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Chancellors and Recessions

The greatest lie in politics is that economic growth is in the Chancellor’s gift.

Because the economy is usually growing, it pays for chancellors to claim credit for it, but this is just Game Theory. As soon as it starts shrinking, the opposition start shouting about how the “chancellor’s failed”. They’re both lying to you (and probably themselves too). Chancellors do influence the economy, but more subtly than the simple -/+ve GDP growth number.

I did not credit Brown for the boom, which was global, I did not blame him for the recession, which was global. I do blame Brown for the deficit, or at least that part of it which isn’t automatic stabilisers and bank-bail-outs, but that is NOT the same thing as the recession. I do not blame Brown for the boom and bust because in the main, I don’t think the business cycle is particularly amenable to manipulation by chancellors. And insofar as they are able to influence GDP growth, I don’t think this is the Chancellor’s main role.

So what are chancellors for? Even Gordon Brown knew this: to balance the budget (or nearly so) over the business cycle. This was his “Golden Rule” (remember that?). In this, he failed, spectacularly. This is not about the bank bail outs – that bit of the deficit from 2008/9 is fine. While I disagree with Brown’s policy to bail the banks out, but I don’t regard the policy as idiotic: it’s certainly one of a number of possible solutions to a genuine problem. My problem is with the growth in state spending from 35% of the economy to 50% in 13 years, the over-complex tax-code (which is giving so much wiggle-room to “avoiders” right now) and the borrowing during the boom to fund a worthless army of state apparatchiks, which is causing so much pain now. In running a structural deficit to fund a massive expansion of state employment, Brown weakened the economy, removed the room for manoeuvre when the inevitable bust came, and arguably made the inevitable recession deeper when it did, and the resultant recovery slower.

So Chancellors do have an effect on the economy, but it’s far more subtle than “is the economy growing?”.

The longer the boom, the more painful the bust, and the UK enjoyed 16 years of economic growth (which started under the Tories…). Some of Brown’s policies may have prolonged the boom – the UK version of the Greenspan Put certainly contributed to financial recklessness, but it was an approach shared by the USA and elsewhere. I doubt a Tory chancellor would have done much different. Ever cheaper money certainly contributed to the housing price bubble which has arguably not yet deflated. Even with all that cheap money, the biggest boom was in the state sector, where almost all the net new jobs of 13 years of Labour rule were created.

It is this army of state apparatchiks which kept the boom going, giving the impression of growth, where the private-sector had stagnated long before 2008.. Cheap money and diversity outreach-coordinators can only manipulate the GDP numbers for so long. And it it this Army of state apparatchiks being culled en-masse which forms the biggest component of “austerity”. Yes it hurts for the PCS and UNITE to lose so many members, but those UNITE members are handing in their membership cards and joining the growing Private sector. Even during a slump, which Labour will tell you is the worst since the war, as soon as the Public sector stopped hiring, the private sector started. It’s almost as if there was something in this “crowding out” theory. True many of these new capitalist running-dogs are “under-employed” self-employed or part-time workers, but these are the seed-corn of the next generation of small businesses.

So. Gordon Brown can arguably have made the current recession worse with his policies. And George Osborne’s austerity might at once be slowing growth in the short term, and also be necessary. Just because sacking civil servants depresses GDP, it does not follow that not sacking them is the right thing to do. GDP growth does NOT generate lower deficits when that GDP growth is simply deficit financed spending on worthless, return-free state prod-noses.

In the parts of the economy where the state is dominant, the recession is brutal. Jobs are non-existent. In London and the South-East where the state is relatively small, people are saying “what recession?”. Just as Labour’s boom was an illusion created by a chancellor gaming (deliberately or accidentally) the GDP number by splurging money at the public sector, this “double dip” is the result of a chancellor (in my view) doing the right thing in attempting to balance the books and reign in a state-sector which had been growing over-mighty. When winds of austerity stop blowing through the public sector, we will be left with an economy carrying a much, much smaller burden of state jobsworths, with a lot of under-employed people in the private sector. This sounds like a recipe for growth to me.

