Pensions: Thatcher’s vision is coming to fruition

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Society is indeed a contract. It is a partnership…. not only between those who are living, but between those who are living, those who are dead, and those who are to be born”  Edmund Burke, Reflections on the Revolution in France 1790

Pensions: Thatcher’s vision is coming to fruition by Prue Plumridge

At the end of last year the Institute for Public Policy Research published its ‘Future Proof report’. It painted a bleak picture for British citizens by 2030.  It suggested that, unless solutions were sought, an ageing population would place a huge and unsustainable burden on the public coffers.

In 2013, The Intergenerational Foundation published the results of a survey of 50 of the UK’s leading thinkers on economics which was entitled ‘Can the UK afford to pay Pensions?

The growing national debt and pension liabilities either to public sector pension schemes and the state pension were cited as reasons to seek solutions to the so called ‘demographic burden’ of an ageing baby boomer population.  The report suggested that these liabilities would be a considerable financial burden which future generations would have to pay off through their taxes.

In 2014, the Institute of Economic affairs also added its warning by claiming that future generations could be ‘short-changed’ and the public finances put in jeopardy unless the UK takes serious measures to reform the state pension system.  Clearly there is no shortage of organisations and politicians ready to pitch in to reinforce this message.  To that end, Sir John Cridland, former CBI Director General, is due to publish an interim report early this year aimed at ‘ensuring the state pension remains affordable’.

In response to these fears, changes to the pension retirement age are already in progress and, whilst it is currently set at 66, it has been suggested that the Department of Work and Pensions may have plans to increase it further to the age of 70.  Furthermore, the Chancellor Philip Hammond has hinted that after 2020 state pensions may no longer be ring-fenced from spending cuts.

Added to these messages of unaffordability there is also something far more insidious going on.  In Australia, a crossbench senator recently said that ‘taking the pension shouldn’t be something you aspire to, it should be something you try to avoid because it signifies you’re in a low-income group’.  He suggested that payments be viewed as welfare not an entitlement.  Right wing ideologies which promote the primacy of the individual over that of the well-being of a wider community have led to an emphasis on individual responsibility which has, in turn, led to the shaming of those who find themselves on the wrong end of the economic stick.  The inference is that if you’re poor, unemployed or sick then you only have yourself to blame.

The political discourse is making it clear now that pensioners are not only about to be added to this list but also perhaps even condemned for not having saved sufficiently to pay for a decent retirement.  Even the prospect of retiring is no longer sacrosanct.  The Tory peer, Baroness Altmann, tweeted last year that “private pension/health will drive retirement age” thus suggesting that unless you’ve got a big fat private pension or health insurance you can forget retiring on a state pension because it simply will not pay enough to cover your costs.  Clearly retirement is intended to become the privilege of the rich and well heeled.

Citizens face the prospect not only of a two-tier health and social care service but also a two-tier pension entitlement – one for those who can afford to save for one and one for those who can’t which may condemn people to working beyond retirement just to survive.

As Peter Fleming recently wrote in an article in the Guardian:

“We can trace the untimely demise of retirement to a number of assumptions about how society ought to be organised.  At no other time since its inception has the welfare state been so hated by the governing elite.  Social care.  Unemployment assistance.  Health.  Local councils and libraries.  Municipal parks.  Anything relating to what used to be called “the public good” is attacked at the roots.  Austerity redefines these things as fiscal liabilities or deficits rather than shared investments in common decency.  It was only a matter of time before pensions too were put on the chopping block”.

Of course, it might also be said that things are not looking favourable either for those who are paying into private pensions.  Not only have many defined benefit pension schemes been closed and replaced with pensions linked to the uncertainties of the stock and bond market but also in a new development the government has recently announced a consultation paper which could take thousands of pounds of income away from 11 million retirees.  This means basing annual increases on the consumer price index rather than the retail price index.  The paper also suggests that where a company is facing significant financial pressures it could suspend increases altogether.  In the heady days of market superiority private pensions might have been all the rage but in these cash strapped times and market uncertainty the gloss may be rubbing off.

Whilst clearly the mainstream and ideologically inspired experts view this demographic transition as a ticking time bomb of the financial kind, I want to investigate in this article how this view has arisen and show that, because we misunderstand how our money system actually works, the argument is far from an affordability issue.

