One step forward, two steps back, or maybe not, for the EU. Iceland votes to consider joining, Turkey asks to revise its agreements to increase links, and demonstrators continue to protest in Georgia about the stolen election and the postponement of EU accession talks, and last month Moldova voted to change its constitution to permit accession talks to begin. Yet in the UK, the pall of stupidity and fear still envelopes the Labour Government. …
I have been trying to get on top of whether the Draghi Report on European economic competitiveness is really a game changer. Without study it seems to be a call for more EU (as opposed to member state debt. I am of the view that within the UK, there needs to be transfer union i.e. that borrowing and wealth from London needs to be shared with other parts of the country.
I found this article from the FT, which is headlined, “Europe can learn fiscal lessons from the UK on how to achieve its goals”, and subtitled, “ A co-ordinated reform agenda is crucial if the EU is serious about becoming a climate leader and geopolitical player”, written by Draghi. On diigo, I highlighted the following lines,
The UK government has chosen to significantly raise public investment over the next five years and has adopted precise rules to ensure that borrowing is used only to fund this investment. … Moreover, in order to ensure the quality of spending, transactions will be validated by independent authorities.
To which I reply, “Of course Draghi would argue for independence. The near cultish following with which his recent comments have been greeted is based on the desire by politicians and capitalists to ensure the macroeconomic policy and regulation is outsourced to non-democratic agencies. Central bankers underestimate the ability of democracies to present a wisdom of crowds, even on investment decisions. An example of this is the EU’s horizon investment valuation process, which ranks proposals and select winners from a competition. The technocrats and democrats, particularly representative politicians also underestimate the value that citizens assemblies may bring to these decisions.
Draghi continues,
“A more efficient use of Europe’s high private savings rates requires integrating its capital markets. To redirect private investment from mature industries to more advanced sectors will hinge on completing the single market. … innovative firms in fast-growing sectors such as digital services will not be able to scale up and attract capital. And, as a result, investment will remain locked in old technologies.”
Is this true? Perez, whose theories I summarise on my blog, argues that the declining profit of now legacy industries will ensure that investment goes to new innovative industries. Also, like most Draghi is betting on digital services as the driver; Perez’s theories suggest that IT is now reaching its stagnation stage and will be replaced although we maybe in a stage where the political power of legacy capitalism is too powerful to be overcome. This is why corporate lobbying power is so destructive to human progress. …
So Louise Haigh has resigned from the Government. I note that the offence which led to the resignation was spent, and she had previously disclosed it to the party. The fact that an offence can be spent, is designed to allow people to rehabilitate themselves. In any other organisation, punishing someone for a spent offence would be a crime, actually in the government and Labour Party it’s a crime. So much for “law makers can’t be law breakers”.
Also, while writing my incomplete review of the Forde Report, I uncovered the following quote,
We are also concerned that the provisions which allow for individuals to have membership removed or denied on the grounds they have committed prohibited acts could be exploited for factional purposes.
Haigh was probably pushed to go because she stood up for policies that Labour’s nomenklatura oppose, such as criticising and regulating private sector transport providers, renationalising the railways and further enabling municipal bus services. To me it is certainly evidence that Forde’s fears were justified and remain so.
The language used by Sky News, “Had Ms Haigh been an ally of the power brokers in Number 10, this row is arguably one she could have ridden out.” is almost certainly true and her treatment will come to be compared with others treated more leniently.
Image Credit CC 2024 DTP BY-NC-ND from flickr. …
Not a good day for progressive politics yesterday, Trump smashes Harris, and in Germany, Scholtz fires his finance minister, Linder, probably signalling the end of the ‘Jamaica’ coalition. I am with those that say the lesson for liberal centrists is not to piss off your base and keep your eyes on the real value of wages/household income. If “it’s the economy stupid”, then the economy is real wages !!! There are big lessons for UK politics here.
For more check out articles by Adyta Chakraborty, Bernie Sanders, and Phil Burton Cartledge. …
The budget headline is a £127bn deficit and current account stabilisation where the Tories had planned further reductions in expenditure. While not being willing to give Paul Mason the last word, he says, in a Medium article,
“You can quibble with details of Reeves’ plan, but it is a solid social-democratic reaction to the situation she found herself in. It looked after the workers, it taxed the bosses and the rich, it stabilised debt and left room for tens of billions of investment in the NHS, schools and homes; and it hiked the minimum wage.”
I don’t think it’s quite there, but I am on the side of those who say, it’s not too bad and could have been worse. It, in the words of most performance management systems, “Exceeds expectations”, although most of those were set by themselves. There remain some unsolved problems and some risk but I think this response from Jeremy Corbyn and the Green Party misses the mark, it is not austerity light.
