Housing Benefit Reform: A Further Squeeze on Britain’s Young People

Stephen Donnan 

Image © Kymberly Janisch

As a man of 24 who has experienced homelessness first hand, you will forgive me if I find George Osborne’s sustained and prolonged attack on the young and vulnerable insufferably despicable. I had decided not to watch the Tory Party conference, as my blood pressure is rather high enough without the added smug grin of Osborne and his Conservative party cronies adding to my systolic pressure. However I was unfortunate enough to learn, as had been rumoured, that the current Government is planning to axe housing benefit for those under the age of 25, because in Cameron’s World, everyone gets along great with their non-deceased, wealthy parents who live just round the corner in a five bedroom house.

Wrong.
For me, and I suspect for many others my age, this is one of the many issues that has proven to me over and over again that the Conservative Party are out of touch to the point of delusional malice. A cut to the housing benefit for under 25′s flies directly in the face of the previous Labour Government’s National Youth Homelessness scheme to provide temporary housing to homeless young people in England, a move that was welcomed by charities such as YMCA England and Centrepoint back in 2007. The statistics back then demonstrated that around a third of people who had been declared homeless were under the age of 25, and around a quarter of those young people were homeless because their parents were no longer able or willing to accommodate them.

Five years on and the current administration is planning to push those same people to the brink by removing the one safety net that many young people feel stands between them and living on the streets. When I was homeless for a short time it was not because I wanted ‘more independence’ as Cameron and his Eaton chums would try to depict, nor was it because I fancied the student life or more freedom from my parents.

I was voluntarily homeless because I had no choice, the relationship between my parents and I had broken down so irrevocably due to my sexuality that I felt that running away at the age of 20 was my only option. I was lucky enough to have a few friends that had taken me in for a time, but there were nights that I spent in the January cold in Belfast thinking that my life was over. Eventually, and painfully, I managed to repair the broken relationship with my family and I am grateful that I now have a roof over my head.   Read more of this post

The Irrelevance of the Lords Reform Bill

Eddie Hodgson 

Image © UK Parliament

Reform of the House of Lords has been taking up much of the headlines in the newspapers over the last few days. It must be the silly season when such an irrelevant subject grabs the attention of the leader writers.

Most of the (mainly) pro Tory newspapers are accusing the Lib Dems of blackmailing the Conservative Party by threatening to oppose boundary changes (that favour the Tories) if they oppose Nick Clegg’s proposals for Lords reform.

It is hard to see why anyone should care about this. The only significant facts in the proposals are that:

  • The aim is to have 300 members of the reformed House of Lords
  • The term of office for each member will be 3 parliamentary terms (15 years)
  • Members will be paid a salary

The reasons why this proposal is unnecessary and irrelevant are:

  • Assuming a salary of £75,000 per year, this will cost the taxpayer £22.5m a year. The Government should be looking at better ways to spend this considerable sum of money.
  • The present system is not perfect but it ‘ain’t broke’ so there is no need to fix it.
  • The proposed reforms would mean simply that parties nominate individuals who would vote along party lines, hardly much change from having a second House of Commons. We already have a parliament voted in along party lines and we don’t need another one.
  • The proposals are merely Nick Clegg’s attempt to show that he is trying to get Lib Dem policy enacted. This is one of the dregs left in the Lib Dem manifesto, the most important parts of the manifesto now either abandoned by Clegg for a taste of power (such as abolition of tuition fees) and others having been roundly rejected by the electorate (AV).

The main reason, however that the proposals are irrelevant is that there are much more urgent priorities for this Government than reforming the Lords.

People generally care about four main things: health, jobs, homes and friends. The Government has failed the electorate on at least two of these issues, jobs and homes. Ask any young person and they will tell you that all they want is an opportunity to work, not an internship or work experience stacking shelves at Tesco, but a real job. Usually one can rely on the market to create jobs but the market is essentially self interested and will not create opportunity unless it is in the market’s interest.

Governments on the other hand exist to carry out a duty towards the electorate. The duty is to take responsibility, where the market won’t, to ensure that the people have the opportunity to find work. That means creating jobs or incentivising the market to create opportunities. With jobs people become bigger consumers and the market itself benefits. People can afford to take out mortgages or pay rent again. But this won`t happen while the market is in ‘stall’ mode.  Read more of this post

British Banking: A Culture Shock

James Nickerson 

Image © ell brown

Last week saw arguably the most turbulent time for banks since the financial crisis hit. The blame for the financial crisis, which has lasted since 2008, has rested squarely on the shoulders of the bankers; yet most will agree that we all lived beyond our means, and must take some responsibility ourselves. However, what last week illustrated is that the banks, in which we began to place our trust again, are wholly lacking in integrity.

