Winner of the New Statesman SPERI Prize in Political Economy 2016

Saturday, 19 March 2016

Lack of accountability

In 2007 the Pitt review told us that climate change was going to greatly increase the incidence of record breaking bursts of rainfall in the UK. The Labour government responded by substantially increasing their spending on flood defences in the spending review which ended in 2010/11.

The coalition government reversed those increases, leading to sharp falls in spending on flood prevention. Five years and many costly floods later, George Osborne has finally admitted he was wrong by announcing a substantial increase in money for flood defences. After being told by the government, one flood disaster after another, that they were doing everything that was possible, they have now decided that maybe it would be a good idea to spend more.

A bigger mea culpa you could not find. Yet if you google “austerity flooding”, it is still my blog post that comes top. When the floods hit around Christmas in 2013, no one seemed to want to connect the two. The government seemed immune to criticism, and successfully directed any culpability to the Environment Agency (who could not answer back). Even with the latest floods, outside the pages of the Guardian or Independent there was little criticism of earlier spending decisions. Yes Labour were slow out of the blocks in attacking the government, but are we really in a media world where if a senior politician does not talk about something it becomes a non-subject?

Chris Dillow asks why Osborne is not given the scorn and derision he deserves. As ever he gives many possible answers, but to many people one factor above all explains what is going on. It can be summarised by the following chart from the IFS, looking at who wins and who loses from this latest budget.


As I noted in my last post, Osborne felt he had to produce a budget like this for reasons that have only to do with who will be the next leader of the Conservative Party. Yet many will conclude that he (almost) gets away with it because it is in the interests of those who control the media to let him get away with it.

While there is undoubtedly some truth in this, I do not think this is quite the killer explanation that some suppose. Another important factor is that we have been living through a period in which the need to cut spending to reduce the deficit has entered the national consciousness as not only an undeniable truth, but an imperative that dominated all other concerns. So strong was that conviction that it helped win the Conservatives an election, despite the fact that they pledged to make the deficit worse by cutting taxes. Osborne had successfully characterised himself as the politician brave enough to ‘make the hard choices’ required to fulfil that imperative.

But as I have argued before, this belief that what George did and continues to do on cuts is an undeniable necessity is a product of the events of the recent past, rather than some immutable idea that the nation will forever hold. The most significant part of Iain Duncan Smith’s resignation letter is the following:
“I am unable to watch passively whilst certain policies are enacted in order to meet the fiscal self-imposed restraints that I believe are more and more perceived as distinctly political rather than in the national economic interest.”

So a plea to political journalists and commentators. Forget the spin that this resignation is all about the EU referendum (which, like all good spin, has an element of truth) and focus on this sentence. The idea that with his cuts George was and is only doing what had and has to be done is crumbling, and you do not want to be the last to notice. Start holding our government to account, not just for benefits cuts but also for the damage caused by flooding, and above all for the dire performance of the UK economy relative to the past.


14 comments:

  1. Flood defences are public money financed tricks to boost the price of property built as a speculation on known flood plains.

    The speculation is to buy for a low price land known to be on a flood swamp, build it densely, and then use the distress of the next flood on the dense dwellings to make those who have not speculated on flood plain land pay for making it into dry land with very expensive dykes and their ongoing maintenance.

    But electorally it could make all the difference if the flood plain speculators were swing voters in marginal seats.

    After all making huge property capital gains at the expense of others is the very essence of what UK politics is about.

    ReplyDelete
    Replies
    1. This comment is completely insensitive the distress caused by flooding. Many of the flooded properties were in older parts of towns but New or old the damage and hassle hits residents and local businesses, not just speculators. There are better ways of dealing with property speculation than ignoring flood risks.

      I suggest you visit one of the towns hit by flooding and try reading your comment aloud In a public square.

      Delete
    2. "Many of the flooded properties were in older parts of towns"

      Do the Tories care about that? No.

      "damage and hassle hits residents and local businesses, not just speculators."

      Indeed, but they are not marginal voters. That is the point of my comment.

      Delete
  2. Sky News this lunchtime had a report from Cumbria saying that the area remains in need of bridges and that other flood damage has not been remedied in time for the start of the tourist season for the Lake District.

    I also listened to the BBC's John Pienaar this morning say he thought that Osborne's budget was politically shrewd and he, Pienaar, couldn't understand why it had had the political effect of seeing some Tory MPs in revolt on disability spending and then the Duncan-Smith resignation.

    Pienaar went onto my list of BBC political journalists to be sacked about six years ago and he's still on it.

    ReplyDelete
  3. Talk of fiscal "self" flagellation remains taboo. For now, anyway. Obviously self meaning anyone but the self-servatives.
    #macromedia

    ReplyDelete
  4. Absolutely. And it would help if the Labour Party, instead of reinforcing the govt as household metaphor by continuing to talk about the importance of eliminating the deficit and living within our means by balancing the current budget, instead started to educate the public about the sectoral balances and how in a country running a trade deficit, aiming for govt surplus means increasing private debt.

    ReplyDelete
    Replies
    1. "I am unable to watch passively whilst certain policies are enacted in order to meet the fiscal self-imposed restraints that I believe are more and more perceived as distinctly political rather than in the national economic interest". (IDS).

