David Cameron, a Pro-Poverty PM for an Anti-Vulnerable Age: or, The Walrus and the Carpentier

Around two years ago, I read Alejo Carpentier’s ‘Explosion in a Cathedral’ (original title ‘El siglo de las luces’, which translates as the Age of Enlightenment). The Cuban writer and musicologist’s 1962 novel deals with the ‘exporting’ of the revolution to France’s Caribbean colonies, and was recommended by a friend as a ‘mood-setter’, before we went to Cuba. Its opening line is haunting and chilling in equal measure: “I saw them erect the guillotine again tonight. It stood in the bows, like a doorway opening on to the immense sky…” The book records the transmutation from Enlightenment to Terror and the mirroring of the wholesale executions on both sides of the Atlantic. Inasmuch as some have argued that Scotland’s Enlightenment role was one of seed to its equivalent in France (rather than simple recipient as elsewhere int he world), I think that is a legacy that most of would want some distance from.

I found myself prompted to think of this by David Cameron’s speech yesterday. Emboldened by his unexpected electoral success, he has increased his austerity target to £12 billion in welfare cuts, but will not say where they will come from.  It is planned to cut Personal Independence Payments – the replacement for the Disability Living Allowance  – by 20%, as apparently the list of disabled deaths resulting from the welfare cuts to that sector (see calumslist.org) as a direct result of the implementation of the austerity measures is not long enough already. As Frances Ryan notes in today’s The Guardian, Iain Duncan Smith and his Department of Work & Pensions is in conflict with the Information Commissioner’s Office over figures showing how many individuals have died within 6 weeks of having their benefits stopped. As has been noted elsewhere, this is not exclusively a Conservative problem, as half of the deaths resulted under Labour, the other half under the coalition government. (Journalists such as The Telegraph’s Brendan O’Neill conveniently dismiss this toll as merely a ‘problem of suicidal people’, thus neatly sidestepping any need for responsibility to be taken. Stay classy, Brendan.)

Yeah, maybe it gets boring, dealing with that old idea that austerity is predominantly hitting the wealthy, when of course Dave told us that “we are all in this together”. Here was Dave’s new message, yesterday: the poor, he says, will be hit much harder, if the deficit is not brought under control. This is the myth of trickle-down economics for a new age – once the economy is stable again, then we can look after the poor….but, if we are still ‘in it together’, is austerity hitting the wealthy? Well…since the 2010 General Election, the wealth of the top 1000 has grown by £212 billion (to reach £547 billion), so I’m not sure how much traction that idea really has. This is not trickle down: this is sucking up.

And with the UK’s debt now at over £1.5 trillion (one correspondent suggested Cameron’s promise to ‘look at Holyrood’s books’ was because he was desperately trying to find handy hints on ‘how not to increase your national debt’ for his Chancellor), and the deficit reduction targets consistently being missed by Osborne since he became Chancellor (see https://50daysofyes.wordpress.com/2014/12/18/a-post-autumn-statement-of-the-obvious-using-a-crisis-as-a-pretext-for-an-ideological-opportunity/ ), it seems unlikely that that aspired to ‘stable economy’ is going to be showing up anytime soon to stop the position of the poor getting worse.

Purely in Scotland, there were 510,000 people in severe (with an £11.5K household income, equivalent to 50% of the UK average, or less) or extreme poverty (on a £9.2K household income, equivalent to 40%), in 2012-2013, with 410,000 the year before. With the forthcoming introduction of Universal Credit (the ‘super-benefit’, replacing six others: including Job Seeker’s Allowance, tax credits, income support, housing benefit – see https://50daysofyes.wordpress.com/2015/03/25/the-labour-conservative-alliance-two-sides-of-the-same-coin/), rent payments will go direct to the household, rather than the landlord, despite the outspoken opposition of many charities: as Social Work Scotland said in their submission to Holyrood’s Welfare Reform Committee, “Increased  homelessness is widely anticipated as a result of Universal Credit being paid directly to individuals.” The recent drop in relative poverty (60% of the UK average) not only is a reflection of the general cross-the-board drop in living standards: it was also reflected in the increased numbers of those in severe and extreme poverty. These people aren’t leaving poverty by being ‘upcycled’: currently, there is no way but down, once you get to that income level.

But more than that, as I have said, there are a further £12 billion in cuts coming, meaning that the current proportion of 1 in 10 in Scotland living in severe poverty is scheduled to rise, with a further 100,000 children in Scotland projected to be in poverty by 2020. Audaciously, Cameron attempted to morally justify this move yesterday, by accusing welfare of being a “veneer of fairness”, papering over the cracks of poverty, as opposed to “extending opportunity”…although quite how opportunity will be extending by precipitating more people into the poverty trap of the ‘in-work poor’ in full-time working austerity is currently unclear. More sinisterly, this speech heralded a move to make a significant legislative change, as The Times reported: “The Child Poverty Act, one of the final pieces of legislation passed by the last Labour government, commits the government to ensuring that, by 2020, fewer than a tenth of children live in relative poverty. According to the Institute for Fiscal Studies, the latest figure is 2.3 million, or 17.4 per cent of children in Britain. Cutting child tax credits, one option under consideration by ministers preparing to cut a further £12 billion from the benefits bill, could add 300,000 children to the total living in poverty, according to the IFS. The prime minister said that the definition of relative poverty enshrined in law meant that even a small rise in the state pension led to an increase in average income and, consequently, the number of children living in relative poverty.” A familiar pattern of goalpost-moving for those who remember the modifications of definitions of being ‘unemployed’ under the last Conservative Government, in order to cosmetically reduce the numbers.