Since the post war settlement which led to the creation of social welfare provision including a state pension and free healthcare and education citizens have been bound together by a social contract based on mutual support across the generations.  That social contract is now under threat.  Young people quite rightly compare their impoverished lives with those of their post war parents and grandparents.  Lack of adequate, affordable housing, debt ridden higher education, poorer employment opportunities, low pay and lack of job security not to mention the prospect of working longer and a poverty stricken old age are all a cause for anxiety among young people who fear for their future prosperity.

Quite predictably it stirs up resentment as they perceive the older generation having very nice, comfortable lives thank you with their own homes and decent pensions!  These are advantages that the young can scarcely dream of unless they are lucky enough to have a helping financial hand from parents or grandparents. The inference is that the social contract is no longer sustainable because in the future there will not be enough young people generating tax receipts and income to fund all those things which we have come to rely on to make society decent and civilised.

At the Conservative Conference last October the current Chancellor, Philip Hammond, warned of the dangers of piling up debt for our children and grandchildren promising he would restore fiscal discipline and get Britain back to living within its means.  Georgia Gould, a Labour Councillor in North London, has even suggested that we may have to reconsider the principle of universal pension benefits in the light of the supposed financial ‘black hole’ they represent.

What should be the right ‘balance’ of public spending between the generations to ensure a fair distribution of wealth and resources is the mainstream question and is there even a future for state paid pensions?

The message that our pensions along with our social security system is too costly and unsustainable is constantly drummed into the public consciousness.  Austerity, cutting public spending and privatisation have been presented by all the main parties (until recently) as necessary to get our public finances ‘under control’.  And yet, despite the growing evidence that cutting government expenditure on public and social infrastructure has had catastrophic consequences for the nation’s overall economic well-being – fiscal discipline and paying down debt is the re-occurring mantra of mainstream economists and politicians (even if the timescale for such plans has slipped somewhat in the face of an uncertain economy).

We need urgently to challenge these claims.

It might first be worthwhile spending some time on explaining from where this narrative arose.  The Keynsian inspired post war consensus started to break down in the 1970s with the two oil shocks and resultant rising inflation and unemployment.  This also coincided with the infiltration of neoliberal/monetarist ideas into the political mindset which was to have increasingly destructive consequences on economic policy for the next 40 years.

This decade saw the death knell for post war Keynsian policies and initiated a shift away from full employment.  Labour eventually paid a high price for its management of the economic crisis and lost the election to the Tories in 1979.  Margaret Thatcher brought to the table an economic vision inspired by Friedrich Hayek and Milton Friedman and her policies reflected her belief in the superiority of the market, less government involvement and the importance of the individual.  The idea implicit in this dogma was that the welfare state deprived people of the opportunity to make their own arrangements for pensions, health and housing.

As a result, the merits of home ownership were promoted and our stock of social housing sold off, along with the opening up of the market for private pensions in an attempt to weaken the state’s own pension provision, both of which continue today.  Treasury documents released last year revealed that Thatcher also supported a plan to dismantle the welfare state and introduce private health insurance to end the NHS.

By the time Labour finally returned to power, market driven ideology was firmly entrenched in the political narrative.  Under Tony Blair’s leadership the party, with its ‘third way’ credentials, rejected its socialist roots and fostered a laissez-faire capitalism of globalised markets and increasing corporate power.

Philip Bobbitt in his book ‘The Shield of Achilles’ published in 2002 suggested that power of the nation state would, over time, lose its authority to the ‘market state’.  The ‘nation state’ he said ‘derives its power through its promise to improve its citizen’s material wellbeing, while the market state is legitimised through its promise to maximise its citizens’ opportunities.’ To put it simply the centralised state has indeed been replaced by a market state orthodoxy which is fragmented and outsourced. In short, public money is being poured into the coffers of global companies to run public services for profit.  It is a place where, it would seem, the term ‘public purpose’ has its narrowest meaning.

Following the Global Financial Crash when Labour with some success flirted for a short period with Keynes, the Tories returned to power in 2010 to reinforce the corporate dominated, revolving door politics of the past decades.  And, on the basis of an incorrect accusation of Labour’s overspending, began their attack on public services, the NHS and social security peddling the cruel mantra of ‘we must live within our means’ in justification.

