Monday 22 January 2024

The Anatomy of Tory Tax and Mortgage Bribes

Want a reason to vote Conservative? As the party slides in the polls toward Liz Truss territory, Rishi Sunak has rustled up a pair of buckeroos Tory high command thinks everyone would like to climb on. Number one: even more tax cuts. Number two: government subsidised 99% mortgages. That might explain why the Tory Sunday papers were so chipper in the face of their party's appalling polling.

What do we have on offer? In the Mail on Sunday, Jeremy Hunt speaks highly of the late Nigel Lawson and, emulating his hero, would like his stewardship of the Treasury put money in people's pockets. Just don't talk about how much of this money was thanks to cheap credit that evaporated in the late 80s property bust. Hunt thinks (unspecified) tax cuts can happen because, apparently, "technology". With the National Insurance cut taking effect from this month, Numbers 10 and 11 are hoping a few extra hundred quid in the pocket will cause millions of working Britons to look afresh at their party. Especially those who are better off because, true to form, the higher the income the more someone will save.

Hold the front page, the Tories want to defund public services for marginal income gains. The 99% mortgage offering is more of an eye-catcher. Effectively handing out housing deposits like confetti would (theoretically) help millions move out of renting and into buying their own home, kickstarting a new housebuilding boom and addressing the property shortage. Not at all coincidentally, turning young people into mortgage holders might boost the conservatising effects of ownership - those very effects that have powered Tory partisanship for more than a generation and have been systematically undermined by ... the Tories.

Scientific accuracy is a virtue in political commentary, so we should call these bribes what they are: wheezes. More tax cuts for most working age people disproportionately benefit the affluent and count for little when wages have been battered by inflation. And those who are better off end, the would-be natural Tory voters, are well aware that what they gain from NI cuts disappears because of frozen higher rate tax thresholds. And the mortgages? Any hope 99% mortgages would put rocket boosters under Britain's construction industry is forlorn. House builders have a vested interest in making sure completions lag behind demand so they benefit from asset price inflation and guaranteeing healthy profits. Creating a government-backed scheme is only going to generate more demand and stoke the property bubble some more. And that might be the point. Getting those vaulting values jumping upwards are what Tory opinion formers and the party's base loves to see.

Taking all this on board, could they do the job of reaching out to wider layers and avoid ballot box carnage? It's doubtful. If the Tories were serious about housing, they could have introduced this scheme much earlier. Indeed, had they done so their political position would not be as precarious. Hindsight, eh? And because the Tories have spent the last 14 years hammering working age people, a gift wrapped mortgage is not going to shift the deep antipathy. There's a reason why the Tories are on 10% among the under 50s. No, the mortgage scheme, like tax cuts, is an exercise in vibes. Its main audiences are not those who would ostensibly benefit from tax cutting and deposit largesse, but their elderly parents and grand parents.

Central to Tory politics of divide and rule between the retired and the rest is endless propaganda that their children and grandchildren are pampered, lead easy indolent lives, and have never had a diploma from the school of hard knocks. The war on woke and similar cynical rubbish makes out the younger one is, the more entitled, fay, and decadent they are. And so Tory policy and its presentation in their media, which the base disproportionately depends on for news, gives this rising generations of bums and ingrates the kinds of kicks that never did them any harm. It instructs young 'uns about the real way of the world, and if they respond positively by working hard and getting on they will be rewarded. With things like lower taxes and mortgage subsidies. The Tories are trying their best to help them along, and if they don't take a bite out of the carrots offered then the stick it is.

As the general election approaches we can expect more "generous" policies, but none of them are designed to win over swing voters. The Tories know the wipe out is coming and nothing can stop it. The best they can do is anticipate defeat and keep banging away at policies they think will cohere the base. That way the party will be fighting fit to spring back once the public get disillusioned with one term of a Labour government. In all likelihood, it's not going to turn out like that, but even the Tories can't help but find a flash of hope in the black of the abyss.


Zoltan Jorovic said...

Hi Phil, I wondered if you have read the book by Abby Innes, "Late Soviet Britain: Why Materialist Utopias Fail" see the review here:
I have not read it yet, but will be getting hold of a copy as it looks like essential reading.

Phil said...

I have not but it's now catapulted itself to near the top of the TBR pile!

Blissex said...

