Just getting by is not enough

“The rich run a global system that allows them to accumulate capital and pay the lowest possible price for labour. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few. Democratic politics, which purports to enrich the many, is actually in the pocket of those bankers, media barons and other moguls who run and own everything.”

Charles Moore

In the light of the possible wage freeze for 5 million public workers, the economist Grace Blakely explained on Double Down News this week why billionaires should pay, ‘not working people who sacrificed their lives to keep our economy going.’ Whilst the sentiment is right that working people should not pay for the crisis, her suggestion that the billionaires should step into the breach and pay what they owe instead is just more neoliberally inspired claptrap. The implication that the very rich are stealing from the public purse and that we should bring back John McDonnell’s magic money tree from the Cayman Islands is a shameful and false narrative being peddled by a supposed left-wing economist who clearly is still caught in the headlights of false household budget accounting. By such shifting of blame elsewhere, Blakeley fails to acknowledge the real power of the public purse to spend, should the government choose to, on public purpose and also the power of the state to legislate to ensure that the rich pay what they owe. In this fairy tale narrative of taxes fund spending, she ignores the fact that, amongst other things such as redistributing wealth through progressive taxes, taxation is the mechanism to reduce the influence of the wealthy in the corridors of political power. That should surely be the left-wing argument for ensuring the billionaires pay their dues.

Blakely’s appeal came in response to the proposal by the Centre for Policy Studies for a three-year public sector pay freeze, which it claimed could save the government cumulatively £23m. It also suggested in its newly published report that the pain had not been shared equally and that private sector workers had suffered more than those in the public sector. The CPS put forward that NHS workers could be exempt from the freeze to account for their hard work and sacrifices during the pandemic giving an albeit reduced saving.

Robert Colville, the Director of the CPS, suggested that the public finances had been decimated and that it would be difficult to justify generous pay rises in the public sector when private sector wages were falling, given that there was a need to control public spending and reduce the structural deficit which the pandemic was likely to have opened up.

Once again not only do we see the powers that be aiming to drive further wedges of envy between the public and private sector, but also a reinforcement of household budget accounting in terms of how the government spends.

Over the last six months and more, the public sector has stepped up to the plate in response to Covid-19. The Prime Minister and his Chancellor have stood in Downing Street to clap for the NHS and social care workers and the nation responded. The public sector – the NHS, education, social care, and services provided by local government – has, along with other key workers in the private sector, ensured that services were kept going. That care for the elderly continued to be provided in difficult circumstances, that the food and other vital supply delivery networks continued to function, that supermarkets and other shops were stocked and able to provision the nation.

The pandemic has demonstrated, as no other event perhaps could, how interdependent society is and that key workers in the public and private sectors, many of whom are low paid, underpin the foundations of society so that it can function effectively. The world of Mrs Thatcher’s ‘there is no society’ has been well and truly discredited.

And yet after all the clapping and talk of levelling up, the government might be on the brink not only of creating more societal division in a cynical sleight of hand to distract attention away from government actions, but also of freezing the pay of public sector workers who have already suffered the consequences of a decade of Tory austerity. It is time to question who the government is serving. The markets and exploitative corporations or its citizens?

We have been brainwashed into believing that the government is at the mercy of the market and must serve it. The public has accepted the lie that government spending is constrained and dependent on private businesses generating the wealth which in turn generates the taxes that we are told fund government spending.

And yet the reverse is true. It is the government which sets the economic bar. It is the government which spends to tax, which sets the price for labour and legislates for protective employment law. It has been a political choice to cede responsibility for ensuring that people both in the public and private sector are paid wages commensurate with a good standard of living, that would put paid to continuing poverty and inequality.

At the other end of the scale, the power of the public purse has been shown to work perfectly when it is a question of pouring vast sums into private profit, in many cases with little accountability. The term ‘chumocracy’ has also been applied to how many of these contracts have been awarded.

Only this week, we have seen yet another demonstration of how the use of the public purse is a matter of political choice as the government agreed a four-year £16.5bn increase in defence spending. Boris Johnson called it ‘a once-in-a-generation modernisation of the armed forces … [required] to extend British influence and protect the public’ and restore Britain as “the foremost naval power in Europe”. We seem to be going back in time!

Labour unsurprisingly has supported these plans, but did ask how they would be paid for. Patrick Butler from the Guardian questioned how such a vast amount of money was justified when the ‘public finances have been stretched by the pandemic’.

The vision of stretched finances appeals to household budget explanations of how governments spend and is designed to reinforce the narrative of scarcity of money. Over the last few months, it surely must start to dawn on the public that there is no scarcity of money. The public finances have not been stretched, indeed they have been positively overflowing. The government simply made a political decision to spend money on defence, just as it did to support furlough or after public pressure to feed hungry children in schools.

In terms of how the government spends, it does not have to choose one expenditure over another. It does not have to match its spending to tax revenue or worry whether it can borrow money. It is just a decision based on political priorities. Feeding hungry children wasn’t a priority until it became politically expedient for it to be.

It is disheartening that time and time again mainstream journalists persist in toeing the establishment line that money is scarce and there will be a future price to pay. In an article in the Financial Times this week, it was suggested that that the Exchequer was running on empty and that the Tories in the wealthy south will soon be asked to support tax increases to help left-behind regions.

Let’s reiterate yet again that the state of the public finances is not dire, the Exchequer is not running on empty and, since tax does not fund government spending, increases will not help left-behind regions. In fact, taxing more in a period of economic decline or as a country was coming out of one would be positively harmful.

