Tag Archives: Fiscal policy

Never mind the narrative

Aled Dilwyn Fisher and Adam Ramsay have kicked off another little debate about the recent past and possible future of “the left”, following a total failure to seize the much-vaunted opportunity created by the massive financial crisis in 2008.

Why did anyone except the hard left – not known for their astute political realism – believe that we were likely to see a reshaping of international capitalism in 2008? Governments regulating and administering the major economic powers and their possible successors approaching national elections almost all lined up behind what Aled succinctly calls “deficit fetishism”. Even Obama’s green-tinged stimulus is undermined by States doing the exact opposite.

Adam is interested in narratives about greedy bankers and corrupt politicians, governments running out of money and youth unemployment spirally. Me too, but his writing verges on a pointless delusion – that “we”, a small rabble of bloggers and activists on the fringes of political power, can do anything to effectively resist the onslaught of cuts that the Conservatives, Labour and Lib Dems all signed up to during the General Election, and to bring about a fundamental reshaping of the global political economy.

When I read the language of resistance to today’s cuts, I’m reminded of Neil Kinnock’s most famous speech attacking Labour councils who brought cities to their knees in a vainglorious attempt to ignore (or in their language, resist) government cuts.

If we spend too much time fretting about our narrative we are in danger of falling into the trap of fighting an illusionary battle between the forces of the left and the right, as though they were two divided communities battling for the soul of the nation. A coalition of resistance might create a space for debate, as Romayne Phoenix has suggested, but it isn’t going to stop all the cuts. Debate will be healthy because there are many more than two positions on our current fiscal predicament, and accepting this is the first step towards focusing – as Aled suggests – on organising communities of interest to resist where there is a real chance of reversing a cut (such as housing benefits) and on getting significant sympathetic space in the media to decry cuts that are clearly abysmal and clearly unstoppable.

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Eco taxes going down in the UK!

I came across a shocking statistic today: environmental taxes are decreasing in the UK!

The total revenue has risen slower than inflation between 1999 and 2008; from around £32.6bn in 1999 to £38.5bn in 2008. If it had grown with inflation over that period it would have stood at £41.4bn in 2008.

As a percentage of GDP over that period it fell from 3.5% to 2.7%. As a percentage of the total taxes and social contributions in the UK, it has also fallen behind. In 99 it peaked at 9.7% of total tax revenue, then fell to 7.2% in 2008.

Environmental taxes made up a lower share of our economy and tax revenue than at any time since 1993, when the ONS records begin. So much for shifting the tax burden from income to environmental damage!

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God bless you, lucky home owners

You don’t often see national newspapers celebrating a drop in house prices, despite the fact that they rose twice as fast as average incomes in the past decade. It’s much like the coverage of any strike that might affect a journalist’s holidays plans.

Most journalists and commentators are wealthy middle class home owners, so they are heavily invested in maintaining this trend of above-income-inflation house price rises. There are two main reasons for this trend: first, house building supply never came close to meeting demand; second, cheap credit created a bubble that massively over-inflated the value of homes.

Here in London, households with incomes up to an incredible £74,000 are soon to become eligible for “affordable housing”, which you can buy up bit by bit. Us paupers on a mere £74k are no longer able to buy a home otherwise.

In the past year this trend has very slightly eased, with falling demand matching a slight recovery of housing building numbers after the recession kicked them off a cliff. That’s Labour’s reaction to the recession – not a Green fiscal stimulus, but at least not cuts followed by a depression. Still, this slight reversal doesn’t please Geoffrey Dicks, chief economist of Novus Capital Markets, who warned in The Times that recent trends are “exacerbating an emerging supply-demand imbalance”. Cripes!

But just before you got too upset, Dicks evokes Tiny Tim to cheer on the possible return of above-income-inflation house price rises. God bless us, every one! Perhaps after being adopted by Scrooge, Tim would have reason to cheer on the rise of grossly unfair home ownership.

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Who is really ripping us off?

A discussion with two friends on the back of my post about the cuts agenda brought up some interesting figures about benefit and tax fraud.

There’s nothing the Tories and right-wing media pundits like more than a good old attack on benefit fraud. Lazy good-for-nothings scamming our taxes! Get ‘em! But how big a problem is benefit fraud, and how does it compare to the rich ripping us off with offshore tax havens and the like?

Benefit fraud in 07-08 cost us around £800m out of a budget totalling £125bn. Tax evasio by the rich cost us around £18.5bn and a tax avoidance is estimated at around £100bn compared to a government budget totalling £589bn.

Tax evasion  is harder to tackle, involving international negotiations, but it says a lot about your priorities. Tory plans to bail out a few thousand rich families through inheritance tax changes would cost considerably more than benefit fraud. Are they cutting public finances to help the country, or to help their wealthy mates?


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Don’t let the Tories get away with it

As long as the Democrats talked within Republican frames like “tax relief”, they always lost the argument. So why are Labour taking on Tory economic narratives during their party season? They’re handing the election to Cameron on a plate.

The first narrative is that we need to cut public expenditure to save the deficit and curb the national debt. Except that our national debt is much lower than most developed economies, and is projected to stay that way. Our deficit is large, but Cameron’s criticism of any fiscal stimulus would only have landed us in a bigger hole with more unemployment and smaller tax receipts; perhaps even a depression.

The second is that the public sector is an unproductive drag on the economy, and should be the focus of cuts. Except that the public sector injects stable spending power into the economy; provides the infrastructure and services that business can’t function without; subsidises businesses who want to pay scandalously low wages through the benefits system; is funded more by working people’s tax contributions than those direct from business; and so on.

For much of the left wing commentariat, who think “Left equals Labour”, this is more evidence of the intellectual vacuum at what’s left of the heart of the left Labour project. But New Labour was born from the marriage of social democracy and New Right economic thinking. Brown et al are never going to seriously rethink the economic terrain they shaped, which contributed to the near-collapse of the economy. Their only narrative these past few months has been “our cuts will be nicer”. Nice.

If only those commentators would look beyond Labour to parties who are articulating a genuine alternative, and who are challenging these Tory narratives. Like, urm, the Green Party. At the moment they seem resigned to an electoral wipeout without redeeming heros.


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