Tag: OECD

Why is the UK so unequal?

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The US and UK share an ideology of ‘free-market’ fundamentalism and competitive individualism. More widely called ‘neoliberalism’ these ideas were introduced, respectively, on both sides of the Atlantic by Ronald Reagan and Margaret Thatcher. 

Earlier this year, Angus Deaton, professor of economics at Princeton University and a Nobel laureate, launched a five-year review on the subject of inequality. Sir Angus, who is teaming up with the Institute for Fiscal Studies, with funding from the Nuffield Foundation, a charity, intends the review to be the “most comprehensive scientific analysis of inequalities yet attempted”, examining not just the gaps between the rich and poor, but also differences in health outcomes, political power and economic opportunities in British society and across the world.

It will attempt to answer which inequalities are beneficial, providing “incentives” for people to strive harder, and which should be stamped out because they are derived from luck or cronyism and, according to Sir Angus, “make a mockery of democracy”.

Personally, I have some major issues with the neoliberal language of “incentives.” In its crudest formulation this entails providing the conditions for the market sector to produce growth, and accepting that this will somehow result in inequality, and then relying on some vague mechanism of redistribution of some portion of this growth to help repair the inequality that has resulted from its production. Over the last decade, we have witnessed those ‘safety net’ mechanisms being dismantled, leaving a large proportion of society with dwindling resources, while a few people have become obscenely wealthy. The language of “incentives” implies that it is human behaviour and not market fundamentalism, that creates growing inequality.

But that isn’t true. Neoliberalism has failed the majority of citizens horribly, the evidence of which is stifling both the UK economy  and our potential as a society. There are a few beneficiaries, who, curiously enough, are working flat out to promote the failing system of economic and social organisation that was ushered in by the Thatcher administration, while viciously attacking any ideas that oppose their dogma and challenge their stack of vested interests.

The Deaton review starts from the premise that not all inequalities are bad. Deaton and the IFS also believe that inequalities based on luck or rigging the system are far worse than those based on the skills of individuals: “If working people are losing out because corporate governance is set up to favour shareholders over workers, or because the decline in unions has favoured capital over labour and is undermining the wages of workers at the expense of shareholders and corporate executives, then we need to change the rules,” Deaton said.

This assumption that cronyism and damaging activities of the rich have left others in poverty has raised hackles in some free-market circles. Ryan Bourne, economist at the Cato Institute, for example. He says the IFS should be careful not to assume wrongdoing just from data showing rising inequalities, and: “Income inequality, for example, can be increased through entrepreneurs making fortunes off hugely welfare-enhancing new products,” he said. Whether or not this is correct, many UK officials are concerned that the market economy is in danger of becoming rigged against ordinary people.”

Andrew Tyrie, chair of the Competition and Markets Authority, the competition watchdog, admitted earlier this year that the authorities had been “slow” to address shortcomings in competition and rip-offs and would in future “be doing and saying a lot more”.

I have a lot more to say on this topic, too.

I’m planning to produce a series of in depth articles on inequality and growing poverty in the UK. To introduce this series of works, I’ve invited a guest writer, Kenura Medagedara.

Here is Kenura’s article:

Despite having the fifth-largest economy in the world, the United Kingdom is a surprisingly unequal society. It has the fifth-highest income inequality in Europe. The top 20% highest earners earn six times more than the poorest 20%. The top 10% of wealthiest households own five times more wealth than the bottom 50%.

These statistics may not come as such a surprise to some of us. Unfortunately, Britain’s historic class divisions are showing signs of increasing. But why is Britain so unequal, especially compared to other wealthy nations? And what can we do about it? These are the questions I’ll be trying to answer in this article.

The problem of inequality

Before I discuss any of this, I should first explain why inequality is so dangerous. We all know that absolute poverty is bad, as it means that people can’t afford to survive. We also understand that undeserved wealth is problematic, as it gives some people an unfair advantage over others. Did you know, for instance, that the third-wealthiest landowner in Britain, Hugh Grosvenor, amassed his £9 billion fortune entirely through inheritance?

Like I said, most people can see the problems with these two issues. However, (as many of those on the right point out), these issues aren’t intrinsic to inequality. It is possible to conceive of an economy where inequality exists, but the poorest household still has its basic needs met, and measures like inheritance tax can somewhat prevent situations like the one described above. So what’s wrong with inequality?

