Wednesday 15 March 2023

The Economics of a Depleted State

If you take what Jeremy Hunt says as good coin, his statement earlier today was a "growth budget", or a "back to work budget". It was neither of these things. It was just the same tired, declinist tune we've grown accustomed to under Rishi Sunak. It gives off the pretence of doing something, but in the end it doesn't do anything.

There were three big eye catchers which, on closer examination, amounted to not very much. On energy bills, the good news is we're keeping the energy price cap at £2,500. The bad news is that the government are doing nothing to stop the scheduled unit price increase in April. The seemingly most helpful announcement - the extension of free 30 hours of child care for the under-fives - looks really good on the surface. Except its introduction is going to be staggered, and so there's every chance Godot could turn up before the policy is implemented. If that wasn't bad enough, the Chancellor simply assumes there are enough nursery places for every child. In fact, there has been a decline in provision over the last three years and the money the government is making available is not sufficient to fund the staff required to meet demand. Indeed, Hunt recognises this himself. Which is why the number of children nursery staff can supervise under the regulations has been increased from four to five.

The final big policy piece was Hunt's fiddling with pension entitlements. Or rather the big subsidy he's handed to those on high salaries. Apparently, the over 50s are going to be tempted back into the workforce by scrapping the tax cap on pension pots, as well as increasing the threshold at which tax kicks in on payments into pensions. This rises from £40k to £60k. That's definitely going to bring back the hundreds of thousands of essential workers the Tories and their supporters applauded in 2020, and have since been variously rewarded with 1% pay rises and the worst cost of living crisis since the 1970s. He's having a laugh. It's a pill to sugar coat the lowering of 45p threshold from £150k to £125k, a position forced on the Tories in part by their last attempt at a bold budget, and the growing public intolerance toward those troughing while everyone else is making sacrifices.

Hunt included a sop to Time Gentlemen, Please-type landlords with the cringe-worthy "Brexit Pubs Guarantee": a freeze on draft ale duties. Car owners saw fuel duty frozen again for the 13th year on the trot, and a modest fund set aside to help leisure centres and swimming pools stay open. With 7,200 leisure centres and over 3,000 swimming pools that money is not going very far.

And that was it. This budget designed to get Britain off its arse and firing on all cylinders was just vapours. No money for fixing the decrepit state of the state, nothing to help people with the Tories' inflation crisis, absolutely no hope for a better life. Some commentators have speculated this is the "boring" budget before Hunt throws out the bribes in next year's pre-election budget. No jam today means the jam tomorrow of mega tax cuts. The problem with tax cuts when what people need is money in their pockets, is for most they are a marginal benefit. Unless they're VAT cuts, they always benefit the wealthiest the most. Which is why Hunt is likely to appease the Tories' tax rebels eventually, but you can forget about them ever being a vote winner.

In all, this was an eyes-down-seeking-fag-butts budget, the very epitome of the Tory effort to keep expectations low and minimise the scope of politics. Hunt did stabilise the Liz Truss "situation", but he's content to maintain the stagnation. As long as the government keeps resisting pressure on public sector pay, ensures the wage relation is tickety boo, and the profits are flowing, growth - which was unsupported by any new announcement - is simply a nice-to-have.

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11 comments:

Dialectician1 said...

"Apparently, the over 50s are going to be tempted back into the workforce by scrapping the tax cap on pension pots, as well as increasing the threshold at which tax kicks in on payments into pensions."

This measure was sold to the electorate as a way to get more consultants/doctors back into the NHS - those that sought early retirement because of the existing pension cap. This is effectively a £4bn tax giveaway that will benefit the wealthiest people in the UK by dramatically increasing how much they can stash away in pensions while enjoying the full tax benefits. The Institute for Fiscal Studies said the measure “probably won’t play a big part, if any” in increasing the number of people in work. For nurses, health practitioners, ambulance drivers etc. there are no such incentives - and they are leaving the NHS in their droves.

Whilst Hunt’s budget focussed on growth, one of the best measures of the progress of a nation is the health of their people. As a recent piece of research in the Journal of the Royal Society of Medicine (2023) shows: in the 1950s, the UK had one of the longest life expectancies in the world, ranking seventh globally. By 2021 it had fallen to 29th place just above the Maldives, Chile, Costa Rica and Thailand. It states that income inequalities rose greatly in the UK during and after the 1980s and that rise also saw an increase in the variation in life expectancy between different social groups. According to the OECD, the UK is now the second most economically unequal country in Europe after Bulgaria.

As the authors of this report state: “Worryingly, at some point, countries can enter a vicious downward spiral, with worse health feeding into economic decline and vice versa. Meanwhile, a growing body of research is cataloguing how declining health threatens democracy itself.”

https://journals.sagepub.com/doi/10.1177/01410768231155637

JN said...

But apparently there's plenty of money for nuclear-powered submarines on the other side of the world. What interest do the vast majority of the British people have in threatening China? It's ludicrous. If there was a war between the USA and China, that would be a catastrophe for both sides, so why the fuck would any sensible British government want to be involved?

JN said...

The government wants to cut taxes on the pensions of relatively very wealthy doctors but refuses to increase the wages of 'junior' doctors, nurses, paramedics, etc? Logically, non-ideologically, that's crazy.

JN said...

And regarding childcare, the specific details sound like an improvement (?), though not sufficient (?). But the way Hunt described them sounded like the priority was very much to push new mothers back into paid, surplus-value producing work as quickly as possible. You can dress that up in pseudo-feminist language, but ultimately the point is minimise the necessary interruption of these women's ability to work to produce profit. IE: it's not about these women at all (at least not if they are working class); it's about their bosses.

Blissex said...

