A while ago, I caught up with an old friend who I was close to…
The austerity attack on British local government – Part 2
I have been doing research on local government funding in the UK recently as part of preparation for a workshop I am presenting in London on Sunday, May 12, 2019. The workshop – Local Government Funding: Challenging the Status Quo – is primarily designed to tackle this issue from an Modern Monetary Theory (MMT) perspective. My brief is to speak about the way in which flawed understandings of the capacities of currency-issuing governments, combined with a vicious, ideological attack on working people from a government fully invested in neoliberal transfers to the elites, have ravaged the capacity of local government in the UK to deliver essential public services. See the Events Page for more details. It is a public event and I hope people support it. In – The austerity attack on British local government – Part 1 (April 30, 2019) – I examined the way in which the central government austerity had impacted on the major service areas in Britain and considered some of the motivations that have been driving this agenda. In this Part, I am examining the way in which these cuts have been distributed at the local government level. How their grants have been cut and how they have been forced to rely on their own income bases to maintain a semblance of service delivery. I also consider the shifting composition of service delivery in the face of these cuts from broader areas that define a sophisticated society to the raw essentials of human social care. I clearly cannot provide a complete account of what has been going on in two blog posts and that is not my purpose anyway. For example, I am not considering the controversial Universal Credit scheme and the way housing benefits, previously paid by councils have been rolled into that scheme. So bear that in mind when reading. Any reasonable person observing what has been going on in Britain would conclude that this period of Tory government has been a disaster for the well-being of citizens and regions.
Tory cuts and Brexit
My views on Brexit are by now well known. I still read regular articles from progressives saying that the problem for Britain is not its membership of the European Union, but, rather, the mindless austerity bias of the Conservatives.
The corollary of this argument is that all of the emotional energy that is being consumed by the politics surrounding Britain’s impending exit is for nothing.
The argument goes that progressive energy should go towards getting rid of the Tories, establishing social democratic policies in Britain, and then forging this new progressive consensus into a movement that will reform the neoliberal cabal that is the EU.
It’s the stuff of dreams.
I’ve written before about the near impossible task of reforming the EU along progressive lines within the current legal and institutional architecture defined by the various treaties.
I agree that progressives should be working within Britain to kill off the Tory neoliberalism.
But they also should be seeing Brexit as part of the broader campaign to free Britain from the EU.
Now to local government concerns in Britain.
The funding challenge for local authorities
When the Tory government was elected in 2010, at the height of the GFC recession, it did what all mindless conservative governments do – it set about cutting government’s net contribution to spending – the austerity impost.
Local authorities in the UK are heavily dependent on the central government for their income through grants from the Ministry of Housing, Communities and Local Government (MHCLG) – aka ‘The Department’.
The Department not only distributes central government funds to the local authorities but it also sets (Source):
… the limits on the extent to which local authorities can increase their council tax rates without holding a local referendum.
A House of Commons Briefing Paper (No. 08431) published on October 31, 2018 – Local Government Finances – showed that:
Grant funding has decreased in every year since 2010/11, for all types of local authority – in March 2018, the National Audit Office used the same data to estimate that total funding across England is set to fall in real terms by 56.3% between 2010/11 and 2019/20.
They produced the following Table:
A National Audit Office Report (released March 8, 2018) – Financial sustainability of local authorities 2018 – examined the performance of the MHCLG, explicitly in relation to the issue as to:
… whether the Department, along with other departments with responsibility for local services, understands the impact of funding reductions on the financial and service sustainability of local authorities.
It found the following “Key facts”:
1. Between 2010-11 and 2017-18, government funding for local authorities fell by a staggering 48.1 per cent in real terms.
2. Over the same period, there was a 28.6 per cent “real-terms reduction in local authorities’ spending power (government funding plus council tax)”. In other words, the rise in council taxes did not offset the loss of grant funding.
3. There was a “3.0% – real-terms reduction in local authority spending on social care services, 2010-11 to 2016-17”.
4. “32.6% – real-terms reduction in local authority spending on non-social-care services, 2010-11 to 2016-17”.
5. “£901 million – overspend on service budgets by local authorities in 2016-17”.
6. “66.2% – percentage of local authorities with social care responsibilities that drew down their financial reserves in 2016-17”.
7. “10.6% – percentage of local authorities with social care responsibilities that would have the equivalent of less than three years’ worth of reserves left if they continued to use their reserves at the rate they did in 2016-17”.
