The Carillion Problem

This week has seen the fall of the ‘sick old man’ that was Carillion. The UK’s second largest construction firm, which holds hundreds of government contracts and employs tens of thousands of workers has finally collapsed. The fall-out will, I have no doubt, be immense and raises some important if troubling questions.

First, there is the question what will happen to the hundreds if not thousands of small businesses Carillion has contracted to undertake some of its private sector contracts? Some are, it has been revealed, owed payments totalling millions of pounds, which the company has been unable to pay due to its continuing financial difficulties. Some firms have already had to begin redundancy processes, having resigned themselves to the all too clear fact that Carillion will take the money they are owed down with it. There is, for what its worth to both Carillion’s employees and former contractors, to be an investigation into the conduct of the company’s bosses. The questions that need to be answered are all to apparent: for one, why Carillion continued to take-on new contracts despite profit warning as early as summer last year?

But then, why was a company with such a crippling hole in its pocket given them in the first place? This is a particularly potent question when it comes to the government contracts the company was allowed to retain and continued to be given throughout the period of financial difficulty. It has been quite clear for months that the company was likely to, in some way falter financially yet ministers still saw fit to award it a myriad of contracts. Its like asking a builder who you know might very soon go bust, to renovate your lounge, upgrade your bathroom, re-design the kitchen and build the new conservatory; with your help of course! The folly in such actions is evident and no sane individual would take such a blatant risk, particularly with public money. Yet, our esteemed government seemed to think such reckless action on a macro scale advisable…

Indeed, the fact that the government gave Carillion so many contracts over the past few years also in itself raises issues. For one, what happened to the notion of competition? By handing the same rather precariously balanced construction firm so many contracts, the government effectively hamstringed itself, and will now have to take them over, and in the process recoup and money used for the task…… we hope. But why were so many contracts handed to Carillion? What was the nature of the relationship between ministers and the walking corpse that was seemingly their bed-fellow? The selection process must come under scrutiny, but I have little doubt this will be resisted by ministers who will want to contain the cataclysm as much as possible, particularly if its roots are within government.

But what of the future? The Carillion problem really does speak volumes to the way government have handled public-private partnerships. In shackling themselves so closely to one large firm, ministers in essence created the leviathan that collapsed on Monday. This case should serve as a warning to future ministers over how not to handle such contracts, and makes plain the notion of having many contractors, both competing and carrying out work is both more effective and safer for the government. Indeed, this debacle also has the potential to re-open the already seeping wound that is the question of public works. The fall of Carillion will most certainly be utilised by those wishing for increased public investment in infrastructure projects. I don’t blame them. Its easy to see why many believe public projects to be the answer to issues such as those Carillion highlights. But, with the Tories in power, the chances of change in this respect are virtually nil. A party so ideologically bent on privatisation and far to close, in bed even, with large firms like Carillion will never change course: the humiliation would be too great.

The death of Carillion has been slow but certain, it isn’t the first and won’t be the last, I only pray that lessons are learned.

Budget 2017: Social Care Forgotten

“Over a million of our elderly aren’t receiving the care they need and over £6 billion will have been cut from social care budgets by next March. I hope the honourable member begins to understand what it’s like to wait for social care stuck in a hospital bed, or for other people having to give up their work to care for them.”

Intemperate words from Jeremy Corbyn yesterday, bellowing across the dispatch box, in response to a budget that has been greeted with widespread disappointment and which made no mention of social care, despite the continuing crises in the system.

Days before the budget, 90 MPs, over a third of whom are Conservatives, wrote to the Prime Minister demanding cross-party action on social care, telling the PM that “the need for action is greater than ever.” Perhaps the plea did not find its way next door to number 11.

Repeated failures

None of the government’s half-hearted attempts to close the care-funding gap have been successful.

Early this year the Financial Standards Authority criticised the Better Care Fund in the harshest possible terms, saying that it had “failed to meet any of its objectives.” The Local Government Association recently said that the Fund “has lost credibility and is no longer fit for purpose.”

The Social Care Precept enabled local authorities to choose to raise council tax to help fund social care. It has been widely adopted by desperate councils. But because the precept depends on council tax, and therein property values, many decried it as benefiting poorer areas least, ironically those areas where local authority funded care is most necessary.

The chancellor would likely point to the £2 billion ring-fenced for social care in this year’s Spring Budget, to be spent over the next three years, some of which has already been allocated to councils. This, coupled with the Precept has seen social care funding rise by 3% this year, an increase of £556 million, the first year on year increase since 2009/10.

However, as funding is increasing so is demand, and the latter is still outstripping the former. By 2019-20, The King’s Fund estimates that social care will still face a funding gap of £2.5bn, despite these measures to increase funding. With a current average of 5,000 new requests for care every day in England, this is as daunting as it is understandable.

Councils on the brink

Separate research by the Local Government Association predicts that caring for the elderly, other vulnerable adults and children, will consume almost 60p out of every £1 of council tax by 2020, a 41p increase since 2010/11.

The LGA is sounding the alarm that the costs of social care are taking more and more money away from day-to-day services, such as repairing potholes, keeping streetlights on, parks clean and so on. Councils could be forced to ration essential services if the care-funding gap persists.

The way councils raise money is also undergoing a radical change. The largest source of central government funding; the Revenue Support Grant is being phased out. In return, councils will retain more of the money raised through business rates, from 50% in 2015 to a targeted 100% by 2020.

However, the changes to business rate retention were not included in the Queen’s speech, nor cited in the budget statement this week, leaving councils uncertain about how concrete this measure is and how they will be funding services in years to come.

