Month: April 2014

The EU’s democratic deficit

Next month we’ll be voting (well, about a third of us will) for MEPs to represent us in the European Parliament. Here in Yorkshire and Humber, we send 6 elected representatives to the EU after voting under a system of proportional representation. But what do MEPs do, and how much power do they have?

MEPs are elected for five year terms, but the power they have is actually quite limited. The cannot propose or draft new legislation or implement or enforce existing legislation. This role is reserved for the European Commission. MEPs are limited to amending or blocking legislation proposed by the Commission, and under certain circumstances can ask the Commission to prepare proposals for new legislation (although the Commission can refuse the request).

So if MEPs don’t have much power, where does power in the EU sit? The late Tony Benn famously set out five questions for powerful people:

  1. What power do you have?
  2. Where did you get it?
  3. In whose interests do you exercise it?
  4. To whom are you accountable?
  5. How can we get rid of you?

Applied to the European Commission, it could be concluded that they actually have rather a lot of power. As the executive body within the EU, they have the sole power to propose and draft legislation in a number of areas.

There are 28 Commissioners (one for each member state), one of whom is the president who is proposed by the European Council (which is made up of the heads of government of the member states). MEPs then vote to approve the person who has been proposed for president (currently Jose Manuel Barroso). The European Council then appoints the remaining 27 Commissioners, and MEPs then get a vote on whether or not to approve the whole Commission. The can’t vote to oust an individual Commissioner, and can only object to the whole Commission (they have never done this). Do they get their power from EU citizens then? Not really. Their power is bestowed on them by the heads of government’s of each member state.

They are not required to act in the interests of their home country. On the contrary. They are obliged to act in the interests of the EU as a whole. Who decides what is in the interests of the EU? Partly the Commission themselves!

Commissioners are nominally accountable to MEPs who have the power to hold a vote of no confidence on the Commission as a whole. This has never been used though, and an individual Commissioner cannot be sacked. They are definitely not accountable to you and me, although the legislation they propose and draft must be implemented by the member states if voted through by the European Parliament.

How can we as citizens get rid of a Commissioner? We can’t!

The EU as currently constituted is not democratic at all. MEPs have little real power, and could 73 people actually properly represent the whole of the UK even if they did? For Eurozone members, it’s even worse. Recent years have seen democratic governments in Greece and Italy ousted and replaced by unelected technocrats, and incredible pressure to subvert domestic democracy has been placed on Ireland, Cyprus and Portugal.

People on the left in the UK often seem quite happy with this democratic deficit because they like certain social protections that have resulted from EU legislation – protections they fear would be removed if they were left to member states. I think this just demonstrates a lack of confidence in their ability to argue their case and a lack of faith in the public to come together to vote out those that want to roll back those protections. It would be much better if national governments did have power over this kind of legislation where the answers to Tony Benn’s questions 4 and 5 could be “Us!” and “Easily!”

 

 

Food banks and the replacement of ‘social security’ with ‘charity’

Two things over the weekend reminded me of a chapter from Robert Tressell’s “Ragged Trousered Philanthropists” called “Facing the ‘Problem’. Both are related to the increasing proliferation of food banks. Firstly, there was a varying reaction to the news that the Trussell Trust had given an emergency food parcel to almost a million people over the last year. The DWP reacted quite angrily, accusing the Trussell Trust of being “publicity-seeking” and that the increase was purely a result of them “aggressively marketing their services”, but David Cameron actually seems quite pleased with the expansion of food banks, saying he wanted them to expand. Secondly, The Mail on Sunday decided to do a hatchet job on food banks in an article entitled “No ID, no checks… and vouchers for sob stories: The truth behind those shock food bank claims”. The article gives the strong impression that most food bank uses are just spinning the food banks a line in order to get free food, and many of them have no urgent need for the food parcels. It quotes Tory MP Brian Binley as saying he had “always been very suspicious” of the level of abuse in some food banks, and that “there are always a lot of dishonest people who will cadge their way into situations”.