The question remains is it enough to create the conditions to grow the economy, repair our public services and reversed the decades of underinvestment and low productivity. Simon Wren Lewis, in an article entitled, A budget that points way but doesn’t get us very far is not so sure, and James Meadway, in an article entitled “The budget is socialism for the rich austerity for the poor” thinks not. The latter is concerned that insufficient is being done to decarbonise the economy.
Mason in his article also addresses the question as to whether the budget will stimulate the growth required. His key focus though is the political bias of the OBR, who say it won’t, and thus the theories they choose to believe and discard. I agree the OBR never had a real role, it was a piece of theatre designed to undermine the credibility of the outgoing government and it’s time to get rid of it.
The Labour Government’s industrial strategy seems out of date to me. I have been thinking recently that while economic growth should be the centre of the policy, labour’s thinking about growth is stuck in the past. The industrial strategy statement focuses on innovation and startups. More recent thinking suggests that outcomes which would include the outputs of repaired public services should be at least part of the aim. Additionally, some post Keynesian thinking emphasises the need for the development of human capital as a prerequisite and driver of growth. Others including Chris Dillow question the multiplier effect of directly increased investment while everyone recognises that investment in the UK has been weak, although this is historically true for the last 150 years.
Starmer in his FT article, reviewed by me here, identified energy and AI targets for investment, again I’m unsure that the government plans will deliver what’s required and George Monbiot questions the utility of carbon capture. At least it’s not financial services as relied on by the Blair government.
The need to repair our public services is more than just clientism by the Labour Party. An effective economy needs healthy and knowledgeable workers, but even this economistic analysis is being challenged, Meadway and Graeber suggest the central questions for economists have changed,
… the existing discipline is designed to solve another century’s problems. The problem of how to determine the optimal distribution of work and resources to create high levels of economic growth is simply not the same problem we are now facing: i.e., how to deal with increasing technological productivity, decreasing real demand for labor, and the effective management of care work, without also destroying the Earth
David Graeber – Against Economics – New York Review of Books, DEC 2019
On reading the reviews of Reeves’ speech, I was concerned that little was being done to encourage the growth of human capital i.e. knowledge and if anything, policies on university and student finance and immigration likely to damage the higher education sector which is in severe financial straits. This fear was compounded by the announcement on 4th Nov of the first increase in tuition fees in eight years. This is undesirable. The failure to reverse the Tories rules that prohibit students bringing their families with them will impact the finances of the Universities and in the case of postgraduate students impact both the institutions’ research quality and power of the international networks of British academia.
I am also concerned that nothing good is said about local government finance. Local authorities will go under, housing and education delivery will be damaged, social services and child protection services will fail. Local Government is under pressure because the Tories found it easier to cut with the stroke of a pen rather than close programmes, they themselves were responsible for. They also hoped that by passing the decisions onto councils that their Labour leaderships would take the blame.
I am also disappointed with the failure to implement a wealth tax and address financial inequality in British society. I am unsure how much money could be raised by a wealth tax, but the knowledge that the ultra-rich were paying their share would reduce the opposition of the less well off to their increased tax burden. There is a high correlation between economic equality and economic success. One of Britain’s key growth inhibitors is the inequality of wealth within the economy. Tinkering with minimum wage legislation particularly given its failure to implement the TUC’s £15 per hour demand is not enough and the refusal to remove the two-child benefit cap and to implement powers to spy on benefit claimants bank accounts doesn’t auger well.
I mention immigration rules as an inhibitor to the success of the university sector, but the Government’s supply side labour market policies are also inadequate, and in fact designed to restrict immigration, not enhance the labour supply. We are an ageing society and need young people to come and work. Strong unions and minimum wage legislation are a protection against low wages and anyway, companies can move offshore if they really want to take advantage of low wage economies.
The failure to increase fuel duty is an act of political cowardice, although one that I understand, but if climate change is reaching a tipping point, then possibly a decision that should have been taken. I was surprised at the courage and limited reaction to New Labour’s ban on public smoking.
The one big silence in the speech and amongst the commentators is about Brexit. Rejoining the EU, would increase the opportunity for foreign inward investment, improve our balance of trade position which impacts growth and would allow us to reapply to the EU’s green transition and regional equality programmes. Maybe Trump’s re-election and the coming trade war will concentrate minds but Labour’s leadership is remarkably stubborn although this budget suggests an unexpected flexibility. It also relies on some very crude power brokers who have little vision on making society a better place; it comes well behind winning and getting government cars and red boxes.
At least, the argument that with respect to benefits, for the support for the most vulnerable in our society, that there is no alternative to cuts and that tough choices need to be made is seen to be false. They will be oppressive on benefits because they have bought into the skivers vs. strivers narrative and believe it to be electorally popular.
In my eyes the budget is an effort that meets both the “needs improvement” and “exceeds expectations” classifications.
