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Unemployment rate could be twice as high as figures claim

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Reblogged from http://voxpoliticalonline.com/2014/11/12/unemployment-rate-could-be-twice-as-high-as-figures-claim/

12 Wednesday Nov 2014

Posted by Mike Sivier

The Office for National Statistics has put out new figures on the number of people in work – and it’s more than last month. Hooray!

But, as ever, the devil’s in the detail and – as usual – the small print is annoyingly devoid of the detail we need. Boo!

We are told that figures for September showed employment continued to rise (by 112,000 since the April-June period) and unemployment continued to fall (by 115,000 people). There appear to be 3,000 people for whom these figures don’t account. Interesting…

(Perhaps they’re now on Universal Credit – as those figures aren’t counted in these figures, meaning the current way of calculating these statistics is misleading from the start.)

Pay rates – excluding bonuses – was 1.3 per cent higher than at this time last year. This was being trumpeted as a huge success, as pay has risen about the Consumer Price Index (CPI) calculation of inflation, which stood at 1.2 per cent in September. What a shame the more accurate (which is why the government doesn’t use it) Retail Price Index (RPI) calculation of inflation stood at 2.3 per cent, well above in increase in pay rates.

Let’s all take a moment to remind ourselves of where those wages are going, too. Tom Pride, over at Pride’s Purge, has a little graphic for it, which is stolen and reproduced below:

141112average-uk-pay-risesTomPride

So all those bankers, directors and MPs are taking all the cash, leaving the rest of us with – what? This article suggests that, when you take out all the variations – like bonuses, wages for people who do real jobs (unlike bankers, directors and MPs) increased by just 0.6 per cent in the past year. That’s from the Bank of England.

If employment has increased – and there’s no reason to say it hasn’t – we can also conclude that the reason employers are more willing to take people on is that they can pay peanuts for them and rely on the government to top them up with in-work benefits. It seems likely that the work was always there but employers weren’t going to take anybody on if it meant increasing the wages bill and reducing the amount of profit available to them. Now that zero-hours contracts are available, along with part-time schemes that deny people pensions and holiday pay, it’s a different matter.

Of course the trade unions are in no position to stand up for workers’ rights – they have been stripped of any influence over the past 35 years of neoliberal, free-market rule.

The number of people who were self-employed increased by a staggering 186,000, to reach 3.25 million, while people working as self-employed part-time increased by 93,000 to reach 1.27 million. That’s 4.52 million – almost one-sixth of the total number of people in work. If you think that’s great, you haven’t been paying attention. Remember this article, warning that the increase was due to older people staying in work? And what about the catastrophic collapse in self-employed earnings we discovered at the same time?

How many of these are people who have been persuaded to claim tax credits as self-employed people, rather than jump through the increasingly-difficult hoops set out for them if they claimed Jobseekers’ Allowance – and do they know they’ll have to pay all the money back when their deception is discovered?

The number of people in part-time employment has also increased, by 28,000 to reach 6.82 million. Are we to take it that this means under-employment has increased again?

Public sector employment has fallen again. If you want to know why the government keeps messing you around, there’s your answer. There aren’t enough people to do the job. This month’s statistics show 11,000 fewer public sector employees than in March, and 282,000 fewer than this time last year.

Unemployment is said to have dropped – but remember, this is not counting people who have been sanctioned. A recent study by Professor David Stuckler of Oxford University suggests as many as half a million people could have been sanctioned off-benefit in order to massage the figures, meaning that the total listed – 931,700 – is probably wrong. Remember also that Universal Credit claimants aren’t counted, nor are those on government work schemes – another 123,000 people.

This means the actual unemployment rate is likely to be double the number provided by the official statistics.

And what about people on ESA/DLA/PIP?

It’s said that the numbers don’t lie.

What a shame that can’t be said about the people manipulating them.

