Labour and economic multipliers

It was good to read in a recent editorial not only how the public sector unions Unison, GMB and Unite have been advocating a "fair pay rise for council staff", but also how they have been arguing how the "net cost" for such a rise is far lower than the "headline cost" which the government uses (Star, 22/07/20). As a result of these workers paying more tax, plus spending more online and in the local shops which helps create jobs and thereby increases the Treasury`s tax income whilst reducing its expenditure on benefits, economic growth is increased. 

    These economic multipliers mean that none of the government`s spending pledges actually cost as much as they claim, which is why they ignore them, hoping unions and workers will not realise the truth. The same applies when infrastructure spending is announced, when the government`s figures fail to take into account tax returns that inevitably ensue over the years. 

     It is welcome news that trade unions are using economic facts in their arguments, but in truth, they should not be alone in doing this: it is the job of the Labour party and its leader in particular to challenge the misleading claims and figures used by the government, especially when the latter`s purpose is to deny much deserved and needed pay awards.

    Johnson and Sunak will be telling voters about the immense cost of the furloughing without mentioning the multipliers which enable much of the cost to be massively reduced, or the recent £300bn the government received from the Bank of England`s quantitative easing. Throughout the coming weeks the Tories will ensure the media keeps "unsustainable borrowing" at the forefront of the UK`s news. Starmer`s team must ensure they do not use the Tory tactic of treating the voters as mugs, and take every opportunity to use economic facts to challenge the Tories` fictitious figures. 

Against taxing over 40s for social care

If, as the Whitehall source suggests, "there is a renewed focus" in government for getting the social care problem "fixed", shouldn`t the solution on the table be at least a fair one (Plan for all over-40s to pay extra tax for social care, 27/07/20)? The net income of the majority of people in this country is insufficient to warrant more taxation and it would be much fairer to introduce income tax increases on those who can afford to pay more.

   Frequently forgotten in this country are the facts that the average income is around £26,000, and that people earning between £50,000 and £150 000 pay income tax at 40%. To pay for social care a graduated increase in the tax rate paid by all those earning over £50,000 seems an obvious solution, with the rate rising well over the current 45% paid by those earning more. Allied to this could be the employment of thousands more tax inspectors to root out the avoiders and evaders who cause billions to be denied to the Treasury every year.

    As for the £300bn deficit caused by the current crisis, isn`t that what the £300bn of quantitative easing was for, or has it all gone to the banks again?

3 letters on the latest Tory "con"!

Lynsey Hanley is probably correct to say that Starmer`s method of winning "red wall voters" back is to prove Labour`s "cultural conservatism", but, given the lack of detailed policies from the Opposition leader, it is difficult to assess his overall objectives (To win, Labour must focus on changing voters` minds, 16/07/20). Starmer certainly needs to make up his mind quickly, as doubts are obviously intensifying within Labour`s membership over his sincerity regarding promises made during the leadership election campaign about agreeing with the bulk of Corbyn`s 2019 manifesto. Even more pressing is the fact that the Tory propaganda machine is already working on getting the public to see massive tax rises for all as both necessary and inevitable.

  David Gauke, the Office for Budget Responsibility and various apologists are already preparing the ground for tax increases and cuts to government spending, so that the £300bn deficit can be reduced. Strangely, however, they fail to mention the £300bn of quantitative easing recently announced, and will continue to do so, insisting, no doubt, that having a debt-to-GDP ratio of above 100% is reckless. 

        To cope with the greatest economic crisis the country has ever experienced, Starmer must insist that, far from being reckless, it is vital, and that Tory "economic conservatism" is no longer appropriate. Taxes will have to increase, but not for those on average earnings or less. Labour must not allow the country to be conned by Tories quite happy both  to see the return of  austerity, and to use flawed economic arguments like the Laffer Curve and the Reinhart-Rogoff paper, to justify it.

