Economics and politics - comment and analysis

The British elections. Part 1: the Conservative legacy

Introduction

This is the first article in our series on the British elections which take place on June 8th. We start off with an analysis of the Conservative party. Part 2 will be about Labour. Part 3 will deal with the inevitable Brexit. I will present research on the macroeconomic impact of the Brexit (for example here) and respectfully disagree with John Weeks (among others), who argues that the economic impact of Brexit (either ‘hard’ or ‘soft’) on the British economy is likely to be serious in the short turn, but manageable if its government applies appropriate fiscal policies (see here). The point is not that Weeks is wrong, he may well be right. The argument is that Weeks misunderstands the nature of the Brexit, its essence, its raison d’être. We can forget about these “appropriate fiscal policies,” unless Labour wins the election. This is not going to happen. It would be therefore be productive to leave the dream of these “appropriate fiscal policies” behind. We have been hearing similar statements since the referendum. Steve Keen jubilantly wrote that now that the Brexit was a “fact,” the Keynesians would run the Bank of England. Bill Mitchell wrote that austerity was finished. The simple and undeniable truth of the matter is that the Brexit is cementing the most right wing government in the UK in living history. Aside from the economic argument, there is the one about human erosion, the political and the social side. It is very nice to see your economy grow when, say, the bottom 20% of the population (see Palma here and here) are chronically rotting away in 19th Century conditions. Of course, Weeks opposes this. All that needs to be done then, is to add one and one together: the economic impact of the Brexit will be serious; there is no chance that the most right wing government of the whole of Europe will implement appropriate fiscal policies (no one else is doing it either), hence a lot of people are going to bleed even harder than they do already. If you are looking for an explanation for the rise of the right, here it is. That these people then vote against their own interests is due to the dominant ideology.

As Richard Murphy, the leftist tax expert and former Corbyn advisor writes, May is pursuing class warfare under the smokescreen of Brexit (see here). One might dislike this language, but that does not make it less untrue. This is what May is doing. The Brexit, explains Murphy, is all about advancing the neoliberal cause. Advancing the interests of a few in society is always at the core of conservatism. As Murphy writes, massive problems exist in the NHS, education, the justice system, social care, housing, energy, earnings and elsewhere, all of which are going to become increasingly apparent over the next few years. The Tories want to govern for no other reason than to make “appropriate fiscal policies” impossible. They do not care about economic dysfunction, as history as well as the policies of the previous and the current government abundantly shows. The Great Repeal Bill will further reduce employee and environmental rights, harm the protection for those with disabilities (as if that could still be imagined), diminish universal rights to health care, harm security in old age, damagingly bias markets in favour of big business, remove legal protections, probably claw back against LGBT rights, undermine social stability, encourage the break-up of the Union and blame the immigrants for everything. As Murphy concludes:

“May will foster the self interest of the few, increase their access to the state as a means for appropriating its common wealth for private  gain and will put  in place mechanisms that will be contractually hard for successors to unwind. That is the goal. May is pursuing class warfare against most of us and she is getting away with it, aided and abetted by an official opposition that is seemingly dedicated to trivia” (see here).

The Conservative legacy

The economic policies of the Conservatives and, a fortiori, those of Theresa May have been failure of historical dimensions. So far has society regressed that few talk about it. The inherent inhumanness is morally repulsive. May can talk all day long about her Christian values and bringing the nation together. The truth is that the vicars daughter is taking away another £3 billion from the disabled and giving it to the millionaires. For a good understanding, this is on top of the £12 billion cuts to welfare.

During the Easter weekend, when no solicitor in the UK was available, the home service deported a woman who had been in the UK for 27 years. She was caring for her chronically ill British husband. She raised two children in the UK, was well integrated and engaged in volunteer work. The woman was handcuffed, led away, not allowed to say goodbye to anyone and put on a flight to Singapore, where she is has no family, with £ 12 in her pocket. Ah yes, our Christian values.

To the Tories, all of this seems to be a joke, just as cutting off all housing benefits to vulnerable young people is a laugh. There will be more soup kitchens, more homelessness, more destitution, more illness. The answer to the consequences of the Tory cancer will be more repression, more disability cuts, more reduced sickness payments, more work assessment controls which create mental health problems (as research shows – see below). Health care is being progressively made unavailable to immigrants (see here). Even terminal patients can forget it. If there would be any common sense left, the Tories would be obliterated. But common sense has withered away.

The Tories simply do not belong in a civilized society (the reference to ‘history’ above refers to Polanyi’s work on laissez-faire in the mid 19th Century and the fateful repeat of these insane policies in the 1920s – politically speaking, here we are again). Theresa May is every bit as guilty as Nigel Farage in fostering racism and xenophobia.  If Le Pen would say that it is “impossible to build a cohesive society” because of immigration, no one would be surprised. May has not been too shy to ignore and misrepresent the findings of scientists who produced reports proving that immigrants constitute an economic, scientific and cultural advantage to the UK. This happened on several occasions. What is the truth worth if it goes against your ideological fabrications?