In the Ragged Trousered Philanthropists (written before the introduction of the welfare state), those who become unemployed either pawn their possessions or rely on credit to survive. The last resort is relying on the ‘charity’ of the capitalist class:

“…district visitors distributed tickets for coal and groceries. Not that that sort of thing made much difference; there was usually a great deal of fuss and advice, many quotations of Scripture, and very little groceries… These ‘charitable’ people went into the wretched homes of the poor and – in effect – said: ‘Abandon every particle of self-respect: cringe and fawn: come to church: bow down and grovel to us, and in return we’ll give you a ticket that you can take to a certain shop and exchange for a shillingworth of groceries. And if you’re very servile and humble we may give you another one next week.

They never gave the ‘case’ the money. The ticket system serves three purposes. It prevents the ‘case’ abusing the ‘charity’ by spending the money on drink. It advertises the benevolence of the donors: and it enables the grocer – who is usually a member of the church – to get rid of any stale or damaged stock he may have on hand.

When the visiting ladies’ went to a workman’s house and found it clean and decently furnished, and the children clean and tidy, they came to the conclusion that those people were not suitable ‘cases’ for assistance. Perhaps the children had had next to nothing to eat, and would have been in rags if the mother had not worked like a slave washing and mending their clothes. But these were not the sort of cases that the visiting ladies assisted; they only gave to those who were in a state of absolute squalor and destitution, and then only on condition that they whined and grovelled.”

The birth of the modern welfare state should have made this a thing of the past, but we are now seeing the safety net being eroded to such an extent that more and more people are relying on the whims of others for emergency food aid. The ‘visiting ladies’ have now been replaced by GP’s, Citizen’s Advice Bureaus and the job centre who are being asked to decide on who is a ‘deserving case’. You need a ticket to go to a food bank, just like in Tressell’s day, and the are already noises from certain Tory MPs about expanding the ‘ticketing’ system to mainstream social security. If people become reliant on charity to survive – charity that can be denied at will – they are no longer free, and those in control of the charity become very powerful indeed.

In the Ragged Trousered Philanthropists, work for the protagonists is insecure and poorly paid – not enough to live on, and the spectre of unemployment is never far away. In some respects, we seem to be backsliding to those pre-welfare state days. In a modern, western economy, that should be give Cameron a sense of shame, not the sense of pride he inexplicably seems to feel.

Is free movement of labour within the EU a good thing?

This is my third post in a series of pieces on Britain and the EU. In the last, I examined some economic consequences of Britain’s EU membership, and in this post, I want to look at another consequences – free movement of labour. Studies looking at the first wave of immigration from A8 countries after 2004 find a positive impact on the economy as a whole. These macroeconomic effects mask the ‘distributional’ impacts however.

There are winners and losers from free movement of labour. The thinktank Open Democracy published a report in 2012 which looked at this issue. Here are a few stats it draws out on immigration to the UK from A8 countries:

There are some aspects of this that could be seen as positives. We have an ageing population, so an influx of young, skilled migrants could help ease some of the issues and ageing population brings. Those skills could improve the productivity of the UK economy, supporting vital services.

In other regards though, the effects of these factors on the low-skilled end of the labour market are likely to be significant (even if the overall impact on the economy is positive). While A8 migrants are relatively higher skilled, they are often not doing work commensurate with their skills. People argue they are doing jobs Brits won’t do, but  we are supposed to believe in supply and demand. If Brits won’t do a particular job, the employer should either increase the wage offered or invest in capital equipment to reduce the requirement for labour. If it can’t or won’t do either of these things, the job probably shouldn’t exist.

An influx of young workers is also likely to place pressure on particular services in certain parts of the country. Schools, housing and health all face greater pressures due to immigration from the EU, although the magnitude of the impact is not equally spread throughout the country. This can be dealt with if the government has the ability and the will to increase provision of these things, but housing, schools,  medical facilities and the relative professionals to staff these things take a long time to build and to train, while planning is difficult when you don’t know how many people will come and where they will settle.