Both Rishi Sunak`s warning to public sector workers to "expect a renewed squeeze on pay", and his order to government departments to "find cost savings"  are simply more harbingers from the Tory propaganda machine to prepare the way for a return to austerity (Sunak warns of new public sector pay squeeze and cost savings in Whitehall, 22/07/20). Already the ground has been prepared by ex-ministers like David Gauke, the Office for Budget Responsibility (OBR), various right wing media outlets like the Financial Times. all concerned about the need to reduce the deficit through cuts and tax increases. The OBR`s forecast of a deficit of £322bn this year is always mentioned, whilst the Bank of England`s creation of £300bn through quantitative easing is always omitted.

     The government`s argument against raising taxes too high on the wealthy is similarly based on flawed evidence; the Laffer curve has long been discredited by modern economists, and so has the 2010 Reinhart-Rogoff paper which Tories use to justify limited government borrowing. Having a debt-to-GDP ratio of over 90% does not slow economic growth to 0.1% as the paper claimed, but actually stimulates growth to 2.2%, as countries with ratios over 100% have also discovered.

     A recent Guardian editorial was absolutely correct to warn against the Tories repeating "the familiar austerity con that voters fell for a decade ago" (Guardian view on Covid-19 economics: the austerity con of deficit hysteria, 14/07/20), and no doubt there will be another repeat from the government, this time the emotional blackmail nonsense about passing on debt to future generations!

Stephen Bush asks which of his two differing analyses is right, the one which concludes Johnson`s government, despite "bungling the handling of the coronavirus outbreak", can`t lose, or the one suggesting its lack of "grip, focus or competence" will lead to its collapse (The PM knows how to win. To survive a second year, he must learn how to govern, 19.07.20). The answer has to be the second one. For a start, winning an election by telling falsehoods and making contradictory promises is one thing, but using the same methods in government doesn`t go down well with an electorate disillusioned by years of being taken for fools.

        In a year from now, the no-deal Brexit chickens will be well and truly home and roosting, with the resulting shortages, price rises and delays. Allied to them will be Johnson`s breaking of his promise not to return to austerity; already, the Tory propaganda machine has been doing the ground work for Sunak`s imminent cuts and tax rises, with no mention of the £300bn created through quantitative easing which makes Tory claims about unsustainable borrowing invalid. With Starmer`s Labour moving to the right and adopting economic and social conservatism, Johnson and Cummings are unlikely have a clue how to cope with an opposition based on clarity and competence, and which is not under attack on a daily basis from the right wing media.

Labour too timid on economy

Labour`s timidity "in the face of a tsunami of redundancies" is rightly criticised by Len McCluskey, and , as your recent editorial stated, waiting for the next election before "coming up with new manifesto commitments in four years time" is not good enough (Star, 17/07/20). With nothing on the table but mild criticism from Labour, the Tories will have a field day, and their propaganda machine has already started on its campaign to prepare the British people for tax increases. Ex-ministers like David Gauke, plus the usual right wing thinktanks, are warning about how the books cannot be balanced without massive tax rises, not on the wealthy`s income and property, but on ordinary people though increases in basic rate income tax and VAT. One Tory apologist on the Today programme even said that VAT was fair, because "everyone had to pay it", without any challenge whatsoever from the interviewer! Tories are not averse to using economic theories which have been proved to be mistaken to justify their fiscal policies. The much derided Laffer curve has vindicated many a Tory chancellor`s refusal to increase the rich`s tax burden, and Labour`s failure to rubbish it has cost the country dear. Starmer and co, cannot afford to make the same mistake again. When Johnson and Sunak insist, as they undoubtedly will, that government borrowing has to stop because the debt is too great, the Reinhart-Rogoff paper will be their justification, as it claimed having a debt-to-GDP ratio of above 90% slowed economic growth to 0.1%. Labour must point out that this is flawed, largely because the two economists ignored facts on a spreadsheet which revealed that the borrowing stimulated growth to 2.2%! The current level of government spending is not "unsustainable" as Tories will claim, but unless Labour gets its "retaliation in first", Johnson and Sunak will win the argument as they did in 2010, with even more dire consequences!