Scottish politics has turned upside down since the independence referendum

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Events in Scotland illustrate how a political situation can change very quickly. Paradoxically, the real winner of the 2014 independence referendum was the SNP, who have seen a surge in membership, while Labour and the other unionist parties are floundering. Thomas Lundberg looks at the aftermath of the referendum and the puzzling situation of winners turning into losers.

People outside Scotland could be forgiven for being puzzled about recent events ‘north of the border’. After all, didn’t the Unionist cause triumph in September’s Scottish independence referendum? Since then, the Scottish National Party (SNP) and Scottish Green Party, both supporters of Scottish independence, have more than tripled their membership. The SNP has surged in the opinion polls, endangering Scottish Labour at next May’s Westminster election. Events in Scotland illustrate the importance of multilevel governance and party systems, as well as how a political situation can change very quickly.

While nearly 45 per cent of Scottish voters said ‘Yes’ to independence, the break-up of the United Kingdom was prevented by the 55 per cent who voted ‘No’. Only hours after this result was reached, Prime Minister David Cameron moved the proverbial tanks onto the Labour Party’s lawn, saying that any significant increase in the devolution of power to Scotland would require a change in voting practices so that MPs at Westminster from the 59 Scottish constituencies would no longer be able to vote on bills deemed as affecting only England. Labour Party leader Ed Miliband rejected the linkage of enhanced Scottish devolution to what is sometimes labelled ‘English Votes for English Laws’ (EVEL), proposing instead a convention to examine Britain’s constitution more broadly. Both politicians have been criticised for evading the so-called ‘vow’ to grant Scotland greater autonomy, a promise that might have persuaded some voters not to vote for independence in the expectation of having ‘the best of both worlds’, whatever that means.

It is unlikely that the Smith Commission, an all-party group investigating routes to greater autonomy, will propose significantly enhanced devolution of power to Scotland unless the May 2015 Westminster election yields a hung parliament. The Conservatives, while supporting more radical tax proposals than Labour, are probably concerned about the prospect of too much decentralisation and how that might harm the centre, while Labour worries about the potential for undermining the British welfare state and the prospect of curtailing the voting rights of MPs from outside England. The SNP, however, will seek to gain as much extra power for the Scottish Parliament as possible, trying to satisfy both independence supporters and those who want ‘devo max’, the devolution of all domestic matters (basically home rule). Recent opinion polling reveals that the SNP is so far ahead of its traditional rival, Scottish Labour, that the latter would be nearly wiped out at Westminster. Such an outcome in May would have implications beyond Scotland – it would probably deny Labour a majority, keeping David Cameron in Downing Street if he can do some kind of deal with the smaller parties that might hold the balance of power.

Labour’s problems in Scotland result from both the sudden resignation of its Scottish leader, Johann Lamont, and from the perception, held by many of its traditional supporters, that the party betrayed working-class Scotland in the independence referendum campaign, doing the Tories’ dirty work. Class was one of the biggest demographic dividing lines in the referendum, with poorer people more likely to support independence than the affluent, who would have more to lose if things went wrong. The likely replacement for Lamont, Jim Murphy, may have a higher profile, but he also comes with a lot of Blairite baggage, such as his support for invading Iraq and for maintaining Trident, the nuclear deterrent based in Scotland. Such right-wing positions, as well as the fact that he is currently a Westminster MP, may put him at a disadvantage against the SNP, soon to be led by Alex Salmond’s deputy, Nicola Sturgeon.

Governing since 2007, the SNP has managed to become a highly successful catch-all party, appealing both to independence supporters and to those who prefer greater Scottish autonomy within the Union, to all social class backgrounds and age groups, and to both women and men. While it has business-friendly policies that include cutting corporation tax, the SNP has managed to compete successfully against Scottish Labour, using its left-wing image and grass-roots campaigning to steal supposedly safe constituencies in Labour heartland areas. Despite its significant decline, Scottish Labour remains the SNP’s bitter rival, while the Scottish Conservative and Unionist Party now struggles to make an impact in polling and the Scottish Liberal Democrats scarcely register at all, with the latest Holyrood poll putting both Tories and Lib Dems behind the Scottish Greens in the regional vote part (the one usually cast for a party list) of the two-vote system. Despite the use of the mixed-member proportional electoral system for Scottish Parliament elections, the effective number of parliamentary parties in the body has dropped from a high of 4.2 after the 2003 election to 2.6 in 2011, suggesting that we should not give too much credit to the impact of the electoral system on the party system.