There are her outrageous anti-democratic machinations. There is no doubt that the idea that the United Kingdom will “come together” behind a Tory administered Brexit sounds like insane gibberish in Scotland and Northern Ireland. It has never been clear why May got appointed PM by her fellow Tory MPs. It was certainly not because of her political track record at the Home Office, which was a sickening blend of extreme authoritarianism and outright incompetence (see here). The Tories – this is absolutely not a moot point – won control of government with the support of just 24% of the electorate in 2015. That is the result of the UK’s fundamentally unrepresentative and undemocratic voting system. The Tories are trying to make it more unrepresentative. It is of course true that the Tories undeclared or misdeclared electoral spending in order to machinate their way to success in constituencies which were at risk. It constitutes nothing less than electoral fraud (see here and here).

May also broke her word about the elections. Seduced by the siren evidence of a 20 or so point lead in the polls, she went for a general election, one said again and again she would not call. “There should be no general election until 2020. There should be a normal autumn statement held in the normal way, at the normal time and no emergency budget,” May said on the 30th of June 2016. “I’m not going to be calling a snap election. I’ve been very clear that I think we need that period of time, that stability, to be able to deal with the issues that the country is facing and have that election in 2020,”May said on the 4th of September 2016. She repeated this position another couple of times (see here).

In doing so, May has made a Scottish referendum inevitable and a border poll in Northern Ireland infinitely more likely. Sturgeon’s tweet after the news hit the nail on the head: “The Tories see a chance to move the UK to the right, force through a hard Brexit and impose deeper cuts. Let’s stand up for Scotland.” Sturgeon has won the backing of Holyrood to hold another referendum between 2018 and 2019 (see here). What will come of it? Will the “United Kingdom” survive in its current form? It is highly doubtful.

“The one thing we know about Labour is that they would bankrupt Britain,” said May in parliament (see here). The myth has become so entrenched in the conservative mind that many believe it. The truth is that the national debt sharply increased when the taxpayer was obliged to shoulder the financial crash. Then, the Conservatives came to power. Cameron assured that the government would pay down Britain’s debts – an incredible statement for many reasons. To make a long story short, under six years of George Osborne, the UK national debt increased by over £555bn. The average borrowing for each year in office is much higher for the Conservatives (£33.5bn) than Labour (£26.8bn) (see here).

In order to make these “savings”, “some difficult decisions had to be made,” explained Cameron. In the meantime, things got worse, much worse. Many families are so increasingly trapped in debt, having to rely on credit cards they struggle to pay off, as the Financial Conduct Authority reported last week. Charities are warning that inequality is rising, with those at the bottom faring the worst. The Resolution Foundation calculated that welfare and tax changes introduced last week will leave a middle-income family earning £33,500 a year, with three children including a baby, £2,500 worse off overall as a result, losing £2,700 from benefit cuts while gaining £160 from tax cuts. A third of the Sure Start centres, part of a scheme set up to help disadvantaged children, have been lost since 2010 in England (see here).

Housing benefits do not rise in line with private rents (this has been the case since 2010) and the current benefit will remain frozen at 2016 levels until 2020, regardless of how much private rents have gone up. Research by Shelter shows that in one in four areas of the country, a small family with one or two children living in a modest two-bedroom home must now stump up an extra £100 a month or more since the benefit was first frozen. This is not a small issue. The freeze is pushing more renters on low incomes into deep poverty or homelessness. These are mostly struggling families and young people who are often in work but are on low pay or zero-hours contracts and cannot afford the escalating cost of private rent (see here).

The combined impact of welfare cuts will leave struggling working families – the “just about managing” (JAMs) households worse off by more than £2.500 a year by 2020. A study of 187,000 households across the UK found that policies including cuts to universal credit and the four-year benefit rate freeze, coupled with rising rents and higher inflation, would see low-income working families typically lose £48.90 a week by the end of the decade.

But now the Tories found their excuse: Hammond warned that the government is facing a “sharp challenge” in the face of the Brexit vote. There is, therefore, a need to save. May announced tax breaks and an annual £2bn investment fund for research and development to big businesses and she is further wooing big business by slashing corporation tax to the lowest level out of the world’s top 20 economies. This happened after May “confirmed” that there would be no fresh cuts to social security in this parliament, a promise which has been broken. A study by Policy in Practice suggests that even if this promise would not have been broken, the cumulative impact of the £12bn of welfare changes already in place will be far harsher than that experienced by low-income households under the first wave of austerity-driven welfare cuts during Cameron’s leadership. The analysis, which uses housing benefit and council tax data supplied by the local authorities, gauges the cumulative impact of various welfare reforms, including the benefit cap, housing benefit freezes, bedroom tax and universal credit changes. When the impact of welfare cuts on out-of-work households is included, the average weekly loss drops to £41.45 according to this study (see here).