One of the main problems is inequality of opportunity. In any society, there are a limited number of opportunities available. Big companies only have so many vacancies, top universities only have so many places. Even in a society where absolute poverty doesn’t exist, opportunities for social mobility will still be limited. And these opportunities tend to stay in the hands of the rich. There are a wide range of reasons for this, from subtle ones like poorer students facing more mental stress when applying to university than richer ones as the cost of them failing is significantly higher, to more obvious ones like wealthy people being able to afford additional courses and qualifications to make them more qualified for higher-paying jobs. Either way, economic inequality brings about very unfair circumstances.

Money in politics

Another problem is that of political power. In a democracy, everyone’s voice should be heard equally, through universal suffrage. However, money can significantly increase someone’s political power. For example, they can afford a party membership, giving their party more money to spend on advertising campaigns to win elections. They can also make donations to influence policy decisions. In these ways, the wealthy have an unfair say in politics over the economically disadvantaged. Technically, this could be remedied by certain policies, such as all political parties receiving the same amount of funding from the government, but this seems very implausible, so I’d argue that inequality remains the real issue here.

From a more pragmatic perspective, economic inequality actually hinders economic growth. A 2014 study by the OECD found that the UK’s failure to address inequality meant that its economic growth was six to nine percentage points lower than it could otherwise haven been. This is because, as previously mentioned, people from poorer backgrounds find it harder to get good education opportunities as the rich can use their wealth to give them an unfair advantage. As a result, the poor get low-skilled jobs contributing little to the economy, whilst the rich get high-skilled jobs with relatively little competition, and so are generally not as efficient as they should be. It turns out that reducing inequality actually benefits everyone.

Why is the UK so unequal?

Before we can combat inequality, we first need to understand what causes it. In the UK, one of the main causes is the housing market. Currently, only 64% of all households are owned, compared to 71% in 2003. And this is expected to get worse; the average wage in London is 16 times less than what would be needed for a deposit. A house is normally the most expensive asset someone will own. Britain’s situation has meant that the children of homeowners inherited vast sums of money, giving them a huge advantage over people who weren’t as lucky.

This has allowed them to afford their own property, and buy more assets to generate even more wealth. This makes the rich get exponentially richer, whilst the poor are forced to cope with higher rents due to increased housing demand, reducing their disposable income and effectively making them poorer. As a result, 10% of households own 44% of all wealth, while the poorest 50% of households own just 9%.

Education

But this isn’t the whole story; after all, the UK has a fairly average wealth distribution compared to other OECD nations. Another major source of inequality is the education system. Despite the fact that this is often touted as the ‘great equaliser’, only 21% of children eligible for free school meals go to university, compared to 85% of children from private schools. As a result, those from poorer backgrounds tend to get low-paying jobs, whilst the opposite is true for the wealthy. This ensures that the rich stay rich and the poor stay poor.

One major reason for this contrast is the price of nursery. The average price of full-time nursery in the UK is £242 per week, which is roughly 50% of the average household disposable income. Those on lower incomes will struggle to afford this compared to richer parents. This may explain why economically disadvantaged children even do much worse than their wealthier counterparts in primary school.

Solutions

To solve wealth inequality, the government must reform council tax. This is one of the main reasons why the housing market is in such bad shape. Firstly, this policy is regressive. According to a report by the Institute for Public Policy Research (IPPR), a household in band A property in London pays almost five times what a band H household would pay as a proportion of property value. Additionally, in 2013 the government simultaneously devolved council tax benefits and cut funding for it, forcing councils to start taxing those on the very lowest incomes. As a result, council tax has greatly contributed to economic inequality.

One possible solution is to exempt those on the lowest incomes from paying council tax. This will somewhat stop the tax from being regressive if poor households simply don’t have to pay it. Another, more long term, solution could be to scrap council tax entirely, and replace it with an annual flat rate tax. This would guarantee that the policy is progressive. According to City Metric, a 0.25% tax would raise the same revenue for London as the current system, but 80% of households will pay less.

To solve the gap in education, one possibility is to make nursery free. In a 2016 report on child well-being in rich countries, UNICEF called for high quality early education and care for children to reduce inequality in education. Making it free would certainly achieve this. In addition to this, British charity Teach First, who work to reduce educational inequality, claim that the government needs to increase the amount of teachers in schools in deprived areas. This will reduce class sizes, which plays a big role in the success of the pupils.

Conclusion

To conclude, economic equality is vital to achieve political equality and equality of opportunity, and also creates more economic growth. Two of the main causes of inequality in the UK are the housing market and the education system, both of which require serious reform if we’re to solve this issue.