Perhaps paradoxically, the real winner of the 2014 independence referendum was the SNP. The party has emerged energised, larger, and better connected to the public. It now stands head and shoulders above its Unionist competitors. While the SNP finds itself in an enviable position, it must avoid complacency. The party began its ascent in 2007 by being seen as potentially more competent than Labour, and its performance running a minority government was rewarded in 2011 with a majority of seats; academic research has shown that public support for independence (typically among only about a third of the electorate in recent years) explains only a portion of the SNP’s support. Sturgeon must be careful to maintain her party’s image for competent management of Scotland’s affairs while appealing to the broad majority of Scots (even those who rejected independence) as their advocate when it comes to dealing with the UK government and the likelihood of further spending cuts after the 2015 election.

The big increase in the SNP’s membership following the referendum could pose challenges to the party’s leadership. The recent membership surge from some 25,000 to over 80,000 in the weeks following the referendum could make the party more difficult to govern. Many of the new members (perhaps alienated Scottish Labour members or voters) are likely to hold left-wing views and this could put pressure on what has been a remarkable effort to keep the party unified. Those disappointed or unimpressed with the SNP, however, could instead look to civil society, which has also been jolted by the referendum. The Yes Scotland campaign evolved into a social movement, with a range of organisations working together; aside from political parties, groups like Women for Independence, Business for Scotland, and the Radical Independence Campaign represented a wide spectrum of the public, and the movement included prominent individuals not associated with any party.

The aftermath of Scotland’s independence referendum resembles an upside down political situation: losers turned into winners and members of the public – including many from modest backgrounds – refusing to go ‘back into their boxes’. The supposed winners – the Unionist parties and privileged classes – must be just as puzzled as those living outside Scotland.

About the Author

Thomas LundbergThomas Lundberg is Lecturer in Politics at the University of Glasgow.

http://blogs.lse.ac.uk/politicsandpolicy/scottish-politics-turned-upside-down/

The idea that there is a welfare-dependent underclass is wrong

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A new book by John Hills explores key issues in the current debate about ‘welfare’ and the welfare state. The debate contrasts a stagnant group of people benefiting from it all with the rest who pay in and get nothing back – ‘skivers’ against ‘strivers’. John explains how, because people’s lives and circumstances change, most of us get back something at least close to what we pay in over our lives towards the welfare state.

Twenty-five years ago Granada television and my colleague in LSE’s social policy department, Julian Le Grand, came up with a novel way of presenting the effects of social policy. Instead of graphs, tables and talk, they used a TV game show between two families – the Ackroyds, from Salford in Greater Manchester, and the Osbornes, from Alderley Edge in Cheshire – to illustrate who got what out of the welfare state of the time. Which of these stereotypical working-class and middle-class families were the true ‘Spongers’ of the show’s title, most ‘dependent on government’ in current formulations, if one could look over their whole lives?

As it happens, the longer-living, university-educated, opera-loving middle-class Osbornes turned out to be the winners, getting more than the working-class Ackroyds. A follow-up programme which I helped with, Beat the Taxman, two years later looked at which family had done best as a share of income out of the tax reforms of the Thatcher years. Perhaps less surprisingly, the Osbornes won that one too.

What was special about these families was that, in the words of the game show host Nicholas Parsons, “we’ve invented them”. A quarter of a century later I’ve gone back to those families and their (newly invented) children and grandchildren to explore key issues in the current debate about ‘welfare’ and the welfare state.

