Out of credit

Are lending institutions solely responsible for individuals getting into debt they struggle to, or cannot, repay?

I ask because the campaign to ‘End Legal Loan Sharking‘ – organised by Compass and supported in Parliament by, amongst others, Stella Creasy MP – seems to lay the blame primarily, if not wholly, at their door; borrowers themselves appear largely blameless. The language (‘spin’?) used by campaigners reinforces this view – borrowers are ‘exploited’ by ‘unscrupulous’ ‘sharks’.

The availability of easy credit does not mean borrowers have to use it, just as the availability of all manner of artery-clogging junk at the supermarket does not mean people have to eat it (and we rarely give sympathy to people who get fat because of their own greed).

It’s of course a legitimate concern that some low-income households finds themselves in spirals of debt, and right that elected officials should seek to remedy this.

But there are other households who have simply made bad decisions. And so ignoring the role of the individual in the equation is a major omission.

In the personal debt toolkit, caps on charges levied on payday loans might have their place (although I’m not personally convinced they would be effective). But where are the calls for better financial education?

Why are people, who for no obvious rational reason take on more debt than they can realistically afford, seen as victims? Do we really believe that they are forced, against their will, to sign up to legally binding credit agreements?* Why are those that lend solely to blame?**

The Left can’t and shouldn’t ignore the role of the individual and their decisions when it comes to personal debt – demand is just as important as supply. And no amount of regulation on lenders will stop some people making stupid decisions.

Maybe the End Legal Loansharking campaign is just symptomatic of a broader problem of debt in Britain – that none of us, really, likes to take personal responsibility for bad money management.

That is a rather ominous thought as we work out how to avoid another financial crisis.

Alex Baker is Secretary of the Young Fabians.

*Some might suggest that consumers are confused by the true cost of credit agreements they enter into, but one of the interesting aspects of payday credit is that the charges levied are arguably more transparent than for other forms of loan/credit agreement.

**As an example of the potential weaknesses of the arguments advanced by the End Legal Loan Sharking campaign, it is not particularly apparent why lenders would want the majority of people it lends to to be unable to repay – this is obviously an unsustainable and unprofitable business model. The question of fees levied on these charges then becomes trivial, as it is unlikely to be paid.

What are the Lib Dems for?

This morning, Danny Alexander repeated a line on BBC Radio 5 Live used by Vince Cable a few weeks ago:

“We didn’t win the election. We came third. We’re part of a coalition government. We’ve worked to ensure that as part of the discussions we’ve had that we’ve got a system that is fairer, more progressive.”

I’m not sure this will be a fruitful line for Liberal Democrat Ministers to use in respect of tuition fees, or any other difficult policy discussions they’ll have in the coming years*.

Firstly, it implies that, in the extreme, it is acceptable for two (or more) political parties to campaign on one set of policy proposals but – in the event of a hung Parliament – to ignore all of them in order to form a Government with a working majority. Is that really democratic?

Now if that isn’t what Alexander or Cable meant, then surely their position has to be that Liberal Democrat MPs will support policies on those areas where there is common agreement between the two coalition parties, and on any other issues/policy proposals they’ll abstain from voting or argue they should be left off the agenda for this Parliament.

But that’s not what they’re proposing on tuition fees. At the very least they’re proposing that Lib Dem ministers – the government bit of the Parliamentary party – votes one way, and the rest can do what they want. This would technically be consistent with the statement in the Coalition Agreement on fees:

“If the response of the Government to Lord Browne’s report is one that Liberal Democrats cannot accept, then arrangements will be made to enable Liberal Democrat MPs to abstain in any vote.”

However, it does invite the question: what are Liberal Democrat ministers for if they abandon their policy platform for Government office? Are they even technically Liberal Democrats?

It implies that the role of the Lib Dems in the Coalition is to (a) provide a working majority for the Conservatives and (b) make essentially Conservative proposals a bit fairer. That makes the Lib Dems look a bit pathetic really, and is contrary to the posturing of Nick Clegg and others about their role in the Coalition (see Clegg’s conference speech, for example).