Pensions will supposedly be protected in this new round of cuts. One might cynically say that this is because the demographic that will be recipients are traditionally a core Conservative-supporting group, but in reality (if looked at by share of average earnings) the UK pension ranks 23rd out of 27 in the European Union. Instead, tax credits are widely viewed to being in the frame for a significant part of the cuts…as Alison Garnham of the Child Poverty Action Group put it: “No moral mission involves taking away tax credits for our poorest children. No serious plan for the low-paid begins with making them poorer by cutting their tax credits.”

Mike Danson, Professor of Enterprise Policy at Heriot Watt University, warned us before the General Election that the remaining austerity cuts would be implemented regardless of the impact on the poor, because they were ideologically-driven – and this was reinforced by Osborne not backing away from further austerity in his last budget 50 days before the General Election (https://50daysofyes.wordpress.com/2015/03/25/the-labour-conservative-alliance-two-sides-of-the-same-coin/), as well as the recent noises that they will go even further. Other than meeting purely ideological objectives, these cuts achieve nothing…in fact, they further contribute to low growth and extend the life of this (increasingly-localised) recession. Simon Wren-Lewis, Professor of Economics and fellow of Merton College University of Oxford, criticised the austerity ‘strategy’ for this very reason before the General Election: “The main impact of lower growth – including that caused by fiscal austerity – has been on living standards.” Lower growth caused by fiscal austerity would normally mean higher unemployment or lower living standards: “Austerity in itself has increased child poverty…Nicola Sturgeon’s statement on the economic impact of austerity on the UK is correct, with no qualifications.”

It is scenarios like this that start to give one a glimpse of the anger of the people that simmered under the former European aristocracies, eventually causing the people to take to the streets and later execute those aristocrats. Working in China during the last couple of years, I saw the gauche evidence of China’s new rich, driving their Maseratis past the subsistence farmers, who were struggling with their donkeys along the same stretch of motorway. Culturally, rural China might well have been long indoctrinated through the Cultural Revolution into believing in their inherent agrarian nobility – but how long can you expect such flaunted wealth to not provoke a reaction? Perhaps the most powerful – and most likely the least-intended – lesson that I derived from Carpentier’s novel was that, bloody as the Terror was, at least the aristocrats did not smoothly slip back into their previous roles within a short space of time, restoring the status quo that had been so comfortable for them at other’s expense. True, others eventually did – but it took much longer than in France, and at least was not the originals.

Cameron states the continued existence of the deficit would harm the poor in the long-run – that, in effect, the increased poverty (and – inevitably – deaths) are ‘for their own good’: he plays the part of Lewis Carroll’s Walrus to Ian Duncan Smith’s Carpenter…sobbing crocodile tears and feigning sadness, while keeping right on eating. Except the lives affected are not oysters, but those of real people, successively demonised by the press since the recession began, and now ripe for victimhood. The difference being that, by the end of Cameron’s gluttonous meal, there will be far more impoverished and suffering than at the start of his ill-advised walk upon the sand. Does Cameron really understand the keg of nitroglycerine that he is kicking around? Does he see the abyss, or is he too drunk on the heady intoxication of his unanticipated electoral majority to remember to care?

Perhaps he can act with complete impunity. But he would do well to heed the warning: Sands shift.

 

“It has been astonishing, from a US perspective, to witness the limpness of Labour’s response to the austerity push. Britain’s opposition has been amazingly willing to accept claims that budget deficits are the biggest economic issue facing the nation, and has made hardly any effort to challenge the extremely dubious proposition that fiscal policy under Blair and Brown was deeply irresponsible – or even the nonsensical proposition that this supposed fiscal irresponsibility caused the crisis of 2008-2009.” (Paul Krugman, Nobel economist 2008, The Guardian, 29/4/2015)

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50 Shades of Austerity: Poles Apart, or an Example of Economic Masochism?

I watched a summary of yesterday’s Sunday Scottish Politics half-hearted Leaders Debate this morning. It was not an entirely wasted experience, however – as much as the broadcast little resembled what I understand buy a ‘debate’, I am informed that the hectoring and interrupting that Murphy so frequently deploys is actually a debating technique, called ‘gish galloping’ (thank you, Patrick Roden…). The ‘technique’ involves lots of small simple questions or accusations regularly being hurled at your opponent while they are speaking, never giving them time to answer. This works particularly well if you know that the answers take time to give a proper answer to – because you can then deny the environment that such an answer can be given in…providing you have a moderator that is not going to switch off your microphone.

One SNP person, with 3 from the Westminster parties ganging up to shout her down and talk over her in a BBC studio, with one behaving like the playground bully – it was somewhat depressingly familiar to what one saw during the Referendum campaign, and highlights the difference when other parties (say, like the Scottish Greens, who are looking somewhat more relevant than the LibDems to Scottish politics right now…) are involved to break the onslaught of establishment dogma, and perhaps also explains why Nicola, Natalie and Leanne did so well during the Leaders’ Debate. But there is much that is different between the Referendum and this General Election, in terms of the coverage – for one thing we now have a newspaper!!! This makes my work very different, as it is less a role of collation of data and extemporising my own viewpoint, compared to largely passing information on to the comparatively few people not reading one or two key sites, or ‘The National’, rather than generating new copy myself.

