The good we secure for ourselves is precarious and uncertain until it is secured for all of us and incorporated into our common life.
Jane Addams, US social reformer and suffragette (1860-1935)
How best to describe the state opening of Parliament this week? An anachronism in the 21st Century, bearing no relationship to the reality of people’s lives? Or, as Raphael Behr suggested in a Guardian article, ‘it was a reminder that much of what passes for a British constitution is actually fancy dress’. A King in waiting, dressed up in his military uniform, sporting medals and seated next to his mother’s jewelled crown, delivering a speech not actually written by her at all. You couldn’t make it up.
In terms of the reality of people’s lives, in these difficult and uncertain times, it proved as predicted, to be all show and no substance as the very real hardships being faced by people were scarcely acknowledged. No further solutions were offered to the growing financial insecurity caused by the ongoing fallout from the pandemic, global supply issues and rising inflation, along with the Ukraine war, which are all affecting the global economy with concomitant knock-on effects on individual nations.
The Spring Budget brought forth little relief, and the Queen’s Speech reinforced it. We have to bear the pain now to enjoy jam tomorrow! Michael Gove was adamant in ruling out an emergency budget during a televised interview earlier this week and blamed the current situation on global inflation, as if somehow the government had no tools to alleviate the growing pressures on families across the country.
The cure for this economic mess is, according to Boris Johnson, to ‘revive Britain’s economic growth’, as if that could be achieved by next week. He told parliament on Tuesday that whilst his government would make every effort to help those struggling with rising prices, ‘however great our compassion and ingenuity, we cannot simply spend our way out of this problem, we need to grow out of this problem’.
Aside from the fact that compassion and ingenuity seem to be in very short supply when it comes to the economic strategies and spending policies of Johnson’s government, the focus on repairing the public finances, instead of maintaining sufficient spending (in good times and bad) to keep the wheels of the economy turning, will most likely drive the economy into recession. The signs are already there. Data from the Office for National Statistics shows that the UK economy contracted by 0.1% in March, after flatlining in February, with retail sales down, production falling, and spending on cars decreasing by more than 15%. The British Retail Consortium, backed up that data in its latest reporting, noting that retail sales had dipped in April, and figures from Barclaycard also showed credit card spending on entertainment and eating out, slowing. The cost-of-living crisis is beginning, predictably, to crush confidence and put the brakes on people’s spending. And whilst Boris Johnson pledges that the government will, ‘do things in the short term to ease the squeeze on living standards’, (no sign as yet), they will likely go the same way as all the rest, into the wastepaper basket of empty promises. It must be getting pretty full by now.
It beggars belief that The Telegraph published an article this week suggesting that, according to top economists, people should save less and borrow more to save the economy and prevent a recession. Martin Beck, who is the chief economic advisor at the EY Item club claimed that it was, ‘incumbent on households using their strong financial position to keep spending’, and that ‘the pandemic has left households very well prepared for this period of turmoil because they were able to save more and pay down their debts.’
Where do they find the economists who write this drivel? Aside from the fact that it is only government that can enact the spending policies able to stabilise the economy, the truth of the matter is that not everyone was in the fortunate situation of being able to save and pay down debt during lockdown, and in times of economic uncertainty, whether you have the money or not, spending, or borrowing (unless they are driven to the latter) is the last thing that is on people’s minds. Furthermore, an analysis of Bank of England data by the Debt Justice, revealed that the number of UK households struggling with high levels of debt had increased by a third in 2021, even before the rise in energy prices and the removal of the £20 uplift in universal credit payments. And indeed, as mentioned above we are seeing the signs that people are retrenching in the face of that uncertainty. Lack of confidence begets a reluctance to spend.
Furthermore, the mantra of growth, as promoted by Johnson as the route out of this impasse is based presumably on the promotion of the false logic that a healthy economy drives tax revenue and gives government fiscal space to spend on public and social infrastructure. Just more of the same garbage churned out daily by those who know exactly how government really spends, but use the myths of scarcity to serve a purpose and deliver their ideologically-driven narratives. A political choice at the expense of the health of the economy and those who underpin its success – working people.
A healthy economy doesn’t depend on government tax revenues or borrowing capacity, it depends on a government having the political will and the real resources to deliver it.
A healthy economy also depends on the public and social infrastructure being in place, FIRST, to support the people and the businesses who rely on it. That is the job of government and represents the vital components of a functioning economy, and is certainly not dependent on monetary affordability.
