Britain is in a very unwelcome state right now. The ruling Tories, lacking any sane thinking, are likely to lose at the next general election in 2024 to Labor, which promises to be the party of “sound finances”, meaning they will be ill-equipped to meet the challenges facing the country in a highly volatile world , may well end up losing popularity and ceding government to the Tories. As in 2010, Labor’s reputation will suffer and they will lose again in another election round. This future prospect is not inspiring, is it. dilemma.
Labor pledges to essentially become Conservative
The pandemic has caused a lot of confusion – political forces traditionally leaning toward austerity have been forced to take a pragmatic stance that is contrary to their nature and allow governments to play a greater fiscal role to support incomes and jobs.
Despite the devastating nature of the pandemic, fiscal interventions have prevented the economic situation from worsening and exacerbating alarming health conditions.
At least income is protected to some extent, as are jobs (not quite but better than no protection at all).
Indeed, low-income communities have so far borne the burden of the pandemic because policy interventions have been less than comprehensive.
One might argue that traditional social-democratic political forces might have learned from this period of fiscal dominance and used it to flatly reject the neoliberal mainstream macroeconomic narrative that has dominated the past few decades.
But the fact is that, as was the case during the global financial crisis, social democratic forces in politics have not taken the opportunity to redefine the economic debate and widen policy space.
Instead, they seem to think they have to be more Conservative than ever, promising to do better what Conservatives naturally do.
The leader of the UK Labor Party delivered a speech in London yesterday (January 28, 2023)
When I became a leader three years ago, I knew we had a daunting task ahead. We must change our party and prepare for power. We must change our party and prepare for power in one fell swoop. Not change for the sake of change. The purpose of change is to make our Labor Party fit to serve our country. That’s why we must support NATO and show that it is non-negotiable.
Show hope that the business will thrive. Understand the importance of sound money. The country comes first, the party comes second. But above all, this is why we must eradicate anti-Semitism.Our message at the next election must be that we are not the same party that Britain rejected in 2019. We’re just pointing out the changes we’ve made. We must say that Labor will never again be the party of protest rather than the party of public service. Labor will never fail to understand that economic stability underpins our ambitions. Never again will Labor allow hate to spread unchallenged.
We have changed our party and we are ready to change Britain. Get ready to build a fairer, greener and more resilient Britain where working people succeed. Aspiratino has paid off. Public service work. Communities control their own destiny.
A Britain of hope and possibility, once again. This is where the Labor Party stands. Let’s make it a reality together.
He also said:
The lessons of last year are stark. Lose control of the economy, lose control of the businesses and working people who pay the bills. We cannot let that happen, even if it prevents things – good Labor things – that we might want to do when we are in power. Sound funding in our public finances comes first. But at the same time, we must have the courage to reform, to rebuild, and to rejuvenate the nation.
So the priorities seem to be – sound money “top” and anti-Semitism “above all”.
In my opinion, the anti-Semitic narrative is a ruse to remove the influence of socialism within the party.
Over the past three years there has been a sustained purge under the banner of anti-Semitism, which is really just about getting rid of the left and strengthening the right within the party.
Under this ruse, some good MPs and party workers were fired to allow Starmer and his lackeys to push to the right.
Most recent House of Commons research brief (published 17 January 2023) –
Budget Deficits: A Short Guide (Published 17 January 2023) – Provides a relatively recent view of the UK’s fiscal position.
Don’t take reports seriously other than data. All that stuff about funding deficits and such is mainstream.
as shown by data:
1. “In the 2021/22 financial year, government revenue – from taxes and other revenues – was £915 billion, while government spending was £1,040 billion (£1.0 trillion). The deficit was therefore £125 billion, equivalent to 5.4% of GDP.”
2. “The deficit at 5.4% of GDP is the UK’s twelfth largest deficit since 1948.”
3. “During 2021/22, the government has supported households, businesses and public services through the coronavirus pandemic. Support provided was less than in the previous year, as noted below, with the deficit reaching a peacetime record of 15% of GDP. “
4. “Government spending increased from 39.5% of GDP in 2019/20 to 53.0% in 2020/21. The sharp increase reflects an increase in government spending of about 24% in cash terms in 2020/21, while GDP fell by about 7% %.”
5. “Government revenue equivalent to 36.7% of GDP in 2019/20 and 38.0% of GDP in 2020/21.”
6. “Since 1970/71, the government has run a surplus (spending less than it takes in) in only five years. The last time … was in surplus was in 2000/01.”
7. “Since 1970/71, the average annual budget deficit has been 3.7% of GDP.”
8. “As the UK faces high inflation, rising interest rates and a weak economy, relatively large budget deficits are expected in 2022/23 and 2023/24.”
Consider some of the challenges the new government will face.
The NHS is in a deplorable state because of the austerity policies the Conservatives have imposed on it for the past 11 years or so.