Another difference is the interaction with polls: in ‘Yes’ we largely ignored the polls, except to look for signs of slow growth over time. By June/early July I know I was a little alarmed when we were not turning the corner of 50:50, as there was not going to be time to deflect counter-propaganda if we did it late, so hoped that we might sneak over that threshold on the day, without any polls to expose our rise. Of course, we had the worst possible scenario – a week to go, YouGov arrives, the propaganda lie of ‘The Vow’ was delivered in response, and we slumped at the last day.

But now the polls have a very different role. From the point of Johann Lamont’s resignation, the SNP has soared in the ratings, making this our General Election to lose. This means we are in the ‘No’ campaign’s starting position, three years ago, but once again with most media outlets turned against us…fortunately with Labour and the Conservatives taking some flak as well. YouGov, which always gave fairly low ratings of ‘Yes’ popularity, have now become our new Best Friends Forever as far as SNP versus Labour support goes. And also – even more unlikely as an ally – Conservative peer Lord Ashcroft’s extensive polling has indicated that dissatisfaction with Labour is greatest in those seats that they hold with the largest majorities.

But, within that, there was one weird statistic of his that made me do a double-take.

In a question on austerity, 57% of those that he polled did not want any more austerity – which does not seem so surprising – but 43% DID. Closer analysis shows that his 57% was made up of 36% yes austerity was needed but no more, and 21% that it was never needed, but, yes, 43% said that more austerity was needed. Say what? I mean, I could understand if it was a class thing, perhaps a poll done in Mayfair or the heart of Kent, but 43% based on national polling? What is, this some sort of inferiority complex, that the government in charge ‘must know better than me’? ‘Punish me – if it hurts, then it must be good for me’, is that it?

Well, let’s take a look and see how that is working out – first looking at the social impacts of austerity, and then at those all-important ‘economic benefits’ – shall we?

David Cameron was recently supported by a letter from 103 businesses in the Telegraph saying that if Labour got in, it would be a disaster. But would it really make such a difference, or is this simply a sign of traditional prejudices? Miliband has pledged to limit zero hours contracts to twelve weeks, rather than letting them run for a year, but (as those of us who have been on renewable contracts know, where employers will end them as the two year mark approached, when you would actually acquire some rights as an employee) that just means the turnover period is faster. Ed Balls, Labour’s Shadow Chancellor, knows all about zero hours contracts: he recently claimed that he would pass legislation to ban zero hours contracts – shortly before it emerged that that was how he employed four of his staff. Ed has committed to spending £800 million in Scotland, but that is somewhat offset by Scotland’s anticipated £2.4 billion share of the forthcoming cuts that he has pledged not to overturn if he gets into office. As one wag correspondent put it on April 1st: “Cracking April Fool’s story on the front page of The Herald today – Ed Balls pledging to ‘end Tory austerity’. Who makes these things up?”
Ed still cuts a more human figure than Ian Duncan Smith, the Secretary of State for Work and Pensions, though. He has planned £12 billion in welfare cuts for Scotland alone over three years of the next parliament, which he claims will be cut from the welfare budget without affecting the poorest in society.

It is fair to say at this time that no one is pointing out the positive aspects of welfare in terms of benefits to the economy, not just for ameliorating inequality, but also through business promotion. A recent US study, demonstrating the impact of welfare dimensions to business development and success, recently showed a dimension that we are missing in the UK. Looking into expanded foodstamps, they found that it provided new businesses with a safety net to fall back on: if business is about risk, or managed risk, then knowing that you will not compromise the security of yourself or any dependents is a key consideration. The research showed that there was an increase of 16%, in other words a greater likelihood for people to start up their own business, if they knew that they could rely on this welfare availability…although most of them never used the facility – that was not the point, it was the idea of managed risk. Similarly, US Government healthcare means people at retirement age are more likely to start their own businesses, as they no longer have to worry about relying on an employer providing health insurance. Those families in the US that qualified for Children’s Health Insurance were 31% more likely to start their own business, than those in the slightly higher income bracket that failed to qualify. Similarly, France continues to pay benefits to long-term unemployed people starting a business, finding that they are 25% more likely to start a business than without.

But the ideological changes driving these Conservative cuts, under the veneer of ‘necessary austerity’ do not allow for that perspective. They do not believe in the state’s role in providing support, and come what may they will try to remove as much of that structure as possible, while they have the pretext of the deficit.

And Scotland will still have limited ability to protect itself from those welfare cuts – again, thanks to Ian Duncan Smith’s last minute intervention before the Smith Commission report was finalised. Only 14% of the total welfare budget is to be devolved, including benefits for disabled people and carers. In 2017, under the Smith proposals (if they ever see the light of an Act of Parliament), the Scottish Government will take over responsibility for the successor to the Disability Living Allowance, called the Personal Independence Payment (PIP), with a 20% cut in the relevant budget. This means that 100,000 working age disabled people will see their benefits reduced, the equivalent of cuts of £300 million a year, a loss of around £1,120 per person affected. Across the UK, this will see a million people affected by 2017/2018.