By any stretch of the imagination this is a parlous state for the authorities vested with the responsibilities to provide essential human and infrastructure services in local areas.
As the austerity squeeze has tightened:
Local authorities have protected spending on service areas such as adult and children’s social care where they have significant statutory responsibilities, but the amount they spend on areas that are more discretionary has fallen sharply … spending on planning and development fell by 52.8% in real terms, with spending on housing services and highways and transport falling by 45.6% and 37.1% respectively.
So there has been a concentration of local spending on social care, while the rest of their service charter is being neglected.
On December 7, 2018, The Chartered Institute of Public Finance and Accountancy released their – Annual Library Survey.
It found that:
The number of public library branches and paid staff in Britain continues to drop, as stretched councils reduce their spending on the service … This follows a trend which has seen the number of public libraries and paid staff fall every year since 2010, with spending reduced by 12% in Britain in the last four years …
The CIPFA spokesperson said:
Libraries have faced significant cuts under austerity, with councils forced to reduce spending on all ‘non-essential’ services across the board.
We can view libraries as a bit of a canary in the coal mine for what is happening across the local government sector, as we see it reflect many wider trends.
A lack of funds is forcing many councils to get creative in how they deliver their services, and we find in our public libraries this loss of paid employees is creating a reliance on volunteers.
Similar cost shifting is happening across almost all local government services, with communities finding everything from legal aid to green waste collection no longer as accessible.
CIPFA found that volunteerism is on the rise as citizens try to defend the loss of services they value.
Volunteerism has become a symbol of the neoliberal era. Austerity-biased governments spruik how wonderful it is that such community spirit is growing and preach community service and all the rest of the motherhood statements that accompany this syndrome.
But in many cases, volunteers are just doing work that was formerly a paid job. They are just covering up, to some extent, the damage created by unnecessary fiscal cutbacks.
I see no virtue at all in people working for free when the tasks they were fulfilling were previously paid jobs.
The National Audit Office Report (cited above) concluded that:
Compared with the situation described in our 2014 report, the financial position of the sector has worsened markedly, particularly for authorities with social care responsibilities …
Local authorities face a range of new demand and cost pressures while their statutory obligations have not been reduced. Non-social-care budgets have already been reduced substantially, so many authorities have less room for manoeuvre in finding further savings …
The financial uncertainty created … risks longer-term value for money.
Neoliberal myopia.
The – Local government financial statistics – England (compendium) – data allows us to see the changing revenue situation for English councils.
Government grant funding to local authorities has fallen from 65 per cent of total income to 52 per cent (in 2016-17) in a period of declining funding overall.
There are two other problems facing local authorities in the UK in the face of the government funding cuts:
1. The population is increasing which means higher demand for services.
2. The population is ageing which means higher demand for particular services.
The Family and Childcare Trust – Annual Older People’s Care Survey – (released December 13, 2018) found that:
Just one in five local areas in the UK report having enough older people’s care to meet demand … leaving over 4.3 million people aged 75 or over living in areas without enough care …
no local authorities in Inner London or Northern Ireland reported having enough care to meet demand in their area, while almost half (44 per cent) did in the East Midlands and the North East. 34 per cent of local authorities expect the situation to get worse in the next year, compared with only 1 per cent who expect it to get better.
So the austerity program from the Tories is not only shifting costs onto local governments but also shifting costs from local government to individuals, who are increasingly being forced to pay for their own aged care.
Local government spending patterns
With the devolved administrations for Scotland, Wales and Northern Ireland, comparison with England is not possible in any sensible way.
So what follows focuses on English statistics only. The trends are typically common across all of the UK.
The largest proportion of local government service expenditure (excluding Police, Fire and Rescue spending) in England goes to Education (42.9 per cent).
Social care spending is next 30.4 per cent.
These proportions are shown in the following graph (as at 2017-18).
It should be noted (and I discuss this a little more next) that while Education services is the highest proportion of service expenditure, the majority of spending that local authorities faciliate takes the form of ‘ring-fenced’ grants from the central government.
The – Dedicated Schools Grant – is a prime example.
Education spending, for example is a smaller proportion of total local authority spending because of the way the central government has transferred funding to the ‘privatised’ – Academy structure – which are independent of local authority control.
