Tag Archives: economy

Early implications of the Budget 2015

Posted by Euan Bennet on 09/07/2015

Having read the actual budget document yesterday, I was surprised [not really] to see the front pages of the UK mainstream media proclaiming a “pay rise for all” without the appropriate caveats. Caveats such as “all, except for the young, the low-paid, and the sick”. The way the press have run with the “£9 living wage” announcement represents a very loose interpretation of reality – what was actually announced is next year the minimum wage will be £7.20 an hour, rising to £9 an hour by 2020. As long as you are 25 or over. For comparison, the Living Wage in Scotland is £7.85 an hour right now. Living wage employers in Scotland include the Scottish Government.

Of course, the mainstream media will never report that the only place any of these wages are enough to live on is some parallel universe where food and energy prices haven’t changed for the last seven years. The actual living wage is more like £10 an hour (at least). Until yesterday, this was reflected in tax credits paid to low earners. After yesterday, those tax credits are being cut, and cut hard:

I’m sure this family won’t miss that £1,357.22 a year. After all, it’s not like they need food AND electricity, is it? Image source.

As Wings over Scotland have pointed out today, even when the Daily Mail fudged and sugar-coated the numbers, they couldn’t hide the abominable transfer of wealth directly from the poorest in society to the richest.

Daily Mail says: Fantastic! Everyone is an average of £1,204 per year worse off!!! (Sincere apologies for the source)

The United Kingdom in 2020: economic apartheid

The figure below shows the distribution of income per household per week, in 2011/12. The figures are not adjusted for housing costs, but are adjusted to include social security.

See full ONS report 

Imagine you are towards the lower income end of this range – to the left of the median income line i.e. where most of the population is. We’ve already seen that the changes mean you would gain slightly in wages, but lose out by more than you gain when the changes to welfare are included. What does the Budget statement say about your situation? Let’s find out by cherry-picking some out of context quotes!

“The government believes that those in receipt of tax credits should face the same financial choices about having children as those supporting themselves solely through work.”

Sounds promising, so they’re appreciating that family social security is about making sure the children get the best possible start in life first and foremost then, right?

Wrong:

“The Budget will therefore limit support provided to families through tax credits to 2 children, so that any subsequent children born after April 2017 will not be eligible for further support. An equivalent change will be made in Housing Benefit to ensure consistency between both benefits. This will also apply in Universal Credit to families who make a new claim from April 2017.”

“The Department for Work and Pensions and HMRC will develop protections for women who have a third child as the result of rape, or other exceptional circumstances.“

But it’s ok, they’re not completely heartless. Already have two children, and happen to become pregnant after getting raped? Simply prove it some bureaucrat and everything will be fine!

Ok, so they didn’t really mean that everyone should have the same choices for their children, in terms of welfare. Maybe they meant everyone should have the same choices if one parent would like to give up work to raise their children?

“Extending parent conditionality – From April 2017 parents claiming Universal Credit, including lone parents, will be expected to prepare for work from when their youngest child turns 2, and to look for work when their youngest child turns 3”

Oh. Well at least they’ll continue to support disabled children whose parents need to provide full time care, right?

“The disabled child premia in tax credits and UC will also continue to be paid to all children with a disability.”

That’s good. Except, as we’ve already seen, a family with one adult working at the minimum wage will be £1,357.22 a year worse off because their tax credits are being cut…

If you’re well off, you’ll be fine

“Combined with the increases the government has made to the personal allowance and the introduction of the Personal Savings Allowance, from April 2016 individuals will be able to receive up to £17,000 of income per annum tax-free, and separately invest up to £15,240 per annum through an ISA tax-free.”

“The government will achieve this by taking the family home out of inheritance tax for all but the wealthiest with a new transferable nil-rate band, introduced from April 2017.”

“First time buyers will be able to deposit £200 per month into their Help to Buy: ISA at participating banks and building societies. First time buyers will be able to open their Help to Buy: ISA accounts with an additional one off deposit of £1000 so that they can start saving now.”

I wonder how much of their £20,448.79 a year a family with 2 children will be putting in an ISA to make the most of the limit being increased. Or maybe they should be putting their money in a help to buy account so they have something to pass on to their children. All nice considerations to add in to the annual “heat or eat” decision!

But what about the welfare parasites?

Corporate welfare – £93 billion per year .

Image source.