Bigger thinking

Addressing the immediate crises in social care will require additional funding. However, the long-term solution for elderly social care provision in the UK requires deeper thinking. The endless, circular arguments about social care funding are reminiscent of many debates in our country when it comes to social services, where any form of insurance scheme is anathema.

One of the fundamental goods of the NHS is the ability to receive all manner of treatment without any form of point of use payment, this is a social service provided by general taxation, akin to policing, firefighting and national defence.

We could choose to fund social care through central taxation, as we do with the NHS. But can we honestly say with confidence that this would ensure sustainability and drive up outcomes long term? When answering this we should pay attention to the current crises faced by the NHS itself.

When it comes to social care, other options should at least be open to consideration. Our society and ways of life have changed. We all know that we are living longer and unlike in bygone eras, it is rare for elderly relatives to live with their sons and daughters. Because of these deep societal changes and others, we need to think rationally about the best way to fund social care, not with the sole aim of cutting costs, but to improve services, make the system sustainable and a guarantor of dignity and wellbeing in later life.

Another option to fund care services in the future is to move towards an insurance-based model. Take the example of the ultra-liberal, egalitarian Netherlands, where insurance schemes for social care, run by not for profit agencies, are compulsory. However, even systems like those in the Netherlands, which combine compulsory insurance and central taxation, are encountering their own funding shortfalls.

That familiar green glimmer on the horizon

Poor economic performance and the fact that care funding has already been increased – however lacklustre that increase has been – may have led the chancellor to believe he could ignore social care, as so many chancellors and minsters have in the past.

Phillip Hammond’s attitude may have been buoyed by the announcement that the long awaited green paper on care and support for older people will be published by summer 2018. Indeed the timing of the announcement, two days before the budget, was probably a pre-emptive defensive manoeuvre. For some time now, the green paper has been the go-to get out of jail free card for any minister or prime minister facing a grilling on social care.

Hope then, springs eternal. Truly effective policies are what everyone desires from the green paper. Accomplishing the shared goal of improved care, which is sustainable and affordable, will require data driven decisions, original approaches and perhaps just as important; political will and personal courage.

The Conservative case for a Universal Basic Income

A Universal Basic Income (UBI) is something that has often been talked about among regional authorities and more rarely by national Governments, it is not a new concept by any means but it is also something that has never been truly implemented (No seriously! Unlike socialism there really is no examples of a full UBI in practice), anywhere, which in itself is quite miraculous that in all our years of democratic society, we have never had a UBI system in place.

Before I go into the “why”, I want to clarify the “what”, as often things are mislabelled as being a UBI when in fact they are not. A Universal Basic Income is a fixed amount of money (or in some examples capital) that is paid unconditionally to every single member of the state, regardless of situation or earnings, in real terms it would mean replacing every single state welfare fund, from JSA to pensions, and using them to fund a single payment that is paid to everyone from a homeless gentleman on the streets of Manchester, to the rich oil tycoon in Kensington. It would mean scrapping the Department of Work and Pensions and bringing the new UBI under the remit of HMRC.

That all sounds rather fancy, but what would it mean to Joe Bloggs? In the 2016/2017 financial year we spent a whopping £264 billion on State Welfare, 34% of our budget, if we divided that across the country we could afford to pay only £415 a month to every working age adult. This is where UBI meets its biggest hurdle as £415, whilst being more than JSA, is a lot lower than most benefits and (when doubled for a two beneficiaries) £347 below the poverty line for a two person household, it would effectively throw many state dependants into poverty.

It can work though, if we have a UBI system, we no longer need tax-free earning thresholds since everyone in work would be earning a UBI anyway that £1400 a year saved on Tax Free earnings would be returned multiple times over. So if we were to scrap tax-free earnings that would free up approximately £70b more, or a further £120 a month. This is where a UBI becomes far more feasible, as this puts a household of two on £1070 a month, well within striking range of the poverty line currently set at around £1177 a month, it is not quite a perfected system within this article, but I think this proves the feasibility and thus proves there is an argument to be had for it.

Which leads on nicely to the question of who should be making this argument? The concept of a Universal Basic Income is often touted as a left wing idea, it is often seen as socialist, something that Momentum would sing from the hill tops as a flag ship policy of Jeremy Corbyn, I disagree, the very idea of a UBI is a conservative (small c) idea, conservatism is about ambition and equal opportunity for success. Conservatism is about the equal opportunity for happiness.

Conservatives need to adopt this idea and champion it for two reasons: First of all, this will give everyone a cushion to fall back on, I have been unemployed and I have been an entrepreneur, both times a UBI would have made a world of difference to my life and helped get me off the ground on days where I felt like I had a mountain ahead of me. Secondly, I truly believe that the Conservative Party is the party of the working class, a UBI would not just be there for those who do not want to work, who just want to claim off the system, it would be there for those single working parents, scraping by on minimum wage trying to support two children, it would be there for that hardworking builder who has fell on hard times, it would be there to escalate hundreds of thousands of people out of working poverty, giving everyone true spending power.

It would also allow people to begin to enjoy our lives, we spend about half of our waking life at work throughout the majority of our years, this would allow more people to adopt flexi-time or part-time hours and give them more of their lives back, this in turn would create more jobs as more and more people job share. With an age of automation and AI looming a head of us, which is expected to take up 1/3 of all jobs in Britain, a UBI is going to become more and more necessary in the future. The Conservatives and the UK Government could pioneer the way forward and set the precedence. We can plant the flag and become the champion of a UBI and prove we are truly the party for the many, not the few.

