IDS, benefit cuts and making work pay.


I agree with Zoe Williams when she writes about the Tories:

… the true division of the Conservative party – the ones who are mistaken versus those who are wrong deliberately.

Some of them are simply out of their depth, do not understand the benefits system or a government’s realistic prospects of controlling the economy…Others take the Fox News approach: if you can just get enough misinformation out there, enough people who were only half-listening might half-believe you. Competing claims don’t need to relate to facts, their validity will be judged on the manner in which they’re delivered. You may have to retract later, but what does that matter? Does it even count as humiliation when the only people talking about it are the ones who disagreed with you anyway?

This is politics at its most cynical, its most rebarbative; this is politics pursued purely for personal advancement and for the game, in defiance of the public interest and the long term. I have a feeling that the first type of Tory would despise this second type even more than I do. The trick now is to tell them apart. (1)

It is open to debate as to which camp Iain Duncan Smith belongs, given his latest pronouncements on benefits:

 ‘IDS on welfare reform -how do I lie to thee let me count the ways’

‘from factcheck analysing IDS’s claimed figures which were inflated massively as you can see here

He claimed Labour spending was up 58% when it was 8%!

He claimed massive amounts of public monies being lost to fraud – the fraud rate was 0.7%!

He said tax credits rose by 20% in the last two years under Labour – It was 8.8%


However regardless of motivation, as George Eaton writes:

‘… even if we accept Duncan Smith’s baseline, his logic is profoundly flawed. The fact that benefits have risen faster than wages is an argument for increasing wages (for instance, by ensuring greater payment of the living wage), not for cutting benefits.’ (3)

Henry Ford would certainly have agreed with George about the flawed logic of allowing wages to decline in real terms :

I have learned through the years a good deal about wages. I believe in the first place that, all other considerations aside, our own sales depend in a measure upon the wages we pay. If we can distribute high wages, then that money is going to be spent and it will serve to make storekeepers and distributors and manufacturers and workers in other lines more prosperous and their prosperity will be reflected in our sales.

My Life and Work – an autobiography of Henry Ford, pp 86 

Hat-tip –


In other words, Henry Ford understood ‘Keynes’ Paradox of Thrift’ and IDS et al either do not know it, or do not choose to know it.

Fundamental to macroeconomics is a very simple formula which this government seems to completely ignore:

Spending equals income equals output which creates employment.

If IDS and the Tory/LD government really wanted to get people off benefits and into work, they would raise the minimum wage and increase benefits.  That would increase spending because unlike the rich, the poor have to spend all their income on surviving.

The increased spending would create employment which would get people off benefits and into work.  Of course, this would be even more effective if government actively invested in job creation.

And as an incidental, the resulting increased tax revenue would also close the structural deficit that they’re always banging on about.

‘…  if you are obsessed with reducing deficits, the best way is to engender growth. The dumbest thing a government can do if it wants a lower deficit is to impose fiscal austerity. There are a lot of dumb governments out there. The problem is they are aided and abetted by criminal types who know full well it is dumb to cut net public spending but pressure governments to do so as long as the space for spending on them expands.’

As Zoe Williams says:

‘.. this is politics pursued purely for personal advancement and for the game, in defiance of the public interest and the long term. I have a feeling that the first type of Tory would despise this second type even more than I do. The trick now is to tell them apart. (1)

I look forward to her first type of Tory coming out to demonstrate against the cynical political ploys of this government.




George Osborne says we’re running out of money ..

I’m just angry at the government.


DanThom writes:

I’m posting this everywhere so sorry if you’ve read it before or know all of these ideas which are not really my own, I’m just angry at the government.”

How could we resist not giving a helping hand?  The unassuming DanThom says:

If the amount of money in the pockets of both the working and unemployed middle and working classes is held down or cut by greedy capitalists or an economically illiterate government then the private sector gets damaged. The Condems may try to hide or spin figures but demand for the goods and services of small businesses spirals downwards when money gets into fewer hands.

Infrastructure spending is good it creates jobs – however, partly paying for it by attacking the most vulnerable in our big society is not only morally wrong, it offsets a lot of the benefits that infrastructure projects can bring.

