37%; an ICM poll from around the same time offered the choice between raised fees and the far fairer option of a graduate tax, and found that people favoured the latter over the former by 61% to 29%.

More generally, presumably to the delight of the government, a cliche has long since oozed into the reporting of what they are up to: that people accept the need for drastic austerity, and are meekly preparing for the necessary dose of fiscal medicine. Browse the requisite opinion polls, and you could be forgiven for assuming the worst: late last month, for example, Ipsos Mori found that 59% of people agreed that there was “a need to cut public spending on public services” – the kind of statistic cited almost daily by those newspapers who habitually encourage the government to go further, and faster.

In fact, things aren’t as simple as that. According to the same poll, the share of people who think the government has made either the right or wrong calls on public spending is evenly split: 41% and 38% respectively, while one in five simply don’t know; 40% of people disagree with the idea that the coalition’s approach will improve the state of the economy; while 49% reject the idea that, as the coalition insists, public services will somehow improve in the long run; 47% oppose cutting back the number of people who work in the public sector. Public opinion, it seems, is as contorted and contradictory as ever – and for the government, there is much less comfort than you might imagine.

While the coalition comes over all Churchillian, endlessly talking about the “national interest” and the spurious idea that we are “all in this together”, there is also a low hubbub of noise about their shortage of a mandate. On Wednesday, the ire of the marchers was focused on all those Lib Dems who blithely signed the NUS’s anti-fees pledge (“I pledge to vote against any increase in fees in the next parliament and to pressure the government to introduce a fairer alternative” – yesterday, Nick Clegg limply said that he “should have been more careful” than to put his name to it). But there are also serious questions about the Tories – not just that they are pushing what Cameron recently called a “revolution” with the support of around one in five of the electorate, but also when it comes to the pronouncements they made during the election campaign.

Consider, for example, a now-infamous quote from the PM, issued on the Andrew Marr show on 2 May: “What I can tell you is any cabinet minister, if I win the election, who comes to me and says: ‘Here are my plans’ and they involve frontline reductions – they’ll be sent straight back to their department to go away and think again.” And really: they wonder why some people are increasingly angry.

And so to the wider context, and things that most of the media very rarely mentions. Political debate in Britain is endlessly distorted by the way that London so dominates the national conversation, and assumptions that run wide and deep in some of Britain’s more desirable postcodes are assumed to blur into the national mood. In Islington, Notting Hill, and the more upmarket corners of the home counties, austerity will doubtless be taken in a lot of people’s stride: if you have opted out of large swaths of the public sector and earn a six-figure salary, the prospect of the cuts will inevitably cause you relatively little worry. Self-evidently, this will not be the case in Bolton, Merthyr Tydfil, or Hastings; but neither will it hold true in Basildon, Crawley, or Harrogate.

At the top of government, what might be called the “experience gap” grows even wider. There are at least 18 millionaires in the cabinet: Cameron is said to be worth around £3.4m; Nick Clegg’s wealth is put at a mere £1.8m. Of late, even commentators on the right have been talking about the distance between some ministers and the people at the sharp end of their policies, not least when it comes to the middle class. Last month, for example, the Daily Telegraph’s Peter Oborne bemoaned their “devastating” fate, in a piece worth quoting at reasonable length, if only to prove that the idea of an out-of-touch elite blithely wreaking havoc is not the preserve of hard-bitten lefties.

Among Oborne’s most telling passages was this one: “Doubtless both David Cameron and George Osborne think of themselves, quite genuinely, as middle class. Indeed, a few weeks ago, David Cameron referred to himself as a member of the “sharp-elbowed middle class”, and the political intention of this remark was clear: he was claiming associate membership of the club of hard-working people who pay their taxes, do their best to rear their children and find it desperately hard to make ends meet. Few would challenge the Camerons’ fundamental decency. But the middle-class people David and Samantha Cameron know socially tend to be on quarter of a million a year and upwards. Life for them may indeed be tough, but only in the sense of whether they can afford a skiing holiday or a spring break in the Caribbean.”

In last week’s news that Cameron had put his personal photographer on the public payroll, there was a slight touch of the Marie Antoinettes, and a tension that may yet cause the government no end of trouble. It boils down to this: if you are secure in such an exclusive social bracket, it will inevitably distort your view of things. Around £27,000 for a university degree may well seem like the acme of both affordability and common sense; lost child benefit may seem like money dropped down the back of the couch; people on welfare will inevitably look like the residents of a completely different planet.