Inequality is a very complex problem, and I’m not suggesting that this article has magically solved all of the issues that cause it. However, hopefully more discussion on this topic will eventually give us the answers.

If you enjoyed this article, you may want to check out Kenura’s blog for more analysis of British politics.


 

I don’t make any money from my work. But if you like, you can contribute by making a donation which helps me continue to research and write informative, insightful and independent articles, and to provide support to others going through disability  assessment and appeals. The smallest amount is much appreciated – thank you.

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Government refuse to publish Brexit impact assessment. We need to ask why

“Despite calls from over 150 MP’s and threats of legal action, the Department for Exiting The European Union are still refusing to publish Brexit impact assessments.” David Lammy.

Whitehall’s internal risk assessments of the impact of leaving the EU on various sectors of the UK economy have remained the private property of the government. The government’s reluctance to publish them has been one of the most controversial, and widely discussed, features of its approach to Brexit. Ministers say that publication would undermine their hand in the Brexit talks and could influence the debate on Brexit if they were revealed. Circulation of the assessment is said to be highly restricted inside government because of its political sensitivity.

However the government’s authoritarian refusal to publish these documents is undemocratic, and it means the public will be intentionally kept in the  dark about Whitehall’s internal analysis over the economic impact of Brexit. Not a government that’s fond of public scrutiny, transparency and democratic accountability, then.

If you think my use of the term “authoritarian” is a bit strong, it’s worth remembering that in 2012, the government was ordered more than once by the Information Commisioner and by a Tribunal to release the risk register document relating to the impact of the controversial Health and Social Care Bill. Ministers vetoed the disclosure, and said that revealing such information would “interfere with policymaking”, and as such, was “not in the public interest.”  However, the Information Tribunal had ruled that the public interest in publishing the risk register was “very high, if not exceptional”.

Nonetheless, it has never been published for the public to see. Over the last 7 years, I have given many other examples of policies and narrative that indicate the Conservative’s strong authoritarian tendency.

The highly controversial Welfare “Reform” Act ( key measures of which were the introduction of Universal Credit, the “bedroom tax”, changes and steep cuts to disability benefits, the introduction of  a harsh and punitive sanctioning regime and the benefit cap) was defeated several times in parliament. The government implemented it nonetheless, by enforcing the “financial privilege” of the Commons in order to ignore the serious concerns raised and the refuse to entertain the mitigating amendments from the House of Lords.

Parliamentary debate regarding Brexit legislation is at a crucial stage, but opposition parties are given very little information before they are expected to make key decisions and vote on them. This is not an isolated or incidental set of circumstances. It’s emerged as a key Conservative strategy over the last few years, to ensure that parliamentary and public scrutiny and debate of controversial legislation is minimal. It’s a government that likes to get its own way, regardless of what the majority of the population may think. 

Tim Roache, GMB General Secretary, has said: “Brexit isn’t a game – people’s livelihoods and futures are at stake.

The Prime Minister seems to be intentionally keeping people in the dark in her quest to leave the single market and customs union.

The Government must publish their secret impact assessments as soon as possible so people know what’s in store and what the government is putting at risk.

Public services, unions and government need to plan for the future, we can’t do that when the government is hiding so much information from everyone.”

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There has always been a substantial gap between the Conservatives’ ideological position and economic prudence. Despite assurances earlier this year from the government, the Daily Mail  and the Express that our economy is “thriving”, they have somehow managed to misplace £490bn of our cash. That’s half a trillion pounds. It’s equivalent to 25 per cent of GDP.

This quote from the Daily Mail hasn’t held up very well in the fullness of time:

“In a damning assessment of the scaremongering by the Remain camp, the Office for National Statistics declared that there had been no post-referendum economic shock.”

I think it’s a bit of an economic shock to discover that the UK’s wealth has suddenly diminished from a surplus of £469bn to a net deficit of £22bn, and that investment in the UK by overseas companies and individuals fell from a £120bn surplus in the first half of 2016 to a £25bn deficit, over the same period, in 2017. 

Meanwhile, the government’s decision to leave the EU has itself “raised uncertainty and dented business investment” in the UK, a new report from the Organisation for Economic Cooperation and Development (OECD) has warned. 

The report says that real wages are being stripped back amid soaring inflation, despite low unemployment. Of course this has been a longstanding problem under successive Conservative governments as they have pared back labor market regulation and undermined the very notion of workers rights and collective bargaining. The balance of power was deliberately tipped against unprotected employees, in favour of exploitative and bad employers.