The policy of ‘sanctioning’ welfare claimants has been a particularly dark ‘costcutter’, with documented cases of suicide resulting: from October 2012 until September 2014, 81,980 Scots experienced 143,671 sanctions (meaning no state benefit for at least 4 weeks), equivalent to £32 million in Scotland in 2014. Over the whole UK it was 355 million, up from a mere 11 million sanctioned in 2009-2010. Former senior Scottish Medical Officer Sir Harry Burns (see NHS Scotland: Always independent, now at the TTIPing Point of Privatisation ) has been highly critical of coalition policies on welfare, chillingly talking about the legacy of the seventies and eighties unameliorated industry cuts in Scotland, which destroyed communities, boosted problems of violence and substance abuse, until Scotland has the worst drugs problem in Europe. He is well worth listening to in conversation on Bateman Broadcasting online as he talks about the causes of ill health from this political legacy, and noting the statistically significant connections between percentages of ‘Yes’ votes and low life expectancy in a given area: these were people who knew the Westminster system is not working, with the evidence of their everyday lives. Burns describes sanctions as “a judgment on the poor”, and those sanctions are only due to increase with the rollout of the Department of Work and Pensions’ new Universal Credit system, which reaches Glasgow just after the General Election.

A pilot scheme for the new Universal Credit system was introduced in Inverness last year, leaving families with only beans on toast for their Xmas dinner, as there was a 5 week gap transferring from JobSeekers Allowance to Universal Credit, with no money in between. The transition of the system – never mind the smaller level of support offered to fewer people – seems to be deliberately creating gaps for people to fall through. Certainly, jobseekers in the UK receive very little help in finding work. compared with other European countries. Alex Neil, Cabinet Secretary for Health and Wellbeing, has argued in the wake of the Smith Commission for immediate legislation to abolish bedroom tax so that the Scottish Government can redirect the £50 million being spent on mitigating the effects of that tax.

Child benefit is now at its lowest point (0.6% of GDP) since 1977 (it reached a high of 1.3% in 1980). In some areas in Glasgow 1 in 3 children are living in poverty, and by the end of the coalition government’s term of office, the value of Child benefit will have fallen by 14%, against a backdrop of increasing costs. Accompanying this, the Scottish Trades Unions Congress highlights that this is the fifth consecutive year of a drop in the median wage in Scotland. Women working part-time have experienced the biggest losses (down 11.6%), but financial sector directors’ salaries went up 23% in last year alone.

This has seen the rise in the phenomenon of ‘the working poor’: Professor Steve Fothergill of Sheffield’s Hallam University recently noted that Scots in work have lost £730 million a year as a result of the coalition’s welfare reforms. 48% of the £1.5 billion (or £440 for every working adult) losses would be met by households with at least one working member, with £960 million of the cuts going on families with young children as well as disabilities and health problems. So, for example, a couple with 2 children on average would be £1480 worse off, single parents with one child £1770 poorer, single parents with 2 or 3 children £1850. Sick and disabled households are losing £600 million a year in total. Although many of the effects of the cuts have been mitigated by the Scottish Government refusing to pass on the 10% cut in council tax benefit payments, and non-implementation of the bedroom tax, the impact is still severe and it drives people further into poverty: 43% of people in poverty live in working households, although the low-paid are better qualified than ever. The UK’s minimum wage level lags behind the level in Luxembourg, Ireland, Belgium, Germany, France, Netherlands, and the Trades Unions’ Congress has highlighted the problems of ‘living wage blackspots’, e.g. Birmingham Northfield, where 53.4% of people earn less than £7.85 per hour, blighting entire areas. This led to the STUC calling on all Scottish parties in the run-up to the General Election, to restore trade union freedoms and collective bargaining, the lack of which prevented them from defending those who suffer most from low pay and insecure work.

Foodbanks first appeared in the UK under the 13 year Labour government, and the disability benefit scheme of Work Capability Assessment was introduced, with its notorious implementation by ATOS to remove as many disabled claimants as possible from benefits. 71,000 people in the oil-rich nation of Scotland now depend on foodbanks (the figure stood at 7,500 four years ago). In December, 10,500 people visited the Trussell Trust’s Scottish foodbanks, a 13% increase on the previous year, and a third of them were on low incomes.

80,000 people in Scotland are working on zero hours contracts, 180,000 on council waiting lists, 820,000 Scots in poverty. The least wealthy 30% of households (half of whom are headed by someone employed) in Scotland have no savings or pensions, and own only 2% of the wealth of the country, property and personal belongings – they are most likely to be single adults or lone parents. But the most wealthy 2% own 17% of the wealth in Scotland.

At the same time, although Scottish rents are rising at their slowest for over two years (1.1%, with inflation becoming zero for the first time since records began in February 2015), the numbers of late rent payments are still increasing. This has all resulted in a predictable rise in personal debt. A PricewaterhouseCoopers report (24/3/2015) states that the average UK household is set to owe close to £10K in debts of personal loans/credit cards/overdrafts by the end of 2016.

The evidence from this blizzard of statistics (which is testament in itself to how endemic the problem is, with the ever-mounting numbers of studies being carried out) is that this is an ‘economic recovery’ based on low wages, rising insecurity for those in and out of work, rising household debt, and a failure to ‘rebalance’ the economy away from the financial sector. Any recovery in living standards is still to be seen, with shockingly weak reforms to the cause of the current crisis, namely the banking sector, and a lack of preparation or actions to prevent a similar crisis in the future.