It started with the ‘deceitful manipulation’ of the interbank interest rate (Libor) and Euro interbank interest rate (Euribor) between 2005 and 2009. It has led to the mis-selling of specialist insurance that was meant to protect businesses against rising interest rates. Something has gone ‘very wrong’ with banking culture, and this needs to change.

We all know that banks are private institutions, which are run for profit, yet reasonably expect them to uphold certain moral values, such as remaining honest. What the trusting borrowers believed they were getting involved in was the protection against rising interest rates. What actually happened was that the banks failed to clarify what these hedges meant, failed to check if the customer understood the agreements and, fundamentally, the whole situation has reflected an ethos of selling for private gain rather than what the businesses needed. There has been the intended mis-selling of complex loans such as ‘Interest Rate Savings Agreements’, ‘Collars’ and ‘Caps and floors’ in order to hedge funds. When the interest rates fell to record lows after the recession hit, a large amount of businesses found themselves with massive debt payments, many of which cannot be afforded.

Compensation is now being offered for the estimated 28,000 products that have been mis-sold by the four major banks (RBS, Barclays, Lloyds Tsb and HSBC). The Barclays chairman, Marcus Agius, has also stepped down with each of the Chief Executives refusing to take their respective bonuses. This will appear to most of us, however, as merely a way to escape the contempt surrounding them. It will also strike most of us as too little too late: the banks may well compensate those who have been injured by their actions, but the unjust behaviour and greed driven intentions were there all the same.

Bob Diamond, Chief executive of Barclays, has finally resigned today. Given that Barclays has been fined £290m, indicating the scale of deceit, one MP was ‘amazed’ at how unaware Diamond claims to have been. Even if he was not directly involved, his gross negligence of immoral behaviour within a bank for which he is paid an enormous salary to run must entail punishment. His letter to Barclays’ staff seems to be a mere way to appease public and media outrage, but does not unshackle him from his responsibility. In fact, George Osborne, Chancellor, claims that this is the ‘first step towards a new culture of responsibility’.  Read more of this post

Moving to the Right?: Cameron to Consider Vote on EU

Francis Pitt 

Image © Nick Atkins Photography

The British Prime Minister, David Cameron has stated that he is prepared to consider a vote on Britain’s relationship with the European Union, adding that an in/out referendum is not what the majority of the British public “most wanted”. Britain’s relationship with its partners across the channel has always been complex and Cameron now wants to add yet another chapter to this book.

Before I carry on, I must clarify my own position on the European Union. I am a passionate supporter of Britain in Europe and studied the European Union for my undergraduate degree. I have also enjoyed studying in Europe as part of the European Union’s Erasmus Exchange Programme. For me, Britain should be integrating further into the union, and not turning its back on our European partners.

Britain’s history with Europe has been on a bumpy road, with Britain acting as the stroppy child sitting in the back seat of the car, constantly asking the drivers (France and Germany) “are we there yet?” When the forerunner of the European Union, the European Coal and Steel Community, was founded, Europe was still recovering from the aftermath of World War Two and Britain refused to join the club.  It was not until 1973 when Britain was finally admitted to the community in its first expansion, along with Denmark and Ireland. But almost from the start, the question of whether the UK should remain in Europe came to the fore when the 1975 referendum on continued membership took place. However, back then the British public was far more pro-European than today, as 67% of the voters backed Britain’s continued membership. The following 37 years have seen Britain refuse to give up the rebate, join the single currency (although this might be a blessing in disguise in hindsight), and have recently decided to use their veto.

Britain has managed to get to this position by constantly dragging their feet over practically every EU decision or treaty. In 2011, Cameron vetoed joining a new European treaty on fiscal discipline, in order to protect the City. The move left Britain more isolated in Europe and even drew criticism from the Archbishop of CanterburyRead more of this post

The PM Himself is a Product of a “Something for Nothing” Culture

Nicholas Pentney 

Image © DFID

In a recent speech, Prime Minister David Cameron spoke of his desire to overhaul the benefit system and to see an end to the “something for nothing” culture. The speech likely forms part of a political strategy that aims to tap into widespread public resentment at the current benefit system and to, as The Guardian described it: “protect those at the top smarting from Nadine Dorries’s ‘posh boy’ charge.”

As a fierce advocate of the concept of working-class dignity, I understand the resentment felt towards those who exploit the welfare state but we must be wary of an attack on these people when it comes from someone like David Cameron. The PM’s speech failed to make any mention of the scroungers at the other end of the class spectrum and omitted the fact that he himself is the product of a something for nothing culture.

There can be little doubt that Cameron works hard as our PM or that he worked to get where he is today. However, being born into immense wealth meant that he has enjoyed huge advantages that helped him immensely to get to the position he holds today. What did Cameron do to deserve these benefits? The answer is of course nothing; he merely had the good fortune to be born into that particular family. It is from that nothing that Cameron has been able to get something, but Cameron never passes judgement on himself or his mates who benefit from the inherited-wealth system and he doesn’t discuss the need to reform it.

