Posts about British economy and social issues

The EU is in terminal decline

Some Wednesday snippets. First, I juxtapose the political machinations that the EU President is engaged in to consolidate and expand her power within the European Commission with the reality that Member State governments are becoming dysfunction because social instability and political extremism are rife. Then I reflect on my experience as Chancellor of Britain – a great success I should say, although I was told I had broken all the rules. It tells one how stupid the rules are. Then, finally, some music to enjoy.

Read more

The British government does not have to appease the financial markets

Sometimes one journalistic piece captures the problem facing those who are trying to change the economics narrative and promote an alternative framing that is ground in the reality of the system rather than one that serves to reinforce the dominant ideology of the elites. The opinion article by Larry Elliot in yesterday’s UK Guardian (October 13, 2024) – Labour’s challenge is complicated by the triumph of finance. That’s bad news for UK plc – is one such article. It summarises how far the progressive debate and the British Labour Party has become trapped by fiction. It demonstrates clearly how if we start off assuming that there is a rigid constraint on decision-making then the bind will lead, invariably, to poor decision making because the opportunity set is so artificially limited by the starting assumption. I am amazed really that progressives in Britain (and everywhere by the way) still adopt this flawed framework for debate and decision-making. So let’s work it out properly.

Read more

More economists are now criticising the British government’s fiscal rules – including those who influenced their design

There is renewed debate in Britain at present on the use and design of the new government’s fiscal rules, which many people are now saying will force expenditure cuts which will “damage the ‘foundations of the economy”, according to the Financial Times article (September 16, 2024) – UK spending cuts would damage ‘foundations of the economy’, Reeves told. Those reported ‘telling’ Reeves include British economists, who were instrumental in the design of the rules that the new Chancellor has taken on and deemed necessary to rigidly control government spending. The economists claim that if Reeves continues to operate according to the fiscal rule “inherited by the Labour government” it will cut public investment expenditure significantly and undermine prosperity. I agree that the application of the ‘Fiscal Rules’ will be damaging but I find it amusing that some of the ‘Letter Writing Economists’ were prominent in advocating such rules in the past as the way ahead for British Labour are now criticising those rules.

Read more

British House of Lords Debt Report starts with false premises and then just repeats conventional fictions

On Tuesday (September 10, 2024), the UK House of Lords Economic Affairs Committee released their first report for the Session 2024-25 (HL Paper 5) – National debt: it’s time for tough decisions – which was the result of their decision to hold an inquiry – How sustainable is our national debt? – into whether “UK’s national debt is on a sustainable path” and whether “the Government’s fiscal rule regarding the national debt is meaningful”. They didn’t need a large-scale investigation to come up with answers to those questions: Yes and Not meaningful- are my answers based on the reality of the currency status of the British government.

Read more

British GDP growth depends on the current fiscal position – a fact that is being forgotten

It seems that since they were elected British Labour, principally the Leader and Chancellor, have thought it necessary to put out ever increasing messages of doom and the need for tough fiscal action – aka austerity – despite them claiming when they were wooing the electorate that they would not pursue that ‘Tory’ option. Of course, they pulled the old stunt that once they were in office and had access to the ‘books’ they discovered, surprise surprise, that the state of government finances were even worse than they had imagined and that meant it was all to play for, which justified them taking tougher than planned actions. Every week passes since, it seems, when the tough talk gets tougher and core promises are abandoned. Tory policies that are the anathema of a progressive policy stance – such as the two-child benefit cap – will remain. And other Tory policies that were more ‘Labour like’ in nature will go – such as the Winter Fuel Payment received subsidy – will be severely cut back. There are many criticisms that I have made of the Chancellor’s stance (see previous blog posts) based on the absurdity of constructing the British government’s finances as equivalent in principle to the finances of a household issue. But, in addition to those more elemental issues, there is another matter that I have not seen addressed by the mainstream media nor the actual politicians relating to the proposed austerity. The whole discussion appears to be waged in a vacuum – context free. It is as if the current policy position, which the Chancellor claims is shocking and unsustainable, is divorced from the current broader economic reality in Britain. And that construction means that poor policy decisions will be made that will damage the material prosperity of the nation.

Read more

The Bank of England does not need a tiered reserve system for the Government to avoid austerity

There is an interesting debate going on in the UK at present about the concept of tiered bank reserves. The concept is now being used by commentators to argue that the new British government does not need to inflict the austerity that the Chancellor has now announced (even though she is denying that is what the government is up to) because the government can simply reduce outlays to the commercial banks in order to meet the fiscal rules. The discussion is rather asinine really and features all the missteps that commentators make when trying to appear progressive but falling into the usual mainstream macroeconomic fictions.