Migration to the UK from Eastern Europe is related to the unemployment rate in the home nation. When unemployment is high, people emigrate. While a period of high unemployment on the continent may coincide with a labour shortage in the UK, equally, it may not, so the numbers coming and their timing is largely based on the performance of economies elsewhere.

Other countries use a points-based system to determine who they want to allow into the country, and they can loosen or tighten the points criteria as needs change. In the UK, we have a visa system for those wishing to come to the UK from outside the EU, but cannot impose restrictions on those coming from the EU itself. Even if you believe immigration is a positive thing (and I broadly do), the idea you would not be able to impose any restrictions of those seeking to come from certain parts of the world – regardless of your national interest – just doesn’t sit right with me. This is one area that would need significant reform before I could be convinced the continued UK membership of the EU is desirable.

 

 

Links for the w/e 13.04.14

Just a few links to share this week. First up, Brian Romanchuk gives us a primer on functional finance as proposed by the economist Abba Lerner, which is an alternative approach to government finances:

Primer: What Is Functional Finance?

Next, here’s Bill Black comparing and contrasting two Nobel economics prize winners:

Nobel Schizophrenia over the Georges: Stigler and Akerlof

And here’s a nice interview with economist Ha-Joon Chang:

Ha-Joon Chang: Economics Is A Political Argument

Over in Ireland, it seems some discussion of a full job guarantee may be starting to take place:

Joan Burton wants a job guarantee for everyone on the dole

And to end, because this is a short list this week, we finish with Chris Dillow writing:

In praise of brevity

 

If the private sector’s not doing it, doesn’t mean it’s not worth doing!

Regular readers will know I favour a policy known as the job guarantee. This is where the government pays the wages of anyone willing and able to work, but unable to find it. This appeals to me because I believe the following things are true:

  • In our society, working (either for yourself or an employer) is seen as the norm; part of being a good member of society;
  • Doing a job of work that people think is worthwhile brings a lot of benefits in terms of mental and physical health;
  • People consciously or unconsciously understand this and most people want to work;
  • People shouldn’t have to work for wages below a level which allows them a reasonable standard of living;
  • Without active government involvement, there will never be enough jobs for all or enough jobs paying a socially acceptable wage.

So I am fully signed up to the idea that a job guarantee would be a very fine thing. Convincing others of the merits of this idea is much more difficult than I thought though! A lot of people accept there aren’t enough jobs, that wages are too low and that work is becoming more and more casualised. Despite this, they would rather leave people unemployed than have the government actually create jobs. I’m not quite sure why this is, but I it’s partly a lack of imagination (what would they do/non-jobs/digging holes and filling them in etc), and partly the usual “nice idea, but how will you pay for it” response.

It also seems to be received wisdom that the profit motive ensures that everything worth doing is already being done by the private sector, and if the private sector is not doing it, it must not be worth doing. It’s this argument I want to address now by suggesting a few areas either not being delivered or are under-delivered by the private sector, but are nevertheless quite worthwhile!

  1. Adult social care – We are often told there is a crisis in adult social care. At present, private sector companies are contracted to provide a lot of the home visits to the elderly an infirm. Contracts are often awarded to the lowest bidder, which means these services are delivered on the cheap. Staff are often on zero-hours contracts, poorly paid and only permitted to spend 15 minutes or at most half an hour on each visit. They are often not even paid for travelling between visits! So why not train up some of those willing and able to work, and pay them to provide a much more comprehensive service to people in need? This would help take the pressure off our hospitals if people are being well cared for in their homes, and allow resources in the NHS to be better targeted.
  2. Sports/Fitness coaches – As well as an adult social care crisis, there is also an obesity crisis. We could train people to deliver sports coaching to kids on a much wider scale. There are a lot of sports that require very little equipment, but with a coach who can inspire and importantly, a service that is free or heavily subsidised for the user, we could start to reverse the obesity trend. This again reduces expense in the long term on the NHS and kids who are fit and active do better in school.
  3. Childcare – Childcare is very expensive and means that a lot of people who want to work find most of their wages are going on childcare. Training people to provide childcare would lead to lower costs, meaning work becomes a more viable option for many. In addition to this, for those who prefer to look after their own kids, could also be paid to do so. A lot of people struggle to see looking after your own kids as being a job, but it could be argued that it’s a pretty important job. The production of the future generation will always pay for the future consumption of the current generation, so if kids are brought up happy and healthy by a parent in their early years, they will likely become more valuable members of society when they grow up. Is it really that different paying someone to look after someone else’s kids, to paying someone to look after their own?