The other lie politicians tell is the deliberate confusion (by both sides, when it suits), of debt (the size of the mortgage, if you like) and the deficit (the amount extra borrowed each year to cover income shortfalls). The deficit is falling, yes, slower than expected or desired, but it is falling from nearly 12% in 2010, to 6% now. This doesn’t look to me like “failure” on reigning in the debt. However thanks to Ed Balls’ former master, we still have a deficit therefore the debt is rising. Pointing out that the UK is borrowing more now than it did 5 years ago is just dishonest. It is obscene chutzpah from Balls to blame Osborne for failing to deal with what was, and remains the biggest deficit in the western world in just two years,when the biggest part of the extra borrowing is … wait for it… debt interest. The solution to this growing part of Government expenditure is not Ed Balls’ solution of “investment” (by which he means ‘spending’). It involves driving interest rates down, and hoping inflation does the work for you.

The point is the boom pre-2008 wasn’t as good, and the bust post 2010 isn’t as bad, as the politicians or the GDP numbers would have you believe. GDP numbers are a lousy way to judge a chancellor’s performance.

Save The Children & Child Poverty in the UK.

Thanks to the Unique way the BBC is funded, Save the Children got a free advert courtesy of BBC R4’s thought for the day this morning. Akhandadhi Das contrasted Save the Children’s first ever campaign about poverty in the UK with the charitable status of independent schools, explicitly suggesting the “need of independent schools to fill their places” was less worthy than Save the Children stepping way outside its remit and embarking on a party-political crusade. Let’s leave aside the left-wing obsession with private schools, and deal directly with Thought for the day acting as a party-political broadcast for the Labour party.

Child poverty in the UK is NOT caused by a lack of resources. Every child has access to the NHS, free education and the parent receives £20.30 per week for the first child and £13.40 for each subsequent one in child benefit, no questions asked. If there is no job in the household, the family will be housed at public expense, and they will be eligible for income support, a benefit rarely mentioned by welfare campaigners because it’s calculated as “the difference between the claimant’s net weekly income and the amount required to meet his or her needs”. Worklessness in the UK does NOT result in kids starving, or being unclothed, or not being able to get to school, or even being homeless, unless there is contributory negligence by the child’s parents. Yes, it’s true those kids are unlikely to have access to the latest fashions, and may not be able to afford every school trip, but the poverty is only relative to others whose parents work.
Work, of course is the route out of poverty. The state cannot and should not simply give the poor money, as this creates a moral hazard. Unfortunately, in taking up low-paid work many poor people face the loss of benefits and face a marginal effective tax rate over 100%, mainly thanks to Gordon Brown’s working & child tax-credit system. Furthermore, the Benefits system with it’s 72 separate bureaucracies makes reclaiming benefits should a job be lost an absurdly onerous process resulting in a massive disincentive to take on the low-paid, insecure “starter” job. And the low-skilled are, of course, banned from ever selling their labour at their real marginal rate of production, thanks to the Minimum wage, and will therefore never get any job and hope of improving their skills .When you factor in the cost of travel and things like work-clothes and sustenance, it simply doesn’t pay to try to get off benefits.
This is the poverty trap, Iain Duncan Smith’s Centre For Social Justice has identified and is seeking to remedy, in part through a universal credit, simplifying the benefits system.
This has not prevented the left from blaming child poverty on “the cuts”, and describing Iain Duncan Smith as a monster, intent on putting a boot on the face of the poor. Every change to the benefits system has been opposed tooth and nail by the unions, who will lose valuable jobs in the bureaucracy, and by the Labour stay-behind OPs in the Quangocracy for whom “poverty” is a meal-ticket. Poverty is being openly blamed on a recession caused by Government policy, and on “the cuts”. This simply isn’t true. Most child poverty in the UK is in the 20% or so of households where no-one works. Many of these are Multi-Generational welfare families, who are absolutely immune from the business cycle. This is also the reason it’s very hard to see correlation in crime numbers with the business cycle.
Save the Children is not an impartial organisation. It is run by a former Blair and Brown number 10 staffer, Justin Forsyth, and Brendan Cox, Director of Policy and Advocacy was a SpAd to Gordon Brown. Amongst the Trustees are a number of Labour quangocrats, including a director of “Labour’s greatest success”, SureStart, Naomi Eisenstadt. The Coalition are not convinced SureStart is worth the money. This campaign, the first by Save the Children concerning poverty in the UK – they werre silent during the winter of discontent, or during the massive rise in youth unemployment under Blair and Brown, is aimed squarely at the coalition government by a nakedly partisan, left-wing organisation.
It is Save the Children who should have its charitable status revoked, not Eton.