David Cameron introduced enormous fees of £1,200 for anyone seeking redress from an employment tribunal for unfair dismissal or discrimination. The crippling cost had its intended effect – in one year there was a 67% drop in the number who could afford to use tribunals. Only the highly paid or those backed by a union can now seek help. Women have been the hardest hit as sex discrimination cases fell by over 80% in the first year of fees.

Then there came the Trade Union Act which was deliberately designed to set too high a bar for strikes – a conditional ballot requiring a 50% turnout, and 40% of the electorate to vote yes.

General Secretary of the Trades Union Congress, Frances O’Grady, says: 

“Pay packets are taking a hammering. This is the sixth month in a row that prices have risen faster than wages.

Britain desperately needs a pay rise. Working people are earning less today (in real-terms) than a decade ago.

The Chancellor must help struggling families when he gives his Budget next month. This means ditching the artificial pay restrictions on nurses, midwives and other public sector workers. And investing in jobs that people can live on.” 

Despite their eyewateringly disingenuous rhetoric, the Tories have never been “the party of the workers”. Real wages are still shrinking , the cost of living is spiralling upwards, inflation was 2.6% in July (the mid-point of the quarter), and jumped to 3% in September.

Today, in response to the ONS employment report that was published, the Resolution Foundation analyst, Stephen Clarke, says:

“Today’s figures confirm the big picture trend that the UK labour market is great at creating jobs, but terrible at raising people’s pay.

“The scale of the pay squeeze over the last decade is so vast that people today are earning no more than they did back in February 2006, despite the economy being 4.4 per cent bigger per person since then.”

Britons would need a £15 per week pay rise to get back to the levels before the financial crisis.

Brexit, the economy and more shenanigans

The 140-page annual report from the OECD outlines the state of Britain’s economy 16 months after last year’s EU Leave vote.

It also says the deadlock in talks has put Britain on course for a “disorderly Brexit”, suggesting: “In case Brexit gets reversed by political decision (change of majority, new referendum, etc), the positive impact on growth would be significant.” 

The deputy leader of the Liberal Democrats said it was clear from the OECD report that a second vote was needed to prevent the harm caused by Brexit.

Jo Swinson said: “Brexit has already caused the UK to slip from top to bottom of the international growth league for major economies.

“This will only get worse if the government succeeds in dragging us out of the single market and customs union, or we end up crashing out of Europe without a deal.”

At least 20 members of May’s cabinet backed remaining in the EU in the run-up to last year’s referendum. 

The Treasury and Conservative ministers have rejected the OECD’s suggestion of second Brexit referendum, despite the warning from the thinktank that Britain must stay close to the EU or face long-term decline, and that reversing the decision to leave would significantly benefit the economy. 

I wonder if Philip Hammond’s Autumn budget on 22 November will continue to push the “balancing the budget” theme – a Conservative euphemism for more austerity, and the poorest citizens having to live within the governments’ dwindling and increasingly miserly “means,” now that he’s somehow misplaced a massive amount from the public purse. It’s going to be very difficult to woo the electorate with such a backdrop of even more looming poverty for the demographic that Conservatives usually direct their traditional prejudices at. For many of us, the “no gain without [your] pain” mantra doesn’t endear the Conservatives or switch on our confidence in their “long-term economic plan”.

There is a veritable chasm between policy and democracy, rhetoric and empirical evidence, not forgetting the galaxy-sized space between facts and techniques of persuasion. Maybe the Conservatives are still trying to convince themselves, in the their typical blustering, unreachable, non-dialogic “because we say so” way that always indicates denial and authoritarianism, that they can persuade a cut-weary public that austerity will suddenly work if we persist for yet another decade.

The “paying down the debt” deadline set by the chancellor has become an elusive goalpost, forever retreating into the future, and now we are expected to believe that by 2025, our economy will be fine and we’ll have a comfortable surplus instead of an ever greedy black hole of trillions.

Back in 2010, we were reassured by George Osborne that the government’s aim was for the deficit to be eliminated by 2015, and in his first budget he said that aim would be achieved, based on the government forecasts of the time. That didn’t happen. By November in 2011, the first surplus was forecast for 2016/17. By December 2013, it had been pushed back again to 2017/18. Now it’s been pushed back to 2025.