Good times bad times [FC]In my new book, Good Times, Bad Times: The welfare myth of them and us, I present the results of research over the last decade or more in LSE’s Centre for Analysis of Social Exclusion (CASE) and elsewhere using large datasets, our own surveys, government statistics, and the results of computer simulations.

But the continuing lives of the Osbornes and the Ackroyds may bring home some of its key points. There are Gary and Denise Ackroyd, whose incomes vary widely from month to month as his hours as a van driver change and her work in a school only brings in pay only in term-time, contrasting with the stable and predictable incomes of people like young civil servant Charlotte Osborne (and of many academics).

Over the 2000s, the circumstances of the Osborne parents, Stephen and Henrietta changed a lot, particularly after Stephen’s heart attacks and decision to down-shift his accountancy work, but they still remained in the top 2 per cent of the income distribution. By contrast, the changes in the size of their family and the effects of Jim Ackroyd losing his job in 2006 meant that he and his wife Tracy bounced around the income distribution – close to being in the poorest tenth in two years, but just above the middle by the time they were empty nesters in 2010.

The book also looks at the life chances of the newest grandchildren, George Ackroyd and Edward Osborne, born at the same time in July last year. If we knew nothing about them apart from where they were born, we would already expect Edward to live nearly four years longer. And although some of the educational gaps have closed in the last decade, the chances are that Edward will be doing better at school from the very start, leave with better qualifications, go to a better university, earn much more and build up a far higher level of wealth. There’s nothing predetermined about that, and George Ackroyd might buck the trend – it’s just that he starts with the odds against him.

And looking at the recent past, the poorest of the families, lone mother Michelle Ackroyd, working 16 hours a week on a low wage, turns out to have lost 6 per cent of her income from tax credit and benefit cuts and austerity tax rises since May 2010. By contrast the most affluent of the families – Stephen Osborne with £97,000 per year earnings and his wife with £9,000 from her part-time teaching, plus significant investment income – have lost slightly less in weekly cash than Michelle, and only 0.7 per cent of their income.

Twenty-five years on, more than ever, the debate around ‘welfare’ contrasts a stagnant group of people benefiting from it all, while the rest pay in and get nothing back – ‘skivers’ against ‘strivers’; dishonest scroungers against honest taxpayers; families where three generations have never worked against hard-working families; people with their curtains still drawn mid-morning against alarm-clock Britain; ‘Benefits Street’ against the rest of the country; undeserving and deserving; them against us. We are always in work, pay our taxes and get nothing from the state. They are a welfare-dependent underclass, pay nothing to the taxman, and get everything from the state.

But we don’t need made-up examples to know that arid picture of unchanging lives is wrong. We know from our own experiences, those of our families – and from TV soap operas and nearly every novel – that people’s lives and circumstances change, and what we get out and put in changes over our lives.

It remains true that people starting advantaged remain much more likely than others to end up advantaged, and those who start poorer are more likely to end up poorer. But there is considerable variation and uncertainty around such average differences in life trajectories. This does not just include the long-term changes over the life cycle that we all go through, but also other variations and changes, from at one end the rapid variations many people experience in circumstances and need for support from week to week to, at the other end, the factors that affect the life chances of our children and our grandchildren.

As a result of all this variation in circumstances over our lives, most of us get back something at least close to what we pay in towards the welfare state. When we pay in more than we get out, we are helping our parents, our children, ourselves at another time – and ourselves as we might have been if life had not turned out quite so well for us. In that sense, we are all – or nearly all – in it together.