Although with the cuts to the NHS, local authorities have now become responsible for taking up the slack for those with learning disabilities.
So these proportions should really be interpreted as mostly reflecting the funds that local authorities glean from tied central government grants rather than any discretionary spending decisions that they might take themselves.
The following Table (derived from MHCLG data and ONS inflation and demographic data) shows the percentage change in real headline categories of spending at the local level per capita between 2010-11 to 2017-18.
Note the caveats above regarding the complexity in differentiating spending that local authorities just pass through from discretionary spending decisions.
The only area that has seen an increase in real per capita spending over the Tory reign is Children’s Social Care services and this largely because there has been a massive increase in the number of vulnerable children.
Data available from the UK Department of Education – Characteristics of children in need shows that there has been a dramatic rise in numbers under the so-called Section 47 under the Children’s Social Care legislation, which covers cases where there is a “reasonable cause to suspect that a child who lives, or is found, in their area is suffering, or is likely to suffer, significant harm”.
So bad cases.
As local authorities are forced to deal with these human emergencies, spending is cut elsewhere in an environment of declining overall funding.
That is a vicious cycle – the cuts wreck families, children suffer, so spending on protecting them has to rise, and that squeezes spending elsewhere and – the cycle continues.
Whichever way one might want to look at this, and whatever complexity and qualifications one puts up to blur the story, the cuts are devastating both in the short term (for example, cuts to Adult Social Care services, Cultural services, etc) and the longer term (for example, cuts to planning and development services, environmental services, etc).
Some of the longer-term impacts will be seen in the massive cuts to housing expenditure by local authorities.
Local authorities are responsible for helping improve housing quality in defined slum areas, keeping track of private landlords and for increasing the stock of public housing.
But as the poverty rates rise and homelessness increases it is obvious there is an inability of the local authorities to keep pace with the disaster unfolding.
The upshot is that local authorities are diverting some longer-term housing spending into crisis accommodation to help keep people off the streets. It is a myopic strategy but obviously essential given the crisis.
Finally, the National Audit Office’s report on the Financial sustainability of local authorities 2018 (cited above) concluded that:
Compared with the situation described in our 2014 report, the financial position of the sector has worsened markedly, particularly for authorities with social care responsibilities …
A combination of reduced funding and higher demand has meant that a growing number of single-tier and county authorities have not managed within their service budgets and have relied on reserves to balance their books. These trends are not financially sustainable over the medium term …
Some 10.6% of single-tier and county councils would have the equivalent of less than three years’ worth of total reserves (earmarked and unallocated combined) left if they continued to use their reserves at the rate they
did in 2016-17 …
So the story is a bit like this:
1. The central government squeezes total funds available to local authorities.
2. It increases or maintains their spending responsibilities.
3. Population grows and ages.
4. Overall austerity increases the number of people reliant on council service delivery.
5. Local authorities divert their shrinking funds into crisis areas.
6. They cannot cope.
7. They start drawing on their finite reserves.
8. Eventually, with public infrastructure in a degraded state due to lack of maintenance, people still in need, the local authorities are issued with so-called Section 114 notices – signifying they are “at risk of failing to balance its books in this financial year”.
9. At that point, the local authority is in breach of the law and the system of government becomes unsustainable.
Regional impacts
The cuts in government spending on services (both central and at the local level) have not impacted evenly across space.
After analysis the spending power of local authorities (which is “the total amount of money that local authorities have available to them for making decisions”), the House of Commons Briefing Paper (No. 08431) cited above concluded that:
… few consistent patterns in the distribution of spending power, although there is a definite cluster of higher spending power in the north and in the London boroughs.
However, they also note that:
One of the best demonstrations that spending power is not necessarily associated with the location of an authority is that the local authority areas with the highest and lowest spending powers are right next to each other (these being Kensington and Chelsea and Wandsworth, respectively).
Trying to summarise these patterns therefore is quite a task.
Further, there is a problem with comparability of data across years as policy shifts occur (programs come and go, etc). In part, this is also because:
much of the money that the authorities spend … is instead simply passed directly on to service providers (such as schools or the police). This means that such spending does not count as part of authorities’ funding or their spending power; it also means that figures for core spending power and actual spending are not directly comparable.
Having said that, it remains true that the highest spending power per capita is “found within London” and the “lowest is to be found in the Midlands”. Local authorities “around Manchester and Liverpool also … [have] … relatively high spending”.
