Tag Archive: Labour



 

Osborne's Autumn Statement speech revealed more borrowing

Switch in focus from growth

Austerity is still the answer but now the question has changed. ‘How do we rescue the country’s economy, eradicate the deficit, and return to growth?’ has been replaced with, ‘how do we ensure that the cost of borrowing doesn’t increase?’

 

When governments borrow money they do so by selling bonds (gilts). These can best be described as IOU’s where investors buy a certain amount of bonds to be repaid, plus interest (yield), over an arranged period of time. Keeping down this yield is paramount to a government’s ability to repay its debts. If the government becomes insolvent then it will default and trigger the kind of austerity measures currently seen in Greece.

 

Britain’s coalition is trying to ensure that the country is still seen as a safe haven for money markets. When investors suspect that a country is unlikely to be able to repay its debts then credit lines dry up and the governments have to offer higher yields to convince potential investors that the extra reward merits the enhanced risk. An example would be Italy where a lack of liquidity has led to yields of eight per cent to be repaid in just three years. This contrasts with Britain’s relatively luxurious position of selling, at just over two per cent, bonds that don’t have to be repaid for a decade.

 

So Chancellor George Osborne is understandably keen to maintain cheap borrowing levels and avoid massive interest repayments.

 

How is the coalition maintaining market confidence?

 

Just how one keeps borrowing down is the dividing point in the country’s political landscape. The Conservative led government hopes that by maintaining their austerity programme to eliminate the structural deficit over the course of the parliament, they are keeping the faith of the markets. But austerity comes hand in hand with lower investment, lower spending and lower growth. The UK economy has flat lined and as a result borrowing has to increase to fill the void left by lower tax revenues. The government’s argument is that avoiding austerity measures and allowing the yield on UK bonds to grow by just one per cent would mean every family in the country paying an extra thousand pounds so Britain could repay its debts.

 

The Director of the Institute for Fiscal Studies, Paul Johnson, appearing on the BBC’s coverage of the ‘Autumn statement’, noted that due to declining growth increasing the amount Osborne has had to borrow, he has to factor in more cuts than previously to eradicate the structural deficit:

 

“He’s had to take another 15 billion [pounds] away from public spending in the years after the next election. Now he hasn’t told us how he’s going to do that, he’s simply said that in his forecast he’s taking an extra 15 billion away, that’s enough for the OBR (Office for budget responsibility) to say he will meet his target. Had he not pencilled that in the OBR would have to have said he’s going to miss his targets.”

 

Osborne’s analysis is that should this happen the effect would be to shake the markets’ confidence.

 

 

So what of the opposition?

 

Polls are currently reflecting the public’s lack of faith in Labour’s economic plan. ComRes found that 21 per cent of people trust Labour with the economy whilst 50 per cent do not. Ed Balls’ argument for his economic philosophy has hit a wall. The party’s message is that spending more and therefore increasing borrowing costs will lead to lower borrowing costs. On the surface the claim appears illogical and they have failed dismally in getting across any sort of economic argument to support the claim.

 

The coalition has found political capital in claiming that despite inheriting a huge deficit they have maintained a low level of borrowing costs. This appears true when compared with European neighbours like Greece and Italy, but does this tell the whole story?

 

Today’s bond market:

  Price Yield
US Gov 10 yr 100.00 2.00
UK Gov 10 yr 113.27 2.23
Ger Gov 10 yr 97.23 2.31

 

The above graph shows that the UK does indeed borrow a similar amount to both the USA and Germany. If the theory of cutting the budget deficit to increase the attraction to borrow follows, then you would expect them to have similar budget deficits:

 

Budget Deficit (% of GDP)

US 9.3
UK 8.7
Greece 7.0
Germany 1.1

 

So far so good.

 

But the US, despite the best efforts of the Republican Party, isn’t following a similar austerity plan to keep favour with the markets.

 

Upon arrival to the White House President Obama initiated an $800bn bill and recently fought hard for a $447bn package of tax cuts and government spending. Hardly austerity measures and when combined with the life and death struggle to raise the debt ceiling, which had it not been achieved would have led to an American default, would surely deter any nervy investors. Yet that isn’t the case, so Chancellor Osborne’s theory of ‘austerity or exorbitant borrowing costs’ appears to fall down.

 

The example of America’s economic situation is much more consistent with Britain’s position than the European countries. Britain hasn’t defaulted on its debts for 300 years, it has its own currency, an independent central bank and control of its own monetary policy. Our flexibility is far greater than the likes of Italy and Greece and is as such a far safer economy to invest in.