      I couldn't put it better myself. Osborne is operating a Dickensian version of Gold Standard economics. The Gold Standard ceased to exist, finally, in 1971. That is how far out of date this government is. The budget deficit and the accumulated budget deficits, known as the national debt, are irrelevant at times like these. The debt to GDP ratio is also meaningless.

      The whole of the government's, so called, national debt; is Pound for Pound equivalent to the non-government sectors savings. So if you want to reduce the national debt, send all your Gilts; NS&I savings bonds and cash notes, wherever you are saving / holding on to them, back to the Treasury.

      Fortunately, you are not going to do that. Even worse for Osbo', every time he spends his own money (creates new fiscal assets) into the non-government sector, every day; you buggers don't let Osbo' get it back in taxes and reduce his "in year" deficit, because you don't spend enough of it. You keep saving it, for rainy days and the chance a P45 will turn up in your household. Mind you, compared to the Japanese we are spendthrifts.

      Osborne is a far greater threat to the UK economy than Brexit. It is doubtful that either the Conservative or Labour Party, has anyone, who knows how to use a fiat currency system as a tool, to maximise the use of both labour and capital resources.

      We need some new politics, preferably consisting of system design engineers and fiat currency accountants.

      Delete
  5. When you ask why Osborne does not attract the scorn and derision he deserves, I would add 'yet'. It will come and perhaps sooner than commentators think. His status as heir apparent to Cameron is already fragile.

    In the many analyses of the last election, it has not been recognised that the post-war British political cycle is typically longer than the electoral cycle: it seems to take 2-3 Parliaments before the electorate is ready for change. The victory that seems to contradict this was Heath's in 1970 but that notoriously led to 'being in government but not in power' which I read as confirming that the election result had not reflected a deep change in public opinion.

    Incoming governments can always blame predecessors for problems but there comes a point at which voters start to feel that the new government has been around for long enough to start taking responsibility. The exact timing of this depends on both events and politics and is hard to predict. Certainly tax credits and now PIPs have exposed a growing resistance of austerity as it starts to bite into the core of the social insurance system.

    If the Tories continue to tear themselves apart over Europe and Labour can demonstrate some discipline and focus, we could indeed have a Corby government in 2020.

    ReplyDelete
    Replies
    1. Agreed with you right up to the last 4 words! I certainly feel there is not much point on calling on certain sections of the media to do anything very different from what they have always done. It's is up to Labour to present their case with such strength, to make it well nye impossible for the media to spin their worst-the press like a potential winner, left or right- but they, Labour, are too vulnerable on many levels at present, and their lack of unity is a symptom, not the disease.

      Delete
    2. I think the aim should be the confidently present simple messages that resonate with the public, and which can then rise above the inevitable unfavourable spin. Like its time to invest in the future.

      Delete
  6. "Start holding our government to account. . . for the dire performance of the UK economy relative to the past."

    Sticking with the 'macro' theme, isn't this the complaint in every country in the West that plays by the rule-free global finance? The G7 countries collectively dominated the world economy up to the early 2000's with about two thirds of global output. But the economic centre of gravity continues to move east and now the G7 have less than half [and falling] of the output. In 'Debt and the Devil', Adair Turner recommends fixing the global political economy with effective rules.

    Interestingly, in accordance with this the top item on the G20's agenda this year [China chair] is multilateralism. Yet talk in the G7 is of simply more and more deregulation.

    ReplyDelete
  7. Simon

    Accepting your points that spending reductions are unnecessarily severe in current circumstances, and that the surplus rule is ill-conceived and unnecessarily restrictive over the longer term, do not those on the left inevitably look evasive if, given their views on the role of the state, they will not present the case for governments raising more revenues (and/or ceasing certain non-core activities)? The combination of high relative income elasticity for the kinds of service that governments are best placed to provide, and the relative price effect, means that this has to be confronted at some point, even if not now. What was objectionable about the budget was not just that the welfare cuts were unnecessary, but that even if one judged that now was the time for consolidation, it did not have to be done this way - which I think was what ID-S was also saying.

    ReplyDelete
    Replies
    1. John McDonnell believes “governments should not need to borrow to fund their day-to-day spending” (investment and emergency spending at the ZLB are outside this rule) and that Labour is “as interested in how Government earns money as much as how it spends money”. Both quotes from a recent speech that can be read in full at http://www.ibtimes.co.uk/john-mcdonnell-read-shadow-chancellors-fiscal-rule-speech-full-1548936.

      How extra revenue will be raised in still being discussed but some options are already visible, including reversal of income and capital tax cuts for high earners, improving the performance of HMRC in raising revenue from corporations, reviewing exemptions and other opportunities for tax avoidance, enforcing transparency on multinationals and new top bands for council tax. Spending policy will be discussed in the party but some cuts will be delivered, with Trident replacement an obvious candidate.

      So the left is not being evasive about this.

      Delete
  8. Having watched IDS being interviewed yesterday by Andrew Marr (and having met him personally some years ago) I am quite he sure he is being straight about his reasons for resigning. Yes the Brexit issue will have helped to alienate him from Cameron and Osborne and perhaps made his decision easier.

    ReplyDelete

Unfortunately because of spam with embedded links (which then flag up warnings about the whole site on some browsers), I have to personally moderate all comments. As a result, your comment may not appear for some time.