Alison Garnham, chief executive of Child Poverty Action Group, said:

“The huge cuts hitting, or about to hit, families under previously announced policies will be devastating to these families, communities and local authorities, as child poverty rises and huge amounts of money gets sucked out of local shops and businesses. Until the government acts, councils are resigned to being in the ‘damage limitation’ business (see here).

Phillip Blond, director of ResPublica said that:

“It is vital Theresa May does not let her one-nation Conservatism experience a similar sacrifice at the behest of Brexit. The trouble with Brexit is that those who voted against the EU as a proxy for globalisation and its general destruction of working-class security, risk finding May’s ‘global Britain’ to be far, far worse for them” (see here).

This is a very fair statement, considering that the poorest third of households are faring much worse under May than they did after the 2008 crash. But – again – heaven’s thank, there is the Brexit monster. No one talks about anything else – the vote on Heathrow has been pushed forward. Key social reform policies in education have been delayed. According to the Resolution Foundation, “we are heading for the “biggest rise in inequality since Margaret Thatcher was in Downing Street.”What are the politicians talking about? It is all  about the Brexit, immigration, trivia and either good or bad intentions.

Disability activist Fiona Robertson says the UK’s most vulnerable are screaming for help (see here). According to research by Oxford University and the Royal College of Medicine, there have been 30.000 extra deaths in England and Wales in 2015 as a result of cuts to health and social care (see here). There have been hundreds of suicides, at the very least 590, in the Tory push to get the disabled into work (see here). There has been an increase in mental disease and the relapse of people with mental health problems because of the stress and pain of the work assessment programs, malnutrition, lack of heating and isolation, exacerbating a person’s condition to the point of lethality (see here and here). More than 50.000 people have lost their motability vehicles and have become chronically isolated. As Robertson writes, every one of those is someone who was considered disabled enough to require high mobility care until the Tories changed the narrative of who deserved assistance, against all the evidence from expert organisations who responded to the consultation (see here).

What did austerity accomplish (see also here)? UK politicians have the mouth full about their fast growing economy and their lowest unemployment rate since the financial crisis. As Michael Roberts explains, the lack of increasing average real incomes and living standards tell the story (see here). Most of the new jobs are low-paid, temporary and/or part-time.  As a result, growth in weekly earnings is not keeping up with employment. Average weekly earnings for employees in nominal terms increased by 2.3% compared with a year earlier. Only about one job in 200 is being created in the North – the rest is for London and the South. Inflation is rising at the same rate, so average real earnings are flat.  Real pay growth fell to 0.1 per cent in the three months to February. The Resolution Foundation notes that pay is falling in nine sectors of the UK economy, including accommodation and food services, transport, finance and the public sector (see here). Together these sectors for account for 40% of the workforce (see here). Britain has many problems. It greatest single economic problem is comparatively poor productivity, as Larry Elliott recently once again explained in the Guardian (see here). This is absolutely not being addressed. Or is the point that “removing” (sic) immigrant workers will increase UK productivity? One never knows what anyone will say next.

May’s Brexit sham

I have been suspecting for a long time that May’s whole Brexit strategy is nothing but a sham. May is not interested in a Brexit. At least, the Brexit is a means to an end, it is not the end in itself. What May is after is to cement the power of the Tories in the country. “Taking back control” and “Brexit meaning Brexit” are just hot air, words without any meaning – anything will do to win the election. May – and really everybody else – knows that it is absolutely impossible to conclude the Brexit negotiations in 18 months from now (the time frame demanded by Article 50). No one in the Conservative party has anything substantial or intricate to say about the process, let alone the “deal,” because they are dragging their heels. The talk that “no deal is being better than a bad deal” has the sole function of pleasing the brainless part of the electorate which has been poisoned by the anti-immigrant rhetoric. “No deal” would mean that the UK will effectively crash out of Europe and that it will rely on WTO rules.  According to an analysis by the Independent, the tariffs which would then come into place would amount to an extra cost to British exporters of at least £ 4.5 billion, “and in all likelihood they would take a hit many times larger” (see here).

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Pictures 1 and 2: The British “press” in action – racism day in day out, protected by free speech and the cowardice of mainstream politicians too afraid of losing votes until they make the argument that this is what the people want. (Source: Daily Mail and Daily Express).