That’s providing that the public continue to believe the Conservatives have a shred of economic credibility for the forseeable, of course. Personally, I think that people are starting to grasp that the continuing radical cuts to public spending the economy will continue to shrink rather than expand the economy, because it’s not rocket science, and besides, we have now witnessed 7 years worth of empirical evidence that austerity does not work the way the Conservatives say it will. There’s only so many times that the Conservatives can get away with saying “but the economic damage was greater than we feared”.

The Tories have succeeded in being economical with the truth. But the fullness of time itself – the last 7 long years – has been a very good test of verisimilitude. The Conservatives failed. The public have noticed.

Only months ago, before the election, the government were boasting about the economic “recovery”. Yet when it comes to actual policies, we see more miserly austerity cuts, juxtaposed with generous tax cuts for very wealthy people, and the justification narratives always sound as if those carrying the brunt of austerity cuts – our poorest citizens: disabled people, young people, those on the lowest wages, public sector workers and so on – are somehow culpable personally for the state of the economy, inequality and poverty.

Some disabled people have been forced by the state to “tighten their belts” on behalf of the nation to the point that it has actually killed them. I can’t help but wonder how long the public are willing to sacrifice politically marginalised groups in the name of “the national interest” and “the deficit” just for the sake of fulfilling economic dogma, traditional Conservative prejudice and nasty, antisocial ideology.

The revised figures from the Office for National Statistics figures have weakened the governments’ position in Brexit talks. On Monday, the prime minister is meeting with European Union leaders, Jean-Claude Juncker and the EU’s chief negotiator Michel Barnier, a matter of only days after the exit negotiations were deadlocked.

The OECD said Britain must secure “the closest possible economic relationship” with the EU after Brexit to prevent the economy suffering a long-term decline.

Angel Gurría, the OECD’s secretary general, said Brexit would be as harmful as the second world war blitz and the British would need to act on the propaganda maxim to “keep calm and carry on.” That doesn’t exactly bode well. 

The revision of UK national accounts, the ONS “Blue Book”, shows that the country no longer has a net reserve of foreign assets, and therefore no safety margin while talks with the European Union reach a critical point, as time runs out to reach an agreement.

Is no prime minister better than a bad prime minister?

The half a trillion pounds that has gone missing is equivalent to 25 per cent of GDP.  

The Institute for Fiscal Studies says that if we leave without a deal, trade with the EU would fall by as much as 29%, costing the UK economy between £48.6 billion and £58 billion – the equivalent to between £741 and £884 per person.

The Treasury, rather worryingly,  is equally pessimistic saying it could cost 800,000 jobs, cut GDP by 6% and see the pound fall by 15%.

The Conservatives have succeeded in raising employment figures, but all that means in reality is that more people earning smaller wages.

And the pay squeeze is set to continue.

Maike Currie, investment director for Personal Investing at Fidelity International, says the rise of the ‘gig’ economy, and the government’s public sector pay cap, are partly to blame for the wage squeeze:

Another month, another fall in real household incomes. Today’s wage growth figures show our total earnings including bonuses grew at just 2.2% in the three months to August . With yesterday’s CPI figures showing inflation spiking to an eye watering 3%, the gap between our pay packets and the cost of goods and services continues to remain vast – our wages are not keeping up with the rising cost of living.

“The absence of wage growth remains the missing piece of the puzzle in the UK’s slow road to recovery – high employment should be the worker’s best friend because that’s what pushes up wages. With UK unemployment at a 45-year low, one would think that workers’ bargaining power at the wage negotiation table would improve, yet earnings growth remains elusive and the UK’s workforce is getting poorer. There are many potential reasons for this ranging from poor productivity to the squeeze on public sector pay and the rise of self-employment in the so-called ‘gig economy’.

Treasury documents showed Britain could lose up to £66bn a year if it pursues the hard Brexit option – leaving the single market and EU customs union.

Yet May’s Conservative conference speech signalled that the UK will prioritise immigration over single market access in Brexit talks, which also sent confidence in pound sterling plummeting.

While the longer-term economic impacts of Brexit are yet to unfold, and surprise everyone except the government, today’s report from the Resolution Foundation think-tank strongly suggests that the lowest paid could once again be hardest hit. It’s like everything this government touches upon immediately loses its value.

A draft Cabinet committee paper, which is based on a controversial study published by George Osborne in April during the referendum campaign, says:

“The net impact on public sector receipts – assuming no contributions to the EU and current receipts from the EU are replicated in full –would be a loss of between £38 billion and £66 billion per year after 15 years, driven by the smaller size of the economy.”

