“The difficulty lies not so much in developing new ideas as in escaping the old ones.”
― John Maynard Keynes
When the world is facing one of the worst public health and economic crises since the Great Depression in the 1920s, Rishi Sunak excelled himself this week with his summer statement. Not in a good way one has to say. To put it bluntly, we have gone from Boris Johnson’s ‘New Deal’ pretensions to Rishi Sunak’s ‘meal deal’ as so neatly coined this week by the Labour party. At a time when unemployment has soared globally with projections that it will rise still higher, Sunak’s intervention could be said to be less than even a damp squib which fails to deal with the very real threats that the UK faces right now as domestic and worldwide demand plummets and people hunker down in uncertainty both for their jobs and their financial security.
That the Chancellor thought a ‘eat out to help’ scheme would help those 3.7 million key workers struggling to survive on less than £10 an hour shows where his head is firmly planted – in the sand. As Garry Lemon from the Trussell Trust noted ‘encouraging people to eat out is one thing but ensuring people can afford to eat at all must come first’. Ten years of austerity has left essential public services on the edge of collapse and people in insecure work on low incomes both in the private and public sector. Whilst giving a dining out discount to the already well-off it is quite simply a slap in the face for working people who have already borne the brunt of years of government cuts to public spending and yet who have proven their value to society in these last few months as key workers keeping the important services going as the nation locked down. The clear downside of his meal deal voucher is that you’ve still got to have the means to pay the other half of the bill when many are simply struggling to put food on the table!
And the bad news did not stop there, as government showed yet again who is to benefit from increased government spending. The proposed Job Retention scheme, which will replace the Furlough scheme ending in October, is just another mechanism for supporting businesses instead of working people and as the TUC commented it will do little to reduce unemployment. It will quite simply represent just more of the same corporate ‘welfare’ which has underpinned government policies for decades, whether bailouts for banks and businesses or employment legislation honed to serve private sector needs.
And then, to cap it all, a £1bn giveaway to second home-owners and landlords in the form of a reduction in stamp duty which once again favours the wealthier amongst us and does nothing for renters or indeed anyone purchasing a house in areas where prices are lower out of London.
Just how Sunak viewed these proposals as a mechanism to kickstart the economy is anyone’s guess, when there are already vast numbers of people struggling as a result of the combined consequences of government austerity and the economic consequences of Covid-19 with more hardship to come as the OECD projections make clear. The words of Marie Antoinette who was reputed to have said when there was no bread ‘Let them eat cake’ sums up the government’s response very simply as a complete denial of the extent of the poverty and inequality that exists which has been caused by a pernicious economic theory which has been used to justify greed and selfishness and put private over collective good.
Bread or cake, either way it’s just crumbs, when the strategy should be far bigger in terms of spending to alleviate the human cost to society and the economy and indeed dealing with the next big challenge bearing down over humanity – climate change. His plans do nothing to address the structural poverty which exists in the UK where food banks, homelessness and families living in temporary accommodation have become the norm and an accepted part of the way things are, as has blaming and shaming.
His plans do nothing either to reverse the cuts to public spending which have done so much damage to our essential public and social infrastructure, the consequences of which have been so much in evidence these last few months. After weeks of people clapping key workers on the doorsteps of their homes and politicians jumping on the goodwill bandwagon to give the false impression that we are all in it together, little has been said about the who is to blame for the worsening condition of our public services and what comes next. Johnson passing the buck for the care home crisis onto staff, along with his criticism of NHS England, Public Health England and SAGE’s responses to the pandemic should be a clue to where the government intend to shift the blame. Just more smoke and mirrors to distract from the consequences of government policies.
The fine words and expressions of solidarity with the working people of this country by Rishi Sunak are no replacement for real action to deal with the threats that face us. In the event that a second wave of Covid-19 can be avoided, unemployment is likely to rise to 11.7% by the end of the year but should we experience a second wave that could, according to the OECD, rocket up to almost 15% of the working population. The scourge of unemployment threatens young people in particular who stand to lose out as the labour market contracts.
So far, we have seen the government relying on the private sector to dig us out of this mess, whether it’s a Job Retention Bonus or the proposed apprenticeship scheme. It fails to acknowledge that continuing economic uncertainty will not bring about confidence, either for businesses to invest or consumers to spend. Furthermore, a £10 meal voucher or a reduction in VAT will do nothing to restore confidence when people are fearful for their jobs and their future income. It’s all sticking plasters and simply perpetuates the lie that it is only the private sector that can create the wealth in the end.