Paradise not lost: Why tax avoidance is not immoral

The “Paradise Papers” leak several days ago has got a number of celebrities in hot water with regards to certain investments in offshore schemes. Those involved include Lewis Hamilton, Bono, Lord Ashcroft and even the Queen and Prince Charles. With the Paradise Papers having seeped into public awareness, many big names have been associated with the act of tax avoidance. The obvious issue with tax avoidance is that certain extremely wealthy people are able to harness the legal code, or navigate the regulatory matrix of numerous jurisdictions, in manners unavailable to the common man to lawfully shirk on various aspects of taxation. Some, too, would go so far as to say that this is not a problem of legislation in these jurisdictions but rather the immorality of those that engage in these schemes quite simply for the reason that they ought to pay these taxes like everybody else to contribute to public schools, roads, hospitals and so on.

Of course, the issue is complicated. Perhaps not as complicated as the laws surrounding these taxes in question, but nevertheless: complicated. There are various chambers of thought in which to judge the issue: the legal, the moral and the political. When sincerely consulting these three regions of contemplation, rather than being a sinister scheme for those of lavish fortunes, it is clear that tax avoidance is not diabolical or despicable. In fact, there are moral or entirely understandable aspects of it which extend to all people in the country. The depiction of tax avoidance as being a heartless scandal of selfishness seems to be more of a ploy of either distracting people from the incompetence of their leaders, or a continuation of a ubiquitous state narrative of how everybody is meant to fall in line to propel their governments’ ever-growing ambitions.

The Cayman Islands – British Overseas Territory associated with tax avoidance schemes 

Ethically speaking, what really is tax avoidance at its core? Following the law to minimise one’s taxes. What really is taxation, though? Whether or not we decorate the true meaning in robes of moral grandeur and civilised sophistication, taxation is the forced payment of money to a government, in short. The concept that there is honour in paying taxes, then, seems to be dwindling when it is not a moral venture but rather one that is demanded of through the threat of a punishment. The fact that an individual could exploit the law to slip through the holes of a taxation regime, literally to retain more of their own earned money, seems to be no fault of the dodger themselves. It would rather seem to be a predicament of statecraft and legislation.

Politicians either are not competent enough to patch up the cracks in the tax code, or they simply do not want to. It is really any wonder, given the traditional nature of our political system? They are likely to levy considerable benefit from the donations of those that will likely exploit these laws, and there seems to be no demand for arrangements that lead power away from independent states for better regulation of globalised taxation systems. This is especially following Brexit. In fact, given the rather frequent leaks of MP expenses scandals whereby politicians revoltingly claim the people’s taxes for entirely personal gain, avoiding taxes would suddenly seem entirely logical.

The problem of Paradise Papers soon materialises as merely thus: only wealthy people are able to avoid taxes as they can afford the warranted tax lawyers and financial advisors. It is a problem of inequality. This is an entirely reasonable assessment of the reality of tax avoidance. This too is tacitly on the grounds that the poor would avoid taxes too if they could. If you were given the option of paying fewer taxes and you refused every single time the option appeared, I wouldn’t believe you. If you, too, especially as a poorer person, were asked if you would like to receive state welfare funds, entirely legally, by appealing to blind spots in legislation, I’d also find it baffling if you were to perpetually rescind this proposal. Is there, though, a moral difference between avoiding taxes and manipulating welfare laws? No. There is only an issue if there is fraud or fabrication involved. If we focus our grievances towards those that play their hands incredibly well (and legally) to maximise their holdings, we ignore the root of the problem and even encourage the preservation of that problem itself.

If we pelt the tax avoiders with shame and scoff, we do not change their incentives or the laws at hand. To do this is to entirely miss the point: if we truly do want to equalise the poor and the very wealthy under the eyes of the law, we will never do it by hurling our anger at the followers of the law. We should, rather, hurl it at the makers of the law, if anybody at all. While it is true that one could be immoral by following the law in a particular country (I could practically write a book about that), there is no immorality in owning more of your own money when you can. This is because you have every right to do this as you acquired it legitimately. The state’s claim upon your wealth is not made morally but through necessity. And if the state fails to fulfil their requisitions upon your property through poorly fashioned laws, they cannot turn to you to rectify their own creation.

This is assuming, though, that there are not difficult facets in the aim of preventing tax avoidance. This is where grim political realities for the left must rear their faces. There are not only very obvious difficulties of the feat itself of ending tax avoidance with international jurisdictions involved, but also the issues it would pose for the sizes of resultant government budgets themselves, even if more earnings of the wealthy as a proportion were to be harvested. If the left are brazen about funding state welfare programmes like “free” tuition and more social housing, closing tax avoidance loopholes would very clearly denigrate their demands. With fewer wealthy people coming to the UK for tax-easing purposes, the less they will pay in taxes at all.

It is the same when the state increasing the top rate of tax: the wealthy will dwell elsewhere, bringing their taxable wealth and potential jobs with them, or simply never come here, having been rightfully scared off. The frivolous left could fix this, if they really wanted to. They could willingly pay more taxes if tax avoidance cannot practically be ceased. They could, too, while they were at it, lay their tapered eyes upon the statistics of taxation to realise that those that are most likely to dodge taxes are those that contribute the most in taxes in the first place. In this sense, even though the wealthiest in society can sometimes pay minute morsels in corporation taxes, they are still feathering the nests of their host society in manners far and away more significant than the rest. The closure of these tax avoidance possibilities, then, couldn’t at all be what the hypocritical Bono might say was in the name of love if it sabotaged the state machinery by which the poor are aided.