This evening the All Party Parliamentary Group on a Better Brexit for Young People released a report on the concerns and priorities for Britain’s youth during the Brexit negotiations. The report, compiled in association with LSE, gathered data from forty focus groups of 18 to 24-year-olds from varying economic, geographical and social backgrounds over an eleven-month period from November 2016 to September 2017.

The report, which is divided into three sections, explores youth views on the current state of Brexit, their concerns about Brexit and their priorities for Brexit negotiations.

In the introduction, it says: 

“[Respondents] spoke of their concern about the economic pressures they face with regard to housing, jobs, and education, and the political, social and economic direction of travel that Brexit represents”.

This opinion, says The LSE say that this is an opinion that was shared by over 90 per cent of those surveyed, demonstrating an overwhelmingly negative view of Brexit and its consequences. It’s clear that the referendum stirred feelings among many young people  of sadness, anger and frustration at the outcome of the referendum, and some of that was directed at people who voted to leave – the majority being older generations.  The government chose not to give the right to vote to 16- and 17-year-olds in the referendum. It is fair to ask whether allowing them to vote could have changed the result of the referendum or not.

Neoliberalism: more business as usual

You’d be forgiven for thinking that the near meltdown of the global financial system would prompt a comprehensive rethink of the principles underlying neoliberalism. Instead, the crisis was exploited to de-fund social welfare provision on a grand scale, to dismantle the social gains from our post-war settlement ) legal aid, the NHS and other public service provision, social housing and civil rights, and to hand out our public funds to a small and very wealthy cabal. Austerity socialised losses for the poorest, and privatised hand outs in the form of tax cuts. Labor market deregulation and increasing trade union regulation also benefitted the wealthiest, resulting in the growth of exploitative wages, job insecurity and poor employment practices for ordinary people, and big profits for the wealthiest. 

Immediately following the referendum result, the Centre for Policy Studies (CPS), a free market thinktank, revealed what many of us suspected – Brexit has presented the Conservatives with a cornucopia of opportunities to extend the principles of an already overarching, totalisin ideology to its absolute limits. The CPS said:

“The weakness of the Labour party and the resolution of the EU question have created a unique political opportunity to drive through a wide-ranging … revolution on a scale similar to that of the 1980s … This must include removing unnecessary regulatory burdens on businesses, such as those related to climate directives and investment fund[s].”

Shortly after, George Osborne proposed to cut corporation tax from 20% to below 15%, to staunch the haemorrhage of investment. During the coming months and years, the unfolding Brexit fueled economic crisis will provide countless pretexts for similar “emergency measures” that solely benefit big business profits and of course “roll back the state”. 

This is inevitable if the current government remain in office. There will be no Brexit risk assessment available to the public. There will be no vote in parliament, no second referendum, no fresh elections: just the most massive, scheming and authoritarian legislative programme in history within the current parliament, in which the Tories command an absolute majority based on 37% of the votes cast in the last general election.

So much for “taking back democratic control”. 

Tom Coberg, writing for the Canary, says:

“[…] it was not long after the 2016 EU referendum that one commentator observed how the Conservatives appeared to be adopting tactics akin to “disaster capitalism“. And that with Brexit:

[…] the prize is the opportunity to rework an almost infinite range of detailed arrangements both inside and outside the UK, to redraw at breakneck speed the legal framework that will govern all aspects of our lives.

May has begun to prepare the public for this. And according to Joe Owen of the Institute for Government, the civil service drew up plans for a ‘no deal’ “months ago”. Though, given the close links between the Tories and Legatum, such a scenario may have been the plan all along.

Or to put it another way: extreme Tory Brexit looks as if it could mean exploitation of the many, for the benefit of the few.”

 We are taking our country back. 

We’re heading for the feudal era, singing Hayek’s deadly anthem all the way. 

When the “free market” came to Chile

 


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UK has shameful but unsurprising levels of inequality

 

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Austerity was never about what works or what is needed. It’s about traditional Tory class-based prejudices. Austerity is simply a front for policies that are entirely founded on Tory ideology, which is  all about handouts to the wealthy that are funded by the poor.

David Cameron has often denied claims that his party has overseen a rapid rise in inequality. In fact last year, Cameron said that inequality is at its lowest level since 1986. I really thought I’d misheard him. 

This wasn’t the first time Cameron has used this lie. We have a government that provides disproportionate and growing returns to the already wealthy, whilst imposing austerity cuts on the very poorest. How can such a government possibly claim that inequality is falling, when inequality is so fundamental to their ideology and when social inequalities are extended and perpetuated by all of their policies? It seems that the standard measure of inequality has been used to mislead us into thinking that the economy is far more “inclusive’ than it is. Yet the UK is one of the wealthiest nations in the world.

