Has the writing of Tory welfare policy been outsourced to the Daily Mail?

The Tories announced two new welfare policies this week. The first was their plan to remove benefits from those with drug and alcohol problems or who are obese and who are refusing treatment, while the second, announced today (not for the first time?), seemed to be all out work for the dole for 18-21 year olds.

I was listening to a talk show discussion on the radio yesterday about the first policy, and was struck by how there was a neat divide between those who worked with addicts or in the healthcare sector in general, and those who seemed to me the type of people who think what’s printed in the Daily Mail is the unvarnished truth. The healthcare professionals universally thought it was a ridiculous idea, while the Daily Mail readers thought it was simple common sense. Guess which these policies are designed to appeal to?

There was a Tory MP called Alec Shelbrooke on the programme to speak in favour, and he was basically spouting the hardworking taxpayer funding lifestyles line. When asked what would happen to a person whose benefits were stopped, he declined to give an answer, but it seemed fairly obvious his view was “fuck ’em”.

There’s no doubt policies like this are popular with a sizable chunk of the public who are quite keen on poor-bashing, but I think policies like this should at least be based on some semblance of evidence. Welfare policies should be designed around what works rather than what will make ‘hardworking taxpayers’ give a little less thought to how hard they are being screwed. At the moment, though the Tories seem to be taking their manifesto pledges directly from the Daily Mail. Both these policies seem to be of the traditional ‘nasty party’ variety. From what I was hearing on the radio about the addiction/obesity policy, it just won’t be effective at turning people’s live around, and seems just about being vindictive. On the 18-21 year olds policy, I just think, why not give them a job, rather than making them pick up little for the same as Jobseeker’s Allowance?

UPDATE: Via Twitter, someone sent me this link, which details how the Government already ruled out the drug/alcohol benefit withdrawal policy, giving good reasons why it wouldn’t work, so they are now seeking to go against their own advice.


Beware of Tories bearing gifts

Another week, another speech from David Cameron. This time it was on tax, and he had two headline announcements – that the tax threshold for the basic rate would be increased to £12,500 while the threshold for the 40p rate would go up to £50,000. This, Cameron said was a ‘reward‘ for putting up with austerity so obediently. Both these measures help the better off more than the lower paid, as those on the lowest pay already don’t pay income tax so raising the basic rate threshold does nothing from them.

For all the talk of lifting people out of tax and people being better off to the tune of £x000 a year, the reality is actually very different. This chart (click on it to enlarge) is taken from a recent publication from the Institute of Fiscal Studies, and it shows the net impact of the Coalition’s tax and benefit changes over the course of this Parliament.

Screenshot 2015-01-26 at 5.09.43 PM

It shows that for all income deciles, bar the 7th and 8th, any tax cuts have been less than other tax rises and benefit cuts, meaning nearly everyone is worse, not better off. While the top 10% have lost most in terms of £s, as a proportion of their income (light grey line), it’s the bottom 10% who have lost most, closely followed by the second bottom 10%. Indeed, even excluding benefit cuts, the bottom 10% have lost more than they have gained through tax changes. They have been hit hard by the VAT rise, but hardly benefited at all from the rise in the income tax threshold.

Cameron may talk about patting us all on the head with a nice ‘reward’, but beware of Tories bearing gifts. There are likely to be some nasty surprises in there as well should they win in May.

How well do people understand the term ‘government deficit’?

Here’s an interesting poll finding from Yougov this week. They asked people the question “How well would you say you understand what people mean when they talk about the government’s deficit?” In answer, 69% said they had a very clear or fairly clear understanding. Not bad then. It’s talked about every day by politicians, so it’s good people understand what it means.

Not so fast though. Yougov followed up by asking “Which of the following do you think best describes the government’s deficit?” The majority (51%) thought “The total amount of money the government has borrowed” rather than the more correct description (“The amount of extra money that the government borrows each year”), which was only picked by 31%. 2% even answered “The total amount of money that everyone in the country has
collectively borrowed on overdrafts and credit cards.” Oh dear.

This is probably good news for the Tories. They can run around saying they have halved the deficit and most people will associated that with lower government debt (which people in turn tend to equate with their own household debt, where more=bad). It’s also bad news for people like me who want to try to explain to people that government deficits might not be an altogether bad thing, and that our government debt is not an issue that should supersede all others. It will also make me more skeptical about any future headlines generated from polling data!