It also fails to acknowledge that in the light of the climate crisis, Johnson’s focus on growth per se, without a clear plan or a strategy to deliver a sustainable and fairer, more just society, will just keep the capitalist juggernaut hurtling towards its destruction. And in this respect, we don’t seem to be making much progress in addressing this emergency. COP 26 is but a distant memory, and growth at any cost seemingly the name of the game.
At the same time as Black Rock warned this week that it would not support shareholder resolutions on climate change this year because they were ‘not consistent with their clients’ long term financial interests,’ a new forecast by scientists led by the World Meteorological Association, found that the probability of one of the next five years temporarily exceeding the 1.5 global heating limit was now 50% up, from 20% in 2021.
As the climate crisis warnings become ever more insistent and visible in our daily lives, banks continue to fund investment in fossil fuels and governments allow them to, without censure. The mission to save humanity from planetary degradation is on the rocks, as governments put fighting wars and growth as a top priority, trumping a future for our children.
It is distressing that the idea that government spends like our own household budgets has tainted any public discussion about the way forward, whether it is dealing with the fall-out from the pandemic, the effects of poverty and inequality on economies particularly, but not confined to the Global South, and the affordability of addressing the climate crisis. The tools are there through an understanding of monetary reality to deliver a healthy economy within the context of available resources, which we emphasise again are the real constraints to government spending.
However, the effects of government austerity policies which have dominated the economic narrative for over a decade, and also led to the idea that cuts to the public sector were necessary to get the public finances back into order, have not only created an increasing burden on the working population and their families, but also have driven the process of stripping out the last vestiges of our publicly paid for and delivered public services, on the lie of its unaffordability. The price we are paying today is unacceptable
It fits very nicely with the neoliberal ideology which has prevailed for decades; that the state’s role should be minimal, that it exists solely as a cash cow for the private sector, that the charity and voluntary sector should step into the government’s shoes for the provision of services that are not profitable, and that the individual should be promoted over the now dying concept of collective action.
At the same time, that same government (and others before it) have dedicated themselves to serving their own interests and those of their wealthy and corporate supporters, as well as pouring public money into private profit, from arms dealers to healthcare. And there it is, the vital clue, that money is not a scarce commodity. Public money for the corporate beggars leaching on the state while the public sector begs for adequate funding.
The consequences of this long-standing toxic ideology are before us. The growth of a low wage economy, in hunger, food banks and homelessness, and the widening gap in wealth distribution, are just a few of its damaging manifestations, all the result of government choices.
The Food Foundation released data this week that shows that in the last three months there has been a rapid jump in the proportion of households cutting back on food, or missing meals altogether. It noted that in April, 7.3 million adults live in households that said they had gone without food or could not physically get it in the past month. That compared, it said, with 4.7 million in January. There had also been a sharp increase in the proportion of households with children experiencing food insecurity in the past month, at 17.2%, up from 12.1% in January 2020. That represents, the Food Foundation noted, a total of 2.6 million children under 18 who live in households that do not have access to a healthy and affordable diet, putting them at high risk of suffering from diet-related diseases. It has called on the Government to take urgent action to prevent further escalation of this crisis, to include increasing benefit levels in line with inflation, expanding access to Free School Meals and the Healthy Start Programme.
The National Institute of Economic and Social Research, following its analysis for Channel 4 last year, reported this week that more than 250,000 households will ‘slide into destitution’ next year, which will bring the total number in extreme poverty to around 1.2 million. The think tank, echoing the Food Foundation, said that without government action, more than 1.5 million will face a rise in food and energy bills, that will outstrip their disposable income and force them to use savings (if they have any) or borrow to get through.
Professor Adrian Pabst, who is NIESR’s deputy director for Public Policy, commenting in November last year said: ‘Britain’s broken economic model shows no signs of turning into a high-wage, high-productivity, high-growth economy anytime soon.’ Regardless of Johnson’s promises.
While government fails to deliver, people will continue to struggle. It is distressing to note that while people’s lives are being ripped apart by a government that has no solutions but book balancing, Tories remain in their ivory towers sitting in judgement on those who cannot feed themselves or their families adequately. Not because they lack cooking or budgeting skills as a Tory MP suggested this week, but because they don’t have enough money. First up, we had the Ashfield MP, Lee Anderson, speaking in the Commons debate on the government’s Queen’s Speech, claiming that there wasn’t a widespread need for food banks, and that hunger was rather down to the fact that too many people ‘cannot cook’ and ‘cannot budget’. Tell that to the Trussell Trust and the myriad food banks serving their local communities. It was an insult to those who are forced to use food banks through no fault of their own, and to suggest that one can cook a wholesome meal for 30p a day by cooking from scratch. Perhaps he should be issued with a challenge to do so. It shows completely how out of touch some MPs are with the lives of their constituents.