Get this collected and the national debt will be gone in no time. Let’s see what the budget has to say about it:

“The government has asked HMRC to start a dialogue with business on how to improve the effectiveness of existing IR35 [tax avoidance] legislation. “

“The government will consult on the technical details of introducing tougher measures for those who persistently enter into tax avoidance schemes”

“The corporation tax rate will be cut to 19% in 2017 and 18% in 2020.”

The change in language when discussing tax collection is very apparent when compared to how welfare is discussed in the document. Now it’s all about “dialogue” and “consulting” instead of making sure the super-rich pay their fair share. Though at least the Government are doing their bit to reduce corporation tax avoidance, by reducing the amount of tax to be paid.

Conclusion

It’ll take some time for a more detailed analysis to emerge, but it would be reasonable to expect that inequality in the UK has just taken a step change increase. The Budget was a direct transfer of wealth from the poorest in society to the wealthiest. Aspects of inequality are now going to become more firmly ingrained, and far from work being the route out of poverty, the changes to the welfare system are likely to mean more people become trapped in working poverty. Then there are the under-25s – a generation who are in danger of being left behind.

And the truly sickening thing? This Budget was announced to cheers and celebrations by our colonial masters.

Reverse Robin hood – the first true blue Tory budget in nearly two decades

Posted by Euan Bennet on 08/07/2015

While reading today’s UK Government budget statement I couldn’t help but be reminded of my final article before the Independence Referendum. I wrote it late on the evening of the 17th of September, and in it I tried to imagine realistic best- and worst-case scenarios following a (then hypothetical) Yes or No vote.

As it turns out, today I have to hold my hands up and admit that I was wrong. My worst case scenario predictions have already been surpassed. Here is what I said on 17/09/2014:

The realistic worst-case scenario: No

There is the temptation here to construct an unrealistic scenario. One such extreme example would be the Scottish Parliament being abolished, which would be within Westminster’s gift to do at any point. The realistic worst-case scenario is, in roughly chronological order:

  • No new powers for the Scottish Parliament. Or worse, the Labour proposals for further devolution are brought in, featuring no new powers, but new responsibilities without the means to fund them.

  • A Tory Government or a Labour Government at Westminster come 2015. Both have pledged that they will continue planned public spending cuts, austerity measures, punitive welfare reform, and confrontational foreign and immigration policy. Add UKIP to a coalition with the Tories for extra racism, sexism, and every other ‘-ism’ in your worst-case scenario!

  • An EU exit following the proposed referendum in 2017.

  • The TTIP opens up the NHS in Scotland to marketisation just like it already is in England.

  • 100,000 more children in poverty by 2020.

  • Another banking crash fuelled by the housing bubble that economic policy is currently reinflating.

  • More austerity, forever.

  • BUT enough money to build a new generation of nuclear weapons stored 30 miles from our biggest city

  • Scotland’s renewable energy potential left to one side while fracking poisons our soil and water.

Nine bullet points. Six of them (no new powers for Scotland, a Tory government, an EU referendum, permanent austerity, Trident replacement, and difficulties for the Scottish renewable energy industry) have already come to pass. Of those, it could be plausibly argued that the following surpasses my “predictions”:

  • “no new powers” has been surpassed by EVEL (and every amendment to Scotland Bill blocked by MPs for England)
  • Tory government, while not backed up by UKIP, is unconstrained by whatever meagre conscience the Lib Dems provided as part of the coalition, and today it looks like their assault on the poor has really been stepped up.
  • a 2016 EU referendum.
  • permanent austerity with added £12 billion cuts in welfare announced today.
  • Scotland’s renewable industry can barely be described as being on life support, following cuts to wave power research late last year, and cuts to wind subsidies this year. Meanwhile, licences for fracking are being handed out like free sweeties.

By my count, that’s five of the nine points in the worst case scenario that have been surpassed. Already. TTIP is still on the horizon but I’m sure we’ll hear more about that shortly. 100,000 more children in poverty by 2020 was the SCVO estimate based on cuts between 2008 and 2015. Given the cuts today, it’s probably safe to say that number will be getting revised sharply upwards once the dust settles from the demolition of the social security safety net.

Now what?

In my pre-referendum article I also suggested how we might go about preventing the worst. Here were my suggestions:

What we can do to prevent the worst-case scenario

  • Hope that it doesn’t happen.

  • Remember that day in 2014 when we held absolute sovereign power for 15 hours, and chose to give it away?

  • Regret voting No.

I had expected a feeling of powerlessness to grip the Yes movement had the vote been for No. Thankfully this was only true for a matter of hours on the 19th of September – I was astonished by the energy and strength shown by those on the losing side, and it certainly helped me recover from the crushing disappointment of the result. The response has been unbelievable, and of course culminated in the unprecedented UK election result on the 7th May. But we’re not done yet.