However, the increased poverty, inequality and insecurity can be attributed not to previous governments overspending or living beyond their financial means but rather a pernicious ideology which has put increasing the wealth of the few above the well-being of society and raised the status of the corporations to gods.

Politicians aided by a self-interested press, corporations and the wealthy have convinced the public that the state finances are like their own household budgets and that the national debt and deficit are dirty words.  We have to cut expenditure to get our public finances in order to prevent burdening future generations with debt and higher taxes is an oft repeated message in the media.

So, is it true that by borrowing now we are burdening future generations?  The short answer is NO and is indeed illogical.  We should be challenging such a distortion and indeed presenting the real facts about how our money system works in practice.

The economist, Professor Bill Mitchell rightly points out that past and current policy decisions do affect young people today and will also affect future, yet to be born, generations.  However, as we have seen this has been presented by politicians and think tanks in terms of financial affordability – whether there is enough money in the public pot to continue paying for social security, the NHS, public services and education both now and in the future.

Deficits and public debt have become society’s bogeyman which has proved a very useful myth to justify continued public sector cuts and privatisation thus serving the pursuit of a political ideology rather than any sort of economic reality.

We are regaled endlessly with the message that fiscal discipline is vital if we are to maintain a healthy ‘bank’ balance, save for a rainy day or avoid bankruptcy.  Of course, that would be true if the State’s finances ran like our own household budgets where our expenditure is limited by our income.  However, this may come as a shock to some but in a post gold standard world government spending is not constrained by the taxes we pay.

For an explanation, we must look at how a sovereign, currency issuing government like ours actually operates.  As Professor Bill Mitchell points out:

“The fact is that the current government has as much ‘money’ now as it had yesterday and the same amount, it will have tomorrow.  That is, it has whatever it wants to spend.  It always has that.  It has no more or less capacity to spend today because there were surpluses in the past than it would have if there have been deficits in the past.“

“Borrowing” doesn’t take any money at all from the pockets of future taxpayers and baby boomers (like myself) have never been asked to pay back a single penny of the public ‘debt’ accumulated by their parents’ generation.  Indeed, those fiscal deficits created public assets and infrastructure from which we have all benefited. Those terms debt and borrowing are loaded words which fit very nicely with our understanding of how our personal finances operate in practice in a Wilkins Micawber sort of way.  However, in terms of a sovereign state issuing its own currency it bears no relationship to our own household budgets.  The funds that pay for bonds or what is called ‘borrowing’ began life in government spending.  So, when economic experts and politicians refer to debt clocks claiming that we are sinking under its weight and we cannot afford to burden future generations we need to take a step back and look at it rationally.

If the government is the currency issuer then as Professor Mitchell points out, it is in fact, only ‘borrowing’ its own spending back.  So how on earth can we be said to be ‘borrowing’ from the future?

As Paul Segal, a senior lecturer in economics noted, the debt is ‘the money the government owes us, not money that we owe to anyone else. […..] What is called the ‘national debt’ is our own savings, looked at the from other side of the balance sheet”.  And how does it get there?  We put our savings into banks and pension funds which are then invested by those same banks and pension funds when they buy interest bearing government bonds, which include premium bonds by the way,from which investors and retirees then enjoy a return as income which is either saved or spent into the economy. In short, if you’re worried about the national debt then you should do the decent thing and stop enjoying the proceeds of your investment savings.

Furthermore, and fundamentally, as Bill Mitchell highlights ‘Every generation chooses its own tax rates. That is, the mix of public and private sector involvement in the economy is a political choice’  The key word here is choice.  Governments make policy choices related to the particular politico/economic ideology they espouse and for the last forty years and more that choice across the political spectrum has been neoliberal and market driven.

The result has been more about redistribution of wealth upwards than ‘trickle down’ and this has been at the expense of ordinary working people.  As the economist, Ellis Winningham recently noted: ‘The rich have been robbing us’.

Oxfam reported in January that runaway inequality has created a world where 62 people own as much as the poorest half of the world’s population.

The idea that government policy should serve public purpose aims as it did during the post war years for the economic well-being of a nation has largely been abandoned in favourof the rise of a deregulated corporate driven state whose hallmark has been excessive greed.