Secondly, it weakens the positive argument FOR policies which were in their manifesto. In future, Lib Dems might well argue that policy X is right and was something that was in their manifesto at the last election for which they have a mandate. But it seems a fair response to say that it is irrelevant what policy proposals they had in their manifesto on the basis that they didn’t win the election – they came third.

They can’t have it both ways with respect to their manifesto.

The Lib Dems really need to work on the justification for this political car crash.

*More of this sort of stuff and the likelihood of the current Government lasting a full Parliament will probably reduce.

Alex Baker is Secretary of the Young Fabians.

Why David Lammy is wrong

In advance of this week’s vote on tuition fees, David Lammy has penned an article for the Guardian titled “The Oxford whitewash”, in which he basically accuses Oxford of institutional racism – it is, he argues, the university of the elitists in Government and “continues to recruit in the same image”. The tuition fee hike will only entrench that, he concludes.

There are several things wrong with David Lammy’s article, not least his questionable use of statistics – see here, here or here for example. But what most angers and worries me is that apparently serious Labour politicians continue to bemoan the symptoms of a deeper problem, rather than its root cause.

I’ll declare my interest early on – I went to Oxford. It’s not something I’m ashamed of – I worked hard at my local state-funded community college to get the grades, and even harder at the interviews to get the place.

While at the university, I helped on various access schemes including Sutton Trust summer schools and other outreach work. I tried to do my bit to encourage people with backgrounds like mine to believe that Oxford was a university for them, because I genuinely believe it is if you can get the grades and demonstrate potential to tutors.

But what struck me about the then 16 and 17 year olds I spoke to is that a worrying number of them had already made up their minds that Oxford and Cambridge were not the sort of universities people like them went to. Much of the outreach work I did was probably fruitless – not because of the best endeavours of the committed outreach staff at the university, but because those they targeted were beyond convincing of the merits of even applying.

Those experiences convinced me that while universities must do their bit to encourage applications, the real problem was that in schools like the one I went to there is a real poverty of aspiration. Kids aren’t necessarily encouraged to do their best, but to do enough to make league table statistics look a bit better (for example, I remember a lot of effort was spent trying to move kids on the C/D borderline at GCSE into the cherished A*-C grade). This isn’t a reflection on the teachers, of which there are many outstanding examples, but of the structure of the national curriculum system and the practical difficulties of making comprehensive education work.

It is easy for politicians to push the burden of outreach onto universities – it allows them to think less about policies to widen participation in primary and secondary schools, and gives them someone to blame when things don’t work out.

And it is easy for Labour politicians to play the elitist card, both about the current government and about Oxford and Cambridge.

But that won’t help change the problem Lammy identifies. The more Labour politicians bang on about elitism at Oxford and Cambridge – rather than do something useful like focus on the evident poverty of aspiration in state schools – the more likely talented young people from disadvantaged backgrounds will think that they’re not the sort of universities for people like them.

Instead Labour politicians should hold such universities up as the sort of institutions to which anybody should aspire; they should fight for a higher education system in which more universities develop world-leading specialisms; and they should advocate policies at all levels of education which are likely to result in higher volume of applications to world-leading universities (not just Oxford and Cambridge).

Labour should be the party that puts forward a positive vision for our higher education system, and the impact it can have on people’s lives. But instead the temptation to inverted snobbery is too great.

David Lammy is right to be concerned about the impacts of changes to the higher education system on those from disadvantaged backgrounds, but he is wrong to use lazy, worn arguments about elitism to make his point.

Alex Baker is Secretary of the Young Fabians.

Woolas-gate revisited: ‘us and them’

The whole Woolas affair has highlighted that Labour MPs can sometimes do stupid things – like, for instance, knowingly publishing false statements about your opponent to get elected. Equally as stupid has been the response of many Labour MPs in support of Woolas. Chief-amongst-idiots is Graham Stringer MP, who has been the public face of PLP support for Mr Woolas.

He said in an interview with John Pieenar on BBC 5Live last Tuesday:

“The court has come to one conclusion…Actually the court shouldn’t be interfering in the democratic process in this way anyway…And if they have done the position of the party should be to support Phil…Constituencies that are marginal in general elections are not Sunday school outings…candidates from all parties occasionally cross the lines in the heat of those elections…It’s not [a matter of] agreeing with every word [that Woolas published in his leaflet]…it’s recognizing that even if he crossed the line, the court should not have intervened…There are important democratic principles involved here.”