In this sense, tax avoidance is not only a feat not worthy of true moral indignation, but the difficulty, drenched in all its political, financial and legal difficulties, appears to be here to stay. If anybody is to be scorned, it is the politicians that shamelessly call for these schemes to be ended yet, when landed into power, forget entirely about the issue. The left must be mindful, too, of the fragility of such laws when perhaps their biggest source of energy for their goals can be obliterated through the prism of good intentions. The best we can hope to do to equalise the poor and wealthy is to decrease taxes on everybody and remind ourselves of how much tax money tends to be squandered in the first place at the clumsy hands of our politicians.

 

EMPLOYEE GRIEVANCE PROCEDURE: NEEDS TO BE LEGALLY BINDING?

There has been a huge commotion in parliament over the last few days. Particularly involving
certain MPs and their overzealous acts of sexual conduct towards women, some of those
working in parliament themselves. This then calls for some sort of solution to fix the issue (or
at least reduce the risk). Theresa May as the PM comes under intense scrutiny for the need
to address the issue. To which she proposed that the code of conduct in parliament should
have some “legal standing” and a contractually binding grievance procedure for all MPs set in
place.

There were allegations made regarding the Tory party, including some senior ministers who Mrs. May
was working closely with in parliament. There were also allegations made towards MPs
from the Labour party. Did May know what was happening? If she did that’s a worrying concern
for the young female professionals, who have been reported to have been victims of these
alleged groping and propositioning incidents. But even then, many leaders lose sight of the
issues on their own team as I’m sure they would expect their team players to uphold the same
values as they do. Well, that clearly wasn’t the case and May is in a huge frenzy to have a
reshuffle of her cabinet.

We’ve been told government officials keep a “black book” of allegations against MPs hidden
away. So that leaves us to question, how long does the list track back from? And why has it
taken this long for these allegations to come into the public consciousness?

What was of shock to me regarding the scandal is that there is a “WhatsApp sex pest group”
that women who include parliamentary researchers, secretaries and aides are all a part of.
Who claim that politicians on both sides of the house have pestered them and given them
lewd nicknames. The code names for some of these MPs in parliament who committed the
acts were described as “Lift Lunger”, “Happy hands” and “Taxi Tickler”. All involved in groping
women in enclosed environments and even in public, which reveals the lack of awareness or
care these perpetrators had for the actions they were partaking in.

The recent allegations have come into fruition in the light of the recent global social media
campaign called #MeToo launched by Alyssa Milano, an American actress at the forefront of
it, who too was a victim of sexual assault. The campaign encourages all women to confront
the men they know, whether their brothers, friends or work colleagues about their attitudes
and behaviours. Thousands of women have come forward sharing their stories since the social
media hashtag was created. No doubt this had huge influence regarding the women in the
political sector to share their own stories, despite huge risk to their careers within parliament.
I say that as MPs hold immense power and as the young employee with a lack of voice
compared to their older counterparts, particularly when female, societies attitudes can be off
putting in believing their reports.

Alyssa Milano, the actress who started the #Metoo
campaign on Twitter

Echoing what Theresa May has proposed in her comments concerning the MPs in the scandal.
The current grievance procedures in government we have regarding employees and their
employer are not legally binding. It’s expected that the employer follows the necessary
guidelines to tackle the problems that may arise through complaints from the employee in the
work environment. But we know this is not always the case and it’s pretty difficult as a young
professional who are the most vulnerable in the workplace, due to their lesser status and lack
of experience. Combining that with being a female in the workplace, it’s an even tougher task
to share your grievances towards your employer, especially one who holds immense powers
in parliament. For a lot of women, they do not bother reporting incidents or if they do, it is not
taken as seriously.

Theresa May’s views on the grievance procedures should be the agenda needed to create
some legalities around the topic. Implementing some sort of policy around the instances of
sexual conduct towards employees and making it legally binding needs to be a course of
action in parliament. It’s a sad shame knowing what it is morally right and wrong cannot be
the indication we need to take complaints of sexual conduct in the workplace more seriously.
It seems when employers are threatened by legal action, they may tend to take matters as an
urgent need for attention rather than sweeping cases under the rug like many in parliament
have been doing to protect the most powerful and senior members of staff. Well this needs a
complete reform and female employees in this case need to know that their issues will be dealt
with accordingly and the relevant persons will not go unpunished. I think it will also be a wakeup
call for those who commit these revolting acts, that there will be repercussions for their
actions. Hopefully, it will also allow them to get the help they need for their habits.

Campaigns such as #Metoo are giving women and (men) the opportunity to voice their stories
more bravely than in the past and help others in the process to share theirs. Building a
community of victims to overpower the perpetrators who inflicted any sort of harassment or
assault towards them. Theresa May, now needs to enforce laws that are contractually binding,
that involve the issue of grievance in parliament and the workplace. That may be just one way
of tackling this ever troubling problem.

What’s it like going to the job centre in modern Britain?

At the beginning of September, I found myself in need of a job. I was a civil servant on a fixed term contract which ended a couple of months prematurely, this without a doubt left me on the back foot but I wasn’t overly concerned; I figured I could get a job easily. I was wrong.

After four weeks of juggling job hunting, volunteering for Activate UK and spending every other waking moment wondering how I was going to pay the bills, I had to make a decision that the foolish prideful me never wanted to have to make. I needed help and so I went to the Job Centre to sign on.