Good Times, Bad Times: The welfare myth of them and us is published by Policy Press. For further information, follow this link: Good times, bad times

About the Author

John HillsJohn Hills is Professor of Social Policy and Director of the Centre for Analysis of Social Exclusion (CASE) at the London School of Economics.

http://blogs.lse.ac.uk/politicsandpolicy/the-welfare-states-surprising-winners/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BritishPoliticsAndPolicyAtLse+%28British+politics+and+policy+at+LSE%29

Cameron and Miliband are both right on the constitution – But for the wrong reasons

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Posted: 27 Sep 2014 12:00 AM PDT
Stephen Barber

As the constitutional fallout from the Scottish Independence Referendum campaign continues, Stephen Barber looks at how the two main party leaders down south are addressing ‘the English Question’. Cameron and Miliband may be acting from short term partisan motivations, but this doesn’t mean they’re wrong. While any plausible constitutional settlement is complex, it must be based on devolution to ‘cities and counties’, with any proposed ‘English Parliament’ failing to offer real devolution of powers closer to the people.

Westminster leaders need to put aside short-term party advantage in a similar way that Scottish politicans did during the referendum campaign. If they did, not only might they forge a constitutional settlement that will serve England well for a generation, they might also find they can enjoy the sort of ‘apathy free’ politics that was a highlight of the independence referendum. Whether they choose to engage seriously or not, it is clear that there needs to be real devolved power to England and if new institutional layers are to be discounted, the settlement needs to be one of ‘Cities and Counties’.

What a shame it is that the Westminster party leaders have reverted to type by putting narrow electoral advantage ahead of England and the United Kingdom’s constitutional future. The contrast in England to the sort of leadership Alex Salmond and Alistair Darling showed over Scotland is stark. Westminster should take note because it is this sort of politicking which is responsible for the cynicism of voters and poor turnout at elections: something entirely absent from Scotland where 86% turned out to vote in the referendum.

David Cameron favours ‘English votes for English matters’. Ed Miliband wants to delay changes for years and until a Constitutional Convention can report. It is clear why: Labour would likely suffer from the emasculation of Scottish MPs and whatever the chaos, the Conservatives (who only secured a single Scottish MP at the last election) would more often command Commons majorities on ‘English’ votes; irrespective of who formed the government. If anyone wanted a blueprint of how not to reform a constitution, this could well be it.

Credit: UK Parliament, CC BY NC 2.0But that doesn’t mean that everything the Westminster elite have said is wrong. Cameron is surely right that new powers for Holyrood must be balanced with a fair English Settlement. And Miliband is surely right that the position we find ourselves in demands more thought than enshrining two classes of MPs. They are right, but for the wrong reasons.

A better reason would be to forge a workable and legitimate constitutional settlement in England. And here Scotland has done the service of defining powers which need to be devolved from Whitehall not only to Holyrood in the wake of the independence campaign but also to England. As such, the English need to have a direct say over education, health, transport, welfare and the environment. Not only that, this power has to be balanced by the responsibility to raise taxation used to pay for those services. This ensures the new settlement isn’t simply about Westminster throwing more money at poorer areas of the UK but is about genuinely devolving both power and accountabilities.

An English Parliament has its attractions as a replication of the sort of devolution seen in Scotland, Wales and Northern Ireland. But as home to 53 million of the 64 million population of the United Kingdom, it doesn’t devolve power much of a step closer to the people. Moreover Miliband has already ruled out new government and new layers of politicians. Of course that could be solved by the John Redwood plan of English MPs doing two jobs; an English Parliament drawn from within the Westminster Parliament and two classes of MP. But that is so very messy with potentially rival governments created from a single chamber that it needs to be dismissed out of hand.

Consequently any new settlement in England needs to be forged from existing structures outside of Westminster. My proposal would be a combination of cities and counties plus a long overdue reform of the House of Lords.

This would mean empowering the great and small metropolitan areas of England perhaps comparable to what has happened in London. It would create figures accountable to the electorate and able to make policy in areas which matter to them. Such a move could both politically invigorate those parts of the country Westminster cannot reach and boost local economies left behind by the growth of the Capital. For those who do not live in or around the cities, the settlement should be accompanied by a new enabling of the existing twenty six County Councils of England and other council areas. The prize would be a new era for local government as real power is devolved from the centre.