Ed Balls’ “Wealth Tax”

In an Independent “exclusive“, Ed Balls has said he’s going to impose a “proper wealth tax”. Wealth taxes are window-lickingly stupid and anyone advocating them is an economically illiterate moron. here’s why:

  1. Moral hazard. It penalises those who save for retirement, pay off a mortgage and seek to not be a burden on the state, against those who spent their surplus income on Beer and Cocaine.
  2. As Tim Worstall points out, a well-off retiree might face a wealth-tax greater than their annual income.
  3. Real wealth is very mobile. No-one is going to stick around or let their money stick around to be taxed by the government. The left hand side of the laffer-curve on wealth taxes is very short. For this reason, the super-mobile top 1%, who pay 25% of income taxes will leave for Switzerland, Monaco or the Carribean. You end up therefore not taxing the 1%, but the less-mobile upper-middle income retirees instead. Even here, a wealth-tax increases the attractiveness of the Costa-del-sol, where retirement property is currently cheep, like a budgie. The wealth tax may, and probably will, therefore end up costing the exchequer.
  4. For the reasons laid out above and many more, wealth taxes are very hard to collect. Dennis Healy, former Labour chancellor of the exchequer during the ‘winter of discontent’, no rich-pandering neo-something he, said in his memoirsin five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and the political hassle
  5. Though to be fair, that the hapless Healy thought something impossible does mean it actually is.

Wealth taxes are so utterly stupid that even Gordon Brown’s lickspittle, Ed Balls is not actually proposing one. He appears to be entering negotiations with the Liberal Democrats by suggesting a mansion tax instead. He’s just appeasing his own moron supporters by calling it a wealth-tax. I’ve no problem with a mansion tax, but it would be best imposed putting a few more council tax bands on at the top, rather than designing another silly, gimmicky tax with its own bureaucracy of Labour-voting trades unionists. However increasing council tax, even on the rich is political suicide because of the Daily Mail.
So. Everyone’s wrong. Democracy: doncha love it?

The Brothers Unite Against Progress.

Listening to the interchangable trot (I think it was the head dinosaur at the GMB union, Paul Kenny) the BBC dredged from the 1970’s to appear on the ‘Today’ Program, I was struck by his repeated use of the words “private company”. The background is that the Blairite think-tank, Progress, whose mission is to

promote a radical and progressive politics for the 21st century…

whatever that means, is structured as a company, not a charity, and it distributes money around the labour party, and somehow this is sinister. But it’s the way the Trades Unionist apparently thought “private company” was something everyone would find as distasteful as he that I found striking.

Frankly, I couldn’t give a tinker’s cuss about how pressure groups, think-tanks and so on are structured. Many in the Libertarian world make much grunting about the fact that the Accociation of Chief Pig Officers is a private company. Of course what matters is the influence, and the quality of thought. And in progress’s case it was founded in 1996 by Peter Mandleson, now Lord Fondlebum of Rio, to come up with an answer to the conundrum: The Tories are right on more or less everything, but they make me feel all icky. How can I get Tory policies past the Unions?

Of course Tory policies delivered by people who don’t understand why they work was popular until it all blew up. The Labour party was able to win elections under Blair in a way they hadn’t been before. Of course, winning elections isn’t what the unions want, because they don’t believe power should lie in the ballot box, but at the point of production. The Unions want their party back, so they can go back to discussions about how to bring about the inevitable end of capitalism, and when to smite the hammer-blow by calling a General Strike. And to this end, they are trying to get New Labour kicked out of the party, just as the party dealt with the militant tendency in the 1980’s. Labour is moving sharply left, and towards a lumpen, municipal socialism of the 1970s. The drabness of the vision is matched only by the unpleasantness of the men who want to lead it.