And there have been many similar misguided statements along these lines in recent days – that it is for electorates, not the judiciary to decide the result of democratic elections. See here and here for example.

There appear to me to be three strong objections to this view:

1. Firstly, is the outcome of an election in which candidates knowingly publish lies about their opponents to win truly democratic? Surely democracy is about more than a mathematical exercise? Democracy is about choice and true choice can only come when we have a reasonable expectation that electioneering is not based on falsehoods. The legitimacy of the democratic process is undermined if that choice is effectively removed from us.
2. Secondly, why should MPs be above the law? If legislation exists which prohibits certain conduct during electioneering, then it is right that MPs are subject to that law and its consequences (like being banned from being an MP for 3 years – the statutory punishment for illegal practices such as those the courts found Mr Woolas guilty of). I’m actually enraged by the thought that there are sitting MPs who believe they should not be subject to the laws applicable to everyone else. Mr Stringer appears to forget he works for the electorate, not the other way round.
3. Thirdly, it appears to be beyond the wit of Mr Stringer (and others) that the body which creates legislation is the legislature (i.e. MPs – that’s you Mr Stringer!). If Mr Stringer and the rest don’t like the legislation which was applied in the Woolas case, then they should – as others argue – try and repeal that legislation in the House of Commons.

Today we discovered Woolas’ appeal will likely hinge on how the phrase “personal character and conduct” was interpreted by the court in the context of this issue. What hasn’t been disputed – but we learnt in the original judgement – is that the material that Woolas published was knowingly false.

If Woolas wins, it will be a pyrrhic victory – he will have knowingly lied to get elected (and admitted it) but lied in such a way as to avoid falling foul of the technicalities of the law.

Hardly a great advertisement for Labour, or for our democracy.

Alex Baker is Secretary of the Young Fabians.

Woolas-gate

Today,  news of a fresh twist in the Phil Woolas affair: members of the Parliamentary Labour Party are furious at Harriet Harman for effectively disowning Woolas, irrespective of the outcome of a potential judicial review into the judgement of the special election court last week which declared his election void.

Moreover, some of them are raising a ‘fighting fund’ to help Woolas challenge the ruling.

I’m given to understand – and the news today seems to confirm it – that Phil Woolas is held in quite high regard amongst many of his (former?) PLP colleagues.  While I have no reason to doubt that Woolas is a good friend to many of them, I think the PLP are letting personal relationships cloud their political judgement.

• Firstly, the election court judgement (pages 39-41) is quite unequivocal in its assessment of the facts against what is a very high watermark to declare an illegal practice has been committed. Evidence uncovered by the court portrays quite underhand electoral tactics by Woolas’ team. For example:

“The Respondent’s diary and the email correspondence between members of the Respondent’s election team, including the Respondent, explain why the Respondent was willing to make statements in the truth of which he had no reasonable grounds to believe. By the last week of the campaign, after the Prime Minster’s confrontation with Mrs. Duffy, he was pessimistic as to his chances of success in his own election. “I can’t see Labour recovering from this nationally; we may come third. Locally we will be very lucky to hang on”. His agent, Mr. Fitzpatrick, was very pessimistic. “I am convinced that it’s game over.” Mr. Fitzpatrick’s assessment was that it was necessary to find a means of persuading the Tories in the constituency to vote for the Respondent. “If we can convince them that they are being used by the Moslems it may save him and the more we can damage Elwyn the easier it will be to stop the Tories from voting for him”. The Respondent and his election team were aware that some Muslims wished to cause the Respondent to lose his seat and, to that end, were persuading Muslims to vote for Petitioner. They in turn wished to persuade the “white folk” to vote for the Petitioner. To do so they had to get them “angry”. The chosen method or strategy was to suggest that there were Muslim extremists who advocated violence, in particular to the Respondent, and that the Petitioner was attempting to seek the support of such Muslims. This was, we consider, one of the methods by which it was hoped to “damage” the Petitioner.” (para 199)