One other overdue reform needs to be included in this settlement: the House of Lords about which I have recently written. The upper house is an indefensible, antiquated constitutional muddle. It remains appointed by the Prime Minister, has grown too big and is full of party donors and factotums. With any new constitutional settlement, reform of the Lords should not be ignored, because it presents an opportunity for some democratic legitimacy in the upper chamber as it is slimmed down and given a role in the new constitutional arrangements of the whole of the United Kingdom.

A new positive English settlement embracing the Cities and Counties and a reformed Lords is possible, but it needs leadership from the top of our politics. Putting aside narrow party advantage might be difficult, but if it happens, not only will Britain have the constitutional arrangements it deserves, leaders might also find some of that ‘apathy free’ politics rubs off on them.

http://blogs.lse.ac.uk/politicsandpolicy/cameron-and-miliband-are-both-right-on-the-constitution-but-for-the-wrong-reasons/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BritishPoliticsAndPolicyAtLse+%28British+politics+and+policy+at+LSE%29

Only a new wave of socialism can end the great squeeze on us all We must break with the free market consensus established by Thatcher

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OWEN JONES

Sunday 8 September 2013
Independent

Britain is now suffering the longest fall in living standards since Queen Victoria sat on the throne. If this Great Squeeze isn’t the key issue of the day, the entire political system might as well dissolve itself on grounds of irrelevance and moral bankruptcy. It would be easy – but wrong – to lay all the blame at the feet of the wicked Tories, however wicked they may be. The truth is the Great Squeeze began six years before David Cameron and Nick Clegg hooked up in the Rose Garden, and four years before Lehman Brothers toppled. From 2004 onwards, the incomes of the bottom half began to flatline; for the bottom third, they actually started to drop.
But the Great Squeeze has been given renewed intensity and prolonged duration by the Tories’ hijacking of the financial crisis. As the Resolution Foundation has uncovered, one in five workers now toils for below the living wage: since 2009, the numbers have rocketed from 3.4 million to 4.8 million. On the eve of Cameron’s assumption of power, 18 per cent of women worked for less than the living wage; it’s now a quarter. Nearly four out of five jobs created under this government pay less than £7.95 an hour. These jobs are often precarious, too: there is now a million-strong army of zero-hour contract workers, a return to a supposedly bygone era when dockers would trek to the yard, sticking their hands in the air in the hope they might get some work that day. Real wages are, on average, £1,500 a year lower than when the Tory-Lib Dem cabal bedded into power, and inflation is higher for essential items, punishing the poorest most. More than a million children are set to be plunged into poverty by government policies, according to the Child Poverty Action Group. And for the first time since Berlin fell to the Allies, the next generation faces being poorer than their parents.

The symptoms of the Great Squeeze are everywhere. We can only speculate as to how Wonga executives chose to celebrate their 36 per cent surge in profit. Vultures have rich pickings in Cameron’s Britain: a million families a month now depend on legal loan sharks – allowed to charge extortionate rates – often to pay for food, heating, mortgages and rents. Half a million people depend on food banks, while the Energy Bill Revolution campaign earlier this year found nearly a quarter of families having to choose between buying food and heating their homes. Here’s to the seventh richest country in the world, whose poorest people struggle to feed themselves. Politicians of all stripes constantly preach work as the route out of hardship, but most of Britain’s poor have to work for their poverty. And although the Great Squeeze hits those at the bottom hardest, the pandemic of sleepless nights over bills, rents and mortgages is consuming the lives of millions of Britons.

If Labour had a set of courageous policies to tackle this Great Squeeze, it wouldn’t have left a whopping big vacuum filled with personality-driven tittle-tattle. Indeed, the absence of answers has had even more disastrous consequences: the devious, reprehensible redirecting of anger at immigrants, public sector workers, unemployed people – anyone except those responsible. But such is the scale of the crisis that it needs radical solutions, breaking with the free market consensus established by Margaret Thatcher: a new wave of bread-and-butter socialism.