The UK Government’s budget deficit (the difference between expenditure and revenue raised) peaked at £150 billion, and now stands at £80 billion. The Institute for Fiscal Studies says that eliminating the annual deficit will require departmental cuts of 14% and 750,000 job losses. UK national debt has now trebled since 2008 to £1.4 trillion, because tax receipts plummeted with the collapse of the economy in 2009. This was compounded by the Thatcher-style cuts policy of the 2010 coalition, which increased the downturn of the economy, and thus the welfare bills. The only economic growth is coming from £130 billion of subsidised mortgages, triggering another property market bubble (particularly in London – although the Centre for Economics and Business Research is predicting a fall in London’s house prices this year of 3.6%, after “years of overperformance”), with rising house prices encouraging consumers to borrow again. This, of course, creates a mini consumer boom…which only lasts until interest rates start to go up.

Thus, the coalition government’s economic strategy is short-term, as it is based on a housing bubble, and transferring state debt to households (by 2020, the household debt to income ratio is forecast to be more than 10% above pre-recession levels, according to the Office of Budget Responsibility), and undermining sustainable long-term growth. The Coalition has overseen the weakest recovery for 200 years, where indeed the only factor exerting a positive influence on living standards across the UK is the falling oil price – which is nothing to do with government policy (although their response to it is).
Paul Krugman, 2008 Nobel Prize winning economist, noted recently in the New York Times that although growth resumed in 2013, the income per head of the population is only now reaching pre-crisis level, giving Britain a worse track record than during the Great Depression. He went further, in terms of the evidence that political response by the public to the economy is only based on very short-term perceptions.

In brief, he suggested that for politicians (NOT for the economy) the best strategy would be kind of similar to one that I used to employ in games of SimCity. Your popularity as the leader of your City was dependent on taxation, but your ability to build your City and keep the people happy, was dependent on taxes. So you could keep taxes incredibly low throughout the year, and then just before it came to the end of the financial year, you kicked taxes into the stratosphere to get a massive amount of revenue to compensate for the rest of the year – then dropped taxes way down again straight afterwards. In the game, the public had long-term, rather than short-term, memories, so would ignore the recent pain of the high taxes. What Paul suggested as the best route for political success was an inversion of that approach: as voter memories are only interested in the last couple of quarters, not the longer term picture, a successful strategy to stay in power would be to deliberately impose “a pointless depression on your country for much of your time in office, solely to leave room for a roaring recovery just before voters go to the polls. That’s a pretty good description of what the current British government has done, although it’s not clear it was deliberate.”

He is far from alone in this analysis, as noted by George Kerevan. Foreign investors hold £400 billion (a quarter of the total market), and are selling off their holdings of British Government debt at a rate of knots – a massive £14 billion went in January and February, far faster than during the credit crunch. The usual buyers are refusing to pick it up, as it has become toxic, because Britiain’s current account deficit (borrowing required to pay for imports, when a state does not export enough) reached 5.5% of GDP last year, heading for a record 6% in 2015. Productivity has been falling for many years (which even the International Monetary Fund has raised concern about, as a ‘major risk to growth’), and the only reason the City of London stays afloat is because of its low regulation tax haven status, which allows foreign investors cheap access to the EU market of 500 million customers (usually providing a convenient 2.5% of the UK’s GDP in the process). Except, of course, that this is threatened by the EU exit referendum, which will render London of no interest, next to Paris and Frankfurt, as choices for basing your trade. Uncertainty on the financial markets for a Scottish Referendum? You ain’t seen nothing yet…

And for those of you – evidently into masochism, if you have stuck with me so far – who are still wondering, this is why I am shocked that 43% across the UK could still be saying ‘more austerity is needed’.

Really? Inequality is rising, poverty increasing, which means crime rises too, society becomes less safe – and all because of a strategy that is failing to work, but generating an inflatable model of a recovered economy, relying on a housing bubble. In the age of Christian Grey, this appears to be a population that truly wants to be punished.

Austerity is not a way forward – it never was, and certainly isn’t now, with the reams of stats above. Austerity is an ideological transformation of the British state, while failing to address the economy it purports to be helping, and destroying social cohesion and the fabric of society along the way.

It is time for something different.

 

“Very few British academics (as opposed to economists employed by the financial industry) accept the proposition that austerity has been vindicated. This media orthodoxy has become entrenched despite, not because of, what serious economists had to say.” (Paul Krugman, 2008 Nobel Prize winning economist)

Scotland’s Economic Prospects In and Out of Union, and the Death of the Post-War Dream

At the end of my first day back on the stall, an individual approached the stall wanting to know our reasons for voting Yes. It soon became clear that rather than undecided, he was a ‘No’ voter, so as my colleagues packed up tables and diminishing numbers of leaflets in the background, I continued to talk to him. Although ‘No’ supporters are ‘high risk’ in terms of time investment (and there is always the danger of them simply being a deliberately time-wasting troll – but for that they usually pretend to be undecided), this is also part of winning the potential peace if we get a Yes vote, and if at least some concerns can be alleviated amongst the more rational and less headstrong of them, then the smoother that transition might be. We don’t want ‘Project Fear’ to reap its own harvest of further fear in the wake of an actual ‘Yes’, having spent its entire campaign trying to create uncertainty about the future of a much wealthier (per head) independent Scotland, without turning any scrutiny to the massive uncertainties of remaining tied to a UK economy that is going down the pan with an ever increasing debt mountain (and punishing the poor and disabled on its way down).