 

Economist Paul Krugman believes austerity rain will lead to an austerity flood

Labour will need to work hard to convince the country that stimulus is the way to go with even former Liberal Democrat leader and Keynesian, Lord Paddy Ashdown, subscribing to the government’s argument. During a debate with Alistair Darling in response to the ‘Autumn Statement’ he reiterated the party rhetoric; “debt as high as Italy yet borrowing rate lower than Germany.” Labour has to show that this is a distortion of cause and effect to gain any credibility for their argument. Ashdown’s party has always wanted to join the Euro despite the disadvantages of the loss of a sovereign monetary policy. These monetary conditions are again ignored in the austerity hypothesis. Italy cannot print money into the system in order to devalue; it has no control over interest rates and is tied into a political entity that is forcing austerity measures that only increase the likelihood of default and further disincentivise investors.

 

The 2008 Nobel Prize winning economist Paul Krugman states in his blog: “it turns out contractionary policy is contractionary after all. As a result, despite all the austerity, deficits remain high. So what is to be done? More austerity!”

 

Perhaps the Labour Party would be well served to adopt this point in favour of the distinctly less successful ‘too far too fast’ campaign.

 

 

 

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The people have spoken and they have unanimously decided…. NO!!!

No to what? Well obviously no to political reform. But also a great big vocal no to politics as a whole. Here are some of the other questions posed at the ballot that were rejected.

Q. Do you have any sympathy for Nick Clegg’s scapegoat status?

A. NO!! One thing is for sure, Liberals got hammered in England, Scotland and Wales.

Q. Have you given up on government?

A. NO!! In England Tories are still firmly in control of local councils and whilst they expected to lose hundreds of seats they actually gained 81.

Q. So do you support the government?

A. NO!! We hate tuition fees, we don’t like the cuts but we blame the Lib Dems and Labour so Tories have got through the local council elections unscathed.

Q. Have you forgiven Labour?

A. NO!! Labour fell well short of the 1,000 extra councillors they wanted to gain in England and they took a beating in Scotland courtesy of the SNP.


The public may not know what it wants but they know what they don’t want and that’s everything currently being offered.

The traditional progressive movement in England has been given a resounding kicking. The Liberal Democrats got annihilated in the local council elections losing just shy of 700 seats and 9 councils. Even here in Sheffield, where it was expected that things would be bad with Labour gaining control of the council, it was far worse than expected. Nine councillors were lost and many other wards saw Sheffield’s lowly conservatives overtake Clegg’s men.

And then there was AV. The polls seemed to agree that there was no hope for the attempt at political progression putting it 18 points behind the No2AV campaign. In actuality it was far worse than this as 68 per cent voted against thus giving Clegg his second kicking and leaving his party at a crossroads.

Can he lead Scotland to Independence?

Scotland

The one concrete result we have got is in Scotland. Ed Miliband wanted the Labour recovery that aims to eventually see them retake Westminster, to begin in Scotland. Such talk indicating Miliband’s patronising belief in Scotland’s subsidiary status didn’t have the desired effect and pushed the voters towards Alex Salmond’s ‘putting Scotland first’ approach. The Scottish Nationalist Party stormed to an impressive electoral dominance destroying the labour party who so long have ruled the lands north of the border. However, whilst the SNP are experiencing a surge in support, this may not actually point to a thirst for progression. Whilst the First Minister, Alex Salmond, now has a position to implement a referendum for independence it is not at all certain that if he does he will win. The result was massive for the party but if they don’t win a referendum on independence then it could be assumed that the results of the Scottish assembly elections were an anti labour and Westminster vote more than a victory for SNP. Salmond is a heavyweight politician operating in a pool of small fish. And whilst clearly he has voter appeal he may have benefited more from poor labour tactics than having successfully united his country over political reform.

England

Liberal Democrat attention is now being switched to the next great battle. NHS reforms will serve as the latest battleground in order to refocus and regroup the party. I have always resisted previous talk of the coalition government not lasting as ‘too early to say’ but now the government is ‘mission creep-ing’ its way to internal crisis. Divisions that were previously confined to the backroom are now open to the public. Aside from the AV campaigns and figures such as Chris Huhne, and Paddy Ashdown throwing tantrums the formerly silent but lurking Tory backbenchers are creeping into the limelight. When asked about the longevity of the coalition government conservative Peter Bone MP said: “I don’t think it will go on for the full five years that’s for sure. The only reason for the coalition was to come together and sort out the economic mess that labour left this country and once that’s done there’s absolutely no need to continue with the coalition.” He went on to say: “Liberals have got to row in behind the government and stop bleating”. This opinion is reflective of so many Tory backbenchers who don’t see this as a coalition government, but a conservative one with a few refugees thrown in to provide Mr Cameron with the votes he needs to do the bidding of middle England.

Liberal Democrat MP Norman Lamb, most famous for threatening to resign unless changes were implemented to Andrew Lansley’s NHS reforms, stated today: “We have become a human shield for the conservatives”. There is no doubt this is true and it’s hard to see what they can do to change that whilst remaining in government. Mr Cameron won’t throw them any bones. The Tory backbenchers won’t allow it. They’ve come to the fore as they did to derail John Major over the EU. The current PM will be wary of his history, internal party rebellions destroyed the two previous conservative PM’s and now that the Liberal Democrats are so weak and Labour are still a long way back on their road to recovery, his primary concern is to appease his own party.