When those on opposition benches take the government of the day to task for rising debt and increasing deficits as if these were signs of poor economic management, the public are quite understandably horrified at government’s apparent wastefulness – how that suits the orthodox agenda!  The debt and deficit are, however, largely misunderstood by the public, and politicians either take advantage of that confusion to be better able to justify ideological austerity, cuts and privatisation or simply don’t understand that their own knowledge is flawed.

In short, deficits (i.e. the difference between what is received in taxation and actual government spending) are neither good nor bad in themselves – they are more of an economic indicator of whether a government is doing its job effectively or not.  Thus, the success or failure of an economy will depend on whether there is an appropriate level of government spending to ensure full and productive employment.  Historically, fiscal deficits have in fact been an enduring feature of post war economies and are, in the words of the economist Dr Steven Hail, ‘normal and necessary’.

Indeed in 1982 Gardner Ackley wrote:

“My own position on deficits has always been, and remains, that deficits, per se, are neither good nor bad.  There are times when they are not only appropriate but even highly desirable, and there are times when they are inappropriate and dangerous.  During a recession or a period of “stagflation”, deficits are nearly unavoidable, and are likely to be constructive rather than harmful.”

…It is not the government’s role to run deficits or surpluses. We want governments to make policy choices that will maximise the potential of the people to enjoy their lives and contribute the best they can, given their own circumstances to the well-being of society and the planet.

We might call this goal one of public purpose.  An essential element of that goal, given current cultural mores in most nations, will be to ensure that everyone who wants to work has a job and for those that are unable to work, for whatever reason, have adequate income support so they are not alienated and socially-excluded.

When Labour came to power after the second world war the aim of Clement Atlee’s government was to create a more stable, fair and less exploitative society than had been the case before the war.  Fiscal deficits were an enabling factor in achieving this.  Our parents and grandparents didn’t whisper in corners about government wasting money or talk about how governments should be fiscally sound they understood its role in making their lives better.  We have all benefited from that wisdom and foresight even if we have increasingly forgotten that, over the last few decades, as market and monetarist orthodoxy has replaced a public purpose vision which benefited citizens through access to publicly paid for health and education, decent housing, public services, social security (including pensions), redistribution of wealth and a focus on full employment.  We neither went bankrupt then creating a fairer society and nor can we do so today no matter what those that claim to know try to tell us.

The idea that we can no longer afford such a vision because we can’t afford it is one of the biggest inventions of our time and one that will continue to impoverish society if we let it.  So, in the same way as our parents and grandparents understood the importance of government’s role in investing in better lives for themselves and for their children we must embrace that same understanding and reject the paltry arguments of orthodox economists which has led to increasing poverty and inequality through a casualised labour market, wage suppression and attacks on trade unions all to support global trade, an emphasis on a largely unproductive finance sector and the politics of austerity.  There is an alternative to this miserable economic narrative which wants us to believe that governments are financially constrained and all it requires, is for us to challenge those who tell us there isn’t one.

Fundamentally a healthy economy is dependent on a healthy and educated population which is not driven by fear of want.  The social security system including state pensions, the NHS, public services and transport networks are all necessary to the good working of society and a nation cannot function properly without the vital infrastructure which underpins a strong economy.

So, if a sovereign state like ours which issues its own currency, is not constrained by taxation, cannot run out of money, go bankrupt or burden future generations, are there any real constraints to government spending?  There are certainly caveats which relate to resource availability whether that’s raw materials, goods, services or human labour.  Money is not finite but resources are whether they are human or otherwise.  To quote again Gardner Ackley:

“That goal is constrained by the availability of real resources that the nation commands – labour, capital, land, etc – but not by the financial capacity of the currency-issuing government.”

Whilst this generation cannot burden future generations with higher taxes or debt burden we have to recognise that there are limitations related to consumption of finite resources and that the resulting damage to the environment will diminish the prospects for our children’s children and beyond.  This is perhaps the most pressing problem of our times which we must reflect on urgently.  Therefore, the onus on this generation and its elected governments is to do two things: firstly to commit to investing in our young people over the long term to ensure that they can be employed in productive well paid jobs to serve the needs of future generations including the retired; and secondly but more importantly we have a responsibility to ensure that we actually have an environmentally sound planet to bequeath to our grandchildren and their children.