• Secondly, Harriet Harman’s position is strategically sound. Irrespective of whether an appeal overturns the original judgement on a technicality, she is right to say that the public won’t accept the party backing politicians who appear to have lied to get elected. Moreover, the nuances of the grounds of Woolas’ appeal are likely to be lost on most of the public – the damage has already been done.
• Thirdly, a YouGov poll today suggests that the overwhelming majority of the public agree with the courts’ decision, and the breakdowns suggest the same is true of Labour respondents.
• Fourthly, it sends a very damaging message to the electorate when they start raising money to protect one of their own from the consequences of behaviour which is clearly indefensible. Surely politicians learnt a few PR lessons from the expenses affair?
• Finally, there is some debate over whether or not a judicial review is (a) permissible and (b) would have the effect of reinstating Woolas as an MP even if successful.

Woolas-gate is a sorry affair. Irrespective of their personal loyalties, Labour MPs should recognise the damage that has already been done, and that is unlikely to be healed by a prolonged legal action or PLP-infighting.

Turning on Harriet Harman won’t change these perceptions. Rather, it will confirm in the mind of members of the public the self-serving and removed nature of the ruling class. In some ways, the PLP are showing a high degree of political naivety in defending Woolas in this way.

Woolas’ election literature has already done enough damage. Labour MPs should avoid making it worse.

Alex Baker is New Media Officer of the Young Fabians.

In praise of the Browne report

It’s a rather geeky admission, but Higher Education funding was one of my favourite topics in undergraduate economics. It is a special sort of what is termed a “constrained optimisation” problem – you have finite public resources, and are trying to balance equity and efficiency considerations (in addition to other public policy goals). Trying to find an optimal design is a challenge.

Back in 2004, I was in the rather awkward position of disagreeing with most of the university Labour club about proposals to reform the higher eduction funding model to introduce deferred, variable fees. Indeed, I think I argued at the time that it didn’t go far enough to achieve the paradigm economic design of a higher education funding model (no real interest rate on loans and an arbitrary cap on fees, for example).

So I was rather impressed with the Browne report, which sets out an evolutionary step in higher education funding given the 2004 Act. Aside from setting out clearly the case for further reform (building on other reports, such as the 1997 Dearing report), there are some very sensible suggestions for change:

• More help for part time students. As someone who studied part-time at Birkbeck college, I am fully aware of the financial pressures the current funding regime places on part-time students. Deferring fees for part-time students will ensure that anybody, whatever their personal circumstances or age, is able to acquire a university education.
• More onus on secondary schools to provide decent information to students. I remember from outreach work I did while at Oxford University that the balance of responsibility for widening participation fell almost entirely on universities. Yet, by the time kids are 16/17, it is likely that preferences and prejudices about the sorts of institutions or courses they should do are set. It is right that more emphasis is placed on schools to provide meaningful advice, supported by broad quantitative and qualitative information about institutions (including survey information from current students).
• An end to universal subsidies on loan interest. Real rates of interest for those who can afford them will mean, ceteris paribus, government support will go further and be better targeted where it can make most impact.
• Freedom for institutions to genuinely compete, which should benefit students through a greater focus on quality. At present, institutions face penalties for failing to adhere to government set limits on admissions. Browne recommends government loosely manage overall aggregate funding limits by setting minimum attainment thresholds students must pass before being eligible for funding. But, thereafter, students get real choice on where to study. A key benefit to this system is that universities are likely to be far more responsive to student need, instead of providing the bare minimum teaching to qualify for government funding.
• A more progressive repayment design. Those who can afford to pay more will do, and the thresholds at which payments kick in will increase.

The reaction to the Browne report – particularly on the left – was disappointing. There is a lot of good material in the document and its recommendation should be taken seriously.

The alternatives to the current system (or modifications of it) seem to fail the progressive test. All would result in greater rationing of opportunity than would occur under Browne’s proposals – especially a fully-funded higher education system (although the debate appears to have moved on since 1997 and 2004). A true graduate tax would break the link between the cost of higher education and benefit to the individual. Moreover, like Hopi Sen, I’m not clear why a graduate tax would provide any less of a disincentive to get a university education than a fixed repayment amount. Which is why Ed Miliband’s comments during the Labour leadership campaign about a graduate tax being preferable (echoed by all of the candidates, I’ll add) were distinctly unwise.