Secondly, the Metro reported this week on Dartford Conservatives tucking into a buffet of cakes and sandwiches, after cutting the ribbon for the opening of a new food bank, as if that were something to celebrate. Whilst, in the same church building, desperate families have to queue there for food.
In 2017, Tory MP Jacob Rees-Mogg called the support given to food banks ‘rather uplifting’ and ‘shows what a compassionate country we are’. Of course, it is human to feel compassion for others who have fallen on hard times and want to help, but the existence of food banks, whilst not a new phenomenon, is a stain on a government which has the fiscal tools to ensure that people have the dignity of well-paid, secure work, either in the public sector, or in the form of a publicly run Job Guarantee scheme, to support those caught in the inevitable ups and downs of the economic cycle, and extraordinary events such as the pandemic or war, from which now stems an increasing tide of hunger and poverty, to add to that already perpetrated by prior lack of adequate government action.
Nicholas Hair, a Labour council candidate, commenting on the event said,
‘Food banks are not heart-warming. They are evidence of a failure of government and of a society to seek social justice’.
That gets to the heart of the matter. A government which knows it has the tools, as the currency issuer, to support people through this difficult time, but has chosen not to. A government that fails to spend sufficiently to support an economy and its citizens, transfers the burden to those who can least afford it. The human cost of this failure to act now will be devastating for working people and their families.
The solution, however, is not as the Chairman of Tesco has suggested this week, to impose a windfall tax on energy companies, as if collecting that money would give the Treasury the funds to alleviate the cost-of-living crisis. And, in the same vein, neither will a windfall tax on North Sea oil and gas operators, ‘rake in’ money for the Treasury to soften the pain of rising energy bills as predictable analysis by the Labour party continues to suggest. Just more of the managed illusions politicians rely on to keep the public on side from the valid point of view of fairness. The government, as the currency issuer, could create that funding tomorrow by authorising its central bank to do so. And it neither needs to tax nor borrow to keep the economy functioning. Again, its only constraint is the availability of real but finite resources, and how they are managed to deliver government priorities and avoid inflationary pressures.
However, on the other hand, a big yes to taxing the energy companies whose profits have gone through the roof, along with executive pay, and whose business is polluting and contributing to the climate crisis. Tax them to force change and drive sustainable energy solutions, or tax them out of existence if they fail to comply, but not because it provides funds for the Treasury to spend. It doesn’t.
On one further point, one could not disagree with the Tesco Chairman’s view that Rishi Sunak should not have raised National Insurance. He gets it! He understands that removing even more of people’s income leaves less for essentials. His remarks may have been driven by clear concern for those who are rationing the amount of food they eat, but also, no doubt, by the effects of that on the business as less money circulates through the economy and into company profits.
On that basis, it also makes a nonsense of Boris Johnson’s announcement this week that the government plans to cut 91,000 civil service jobs, claiming that it will free up cash to tackle the cost-of-living crisis. Or as Larry Elliott suggested in an article this week that ‘harder choices will need to be made, and at a time when ageing populations are intensifying pressures for higher spending. What nonsense!
Aside from the fact that government, as the currency issuer, doesn’t have to rob Peter to pay Paul, and paints a picture of scarce monetary resources which have to be divvied out, it demonstrates blinding economic illiteracy. Again, involuntary unemployment is not only harmful to those affected by it, but under current benefit arrangements, people would be left with less money to spend which, ultimately, would also have a knock-on effect on businesses such as Tesco, in an economy already facing serious problems.
If the government can create funds for its wars, or to bail out banks with no problem, then the question we must ask urgently is why can’t it do the same to help people, and why can’t it invest in the vital public and social infrastructure it has destroyed in the last decade?
When a Treasury spokesman claims, as was reported in The Telegraph this week, that since ‘public debt is at its highest levels and rising inflation is pushing up debt interest costs, the government has to manage the public finances sustainably to avoid saddling future generations with further debt’, there is only one response. It is a damaging lie.
And when Steven Millard, an economist at the NIESR think tank commented that, ‘The Chancellor had the chance to help poorer households, to do something about this. But he chose not to. He chose instead to pay for the Covid Assistance, the added fiscal support, by running down the deficit’, he has understood the potentially catastrophic consequences of that political decision, even if he chooses, like many in his profession, to ignore the monetary reality of how government spends.
The crossroad is before us, there is an alternative. But the question is, which direction will we take?
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