The way forward

Now we really do need to work together -Yes and No voters alike. If you are alarmed at the UK Government directly transferring wealth from the poorest to the richest in society, assaulting the social security that forms part of the basic function of the state, and generally making bad decisions, what do you plan to do about it? I would hope that everyone is re-examining their decision, whichever way they voted. Continuing the theme from the referendum campaign: what sort of country do you want to live in?

I’m sure the budget today will cause protests and demonstrations in numbers. Another outlet for protest is to join and campaign for a political party that opposes austerity. Coincidentally, in Scotland all of the anti-austerity parties and groups are pro-independence. Here is a list of the most well-known parties:

http://www.snp.org/

http://www.scottishgreens.org.uk/

https://www.scottishsocialistparty.org/

http://www.new.solidarityscotland.org/

Politically, the priority of the anti-austerity movement should be ensuring a majority of MSPs come from these parties after the next Scottish elections in 2016. A related objective is the further extinction of the Labour Party in Scotland. We’ve completed phase 1 – reducing them to one MP this year. Phases 2 and 3 (Holyrood in 2016, and Council election in 2017) should be continued as methodically as Phase 1 – by offering a real alternative to voters and campaigning on a positive basis for anti-austerity policies.

There are also a number of groups who have continued since the referendum. This is by no means a comprehensive list:

Women for Independence: http://www.womenforindependence.org/

The Scottish Left Project: http://leftproject.scot/

Common Weal: http://www.allofusfirst.org/

Become the media

Another welcome development since the referendum has been the scales tipping slightly back towards some sort of plurality in the media. News outlets now include:

Common Space: https://commonspace.scot/

NewsShaft: http://newsshaft.com/

The National (also available in print!): http://www.thenational.scot/

These are a welcome addition to previously unoccupied niches, and offer a slightly different approach to those provided by the established websites:

Wings over Scotland: http://wingsoverscotland.com/

Bella Caledonia: http://bellacaledonia.org.uk/

Newsnet Scotland: http://newsnet.scot/

Another referendum?

I’ve noticed people talking about a second referendum more and more recently. A more detailed look at that is for another day, other than to say that there will be another referendum when the people demand it. Given the surge in party memberships, campaigning groups, and media voices, it’s likely that in any new referendum the Yes campaign would be starting from a much higher baseline than it did last time. Many of the lies and scaremongering employed by the No campaign will no longer work.

Times are going to get very exciting indeed.

The affordability of staying in the Union – part 1

Posted by Euan Bennet on 20/09/2013

This is a companion piece to yesterday’s. The question that is never asked by the media is “can we afford to stay in the Union?”, yet it is becoming clearer that this is an issue that people are going to have to consider. In order to make an informed decision one must investigate both options in equal detail. There are no guarantees under the Union just as there are no guarantees with independence, but there are plenty of indicators for how both could turn out. In order to assess how things might get better or worse, we should establish a baseline of how things are now, and how we got here. After all, the best way to predict future behaviour is to look at past behaviour.

We frequently see the Yes campaign making the assertion that the UK is the fourth most unequal country in the Western world , so let’s take a look at the figures to see how they stand up.

Economy and Inequality

Let’s start with the headline points. The UK is the 6th richest country in the world in terms of total GDP. Sounds great, except when you look at how that wealth is distributed. The UK is the seventh most unequal in the OECD.  Wikipedia has handily already compiled historical figures into a nice table. Three of the countries in the OECD that are more unequal than the UK are Mexico, Chile, and Turkey. There are several definitions of “developed country”, but for example this list (citing page 166 of this report) shows that if we do consider only developed nations, the UK is indeed fourth most unequal: behind the US, Portugal and Israel.

The wealthiest 10% of UK citizens are 4.4 times better off than the bottom 50% combined. 62% of total wealth is owned by the top 20%, while the bottom 50% own just 9% of the total wealth between them. The latest figures from 2010 show that the UK has become more unequal compared to the previous figures from two years earlier.

Since 2010 there has been further increases in inequality, which have been contributed to by the public service and welfare cuts implemented by the current Westminster government (figures on page 27 of the report that links to). Successive budgets have made an indirect transfer of wealth from the poorest three deciles to the richest two.

Other highlights

These statistics are entirely a reflection of policies pursued by successive Westminster governments. They represent choices that have been made.

