It is time to discuss welfare

(source: http://www.ukpublicspending.co.uk/)

This is the planned spending for next year; Welfare spending will be 17% of total spending. £117 billion is the percentage in cash terms and it will only fall by a £1 billion at the end of this Parliament. The coalition has introduced pension, education and health care reform (even though these budgets are set to increase by 2015) to try and control these budgets.

Welfare, too, has seen reforms. Next year, the welfare cap will be introduced and no household will be able to claim over £26,000 a year. Still, it is not enough. In some regions, £26,000 is more than the average income for a working household; but the government seems to be unwilling to regionalise the cap – which is inevitable, to be honest.

Without more reform and, yes, cuts, the current welfare regime will risk becoming insolvent. This scenario would be much worse than the prospect of £10 billion cuts. Politicians, across all parties, need to have a mature debate and the public needs to join in, too.

It is an emotive subject and, of course, protests will occur. But refusal to address this problem now will result in further and more drastic action in the future. That is an outcome we should seek to avoid. We will be selling a false promise if we tell the public the welfare budget is fine and requires no reform.

If we take the populist approach, again, then the public will be horrified when we cut the welfare budget post 2015.

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OBR: Govt ‘won’t hit debt target before 2017′

George, we have a problem.

A £1.06 trillion problem, that is set to become £1.4 trillion in 2015.

Nobody is addressing this problem – especially since the Treasury is distorting deficit reduction as debt reduction; deficit and debt are two separate things. The deficit is coming down, unlike the national debt.

Regardless of the spin, the government is not actually cutting public spending – it is set to rise to £750 billion in 2015. The structural deficit (long term) is what the government is cutting and bringing down, but the cyclical deficit is growing (see Labour’s borrowing clock).

In other words, the Treasury are taking some very dangerous short term risks on debt and cyclical deficit to erase long term problems i.e the structural deficit. But, what George Osborne won’t tell you is the short term failures can lead to devastating long term disasters. This is why debt targets are being abandoned; the short to medium term is irrelevant to the Treasury and forecasting.

Whilst the government plays politics, the national debt continues to get bigger and bigger.

If you think fiscal policy from 2010-15 is tough, wait until the announcements for 2015-20. The budget will have run continuous surpluses to bring the debt under the control.

Britain has a major debt problem that has not even begun to be addressed.

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Romney compares the United States to Spain

“Spain spends 42 percent of their total economy on government. We’re now spending 42 percent of our economy on government. I don’t want to go down the path to Spain.“

The nonpartisan Congressional Budget Office says that government spending is 23 percent of GDP, for the record

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Is Ed Miliband a secret Tory?

He is a family man, devoted to his country and has faith (well, not in God, but people); Ed Miliband is a conservative, not a socialist – right? His critique of modern society, in all forms, and how New Labour failed to tackle concentrated power at the top and its ignorance towards the working man could have easily been spoken by Harold Macmillian; after all, One Nation Conservatives were among the biggest critics of Margaret’s Thatcher economic liberalism.

Disraeli, the father of One Nation, often spoke about the need for state intervention for the poor to ensure social harmony and respect among the classes; the factory owner had a duty to ensure his worker had decent pay, a safe working environment and job security. His 1872 Sanitas Sanitatum, Omnia Sanitas speech contains passages that a contemporary socialist would marvel at. During the mid 1800s, Europe was revolutionary-literally-and experienced difficult recessions (including the long depression of the 1870s) – eerily similar to the present. Those economic difficulties and pockets of social unrest had the establishment fearing a revolution among the British working classes. Even though tensions remained during and after the second ministry of Disraeli, his One Nation vision helped to tame the situation. It was universally accepted for the state, and society, to aid the deserving poor.

One could argue that Miliband is simply channeling a forgotten element of the Labour movement; a former trade union leader, and MP, Alexander Macdonald acknowledged the social reforms of Disraeli in 1879 and told his constituents, “The Conservative party have done more for the working classes in five years than the Liberals have in fifty.” And in 2010, the working classes are more conservative than socialist in Britain.  In other words, Ed Miliband might have no choice but to be a Tory.

Listening to his conference speech yesterday, it was quite manageable to imagine a Conservative MP delivering it. Reviewing the transcript there is little or no ‘red meat’ – apart from the facetious and tedious class war references. Which, I might add, will come back to haunt him. But Ed Miliband is occupying Tory towers; he is no longer the old fashion socialist – this is the new Tory Ed.

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Is Ed Miliband the new Benjamin Disraeli? I don’t think so

Rumours are flying around that little Edward is to align himself to one of the greatest Prime Ministers in our history; the father of ‘One Nation’ and, under his leadership, “… done more for the working classes in five years than the Liberals have in fifty” according to Lib-Lab MP Alexander Macdonald in 1879.

His second ministry was attributed to passing some of the greatest social reforms in our history. It included the following Acts:

• Artisan’s and Labourers’ Dwellings Improvement Act 1875
• Public Health Act 1875
• Sale of Food and Drugs Act 1875
• Education Act 1876
• Conspiracy and Protection of Property Act 1875
• Employers and Workmen Act 1875

Disraeli also has a memorial at Westminister Abbey and was offered a state funeral, but rejected it on his death bed. Ed Miliband has a long way to go before comparing himself to one of the legends of British politics. A very long way to go.