From the review: «While liberal policies have been based on neoclassical theories and early Soviet economics on Marxist-Leninist sociology, "both assert that there are predetermined laws of the economy that each doctrine alone can apprehend. Furthermore, both schemes require the the operation of a universal and consistent rationality, albeit a rationality of opposing forms - a constant fraternity (Soviety) versus a constantly rational self-interest (neoliberalism).»

Oh please! While some knowing propagandists might describe neoliberalism as that fantasy, actually-existing neoliberalism is nothing like that, it is just a set of policies to deliver big state intervention and big state spending for property and finance interests while cutting wages and pensions and social insurance for the servant classes and in little steps so those in the servant classes who are "vested" do not feel threatened.

When thatcherism fails it will be not because it is a materialist utopia, but because its electoral appeal is founded on 20-40% of the population living via property and business rentierism off the remaining 60-80%, but rentierism needs a ratio of least 1-to-10 or more usually above 1-to-20 to be sustainable. So far the gap has been funded first by petrodollars when scottish oil was being exported, and now by ballooning private debt ("privatized keynesianism") which eventually will conflict with the need to pay for imports.

When a commenter on “The Guardian” wrote in in 2018: “I inherited two properties in 1995 [...] and the value has gone from £95,000 to £1,100,000” apparently nobody asked themselves from whom that £43,000 per year, for 23 years, no-work profit had come, and whether those profits would continue as it not so sure that property prices can continue to double every 7-10 years "forever".

Anonymous said...

Well, that book appears to have basically a single point to make, and which doesn't require much selling to me: the assumptions of the neoliberal economic model are based on political fantasy rather than reality.

Hold the front page, eh...?

It was accorded much fanfare during the 70s and began a 40-year rule at the turn of the 80s not because it was really any good, but because it was an appealing fantasy to the powerful vested interests. That being the only way, apart from bloody revolution or bottom-up gradualism, that a "new" economic model ever gets any real traction.

And of course its free lunch ran out when the Great Bubble popped in 2007-2008, and since then it has been holding on by doggedly dug-in fingernails and sheer inertia.

I'm all for a mountain of academic slating piling up against it, it certainly deserves that. But someone should probably try working out exactly how it will be replaced, because that also determines what will replace it.

Blissex said...

«that book appears to have basically a single point [...] the assumptions of the neoliberal economic model are based on political fantasy rather than reality»

That is indeed what the book says, but it is completely wrong and irrelevant: the assumption of the neoliberal *propaganda* model are political fantasy, but the actual neoliberal electoral mode is based on a solid foundation.

Really? Has nobody noticed that neoliberal politicians have been winning every single general election since 1979? Has nobody noticed that neoliberal voters have loved their booming living standards since then with two brief interruptions in the mid 1990s and the late 2000s, and accordingly have always voted enthusiastically for more neoliberalism? Has nobody really noticed that all major parties are neoliberal and have been for decades except for the Corbyn period at Labour (and perhaps the Kennedy period at the LibDems)?

There is the usual explanation: that all that happened only in my imaginary parallel reality, and in the real reality neoliberalism has endured for so many decades "not because it was really any good, but because it was an appealing fantasy" making everybody, including neoliberal voters and "sponsors", poorer? I guess that in real reality all those shark-like CEOs, speculators, "Middle England" petty bourgeois did not mind that their incomes and wealth have been falling because an "appealing fantasy" has made then feel good regardless.

Anonymous said...

Of course the neoliberal electoral model was very successful, Blissex. Hopeful fantasies tend to be easy sells, especially if reality appears to be backing them up... for a while. Consider pyramid schemes (especially if you're going to talk about solid foundations).

The time period matters. Pyramid schemes are great until they collapse, and some people can get out with wins. Likewise for politically-appealing fantasy economic models. Some people won big - at the expense of many others. And as you never tire of pointing out, many people thought that they were winning big, but face a rude awakening when the rug-pull happens.

But when is that going to be, and under what circumstances? The political model now, post-2008, is that all of the people who are in up to their necks want it to survive just long enough for it not to be their problem any more. Either because they've shuffled off their smug mortal coil already, or because the circumstances at the time are such that everyone has bigger problems anyway, and therefore they won't personally lose out by much.

The point remains - and it's one that you appear to be in agreement with - that the neoliberal model is fundamentally a political one, concerned only with book-cooking for short-term gain, and its fig leaf of respectability as a scientific model is a propaganda exercise. Somewhat like the Soviet model ultimately revealed itself to be.

Sean Dearg said...