Earlier this year a published report by the Dublin-based Foundation for the Improvement of Living and Working Conditions (Eurofound) stated that the UK has become the most unequal country in Europe, on the basis of income distribution and wages.

The report also says that the UK has the highest Gini coefficient of all European Union (EU) member states – and higher than that of the US. The coefficient is a widely used measure of the distribution of income within a nation, and is commonly used to calculate inequality.

A year ago, the Organisation for Economic Cooperation and Development (OECD) published research that confirmed what most of us already knew: that income inequality actually stifles economic growth in some of the world’s wealthiest countries, whilst the redistribution of wealth via taxes and benefits encourages growth. That debunks one of the nastiest Tory myths. Having long been advocates and engineers of social inequality, implying a mythological  “trickle down” as a justification, and hankering after a savage, axe-wielding minarchism, chopping away at our civilising public services and institutions, they are now officially a cult of vicious cranks. The problem is that the general public don’t pay much attention to research like this. They really ought to.

Conservatism is centred around the preservation of traditional social hierarchy and inequality. Tories see this, erroneously, as an essential element for expanding national economic opportunity. But never equal opportunity.

Conservatives think that civilised society requires imposed order, control and clearly defined classes, with each person aware of their rigidly defined “place” in the social order. Conservatism is a gate-keeping exercise geared towards economic discrimination and preventing social mobility for the vast majority. Inequality is so clearly embedded in policies – which are written statements of political intent.

According to the annual Family Spending Review for 2014, published by  the Office for National Statistics (ONS), the richest 1 per cent of the population have as much wealth as the poorest 57 per cent combined.  Wealth inequality has increased since 2012. The richest 10 per cent own half the country’s wealth.

Charities have urged the government to address Britain’s shameful and growing inequality after the figures published this week show that the country’s richest 10 per cent spend as much on alcohol and cigarettes in a week as the poorest spend on gas and electricity. That turns the dominant “feckless” poor narrative in the media on its head. Poverty doesn’t happen because people have poor budgeting skills. Poverty happens because people don’t have enough money to meet their basic needs.

The richest 10 per cent of households spent more per week on furniture – an average of £43.40 – than the poorest spent on food – £30.40.

The average weekly household spend was found to be £531.30, but there was great variation of this amount between the highest and lowest earning 10 per cent – £1,143.40 and £188.50 per week respectively.

By 2011/12, the poorest fifth of households spent 29 per cent of their disposable income on indirect taxes, compared with 14 per cent paid by the richest fifth. All told, the poorest households pay 37 per cent of their gross income in direct and indirect taxes. In other words, the single biggest expenditure for people in poverty is tax. It is, at the very least, morally unjustifiable to be taxing the poor at such a rate. The most important thing the government can do to help the poor is to stop taking their money.

David Cameron did once tell a truth, though it was an inadvertent Freudian-styled slip. He said: We are raising more money for the rich. Yes. From where, I wonder?

Oh yes. The poor.

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 Pictures courtesy of Robert Livingstone

 

One of the most destructive Tory myths has been officially debunked

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The Organisation for Economic Co-operation and Development (OECD) has discovered what most of us already knew: that income inequality actually stifles economic growth in some of the world’s wealthiest countries, whilst the redistribution of wealth via progressive taxation and benefits encourages growth.

The recent report from the OECD, a leading global think tank, shows basically that what creates and reverses growth is the exact opposite of what the current right-wing government are telling us, highlighting the truth of Miliband’s comments in his speech today – that the Tory austerity cuts are purely ideologically-driven, and not about effectively managing the economy at all. But again, many of us knew this was so.

The Labour Party’s economic plan, based on progressive taxation, equality and funding of public services is the best way forward for economic growth and social stability. The Conservatives have killed the potential for a sustainable economic recovery, and will continue to do so, because they promise endless austerity. This is rather akin to treating a disease with more disease.

Osborne’s economic policy is comparable with riding the fabled rubber bicycle.

We aren’t going anywhere.

The report showed evidence that the UK would have been at least 20 percent better off if the gap between the rich and poor hadn’t widened since the eighties under Thatcher, and successive Conservative administrations – the most recent having reversed the equality measures put in place by Blair. (Yes, he really did).