To begin with, the case has to be made for trade unions, including changing a law that automatically presumes against them. They may be Britain’s biggest democratic movement – representing, as they do, more than six million call-centre workers, supermarket shelf-stackers, nurses and other workers – but they are routinely demonised by the media, portrayed as all but illegitimate pariahs. The past few months have seen yet another attempt to drive them from political life, on the now demonstrably false pretext of alleged vote-rigging in Falkirk. But trade unions are the most effective means for workers to collectively organise for better wages and conditions: it is their weakness that allowed wages to drop even in boom time. In another economic crisis, President Franklin D Roosevelt – no socialist – trumpeted trade unions for these reasons. If a party established by the labour movement fails to do so, it might as well book an appointment at Dignitas.

The need for a living wage is painfully obvious. There has to be a reckoning, at some point, when it is seen as unacceptable to pay wages that do not allow individuals to live a decent life. The establishment of a living wage would reduce the billions currently spent subsidising low pay through tax credits and other in-work benefits. It is an economic stimulus, too: the rich celebrate tax cuts by topping up bank accounts in the Cayman Islands; the poor are likely to spend whatever extra money ends up in their pockets.

Then there’s the housing crisis. Five million are trapped on social housing waiting lists; millions are left at the mercy of unregulated private landlords, many of whom are hiking rents as wages fall. According to the Yes to Homes campaign, rents will soar by 46 per cent by the end of the decade without radical action. Allowing councils to build homes – creating jobs and reducing housing benefit in the process – would prevent living in an affordable home being a far-fetched ambition.

British parents spend a third of their income on childcare: no wonder, then, that the average child now costs £148,000 to raise. Compare this with Sweden where costs are capped at 3 per cent of income, and all can enjoy an excellent standard of state-funded childcare. A similar system would pay for itself by raising the number of women in work and increasing the tax revenues flowing to the Exchequer.

The disastrously privatised railways are an unaffordable luxury for large swathes of the population, and rail fares are set to soar 9.1 per cent on some routes. That’s why Labour should bow to popular opinion and take each franchise back into public ownership as it expires, allowing revenues to be used to reduce ticket prices rather than topping up executives’ bank accounts. Similarly, energy bills have gone up £100 a year since 2010, and a quarter of the population put up with “unacceptably cold” homes in the winter because of financial woes. No wonder 69 per cent want energy renationalised: time for Labour to champion a new, democratic form of social ownership with consumers in charge.

More radicalism is needed, too. Why not learn from Germany with an interventionist industrial policy, creating hundreds of thousands of renewable-energy jobs to fill in the “missing middle” of properly paid, secure jobs? Why not cap the interest rates of legal loan sharks? Why not turn bailed-out banks into a public investment bank to rebuild the economy?

Labour will not win the next election by simply pointing out that the Tories have emptied the pockets of the electorate. Mourning its plight will convince no one. Voters must believe that Labour can finally end this Great Squeeze. And without bread-and-butter socialism, the remorseless turning of neighbour against neighbour will only escalate – and, against the odds, it will be Cameron who emerges victorious.

Mark Carney is saying invest your money, but there are still risks

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Governor has given the green light with continued low interest rates, but markets, inflation or a housing bubble bring caution

Larry Elliott, economics editor
The Guardian, Wednesday 7 August 2013 14.25 BST

Mark Carney, governor of the Bank of England at the quarterly inflation report.

Get out there and spend. Feel free to take the plunge and buy that house. Go ahead with plans for new investment mothballed since the recession.

That, in short, was the message from the Bank of England to consumers, property hunters and entrepreneurs on Wednesday. Why? Because unless something unexpected happens, official interest rates are staying where they have been since early 2009 until 2016 at the earliest.

Such a long period of cheap money would be unprecedented. The Bank of England has never had interest rates this low in its 319-year history and is on course to keep them pegged at 0.5% for longer than it took the allies to win the second world war, longer than the French Revolution between the storming of the Bastille and the topping of Robespierre, and longer than it took the Beatles to record everything from Love Me Do to Abbey Road.