May’s case is simple. I simply do not believe one word of what she says, except when it is about immigration. May privately warned that companies would leave the UK if the country voted for Brexit during a secret audience with investment bankers a month before the EU referendum. As she told Goldman Sachs (leaked to the Guardian), “I think the economic arguments are clear (…) I think being part of a 500-million trading bloc is significant for us. I think (…) that one of the issues is that a lot of people will invest here in the UK because it is the UK in Europe (…) If we were not in Europe, I think there would be firms and companies who would be looking to say, do they need to develop a mainland Europe presence rather than a UK presence? So I think there are definite benefits for us in economic terms” (see here). Yes, it is the same Theresa May.

What do we know so far about the Brexit “negotiations?” David Davis, the Brexit secretary, stated that the government’s objective in relation to the single market was “to have as close to the level of access that we currently have as we can achieve.” What does that mean? As Ian Dunt from Politico.uk observes, this is a truly incredible statement. It implicitly admits that the government would like to stay in the single market – after all, why else want the closest possible thing next to it (see  here)? What do the Tories really want? The answer is very clear and very simple: as Davis, May and many other repeatedly stressed, they want “reform” (it is to say an end) to free movement, which is a requirement of single market membership. “Take back control is quite an important issue (…),” Davis said, when asked about the potential for preferential immigration rules for EU nationals. “There has got to be clear control by this parliament.” Dunt summarises: “It couldn’t be any clearer: The red line is free movement. Not the economy. Not jobs. Not trade. The end to free movement. That is the key demand” (see  here).

Dunt explains further: if Davis, the Brexit secretary, implicitly admits that membership of the single market would be beneficial – a statement made on several occasions by May herself before the referendum – then it is left to the Office of Budget Responsibility to explicitly state that ending free movement would not be. Indeed, this Office said in its Autumn Statement (last month) that the government will need to borrow an extra £16 billion by 2020/21 to make up for reduced tax intake caused by falling migration. Once Britain has left the EU it estimated that the UK will need to borrow an additional £6 billion a year to make up for the decline in immigration (see here).

So eaten away are the minds on the right and the ‘left’ that none of this seems hold much relevance. Davis gave all those answers in response to Emma Reynolds, the Labour MP who in September helped cement the political consensus against free movement saying that “no future deal can retain free movement of people in its present form.” Labour are as responsible for this course of action as the Conservatives are (see here) – exactly the Blairites that Corbyn should fight.

As Ian Dunt concludes: “Has there ever been a more irrational and self-harming policy agenda by a major Western economy? (…) (O)n the basis of their own words and documents, the government is essentially admitting that it is going to make the country poorer. It is going to make British people worse off. (…) (I)f Britain had a halfway capable opposition, it would be making the case that the government should be showing that free movement is beneficial for the economy, beneficial for British workers, and beneficial for the public finances, rather than engaging in the lies and nonsense of the right-wing press” (see  here).

Conclusion

Those on the Left who support the Brexit, should keep their ears open and listen to the dominant ideological discourse. The plan is the ultra-liberalisation of the labour market, making it easier for businesses to opt out of parental leave allowance, compulsory pension contributions and pretty much all other regulations. For some Conservatives the Great Repeal bill is an opportunity for a bonfire of EU rules: finish the job launched by domestic deregulation of the 1980s. Liam Fox has declared that “We must begin by deregulating the labour market. Political objections must be overridden.” Priti Patel, the international development secretary, has expressed the hope that the newly emancipated UK will “halve the burdens of the EU social and employment legislation” (see here).

The “freedom” that the Brexit promises – and which the Tories will deliver – is the freedom for the rich. The freedom of companies to not have unions. The freedom to have no public services. The freedom to deregulate the economy top to bottom. The freedom of the rich to contribute to nothing and, indeed, to accept more gifts.  The freedom to engage in tax evasion as much as to one’s liking. The freedom to have no social welfare state whatsoever. The freedom to have no national health service. No money, no health, no work, no roof over one’s head.

That and nothing else is May’s “once in a lifetime opportunity” to rejuvenate the UK economy” (see here). The freedom to increase insecurity, which is, according to billionaire stockbroker Hargreaves, “fantastic.” Hargreaves agrees with the opponents of the Brexit that it will make the country more insecure, but to him this is just what the United Kingdom needs. Hargreaves made his fortune as one of Britain’s richest men co-founding stock broker Hargreaves Lansdown in 1981. When donors to both sides in the EU referendum campaign were announced, he emerged as by far the biggest on either side, having given 3.2 million pounds to the Leave camp. What does he want? I told you. More freedom, less regulation, more insecurity: ultra neo-liberal Britain.

Those who do not agree have the responsibility to show a study that proves the leftist Brexit opponents wrong. A study that shows that the consequences of the Brexit will be “manageable” (for whom?) on the condition that certain policies will be implemented that have a zero chance of being implemented is not good enough. What the Left in Europe should have done a long time ago is to unite and make a front against EU economic governance. The Brexit will make those for which the Left should stand up worse off. Alas the political resurrection will be for another time – yet again.