We should be clear that the current government has made an ideological choice instead to impoverish future generations by cutting spending and all for ideological reasons that have nothing to do with the well-being of society today or in the future.

References

http://www.ippr.org/publications/future-proof- britain-in- the-2020s

http://www.if.org.uk/wp-content/uploads/2013/02/Can- the-UK- Afford-to- Pay-

Pensions.pdf

https://iea.org.uk/publications/research/the-government- debt-iceberg

https://www.gov.uk/government/news/john-cridland- cbe-launches- consultation-on-

the-state- pension-age

http://www.bbc.co.uk/programmes/b086t0mb

https://www.theguardian.com/commentisfree/2015/oct/24/young-bear- burden-of-

pensioner-prosperity

http://www.abc.net.au/news/2017-01- 02/david-leyonhjelm- calls-to- restrict-pension-

assets-test/8157924

https://www.theguardian.com/commentisfree/2017/feb/14/wealthy-retire- austerity-

pensioners-work

http://www.telegraph.co.uk/news/2016/10/03/philip-hammond- budget-surplus-

conservative-conference- live/

http://www.newstatesman.com/politics/2017/02/goodbye-liberal- era

https://www.theguardian.com/education/2009/may/19/philip-bobbitt- kissinger-cuba

https://www.theguardian.com/commentisfree/2010/jun/17/fiscal-deficit- threat

http://bilbo.economicoutlook.net/blog/?p=28597

https://alittleecon.wordpress.com/2014/08/06/government-debt- is-not- a-burden- on-

future-generations/

http://bilbo.economicoutlook.net/blog/?p=3891

http://bilbo.economicoutlook.net/blog/?p=23673

Cameron’s ‘Predator State’ vs Junior Doctors

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RK on social media wrote (with a little editing):

An item on the news, said that teacher assistants were increasingly being used to teach full classes, some up to 30+ hours. PCSO staff are taking over much more of the standard police work and someone I know has just left a job taking bloods on wards, after little training, left alone to do the job on her own… and paid the same wage as a hospital porter.

I believe that by stealth, fully trained, higher waged professionals and semi professionals are being weeded out of many working environments.

Perhaps (just as nurses are taking over some doctor tasks) we will eventually only find the fully qualified in executive positions and barely trained, poorly paid staff will be undertaking most of the work.

Is this part of Hunt’s plans for the NHS, with doctors supervising a collection of underpaid individuals to deliver our health service?

We are fast heading to a worker bee situation, where cost cutting determines a very basic Health Care, Education and security for the masses except for those that can afford to pay. The rich will have the very best of care, education and security… further dividing an already horrendously divided nation.

This constant undermining of skills has been happening in industry for decades, where apprenticeships have ended and Mickey Mouse schemes qualify someone in a trade, after a six week course in a tech college.

It’s the bottom line that always matters most under capitalism. Skill, pride in workmanship, ethical standards of delivery, knowledge of the tasks, are all obstacles in the way of maximising profit. Perhaps that’s why we have so little of our industrial base left.

The argument is always: ” If we can’t be competitive, then we will take our manufacturing abroad to the third world”.

They can’t do that with health, welfare and education, so it has to be de-skilled to make it competitive. It’s also an attack on organised Labour, good pension schemes and secure employment. We all have to live in fear of the sack, or a wage freeze or as Public sector workers have long known, the gradual drip of outside tendering, ripping up of service agreements and eventual wage cuts and overtime payments.

While the working population is under increasing attack, there is a mirror image… one of unbridled growth in profits, bonuses and executive pay, for those that are ruining our nation.

 

I fully recognize the point RK is making and I think most of us could add even more examples of de-skilling of the workforce, whether in the public or private sector. However, he specifically puts the question:

Is this part of Hunt’s plans for the NHS, with doctors supervising a collection of underpaid individuals to deliver our health service?

Dr Bob Gill provides an answer:

The reality is that more qualified staff are being driven out in preparation for the de-skilling that is always part of healthcare privatisation and corporate takeover. For the UK, this is mapped out in the Five Year Forward View by Simon Stevens, the head of NHS England. Stevens used to be an executive of the US based private health care company, UnitedHealth.

http://koshh.org/the-connection-between-the-junior-doctors-contract-and-the-american-corporate-takeover-of-the-nhs

Motions at the BMA conference raised similar concerns that the future training plans could reduce the standards of patient care and safety; that by de-skilling doctors, de facto ‘sub-consultants’ would be introduced who could be paid less, and be subject to more rigid terms and conditions of service; that unacceptable power would be given to local hospital managers to determine training and workforce planning; and limit the career aspirations of many hospital doctors to a sub-consultant grade.