Read more

British Chancellor fails the basic test – language is meant to impart meaning

Language is meant to bring meaning to discourse. That means we want to use terms that convey information that is of use to us in making our way in the world. The problem is that economists have perverted that process and introduced a metaphorical language that is intended to persuade the reader/listener to accept a particular view of the world but which undermines their ability to actually understand the phenomenon in question. Marx knew long ago how language could be constructed to advance the interests of the ruling class. The mainstream economics commentary that is also used by politicians falls into this category. Terms are used that have no meaning in an elemental sense but provide support for ideological agendas. We, the public, allow that to happen because we are ignorant about the context. It becomes a vicious cycle of lies and fictions which undermine human and environmental sustainability but certainly transfer income to the top-end-of-town. A recent path setting address to the House of Commons by the new Chancellor is a classic example of this reality denial.

Read more

British Labour’s election victory looks very unconvincing when we dig into the data

The UK General Election was held on Thursday, July 4, 2024 and the British Labour Party stormed home winning 411 of the 650 seats in the House of Commons to take a huge simple majority of 174 seats. The awful Tories were cleaned out well and truly and only managed 121 seats a loss overall of 251 seats. The Liberal Democrats improved their seat holding by 64 to end up with 72 (a rather dramatic reversal after they were shunned for siding with the Tories in past Parliaments). So for those who hate the Conservatives this was, on the face of it a huge win, surely. Not quite. In fact, despite the simple statistics above, Labour only gained a 1.7 per cent swing despite 14 years of shocking Tory rule, while the Tories endured a swing of 19.9 percentage points. In fact, the result highlighted the failed electoral system used in Britain – first past the post – when there are more than 2 parties involved, not to mention the demonstration of national apathy as captured by the 59.9 per cent turnout in the voluntary system, which was down by 7.4 percentage points on the last election. In other words, British Labour, despite all the hubris from the leadership actually performed pretty badly gaining 33.7 per cent of the 59.9 per cent who bothered to vote. And, into the bargain, their total vote dropped from 10,269,051 to 9,708,716. When considered in terms of the total registered voters then Labour was preferred by only 20.4 per cent. From the perspective of an outsider, these numbers are simply stunning and do not resonate with any reasonable concepts of representative government. The joker in the pack was, of course, the entry into the election of Reform UK, which effectively split the conservative vote and in this sort of electoral system grossly distorts the overall outcome. I conclude that British Labour can hardly claim to be in a safe position and less people wanted them to govern than when Jeremy Corbyn was leader.

Read more

The new British Labour government will have to abandon its fiscal rule or deliver very little

It’s the Wednesday pot-pourri – British politics, self promotion, events, sport and music. Politicians invariably claim that the situation they inherit when they take office following an election is untenable and that the ‘public finances’ are worse than they had initially thought. Of course, the idea that ‘public finances’ can be good or bad or somewhere in between is a misnomer and just reflects the ignorance of the fiscal capacity that governments have (that is, currency-issuing governments). There is no such thing as a deteriorating public finance situation. So when Rachel Reeves got up after being elected the new Chancellor of the UK she was just posturing and telling the British people that they should not expect much better than what the Tories delivered. What can be good or bad or somewhere in between is the state of public infrastructure and public services. And after 14 years of devastating Tory rule, one can safely conclude that there is a huge deficit in the UK in that context. The question then is what can be done about it. My reading of the situation is that if Labour want to actually improve things significantly in terms of public service provision and the viability of Britain’s infrastructure then it will have to abandon its mindless fiscal rule. And it would be better that they do that quicksmart while they enjoy such a large domination of the Parliament.

Read more

British Labour Party once again tripping over their nonsensical fiscal rules

Regular readers will know that I am not enamoured with the British Labour Party leadership and its obsession with its so-called fiscal rule, which is really just a continuation of the rule that the Tory’s were supposedly running with. How can a self-styled progressive party (so-called) that is about to take over a nation that has been shattered by 14 years of the worst Tory rule that one can imagine, and which will require billions of pounds to be spent to even put a dent in the degradation in infrastructure, services, not to mention addressing the forward-looking challenges (health, climate, etc), claim that a fiscal rule that is biased towards austerity be appropriate? It beggars belief. By continuing with such rules, the Labour Party is ensuring that it will either fail to make much headway in redressing the damage and placing Britain in a better position to deal with the carbon challenges or will fail to meet the fiscal rules or both. It is recipe for not much. Pity the British people who have already endured the consequences of supporting, first Blair’s Labour, then the long hard years of the bumbling and incompetent Tories. In today’s post I want to highlight one aspect of the fiscal rule absurdity, and actually say that Nigel Farage is right about one thing, although not for the right reasons. Read on – a story of corporate welfare and fiscal fictions unfolds.

Read more
Back To Top