You can find the full tables by clicking on the link above, but here are the headline figures. Interestingly, Labour voters were less likely to say they had a clear understanding of what a government deficit was, but they were no more likely to pick the wrong answer than supporters of other parties.

Screenshot 2015-01-19 at 6.04.16 PM

Cameron’s speech sends the alittleecon bullshit detector into overdrive

David Cameron gave a speech on the deficit today. Standing in front of this background, he said some shall we say, questionable things:

I’ve heard the tone of his speech described as ‘hyperbole’, but I would go further and say there were a lot of balls out lies in there. His tactics appeared to be what I would call Shappsian, where you just tell intellectually lazy lies in a matter-of-a-fact way in the belief that people are too stupid to see through it.

First, the background, and the strapline “A Britain Living Within Its Means”. By means he’s talking about money, rather than stuff. If he meant the latter it wouldn’t be so bad, just basic common sense. What he actually means is reducing the deficit so spending is equal to or less than taxation. In attempting to achieve this it will mean households – in aggregate – will need to take on more debt than it had when the economy crashed in 2008. The Conservatives have a bloody cheek talking about living within our means.

Cameron also talked about the ‘chaos’ that would result should Labour win the election. His definition of chaos is:

“It’s election year, and the choice is clear: staying on the road to recovery – or choosing the path to ruin. Competence or chaos.

With the other parties, all you get is confusion.

Uncosted plans. The spectre of more debt. The shadow of more taxes on your family, your home, your business.

With the Conservatives, you get the opposite. A strong and competent team, a proven record, and a long-term economic plan that is turning our country around …

We cannot overstate how important this is.

If we fail to meet this national challenge, the writing is on the wall.

More borrowing – and all the extra debt interest that brings, meaning there is less money to spend on schools and hospitals and all the things we value as a country.

More spending, and the higher taxes that will require – hardworking people thumped to pay for Government wastefulness.

And higher interest rates too – punishing homeowners, hurting businesses, losing jobs.

In short, economic chaos.”

Labour have given themselves a bit of wiggle room over their spending, committing only to balancing the ‘current budget’, meaning, they have left scope for higher spending on whatever they want to define as capital spending, but on current plans, there’s little between Labour and Tory over spending. The amount of spurious nonsense you would have to swallow to take Cameron’s assertions at face value are surely too much for most.

Talk of ‘unfunded’ spending is a silly argument in itself. Cameron is saying both that this will mean more borrowing and higher taxes, but if Cameron is right (he’s not), the extra spending would be ‘funded’ either by higher taxes (in which case, in the mainstream view, no extra borrowing), or by extra borrowing (in which case, no extra tax). He can’t have it both ways, and in fact can’t have it either way, because taxes and borrowing are not needed to ‘fund’ spending at all.

Cameron talks of more borrowing leading to more debt interest payments, but as Richard Murphy points out, interest rates on long-term debt have plummeted over the last 10 years, so even if spending did go up, and the deficit was matched by issuing debt, as the older, higher interest debt was refinanced with new low interest debt, debt interest payments may even fall, not rise. A public debt crisis is not on the way whoever wins the election.

The final bit of nonsense I wanted to pick up on was Cameron’s assertion that interest rates would rise if Labour won. This is rubbish because interest rates in the wider economy are strongly correlated with the base rate set by the Bank of England. This is 0.5% at the moment, and has been for several years because the economy has been weak, and most economists think low rates stimulate the economy. As the economy recovers, we should expect to see interest rates rise, so if the Conservatives are saying the economy will continue to improve with them but slip into chaos with Labour, we should expect rates to rise with the Tories, but stay the same or fall with Labour. A complete 180 from what Cameron is suggesting. It’s not necessarily bad if rates do start to rise (although it will be for some people). It’s just what’s likely to happen in a recovery.

Not a lot to like then. He is relying on voters being idiots. This is not to say Labour do not makes questionable assertions of their own, but it’s been the Tories who have been straight out of the blocks with the sort of negative, fear-mongering campaign many suspected would be the way things would go. How will Labour respond?