Making an informed decision

One of the questions that the media should be asking in relation to the referendum debate is: how did the circumstances arise in the sixth-wealthiest nation in the world where inequality is so bad that over a quarter of children live in poverty? Anyone who may yet decide to vote No in the referendum should at the very least examine the figures cited above and make sure that they are comfortable in voting to endorse a system that has systematically and continuously brought the UK to this economic scenario, because that is exactly what a No vote will be interpreted as – an endorsement of the system. How could it be interpreted otherwise?

This post is not intended to be a whinge about policies that I don’t like – it is intended to be a reality check of the situation that the UK is in. Nor is the post an effort at negative campaigning – I am simply asking that people acquaint themselves with the reality of the economic situation in the UK today, and that they understand that this situation is the result of choices made by successive Westminster governments.

 

[Updated 8.20am 24/09/2013: added more links to clarify “4th most unequal in West… 7th in OECD” statement.]

The affordability of independence

 Posted by Euan Bennet on 19/09/2013

This appears to be one of the central concerns people have about the prospect of independence. Can we afford it? Even though it seems self-evident to those of us who have already chosen to engage in politics and find out about the figures, there are still many people who are unaware of the true wealth of Scotland. It is important for those of us campaigning for a Yes vote next year that we provide truthful and accurate figures to the people who have still to make their minds up. Here we will tackle the two figures that are most commonly used by the media: Public spending and GDP.

Revenue and Expenditure

The figure that will be most familiar to people, because Unionist politicians and the media mention it quite a lot, is that public spending per head per year is £1200 per head higher than the UK average. See for example Tuesday evening’s Newsnight debate; skip to 2min30s for the beginning of the debate, or go to 4min25s to see Margaret Curran deploying this very argument as an apparent great benefit of the Union.

Understandably, people might hear the £1200 per head per year figure and get a bit concerned about the sustainability of such spending. It is a factually accurate statement to make however, although it is extremely disingenuous to present out of context. The context being that there are two sides to every balance sheet.

Tax revenue identified as coming from Scotland (and we will return to the theme of identifiability in the future I am sure) is £1700 per head per year higher than the UK average. As neatly demonstrated by Wings over Scotland, these figures from 2010-2011 coincide nicely with a recent opinion poll which claimed that a majority of people would vote Yes if they thought it would make them £500 better off each year.

In fact, the most recent figures show Scotland in an even stronger relative position than that. The Government Expenditure Review Scotland figures (GERS) are accepted by both campaigns, and for 2011-12 showed that Scotland contributed 9.9% of UK revenues with only 8.3% of UK population, and in return 9.3% of UK spending was identified as being spent in Scotland, or on our behalf. We shall probably return to what “spending on our behalf” means at a later date.

If Scotland had received 9.9% of UK spending, in proportion to our contribution to revenues, then in absolute terms around £4.4 billion more would have been spent in Scotland in that year. Or to put it another way, Scotland subsidises the UK to the tune of £4.4 billion every year. Just imagine what we could do with that money. We could spend it on something, save it, or elect to borrow less, or a combination of all three. To put it into context, the entire health service in Scotland cost £11billion. So more than a third of the cost of the health service goes to the UK treasury every year and is never seen again. And in exchange we get debt accrued in our name, and then more interest charged to that debt than our fair share.

GDP

Revenue and expenditure is only one part of the story when it comes to general finances – another figure that is commonly bandied around is Gross Domestic Product (GDP). Rightly or wrongly, this is normally used as a measure for comparing the relative wealth of nations, both to each other and to themselves over time.

What does GERS have to say about GDP?

  • Scottish GDP with oil (2011-12) = £151bn.
    • For a population of 5.3m = £28,500 per head.
  • UK GDP (with oil) (2011-12) = £1526bn
    • For a population of 62.65m = £24,350 per head

With oil Scottish GDP per head is 18% higher than UK GDP/head.

  • WITHOUT oil Scottish GDP = £125bn = £23,550 per head.
  • Without oil UK GDP = £1495bn = £23,900 per head

Without oil Scottish GDP per head is 99% of the UK level.

Hat-tip to Ivan McKee of the excellent Business for Scotland for compiling that list.

The GDP figures make it clear that discounting oil, Scotland would not be very different to the UK. The oil and gas should therefore be viewed as a bonus, rather than the basis for our entire economy. As page 59 of this report shows, revenues from oil and gas consistently make up less than 20% of all tax revenue collected in Scotland, and our economy is far more diverse than people realise. That diversity is a great strength, and is another topic that deserves an entire post dedicated to it.