The first graph shows the percentage change in Total identifiable expenditure on services by country and region per head in real terms between 2010-11 and 2017-18.
First, it shows the impact of the limited discretion that Scotland and Wales have to resist central government dictates.
Second, there is considerable regional disparity.
At the local government level, the situation is more dire and reflects my view that the austerity imposed by the Tories has been pushed down to local authorities as an act of depoliticisation – the local officials take the blame not the central government.
This graph shows the Total local government identifiable expenditure on services by country and region per head in real terms between 2010-11 and 2017-18.
As we can see, the revenue-raising capacity of the London boroughs has attenuate the central government spending cuts impacting in that region.
For other regions with less own revenue-raising capacity the situation has not been positive.
Conclusion
The two-part series was really designed to help me better understand the way in which the neoliberal austerity in Britain has impacted at the local level.
I don’t pretend to be an expert in UK local government finances – it is a complex web and a difficult one to untangle. It will take a book-type project to do that.
But I am much better informed now and that was my objective.
By any measure, the numbers are devastating.
But behind the numbers – which are easy to see and write about – is a human and environmental tragedy. That is much harder to put into words and impossible to experience sitting behind a computer screen distilling information from official data and reports.
It is the attack on the human condition that should motivate a renewed class struggle within Britain to expunge the Tories and the Blairites from the major political parties, free Britain from the neoliberal cabal centred across the Channel, and start reconstructing the system of government in Britain to ensure infrastructure and services are supplied according to human need rather than according to some fictions recorded in fiscal documents.
That is enough for today!
(c) Copyright 2019 William Mitchell. All Rights Reserved.
Did not the Labour 2016 election manifesto have as a goal balancing the budget in 5 years? Is that proof of neoliberal austerity intent in spite of all leadership pronouncements? Look to the Liberal Party of Australia policies you speak of. The economics of your posts seems to my ill-informed knowledge seems irrefutable but the politics of your analysis is wishful thinking especially as concerns Brexit.
@Heim – all things in time.
When I first became aware of MMT a little over a decade ago, it seemed virtually unknown outside a tiny handful of mostly academics. Whenever I introduced it to any acquaintance, it was inevitably treated with scorn.
Now fast forward 10 years – MMT is constantly in mainstream media commentary and significant and increasing numbers of mainstream professionals are beginning to openly admit to it’s solid factual foundations. It has taken a decade of never-ending failure of the neo-liberal approach for people to start rejecting what has long been a fashionable consensus.
While it may be true that there is still a long way to go, awareness of MMT has made huge strides and as the defectiveness of the neo-liberal approach becomes ever more stark, MMT’s time at the helm will almost certainly come.
Bill has covered a lot of the area that my recent comment to his previous article on the subject tried to address. As he rightly says, it’s a very complex area.
I’m not an expert, but I think that while local authorities have largely been denied the resources do do anything very significant in the world of mainstream education any more, they still have responsibilities. When Academies go wrong – and they do, increasingly – local authorities have to (somehow) pick up the pieces, although they are no longer allowed to build new schools, or plan to do so.
Instead, we have seen the rise of so-called “multi- academy trusts”, with undemocratic, unelected, but very well-paid academy bosses running dozens of schools in an area. I don’t remember anyone being asked to vote for this policy. It just seems to have sneaked in under our noses.
Bill, you are right that it is difficult to get a feel for the human condition just from data. However, I can say that 30 to 40 years ago when social services were better funded, there was sometimes an attitude by the carers that those they cared for were in some sense ‘less’ — less capable, less able to make autonomous decisions, &c. The care was not ‘caring’ if I may put it like that. Psychological needs were not at the top of the care agenda, as the governments of the day did not generally consider them especially relevant.
I think we have come some way over the intervening time in rejecting this perspective, though we need to go further. This alteration in perspective, which is still extant in too many places, seems to have sped up in the past few years as austerity has really begun to bite.
What I mean by the latter is that a person who is fairly insensitive to these issues can not avoid seeing the effect of this policy. Generally, though not always, when austerity is mentioned, the context is a critical one. It is not as common as it was for a mainstream news reporter to report on austerity effects in a positive light. However, they still get the same old, or not dissimilar, bullshit from politicians who still advocate this posture as being necessary.