It appeared, from his account, that he had been swayed to ‘No’ by the arguments of a variety of economists. I suggested that he look at Joseph Stiglitz’s analysis, but wanted to use it as a prompt to get a particular article on the economy up on this blog.

Others elsewhere have noted the degree to which the UK’s economy continues to decline, thus starting to raise the possibilities of further cuts than those already waiting in the wings after a ‘No’ vote. Others elsewhere have run the numbers for what Scotland’s net surplus contribution to the UK has been over the last thirty years (£222 billion). For further figures on Scotland’s longer term pre-oil overpayment, I refer the interested to Business for Scotland: http://www.businessforscotland.co.uk/scotlands-century-of-lost-wealth/ and also for figures predating Ireland’s break from the UK to ‘The Historical Debt’, an article on Wings Over Scotland that reprints figures from a 1960s (pre-oil) publication.

The Financial Times (February 4th) has noted that Scotland would start with better finances (10.9% better, to be precise) than the UK from day 1 of independence. This – like many reports – also makes the flawed assumption that the expenditure plans of the Scottish Government would remain the same as currently (i.e. devolved rather than independent), whereas the lack of burden of UK –spending plans currently not directly benefiting Scotland would also be lifted. If you like, this is the dividend savings of self-government – freed of supporting infrastructure projects elsewhere in the UK with no direct Scottish benefit (particularly London-centric ones, such as the Olympics – see earlier blog for the tourism impact on Scotland that year) such as HS2 (which Scotland will pay £4.8-7.9 billion towards, despite it stopping 150 miles short of the border), the replacement for Trident (£250 million per year for Scottish taxpayers, currently £160 million per year for the current model), shares of the £3 billion Westminster refurbishment (never mind the £60 million per year currently paid to running Westminster and the Scotland Office – and that is without the imminent 10% pay rise announced for MPs) and the £4.2 billion London sewer upgrade (perhaps related to the preceding item in the list – who can say?). They also do not take account of export duty and VAT currently lost to Scotland via payments through port of exit (for duty) and head office location (for VAT).

The proposed budget in the SNP’s Scotland’s Future manifesto includes £800 million per annum on defense, in order to set up a Scottish military. There are also the opportunities that come from paying for a Scottish rather than London-based civil service – and from closing tax loopholes (£2.8 billion currently estimated to be lost in Scotland by HMRC) partly through replacing the horrifically complicated UK tax system with a transparent and efficient one with fewer loopholes.

All of these are positive opportunities to save vast amounts of money as well as expand our activities and pay towards an oil fund. But there is a rising political pressure (undoubtedly a vote winner with those in the UK that are outside of Scotland) to scrap the Barnett Formula, which (if replaced by an average system for all), will leave a hole the size of 30% of the Scottish block grant. This should also be viewed against the alternative, whereby the Scottish Government Budget allocated from 2011-2016 is planned to drop by almost 10%. Where, of the 42 nations analysed, the UK’s pensions are not only the worst in Europe (see previous blog) but 39th out of 42 in the Organisation for Economic Co-operation and Development (Mexico, Indonesia and South Africa are the only countries that come lower in pensions).

Currently we have a political climate that demonises the poor, to the extent that a welfare agenda that saves £6 million by Ian Duncan Smith with a benefit cap in its first year, yet costs £120 million to implement, is presented as legitimate or beneficial. Where, under the pretense of eliminating the DWP estimated £1.2 billion of benefit fraud, cancer sufferers assessed as able to work, while benefit overpayments due to error are £1.4 billion (DWP estimate) and dwarfed by the £16 billion of unclaimed benefits both go unaddressed. And figures for tax avoidance are estimated between £30-120 billion, yet that is not a priority. Labour’s complicity in the welfare cuts (even promising to go further) and the privatisation of the NHS in England and Wales dragging NHS (Scotland) down the same route of a privatized health service through corresponding funding cuts paint us a picture of the future of health and welfare within the UK that is increasingly bleak. This is the Death of the Post-War Dream, as the Westminster government ties its people into nuclear energy companies with ridiculous guaranteed tariffs when we have our own burgeoning energy resources, nuclear weapons sit on the Clyde as a ghost of Empire that are entirely redundant for us in the modern age, and not tackling but creating more poverty when we could seriously address it as a priority which it has ever been for Westminster.

Our priorities are not those of the SE of England, and they are the ones who determine the government of Westminster – NEVER us. And for that reason, we cannot expect to ever receive an equitable deal within the Union – that is simple politics. If we take responsibility for ourselves and our actions, we can avoid continuing as the rich nation held in poverty by its neighbor, and be what we can be.

