One of the emerging themes of the current
crisis is the way in which the Tories are abandoning past positions one after
another as reality shows that they were never as necessary as had been claimed.
In his first budget last week, the Chancellor
abandoned all pretence that there was ever any necessity to plan for a balanced
budget within a specified time scale – or, indeed, ever. It was always an ideological choice.
In his second budget yesterday, he
abandoned the claim that ‘there is no money’, demonstrating instead that there’s
as much money as we need. (And it’s a
pretty safe prediction that he’ll do that on an even greater scale in his third
budget, which will probably be delivered within a week when the flaws in yesterday's become more obvious.)
He also abandoned another ideological pretence
that was used to rubbish Labour’s nationalisation plans in the recent election,
even if he didn’t put it in such blunt terms.
There is a great deal wrong with his plans to make £330 billion
available for loans to businesses, even if there were a thought-through process
for applying, which there isn’t. (Prof
Richard Murphy explains in detail here
why it would be illegal under company law and the Insolvency Act for companies to
borrow money when they are already, or are about to become, technically
insolvent.) The Chancellor claims that
this money makes no difference to the government’s total debt because the
expenditure is balanced in the accounts by an ‘asset’ in the form of debt to
the government by the companies which are expected to repay any sums loaned. The wonders of double-entry book-keeping! They argued during the election that a Labour
government could not afford to nationalise any large companies (and I leave to
one side here the question of whether that is actually desirable; I’m purely looking
at the political economics) because it would increase the national debt. In truth, of course, any ‘debt’ incurred to
buy companies would be matched by an ‘asset’ and would therefore make no
difference to the overall total debt – as the Tories have now effectively
admitted. The main difference between
the two is that Labour’s plans would have involved real, tangible assets to
balance the expenditure, whilst the Tories’ plans involve a whole pile of notional
debt, much of which would never be repaid.
And then there’s the appeal, entirely
correct and justifiable, by the government for shoppers to be less selfish and
to think of others, especially the most vulnerable. But this is the party which – aided and
abetted by ‘New’ Labour, it should be said – has been telling us for the last four
decades that ‘the markets’ will solve all problems, that individual actions in
pursuit of individual interests are what drive the economy, and that, dare I
say it, ‘there is no such thing as society’.
It turns out that, in a crisis, co-operation and collectivism make for a
more resilient and kinder society than competition and individualism. Who'd have guessed it?
I suspect that current events are
something after which ‘normal’ will look very different from what ‘normal’
looked like just a few short weeks ago.
The same is true of ideology – as long as we all remember the lessons
learnt. It might be a crisis which is
exposing the failure of an ideology, but it was failing anyway, just less
obviously. We can hope to minimise the
number of human fatalities caused by coronavirus but let no-one grieve for the ideology
to which it is also delivering a series of, hopefully fatal, blows.
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5 comments:
"Debt" an emotive word if there ever was one ! You rightly point out the flaws and indeed some businesses are already backing off the idea of taking on loans when their ability to survive is questionable. Many of these loans might never be repaid, much like the student loans that are dished out annually to students whose prospects of earning serious money ( to repay said loans) is very slim. This episode is of course on a much bigger scale so the write off will need to be much bigger too.
Ideology is clearly in flux and must look very confusing, but if you remember the first duty of HMG is Defence of the Realm you can see why Little “Risky” Sunack has leashed the virus of debit on generations to come.
HMG does not have the resources to maintain law and order, as the HM Police Force and HMG defence forces are not big enough, and as Britain is a multi-cultural society and unity of response can be very different; if people are out on the streets as they have no money or food to sustain life that is a scenario that would threaten the Realm, therefor finding a Brother Corbyn`s Money Tree or perhaps a forest ,was an no-brainer.
What will be interesting to see, what new structures will come out of this little difficulty, that will eat away at civil liberties.
Spirit,
I share your concern about the eating away at civil liberties; I don't really trust a government which 'temporariliy' assumes draconian powers to relinquish them later. I don't agree with your comment about "Sunack has leashed the virus of debit on generations to come" though. I assume that you mean 'debt', but we need to remember that the government has, in effect, borrowed the money from itself, by instructing the Bank of England (which it owns) to buy government bonds directly from the government. As long as doing that doesn't cause inflation (and it won't in current circumstances), it can go on doing that. When it 'repays' the debt in the future, it will be repaying itself as well - this has nothing to do with future generations being burdened. It can 'repay' itself as quickly or as slowly as it likes - it is, in the end, nothing but an accounting trick which magics money up when required and destroys it again when it's no longer needed.
Who said auto-check was the best thing ever?!
On the debt you are technically correct, but when you put that amount on your books it does not come without any consequences, the devaluation of the currency and on future credit rating, are issues that get into the real economy.
On the Bill itself, sad to note that the Tory David Davies proposed a sunset clause which was not accepted or had any support from opposition parties.
"...the devaluation of the currency and on future credit rating, are issues that get into the real economy." It ain't necessarily so, for a host of reasons. But here's one big reason for starters, which is pertinent in the current circumstances - devaluation of a currency only means anything in relation to either a) inflation of prices or b) comparison with other currencies. When demand is lower than supply (which is actually the current situation, despite the apparent shortages of specific goods in shops) there is no need to worry too much about inflation, and when all major economies are doing much the same thing the currencies can't all devalue against each other.
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