Chronic Kraftwerk tribute act blows starting whistle on boring battle of spending plans.

Meh. Labour and the Tories launched their election campaigns today, marking the start of what promises to be the longest – and on today’s evidence – the most boring campaigns in living memory. Oh and Nick Clegg said something about why coalitions are so great so don’t forget the Lib Dems. Yawn. Five members of the Empire launched a laughably awful ‘dossier’ on Labour’s spending plans. Here they are:

The dossier is about ‘Labour’s unfunded spending plans’, which is literally what every single governing party does with their opponents plans at every election. I was watching a discussion on Channel 4 News tonight between world’s most boring drone Matthew Hancock and Labour’s Chris Leslie, and incredibly, Labour seemed to be rattled by this piss weak attack, so to compensate, Ed Balls made it clear that Labour is definitely not on the side of the people with most reason to despise the Coalition. “Vote Labour! – You’ll get nothing from us.” Not the best election slogan.

I want to know what big ideas the parties have for the country, and what specific policies they have for the country that will improve all our lives and address some of the very real problems we face, but instead we’re just getting sums that politicians have plucked out of their arses. “We’ll spend an extra 50p on the NHS, but before we can do that, we must tax an extra 50p from the banks”, or “We’re going to take £27bn out of the welfare budget, so we can cut taxes for people who probably don’t need them cutting. Oh and the deficit”. “Unfunded spending commitments!” “Black holes!” “How are you going to pay for it!” Somebody make it stop.

And it’s only day 1… roll on May!

IPPR Report – Another Case of Garbage In, Garbage Out

Labour leader Ed Miliband launched a heavily-trailed new report this morning produced by Labour’s favourite thinktank the Institute of Public Policy Research (IPPR) called “The Condition of Britain”. It has been said that it’s a report that will “define social democracy in the coming decade” and that it is “a Magna Carta for social democracy in the 21st century“. I think some people are too easily impressed.

The report (all 280 pages of it), contains 28 recommendations, which Labour seems to be largely adopting as party policy. The recommendation that caught the headlines was the one recommending scrapping benefits for 18-21 year olds, and replacing them with a means-tested “youth allowance”. This is so similar to Tory Party policy that George Osborne’s bitch Matt Hancock accused Labour of stealing their policy. Reading through the other recommendations though, it’s striking just how unambitious they are. Nothing is a great departure from the current direction of travel, and any of them could be adopted as Tory or Lib Dem policies without any eyebrows being raised.

Why is this? The IPPR label themselves as “centre-left”, and Labour should be looking for some eye-catching policies to differentiate themselves from the opposition. I think the problem is one of GIGO, or “garbage in, garbage out”. The underlying assumption before the report was even written was that austerity is a given, there is no money and every new commitment must be matched by a cut or tax hike elsewhere. So they paint themselves into a box and then say to themselves “within these constraints we have arbitrarily imposed on ourselves, what can we suggest to be different from the other lot? Answer: not very much it seems!

It seems to me that if they actually want to make a difference, the starting point needs to be “what would we like to do in an ideal world”, and work back from there. So in an ideal world, we might like to build everyone a mansion. Unfortunately, there is not enough land, building materials or labour to achieve that, but there may be enough of those things to ensure eveyone can live in decent accomodation at an affordable price. So what’s the IPPR’s recommendation on housing?

£Councils should be able to retain and reinvest a share of any savings achieved by local action to reduce housing benefit spending in their area. In addition to their existing powers, they should also be given greater freedom to borrow responsibly against their housing assets and income.”

We have quite a convoluted suggestion where somehow it is worked out a council has “saved” on housing benefit through their actions, and they can then use some of these savings to build houses, or they can borrow money to do the same. I’m not sure we should be encouraging councils to borrow more. They can go bust, and won’t be able to borrow at as low rates as central government (who can always borrow at 0% should they wish). Implicit is the IPPR’s recommendation is that there is enough land, labour and materials to build enough houses. If that’s so, wouldn’t a better suggestion be that central government just gives the money to build housing directly to local councils? Why over-complicate things?

Similar criticisms can be levelled at other recommendations. If you start with garbage assertions about the inevitability of austerity, the solutions you come up with are bound to be severely limited. It just makes Labour look a bit, well pointless.