If Cameron had been born into an impoverished family and grew up on an inner-city estate, would he have had the opportunity to work for Tim Rathborne MP or study at Eton and Oxford? Would he not feel the status frustration that comes with being subscribed to goals that his economic circumstances won’t ever allow him to achieve? Would he find himself at odds with the inherited-wealth benefit system that favours only those at the other end of the class spectrum? Believing this to be an unjust state of affairs, would he have perhaps a few less qualms about signing on to the state’s welfare system himself?  Read more of this post

2012 Reith Lecture: No More Heroes Anymore

John Curran 

Image © The Aspen Institute

Professor Niall Ferguson is giving this year`s BBC Reith Lecture. The initial talk examined the impact of the Glorious Revolution of 1688; an event leading to a constitutional settlement grounded in the notion of an inclusive pluralist state underpinned by the rule of law.

Professor Ferguson unapologetically makes the case for the Whig view of history seeing 1688 as the catalyst for political and economic freedom which saw Britain ultimately become the Workshop of the World. It is argued that the revolution of 1688 ended arbitrary rule resulting in the establishment of “inclusive rather than extractive institutions”. This he argues becomes an institutional template for sound governance exported around the world (a benevolent aspect of British imperialism) which according to Ferguson is key to understanding why the West advanced.

Western decline on the other hand is a result of “institutional malaise” leading to the unacceptable sovereign debt in Greece, Italy, Ireland, UK and USA.  Ferguson argues we must move beyond the jaded debate about austerity versus stimulus and instead concentrate on the issue at the heart of the problem the breach of a social covenant that Edmund Burke described as the “partnership between the generations”.  What is now required is new transparent forms of public accountancy which will identify the intergenerational impact of fiscal policy.

It is the breach of Burke`s covenant that allowed previous generations to spend the inheritance of those not yet born, lumbering individuals in the future with massive debt, huge tax bills or alternatively cuts in public expenditure resulting from the profligacy of the past.

Professor Ferguson`s speech has a right wing Republican flavour especially when he observes that young Americans should if they “knew what was good for them” vote for the Tea Party. But he argues younger voters do not cast their ballots in a self serving direction because they are duped into supporting an agenda that is shaped by an older politically savvy generation.  Read more of this post

Will we see Clegg’s new economic tone? Expect more of the same

Tom Bailey 

Image © Liberal Democrats

For those who believe that the coalition has profoundly misjudged its economic strategy, good news would appear to have come in the form of Nick Clegg promising a ‘massive amplification’ of state investment. This would appear to suggest support for the measures that Labour has been advocating for some time. Credit easing and state investment of the funds that bond purchasers are begging the UK to take could give a boost to the economy which we have just heard has sunk into a double dip recession. When Cameron’s economic record has struggled such that Eurozone leaders are telling him where to take his advice on account of their record on growth exceeding Britain’s, something somewhere has evidently gone desperately wrong. Ed Balls’s August 2010 Bloomberg speech seems vindicated by every new piece of economic news. His argument that the country needed a ‘credible and medium-term plan to reduce the deficit and to reduce our level of national debt, but only once growth is fully secured and over a markedly longer period than George Osborne is currently planning’, seems borne out by events. As Jonathan Freedland wrote, ‘Ed Balls is steadily acquiring the rare right to deploy one of the most powerful sentences in politics: I told you so.’ Robert Skidelsky, Keynes’ biographer, has unsurprisingly welcomed Clegg’s statement, stating that ‘drop austerity, go for growth and the debt will start to come down’. However, unfortunately, I think there is good cause to be sceptical of any major economic policy change. This is not just because I don’t trust Nick ‘No More Broken Promises, I pledge to vote against any increase in fees’ Clegg. Nor is it because he cannot leverage such a change in strategy from the Conservatives (he does not have Cable’s nuclear option)  on account of being the minor partner in a coalition government from which he cannot escape to any realistic prospect of electoral success given his party’s abysmal poll ratings. Instead, the reason for why change seems so unlikely is both how the coalition set out its plan and how the economic crash was defined. For the coalition government, this is a problem of path dependency. Having defined their rapid deficit reduction as essential to economic recovery, a change would be an enormous admission of failure for both political parties.