So how does this fit with ‘The Predator State’ of the title?

It is the term used by economist James Galbraith (2008 book) to describe this phase of capitalism in which politicians have colluded with the corporate and financial sectors to privatize public services, using …

‘The state as monopoly collector of taxes and corrupt distributor of the spoils to the private sector.’

This is certainly what is happening to the NHS. Only this week, Richard Branson took over the NHS Children’s Services in Wiltshire. He will be paid by the state for that provision and will doubtless introduce the usual cost-cutting measures to increase its profitability ie reducing the wages bill, weakening union representation and paring the service back as much as possible. Using under or unskilled labour to do the work of a highly trained professional is the obvious way to reduce the wages bill – wages will be the biggest drain on his profits. The UK government will pay Branson for taking on the service (probably with a huge subsidy) and in return, we will get an impoverished service.

So what, where, why?

Aren’t we told that the Tories are all about ‘free-markets’ and competition … but that sounds just like a rigged ‘market’.  How can Richard Branson possibly lose? Just as with the banks and care homes for the elderly, if the private company goes bust or gets fed up, the government will have to step in to pick up the pieces.  In other words, it is yet again …

‘Privatisation of profits and socialization of losses.’

 As Max Keiser pointed out, privatizing health, education and other public services provide great investment opportunities to hedge against more risky speculative ventures. And with another banking crisis predicted for the near future….

So why are the politicians going along with this rip-off of the nation?

Historically, we need to go back to Margaret Thatcher’s election in 1979, and even further back to Hayek on Mount Perelin in 1947.  Put simply, Margaret Thatcher couldn’t bear the Welfare State and wanted Britain to resemble Churchill’s wartime fantasy of pre-WW2…   The Austrian economist Hayek and his book ‘The Road to Serfdom’, offered her a political philosophy and economics that was an intellectual vehicle for her dreams.  The fact that his ideas were so diametrically the opposite of the Welfare State and a mixed economy meant that there were limits to how fast radical dismantling/restructuring could occur without provoking riots.  The ‘Boiling frogs’ strategy was adopted (put frogs in saucepan of cold water and gradually increase the heat – the frogs don’t notice until it’s too late).

The annual release of Margaret Thatcher’s Cabinet papers after the 30y rule confirms all this, and it is notable that this year, Cameron has stopped the release of a majority of the minutes from 1986.

But Margaret Thatcher was egged on and undoubtably manipulated by much bigger vested interests than her dreams of an England fit for Miss Marples and Agatha Christie. The City of London provided experts and consultants who saw the opportunity to return wealth and power to its ‘rightful heirs’ (and themselves) – those who we now call the 1% but more properly should be called the 0.1% or even the 0.001%.

It is highly significant that after the Great Depression, and in that short window of 1945-1979, the rich were not so rich and that has now been reversed back to ‘normal’.

Screen Shot 2016-02-15 at 01.49.36

http://gabriel-zucman.eu/files/SaezZucman2014Slides.pdf

 

Sadly, the LP lost its way in the 80s and bought into the idea that there was no alternative (TINA). Many actually believed in The Third Way. However as Tony Blair said recently, he had seen his role as to build on Margaret Thatcher’s achievements, and ironically, it seems that New Labour politicians continue to believe in ‘the wisdom of the markets’ when it is quite clear that George Osborne and the Republicans in the US do not.

James Galbraith insists that the original Monetarists like Milton Friedman were serious economists but after deregulation, market solutions were abandoned in favour of Crony Capitalism ‘in all important areas of policy-making’.

 For them, [a market solution] now serves as nothing more than an enabling myth, used to hide the true nature of our world. Ironically, only the progressive still takes the call for “market solutions”

http://economistsview.typepad.com/economistsview/2008/05/the-predator-st.html

In other words, we’re being spun a load of economic lies (like austerity, the deficit drama and competitive efficiency) which are intended to persuade us that the impoverishment of the next generation, to benefit the global over-class of super-rich, is unavoidable. And as it happens, we have a government of Old Etonians and aristocrats who belong to that over-class, as do their cronies, friends, relatives and future employers.