You contend the EU is resistant to change, a charge with which I would not disagree, but how open to change do you think the UK is, especially with its FPTP system of voting? With a change of government, some change would happen, but how much and how deep would this go? For instance, how likely is it that the Blairites are going anywhere anytime real soon?
A great couple of posts which must have involved a massive amount of research.
However, apropos my comment on Part 1, there isn’t more than a mention of business rates retention, and the issue of Universal Credit is glossed over. The former allows the local authorities to retain 50% of the revenue now and 75% from next year. UC will eventually remove the responsibility for LAs to fund housing benefit. So net both of those will make a huge difference, and it is the intention that all central government funding will cease except for certain things like Police and other emergency services.
I’ve tried to get some figures on this, but it is extremely difficult and really it will only be fully comparable when UC is rolled out country-wide.
Nigel, let us hope that further roll-out of UC can be stopped. As presently configured, it is dire.
Bill performs (as usual) a signal public service in making the fruits of his labours freely available to all.
Having said that – and while acknowledging that there’s no substitute for the real facts and figures, painstakingly researched – I couldn’t help (between gasps of incredulity at the sheer scale of the devastation which the Tories have been wreaking) being overcome by a strong sense of deja vu.
Because isn’t this exactly what was to be expected to be, and what a lot of people have been prophesying would indeed be, the result of the neoliberal policy-agenda which this government has been relentlessly pursuing – first under Cameron/Osborne then May/Hammond – for the best part of a decade now?
If you have Chancellors (never mind all the others) who apparently have yet to wake up to the realisation that we have not since 1972 been living under a gold standard and accordingly still believe in the twenty-first century – exactly as Herbert Hoover was proclaiming in the teeth of the Wall Street crash and its aftermath – that we must make “sound finance” our watchword, and an opposition seemingly no less benighted, what else was to be expected but retrenchment and fiscal consolidation as the – pro-cyclical hence lunatic – response to recession? And that’s leaving aside the ideological agenda to entrench neoliberalism so deeply into the public’s psyche as to innoculate it ineradicably against any possibility of even considering that there might be a viable alternative. Already, what percentage of voters have ever experienced anything else?
The only remedy is radical, root-and-branch, reform of our deeply-ailing polity. What chance of that this side the Millennium?
At last night’s bi-monthly patient’s group meeting the speaker made a valiant effort to explain the financial benefits available to the thousands upon thousands of patients who are entitled to assistance from government funds for things like housing costs, energy costs, caring allowances and a whole host of other supports.
If she failed it was not for want of knowledge – it was the complexity and anomalies that defeated her listeners.
neo-liberal government or not, there are vast amounts of effort being made to distribute a largess that was never once referred to as a limited pot of gold during this discussion. Yet, whoever wins the local elections today, the ideological card will be played by some disgruntled party.
But in last night’s event the political card was not offered or demanded – Just some practical solutions please, to a heartfelt societal commitment.
Just saw a beautiful video by Stephanie, Yahoo Finance, under Ray Dalio. I hope I’m wrong. I hope they allow MMT a fair hearing. But notice, Dalio doesn’t know MMT. He ought to have the time to get a book and read it.
Bill. You guys should put together a web site for MMT. In the style I just saw Stephanie. Where you make very basic explanations of the fundamentals, and make statements of fact that are incongruous with conventional theory and thinking. Whittle down the lies and misrepresentations to just several straightforward questions. And then address them. The idea is to blunt lies, obfuscations in an easily available format, easily available to the general public. Not a lot of people are going to sit down with a book on economics and think it’s fun. Avoid in depth discussion and insight – if something is too complicated you won’t convince anyone. Make a place where people can go for a quick introduction and feel. A pleasant experience. Bring out the sober mindedness and reality based foundations. Do a few analyses of the past within the MMT window. Steph answered the question on taxes to control inflation correctly. Be careful of how others try to pin you down, identify, label you.
In the economic policy group of our low percentage progressive party in NZ, we have struggled with local sovereignty/ funding schemes where the central NZ government makes massive grants to local governmental entities. I have followed Bill’s guidance and won or at least fought to a stalement the orthodox economic theory wonks who have opposed the MMT financing component for programs like this. The rocks I would run aground on is the difficulty of persuading the rank and file who start to fight yawns when names like Abba Lerner or Hyman Minsky come up. But this morning it dawned on me that the pitch to sell it to the folks on the street can be very simple.