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We’re all fiscal conservatives now – whether we like it or not

Danny Alexander has just finished speaking; and it painted a very optimistic future, but bleak short term outlook. Whether party members like it or not, the deficit reduction plan will reduce the budgets of expensive spending areas – mainly welfare. As the conferenced vowed to oppose welfare cuts, Danny was direct and precise: it’s going to happen. Deal with it.

Senior Liberal Democrats have, reluctantly, adopted fiscal conservatism; that is, vowing to ensure public spending, the national debt and deficits are monitored and contentiously reduced – regardless of the economic circumstances. Even Tim Farron, party president and to the left of Alexander, took to the stage yesterday to oppose a motion calling on the party to abandon its fiscal mandate. Throughout the conference, senior figures are not shy to publicly silence the left on fiscal policy. More significantly, though, was the new attitude on taxation.

During the speeches of both Danny Alexander and Vince Cable, taxation on income and work were described as “too high”. I’ve read official conference policy debate literature, that discussed the potential adoption of abolishing National Insurance as future commitment.  But what about income tax- would a future Liberal Democrat government lower the top rate even further, possibly below 40%? Introduction of wealth taxes *could* create a capital flight and any government would have to prevent this. Liberal Democrats are preparing themselves to be the first party to actually explain, and begin, the much needed reform of the British tax system – I hope.

But as I mentioned in the title, we are more or less a fiscal conservative party now. And we have to deal with it.

 

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Common sense (at last): Party members reject calls for economic U-turn

Deficit is down to under 8% (was 12% when we entered office), inflation is down and unemployment is coming down; let’s not forget, exports are up with non-EU countries – especially with the developing world. Sadly Liberal Left beg to differ, and still believe we should cuddle up to Labour (who have voted against majority of Liberal Democrat policies).

However, two things I will mention. From the BBC article:

Ed Randall, who proposed the amendment, said the Office for Budget Responsibility, which the government relies on for its economic forecasts, had become a “laughing stock”.

Ed Balls said it was one of the smartest decisions George Osborne made. Promised to keep it and grant the OBR greater independence. Even the credit rating agencies approve of its creation; adds greater credibility because the OBR is independent of government and the head is appointed by Parliament.

He said the Bank of England was “sitting on £30bn” that could be used to support growth and there was “so much more an intelligent and humane government can do”.

Which could lead to a rapid increase in inflation; that’s how QE works. And, secondly, allowing a central bank to pretty much run our fiscal policy is very illiberal. Not even Clement Attlee would allow such a monstrous policy to happen, and he centralised  20% of the economy.

Ironic, though, that Liberal Left are proposing ideas that even Miliband and Balls have both rejected.

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Opinium: Almost three in five Brits believe taxes in the UK are too high

• Almost three in five Brits believe taxes in the UK are too high (57%)
• Three quarters of UK adults think the Government should do more to close loopholes (74%)
• Almost half of Brits believe the Government spends the tax budget wrongly (46%)
• Two in five Brits do not have a sufficient income post-tax (42%)

Opinium Research carried out an online survey of 2,016 UK adults aged 18+ from 22nd to 24th August 2012. Results have been weighted to nationally representative criteria.

In reality, it is no surprise because people don’t like paying taxes. However, the government is planning to start releasing personal tax statements in 2014 (which will show how our taxes are spent) and this might help reduce/increase the scepticism on how the government spends our money.

Of course, the second no-surprise, is the little we have in disposable income. With the countless pages of taxation in this country, people are feeling suffocated; the Treasury should take this into account during simplifying the tax system. Regardless, though, people will probably still feel their income is significantly shorter after post-tax.

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A national (but voluntary) Living Wage?

The Living Wage is an hourly rate, set independently, every year (by the GLA in London). It is calculated according to cost of living and gives the minimum pay (added to the legal minimum wage) rate required for a worker to provide their family with the essentials of life. The current rate in London is £8.30 per hour and £7.20 outside. The Centre for Research in Social Policy calculates the non-London rate; it is not determined by government.

In May 2012, Cameron described the Living Wage as “an idea whose times has come“. But Cameron, now Prime Minister, seems unwilling to legislate for a national, but voluntary, Living Wage. Small and medium businesses would struggle to afford high wages (i.e why it is not compulsory), so of course the Living Wage is restricted to those working 40 hours a week and-in the current economic climate-would probably be only accessible for those employed by large national and international companies. A Living Wage could be mandatory for the public sector (those on low pay) and companies bidding for government contracts. This policy has the potential for ministers to become extremely radical and help to build a perception of fairness during a period of austerity.

Either way, it is a extremely friendly policy for the coalition to explore.

It would be a major, and morale, PR coup for the government in the short term and help to strengthen this ‘Big Society’ project. I assume Cameron thinks this is still a good idea; so why not introduce it?

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How can equality exist with the state?

I am somewhat bemused by the title of the Social Liberal Forum (SLF) conference;

“Liberalism, Equality and the State”

Is it possible to achieve equality, whilst advocating a role for the state in our lives; surely it contradicts liberalism? Statism is, by its very nature, unequal and repressive. The sovereign debt crisis should be a warning and a perfect example, of the failure of the state and central government.

Not only is the state an obstacle to equality, but it contradicts it. Completely negates it. Liberals should be advocating a reduction in its power, not campaigning for more influence in our lives.

Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one. – Thomas Paine

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