What is the point of first past the post? It doesn’t represent the public. It serves only to represent a single political group as the winner rarely gains a majority worthy to represent its constituency and insures safe seats for politicians. This allows them to feel free to use public money to fund anything from pornography to duck houses.

The arguments from the No2AV campaign have relied on an advert portraying people being too stupid to understand a format requiring the writing of numbers in order: http://www.youtube.com/watch?v=-obZ9OG_XKA

And a poster showing a boxer being knocked out by an opponent and still winning despite this being impossible under AV as boxing is a one on one situation: http://www.youtube.com/watch?v=NVRtL20Ue54&feature=player_embedded

But the argument that winning a foot race, even by a nose, is justifiable as being fully representative seems to be doing enough to win with the ‘No’ campaign in the lead by anything from 5 to 10 percentage points depending on the poll.

Why?

The King is born!!! Oh, the King is dead....already

The public have no appetite for change. People will complain about politicians and the press will get delirious with rage at expenses scandals but it means nothing come election time. We’ve become an old country set in its ways. We alternate our governments between labour and conservative as their main competition has been over who can be closer to the political centre ground. We have a monarchy that trudges on despite holding no influence over the country and its subjects anymore. The economy is lurching in the face of competition from China, India and Brazil. Our place as a ‘former’ world power is at last truly dawning and there doesn’t seem to be any enthusiasm to snap the country back into life.

We’ve had two by-elections recently in Barnsley and Oldham East after the previous Labour MPs were imprisoned. You would have thought that criminally pissing away voters’ money would deter the people from entrusting your party again, at least for the foreseeable future. But Labour not only held onto the seats but actually increased their share of the vote by over 10 per cent in each district.

The voters trundled into the booths and collectively put a cross in the box next to Labour because that’s what they’re supposed to do. “We’re from the north. We vote labour. We don’t want Thatcher’s Britain.” The same happens in the south with middle England as staunchly conservative as ever only to be riled out of their dozy middle class lifestyles if there is a perceived threat to…..trees.

AV won’t win because the politicians don’t want it to. The Tories like their safe seats. They represent the moderate right against the left wing. If the voting system represented a straight fight between the right and the left, then labour and lib dem votes would be intertwined possibly decimating the Tories in a number of their close seats.

Labour are split over the issue because they realise the above, but they also don’t like the idea of losing votes to the lib dems who are often the common mans’ second favourite party and could do well under AV.

It could all have been so different……

For real reform it takes a leader who can win the support of the public and develop enough energy to encourage people to act in the name of progression. Think Martin Luther King, Emmeline Pankhurst or Vladimir Lenin. Nick Clegg could have been that man. For a while he was the knight in shining armour destined to lead the country to greener pastures. He fearlessly strode into the field of conflict (TV leadership debate) and after a ferocious battle where much blood was spilt (some verbals and polite disagreements) the gallant knight emerged heroic and victorious (1% gain in vote).

But then it went wrong.

Mel Gibson ain't no English Bitch

I don’t remember Mel Gibson signing an agreement at the end of Braveheart saying: “Fair cop mate, your English boys won. It was a good fight (but never really that close). Do us a favour sport (King Edward), I’ll be your deputy if you fancy?” It wouldn’t have gone down well with the Scots and would probably have confused the film critics. But that’s what Clegg did because he hadn’t seen Braveheart. He fucking hates Mel Gibson films.

Since then he’s had to choke on tuition fee increases that decimated his strong student support and battle his own party about Andrew Lansley’s proposals for reforms to the NHS. Clegg’s Merry Men aren’t happy. Vince Cable (Friar Tuck) is getting into arguments with David Cameron about immigration speeches. Danny Alexander (the ginger merry man) is falling out with George Osborne about ‘dirty tricks’ in the AV campaign. All the while the liberal democrat Godfathers Emperor Ming Campbell and Charles Kennedy are hardly thrilled about the whole coalition deal.

Clegg could have pushed through electoral form. He could have ridden the crest of a liberal wave that refused to elect the Tories outright despite knowing labour were not so much a dead horse but long decayed. His victory is that there is a referendum on electoral form. He has taken it this far but to ensure this he had to sign his political life away. Now Ed Miliband won’t even share a platform with him during the YES2AV campaign. It’s a sad state of affairs for a man who sacrificed his party to gain power and attempt to make real change to the country. If AV wins it will now be Miliband’s victory. If it doesn’t then Clegg’s surely done as a political force. Tuition Fees increased, Trident will be replaced rather than scrapped and electoral reform has slipped away.