The RMT’s Bob Crow: the Labour party’s soul looks like him.

Ultimately, whatever the polls say now, when the people come to look closely at the labour party in 2015, they are unlikley to like what they see. The polls are a mirage, Ed Miliband is a spineless fool, and Cameron’s the luckiest politician in History.

Labour’s EU referendum

Labour’s policy Committee has suggested the party, which has already promised and voted against one, may back an ‘in/out’ referendum on the UK’s EU membership.

Of course, no-one believes that Ed Miliband, grotty little snot-bucket that he is will ever be in a position to deliver on his promise, so the promise is free. Assuming the public buy the policy at face-value, a big assumption, then it may be clever politics.

It increases Pressure on David Cameron, whom the Euronutters in his own party think reneged on his promise on the Lisbon treaty. This is a stupid, mouth-breathing, sun-reading thing to believe, and to this end, any comment with the phrase “cast iron” in it will be deleted. Of course, both Labour and the Tory Euro-obsessives know the coalition partners, the Liberal Democrats are as completely in love with the EU as the Tory Right isn’t. Miliband therefore hopes to split the coalition, force an election, and win while the polls are in his favour.

However. It is transparently obvious that no politician wants to deliver on this promise. Every major party has promised, then voted against an EU referendum, with the honourable, if profoundly stupid exception of some Tory backbenchers. (And NO. UKIP isn’t a ‘major party’) The problem for both Miliband and the Tory Euro-obsessives is that the public simply don’t care about the EU. When asked, It seems the mainstream Tory position: ‘say no to everything, but stay in’ appears to be the favoured policy, but this is not a strongly held conviction. The message, if any, the voters give to the politicians about ‘Europe’ is

“do what you will, just shut up about it, OK?”

Miliband is therefore hoping to open up the old Tory “split” on Europe, guessing that it won’t cost him, and may even boost his polling, if his naked politicing isn’t seen through. And the Tory Euro-nutters, egged on by the UKIP Gin & Jag brigade will charge blindly into the trap. Fuckwits.

Idealogical Certainty.

The main problem with political debate is that the tribes are simply not interested in speaking to each other. The left think the right are only interested in the rich, and are basically self-interested. The right think the left are emotional children, assessing the motives behind policies (with cash inputs as a measurable proxy for morality) without being interested in the effects. Of course, most lefties fervently believe that the state can and should provide services and redistribute wealth, because they believe this will make the country happier and better to live in. The right believe that a smaller state, with a dynamic economy is a better way to achieve the same ends.

I suspect this represents a hankering amongst the politically interested for the ideological battles of the past. Tories want Cameron to be more aggressive, provoking a confrontation with the Unions, so that they can re fight the miners’ strike. That he isn’t picking fights with Europe, the Unions, and so forth leads to suspicions that he’s “not a real Conservative”. Labour for their part despised Blair for failing to reverse Thatcher’s legacy, deriding him as not “real” Labour for essentially the same reasons as some Tories despise Cameron. The two sides are simply not interested in talking to each other.

The fact remains, whatever the rhetoric, Labour presided over a massive (and to my mind) catastrophic growth in the state from 2000 to 2010, and only the most rabid anti-Cameron Tory would suggest that the coalition isn’t trying desperately to reverse that.

Frankly, I’m losing interest in debating with people on the Right who use the phrase “blue Labour” and with people on the left who mouth the same tired, tribal dogmas without even making the effort to engage with the ideas. In both cases, there is a refusal to look and be influenced by empirical evidence, with endless appeals to “common sense”. On the left this is used to support the idea that cuts are “too far, too fast”. On the right, it’s in favour of populist authoritarianism and tax-cuts.

What more does a “Real” Tory (which usually, in practice means a UKIP frother) want from Cameron? Free schools not enough, they want compulsory selection at 11-plus and a Grammar in every town. Standing up to Europe by vetoing a treaty isn’t enough, because there was a subsequent negotiation; they want withdrawal. Cutting the deficit as quickly as possible isn’t enough, they want a tax-cut too, and hang the consequences.