 No doubt we are in a hole; some policies could be very dangerous like going to the bond markets for more money. So is it time for some radical ideas?

 1) How about a modern debt jubilee as proposed by the economist Steve Keen? Perhaps this could work by giving every UK domiciled adult £10k of printed money on the proviso that any debts to the banks (loans, credit cards and mortgages) are paid first before spending on consumption.

 This would recapitalise the banks meaning that banks would be able to start lending to small businesses again. Small businesses would also benefit from an increase in demand because of increased consumption of those who are released from the burden of debt or who had no debts and are free to spend their £10K.

 The scheme could be audited by the banks as they would be the ones who would benefit from the increase in liquidity, and would know who has got debts that need to be paid. If you’re worried about inflation then perhaps this would be an ideal time to renationalise the energy companies and the railways to keep some of it under control

 2) If idea 1) is implemented then perhaps that would be a good time to raise the minimum wage? By getting employers to pay higher wages at the bottom less tax credits would be needed – “QE for the people” will boost consumption therefore it would be an ideal time to increase the minimum wage because any jobs lost will be offset by increased demand. Remember the more money in more hands is good for small businesses.

 3) How about a tax on land with planning permission? This will create jobs and growth. I’ve heard that planning permission has been granted for over 400k houses in the UK. The tax will speed up building and stop those who bank land waiting for the perfect time to maximise profit. It may even mean this kind of land falls in value, so the government or housing associations can buy the land cheaply and build affordable and social housing.

 4) Rather than forcing people (many of whom work) out of the south east in to areas where there are less jobs via the benefits cap perhaps a temporary social rent cap can be made that could be used to get capital for building social housing? This would involve creating a law that would force landlords of people on housing benefit to keep their tenants for a few years with a small cut in the rent they receive. This would create millions of savings on spending which could be used to build more social housing. Combined with idea 3) it could be very effective.

 5) How about stopping tax dodging and evasion? I wouldn’t normally call this radical but it seems that way at the moment. If you’re worried that tax inspectors just increase spending, how about employing them on commission? 

How about ending the multinationals tax avoidance scam? All companies should pay the same corporate tax rate on their actual profits, not hide profits with royalty payments to themselves via a subsidiary in a middle country that has lower taxes. Every country a company trades in should have HQ that pays corporate tax on its profit before sending their after tax profits back to the main HQ which for Starbucks, Google and Amazon is in America not Luxemburg or any other middle country scam.

6) Now if we get to grips with idea 5) perhaps we could put up taxes on the rich? How much money does a rich person need? How many jobs does their money employ? Currently lots goes into speculating on the stock exchange rather than creating jobs in the real economy. This hurts small businesses and the working class.

 7) Although personally I’m not convinced how about the Tobin tax/ Robin Hood tax? The banks are partly to blame for the crisis we are in, so they should pay more to fix it. Put a charge on every financial transaction this will raise billions for deficit reduction and infrastructure spending and has the added benefit of making the economy more stable. The downside/upside is the rich might run away to the likes of Singapore.

 I can think of more ideas but the rentiers won’t like them.

Great ideas … I could vote for DanThom’s manifesto!

I particularly like the idea of taking the railways and energy back into democratic ownership.  I would also be delighted to see Steve Keen’s debt jubilee implemented but not because it would help the banks to lend, but because the banks trade in ‘debt’ so that level of repayment of loans would curtail their risky speculative activities wonderfully.  DanThom is absolutely right to not want government to borrow from private banks/bond market.  But then why have we been doing so?  We are a sovereign nation and have the capacity to print as much money as we need… just as we’ve seen with the £375 bn of QE to buy back gilts.  Obviously, if there were full employment, printing money might be inflationary but currently we have enormous wasted capacity with 8m unemployed or under-employed.  It is the work of people that creates the wealth, not speculative ventures from the City and Wall Street.

PS. There is a tremendous opportunity for UE* in mitigating the effects of climate change – reducing energy demand and the microgeneration of renewable energy.  (* Unemployment Easing).

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There’s No Money Left?