Modified versions of the graduate tax (like those proposed by the NUS), with term limits and higher repayment thresholds, start to look increasingly like the current model except a short-term funding gap would constrain supply of places in the medium-term. The debate then collapses into technical disagreement, rather than a true policy disagreement.

Our efforts should instead be focused on areas in which there is scope to get things wrong: levels of government support; access and widening participation; managing debt aversion; determining which courses meet public policy goals; measuring quality; and avoiding market failure. In addition, more needs to be said about Further Education and how best to support those who choose vocational courses.

When listening to the shrill voices last week who condemned the Browne report for failing the progressive test (many of whom have probably not even read it), I was reminded of comments Charles Clarke made about higher education funding when he was Secretary of State – he said (and I paraphrase) that if he wanted to be truly progressive, he would spend the higher education budget entirely on primary and pre-school education.

He has a point. But given we’re in a world of mixed higher education funding, the Browne report is actually a decent set of proposals that should help increase access and quality but in an affordable and sustainable way.

Further reading:

• I’d recommend reading Pat McFadden’s post on Labour Uncut.

Osborne’s apparent lack of understanding of the National Accounts

Perversely, today’s surprise GDP figures have provided meat to all sides. Labour claims it was their action while in government that helped grow the economy 1.1% in the second quarter compared to the first. The Coalition claim the figures validate their approach of expedited deficit reduction, pointing to the fact that the majority of the 1.1% growth (around 1 percentage point of it) came from the private sector.

AFP reports Osborne as saying:

“Today’s figures show the private sector contributing all but 0.1 percent of the growth in the second quarter, and put beyond doubt that it was right to begin acting on the deficit now.

“While I am cautiously optimistic about the path for the economy, the job is not yet done.

“The priority now is to implement the budget policies which support rebalancing and help ensure … sustained growth.”

This is, of course, a bit misleading. GDP is calculated on a value-add basis – the difference between the value of a produced good or service, and the value of the materials used to create it.

What this means in practice is that the stated government contribution to GDP doesn’t accurately reflect government expenditure. For example, the government could buy £1bn of baked beans and fill the House of Parliament with them, and it would add very little to the government share of GDP. The value add would end up elsewhere – in consumer expenditure or exports/imports, for example.

So quite a lot of Government expenditure doesn’t show up in the government consumption share of GDP – this is the difference between what the Government produces on a value-add basis, and the total income it derives from taxation and borrowing (a lot of government expenditure is just a transfer from one group to another).

This is quite an important point in the context of savage cuts to government department budgets. When the government scales back expenditure, the feed-back effects are more broadly felt – we can expect wider consumption and capital investment to fall because some business and consumers rely on government transferring tax revenues to them (for which they may or may not provide services).

And if you scale back government expenditure by enough, you can start having material effects on non-Government components of GDP because of the way the national accounts are assembled. This may mean lower or negative GDP growth.

Osborne’s analysis of these results therefore seems a little naïve, or deliberately misleading.

How best to solve gender imbalance in the workplace?

A new paper by researchers at the University of Innsbruck suggests that from a young age – three years old – boys are more likely than girls to enter into competitive behaviour, and that this observed behaviour persists through childhood into adolescence. The paper is consistent with earlier studies which find a persistent and large gender gap in the willingness to compete amongst adults, but its conclusions are more instructive – willingness to compete may be less likely to be contingent on nurture, rather than nature, than we had previously thought.

Willingness to engage in competitive behaviour is important in the context of labour markets, where competition is likely to be higher (in general) for high-profile or well-remunerated jobs. This research might have important considerations from a policy perspective when designing programmes to promote competition in the workplace. Namely, when is the right time to intervene?

It might be possible to have greater impacts on outcomes later in life by targeting intervention from a very early age (pre-three years old) to boost the willingness to compete amongst females. However, this implies that the impact of nature and nurture are more balanced before the age of three (as there are no studies into competitive behaviour at such a young age, it is difficult to know).