When it is suggested that drivers could be charged for using roads to help Rishi Sunak cover a tax shortfall of £40bn caused by the rising popularity of electric cars, one is tempted to point out that there is no hole in the finances to plug. Whilst we might want to use taxation to encourage people to use public transport, the only holes to plug are the potholes caused by cuts to spending on our road network.

It cannot now be any clearer that the UK government, which has the power of the public purse to authorise spending through its central bank, is not hindered by scarce monetary resources. That it just spends. The clear political priority is to spend on defence to ‘extend British influence’ rather than invest in a public and social infrastructure that serves the interests of the nation or addresses the rising poverty and inequality which has arisen as a result of government policies over the past 10 years.

The question of affordability has been used by successive governments to justify their spending policies. And yet, whilst successive governments have always found money for defence or prosecuting wars, whether it can be found to pay public sector workers decent wages is quite another matter.

In the same vein this week, the Treasury was reported to have been reluctant to commit more money to delivering the Prime Minister’s 10-point plan for moving to a low-carbon economy. Aside from the usual puff and rhetoric from politicians on a practical level, there are still questions as to whether words will be translated into real, firm actions. In an open letter to the government, it was reported this week that the UK would not be able to deliver on its zero-carbon commitments unless it intervened in the energy from waste sector and that recycling rates have reached a standstill. Ministers have also been accused of using the pandemic to justify further delay on promised action on food waste reporting until 2021. While the planet’s biodiversity continues to decline as the planet warms and valuable resources go up in smoke with few constraints, the government continues to prevaricate.

In saying that hard choices exist in relation to public sector pay or suggesting that we haven’t enough money to address climate issues, the Treasury ignores the elephant in the room. That the real human and planetary cost of not spending on these vital things will be immeasurable.

Over eight years ago George Osborne criticised green policies as a ‘burden’ and a ‘ridiculous cost’ to British businesses. Since then the environmental landscape has changed irrevocably as the climate tsunami bears down upon us with ever greater urgency. Governments have become masters at making promises or giving speeches with hat tips to change, but which result in very little. To suggest that there is a monetary constraint reveals much about the ideology which governs the government’s policies and the constituency it serves, but in the end, the burden of not acting will not be monetary, it will affect every aspect of our lives – economic and societal.

This is an opportunity not to be wasted. We have allowed an economic system to exploit working people. Businesses have justified low wages and poor employment conditions as prerequisites to competitiveness. Government having abandoned full employment policies in the 1970s has rolled over instead of assuming its considerable powers.

A recent report published by the Social Equality Commission quoted a female supermarket worker who said ‘when you dig really deep, I think it is about happiness and stability, and feeling valued … because money is secondary to all that. As long as you can get by, you shouldn’t worry about it.’

Happiness and stability are, without doubt, important but how such happiness and stability can occur when people are struggling to make ends meet is debatable. Just getting by is not enough and nor is it fair. Good wages and secure employment allow people to have a good standard of living, to be able to plan for the unexpected or indeed to save for the future. People are being brainwashed into accepting their lot on the lie of there being no alternative when there is such imaginable wealth in the hands of few people whose power and influence dictate its distribution.

From a macroeconomic perspective, the bottom line is that people with good wages and employment security spend their money in their local communities and the wider economy which in turn support local and national businesses. It seems the Chancellor, by suggesting he has to plug the hole in the finances either by higher taxes or public sector pay freezes, is displaying a deliberate ignorance, dictated by ideology, of the macroeconomic importance of people having money in their pockets. Let’s remember that one person’s spending is another’s income. It is fundamental!

To conclude this week’s lens, it is only right that we bring our readers’ attention to an editorial in the Guardian which highlighted that:

Coronavirus has thrown into sharp relief the inequalities in Britain. The bottom fifth of the working population have seen incomes cut sharply and their savings reduced to nothing. For the poor, there’s little or no cash to furnish even the barest of Christmases, while those at the top have seen cash pile up in bank accounts.

And then went on to criticise Sunak by saying that:

‘he continues to peddle the myth that the extra government borrowing during the pandemic means that he has to make “hard choices” to “balance the books”. The chancellor is softening the ground for austerity policies. Mr Sunak is making an ideological choice by using the wrong model of the economy. If he does not relent then he will be responsible for unnecessary unemployment and poverty.

It then urged Sunak to rethink his future policies by recognising that:

‘the government can take responsibility for maintaining the total level of spending in the economy at level that keeps the country as close to full employment as possible where a working week is at a reasonable length and paid at a reasonable wage.’

This is a moment of great change. A moment of great opportunity to create a fairer society for all. The economist Herman Minsky wrote: “a necessary ingredient of any war against poverty is a program of job creation; and it has never been shown that a thorough program of job creation, taking people as they are, will not, by itself, eliminate a large part of the poverty that exists”.

Unemployment and its associated economic and social ills could be mitigated by the introduction of a government-backed Job Guarantee, not only to deal with the economic fall out from the pandemic which will continue for some time to come but also act as a just transition mechanism as we address climate change. As a macroeconomic tool, it offers a cyclical approach to unemployment that would create a more stable economic environment to deal with the ups and downs of the economy with the added advantage that working people are not left to perish when times get tough.

Instead of talking about monetary scarcity and unaffordability, an argument which dominated the narrative for decades, the debate must now move to how we can create a more sustainable and equitable future in the context of the distribution of finite real resources and who gets them.

Society, through its elected government, has to decide its priorities. Real and sustainable human and planetary well-being delivered by powerful states with the power of the public purse governing in the interests of their citizens? Or a rehash of the current economic model which has at its heart a greenwashed control by global corporations.

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