The Labour Government

[Dave Ewing's Back 'eader]

I thought Hunt was a moron, but Rachel Reeves is shaping up to be a disaster.
Removing the Winter fuel allowance from folks not on pension credits will save 1.4bn and cost between 2bn and 4.2bn for new Pension Credit claims. Genius.
Simply tapering the allowance based on the amount of tax a pensioner pays would save half that but result in no extra pension credit claims.
Then there is VAT on school fees. The Tusami of pupils wanting state places will undoubtably cost more than it raises.
Then we hear today that there will be higher Employer NI contributions - that's going to encourage job growth and investment isn't it...
Entering the doom loop...

There's a lot of similarity between the people arbitrating and governing the game of football and government ministers making fiscal decisions - neither seem to have a fuckin' clue where we will all end up!

 

[bluenova]

I don’t think anyone has made a claim as bizarre as yours regarding scrapping the WFA. A ‘progressive move’? That’s really quite something.

You're right, if I'd made that comment, it would be nonsense, but I didn't say that. I'll assume you just misread my actual comment. I said:

"I'm not sure it was great politics to cut the WFA, or particularly fair for those just above the limits, but if more people claim PC and we end up spending the same amount, but targeted towards the poorer pensioners, then that's a progressive move."

Progressive in terms of benefits is almost always used to describe redistribution.

There have been plenty of people arguing that the universal WFA was a poor use of funds for targeting poverty, but simply cutting it isn't a progressive measure, unless you expect some of the money cut from wealthier pensioners to end up in the pockets of the poorer ones. Means testing the WFA alongside encouraging more people to claim Pensioners Credit, is clearly progressive.

 

[Brewster's millions]

You're right, if I'd made that comment, it would be nonsense, but I didn't say that. I'll assume you just misread my actual comment. I said:

"I'm not sure it was great politics to cut the WFA, or particularly fair for those just above the limits, but if more people claim PC and we end up spending the same amount, but targeted towards the poorer pensioners, then that's a progressive move."

Progressive in terms of benefits is almost always used to describe redistribution.

There have been plenty of people arguing that the universal WFA was a poor use of funds for targeting poverty, but simply cutting it isn't a progressive measure, unless you expect some of the money cut from wealthier pensioners to end up in the pockets of the poorer ones. Means testing the WFA alongside encouraging more people to claim Pensioners Credit, is clearly progressive.

It’s deeply unfair for those pensioners just above the limits, and you’re also ignoring the implementation risks, given the likelihood of significant delays for claimants. It’s terrible politics and Labour will get an absolute kicking over it if we end up having a particularly cold winter.

 

[metalblue]

I don’t think anyone has made a claim as bizarre as yours regarding scrapping the WFA. A ‘progressive move’? That’s really quite something.

You appear to be overthinking things regarding the definition of austerity. The bottom line, as I posted before the election, is that Labour has maintained the same primary fiscal rule as the previous government, and if Reeves is committed to balancing the current budget - as she has stated - then the new fiscal architecture is actually more conservative and restrictive for the public finances than the framework operated by Hunt.

The profile of public sector borrowing that Reeves will outline in the October Budget will look very, very similar to those projected in the past few fiscal statements; a steady decline in borrowing, constrained spending, a rising tax burden and the fiscal target being hit five years ahead. If people were happy to describe that as austerity while Hunt was Chancellor, then I’m afraid it’s going to be the same under Reeves.

So far Reeves has constructed a largely false narrative around the state of the economy and public finances in order to clear the path politically for a small number of tax rises and spending cuts in some areas, so that larger public sector pay deals can be delivered. These are essentially political moves and leave the fiscal outlook little changed in the context of a trillion pound annual tax take.

If you and others are happy with these measures then that’s fair enough - they are politically-motivated after all - but let’s not pretend that scrapping the WFA allowance is a progressive move because that’s just nonsense I’m afraid.

It’s one of the stranger interpretations of austerity I’ve read. It’s almost as if someone is trying to make the definition fit their narrative. Most bizarre.

Austerity is marked by 2 key components, tax rises and reduction in public spending. We’ve already seen infrastructure projects for hospitals, roads, etc etc halted and we’ve been forewarned of tax rises. On the surface it’s going to be more austerity (even if a lighter version) but until her autumn statement we can only look and hope her orthodoxy is to demonstrate a steady ship whilst she plots to produce a rabbit or two from up her sleeve for growth.

 

[bluenova]

It’s deeply unfair for those pensioners just above the limits, and you’re also ignoring the implementation risks, given the likelihood of significant delays for claimants. It’s terrible politics and Labour will get an absolute kicking over it if we end up having a particularly cold winter.

See, there was no need to misstate what I'd said in your previous comment.

That's a genuine take, and I agree with all that.

 

[BrianW]

Everyone seems to want benefits cut - but not my benefits!

What you are seeing are the consequences of the absurd delusion (which began as far back as Thatcher) that the finances of a sovereign state with a fiat currency are analogous to those of a private household. This has become orthodoxy to the point that politicians dare not go against it for fear of being thought irresponsible. (I wonder whether Reeves believes the myth or merely purports to believe the myth.)