Of course, if willingness to compete is largely innate, then it may not matter too much at what stage any interventions occur and, on balance, programmes are likely to have greater impacts if they focus on reducing competitiveness in the labour market to encourage wider participation amongst females.

On a broader, normative point – if we accept there are differences in willingness to compete given gender, then I’m not sure which course of action is more preferable – encouraging females to be more competitive, or making labour markets less competitive? Thoughts welcome…

The government is right to address the pensions issue

Firstly, let’s separate out two different issues relating to pensions – the pension entitlement (essentially a benefit), and public sector pensions (part of a contract between the government and its employees). The Coalition government has made proposals relating to both this week, which is likely to confuse the issue of how specific measures might decrease deficit spending/government liabilities.

Both are Pay As You Go (PAYG) schemes – where current payments are funded from the contributions of those who currently work – and both will become more difficult to fund in future years, largely for demographic reasons.

The are several problems for governments looking to tackle the issue of pensions – for example, people often don’t know the true value of their pension entitlement as it relates to a period a long way in the future; and older people are disproportionately vocal on the issue because it affects them currently, but any concessions we make to existing older generations makes it harder to rectify for future generations.

On State Pension Entitlement, the medium-term choice facing government is harsh – restrict pension entitlement to a shorter period of people’s lives (by raising the age at which the entitlement kicks in), or spread the benefits more thinly (i.e. pay less to each pensioner each week). It really is as stark as that, and the problem will get worse as the baby-boomers start retiring in this decade. (PwC did a good report on the impact to public sector debt if we don’t address this structural problem – and it would make the financial crisis look small by comparison). It is understandable in the context of better healthcare and the fact people are more active to a later stage in life that delaying the start of the benefit, rather than cutting the value of the benefit to each individual, is the preferred route.

I always thought Labour could and should have done more whilst in power to address the impending pensions crisis. I’m glad that the current government is speeding up measures announced by Labour, and thinking of going further. Linking the age at which state pensions kick in to average life expectancy – a measure which the current government is looking at – is a bold move, but one which I would support. Such a link reduces the downside financial risk to government/taxpayers of having to fund pensions over an ever increasing period of time, and ensures what limited resources are available to pensioners go further. Aligning the retirement ages of men and women is right and we should also make it easier for older people to carry on working, if they want to.

Of course, some of the problems which may occur in future in relation to state pension affordability will be directly consequence of measures they propose to introduce – in particular, the cap on non-EU economic immigrants will reduce the UK’s ability to afford pensions, for example by preserving the replacement ratio (roughly the ratio of the working age population to pensioners). This is another reason why that particular barmy proposal ought to be opposed.

As young people, it is important we contribute to the debate. After all, we are the generations which will have to fund baby boomer pension entitlements as well as face reduced entitlements ourselves. The short-sightedness (or selfishness?) of older generations isn’t a mistake we should repeat. When you add in funding our university education, environmental problems, and the massive transfer of wealth to them via housing stock, I think we are entitled to feel short-changed but it is important to address structural issues in our pension funding to avoid selling future generations down the river. (See David Willet’s book The Pinch for more on some of these intergenerational travesties).

Public sector pensions, on the other hand, are an altogether different beast.

There are a lot of arguments thrown around about public sector pensions – that they are lavish, ’gold-plated’, or act as compensation for employees who accept lower current wages than would be payable in the private sector. The truth, of course, is a little more complex.

In my own experience I know of people who have left private sector jobs to joint the public sector and who have secured higher pay, better pension entitlement and have to work a lot less for it. There is some evidence to suggest that the pay gap between private and public sector jobs has narrowed considerably over the last ten or so years, with a concurrent fall in public sector productivity. However, I think the worst excesses are mostly confined to management level positions, rather than more junior and frontline positions (nurses, firefighters etc). We should be careful not to assume that all public sector workers have it good.