‘Cameron himself went to Eton, and the many Old Etonians in his inner circle include Oliver Letwin, minister for government policy; Jo Johnson, head of his policy unit; Ed Llewellyn, chief of staff; and Rupert Harrison, George Osborne’s chief economic adviser.’

http://www.theguardian.com/politics/2014/mar/14/gove-attacks-preposterous-number-old-etonians-cameron-cabinet

“What did the new class… set out to do in political terms? The experience of the past decade permits a very simple summary explanation: they set out to take over the state and to run it — not for any ideological project but simply in the way that would bring to them, individually and as a group, the most money, the least disturbed power, and the greatest chance of rescue should something go wrong. That is, they set out to prey on the existing institutions of the [ ] regulatory and welfare system.”

http://forensicstatistician.wordpress.com/2011/05/23/a-predator-state-the-worst-bits-of-capitalism-communism-and-feudalism/

So where does this leads us with regards to the junior doctors’ contract and Jeremy Hunt?

Jeremy Hunt’s behaviour really doesn’t make any sense if he wants a ‘seven day’ NHS. No-one can imagine that it is feasible, not without more doctors, more hospital porters, nurses, radiographers etc… and expecting 20bn worth of cuts to the NHS budget at the same time? The old adage is that if something doesn’t make sense, ‘Follow the Money’.

After the last 5y of Lansley’s Health and Social Care Bill reorganization and cuts, it is no surprise that hospital doctors feel demoralized, undervalued, over worked and now they are being threatened with a substantial pay cut. Hunt’s imposition of the new contract on the Junior doctors is particularly criticized for driving doctors to work abroad.

Thousands are set to quit the NHS in protest over plans to shake up hours… more than 6,000 requests have been made for the paperwork needed to practise medicine outside the UK.

http://www.mirror.co.uk/news/uk-news/junior-doctors-fleeing-country-after-7367186#ICID=sharebar_facebook

 

Well, the resulting shortage from a mass exodus of doctors would be a perfect reason for using under-skilled staff … and it could be even be spun as unreasonable doctors, disloyally abandoning the NHS.  Hence, the conditions of the NHS could be harmonized with the expectations of private health care providers.  And all who could afford it, would be tempted to go for private treatment… as in the two tier system of the US.

Hunt has good reason to want to upset and alienate the Junior doctors.  It seems all too likely that he would love the awkward squad to go.  Then he can move on to the consultants…

As James Galbraith writes:

There is no common good, no public purpose, no shareholder’s interest; we are the prey and governments as well as corporations are run by and for predators. The “failures” enrich the proper beneficiaries even as they “prove” government is no solution.

 

Fortunately, we’re not told the truth about how the economy really works… and there is no economic reason why a new courageous state could not (in time) restore the NHS to being an improved, truly nationalised service….  And it just so happens that Jeremy Corbyn supports full re-instatement of the NHS.  Fingers crossed.

http://www.nhsbill2015.org/jeremy-corbyn-supports-the-nhs-reinstatement-bill/

 

 

 

https://think-left.org/2012/02/16/the-nhs-and-tina-mrs-thatchers-ideological-anti-democratic-political-legacy/

http://www.taxresearch.org.uk/Blog/2014/05/23/this-mornings-political-landscape-is-a-victory-for-the-cowardly-state/

 

Economic Inequality explained

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Animation from the US but can you spot the differences between the US and George Osborne’s economic ‘strategy’ in the UK?

 


An Animated Video Explains Economic Inequality.

The riddle of the deficit (or deficits for Dummies)

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Riddle: When is a ‘deficit’ not actually a deficit?

Answer: When it’s a Government budget deficit.

 

 Dear [insert name of virtually any Journalist or Politician]

It seems that you’re still having a bit if a struggle to understand what a budget deficit is, and what it does.

Let me try and explain.

Imagine that I’m the ‘Government’ and you are the ‘Private Sector’.  I give you a bar of chocolate.  Now, I (the ‘Government’) am in deficit to the tune of one bar of chocolate… but you (the ‘Private Sector’) are in surplus to the sum of one bar of chocolate.