Williamson`s "mind-boggling" plans for September.

Wikipedia clearly states that the education secretary went to a school in the state sector, unlike the majority of his colleagues in the Cabinet, and, it seems, in the Department of Education too, but it`s hard to believe after reading the guidance he has given schools for their reopening in September (Star, 03/07/20). No wonder the National Education Union describes the new measures as "Impractical" and "more based on hope than science".

     Staggering the start of the school day, as well as the lunch and break times, means "mind-boggling" problems for timetabling teachers so that they can teach pupils in different year group "bubbles". A morning`s work for a subject teacher in a secondary school might consist of let`s say a year 7 lesson, year 11, then year 8, followed by year 13. If each "bubble" starts school at a different time, and has breaks and lunch  when others are being taught, timetabling would be nigh-on impossible. Feeding a thousand at lunchtime in groups of a hundred plus might take four hours or more!

    As for the need for pupils "to avoid public transport", the Education Department has clearly forgotten how its policies of underfunding, and therefore understaffing, comprehensive schools in underprivileged areas have led many parents to send their children across cities to so-called "better" schools.

   Online lessons will still have to be used, and this is where private schools should be forced to contribute, or lose their charitable status, which enables them to avoid paying 80% of their business rates. They should make available all of the lessons they provided during the lockdown, whilst Williamson should face the sack if the laptops and internet access he promised haven`t arrived at schools for the most disadvantaged pupils!

Calling for the government to have "a credible Plan B in place" is sensible, but schools might be better advised to create Plan Cs for themselves!

Govt. can afford to spend

Sunak`s summer statement was the creation of a chancellor determined, as your editorial stated, not "to scare Conservative backbenchers" (Britain is heading into an almighty hurricane without even an umbrella, 09/07/20). The trouble is that, unless he enlightens the likes of Baker and Redwood with economic facts, like the £300bn deficit being covered by the Bank of England`s recent increase in quantitative easing, how other countries manage very well with large debt, like Japan with its 250% debt-to-GDP ratio, and how government investment in people`s pay triggers economic multipliers so that a large percentage is soon recovered in tax, the chancellor is unlikely ever to offer anything other than "cocktail umbrellas" in the face of economic "hurricanes".

      As well as all the statement`s "notable absences" duly noted in your paper, it also lacked mention of much-needed extra investment across all public services, perhaps too bitter a pill for Tory backbenchers to swallow. The 200,000 vacancies in the NHS and social care need to be filled, as do the ones in teaching, police and prison service.Thousands more inspectors are required at HMRC, not only to fill gaps caused by austerity cuts, but also to tackle the tax avoidance and evasion problems. In addition, as conditions in Leicester have clearly shown, inspectors are urgently needed to work both on the government`s National Minimum Wage team, and for the Health and Safety Executive.

       A "bust economic model and a broken social contract" will never be replaced when their existence is denied by the government. Can we really expect more from Sunak, when it`s Johnson and Cummings he`s working for, not FDR!

Reform of university admissions

The government`s plan to reform England`s university admissions system is yet another example, typical of Tory administrations, of providing window-dressing rather than changes which will have effective outcomes (Radical plan to overhaul university admissions, 27/06/20). If the aim really is to "improve social mobility and help disadvantaged school-levers", why is there no insistence that all state-funded UK universities take contextual information into consideration, so that pupils with real potential are given the opportunity to excel? In many instances, pupils either from underprivileged backgrounds, or underfunded state schools suffering staffing recruitment problems, or possibly from both, who achieve A-level grades Cs and Bs, display far more intellectual ability than their more privileged peers gaining As.

      If this plan had serious intentions, it would also insist that the only academic qualifications acceptable as UK university entrance qualifications were A-levels, the examinations described by Ofqual as "national qualifications based on content set by the government". What was the point of reforming A-levels and ensuring for them a high level of regulation if private schools are able to avoid them, and get their already highly-advantaged pupils into university via different means? More lightly-regulated examinations such as Cambridge Assessment`s Pre-U exams have a much higher proportion of A*/A grades than A-levels, and are mostly set and marked by teachers in the private sector.