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Can someone kindly sanity check me? I haven’t posted on Dr. Mitchell’s blog for a long time, but it struck me that as a political device, we can do some MMT jujitsu on the orthodox narrative of needing to “pay for a project with new taxes”. That is, we “pay” for [massive local funding, job guarantee, Green New Deal, infrastructure spending] with a [wealth tax, corporate tax, high tax rates on high incomes]. But it would really be MMT self funding because the government issues a bond to the “tax”payer in an amount equal to the “taxes” paid. Yes, yes, I know Wray makes the point it is cleaner to do it bondless- for the central bank to just fill government accounts at a keystroke- but he also thinks there is nothing wrong with doing it with bonds. In real terms, all this variation involves is where the bonds sit- the theory is the same. Why engage in this clumsiness? I am coming at it from a practical political perspective. I think it was Kelton who was briefing a high ranking and sympathetic Senator, but when it dawned on how the theory works, he responded something to the effect, “I can’t say that”. My take was that he wanted to use it, believed it would plausibly work, but as a seasoned politician, he doubted he could sell it.
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It is a familiar theme here. He knew then that politically, you run straight into the “you can’t just print money”/ “it will lead to national ruin” stone wall.
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I studied some of the more technical writings of MMT writers, and have been attempting through activism to inject some of the concepts into policy at the local level in Hawaii (up to 2010) and in New Zealand at the national level since then.
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So what I am asking is, functionally that will do the same thing, right? It really doesn’t matter that the paper you are printing is a bond or a currency note. The government is still spending money into existence. Right? Never mind the political arguments or the bond vs. bondless pro/con of doing it this way. Constitutionally, the courts will bar the state from forcing people to buy bonds. There is no such block if it is a tax. Nothing in the US or any other western constitution says you can’t return to the taxpayer a bond when they pay a tax.
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But I am interested in people throwing rocks at it from an economic, MMT wonk type perspective. For those who understand the theory, wouldn’t this functionally behave the same way?
With regard to Nigel Hargreaves comments above on Housing Benefit and Business Rates:
At present, local authorities at the district, borough or metropolitan level, collect Business Rates and pay into a central pot but are then refunded according to a formula which I forget. Allowing them retention of Business Rates doesn’t necessarily change the overall sum the LAs have, but skews its distribution. (very badly for some, who still have the same services to fund)
LAs at that same level pay out housing benefit, but they also get nearly all of that money back in specific Housing Benefit Subsidy. I seem to recall that the staff cost for that function was supposedly met from General Grant from central government. Taking that function away will impact on other services only via the impact of redundancy and pension costs, overheads carried by a smaller authority and adjustment of the General Grant. The impact of Universal Credit on the recipients is a different story.
Of course one of the main functions taken from LAs in relatively recent years is that of delivering housing and maintenance thereof, through Right to Buys and Large Scale Stock Transfers to Housing Agencies. In many areas council housing has been turned over to Housing Agencies. What happened on the money merry-go-round? Well, much of capital receipt received by the LAs had to be handed over to central government who funded the buying by the Private Housing Associations, who then borrowed much more from banks and by PFI schemes to pay for the backlog maintenance caused by underinvestment while in the public sector. Who will pay for that in the future? Yet another way to squeeze the poorest in society and enrich the financiers. (Finance for Housing by Cathy Davis looks an interesting read)
Not having been living in UK for the past eighteen years I’ve been unable to appreciate at first hand the full extent of the damage that has been inflicted on British society during that time. So the information which Bill’s article presents registers with all the more shocking effect when administered like this, in one single powerful dose.
Am I to understand that that archetype of the British working-class “the Council-house tenant” (as immortalised in Lonnie Donnegan’s ballad from the ‘sixties:-
“My ole man’s a dustman
‘E wears a dustman’s ‘at
‘E wears gorblimey trousers
An’ ‘e lives in a Council flat”)
has now passed into history?
And been replaced by – what exactly? The gig-economy worker? The food-bank client? …
Of course, Thatcher’s selling-off at fire-sale prices of much of the local-authority housing-stock to existing sitting tenants had already taken place a decade or more before I moved abroad. But I hadn’t realised that her successors had actually gone so far as to forbid the LA’s to continue to undertake one of local government’s most pivotal (as well as most quintessentially communal) functions, namely to meet the demand for so-called “social housing” (built to high standards and made available at affordable rents devoid of any private-profit margin) from within their own constituencies.