@Bliss Why not write your own insightful analysis? Why restrict exposure of your wisdom to such a relatively small audience (no offence, Phil)? You could endow the nation with the benefit of your acumen and perhaps even make it to the top of the non-fiction list. Or are you concerned that any commercial success might undermine your integrity?

I wouldn't worry over the last point.

Aimit Palemglad said...

@Bliss - the point is that it there are no solid foundations (as anon points out). People sometimes contrast mining with forestry. Both extract natural resources for profit. One is a one-time extraction, and when its gone, that's it. The other is theoretically sustainable, as more trees can be planted. But that requires planning and continuity. Forestry can be as rapacious and unsustainable as mining if land is not replanted and enough time allowed for trees to mature. Neoliberalism is more like mining than either type of forestry. At best, it is clear felling the vast old growth forests while trying to cultivate a few meagre plantations on unsuitable land.

Extracting your wealth from others only works if they have enough to survive on. The more you squeeze, the more it resembles mining, with the worthless spoil being all that is left behind.

Having mined the developing world literally and figuratively for the past 250 years, they are now siphoning off what wealth trickled down within western societies from that practice and piling it ever higher upwards. Like a Dragon's hoard heaped into a tottering tower it threatens to overbalance and crush the scampering hordes below. There are no foundations. They are felling the forest before they can grow, strip mining every hill, and partying like there is no tomorrow on the proceeds. The problem is, there will be no tomorrow. Just a massive come down as the hit wears off and you are left looking at a wasteland.

Rather than realise this, and act to correct it, the response has been to create a vast screen and to project a fantasy vision of paradise on to it. Then to point at the screen and say, this is what we are delivering! Can't you see how wonderful it is? That's OK(ish) until those trying to deceive the rest start to believe their own illusion. When self-delusion replaces deceit. That's where we are now.

And Bliss looks and says, "Wow, that screen is impressive. They must have some serious tech to build that". He congratulates himself on knowing it's a screen, without apparently asking what is behind it.

Blissex said...

«the neoliberal model is fundamentally a political one, concerned only with book-cooking for short-term gain»
«the response has been to create a vast screen and to project a fantasy vision of paradise on to it.»

That's really overselling it:

* Neoliberalism is at the core based on upward redistribution, and that is both real and sustainable, indeed it is even "green": lower consumption for the majority who don't matter, higher consumption for the large minority who matter, the total may be even slowly shrinking. The higher consumption for the large minority is real, their living standards have been booming since Reagan and Thatcher.

* In addition to the core of real, significant upward redistribution of consumption there are *also* some financial shenanigans and some book cooking, to obfuscate the process, or to provide more opportunities for spivs, but that's not the core of neoliberalism, just froth; neoliberalism is not a pyramid scheme.

* Nothing is forever, so sooner or later neoliberalism will fail, but in the meantime it has already provided several decades of high living for the middle and upper classes, and presumably the current redistributive model can run for another decade or two, and perhaps longer. Some sensible people thought that "irrational exuberance" would be over in 1999, some other used the term "late stage capitalism" in the 1890s, and never mind all those who predicted the collapse of capitalism in the 1930s.

Anonymous said...

> presumably the current redistributive model can run for another decade or two, and perhaps longer

How sure are you of that?

Upwards redistribution can run only for as long as there is anything left to redistribute upwards, without rendering the lower layers incapable of bearing the weight. Which is also a characteristic of pyramid schemes, funnily enough.

When such an upward redistribution scheme hits the buffers, what signs would you expect to see?

Probably something like this: an explosion of dependence on foodbanks, surge in the political relevance of populist extremism, highly visible collapse of public services (like water, health, etc), surge in major industrial disputes, economic destabilisation (surging inflation, perpetual cost of living crisis, a domino chain of major companies and even public bodies going bust), foreign wars... by now, we're just waiting for the rioting to start, aren't we?

Aimit Palemglad said...

Bliss, you have a strange definition of sustainable if you think that neoliberalism is both sustainable and "sooner or later will fail". If it is truly sustainable, why would it fail?

It will fail, BECAUSE IT IS NOT SUSTAINABLE. It has only been going since about 1980, and it hit the buffers in 2008, and has since been coasting along gradually slowing. A series of road bumps have slowed it further, and it is now barely moving.

The soviet system lasted from 1917 to 1989, ~70 years. 1980 + 70 = 2050. I would be ready to bet it won't make it that far. Unfortunately, it seems likely that some sort of neo-feudalism or technofascism will replace it.