Labour have got what they want from the Leadership, a combative head-banger ranting economic lunacy as Shadow-Chancellor, and a Union stooge as leader of Her Majesty’s Loyal Opposition, and no interest in talking to the country. Unlike Labour, the Tories have people who ARE interested in talking to people other than the tribal base. The last thing we need is for a Conservative party to follow Labour’s lead by being interested only in talking to itself, for that is the real route to oblivion.

While ‘the cuts’ are happening, I’m content this is a Tory government, even if the rhetoric is more conciliatory than the base would like. The ‘state as proportion of GDP’ is all that matters. For my point, being in broad agreement with a Government is unbelievably debilitating for a blogger.

Ground of Your Choosing: The Benefits Cap.

In battle, a successful commander will draw the enemy onto ground of his choosing. At this, Tony Blair was a master. By drawing the Tories to fight on ground, like Europe or the NHS, where they were weak, they were made to seem out of touch. The result was three election victories. Indeed New Labour’s vilest policy, the plan to lock innocent people in gaol for 42 days before telling them what they were supposed to have done, was merely an attempt to discomfit the Tories. Propose a policy so vile that the Tories would have to oppose it, and then say they’re “weak on terrorism”. Of course that was a policy so vile even the lobby-fodder of the Labour party couldn’t wear it and the Labour government went down to it’s first defeat.

Yesterday, Labour, Liberal and cross-bench peers inflicted another defeat on the Government, by supporting an amendment exempting child benefit from the proposed £26,000 benefits cap. Let’s not forget that a tax-free income of £26,000 is equivalent to you or me earning £34,000. You can support a family on a salary of £34,000 so I suspect the Government is delighted.

Who are we talking about? Mainly this benefits cap will hit people living in hugely expensive areas, mainly in London, who have large families. The elephant in the room is Housing benefit, paid directly to Landlords and inflating rents for the rest of us. Obviously people will have to move out of Hampstead, Chelsea and St. John’s Wood to somewhere grotty in zone 4.

So you’ve had to move? This is the world’s smallest violin & it’s playing just for you.

The other group of people are those with large families. I think lefties will be surprised at how people who’d love to have three or four children and who don’t because they simply couldn’t afford to have them, feel about people who’ve never worked, pumping out kids on the tax-payers’ expense. Most people feel we need to end the subsidy for people who’ve never worked to breed people who’ll never work. In any case, you can bring up plenty of kids on a salary of £34,000. You just might have to move to a cheaper part of the country. A family of eight children could potentially forgo income of £5933.20 a year, equivalent to £8725 pre-tax & NI. So in essence, the Labour & Lib-Dem Lords want to pay £42,000 a year to people who’ve decided to make you pay for something many working people have decided they couldn’t afford. Good luck selling that.

Working people on this kind of income, £34,000 a year, are called “middle class” often in a sneering way, and are not helped in any way by the benefits system. Indeed because I EARNED less than this in several previous tax-years, 6 of them, during which I held down 2 jobs while building a business, my Fiancee was denied any benefits at all when she lost her job. So what if people are forced to move to grottier areas of town? Working people have to do this all the time, when their income falls. So what if their kids have to move schools? My friends in the Army have the same problem. There are plenty of Private soldiers in the army dodging bullets in Afghanistan who have families subsisting on less. There are people starting businesses earning nothing who are nonetheless excluded from the benefits system. Do you think these people feel any sympathy for someone paid more than many people earn to do nothing?

The idea that an income equivalent to a salary of £34,000 “will thrust families into poverty” is absolutely abhorrent to the people who are forced, by the threat of expropriation and violence, to pay for it, people who are sneered at as “middle class”. I would not be surprised if the Government quietly persuaded enough of its supporters in the Lords to stay away from yesterday’s vote, to ensure a right royal battle on ground on which it is absolutely certain of the public’s support.

Good luck, lefties, trying to persuade anyone that an income equivalent £34,000 a year salary is going to thrust anyone into “poverty”. I suspect the Government is absolutely delighted to have this in the news for a few more weeks. “Labour wants to pay its voters more than you earn”.

Offense-Taking redux.

Apatosaurus excelsus, wearing display plumage.