 

“Even excluding North Sea output ….Scotland would qualify for our highest economic assessment” (Standard and Poor’s, global credit rating agency, February 27th 2014)

 “An independent Scotland could expect to start with healthier state finances than the rest of the UK” (Financial Times, February 3rd 2014)

The Pitiless Storm and the Unequal Union

In ‘The Pitiless Storm’, one of the highest profile Referendum shows in this year’s Edinburgh Festival Fringe, David Hayman portrays a trade union leader on the eve of accepting an OBE. In composing his speech, he is caught between the critical gaze of his memories of his father, his 17 year old idealist self, and his departed ex-wife’s abandonment of New Labour in the wake of the February 2003 80, 000 anti Iraq war march in Glasgow. Cornered in the nexus of his founding principles, Hayman capitulates to the inevitable acceptance that Labour have abandoned their values, and for the hope of any social justice for his people, that he has to go against his traditional party’s line and vote Yes in the independence referendum. The transformation of the character is hardly a subtle metaphor: the character is committed to the Union and the ideal of the benefits that it should – yet has failed – to bring, and undergoes a Damascine conversion on the night before his Knighthood (which I think an OBE is?). Yet Hayman’s personal commitment to Radical Independence makes him eloquent in his embracing of the character in both aspects – as well as somewhat impatient with questioners during the informal post-production conversation that he conducts with his audience while sitting on the edge of the stage. Perhaps that is why Argyll Council appears to have been systematically suppressing advertising for Hayman’s one-man show, although it still seems a massive overreaction, that on balance is more likely to provoke a ‘Streisand Effect’ (where an attempt to suppress information actually has the reverse of the intended result) in response.

Labour’s underpinning argument for the Union – that of collectivising, of uniting together and sharing effort helps working people – although a fine principle – is not supported by the evidential experience. The idea that a million families with children were lifted out of poverty in the ten years following their 1997 election is somewhat shaky grounds for justification of maintaining the Union, following the consequences of the next 3 years of that same government.

One argument I see from ‘No’ advocates along the ‘stronger together’ thread, is that the United Kingdom is ‘greater than the sum of its parts’. Is it? Frankly, I’m not sure that currently it is equal to the sum of its parts, never mind greater than them. The majority of the UK is held back from fulfilling its potential as more is poured into the city state of London – London is probably fulfilling its potential, but the rest certainly is not. Much of that is due to simple realpolitik: the Westminster Government (whether acting in the EU or elsewhere) will understandably fight for the interests of the majority of their population – which is the south-east of England. Scotland’s different needs with regards to population dispersal, fishing and farming, re-industrialisation and immigration are often argued against because they simply do not suit the agenda of the rest of the country – indeed those needs are diametrically opposed with regard to reindustrialization and immigration.
We are told the Union is ‘the most successful union in history’ (although it is hardly that, given a fair chunk of it left in 1922 – essentially the state that went to war in 1914, the United Kingdom of Great Britain and Ireland, no longer exists to commemorate that hundred year anniversary), but if the ‘No’ campaign is to be believed as sincere in making this statement, then it has a romanticised view of how well the Union has actually worked for Scotland: it hasn’t, and the centralisation in London noted by Vince Cable is also making it a bad experience for the NE of England (and frankly other parts of the UK) as well.

In economic terms, we regularly hear that Scotland has been financially supporting the Union (in the sense of putting far more in than it gets out) for 33 years. Business for Scotland has argued that this is likely to have gone on for much longer, the former civil servant John Jappy noted figures in 1968 (before the oil boom) that showed that Scotland was paying disproportionately more per head even then. This is supported by figures showing that in 1952-1953 Scotland paid 410 million in revenues, and received only 207 million back in expenditure. Even more damningly, government figures for income and expenditure from 1900-1922 (recorded in HJ Paton’s book The Claim of Scotland) show that Scotland was receiving between 21% and 40% of its taxes in expenditure (I’ve excluded 1914-1918 for obvious reasons). Records seem to have been stopped in 1922 at the time of Ireland’s departure, perhaps in some trepidation that these figures might fuel ideas that Scotland was getting a ‘raw deal’, and give them similar ideas about secession (a harbinger of McCrone, in some ways). We may be the wealthy cousin in terms of supporting the Union, but we have not had the economic benefits of the Union that the other two regions (SE England and London) have had that so fundamentally sponsor the Union – and in that sense we appear to have been very much left as the ‘poor relation’ in terms of what is received back.

And this lack of economic distribution has resulted in a lack of opportunity – which can be indicated quite effectively by looking at figures of population growth and emigration from Scotland (either to London or further afield):-
– Between the 1981 and 1991 censuses, over a quarter of a million Scots left Lanarkshire and the former Strathclyde region alone.
– Between 1971 and 2011, England’s population grew from 45.9 million to 53.0 million, whereas
Scotland’s rose from 5.2 million to 5.3 million. That is a contrast between 15.5% and 1.9% growth over 40 years;
– Going back further, between 1952 and 1965, 345,000 people left Scotland;
– From 1901 to 2001, England’s population increased by 60%, whereas Scotland’s increased by 10%.

Armed conflict, of course, will take a proportion of these figures – and others have argued elsewhere over (for example) the higher per capita cost to Scotland of the First World War (although 53 parishes in England and Wales had all their servicemen returned from this conflict, there were no such settlements in Scotland or Ireland that achieved this). Although a family tradition of military service is an important factor, one has to remember that families rarely opt for such careers, when there are other opportunities (such as agriculture) which would enable people to stay at home.