Are the media biased against Labour?

Since the results of last week’s elections were announced, I’ve seen numerous examples of Labour MPs and supporters complaining about the coverage they’ve received. The claim seems to be that despite performing well in the elections, Labour’s results have been painted as bad news, while UKIP have got favourable coverage of their results. Do they have a point though? I don’t see how.

UKIP have come from nowhere over the last 18 months to win hundreds of councillors and actually winning the popular vote in the EU elections. While Nigel Farage has rarely been off our screens lately, the coverage I’ve seen of UKIP has been overwhelmingly negative. The print media in particular have been out to get UKIP, with almost daily revelations about some idiot candidate or another. Despite this, they managed a great result (relatively speaking), doing so by campaigning on two – linked – issues, immigration and Europe. They made some inroads into solid Labour areas, most notably in Rotherham, but also here in Bradford, where, while they only won one seat (off Labour), they came second in a number of others, often coming within a couple of hundred votes of victory.

So that’s UKIP then. But what about Labour? They won the local elections, picking up over 300 seats on a projected national share of 31%, and their vote was up 10% over 2009 in the EU poll. Pretty good? Despite this, the media have been asking why Labour aren’t doing better. Biased against Labour then?

Not really. They’re up against a wretched Coalition government who deserve to lose for numerous reasons (cutting public spending in a slump, disgraceful treatment of the unemployed and disabled, restricting access to justice, speeding up private sector involvement in the NHS and on and on), and yet they can only beat them by about 2 percentage points a year out from the general election. Of course people are going to ask what’s going on.

Labour party people need to stop whining about media bias and start thinking about why they’re not doing better, and why UKIP, who are supposed to be ex-Tory voters, are gaining so many votes in Labour areas.

Are cuts to social security moral?

A lot of people would answer no straight away to this question, but stay with me. I’ve just started reading George Lakoff’s “Don’t think of an Elephant!” which is about how people view the world through different ‘frames’ and how political parties seek to exploit these frames in their political messaging. Lakoff’s central thesis is that those with a conservative world view frame things from the point of view of a strict father figure, while those of a more liberal persuasion frame the world from the point of view of a ‘nurturant parent family’.

So what is meant by the strict father figure frame? Lakoff explains:

“In this model there is also a definition of what it means to become a good person. A good person – a moral person – is someone who is disciplined enough to be obedient, to learn what is right, do what is right and not do what is wrong, and to pursue her self-interest to prosper and become self-reliant. A good child grows up to be like that. A bad child is one who does not learn discipline, does not function morally, does not do what is right, and therefore is not disciplined enough to become prosperous.She cannot take care of herself, and thus becomes dependent.”

To bring it back to the title of the blog then, for those who view the world though the strict father frame (a conservative viewpoint), cutting social security is a moral position, because a Lakoff also writes:

“Consider what this all means for social programs. It is immoral to give people things they have not earned, because then they will not develop discipline and will become both dependent and immoral. This theory says that social programs are immoral because they make people dependent. Promoting social programs is immoral.”

This strikes me a quite a good description of the language Tories like IDS use when discussing social security. They talk about ‘welfare dependency’ as though it’s a great societal evil, and separate people into those who are deserving of help and those who aren’t. They talk about people who ‘want to work hard and get on’. The Tories are for these people. This all implies that if people have the discipline and drive to succeed, then succeed they will. Any failure to do so must be down to the personal failings of the individual. I think this last point was quite eloquently dismissed in a blog by Jack Monroe todaybut it is an idea that many people undoubtedly subscribe to, and the right are extremely proficient in pushing these kinds of messages, while the left are poor at pushing their own. Witness Labour’s almost total inability to defend the welfare state and it’s acceptance of this strict father framing.

I suppose my point then is that a lot of people seem to assume the cuts to social security are because the Tories are evil, or because they want to shift resources from poor to rich. Maybe there are elements of that, but I think for politicians like IDS, they genuinely do believe what they are doing is morally right. The left need to accept that a lot of people agree with him and come up with strategies to reframe the debate.

A lack of jobs not aspiration is the cause of youth unemployment

FACT: Youth unemployment is so high because there aren’t enough jobs.