As Josh Ryan Collins wrote in a UCL IIPP blog on Medium ‘The pandemic has raised the level of uncertainty in the economy to an all-time high. As John Maynard Keynes emphasised, at such times it is natural for firms and households to retrench. Under such conditions – and with foreign demand also crippled – the domestic government is the only actor able to stimulate the economy and prevent unemployment and recession’.
The action needed to avert an economic crisis and address climate change is on a scale far greater than the one on offer by the Conservatives, who are picking and choosing the recipients of their spending based on a flawed economic model which puts the private sector as the wealth creator and denies the power of the state and its money issuing powers to address the serious challenges to come.
Government needs to restore its role as employer of last resort and focus its efforts on full employment through job creation – not as a temporary measure but as a permanent feature of public policy. At the end of the day, whether you are on the right or the left of the political spectrum, a mechanism for providing paid work at a living wage which supports the health and well-being of local communities in difficult economic conditions and at the same time keeps money in people’s pockets which then, in turn, flows through the economy and keeps prices stable surely should be the goal of any government?
But how could this be achieved? In two ways:
Firstly, with the introduction of a public sector Job Guarantee to provide employment for those who have been made involuntarily unemployed either as a consequence of Covid-19 or as part of a Just Transition towards a green economy as old carbon-based jobs become redundant and new green ones take their place. With a living wage and training, it would offer a stepping-stone into private sector work as economic conditions improved, would set a wage floor below which private employers could not offer employment and would serve local communities by providing worthwhile and useful public service work.
And secondly, with an expansion of the public sector, which hitherto has been shrunk to a shadow of its former self and is also short of hundreds and thousands of staff particularly in social care and health. As GIMMS has said many times before, the public sector provides the foundations for a healthy economy and any government of any political shade would do well to recognise that public service which serves the economy should not be in the hands of profit-hungry companies which are more interested in cutting costs than improving lives.
Not only do we need to rebuild the public infrastructure that has been shattered by the austerity policies and neoliberal narratives of small government, but we also need to recognise the real and tangible value of public sector work to the economic and social infrastructure.
Of course, without doubt, the next question will be ‘how will it be paid for’? Over recent weeks the debt scaremongers have been much in evidence from various media outlets to public institutions and public finance experts who show scepticism that even the current round of additional spending can be funded without taxing or borrowing more. They put the fear of God into the public consciousness that at some unspecified time in the future someone will have to pay and that someone will be the taxpayer.
Even the Daily Mirror this week helped to spin the lie to its readers that the government has to borrow to fund its deficit, that it will take decades to pay off the debt that has been accumulated as a result of the additional spending, and that the Chancellor will have to impose higher taxes eventually to pay it back. None of this is true and it is shameful that such lies continue to create such fear and uncertainty in the minds of the public.
By all means carry on with this nonsense but such beliefs will, by their nature, constrain any government’s capacity to serve the best interests of its citizens and the economy as a whole if people lose confidence and fear the consequences of such spending on their own future income. Instead of listening to the likes of the Daily Mirror, Rishi Sunak, successive shadow chancellors and other economic pundits not to mention the IFS which regularly trots out analyses of the public accounts as if it were a household budget, we should be challenging these false notions wherever they come from.
And then, when the National Audit Office adds its concerns about the increasing cost of rolling out universal credit and the rising impact of Covid-19 on job losses and Rishi Sunak announces that the number of work coaches in jobcentres would double next year to cope with rising numbers of unemployed people signing on, if you have even the most limited knowledge of how governments spend then you have to scratch your head in puzzlement.
The first thing to note is that the monetary cost of any programme is an irrelevancy for a government like the UK’s that issues its own currency. Secondly, it is not the monetary cost of unemployment or underemployment that is important, it is the social and economic cost to individuals and the economy as a whole that matters. And thirdly it won’t matter how many job coaches you put in Jobcentres – as Warren Mosler so aptly pointed out using the analogy of dogs and bones – if you’ve only got 95 bones and 100 dogs it won’t solve the problem of unemployment. Suggesting that the onus lies with the individual to shape up and be responsible for his or her own fate is a neoliberal narrative to blame and shame.
We need the state to recognise its responsibility as the employer of last resort during the economic cycle and we need a Job Guarantee, not a system of individual censure and humiliation.
The government needs to think big and be more ambitious in its strategy to help reset our economy on a more sustainable and equitable pathway. Whether it will, is an entirely different matter.
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