It has a huge funding gap and the King’s Fund has found a major staff shortage — NHS staff shortage: Why are politicians struggling to get the NHS the staff it needs? (November 24, 2022).
There is a 7% shortage of needed doctors and a 12% shortage of nursing staff, and the problem is getting worse every year. Other assisted health needs are well below required staffing levels.
The aforementioned report concludes that staffing problems alone mean the NHS will not be able to deliver output sufficient to meet government targets.
Reports late last year suggested that even at current scales costs would rise by at least £4bn, with the Tories pushing for “efficiency savings of £14bn over the next three years or so” for the service.
Clearly, these shortages are manifested in longer waiting lists, overstressed existing staff – with rising absenteeism, sickness claims and premature departures – further exacerbating the situation.
The UK also has to grapple with growing Covid disability, with millions needing extra healthcare relative to what might have been expected before the pandemic, and slower labor force growth as this group will not be able to go to work.
Substantial funding and support for skills development with significant increases in wages will be required.
Labor has so far failed to show they are willing to address the funding shortfall and develop a plan to make up for years of neglect.
As far as I can tell, the only announcement was that they would be diverting income arising from the removal of the privilege of so-called ‘non-domiciled individuals’ to be taxed only on their UK-earned income (source) and restore the top income tax rate.
This is the policy of the Corbyn era.
While this is a step in the right direction to reduce inequality, it hardly addresses neglect in the NHS.
At last year’s annual Labor conference, the shadow chancellor claimed they would “raise” £2bn from tax changes, which will hardly close a huge funding gap – past neglect and future cost challenges.
It also perpetuated talk of tax-funded government spending, a central issue facing Britain for some time to come.
What exactly does Starmer mean by “sound finance”?
Well, if the shadow chancellor’s speech at last year’s Labor conference in Yar is anything to go by, it means that any policy initiative would be:
…calculate costs carefully and secure adequate funding.
Whole capital refers to matching with taxes.
So fiscal neutral.
The pandemic pushed the fiscal deficit above its long-run average of 3.7% of GDP.
A meaningful green transition, repair of the NHS, restoration of public transport, restoration of water supply quality etc. government is not possible without a government prepared to oversee an above average fiscal position for at least two terms.
The damage to the UK public sector is so great that limiting spending to tax revenues would leave the UK woefully short of effective government.
But a Tory is a Tory – again
With the March financial statements looming, the chancellor is out and weighing down expectations.
He tried to claim that the UK’s problems were centered on workers who were either retiring early due to Covid or not working hard enough to find work.
He also claimed (source):
… sound money must come first … limit spending.
The Conservatives are currently rejecting education and healthcare workers’ proposals for decent pay increases and attempts to limit spending in areas they have neglected for the past decade (social welfare, prisons, etc.).
In a major speech in London last Friday (January 27, 2023), the Chancellor spoke in jargon – denying that the UK was facing “declineism”, which spoke to David Cameron – big society – year 2013.
Neither of these empty statements is backed by any policy guarantees — just bullshit.
He claimed the Conservatives would be targeting the “four Es”, by which he meant “business, education, employment, everywhere”.
Note that Marketing Spin defines the 4 E’s as “experience, ubiquity, communication and evangelism”.
However, the Chancellor clearly contemplated that all of this action would come from the private sector, which has failed enormously in giving public assets and essential services to operate under the privatization agenda.
Nor can I find any coherent proposals to improve education, as the current position is to force cuts in teachers’ real wages and maintain spending wherever it has to go to upgrade UK state schools to make up for previous shortfalls.
My reading of the apprenticeship levy introduced in 2017 was that it was a disaster designed to ‘raise money’ for training needs.
It’s an old idea (Harold Wilson even started taxing it in the 1960s).
The issue is:
1. After 2017, apprenticeship vacancies fell sharply, even taking into account the upcoming pandemic.
2. At the time, there were projected large gaps in apprenticeship completion and skills development.this means additional Funding is needed instead of shifting from grant programs to taxes.
3. There is a bias in the selection of young workers.
And we may need to be mindful that “escalation” has become “everywhere” and that the failure of the current government in the former agenda will weaken the rebranded agenda.
in conclusion
The point is that both sides of British politics are plagued by the same imaginary frenzy as they have to devise policies that use tax revenues to pay for spending, without understanding that truly meeting the challenge will require substantially higher fiscal deficits over the longer term.
The Apprenticeship Levy is a good example – it used to be a grant system (funded by public expenditure). When it moved to a “taxation” system, public spending was eliminated, which is partly at the heart of its dysfunction.
Both parties in politics want to have “sound finances” – and this will severely limit what they can do.
In this regard, the scale of what they could do was insignificant compared with what they had to do to prevent further British decline.
The choices facing the people are such that it is frustrating.
Enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