My reasons for not wanting to go straight away were ridiculous. I worked with a lot of claimants in my voluntary work, I had no problem being associated with them, I saw myself as no better or worse than any of them. The problem for me was the DWP staff, I have read one too many horror stories of employees in the Job Centre treating claimants with disdain, horrific stories of sanctions and other such mistreatment; I am not saying that such things do not happen, but I want to write about my personal experience of going to the Job Centre and hopefully I can help someone else in a similar situation to mine reach the same conclusion as me far sooner.

I applied for Universal Credit online, after spending fifteen minutes on some rather cruddy online form I was told my application could not be processed online and I had to call a number (great start right?), I then rang the number, click a few dozen options on the automated system, to then be told this is the incorrect number to dial and I should claim online. At this point I started thinking how ridiculous this was, someone who is just trying to help is having to jump through pointless hopes just to speak to a human being. Slightly discouraging to say the least. Eventually after much googling I found the correct number and got to speak to a human, an actual human! I took about 40 minutes of some rather odd questions and then I eventually got an appointment at my local job centre, hurray!

I went to my appointment dressed in an open collar shirt and I sat down and looked around at the 20 or so people sat with me, bar a few exceptions most were dressed similarly to me; certainly not the stereotypes in tracksuits and hoodies. I went to meet my careers coach, Stuart and instantly all my previous expectations went out the window. Stuart didn’t grill me, he didn’t treat me like a second class system and more importantly he didn’t judge. Every question he asked me was centered around one thing, finding out about me as a person and towards the end of our meeting he said he had the perfect job for me. He slide over an A4 piece of paper and said “This isn’t you dream job, but it pays more than claiming and they are looking for someone exactly like you”. Ten minutes later he had spoken to the employer and secured me an interview and we joked that this could turn out to be the quickest turn around ever at the JC+, before I could go to the interview though I had to go back the next day to the “group signing” so I could actually be paid my benefits.

The group signing was a bit like an AA meeting, we all sat in a circle (15 of us + two career coaches) and shared success stories and tips about jobs. They told everyone about a course that is being run, you spend a week on the course, get a qualification and then get a guaranteed job at the end, about half of the group signed up to do it and I thought to myself how different the experience is from my initial assumptions. When I went back in to the JC just before my interview, I met again with Stuart and he praised my job seeking efforts over the last few days and we chatted a bit about my interview later on. When I went for the interview I was surprised, that one week training course and guaranteed job was provided by the company now interviewing me! They explained they were new into my area and wanted someone to engage and recruit people from the Job Centre onto their courses and the subsequent job. They offered me the job the same day and I went out for a smoke with Stuart and told him he under sold the job to me. I explained that the pay didn’t matter, but this job is amazing because I can actually help people. I sat on one side of the fence and now I can use that experience on the other side.

My experience on benefits was very different to what gets published in the papers and I think we all need to remember, that the papers are there to sell papers. They will only publish the most outrageous stories because that is what sells. It is not a true representation of what the system is actually like and for anyone in a situation like mine I can only advise this: Unbend your pride as soon as possible and just go. Everyone needs help sometimes and you are a fool if you don’t take it.

Economics Round-Up Summer 2017

With parliament almost ready to return to Westminster after its summer brake, and many things having changed, or not as the case may be over the course of the last few months, now seems like an opportune time to round-up some important economic developments of the summer.

The Bank of England keeps the breaks on 

The BoE has continued its cautious attitude over the summer, keeping interest rates on hold with the prediction that it could be another 12 months before the next rate rise. Governor Mark Carney has more than once hinted that he may support a rise sooner than this, but a survey of economists carried out recently by the BBC found that most did not expect a rise until 2019 believing the Monetary Policy Committee would be reluctant to raise rates during the height of Brexit negotiations.

The Pound has been a major consideration in the BoE’s decision making; this summer has seen some important developments. Since the vote to leave the EU in 2016 the pound has fallen about 15% against the euro. Over the summer, it has continued to slide and is predicted to fall an estimated 10% further against the euro by March 2018. Some economists have predicted particularly dire results for the pound next year, suggesting it could fall as low as $1.25 to the pound and just 96 euro cents to the pound by the final quarter of 2018.

Meanwhile, the Confederation of British Industry has continued its rather pessimistic view of the UK economy. It stated in June that it expected growth to be ‘steady but subdued’ falling to 1.4% in 2018, down from 1.6% in 2017. Economists have also remained rather gloomy over inflation. Their predictions range from it peaking at 2.9% in October this year subsequently falling back in 2018 to it peaking at 3.2% in spring 2018.

The Cost of Living, Wages and Unemployment

The basic cost of living has continued to creep ever upwards over the summer. It has increased by roughly 3% since January 2016 and what it will do over the next few months is uncertain, but with the ongoing Brexit negotiations and the growing uncertainty it is almost certain to rise further. Average annual earning for those in full-time employment have however not kept up with the rise in the cost of living. They sit somewhere between £26,000 and £27,000 depending on where you look: compare this to the average annual earnings in December 2015, £27,500 and the problem for many becomes obvious.