In a sense, it makes no odds. She has fitted herself with the corset of Tory-invented fiscal rules that are wholly artificial and which could be changed at will. This means she has to 'balance the books' which in turn means cuts on the one hand and tax increases on the other - albeit the fairest and most sensible taxes have been ruled out of the equation for political reasons.

This is going to hurt, although I suspect the idea is to get the pain out of the way, light candles for growth, and hope that some generosity is possible in the later years of the government. Cynical? Moi? It might just work.

The Tories giving away two clearly unaffordable NI cuts makes matters worse. But I imagine that was the whole idea.

Voters need to blame themselves for believing the 'household budget' myth to the point where politicians have to kowtow to it. If only macroeconomics was taught in schools!

 

[inbetween]

Everyone seems to want benefits cut - but not my benefits!

What you are seeing are the consequences of the absurd delusion (which began as far back as Thatcher) that the finances of a sovereign state with a fiat currency are analogous to those of a private household. This has become orthodoxy to the point that politicians dare not go against it for fear of being thought irresponsible. (I wonder whether Reeves believes the myth or merely purports to believe the myth.)

In a sense, it makes no odds. She has fitted herself with the corset of Tory-invented fiscal rules that are wholly artificial and which could be changed at will. This means she has to 'balance the books' which in turn means cuts on the one hand and tax increases on the other - albeit the fairest and most sensible taxes have been ruled out of the equation for political reasons.

This is going to hurt, although I suspect the idea is to get the pain out of the way, light candles for growth, and hope that some generosity is possible in the later years of the government. Cynical? Moi? It might just work.

The Tories giving away two clearly unaffordable NI cuts makes matters worse. But I imagine that was the whole idea.

Voters need to blame themselves for believing the 'household budget' myth to the point where politicians have to kowtow to it. If only macroeconomics was taught in schools!

But didn't Truss crash the economy when she promised £45bn in unfunded spending? Why would a similar increase in spending not similarly spook investors and similarly crash the economy given the global economic climate?

Commodity prices are falling, gas and electricity will be much cheaper compared to last winter. This is probably what Labour are betting on with the loss of the winter fuel allowance. The biggest worry anybody should have is any event which causes further inflation.

The country may not be a household budget but whatever it was 5 years ago it is now cataclysmically worse. To argue for any form of unrestrained spending ala Corbyn is silly and would crash the economy.

The only sensible option is restrained spending but Labour have only been in power for 2 months, they seemingly don't know how much there is to spend let alone what on.

 

[KS55]

Truss crashed the economy by failing to get the movers and shakers in the markets onside in advance, rather than the actual spending plans. She just sprang a surprise on them and they panicked.

 

[BrianW]

But didn't Truss crash the economy when she promised £45bn in unfunded spending? Why would a similar increase in spending not similarly spook investors and similarly crash the economy given the global economic climate?

Truss wanted to borrow money, not to invest, but to waste on tax cuts for the rich. Who would simply have taken the money and stashed it, to some extent in tax havens.

It's like going to a bank manager for a loan (when you are already in debt) to splash on a lavish party. If the plan is to extend your house you would get a better hearing.

There is also a difference between 'restrained spending' and obsession with a wholly artificial need to 'balance the books'. Because, as I said, a state is not a household. The only limit on spending is resources. If your policy needs 10,000 bricklayers when only 5,000 are available, that causes inflation.

Tax only exists to limit inflation. It takes money out of the economy that would otherwise be used to (in my example) employ bricklayers. The Government could fund itself wholly by printing (or creating) money, but inflation would soar - really soar. This is why the 'taxation is theft' brigade is economically illiterate too.

 

[Blue Maverick]

There are some bizarre takes around. One of the key planks of Osborne's austerity was the public sector pay freeze, and his commitment to cut public sector jobs. Yet now we're being told that not only are the pay rises austerity, but it's ALSO unaffordable and inflationary.

We're now being told that tax rises are likely for CGT and IHT - two taxes on "unearned" income that were in Corbyn's manifestos, which are usually considered wealth taxes, are also actually austerity. If they do manage to raise those taxes and can blame the Tories for it, then it's a win win for the left.

So far the main action on benefits, has been to remove the Winter Fuel Allowance from everyone not on a low income, and a campaign to encourage more people on low incomes to claim Pension Credit. I'm not sure it was great politics to cut the WFA, or particularly fair for those just above the limits, but if more people claim PC and we end up spending the same amount, but targeted towards the poorer pensioners, then that's a progressive move.

After 14 years of the Tories blaming Labour for everything that went wrong in the economy, and the language used by Labour going into the election, I'm not sure who is surprised that they didn't just throw all that in the bin on day one, and say, "you're right, we are going spend, spend, spend!". If anything they made it abundantly clear that they would hammer the Tories, and play this game.

Amazing those public sector freezes are now been caught up on, they did the square route of fuck all except to keep us unhappy, had we just had a normal pay rise I’d have spent that money in tn economy etc etc. when we introduced overtime into the fire service for the first time around 17/18, I broke the back out of it, I earned around £7-8k extra in one year and you know what I did with that money I spent it doing the house up holidays etc, that must’ve contributed more in that year than the 8 years of no pay rise I’d been subjected to because I had fuck all to spend. Give a tax break to a rich person they’ll just squirrel that money away, these politicians are fucking idiots.