Image: https://www.freemalaysiatoday.com/category/business/2024/10/31/uks-labour-govt-hikes-taxes-in-first-budget/ Licence: Attribution 4.0 International CC BY 4.0 …
In order to prop up the markets, Kier Starmer wrote an article in the FT, once again extolling the need for public sector reform. His article covers more than that, it seeks to address innovation & growth, and public sector reform, yet misses the implications on industrial policy, university investment and local authority services.
In it he emphasises the need for private sector entrepreneurialism, claiming that it’s the driver for innovation and growth, however history shows that this is often not the case, as argued by Mariana Mazzucato, in much of her work and we have the historical evidence of the water and energy industries and internet infrastructure. It also fails to recognise the contribution of labour to the creation of wealth. I feel that Labour assumes they can see the next big thing, I am not sure, but the Labour Government is very committed to energy, and AI and I am unsure about the latter as a driver for growth.
The words used on getting people back to work aren’t as bad as we might expect from Reeves and Kendall but the refusal to move on the two-child benefit cap and the plans to spy on benefit claimants’ bank accounts shows an unwelcome direction of travel.’
At the centre of my interest is the comments on public sector reform, he writes,
.. nor can we simply spend our way to better public services. That is why reform is an essential pillar of this government’s agenda. Reform of our creaking central state. Reform of our public services.
Kier Starmer in the FT
There are two problems with this, firstly, increasing central government productivity costs money today, in both investment and redundancy payments. AI might be the answer if Government software had been written over the last 10 years, but it’s older than that, also there’s a significant argument that government AI needs to own its AI training and I am not sure that LLM’s are the answer to streamlining the benefit system or NHS hospital management. Conflicts with the data protection law prohibition on “automated profiling” have clearly not been thought through. I am reminded of the management fad of the 90’s epitomised by, “Don’t automate, obliterate!” which cynics summarise as “Halve the work force, double the fear and quadruple the profits”. This doesn’t work, fearful workers sabotage the enterprise, reminding me of the old joke about the Soviet Union, “they pretend to pay us, we pretend to work”. Furthermore, making workers compete against themselves and not the competition is another route to failure.
Governments of both colours have been claiming that expenditure cuts can be funded through organisational efficiencies for decades, if it were possible, it would have been done. These efficiencies are a chimera, although an aggressive review of long-term consultancy/out-sourcing agreement would be worthwhile.
Finally, we need to increase public sector wages in order to buy the stuff the new industries are going to make.
The budget proposes an £87bn deficit and stabilises the current account spending plans but the focusing of investment towards effective innovation and growth is the job of industrial policy programmes. If energy is to be one of the foci, then there are big questions on what GB Energy is, and whether carbon capture should be a central plank of energy supply reform. Some economists such as Meadway, Graeber, Dillow and Edgerton question the effectiveness of industrial policy, especially that aimed at innovation and start-ups, not least because of the need to combat climate change. Meadway & Graeber argue that the climate crisis is changing the nature of the questions of economics. They all have various proposals, but I am most interested by the suggestions that the creation of social relations and the development of the care sector are important as drivers of growth. I’d add that an innovation based industrial policy should be looking at developing human capital and thus reforming university access and funding.
A final problem which is likely to act as a growth inhibitor is that most local authorities and many universities are on the cusp of financial insolvency. The Government seems to be wrongly arguing that they can build houses and deliver improved services while letting local authorities go-under. Local authorities build and manage houses, fund and guide education delivery and deliver multiple services and protections for the poor and vulnerable, as well as universal services such as culture and leisure. I have argued before, there needs to be a transfer union; business rates don’t work for service provision, those areas in the greatest need, have the lowest revenue and after fourteen years of Tory misrule, the government subsidies are skewed towards Tory areas and are now, too short-term to allow planning.
The Councils are in this position because cutting a grant at the stroke of a pen is easier than stopping services and the Tories passed the cuts they couldn’t make themselves onto Councils in the hope that much of the blame would then be carried by Labour councils.
The UK university system is argued to be the second best in the world; it would be a tragedy if it were to be damaged by systemic financial behaviour; the simplest and speediest reform would be to reverse the Tories prohibition on student families coming to this country; more longer term reforms involve reform of the student [& university] funding systems but Labour’s politicians need to let go of their Blairite student politics on Higher Education access. Human capital is a driver for growth, and I can’t see that the government is planning to invest in it.
In conclusion, public sector efficiencies are not simple or are non-existent. Human capital development is needed, and local services need to be properly funded.
Image: The Arezzo Chimera, by Thomas Shahan on flickr CC 2011 BY …
Several commentators on the UK budget, including the OBR, have suggested but there’s insufficient growth stimulus planed. The OBR predict that the economy will grow slightly less than under previous plans; I don’t know how this can be when the proposed deficit is £89bn. They also however predict that the effect of Brexit his -4% of GDP and yet no one in parliament, except for Ed Davey has mentioned this as a growth opportunity.