All part of the ongoing project for the demolition followed by complete re-engineering along anti-humanistic neoliberal lines of our society with which we’ve become all too familiar, I suppose. But not made any less appalling by familiarity.
I think the whole question of MMT should be turned on its head. I’ve thought this for a very long time but when I discovered MMT I realised my instincts were correct. The whole issue is about resources and whether they are used. If there are people who are unemployed or underemployed and are capable of work it is a CRIME to not utilise their efforts. Welfare states were introduced to keep them alive in order to do NOTHING. If they are employed they contribute to society. If a boatload of tourists were shipwrecked on a desert island they would all work for their survival. Someone wouldn’t invent a currency to make some of them wealthy and the others hungry. So we have a currency. Let’s use it to utilise all the resources available not just as a plaything to keep some in luxury and others in slavery. It’s not about how we’re going to pay for it. That is a nice convenient question to maintain the status quo.
” The argument goes that progressive energy should go towards getting rid of the Tories, establishing social democratic policies in Britain, and then forging this new progressive consensus into a movement that will reform the neoliberal cabal that is the EU.”
Nah. Well, I can only speak for myself.
The argument is that the EU and its member states will continue to exist and attempt to exercise power over Britain whether we Brexit or not. Brexit doesn’t do anything to tackle the actual basis of this power (e.g. the trading relations, tolerance of British finance industry etc.) and takes us from a ponderous legalistic situation where everyone has to broadly pretend to assume good faith to one where more aggressive punitive measures are closer to hand.
Given that, we’d be better off sorting out the administration in Westminster rather than fiddling about with the letter of its agreements with the EU (or USA or China and whoever else the Tory govt might rush to bind us to with bits of paper).
@Adam – the basis of this power is EU membership itself. Australia for one has trading relationships with the EU, without the EU having any particular capability to meddle in the country’s home affairs.
The administration in Westminster must abide by the EU treaties for as long as the UK remains a member – I have heard a lot of hopium and good intentions expressed but I don’t think I have yet heard a convincing explanation as to how simply changing a national government will allow it to ignore parts of these treaties that do not suit it in the process of pursuing it’s own domestic agenda, while still remaining signatory to those treaty obligations – that is, remaining a member of the EU.
I keep on hearing that a Labour government will reverse austerity and implement a solidly progressive socio-economic manifesto (much of the nature of which I strongly agree with personally). What appears to have all but escaped remainers notice are the dramatic changes that have occurred across the channel since the Global Financial Crisis – once things turned sour, austerity became implemented as a bedrock foundation of EU policy, creating a deflationary spiral from which there has been no escape – the appalling ongoing socio-economic outcomes across the south in particular stand testament to this . Labour has not been at the helm in the UK since the very early days of the crisis so I can understand that many might somehow believe austerity (in whatever form or forms) to be purely a product of the Tories governance that will be swept away by the election of Labour, all while remaining within the EU who regard austerity policies as an end in themselves. All I can say is that I will believe this when I see it.
The treaties and membership of the EU don’t work by magic. When attempting to, I don’t know, directly operate train services there isn’t some mysterious force that grips you by the throat until you give up and starting writing a request-for-franchise-tenders.
The treaties are enforced by threat. The threat that the Commission will censure you and order to stop doing whatever your doing and make reparations, or the threat that some other member state or corporation or special interest group will sue you to the same ends. More nebulously the threat that you’ll be seen as bad actor and the consequences of that.
Along the same lines, the EU and its member states do have some ‘particular’ capability to interfere with the domestic politics of Australia. But this is, indeed, far more limited than over individual member states. I think it’s less limited by bits of paper per se, than it is by the practical difference in the force of the threat – fiddling about with EU-Australia trade doesn’t present the same risk of disruption (to either party) as fiddling about with UK-EU27 trade.
Besides which, of course, Brexit – in practice, in this world – means replacing the existing bits of paper with … some other bits of paper that say an awful lot of the same things. The magic of the second bits of paper is liable to be somewhat similar to the first set, I think.
I do accept that this thinking that treaties are magic is widespread, and that in itself does make them more powerful. It makes them a convenient excuse for domestic institutions – civil servants, ‘think tanks’, lobbyists – to argue that this or that is *impossible* (whilst a member state), rather than being realistic about the degree of opprobium that an action which might violate a Directive will attract.