Those are just three suggestions, but I know others will have much more imaginative ideas! There are so many socially beneficial jobs that would enhance our environment that just aren’t being delivered by the private sector (at least not at a price affordable to all). We could change this, but we need to lose the private sector good/public sector bad mentality. It’s holding us back!

The consequences of EU membership

This is the second in a series of posts on Britain’s membership of the EU. The first is here. As a companion to these posts, I’ll be referencing the book “Moored to the Continent” (MTTC) by Baimbridge, Burkitt and Wyman. This post will draw on chapter 4 of that book entitled “Consequences of EU Membership”. The authors write that:

“Successive governments claimed that the benefits of EU membership are ‘self-evident’, so that the UK must remain at the heart of Europe; otherwise it would lose crucial political influence and millions of jobs… Furthermore, the claim is repeatedly made that even a slight weakening in the trend towards greater unification would cost the UK jobs and influence, never mind what would occur if the UK voted to withdraw from EU membership. Yet, governments of all colours have been remarkably reticent to undertake an independent cost-benefit analysis of EU membership.

The reason for this apparent conundrum is that at least in purely economic terms, it is doubtful that the UK has received a net benefit from EU membership.”

So what are the consequences of Britain’s EU membership? MTTC outlines a number of consequences including:

Trade with the EU – It’s often said that the UK benefits massively from free trade with the EU, which might be lost were we to leave, but it’s a two way relationship. The UK has rather a large trade deficit with the rest of the EU, so all those countries desiring to sell their wares to the UK would probably suffer a lot more should a British withdrawal result in new trade barriers being thrown up. So the consequence of EU membership that we all benefit massively from preferential trade is somewhat overblown.

The Common Agricultural Policy (CAP) – In protecting EU agriculture by imposing an external tariff on food imports from outside the EU, consumers within the EU pay higher prices for foodstuffs. This exacerbates the ‘cost of living crisis’, but also encourages an inefficient transfer of resources into agriculture and away from manufacturing and services.

Single Internal Market (SIM) – The single internal market within the EU removes all trade barriers and allow free movement of capital, people, goods and services between members. Before it’s introduction it was claimed it would allow consumers to buy cheaper goods due to increased competition and the existence of greater economies of scale, creating 5 million jobs across the EU. The authors of MTTC argue however that although the removal of trade barriers between member states would have been attractive in the more protectionist 60s and 70s, by today, successive rounds of global trade talks have already drastically cut tariffs, and so the benefits of the SIM are now less clear cut.

MTTC makes a number of other arguments on the consequences of EU membership regarding the common fisheries policy, the historical costs of our membership of the ERM, and the consequences of the EU budget. Some of their arguments I find less convincing, but overall, I think they make the case rather well that the economic case for staying in the EU is anything but ‘self-evident’. At best there may be a neutral economic impact from being in the EU. At worst, EU membership is probably weakly negative. In economic terms, we are alright in and we’d be alright out. In my next post on this subject, I’ll look at some microeconomic and non-economic consequences of EU membership.

How strong is the case for staying in the EU?

As we approach the EU elections on 22nd May, I’m planning to do a couple of posts over the next few weeks on the topic of the EU. As a good leftie, I should be wholeheartedly in favour of Britain’s membership of the EU right? Well not really. Being anti-EU or eurosceptic is seen as very much the preserve of the right in Britain. We like to think of those holding anti-EU views as being either UKIP ‘little Englanders’ or ‘rabid right’ Tories, but I want to set out some good reasons why those of us on the left should also have some pretty significant issues with the EU, at least as it is currently operating.