«the growing public intolerance toward those troughing while everyone else is making sacrifices. [...] nothing to help people with the Tories' inflation crisis, absolutely no hope for a better life.»

Yet another expression of this fantasy. Reality in the the UK is that a large minority of people, 20-40%, not the elites or the 1%, have had booming living standards for 40 years, mostly thanks to property and finance, entirely redistributed from the lower classes.

There are two common attitudes among "progressives" as to that:

* "I belong to that 20-40% and I will pretend that only the 1% or the 0.1% have been benefiting from thatcherism, to fool the gullible losers that I am really on their side, but what I really think is «I don't want to see my home lose £100 000 in value just so someone else can afford to have a home and neither will most other people if they are honest with themselves»".

* "I belong to that 20-40% and I will bravely state that since that 20-40% is a big block of politically active thatcherites then we must pursue them politically rather than the less politically active losers, so «Labour would only win if the party championed aspirational voters who shop at John Lewis and Waitrose»".

I think that both pretending that 20-40% haven't been making a lot of money from thatcherism and most of those love it is bad for the "left", pretty much as bad as pursuing thatcherite policies to pander to most of them.

That's because I think that quite a few among those 20-40% can be converted to an alternative to thatcherism, for example many northern property owners, and many retired or nearly retired people, because their interests can be satisfied in other ways than redistributing to them large yearly amounts from the lower classes.

Blissex said...

«in the Journal of the Royal Society of Medicine (2023) shows: in the 1950s, the UK had one of the longest life expectancies in the world, ranking seventh globally. By 2021 it had fallen to 29th place just above the Maldives, Chile, Costa Rica and Thailand. It states that income inequalities rose greatly in the UK during and after the 1980s and that rise also saw an increase in the variation in life expectancy between different social groups.»

Affluent propertied middle class «aspirational voters who shop at John Lewis and Waitrose» are doing very well on life expectancy, the others don't matter, so it is "unfair" to include "losers" in national averages.

https://www.economist.com/interactive/britain/2023/03/09/why-did-250000-britons-die-sooner-than-expected
“Outside London, there is almost a perfect correlation between life expectancy in a local authority and its level of deprivation—as measured by a government index of a battery of economic and other factors [...] A poor English girl could on average expect to live 7.7 years less than a rich girl, and a boy 9.5 years less.”

«According to the OECD, the UK is now the second most economically unequal country in Europe after Bulgaria.»

A partially repentant neoliberal Economist, Brad DeLong, made a very good observation, that around 1980 many newly minted middle class voters thought that there was too much equality, and that they would be better off if the "productive" rich and affluent (themselves) became richer and more affluent, and the "exploitative" poor became poorer, and voted consistently and zealously for Thatcher, Reagan and their imitator. And they were apparently right.

A 79-year-old retired carpenter in Cornwall «bought his council house in Devon in the early 80s for £17,000. When it was valued at £80,000 in 1989, he sold up and used the equity to put towards a £135,000 fisherman’s cottage in St Mawes. Now it’s valued at £1.1m. “I was very grateful to Margaret Thatcher,” he said.»

Blissex said...

«No money for fixing the decrepit state of the state, nothing to help people with the Tories' inflation crisis, absolutely no hope for a better life»

Why should the Conservatives move to the "left" of New New Labour and the LibDems by doing any of that to attract some lower class voters to their rentier+kipper coalition?

Political parties may offer voters some policies to benefit their core constituents and improve their turn out, or to compete with offers from other parties for swing constituencies. But the latter motivation is unnecessary for the Conservatives in the current situation, because none of the other major parties are willing to represent the interests of lower class voters.

Ken said...

Thus, what is increasingly clear is that an ambitious, active state in many areas is required. However, it’s not what we’re going to get, given “fiscal responsibility.”

Blissex said...

«an ambitious, active state in many areas is required»

This country is then lucky to have one: when it comes to supporting foreign wars, property speculators, finance bankrupt corps the state finds whatever sums it wants in the BoE balance sheet and all organizational and procurement and regulatory issues are made to disappear ASAP. Major example: in the past few years the "decrepit" Home Office etc. have achieved a tremendous surge in processing immigrations because that was the political will.

The question is not the state, its size or its imaginary depletion, it is in whose interests it operates. State efficiency and size are not mere technical issues independent of politics.

Zoltan Jorovic said...

"SO @Bliss, what's your answer to Life, the Universe, and Everything?"

"Its obvious. Its all about home ownership."

"Don't you think there might be other factors?"

"Nonsense. Those who own a home are in a state of bliss (pardon the expression) while those who don't are angry, resentful and dissatisfied. But the homeowners don't care and it just makes them even happier to see the misery and deprivation so longs as they don't have to suffer it."

"That's a bleak view of humanity, @Bliss, and a little simplistic. What about empathy, family bonds, community, concern for others?"

"All made up b*ll*cks fed to people to keep them compliant."

"What, you mean like bread and circuses, @Bliss?"

"Breads and circuses, and homes. But without the bread. Or the circuses."



Dipper said...

'Apparently, the over 50s are going to be tempted back into the workforce by scrapping the tax cap on pension pots'

There is a specific issue here, as you all know, which is the pension rules meaning Doctors effectively being asked to pay for the right to cock up surgery and be sued. To nobody's surprise, Doctors avoid this by not working.

The Tory solution is to scrap the cap for everyone. But labour seem to be saying they will only scrap it for Doctors, which I would guess wouldn't last long in the courts.

The notion that expecting workers to actually receive a reward for working is some kind of Thatcherite plot explains a lot about why we are where we are.

On the wider issues, once again Trussite Tories and Corbynite Labour share some agreement about the transparent failure of Brownite big-state economic policy. But the solution is IMHO not a bigger state, but a smaller one. Hence my being a Truss supporter and not 'left wing'.