Bearing this in mind, unemployment has continued to slowly fall over the summer. Government statistics put it at roughly 4.5%, a low not seen since the record figure of 3.4% in 1973. Of course, such statistics hide the struggles of the so-called ‘working poor’ whose wages are stagnating behind inflation. Use of food-banks and other charitable aid has risen over the summer too, showing that the figures are not all they are cracked up to be. Of course, they are a mirage anyway. In reality, low unemployment and thus high employment should lead to increasing wages driving inflation. Instead, inflation has taken off and wages have stagnated. This is because unemployment is not actually as low as the government would have use believe. It all comes down to the definition of ‘unemployment’, which counts stay-at-home parents, university students, the temporarily ill of disabled etc. as not being part of the ‘workforce’. In essence, the official statistics hide the fact that there is a huge chunk of the population who are ‘inactive’ workers. It fails to account for the fact that every university student over 18 will require employment upon graduation, that many parents with new-borns will look to return to work. As one statistical analyst told me, ‘official unemployment statistics are a lie; a lie which has only survived as long as it has because it suits the political parties’. With this in mind, if we include these ‘inactive’ workers, the unemployment rate becomes more like 21%… shocking isn’t it?

The British Gas Rip-off

British Gas has again, like so many other energy suppliers spat in the face of its loyal customers by declaring over the summer that it would increase electricity prices by 12.5% on the 15th September this year. Considering the issues surrounding wages and the costs of living, this is less than helpful for many thousands of people. Indeed, it has been the increase in electricity and gas prices both over the past few years and again this year which has largely driven the increase in the cost of living along with housing rents.

Former Liberal Democrat Leader Tim Farron attacked British Gas over the summer stating they they were ‘clearly treating these people like cash cows… as things stand, there will be a lot of people in fuel poverty this winter shivering in homes they cannot afford to heat or even light’. For once, he couldn’t be more right.

The actions of British Gas have brought the Conservative Party’s pledge of an energy price cap back into focus, as they desperately try and sweep it under the carpet. It has shown us, as if we didn’t know already that the energy companies have a total disregard for the people they sell what are, in my opinion, basic modern necessities to. Their actions in August are the reason so many will feel the cold this winter and why the nationalisation lobby is becoming louder.

Brexit: The Continuing Saga……

What has happened here then? Very little. We are virtually no closer to knowing what the world will look like after Brexit as the UK government continues to behave like a petulant child demanding all the sweets and refusing to eat its greens. I presume David Davis has used this summer wisely. While he has clearly gotten nowhere in terms of talks with the EU, I hope he has taken the opportunity to have his head examined in the hope of finding an adult brain. He and others seem to enjoy trading childish insults with the EU while the clock on Brexit and indeed the UK’s economic prosperity ticks towards zero-hour.

The position papers were an own-goal. They admitted repeatedly that the EU single market was economically beneficial to the UK as well as admitting that the UK was unlikely to fully ‘escape’ the jurisdiction of the European Court System.

Of all Davis’s and indeed the government’s beliefs about Brexit, the most idiotic which has surfaced over the summer is their continuing claim that Britain will not have to pay a ‘divorce’ settlement and that upon leaving the EU in 2019, the UK could stop paying into the EU’s coffers. They seem to think that they can just walk away from their commitments. This is the adult world for goodness sake! You can’t just walk away from years’ worth of deals and commitments because you want to. That’s not how it works. All I can say is the sooner the negotiators on our side accept this the better; or I really do fear for our economic future…

Overall, this summer has been far from bright. We are no closer to knowing our future destination, people are still struggling and the predictions show this is likely to continue. A sad state of affairs indeed but, and I say this in full knowledge that I will probably be harangued by the Brexit brigade, we as a nation brought this upon ourselves, ‘as you sow, so shall you reap’.

Personal and Household Debt: Facts, Figures and Fears

Debt. 30, 40 or 50 years ago it was a dirty word, something to be avoided and only to be acquired in the most important or extreme circumstances. Now it is by and large the norm of 21st Century Britain. In fact, it is in many cases encouraged and has in itself gone through a vast and thorough cleansing to alter its tarnished image. Most people have ‘debt’ of some type and can live with it comfortably, so long as their personal situations allow them to do so. But, as Alex Brazier: Financial Stability Director at the Bank of England (BoE) has recently stated, ‘household debt, like most things that are good in moderation, can be dangerous in excess’.  With this point, and Brazier’s recent warning that High Street Banks were in danger of ‘a spiral of complacency’ over personal and household debt, a look at the facts, figures and fears over the subject of debt is important.

Personal and Household debt encompasses and includes all debts to individuals and households in the UK; everything from credit card bills to mortgages and other bank loans. It is, as I have noted a phenomena of post-Keynesian economics and in the past decade has reached astronomic proportions. The BoE’s figures put the number at about £1.5 trillion. This eye-watering sum has been increased over the last few years by the rocketing number of unsecured loans and Personal Contract Purchase deals on good such as cars, which on its own, has concerned a number of economic think-tanks and authorities. But more worrying are the related percentage statistics. As a proportion of household income, household debt currently stands at roughly 142% and is predicted to rise to 153% in 2022 according to the Office for Budget Responsibility.

It is this creeping increase that has the likes of Brazier concerned. It has raised the question for both the experts and the rest of us of how much personal and household debt is too much? When does it become a ‘dangerous excess’? Well, when compared to pre-2008 crisis levels which saw household debt as a proportion of household income at 160%, it is arguable that currently, there is no immediate danger of ‘excess’. But, it is the medium term which has the experts concerned; and its not hard to see why. With household debt currently at 142%, predicted to reach 153% by 2022, it is not unreasonable to suggest that by the end of the next decade, the pre-crisis levels of debt and hence borrowing will have once again been reached and possibly even exceeded. In other words, what these statistics signal is the potential return to the attitude of complacency which existed before 2008.

