Archive for November, 2011

Nobel Economics Laureate and New York Times columnist Paul Krugman breaks apart the thinking behind the Tories’ approach to the economy:

Underlying the drive for even more austerity is the belief that the underlying economic potential of the British economy has fallen sharply, and will grow only slowly from now on. But why? There’s a discussion in the Office for Budget Responsibility report, p. 54, that basically throws up its hands — hey, these things happen after financial crises, it says, and cites an IMF report(pdf).

So I wonder: did they read the abstract of that report? Because here’s what it says:

Short-run fiscal and monetary stimulus is associated with smaller medium-run deviations of output and growth from the precrisis trend.

That is, history says that a financial crisis reduces long-run growth potentialif policymakers don’t limit the short-run damage it does.

And yet what’s happening in Britain now is that depressed estimates of long-run potential are being used to justify more austerity, which will depress the economy even further in the short run, leading to further depression of long-run potential, leading to …

It really is just like a medieval doctor bleeding his patient, observing that the patient is getting sicker, not better, and deciding that this calls for even more bleeding.

And the truly awful thing is that Cameron and Osborne are so deeply identified with the austerity doctrine that they can’t change course without effectively destroying themselves politically.

Translation: we’re screwed, the Tories know we’re screwed but they aren’t going to change course because they’re embarrassed. Anyone still think you can run a country’s finances like a household’s?

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Ripped-Off Britons offers an outstanding blog post explaining what’s going on behind the scenes with your pensions, which the government seems extraordinarily indifferent to:

With gentle sounding charges of 2.5%, much less than the 15% service charge you pay when you go for a restaurant meal, the pension funds can grab nearly half of a lifetime’s savings. Something you may only realise when you get the letter announcing your pitifully disappointing pension, discovering too late the jaws of post-retirement poverty that have been tightening on your throat for the previous 40 years.

Read the whole post. I can’t possibly do it justice here. But anyone who really thinks the Tories aren’t doing anything ideological with public sector pensions ought to think again after reading this.

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From TUC General Secretary Brendan Barber:

This government cancelled the tax on bankers’ bonuses. Instead it has brought in a nurses’, teachers’ and lollipop ladies’ tax.

This is what the increase in pension contributions – around £1,000 a year for a nurse – really means. It is not paying for pensions but going straight to the Treasury to fill the hole left by the bonus tax.

It takes a lot to get Brits to strike. Yet the government has driven millions of its own staff to stop work, including unions that have never gone on strike before such as head-teachers. They are not stupid or manipulated by union leaders, but ordinary decent people doing important jobs taking a stand as a last resort.

We know the strike will cause difficulties today, and we regret that. But it’s proved to be the only language the government understands.

I’ve been leading talks with ministers for months. But they were going nowhere. It’s only when we called a day of action that government started to move. Ministers should listen carefully today to their staff, and get stuck into trying to reach the fair negotiated settlement that unions want.

(photo by HeardinLondon)

This letter, allegedly from the Metropolitan Police, is being distributed today:

This is quite unbelievable intimidation against a thoroughly legal strike. Welcome to Bernard Hogan-Howe’s total policing.

From George Eaton in the New Statesman:

Forcing workers to pay more is a political choice, not an economic necessity.

Around two million public sector workers will strike today over the government's reforms to public sector pension
Around two million public sector workers will strike today over the government’s reforms to public sector pensions. Photograph: Getty Images.

The biggest strike for a generation has begun, with around 30 unions, including, for the first time in its history, the National Association of Head Teachers, and two million public sector workers walking out in protest at the government’s reforms to public sector pensions. According to the Department for Education, around 58 per cent of England’s 21,700 state schools will be closed, with a further 13 per cent partially shut.

With most polls showing a small majority against the strike and others showing support evenly split between the strikers and the government, the battle for public opinion has only just begun. Indeed, the most notable poll finding of recent days (courtesy of TNS-BMRB) is that just 4 per cent of private sector workers claim to know a lot about why the strike is happening. Despite the increasingly sharp rhetoric from both sides, the truth is that today’s “day of action” may change little.

But there’s no doubt that Osborne’s new, tougher austerity programme has upped the stakes. As I reported yesterday, the Office for Budget Responsibility predicts that no fewer than 710,000 public sector jobs will be cut by 2017, 310,000 more than previously forecast. In addition, Osborne’s plan to cap pay rises at 1 per cent means that some workers will have suffer an average 16 per cent pay cut over the next five years. If public sector workers can’t go on strike in these circumstances, when can they?

For now, here are two myths that deserve to be rebutted again. The first is that public sector pensions, in their current form, are “unaffordable”. David Cameron, for instance, has frequently claimed that the system is “broke”. But as the graph below from the government-commissioned Hutton Report shows, public sector pension payments peaked at 1.9 per cent of GDP in 2010-11 and will gradually fall over the next fifty years to 1.4 per cent in 2059-60. The government’s plan to ask employees to work longer and pay more is a political choice, not an economic necessity.


As the Public Accounts Committee observed: “Officials appeared to define affordability on the basis of public perception rather than judgement on the cost in relation to either GDP or total public spending.” In other words, the public have been misled and ministers are determined to keep misleading them.