In the context of a reduced number of current contributors to state pension funds (i.e. a smaller government workforce) as well as the demographic burdens of promises to older generations, it is understandable that the government want to limit the liability to the Treasury (i.e. the ‘unfunded’ bit of current pension payments). However, addressing this issue will be much harder for them than the state pension issue for a number of reasons:

• pensions are contractual entitlements, which would make it hard for the government to change already committed entitlements (which means they are unlikely to reduce current pension costs);
• changing pension benefits for new employees (for example, switching to average salary schemes) would not have a direct benefit to the public finances until those workers retire – possibly several decades;
• trade unions are likely to oppose any material changes to existing workers, and possibly new workers.

Making existing members of pensions schemes increase their payments into the scheme would be challenging, but probably the least worse option. Likewise, it might be possible to reduce the entitlement existing members accrue in future. Both are likely to meet strong opposition.

The tribal response to the appointment of John Hutton to chair a review into into public sector pensions was incredibly disappointing, and trivialises a very serious issue for the UK. It is likely we will need cross-party support for any measures to make public sector pensions affordable. Labour should be at the heart of those debates and contributing to the development of policy on those issues. Far from being deriding him for being a “traitor”, Labour should welcome Hutton’s appointment and make the most of his involvement.

After all, we can’t afford not to.

The Emergency Botch-it

Last night the Young Fabians and Progress jointly-hosted an event on the Emergency Budget. Rachel Reeves MP, Kitty Ussher, Councillor Claire Kober (leader of Haringey Council) and Young Fabian Chair David Chaplin were all on a panel, chaired by Stephen Twigg MP.

Despite coming only hours after the Budget speeches ended, there was a good, detailed discussion.

• Rachel Reeves MP highlighted the false comparison between the Greek and Canadian economies and the UK, suggesting that the measures in yesterday’s budget ran the risk of a double-dip recession. She didn’t believe the budget presented a positive vision for what the economy would look like in future, focusing far too much on government expenditure – she believed it was false to ignore growth as one of the main pillars of deficit reduction. She argued for a balanced, fair economic recovery.
• Cllr Claire Kober spoke about the difficulties the new housing benefits regime would cause not just for her own Borough, but also other in London where property prices are high. She also said that her own council were looking at ways of creating their own Future Jobs Fund following the abolition of the central government programme as an “efficiency saving”, highlighting the wider indirect benefits of such programmes – for instance, reductions in crime.
• Kitty Ussher, now Chief Economist at Demos, highlighted the ideological nature of the cuts in today’s budget as well as the Osborne’s evasive tactics in relation to the OBR’s revised forecasts which appear to show that, as a direct consequence of the budget measures, growth would be lower and unemployment higher – she pointed out that cuts in benefits and a rise in VAT would impact consumer spending, a key determinant of growth in the UK economy.



• David Chaplin said it was the first time he had experienced a Budget speech where cuts were ideologically driven, and that many other young people would be experiencing the same for the first time too. He highlighted measures which he thought would affect young people in the future, particularly a reduction in the spending on skills which he said was vital to social mobility. He also argued that Labour needed to change the way it responded to the economic narrative being written by the Coalition government or risk being out of power for a generation – he called on the Labour leadership candidates to be more specific about the sorts of economic measures they would advocate were they to win, arguing that we couldn’t oppose every single measure implemented by the Government without offering a credible alternative.

The debate from the floor was good – particular policies were highlighted as pernicious, such as the changes to disability living allowances and housing benefit – but there was pragmatism in the room. The panel and the floor recognised that had Labour been in government then they too would have to have made difficult decisions, and also that Labour didn’t get everything right while in Government (there was particular discussion about improving the housing benefit system).

Nonetheless, as Rachel Reeve eloquently argued, we need to tackle the Coalition head-on on the argument that the cuts presented yesterday are “unavoidable” – growth is a key way of reducing the deficit and the measures announced will slow trend growth – and even where we do cut, there is a fair way to do it and then there was yesterday’s budget.

Perhaps surprisingly, there was little discussion about the Liberal Democrat’s role in the Budget measures.

Overall, the consensus at yesterday’s event was that Osborne’s announcement wasn’t a budget, it was a botch-it.

(As a footnote, I’ll add that it is reassuring we have elected officials like Rachel in Parliament and Claire in Local Government – we need more like them. It is also a shame that Kitty felt she’d have more impact outside of Westminster, than as part of it.)

A podcast of the event will be published on the Young Fabian website later.