But this all begs the question; why are the figures so high? Well in short, the answer is that the UK economy needs them to be. Now, I’m not trying to be cryptic: I’m being quite honest. It has everything to do with the fundamental nature of the UK economy. It is a service economy; financial services are its life-blood and backbone. In a word, it thrives on debt. Let me put it this way; if no one borrows, the banks can’t lend: if the banks can’t lend, well, you get the picture; the economy will crumble. The recent statistics on personal and household debt and these basic facts of the UK economy combine to again highlight the dangers and issues of a service sector economy without a manufacturing or industrial base to support it should financial markets become unstable as they did in 2008. In essence, what they tell us it that the conditions for a financial catastrophe on the scale of 2008 are being prepared once again; the extraordinary increases in borrowing and thus debt are a sign of slowly creeping complacency, and the patent failure by the conservatives to solve the issue of the service sector economy has only served to deepen both the dangers and fears. It was said by Louis Althusser, a socialist theorist no less, that the institutions of society existed to support the economic system, and the continuing failure of economic reform to alleviate the problem of debt and broaden the outlook of the British economy serves only to confirm his ideas. It is the sad reality of modern Britain, that as individual debt rises, and the seeds of financial disaster are sown, the institutions of society simply continue to support a system flawed at its very base, to which the statistics around personal and household debt, not to mention the ballooning student debt figures, currently at £89 billion, are testament.

But what of the future? Can we look forward to a debt-free world of plenty one day? Currently, with the UK economy as it is, no. It is build on services, it has not backbone. Household and Personal debt are its life-support: the ladder that has put it where it is. Unless there is a fundamental shift in economic planning and outlook, debt will continue to be an ever-present in the UK, and will continue to saddle the ordinary people for decades, even centuries to come.

Public-Sector Pay: Who is saying what and why?

Suddenly in recent weeks, the issue of public sector pay has arisen again and has produced conflicting messages from the Cabinet and leading MP’s. But who is saying what, why and if anything what difference does or will this rekindled-debate make?

The two people whose opinions on this issue and most others matter most appear to remain, this time, relatively united. Both Theresa May and Philip Hammond appear to continue to support the cap on public sector pay and de facto austerity, despite previous suggestion they intended to slacken-off in both areas. Indeed, May made the case for austerity quite clearly when replying to questions from Jeremy Corbyn on the 5th July. Hammond, for his part has been explicit, recently stating that the government ‘must hold our nerve’. In the same speech, he also attempted to blame the continuing squeeze upon public sector pay on Brexit, arguing the damage done to the pound is harming the potential for any change in policy on the part of the government. Of course, all Hammond is doing is utilising Brexit to provide a new excuse for austerity economics, using it along with the age-old arguments surrounding ‘economic prudence’ to legitimise the ideologically motivated subjugation of public sector pay. If one needs any proof of his real beliefs, the recent leaking of comments made by the Chancellor that public sector workers were ‘overpaid’ is surly enough. Indeed, both May and Hammond have been covering for the damage done by the Coalition government, which according to a report by The Office of Manpower Economics was and still is the most important factor in holding down public sector pay.

Mr Irrelevance himself, aka David Cameron has piped-up in support of May’s stance in what I can only call a shocking attack upon those whom we all rely on. Cameron accused those within the Conservative party who opposed both austerity and the pay-cap of being ‘selfish’. His comments have been interpreted in some quarters as being a thinly-veiled attack on public sector workers themselves, and this accusation that in some way they can be considered ‘selfish’ for wanting a pay-rise has touched many a raw nerve, and its not hard to see why. With inflation sitting well above the Bank of England target of 2% at 3% and public sector pay capped at 1%, to accuse the nurses, teachers, police officers and others of selfishness is, by many accounts including my own the height of insolence and disrespect, particularly coming from a man whose political selfishness cost this nation her long-term prosperity and sunk thousands of young people’s futures into the mire.

Summery: Support continuing restraint on grounds of ‘economic prudence’

Boris Johnson is the leading cabinet member who, through indirect ‘sources’, has spoken out in some sense against continuing restraint. It has, in a way been his intervention that has shown not only the divide within government circles but also the true nature of the political ideology governing pay restraint. It was Johnson who through his spokesperson suggested that pay increases for the public sector over and above 1% could be achieved without doing damage to the public finances. Of course, while all support for a slackening of pay restraint is welcome it raises troubling questions. Why now is it possible to change public sector pay policy? Why not 1, 2 or even 3 years ago? Surly the situation is just as precarious now what with Brexit and the falling pound? Don’t mistake Johnson’s outburst for a sudden re-discovery of a moral compass on his part; he lacks one as do his cabinet colleagues. Johnson in particular however has much to gain from his stance; primarily the leadership of the Conservative Party and likely the stewardship of Great Britain. I personally have very little doubt that his recent ‘comments’ are inspired not by any reassessment of the economic situation but by his own personal ambition and need to distance himself from the now desperately unpopular duo of May and Hammond in preparation for the coming leadership battle.

Others who have spoken out on the same side as Johnson have made almost identical arguments to our esteemed Foreign Secretary. Their reasoning? Well, I have a sneaking suspicion that is might have something to do with the events of the 8th-9th of June this year, when the complacent Tories received a violent wake-up call from the people. It was only after this event that the subject arose, and again I would suggest that it has a lot to do with the fear among many Conservative backbenchers that public dissatisfaction with austerity could cost them dearly both as a party and as individuals in their own constituencies.