Quite a period, and evidence of just how fragile Threadneedle Street thinks the economy remains following the deepest recession and the slowest recovery in recorded history.

The financial crisis has left deep scars on the UK. This was an economy, after all, which became chronically dependent on the casino activities of the City and an over-heated property market. Matters have been made worse by the debt crisis in the eurozone, which has hit exports, and by the government’s deficit reduction plan.

That has left the Bank of England with responsibility for keeping the economy going and, fearful that recent signs of green shoots could be nipped in the bud by unwarranted suspicion that it would soon tighten policy, the Bank provided guidance on how it intends to play things.

Monetary policy is now unashamedly pro-growth and deep into uncharted waters. It has raised the inflation target to 2.5% in all but name and is effectively operating the sort of twin mandate system used by the US Federal Reserve in which growth and price stability carry equal weight.

Having experimented with quantitative easing, the Bank is now trying forward guidance: sending messages out about how it intends to conduct policy in the future. Unemployment as measured by the internationally agreed labour force survey measure of joblessness, will have to come to 7% before the monetary policy committee will even consider raising interest rates or starting to sell back to the financial markets the £375bn of government bonds it has bought under the QE scheme.

Unemployment on the LFS measure is currently 7.8%, and according to the Bank’s forecasts will not hit 7% until 2016. Conveniently for George Osborne, that means well after the next general election. Carney was hand-picked by Osborne to replace Mervyn King and the chancellor must have been well pleased with his first big public outing.

The new governor made it clear that he considered the strong data in recent weeks no big deal: “There is understandable relief that the UK economy has begun growing again. But there should be little satisfaction.”

Even after raising its forecast for growth this year to 1.4% (from 1.2%) and to about 2.5% next year, the outlook is for weak post-recession expansion by historic standards.

The MPC wants to see this recovery fully embedded and believes that there is plenty of scope for expansion while keeping inflation to 2%. But the plan to keep monetary policy ultra-loose is not a hard-and-fast promise and there are three circumstances (or knockouts) in which the MPC would consider action before the 7% threshold is reached.

The first would be if inflation 18-24 months ahead was expected to be more than 0.5 percentage points above its 2% target.

This, though, is much less of a “knockout” than it looks. The Bank invariably says inflation will be back to 2% within two years, and did so even when it was running above 5%.

The second knockout – that action would be contemplated if medium-term inflation expectations slip their anchor – is also a bit fuzzy since it will depend on the subjective judgment of the MPC.

Finally, the MPC would rethink its policy stance if it thought an abundance of cheap credit was fuelling an asset-price boom that could not be controlled by the bodies charged with regulating the City – the financial policy committee and the Prudential Regulation Authority. Even so, it would probably want to see whether imposing specific capital requirements for lending to certain sectors of the economy (such as real estate) would work first.

So, in reality policy is not going to change anytime soon, despite the risks.

The Bank believes there is plenty of spare capacity in the economy following the slump but it doesn’t know exactly how much. If there is less than it thinks, faster growth will quickly feed through into higher inflation. Nor does it really know whether there is a stable relationship between inflation and unemployment in the UK, in the way there appears to be in the US.

Nor can it confidently predict how the financial markets will respond to the news that monetary policy will remain unchanged for another three years at a time when other central banks – the US Federal Reserve for example – will be tightening. Sterling looks vulnerable to a tumble on the foreign exchanges, thereby stoking imported inflation.

Finally, there is the risk that when policy is tightened it will need to be tightened aggressively. Britain’s predilection for booms and busts in the past 40 years means that a good, old-fashioned housing bubble, with its attendant balance of payments deficits, cannot be ruled out.

The Bank, though, considers this to be a risk worth running. It has plenty of experience of recessions caused by over-heating and knows how to deal with them. But the slump of 2007-09 was different. Normal policy tools weren’t effective in a downturn caused by global financial systems failure. That’s why exceptional measures were deemed necessary. And are still deemed necessary, whatever the side effects may prove to be.