To kick off then, I’m not going to lay out my argument straight away, but just simply make an observation about the style of argument those on the pro-EU side often make. It’s a style that I find somewhat irritating. I’m going to use Nick Clegg as an example because he’s been in the news recently making the case for the EU (and in a pretty annoying way too). Below are Clegg’s opening speeches from his recent TV debates with Nigel Farage of UKIP. I often feel as though Nick Clegg is insulting my intelligence and these clips are no exception. He basically has two arguments:

1. Trade with EU means jobs.

2. By being part of the EU, Britain has more ‘clout’ in the world.

That’s pretty much it. In the debates he didn’t really expand much beyond this. It seems to me Clegg thinks the case for staying in the EU is so self-evident, he can’t actually bring himself to rise above the level of mouthing simplistic platitudes. This style is typical among those who are pro-EU. They sort of think you are a bit strange if you express doubts, but often can’t raise their game above the level of “of course we’re better off in the EU”. In subsequent posts I will take a look at some of the pro-EU camp’s arguments and see if they actually stack up. First though, here’s the promised vids. Each speech lasts for about a minute. The first one starts around 2m13s, and the second around 2m51s.

Full employment, April fools and stupid Mr Gove

Here’s my weekly roundup of the best links from the last 7 days. The week started with George Osborne declaring his commitment to full employment. This is what some people thought of Osborne’s pledge, but full employment can be defined in different ways. Neil Wilson provides his definition here:

Full employment is when everybody has a job

Tuesday was April Fool’s Day, and Paul Bernal put out this post. It’s actually a pretty good satire that explains the issues a lot of lefties (me included) have with the Labour Party:

Why I’m rejoining the Labour Party

This week also marked the first anniversary of the Bedroom Tax. Here is Jules Birch’s ‘uncelebration’ of the day:

Many unhappy returns

There have been a couple of articles this week by people with a different (and more accurate) view on how the economy works, that have appeared in more ‘mainstream’ sources. First up, Peter Martin blogged on Labourlist about Ed Balls’ desire to run a budget surplus:

The economics of a budget surplus: Something to think about before making rash promises

And here’s one from Philip Pilkington writing in The Guardian about what he sees as the problem the left faces in trying to increase living standards at the same time as shrinking the importance of the financial sector:

The left needs a deft touch in tackling the financial sector’s dominance

Some more non-conventional perspectives now with another blog by Neil Wilson, countering the oft-heard question “How are you going to pay for it?”:

‘Taxation = Government Investment’ : Each Time, Every Time

And here’s another from Peter Martin on what gives our currency its value:

Want to make your business card worth something? Easy. Start a protection racket!

In this article by former financial regulator Bill Black, he explains how the knowledge to prevent the crisis was already available to us but was ignored:

Three Passages From Akerlof & Romer’s 1993 Article That Should Have Prevented The Crisis

Two more bits to finish. First up, a letter to David Cameron on why privatising the NHS is such a horrendous idea:

The best precis of why NHS (and other) privatisation is a Bad Thing

And finally, here’s a video that seems to be going down well with teachers – “Dear Mr Gove”

 

Michael Meacher’s Speech on Benefit Sanctions

There was a backbench debate in the House of Commons today on the DWP’s use of benefit sanctions. The official line is that claimants are only ever sanctioned if they are not doing what is required of them to either find work or prepare for work. The strong suspicion however is that sanctions are being used primarily to get people off benefits. Labour MP Michael Meacher opened the debate with a speech in which he gave numerous examples of where claimants have been sanctioned through no fault of their own, and highlighted the impact this can have on people’s lives. Here is the text of the first part of his speech (from Hansard):

“I beg to move,

That this House notes that there have been many cases of sanctions being wrongfully applied to benefit recipients; and call on the Government to review the targeting, severity and impact of such sanctions…

…From the evidence that I have collected from my constituency surgery, Citizens Advice, YMCA, the excellent Work and Pensions Committee report on this issue and the Library, it is abundantly clear that the standards that the DWP likes to claim always apply in sanctioning cases far too often certainly do not. I wish to cite a number of cases drawn directly from those sources.