Meanwhile, some longstanding assumptions seem to be changing at speed. Wednesday gave the lie to the idea that our young people are thoroughly post-ideological creatures, with no fight in them; if even the most fusty newspapers are worried about the chasm that separates the government from the so-called squeezed middle, you can bet that the politics of class may yet make an unexpected comeback.

Oh, and one other thing. Though few people seemed to notice, on 3 November, a Treasury minister named Lord Sassoon served notice that the coalition’s work on City bonuses was done: “The government has taken action to tackle unacceptable bonuses in the banking sector,” he said, and that seemed to be that. Six days later, Barclays announced that its latest bonus pot would total £1.6bn – which is about a third of what the government currently spends each year on university teaching. The annual season of big executive payouts is about to commence once again; at this rate, do not be surprised if the seditious spirit of Millbank spreads – and fast.
John Harris, The Guardian, Friday 12 November 2010

http://www.guardian.co.uk/politics/2010/nov/12/spending-cuts-fightback-begins

Spending review cuts hit poor hardest, says Institute of Fiscal Studies Respected thinktank says most secondary pupils will lose out as families with children take brunt of cut

Britain’s leading tax and spending experts today flatly contradicted the key claims made by George Osborne and the coalition over the fairness of its £81bn austerity programme.

In a move that forced the government on to the defensive, the highly respected Institute for Fiscal Studies challenged the chancellor’s contention that his plans for four years of belt-tightening would be progressive, safeguard frontline school spending, and require smaller savings for departments than Alistair Darling would have demanded.

The IFS said poor people would be hit harder than the rich, the four-year plan would see spending for most secondary school pupils cut, and Whitehall departments would face deeper cuts than under Labour’s plans.

The IFS also said that the £2.5bn pupil premium would fail to compensate for rising school numbers and other cuts in the education budget, resulting in funding reductions for 60% of primary school pupils and 87% of secondary school children.

Angela Eagle, shadow chief secretary to the Treasury, said: “George Osborne’s smoke and mirrors have well and truly unravelled. On any measure his plans hit the poorest hardest. And the IFS have all but called him a liar for his ridiculous claim that he is cutting less than Labour planned.”

In its detailed analysis of Wednesday’s comprehensive spending review, the IFS said the £7bn of fresh welfare cuts, together with public spending reductions, reinforced the regressive nature of the changes introduced by the coalition since it came to power. Families with children would be the hardest hit by the changes and only by including the increase in the top rate of income tax introduced by Labour could the coalition justify the claim that the better-off were being hit more than the poor.

“The tax and benefit changes are regressive rather than progressive across most of the income distribution. And when we add in the new measures announced yesterday this is, unsurprisingly, reinforced,” said the acting director of the IFS, Carl Emmerson.

“Our analysis continues to show that, with the notable exception of the richest 2%, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way.”

Emmerson expressed concerns about the government’s plans to reform council tax benefit, saying it would make the system more complex and less transparent. “It will also make it harder to make the benefit system fit together better as a whole. The incentive it provides to local authorities to encourage low-income people to move elsewhere is undesirable.”

The IFS also questioned Osborne’s claim that the 19% cut he is demanding of Whitehall departments was slightly less draconian than the 20% cut pencilled in by Labour. The thinktank said that once both sets of plans had been adjusted for the ringfencing of the NHS and Department for International Development, Labour’s cut would have been 16%.

A Treasury spokesman said last night it was legitimate for the government to include tax changes previously planned by Labour in the assessment of whether the coalition’s tax, spending and welfare package was progressive.

David Cameron, meanwhile, said that higher earners would pay more as a percentage of their income and that fairness was “about asking how much people give as well as how much people get”.

He added: “They pay most, not just as an amount of cash, they pay more as a percentage of their income, and that is what the definition of what being progressive is. You are asking those, as you go up the income scale, not just to pay more in cash but to pay more as a percentage of your income. That is what the figures show.”

None of the cuts would increase child poverty, he said, thanks to extra help for youngsters from deprived backgrounds.

“I think that we have done it in a way so we can genuinely say: it is difficult, it is tough but it is fair and we are going to take the country with us,” the prime mini ster added.

Imran Hussain, head of policy, rights and advocacy for the Child Poverty Action Group, said: “The IFS analysis is a devastating dismissal of the chancellor’s hollow claims of fairness yesterday. The government’s reputation on fairness is now shot to pieces. The IFS have made clear the awful truth that families with children are hardest hit.”

http://www.guardian.co.uk/politics/2010/oct/21/ifs-spending-review-cuts-poor-hit-hardest