At wednesday’s Prime Ministers’ Questions, Dennis Skinner, the Beast of Bolsover asked a question about how the Wicked PM invited a representative of Hitler Satan Rupert Murdoch “into the heart of Government”. The prime minister responded by answering the question saying he’d love to give evidence to the Leveson inquiry, then added..

“…There’s no need to go to the Natural History Museum to see a dinosaur, just come to the House of Commons at half-past-twelve…”

Skinner, who’s himself been banned for his parliamentary insults to “the Boy George” Osborne’s alleged use of Coke & Brasses (remarks he defended by saying “they were in the ‘News of the World’ [owned by one R. Murdoch’s News Corp], you can look it up”) merely shrugged. I may disagree deeply with Mr Skinner’s politics, but he’s a parliamentary bruiser, who can take the rough and tumble.

Paul Flynn, who thinks a firm handshake “assault” is not so robust, accusing the prime-minister of “ageism”. You need to work pretty hard to find offence in calling the sine qua non of Old Labour a “dinoasuar”, an epithet often used to describe those on both sides whose antediluvean politics are still fighting battles long lost and won. The insult is pretty mild, and describes the man’s politics, not his age. As Paul Flynn, unfortunately an MP of Long standing well knows.

This offence-seeking needs to stop, and Paul Flynn (who thinks a British Jew can’t be ambassador to Israel because of “divided loyalties”) needs to man up or get out of politics.

Chris Williamson MP & Liz Kendall MP. Lying or Ignorant?

This morning, feebly groping for good news after a disastrous conference, Leicester MP Liz Kendall pointed to some You Gov data from June, which suggested that Labour enjoy a 19% lead on “party closest to women’s voters & understands their views“. This is the desperate data-mining which is common currency on the left, so I called both her and Chris Williamson, Labour MP for Derby North, who retweeted, on it.

is that the sound of a barrel being scraped? How far behind are Labour on the economy? How’s Ed doing?

They both responded. Chris Williamson MP

claims & I are scraping the barrel for pointing out Labour has 13 point poll lead over Tories amongst women

of course, Labour didn’t then nor now have “a 19% lead amongst women”. Their lead was smaller than it was for men, a FACT an MP like Williamson will have known. Liz Kendal too made the same, stupid, incorrect point.

views & concerns of 50% of electorate ‘scraping barrel’? Enough said…

First this is old data, and it’s an occasional question. However EVEN AT THE TIME, the labour lead amongst women was SMALLER than it was amongst men. So the claim that the Tories, and by extension, me are not concerned by women’s issues is ridiculous. Of course, Labour, the party of identity politics is going to have a lead amongst the kind of people for whom women’s issues (which Labour probably think mean abortion and childcare, issues on which I’m probably closer to Labour than the Tories). However the Tories undeniably enjoy a stronger position amongst women than men, at the time, and now. So by women’s OWN responses, the Tories better answer Women’s concerns then they do for men.

This kind of ‘pick a leading question which gives a Labour lead, extrapolate wildly and then suggest the Tories are anti this issue’ is common on the left. Indeed Posts headlined ‘polls suggest voters reject Tory cuts on ….” accounts for about half the posts on Liberal Conspiracy. Such “analysis” is fine when a hack like Sunny Hundal indulges himself in it. however this is a flagrant abuse of statistics, or to put it another way, lying.

I expect better from my elected representatives, even Labour ones, and wouldn’t mind an apology from Mr Williamson and Ms Kendall, for suggesting that I’m sexist or Anti-women for suggesting that people, women included, think ‘the economy’ and the performance of a potential PM (which, unfortunately for Labour, Ed Miliband currently is) to be a more important a question right now than ‘women’s issues’, about which YouGov can’t even be bothered to ask regularly.

So. Which is it Chris & Liz, Lying or Ignorant?

Labour’s “principles”.

If you want one paragraph to sum up the unprincipled evil of Labour, This one on Labour-Uncut by Dan Hodges

“You begin by deciding where you want to position yourself politically. You then develop a policy framework to support that positioning. And finally you construct a philosophical and intellectual narrative to define your programme as you sell it to the electorate”

is it.