Beyond the lack of population growth, the statistic of 19% of the population of Scotland being in poverty (this should be the country with the 14th highest GDP per head in the world, remember), and the burgeoning of foodbanks after 307 years of Union, are also not great indicators that there has either been a Union dividend, or that we are indeed ‘in it together’. In Westminster, the Labour Party failed to get a full turnout to pass their own motion to end the Bedroom Tax (the absentees would have been enough to secure the vote), yet enthusiastically voted for a welfare cap. In addition, they have promised to go even further on welfare cuts than the current government – cuts with an implementation deadline of 2016, that the Child Poverty Action Group has said will push a further 100,000 children in Scotland directly into poverty by 2020, following the 30,000 children pushed into poverty in 2013 alone. In health terms, this is further reflected: in particular, the correlation between long-term Labour wards and low life expectancy in Glasgow is striking. Life expectancy for males in Glasgow’s East End is lower than some warzones (including the Gaza Strip): Labour may espouse that it cares about the worker in Grimsby as much as in Glasgow – but that doesn’t mean that they are going to do damn all for either of them.

This picture of a donor sector of the UK, that has suffered disproportionately as a result, becoming historically poorer than elsewhere in the UK, is not a pretty one: in particular, the squandering of oil resources (at the same time as the possible benefits to an independent Scotland were kept secret in the suppressed McCrone Report of 1975) means that the UK is one of only two oil-producing territories in the world NOT to form an Oil Fund. And this is not an exclusively one party problem: this fiscal recklessness has been repeated by Westminster governments of all colours, and is not simply the domain/devoir of Conservative or Labour Governments, but of Westminster governments as a whole. This has resulted (as the old joke goes) in Scotland being the only country in history to discover oil – and become poor.

“If you agree that society’s ills transcend borders – of course they do – then you should wish to eliminate the influence of these elites from as many people as quickly as possible. The fastest way to do that is to vote Yes. Voting Yes removes the Lords’ power over Scotland forever in one fell swoop, and sends the unmistakable message that we won’t tolerate such injustice any longer. We can stand as equals with our friends in England, Norway, Iceland, Ireland, and beyond, and start building not just a better country, but a better world. It will also be the biggest slap in the face the British establishment has ever faced; a wholesale rejection of austerity; a rejection of weapons of mass destruction and reckless environmental policy; a rejection of centralisation and neoliberalism. This majestic act of defiance could be just what the left in England, Wales and Northern Ireland needs. A single act of defiance can inspire revolutionary movements.” (Magnus Jamieson, National Collective)

‘No-stradamus’ – Looking into a ‘No Future’: Turkeys Voting for Christmas?

There are a few specific threats coming that a ‘No’ vote will render unavoidable. One is the further cuts that the coalition government have planned. Of the 6 billion pounds cut to Scotland’s welfare budget, 70% have yet to be applied by their 2016 deadline. The Child Poverty Action Group estimate that a billion of those cuts still to come will directly affect children, pushing a further 100,000 of them into poverty in Scotland by 2020.

Another is the end of the Barnett Formula. This is frequently presented as Scotland getting a higher per capita spend, even although Scotland (along with London and the SE of England) is one of the three parts of the UK that contribute above the average – which means that Scotland gets less back than it puts in by £500 per capita. This means that the Barnett Formula, which calculates the Scottish Government’s block grant on the basis of expenditure elsewhere in the UK, is politically popular, and supported by all facets of Westminster. It has been indicated that a review of Barnett will not be implemented before the next general election, and that it will involve a reduction of the funding received by Scotland to be replaced by a ‘needs-based formula’. The degree of cuts envisaged range from a conservative £4 billion, but on a per capita basis the ‘£1,200 extra’ often cited equates to a £6.4 billion cut.

A third is the reduction of the numbers of Scottish MPs, which has often been tied in to any further devolved powers, along with the end of the Barnett Formula. From 1885 until 2005 (when a readjustment of Scottish MPs was made in the wake of the establishment of the devolved parliament) the representation of Scottish MPs was over 10%, reaching a high of 12% during the inter-war years. The 2013 review will reduce the number of Scottish MPs from 59 to 52 for the next general election: this 8.67% representation amongst the 600 in Westminster is almost down as low as the 8.06% level when the Union of the Parliaments first took place. This means an increasing marginalization of a Scottish voice, at the same time as fiscal strength of the Scottish Government is damaged through ongoing welfare cuts, the ending of the Barnett Formula and paying for the setting up of a Scottish HMRC.

A conservative estimate will put the ongoing loss at more than £10 billion to Scotland, from these advertised changes, as a direct consequence of a ‘No’ vote – a cut that we do not need to take at all. This is what the choice of dependence means over independence – to be weaker collectively than we would be standing on our own two feet.

So are we going to be turkeys voting for Xmas?

Because there is an alternative.

On Monday February 3rd 2014, the Financial Times (not exactly a supporter of Scottish independence) produced an item on the financial situation of an independent Scotland, using UK government figures, and concluded that every individual would be almost £1,400 a year better off from Day One. They demonstrated that the Scottish Government would immediately have some £7 billion a year on top of the existing Scottish budget of £64 billion – and that was conservatively assuming that the government of the newly reindependent state would retain the UK government’s existing spending priorities.

 

“An independent Scotland could expect to start with healthier state finances than the rest of the UK” (Financial Times, February 3rd 2014)

“On 18th September, 2014, between the hours of 7am and 10pm, absolute sovereign power will lie in the hands of the Scottish people. They have to decide whether to keep it, or give it away to where their minority status makes them permanently powerless and vulnerable. So where do we stand at one minute past ten, at 10.01?” (Jim Sillars, March 2014)