I’ll confess it’s not really clear to me what the regime is meant to be when a member state ignores all that and keeps doing whatever it likes in the face of strong, widespread opposition within the rest of the Union. Thus far, we know from experience, the Commission and other member states throw in the towel – when it comes to Article 2 or pollution standards and things like that at any rate.
They might well be more intransigent when it comes to rejecting austerity of course – and so we’re back to guessing whether it’s better to be pissing off the EU and its member states as one of the latter, or as a third country. Once we stop thinking that bits of paper enforce themselves, what are the different punishments available in each scenario?
Leftwinghillbillyprospector wrote:-
“I don’t think I have yet heard a convincing explanation as to how simply changing a national government will allow it to ignore parts of these treaties that do not suit it in the process of pursuing it’s own domestic agenda, while still remaining signatory to those treaty obligations – that is, remaining a member of the EU”.
Your scepticism is completely vindicated by the case of Portugal (not exclusively – see eg Italy too). The Portuguese had the temerity to elect to government a party which campaigned on a broadly-progressive agenda, with economic counter-cyclical economic stimulus in pride of place (for obvious and compelling reasons, given the condition of the country’s economy). Its (sucessful) stimulus programme was grudgingly tolerated for just over one year, before the Brussels jackals moved in. The economic equivalent of Soviet tanks rolling into Prague in response to the “Prague Spring”.
True, the UK as an EU member is a lot less easy to cow and (though subject – according to treaty – to certain of the EU’s economic policy-dictates – eg competition policy) our not being in the eurozone affords a lot more policy-space than EZ members are allowed (unless they happen to be Germany). But it would still stick in my craw, for one, that the Commission technocrats from whom that concession had to be unwillingly wrung had, and have, no democratic legitimacy whatever.
Quoting John Messerly’s comment above:
So what I am asking is, functionally that will do the same thing, right? It really doesn’t matter that the paper you are printing is a bond or a currency note. The government is still spending money into existence. Right? Never mind the political arguments or the bond vs. bondless pro/con of doing it this way. Constitutionally, the courts will bar the state from forcing people to buy bonds. There is no such block if it is a tax. Nothing in the US or any other western constitution says you can’t return to the taxpayer a bond when they pay a tax.
But I am interested in people throwing rocks at it from an economic, MMT wonk type perspective. For those who understand the theory, wouldn’t this functionally behave the same way?
MY ANSWER:
My answer as an MMTer with a Ph.D. in economics: I agree with you that it seems wrong to suggest that one could choose whether to finance with bonds or money, unless the interest rate targeted by the central bank is zero. In essence, the government (usually in the form of the central bank) sets the overnight interest rate and allows banks and other bond holders to decide how much of the money generated by an increase in government spending to convert to government securities or other kinds of financial assets. This is the old point made by the Cambridge School and other heterodox economists that the quantities of bank reserves and currency are endogenous–that is, determined by the private-sector demand. MMT is in agreement there. However, the question is if the government could effect an exogenous change in bonds using the idea you suggest in your comment, making the money vs. bond finance question relevant as a policy question. The idea you suggest is to give people bonds, possibly after taxing away some money. The denominations of bonds are usually very large, but one could use some form of retail bond like U.S. savings bonds. They would have to be nonnegotiable–not tradeable for cash. One would have to think about whether to make them nontransferable, or commercial banks would probably offer to buy them at a discount. I would think such a scheme might be sellable as a way of promoting saving by households. I would want to look at that as a distinct proposal rather than a way to finance a proposed spending increase. If the savings bonds issued to households were not transferable in any way, forcing households to hold them might not have much as much effect on interest rates as an open-market sale of bonds.
If you were to contact me, I might be able to offer more advice about your ideas.
” The economic equivalent of Soviet tanks rolling into Prague … ”
I think it’s worth thinking about what this actually means. Warsaw Pact troops posed a fairly obvious and direct kind of threat in 1968 – the Prague Spring folded under threat of actual violence, injury and death.
These things are not the (direct) threats of the “Brussels jackals”. What were their weapons then if not guns and tanks? Are these weapons usable against the UK as a member state? Are they usable against the UK as a third country?
This seems to be something that I can never get an answer to regarding Lexit.
A minor aside – Soviet tanks in Prague mostly happened despite a bunch of bits of paper.
Again, we can see that bits of paper on their own are not that powerful.