      In the 1870s Disraeli`s government passed numerous reforms with the appearance of being transformational, but in reality doing no such thing, all with the purpose of winning electoral support . Sadly, little appears to have changed!

As your "manifesto for change" says,  it is unfair to expect the forthcoming academic year`s university students to pay £9000 in tuition fees when "likely to be missing in-person lectures" as well as the usual social activities (A generation of Britain`s children faces crisis. Here`s our manifesto for change, 21.06.20). What is also unfair, however, and with no reference to it in your "measures", is the current admissions procedure adopted by our government funded universities, which accepts as valid academic qualifications results from examinations other than A-levels, even though the latter are described by Ofqual as "national qualifications based on content set by the government". Pre-U examinations, although being phased out, are still preferred by most private schools as the entry-route into universities, thereby by-passing the recently reformed and more highly regulated A-levels. A Freedom of Information request revealed that even as early as the academic year 2017-8, there were 125 Oxbridge undergraduates with three or more Pre-U qualifications, but no A-levels, a figure likely to be far greater today!

    With the virus, as Naomi Kellman of Target Oxbridge says, "reinforcing existing inequalities" at Oxbridge and Cambridge, and universities still not paying sufficient attention to "contextual information", far too many talented pupils are being denied places at our top universities (Covid will reinforce race inequalities at Oxbridge for years, campaigners warn, 21.06.20).Until the government forces universities to change admission procedures, what David Lammy calls their "systemic bias" will remain, to the detriment of all of our young people, and indeed, the country in general.

Johnson and FDR

If Johnson now sees himself as the UK`s FDR because he plans to "accelerate" the spending of £5bn of old money on schools and hospitals, his distorted view of history clearly knows no bounds (First Churchill, now Roosevelt: Johnson promises "UK New Deal", 30/06/20)! The American president, as your article rightly says, "carried out a wholesale reconstruction of the US economy", while Johnson and Cummings, desperate for improvement in the polls, stick to the basic Tory philosophy of taking the British people for fools.

  Presumably, we are expected to think that the New Deal consisted of nothing more than building projects, and know nothing about the heightened regulation on the US financial sector, increased taxes on the wealthy, improved rights for unions and workers, and Blue Eagle awards for businesses which worked not just for profit but for the benefit of the country as a whole.

    Can anyone imagine Johnson telling the electorate in 2024 that "the forces of organised money are unanimous in their hate for me - and I welcome their hatred"? They are, of course, the words of FDR from 1936!

Strange idea of unity!

As Andrew Warden says, Tories, despite many of their number frequently going away from the party line, like Jenrick and Cummings recently, "know that the appearance of unity and discipline is vital" (Star, 26/06/20). One would have thought Labour did, too, especially as Starmer in the leadership campaign frequently not only referred to "unity" of the party as his prime aim, he prioritised it. The trouble is, 

 if his sacking of Rebecca Long-Bailey is anything to go by, the Labour leader has a strange way of going about it. With the shadow education secretary`s dismissal, the Labour leader has both reignited the party`s internal troubles over the issue of antisemitism, with any future criticism of Israeli policy likely to frowned upon or worse, and he has betrayed the thousands who supported his leadership bid because of his pledges on uniting left and right.  The shadow cabinet now lacks even a semblance of being "balanced" across the party as he promised, so one can only speculate on the sincerity of the rest of his leadership election`s rhetoric.To rub salt further into the wound, Starmer has now denied himself the services of an extremely able shadow minister, one easily capable of making mincemeat of her opposite number at the dispatch box.

     Perhaps we know now why Starmer has delayed exposing his vision of the fairer, greener country fit for the next generation, again as promised in the election campaign? It may not include the promises of state ownership, tax rises for the wealthy individuals and corporations, pay rises for key workers, clamp-downs on tax avoidance, and controls on capitalism`s excesses that Labour members  hoped for!