The second is that inadequate pension provision in the private sector is a reason to reduce pension provision in the public sector. The Daily Mail et al repeatedly point out that two-thirds of private sector employees do not have a company pension, compared to just 12 per cent of public sector workers. But this is an argument for improving provision in the private sector, not for driving it down in the public sector. Ministers must not fire the starting gun on a race to the bottom. Indeed, many pensionless private sector workers depend on their partner’s public sector pension to ensure a basic standard of living in old age.

We can debate the merits of industrial action as a form of protest. But with public sector workers facing a triple crunch – higher contributions, a tougher inflation index and lower benefits – it’s hardly surprising that they feel compelled to defend their rights. Even before any of the Hutton reforms are introduced, George Osborne’s decision to uprate benefits in line with CPI, rather than the RPI, has already reduced the value of some pensions by 15 per cent.

Strip away the government’s rhetoric (“unaffordable”, “untenable”) and the truth is that ministers are forcing workers to take another pay cut, forcing them to pick up the tab for a crisis that they did not cause. The public might be on the side of ministers, for now at least, but the facts are on the side of the unions.


Ed Milliband MP speaking at the Labour Party c...

Image via Wikipedia

Said today:

Ed Miliband has indicated that he does not support Wednesday’s public sector strike. “Strikes are always a sign of failure but I’m not going to demonise the people who are taking the action,” he said on a visit to an Asda branch in south London. “I don’t support strikes because they are always a sign of failure.”

And rather than take a position in support of working people across the country, whom he was pretty clearly elected to represent, he’d rather continue New Labour’s obsession with triangulation. It’s ridiculous – of course they’re a sign of failure – they’re a sign of the Tories’ failure. We know a majority of people in the UK outright support the day of action on Wednesday:

An opinion poll commissioned by BBC News suggests 61% of people believe public sector workers are justified in going on strike over pension changes.

More than two million people are due to walk out on Wednesday.

The research also indicates differencesbetween men and women in their outlook on the strikes and the economy.

The polling firm Comres interviewed 1,005 adults by telephone across England, Scotland and Wales one week ago.

The poll indicates greater sympathy for the industrial action among women – at 67% – compared with men, at 55%.

Now the Telegraph would have you believe that a poll commissioned by the Sunday Times justifies Miliband’s position:

But this does not mean the nation necessarily supports the strikers – the BBC’s question is too general. Thankfully, the Sunday Times conducted another poll yesterday asking specifically whether they support or oppose Wednesday’s strike action. The results are the polar opposite: half of those polled ‘oppose’ head teachers, teachers and civil servants striking.

(As an aside, the poll also found that half of those questioned support introducing a rule to ban strikes unless 50 per cent of members vote in favour, instead of just 50 percent of those voting. Interesting when only 29 per cent of Unison members voted for the action.)

When asked what Ed Miliband’s attitude on the strikes should be, only 23 per cent said he should support them. The most significant proportion (33 per cent) say that he should stay on the fence. If he has any sense, the Labour leader will remain on the fence and avoid backing these controversial strikes.

But there are numerous flaws with what the Telegraph has extrapolated from the data. Above all they ignore the responsibility of a political leader, long ignored by Labour and Conservative alike is to lead, not merely to win power. Secondly the data doesn’t indicate how well informed people are about the issues. You’d probably find a similar poll showing support for the death penalty being introduced; it doesn’t mean that should happen. Thirdly the question has an inherent bias – merely framing the argument as being only about whether people should, or not, work longer and make higher contributions to their pensions. Taking that question in isolation is also a fatal mistake, as the entire poll shows pretty clearly that a majority of the respondents is opposed to the coalition and its flimsy record. If Miliband took responsibility for arguing an alternative to austerity and why the government’s position is so disgustingly wrong on the public sector, you may see those numbers change anyway, but no. By triangulating in true New Labour fashion, he justifies the government’s argument and betrays everyone who wants an alternative to the coalition which is dragging us all down with it.

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John Harris is fed up with the Tories’ scapegoating of the long-term sick (so am I):

Last week, there came early news of the official sickness absence review– commissioned by the prime minister back in February, and published today – which advocates eligibility for sick leave being decided by “independent assessors” rather than GPs. Moreover, in its vision of things, anyone signed off sick should be placed on jobseeker’s allowance rather than employment support allowance (the successor to incapacity benefit), and thereby have to prove that they were actively seeking work, despite being officially confirmed as being ill. Newly stringent requirements as to what “actively seeking work” actually means will presumably apply. As far as I understand it, this will mean lots of incapacitated people limply tramping the streets looking for jobs that do not exist.

As for the assessing, we can presumably look to the work being done on welfare-to-work by Atos, whose treatment of benefit claimants has created a seething mass of anxiety and fear, and been roundly criticised by MPs.

It’s outrageous to suggest there should be ‘independent assessors’ – since when are GPs anything other than independent? I think his assessment of the story is quite right – it’s a vile smokescreen to take (yet again on ideological grounds) responsibility for determining sick leave away from doctors and into the hands of their corporate buddies. As he points out it’s not like it hasn’t been done before! It’s spin of course, an attempt to make the country believe that the economy is taking because of workshy layabouts who, in their hundreds of thousands, conspire with their doctors to avoid work. And that’s simply not true – the economy is tanking because of Chancellor Gideon’s inflexible austerity agenda.