Summery: Opposition to continuing restraint inspired by both fears of the future and designs over the party leadership by certain individuals

But what does it all mean? In the immediate future, nothing. The government will not change tack on pay restraint under its current leadership, which in all reality still represent the ideology of the previous ministry. Until this is gone, or the public provide another major shock to the system, the pay restraint will continue. In the slightly more distant future, it demonstrates that the battle lines of the next Conservative leadership contest are already being drawn. Johnson clearly intends to fight on what might be called an ‘economically populist’ front and is already manoeuvring himself thus. More generally, it displayed the division in the party which are almost certainly deeper under the surface.

If it proves anything, it is this: Austerity economics are clearly an ideological choice not a necessity. Only in the eyes and mind of an individual or party which fails to fundamentally understand the nature of people’s reliance on the economic system supporting their livelihoods and families is it in any way essential. Only to those who see opponents of restraining pay 2% below inflation as ‘selfish’ is it a necessary step. Ultimately though, only time will tell if the government can ‘hold its nerve’

A Billion Pounds we never knew we had!

Allow me to crave your indulgence for just a minute to imagine a political scenario. What you must conjure up in your mind is an image of a woman, lets call her the Prime Minister who out of political self-interest and shear petty-vanity decided she needed a bigger mandate. In trying for one she lost her gamble, undermined the stability of her own government and left herself requiring outside support to remain in power. Now, where did she get this support? It came from the only people who would give it to her, who just happened to be some anti-abortionist, terrorist-supporting homophobes called the Democratic Unionist Party (DUP).

Now, the frightening part is that this, what sounds like a comedic farce, is all too real and the cost of £1 billion far too much. In looking at the financial aspects of this deal, I will explore where the money has come from, its impact on Northern Ireland (NI) and elsewhere as well as briefly posing the question of what we could have had for the same price as a dramatically weakened national leader and a government propped-up by a party of extremists.

The first question of where the money came from for the deal is impossible to answer directly. Having been told there is no cash for pay rises across the public sector, funding increases for public services and a myriad of other things, £1 billion has been found for this sordid deal. Perhaps it was stuffed in a mattress at Number 10, or maybe it fell out of Boris Johnson’s suitcase when he went off on some foreign junket. But all joking aside, where did it come from? It would be easy to simply say it is money pulled from public services being used to prop-up the government. But, while we can’t say with any certainty, chances are this is not the origin of the money; to do something so rash would be political suicide, and the danger of a leak too great. More realistically, it has likely been drawn from what you could call almost a ‘rainy-day’ fund, kept by all governments in case of emergency. It is usually employed during crises such as severe floods of other disasters to provide immediate financial relief. This fund is not identifiable as such, nor is it kept in one convenient place, but all over Whitehall ready for government use. Now, whether you believe the DUP deal to be a fair use of this public money is up to you, and I will address this issue in part subsequently, but suffice to say this is almost certainly the origin of the funding behind the deal.

But what impact will this money have on NI and indirectly on the other regions of the UK? First and foremost, this £1 billion should be put into context with already existing funding plans for NI. It will add to the existing £500,000 million of funding pledged to the country, effectively tripling the public spending power of the Stormont assembly if and when it re-forms in due course. I do not need to wax lyrical about the benefits it will have and the huge increases in capital spending it will enable, allowing increased public investment and extra funding for public services. It will allow NI to properly fund its institutions and relax some spending constraints which have been in place for the past 7 or so years. Indeed, the extra £1 billion will allow for increased capital expenditure in several important areas including health and transport, both areas in dire need of increased funding in NI, not to mention the rest of the UK.

The wider impact is somewhat different however. The figures speak for themselves. What the deal and funding increases for NI have created is a dramatic imbalance of funding between the constituent parts of the UK. Allow me to demonstrate this, and why so many are angry with the increase to NI funding with a few statistics. Between 2012 and 2014, average public expenditure per head per annum stood in England at £8,529, Scotland at £10,152, Wales at £9,709 and NI at £10,876. So, before we even take the £1 billion into account, NI is per head better funded as it is. The extra money is only going to act to create an even deeper sense of resentment and of injustice. The greatest irony is of course that this money is being given to an executive which to all intensive purposes doesn’t even exist, let alone function in any cohesive way in order to spend this money!

So with all of this in mind, I feel it would be interesting to briefly list some of the things we could have had for this ‘extra’ £1 billion. Well, for a start we could have reversed and cancelled a vast range of social care and service cuts for the elderly and most vulnerable. Indeed, with the many ‘multiplier effects’ taken into account, we could have afforded much more than the 1% pay increase afforded to NHS staff. Considering recent security concerns, £350,000 million of it could have recruited 10,000 more police officers to keep us safe and patrol our streets. Again, considering recent events, £5,000 per tower block could have seen them refitted with non-flammable cladding. No doubt this will be done anyway, but why not out of this fund instead of putting the onus on local councils and asking them them to find yet more from already depleted budgets? Let us hope the money is not found for these re-fits from other essential services…..

But this is besides the point. Ultimately, the whole situation is a mess, and a self-inflicted one at that. Financially, the real problem arises not from the fact that the £1 billion has come from public cuts but that it is at heart public money going on a political deal and worsening finding discrepancies across the UK. Of course, after the election result, something like this was almost bound to happen; for Theresa May’s advisors and colleagues, it was a situation not unlike trying to advice the captain of the Titanic after it had struck the iceberg. But now the deal and damage is done and we can only wait to see its effects play-out; both economic and political.