Prior to the global recession, the Tories said they would match the Labour government’s state spending and suggested they may even further it. However, when the global crash happened, a sudden opportunity presented for Tories to become fully-fledged… Tories, grinding their ideological axe, taking a neoliberal swing at the “bloated” public sector and at Labours’ public spending for the protection of public services and the most vulnerable citizens during the economic crisis.

It’s worth remembering that the Coalition has borrowed more in just 3 years than Labour did in 13. In fact Osborne has borrowed more than every Labour government since 1900 combined. And the current government have nothing to show for it, whereas the Labour government at least adequaltely funded public services and effectively sheltered the poorest citizens from the worst consequences of the global crisis.

Let us not forget that this feckless government inherited an economy that was in recovery. They destroyed that and caused a UK recession by imposing austerity, savagely cutting public spending and public services. Thatcher used the same basic strategy to redistribute public wealth to private bank accounts and create inequality, although she didn’t cut as deeply. It didn’t work back then either. She caused a deep recession, as did John Major – Tories being Tories.

Let us not forget that despite the finger-pointing blame game that the Conservatives indulge in – their perpetual attempts to undermine Labour’s economic credibility and bolster their own ineptitude – that it was Osborne that lost the triple A Fitch and Moody credit ratings, despite his pledge that he wouldn’t. We are regarded as an economic liability on an international level, which flies in the face of Osborne’s lies about economic growth and removes any credibility from his blustering, swaggering claims. I do wish the public more broadly would engage in some joined-up thinking, since many have believed that the cuts were inevitable, but Tory propaganda, in fairness, is designed to fragment the truth and disjoint rationality.

The truth is that Gordon Brown was right with his ideas about fiscal stimulation (rather than Osborne’s coercive fiscal contraction): it’s been a confirmed model over and over by economists and by the fact that we were out of recession in 2010. The Tories’ austerity measures have since damaged the economy profoundly.

But austerity was never about what works. Austerity is simply a front for policies that are entirely founded on Tory ideology, which is  all about handouts to the wealthy that are funded by the poor. 

Accumulation for the wealthy by dispossession of the poor.

The OECD report highlights the fact that Conservative economic rhetoric is based on utter nonsense: it isn’t remotely rational. Tory ideology is incoherent, vindictive towards the poorest and extremely damaging, socio-economically. It shows us that the sacrifices of austerity, which were cruelly imposed on those least able to carry that burden, were justified by a malicious lie dressed-up as a promise of economic growth. But that is precisely what the Tories are destroying.

We knew that the laissez faire capitalism of industrial capitalism  and the more recent financial capitalism of post industrial neoliberalism  extend inequality. How can such systems, founded on competitive individualism, not do so? But now we have the evidence that inequality damages rather than encourages economic growth.

I’ve said elsewhere that Conservatism is centred around the preservation of traditional social hierarchy and inequality. Tories see this, erroneously, as an essential element for expanding economic opportunity. But never equal opportunity.

Conservatives think that civilised society requires imposed order, top down control and clearly defined classes, with each person aware of their rigidly defined “place” in the social order. Conservatism is a gate-keeping exercise geared towards economic discrimination and preventing social mobility for the vast majority.

David Cameron’s Conservative party got into Office by riding on the shockwaves of the 2008 global banking crisis: by sheer opportunism, dishonesty and by extensively editing the narrative about cause of that crisis. The Conservatives shamefully blamed it on “the big state” and “too much state spending.”

They have raided and devastated the public services and social security that citizens have paid for via taxes and national insurance. Support provision for citizens is cut to the bone. And then unforgivably, they blamed the victims of those savage, ideologically-directed cuts for the suffering imposed on them by the Conservative Party, using the media to amplify their despicable, vicious scapegoating narratives.

Conservatives really do think that inequality is necessary, they think that our society ought to be divided and hierarchical. They are traditional rather than rational. They have an almost feudalist approach to economic policy, blended with a strong old boys network of corporocrats.

The Tories have long been advocates of the market society, which turns everyone and everything into a commodity. Neoliberalism is an invisible hand in an iron glove, with its whispered broken promise of a mythological “trickle down” as justification – now the new right neoliberals are officially a cult of vicious cranks.

 

Related

The BBC expose a chasm between what the Coalition plan to do and what they want to disclose

The word “Tories” is an abbreviation of “tall stories”

Conservatism in a nutshell

Osborne’s Autumn statement reflects the Tory ambition to reduce State provision to rubble

A list of official rebukes for Tory lies

 

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Many thanks to Robert Livingstone @LivingstonePics


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