A security guard at a jobcentre turned away a man with learning disabilities who had arrived 20 minutes early to sign on. The man then returned two minutes late to sign on and had his JSA sanctioned for 4 weeks.

A man was sanctioned for four weeks because he had not known about an appointment as the letter had been sent to an address that he had left a year ago, even though Jobcentre Plus was aware of his current address.

A woman claiming employment and support allowance had been diagnosed with cervical cancer and had given the back-to-work scheme provider a list of her hospital appointments. She was sanctioned for failing to attend an appointment on the middle day of her three-day hospital stay. The woman had two daughters but her ESA was reduced to £28 a week. She asked for reconsideration, but had heard nothing five weeks later.

A woman was sanctioned for failing to attend provider-led training when the receptionist had rung to tell her not to come in because the trainer was ill. She was subsequently told that she should have attended to sign the attendance register.

A woman whose ESA was sanctioned had her benefit reduced from £195 to less than £50 per fortnight because she missed a back-to-work scheme appointment owing to illness. Her sister had rung two days beforehand to say that she could not attend and arranged another date, when she did attend.

An epileptic man had his JSA sanctioned for four weeks because he did not attend a back-to-work scheme meeting as his two-year old daughter was taken ill and he was her sole carer that day. He rang the provider in advance, but was told this would still have to be noted as “did not attend”. During the four-week sanction he suffered hunger, hardship, stress and an increase in epileptic attacks, but he was not told about hardship payments or food banks or how to appeal the sanction decision.

Lastly, a man in Yorkshire and Humber was sanctioned for allegedly failing to attend back-to-work scheme events. He had in fact attended, and the provider had no record of any failures. His hardship request was not processed, his housing benefit was stopped, and he fell into rent arrears and had no money for food, gas or electricity.

These are not isolated or exceptional cases.”

There seems to be the beginnings of a bit of cross-party opposition to the DWP’s behavior with regards to sanctions, and I believe an independent review into their use is under way. While I don’t expect it to result in huge change, if it ultimately means fewer sanctions, then some good will have been done.

 

No the Government has not lost a billion pounds of your money

The title above refers to this article on Labourlist which is about the sell off of Royal Mail that has been criticised for not achieving ‘value of money’. I find this line of attack somewhat annoying. Labour put up a very weak opposition to privatisation at the time (because they wanted to do the same thing), so has instead now resorted to saying the privatisation was ‘botched’.

The argument that the Government’s mistakes have ‘cost’ the taxpayer millions is based on some quite dodgy thinking. It assumes that in terms of the sale price, the higher the better because the Government can then spend the proceeds, and that if it doesn’t achieve the highest possible price, it has ‘lost’ money. The Guardian has a story up today detailing what an extra £750m of ‘taxpayer’s money’ could buy. This is not how government spending works though. If the Government wants to spend an extra £750m, it can just soak up some of the private sector’s excess saving by issuing some gilts, or it can – horror of horrors – just create the additional £750m through its agent the Bank of England.

In a lot of ways, having made the decision to privatise Royal Mail, it would have been better if they had just given shares – for free – to each household in the UK. This would have generated some much-needed economic stimulus as people sold their shares and spent the proceeds. As it is, selling Royal Mail for less than it’s ‘worth’ doesn’t impact the Government’s ability to spend on what it wants in any way.

The argument then should be over a nationalised or privatised Royal Mail – basically, is Royal Mail better off in public or private hands? Here are a few genuine questions we need to know the answers to to know if the privatisation was/will be a success:

Will prices now be lower or higher?

Will the service be better or worse?

Will Royal Mail’s staff have better or worse pay and conditions?

Who ultimately now owns Royal Mail?

What returns are they making?

Are those returns the result of productive investment, or rent-seeking and abuse of a near monopoly?

Will any assets be sold off? Who benefits from that?

Those are some real questions. I’m sure there are plenty of others!