Are you with me so far?  The government sector and the private sector or non-governmental sector, are opposite sides of the same coin.  A deficit for the government means a gain in the private sector and vice versa.  (The private sector means everything in the domestic economy, which is not government – I’m leaving out exports/imports to keep it simple).

One way or another, Government spending all goes into the private sector … payments for the NHS, Education, the military, unemployment benefits, working tax credits, child benefit, the Police, the judiciary, pensions, motorways, new infrastructure, grant to local governments and much more, are each paid for out of government spending.

OK?   So government doesn’t just spend, it also taxes.

So I’ll be the ‘Government’ again, and I’ll give you (the ‘Private Sector’) a bar of chocolate and then take back half of it, as a tax.   Now both the ‘Government’ and the ‘Private sector’ have half a bar of chocolate each but the government has a budget deficit of half a bar of chocolate whilst the private sector is increased by half a bar of chocolate.

With that extra half a bar of chocolate you have a lot of options.  For example, you could eat it (i.e. consume goods and keep someone in a job replacing them); give it to someone to mend your bike (i.e. create employment); put it in the cupboard for another day (i.e. save) or repay your friend the chocolate you owe him (i.e. pay off debts).

The way to work out if the government has a budget deficit, a balanced budget or a surplus is simply to subtract the total amount collected in tax from the total amount that government spends.   At the moment, the UK has a budget deficit, which means that the amount spent is greater than the amount of tax collected.

However, George Osborne says this is absolutely ‘frightful’ and that under his new policies, the UK will be in surplus by 2020 (!)

So what does a surplus mean for those of us in the private or non-governmental sector?

Well, if I pretend to be the ‘Government’ again, and I give you (the ‘Private Sector’) a bar of chocolate and then take it all back again … the budget will be balanced. Government spent a bar of chocolate and collected a bar back again… but you in the private sector have nothing more than you had before the ‘Government’ started spending!   (How great does a balanced budget sound now?)

To be in surplus, I as the ‘Government’ would give you a bar of chocolate and then demand a bar and a half of chocolate back from you (the ‘private sector’).  Now you have the problem of how you are going to get me that additional half a bar of chocolate?  Maybe you have some saved bars of chocolate which you can use for a year or two but eventually you may have to go into debt or even sell your house to give me, the Government, that extra half bar of chocolate!

As J.D. Alt writes in his excellent US post:

 If [government] runs a “budget surplus” for long, the Private Sector will either have to diminish its economic activity in general (go into recession)—or plunge hopelessly into debt (borrowing bank money it can’t repay, possibly causing a banking crisis)—or both.

 

Instead of creating jobs by spending, paying off debts or saving, a surplus budget eventually leads to redundancies, greater household indebtedness and greater precariousness of the workforce.

Obvious questions are raised by this simple story, like where did I (the ‘Government’) get the money to buy the chocolate in the first place?   Answer: I created it – that’s what Governments do if they’re the sovereign issuer of its own currency!   This is an incontrovertible fact – only the UK government can create Pounds Sterling – anyone else is committing the criminal act of counterfeiting.

If sovereign governments can create as much money as they want, why does the UK government need to collect tax to fund public spending?   Answer: It doesn’t – there are many essential reasons* for the government to collect tax but taxes do not pay for anything.

Think about it, if government kept on spending into the private sector without having a means of also draining the economy, we would have rampant inflation. (Literally, if it was all in bars of chocolate!)  So tax is one of the means of keeping the amount government spends into the private sector equivalent to the number of goods and services available for people to buy… thus preventing price inflation.

That is probably enough for now. I would recommend this and this for more information but please don’t hesitate to contact me if you need further explanation as to how the economy really operates.

Kind regards

Yours sincerely

Syzygysue

* Tax is important for lots of reasons including giving value to the currency but it does not fund government spending.

PS.  We’re constantly told that the deficit means that future generations will have to pay off our debts. This is simply rubbish.  Which would your children really benefit** from?   Half a chocolate bar (deficit budget), no chocolate bar (a balanced budget) or increased household debt and a potential recession (a surplus budget)?  It would be no contest in my family!

(** Obviously, caveats re: inflation apply)

 

DIAGRAMS & DOLLARS: modern money illustrated (Part 1) 

DIAGRAMS & DOLLARS: modern money illustrated (Part 2)