This seems to be so obvious, you might be wondering why I feel the need to write a blog about it, but a large proportion of the Tory Party don’t seem to accept this. David Cameron announced at his conference this week his (unworkable) plans to deny all social security benefits to those under 25. Instead they must ‘learn or earn’. Implicit in this idea is that most young unemployed young people are out of work by choice, and removing the option of social security to these people will solve the problem. I don’t know whether they really believe this or not, but it’s a total myth.

When the economy is weak and unemployment is high, employers can afford to be more picky in their hiring. There are often numerous highly skilled or experienced people applying for the same vacancies as young unemployed people. Taking on the young person becomes a risk for the employer. Young people are moved to the back of the queue, and move further back the longer they are out of work. Even as the economy recovers, the young, the old and the long term unemployed still struggle to find work. It has nothing to do with aspiration or the choice to live a life on benefits.

The current stats bear this out. Including ‘inactive wants a job’, there are around 5 million people wanting a job but can’t find one and a further 1.4 million who are working part time but the ONS says there are just over 500,000 vacancies available currently.

So this latest idea from the Tories is ridiculous. To repeat, there just aren’t enough jobs.

Another way to think about government debt

The Tory Party conference is coming up, so expect to hear lots about how they literally saved the country from becoming like Greece, tackling the deficit head on and paying down Britain’s debt. The reality’s a little different though. Mercifully, and despite their better efforts, the deficit has remained high, as the government’s cuts have been offset by higher welfare spending and lower tax take. The high deficit seems to be supporting the economy just enough to allow a weak recovery at the moment. The national debt however, continues to grow.

All the main parties want us to fear government debt and play on our wish for our children to have a better life by constantly talking about the burden we are placing on future generations. To a large extent, this scaremongering has worked. Most people hate austerity, but accept “there is no alternative”. We must get the deficit down.

But should we be thinking about government debt as placing a burden on our children? How will we pay it back? For an alternative viewpoint, the following is an extract from a book called the “Seven Deadly Innocent Frauds of Economic Policy” by Warren Mosler. Everyone can and should read this book for free here. I’ve replaced some words to make it fit for the UK i.e $s to £s or the Fed to the Bank of England.

“Next, you need to know what a U.K. government bond (gilt) actually is. A U.K. government bond is nothing more than a savings account at the Bank of England (BoE). When you buy a gilt, you send your pounds to the Bank of England and then some time in the future, they send the pounds back plus interest. The same holds true for any savings account at any bank. You send the bank pounds and you get them back plus interest. Let’s say that your bank decides to buy £2,000 worth of gilts. To pay for those gilts, the BoE reduces the number of pounds that your bank has in its current (reserve) account at the BoE by £2,000 and adds £2,000 to your bank’s savings account at the BoE. (I’m calling the gilts “savings
accounts,” which is all they are.)

In other words, when the U.K. government does what’s called “borrowing money,” all it does is move funds from current accounts at the BoE to savings accounts (gilts) at the BoE. In fact, the entire £1.4 trillion national debt is nothing more than the economy’s total holdings of savings accounts at the BoE.

And what happens when the gilts come due, and that “debt” has to be paid back? Yes, you guessed it, the BoE merely shifts the sterling balances from the savings accounts (gilts) at the BoE to the appropriate current accounts at the BoE (reserve accounts). Nor is this anything new. It’s been done exactly like this for a very long time, and no one seems to understand how simple it is and that it never will be a problem.”

So rather than a burden, a more realistic way to think of the national debt is as the financial savings of the private sector. It’s not something we should be overly concerned about. Over the last few years, the private sector has been demanding to save (lend money to the government) as it has not been able to find profitable investments in the real economy. It wanted risk-free assets, and nothing is more risk free than putting money into a savings account at the BoE. This huge demand for risk free savings has keep the price of those savings high (and the interest rate low). So when the government boasts about keeping interest rates low, this has been a prize for failure rather than anything to be proud of. In a strongly recovering economy, the demand for risk free savings (gilts) will fall, so interest rates will rise. This will be a good thing as it will mean we should see more investing in the real economy.

When we hear politicians talk about the economy, up is down, left is right and black is white. The truth is often the complete opposite of perceived wisdom, so read Mosler’s book and have your mind blown.