To change economic policy would demonstrate that the Lib Dems made the wrong judgement in signing up to the Conservative’s pace of deficit reduction. When the coalition was formed, the Lib Dems performed a volte-face on economic strategy. Their manifesto had stated that ‘if spending is cut too soon, it would undermine the much-needed recovery and cost jobs. We will base the timing of cuts on an objective assessment of economic conditions, not political dogma.’ Whilst before the election they had supported a ‘one-year economic stimulus’ through to 2011, by mid-May 2010 Clegg and Cable had become advocates of immediate austerity. In 2009, Cable wrote that ‘the apocalyptic cries of “national bankruptcy” are unhelpful scaremongering’. By June 2010, he had of course come to support rapid deficit reduction, explaining his change was made because he had been ‘persuaded that early action is absolutely necessary’. Lib Dems fell over themselves supporting Osborne’s claim that ‘Labour brought Britain to the edge of bankruptcy’, statements for which he was justly slapped down by the Treasury Select Committee. All this was further justified with recourse to that moronic note left by Liam Byrne. It would be a major U-turn to take a more Keynesian approach to economic policy.

A change in strategy would also be incredibly difficult because it would undermine the narrative that the Conservatives have propagated about the economic crash. The choice was made by the Conservatives to present the Great Recession commencing in 2008 as primarily a crisis of state debt rather than as a crisis triggered by enormous systemic financial sector failures that then resulted in the large deficit. This choice was likely made because this seemed the best way to attack Labour. A mess resulting from overspending by a Labour government is a much easier message for a Conservative party leader to make than a more nuanced recognition that state finances had been more prudent than the private sectors’ before the crash despite the treasury’s dependence on unsustainable finance sector revenues. Cameron and Osborne certainly never trumpeted any foresight of the crash nor offered any serious alternative economic policy paradigm before the crash. In 2007 they pledged to match Labour spending plans while in 2006 Osborne wrote that Ireland, even more of a credit fuelled unsustainable boom than the UK, represented ‘a shining example of the art of the possible in long-term economic policymaking’. Having made the choice then to define the crisis as one of state debt, the Conservatives have limited their options now. They are the original proponents of the view now repeated in every right wing paper that state spending cannot contribute to recovery. Simon Heffer’s statement, that ‘borrowing money, or printing more of it, would simply hasten Britain’s progress to Greek-style bankruptcy and financial implosion, wrecking living standards of Britons for a generation, and quite possibly longer’, could have come out of Cameron, Cable or Clegg’s lips at any point in the last two years. It is far easier for the coalition to muddle through blaming the eurozone, the weather or the Royal Wedding for the economic slowdown rather than their measures. A serious change of economic policy would go against everything that they had said since 2009 and would be an admission of the failure of plan A. Read more of this post

Politicians should be wary of vested interests in the economic debate

Tom Bailey

Image © Alan Chan

On Monday the 2020 Tax Commission final report was published. Other websites have picked over the bizarre elements, the major problems and highlighted certain strengths better than I could. This blog will not discuss all of the report itself but instead use it to raise a broader point. These reports are productions by groups of self-interest and must be treated as such. Think tanks such as the Taxpayer’s Alliance often lack transparency about funding. I can’t find such information on their website and emailing to ask who funds them has not led to a reply (nor did it for George Monbiot). Polly Toynbee wrote a good piece a while back that articulated the problems of that think tank in particular. The TPA supports the self-interest of large business owners and leaders in lower taxes, regardless of the consequent costs for everyone else. What is more annoying is that they are sought whilst many intelligent economists without such evident self interest are ignored. Business leaders and their stooge think tanks seem to be given a preferential place in all economic debates.

This is a cross-party phenomenon that has been going on for far too long. Sure, business support is all well and good, but it should not be the be-all and end-all in economic debates. Tony Blair wrote in his memoirs that he knew Labour had lost the 2010 general election when business came out in support of the Conservatives. He wrote that once you lose chief executives, ‘you lose more than a few votes. You lose your economic credibility. And a sprinkling of academic economists, however distinguished, won’t make up the difference.’ (681) Given Blair’s obsession with courting business support, it seems it was more than just another cheap shot against Gordon Brown. The Conservatives have had a more established deference to business. Appeal to business authority was one tactic used in 2010 by Osborne trying to make the case for deeper austerity than Labour favoured. He said in his Mais Lecture in 2010 that his view was supported by ‘many leading business figures and crucially by international investors’. Both reveal an the misplaced confidence that credibility is primarily derived from business, a theme constantly repeated by journalists. For instance, in January the ever critical Dan Hodges welcomed Labour’s declaration that they could not reverse cuts as a demonstration that ‘Labour “flat-earthers”, who argued for no retreat in the face of the coalition’s austerity measures, or an electorate that views them as a necessary evil, have been routed.’ It has been a common critique of Labour despite the slowdown since the election of the Conservatives in 2010. Personally, I think credibility should be what works rather than by default with what business vested interests support. Business lined up behind Tory levels of austerity arguing that it would support recovery. As we have now gone into a double dip (or if the figures are off, are still flat lining at best), can we be a little more sceptical about their wisdom on all economic matters?

Read more of this post

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