The OBR and the Bank of England are both institutions designed to protect economic policy from democratic control. Time to abolish one and reform the other. …
I wrote a piece for Brexit Spotlight on Starmer’s visit to Brussels . Earlier this month Keir Starmer’s went to Brussels to meet the President of the European Commission, Ursula von der Leyen, in a much–heralded start of a “reset” of the United Kingdom’s relationship with the European Union (EU). A genuine re-set of relations was always going to be a challenge given the red lines established by the Labour Party in the UK General Election.
The article looks at the development of Labour’s policy towards the EU and the development of the “Red Lines”, or the three “Noes” as some European politicians are calling it. I acknowledge that Labour’s leadership have attempted to broaden the conversation by raising Defence and Security, although I believe this is basically an attempt to trade the UK’s relative but shrinking strength in military capability for ‘single market access with opt-outs’.
The announcements on both sides were lukewarm towards progress although they agreed to meet again. I finish the article by saying, it has hardly been an ideal beginning to the ‘reset’, even if the red lines established by the Labour Party were always going to inhibit a fuller and more meaningful collaboration. Indeed, the Independent reports that the meeting was:
“… a blow to the Prime Minister, the EU repeatedly pointed to Britain’s existing arrangements with the bloc – Rishi Sunak’s Windsor Framework and Boris Johnson’s Trade and Cooperation Agreement (TCA) – calling for the ‘full and faithful’ implementation of those deals. It could suggest there is little room for any major new agreements until existing plans are fully in place. Currently parts of the TCA are not in place, such as repeatedly delayed Brexit checks on EU imports.”
This is as close to “come back when you’re ready to say something interesting”, as the EU gets. …
In a Labour List report Pat McFadden MP, in writing an introduction for a coming report on trust from the SMF, is quoted as saying, “ … cautioned Labour against assuming the magnitude of the majority the party won in July would “automatically” see it win the next election.”
Too right. The Labour List article places the timing in the context of current opinion polls one of which shows Labour with a 1% lead; personally, I prefer to use politico.eu’s poll tracker which suggests it isn’t that close but does show that Labour lost 10% points during the election; 131 of Labour’s elected MP’s have majorities of under 5000 and yesterday, Labour lost a bunch of council seats.
We also have the examples of Pasok, Syrezia, and the slump in support for Labour’s sister parties in France and Germany. All these countries now have significant caucuses of far-right MPs. The cost of Labour’s failure maybe very high.
Rosie Duffield in her letter resigning the Labour whip ( Sky | mirror ) spoke of the efforts of the whole party, and the electorate’s trust,
As Prime Minister, your managerial and technocratic approach, and lack of basic politics and political instincts, have come crashing down on us as a party after we worked so hard, promised so much, and waited a long fourteen years to be mandated by the British public to return to power.
…
How dare you take our longed-for victory, the electorate’s sacred and precious trust, and throw it back in their individual faces and the faces of dedicated and hardworking Labour MPs?!
While Labour’s leadership were telling its members before the election there was no room for complacency, today, there is no room for arrogance or failure to meet the electorates expectations which maybe higher than that which the manifesto promised. …
I went on the National Rejoin March. These are the notes I made if I had been chosen to represent Another Europe on the platform.
Now we have a labour government, one that claims to represent its federal party constituents and its voters. Unfortunately, would seem not on the question of European Union. The majority of Labour’s voters and members both support rejoining the European Union.
The LME, Labour’s pro-Europe socialist society, issued a call to attend their Labour Party conference fringe, claiming that in Parliament their membership was larger than the Tory party. It is probably not very helpful; the PLP is in fear of the leadership and so it’ll be sometime, if ever, before the LME members will find their voice and commitment. Their behaviour in the selections and manifesto making process illustrate a supine attitude towards the leadership, who had variously announced, “Not in 50 years” and that they would “Fix Brexit”.
The LME did not call for the rejoining of any element of the European Union, basically opposing joining the customs union and the single market. These Labour’s MPs join those journalists, consultants, and academics for whom their career and reputation is more important than their cause.
The persistent attempt to cleverly design demands that allow the government to claim they’re not rejoining but are in some way improving or resetting our relationship with the European Union is dishonest and will fail.
Even a medium term project to rejoin the Union or the single market requires the Labour Party and its Government to change its mind. Those of us who are still members need the help of those who are not.
The job of left wing, and all rejoiners, is to argue that the UK will not be permitted to rejoin until its ready to be a good citizen and to convince the people and their parliament that it’s an advantage to be members of a united Europe where member states and people act in solidarity.
We must leave the mentality of the “Nation of Shopkeepers” behind us. …