Saturday, 23 March 2013

The economic and moral vacuum of Ed Miliband's politics

According to today’s interview in The Times, Ed Miliband probably thinks he’s had a good week. After all, he converted the leader of the Liberal Democrats to press regulation and as a result got David Cameron to surrender as well. Then it became abundantly clear from the Budget that George Osborne’s approach isn’t delivering economic growth or fiscal discipline that remotely represents what he has said. This was cue for Ed Miliband’s “We told you so” barely concealed glee on the economy, that being the now clichéd “Tories cut too far too fast”, which is the single dominant message from Labour since the election – that the solution to a budget deficit is to oppose all spending cuts. Plain politically driven Opposition, as vapid as ever. 

Today Ed Miliband spoke at the annual Labour Party conference recycling the same old message, the claim that what has been called austerity, has strangled the economy. Meanwhile, he has churned out the same so-called answers, that higher taxes on those on highest incomes and taxes on wealth, offset by a cut in tax on consumption (which would be many times greater in reduced revenue than the tax increases), will deliver the sort of boost needed. The view that borrowing more for the state to build more state housing will reduce the deficit. Labour wants more people living in homes owned by the state. If that was the answer to prosperity, then the former Soviet bloc would have thrived. If massive capital spending saved economies, Japan would be booming, as the country is awash with bridges, roads, airports and railway lines that are grossly underutilised.  Yet Labour isn't promising to do anything of that either, except of course the cross-party totem of HS2.  

It wouldn’t be so bad if there wasn’t so much at stake, but there is. 

Public debt has gone up 38% since the coalition was elected and will be double that level by 2018. The coalition is essentially doing the bare minimum to avoid spooking the bond markets, assisted considerably by the money printing, euphemistically called QE, that is in part, monetising UK public debt, at a cost of a 3% haircut in people’s savings year on year (or 9% if you count the depreciation of the pound relative to the US$). Yes, don’t be shocked by Cyprus, for QE is doing the same, by stealth to bank deposits, and no major party opposes it. 

The private sector is sitting on piles of cash as security, and because of a lack of confidence in future growth. Cash that, when eventually it is spent, will unlock inflation and the inevitable monetary policy conundrum of whether to choke off the inflationary recovery with higher interest rates. However, wilful blindness to this is not confined to Miliband. 

However, his vision is one where the state restarts the economy by spending more so people spend more on consumption, by spending more on the commercially unsustainable “Green economy”. He happily embraces a UK economy where the state sucks up 50% of GDP, and talks of “supporting” families, businesses and every other group where he thinks there are swing voters. He preaches state dependence, state welfare and state corporatism. 

Ed Miliband offers absolutely nothing to change that, dismissing demands for what “he would cut” by saying “we don’t know what things will be like in 2015”. Well Ed, we do. At best, there will be a budget deficit of £100 billion to add to the public debt by then. We know the UK now has one of the worst budget deficits in the Western world. Ed might want to evade that fact, or he might think he can tax 1% of the population to fix it, but he can’t and that wont. He claims that if you “get people back to work” that will do it, but even if ALL jobseekers’ allowance and income top ups for the unemployed were eliminated, it would only save £13 billion a year. It’s exacerbated by his war on large businesses, his attack on energy companies, which charge customers more in green levies imposed by government than they charge to make a profit and which operate the most competitive energy market in Europe. Miliband ought to know, since the current system is the one he developed as Secretary of State for Energy. However, like his demand for another tax on the banking sector, it just shows his Marxist anti-big business credentials, with no regards at all for whether the taxes and regulations he wants will benefit the general public. At a time when there are concerns over a lack of new electricity generation capacity, his bashing of energy companies would accelerate an age of shortages. 

Miliband economics don’t add up. 

The moral vacuum is the class warfare that has infected, yes infected, the Labour rhetoric. Labour’s big message is that the Conservatives are the party of the rich, governing for the rich. It is pure Marxism from past generations, as it is just absurd to think that most people who are wealthy regard the state as a way to make more money. The message is “the Conservatives say they are trying to fix the economy, but they give tax cuts to their friends and deliberately target the poor to cut the deficit”. Yet conversely, Labour has opposed every attempt to eliminate welfare for the wealthy, including capping the total welfare anyone can receive to the average wage, and capping child benefit. Surely if the Conservatives wanted to help the rich, they would universalise benefits? 

Yet the moral abyss between Ed Miliband and reality is clearest here, and it is in the masterful use of Gramscian techniques of manipulation of language and discourse. It is riddled with shameless lies, but you know them already: 

 - “Tax cut for millionaires” to describe a drop in the tax rate for those earning over £150k;
 - “Bedroom tax” to describe the cut in housing benefit for individuals, couples or families in properties with spare bedrooms;
 - “Granny tax” to describe a one-year freeze in the tax free allowance for pensioners (instead of inflation adjusting it); 
- “swingeing cuts” to describe total cuts of just over 1% in two years in real terms. 

Yet none of that is quite so egregious as the denial of the fiscal bomb created by the previous Labour government. It was acknowledged by Alastair Darling, which was why Gordon Brown tried to fire him. It could be seen in public sector wage increases faster than that in the private sector, in the spread of middle class and universal welfare benefits. Had Labour won, it would have had to cut spending and raise taxes, now it is carefully spinning the lie that if it wins in 2015, it will have to clear up a mess created by the coalition. Labour wants to claim that it wouldn’t need to cut any spending at all or it would be “nicer” about it. It also has hitched its wagon to a war on taxpayers and tax avoidance, raising the vile vision that anyone obeying the complex and byzantine tax system, is immoral.  Ed Miliband even says keeping public sector pay rises to 1% per annum is "reprehensible", presumably he thinks taxpayers working in the private sector should continue to support greater pay rises in public sector workers than they get themselves.   Public sector workers will love him, but really how can any politician justify forcing the private sector to pay for public sector workers to get ever greater pay that they themselves get?

Fortunately, a sizeable proportion of the public are not stupid. They know Labour, including Ed and Ed, governed the country for 13 years, running budget deficits for most of that period. The initial lie that deficits were due to the one-off bailouts of banks, is lost now. Labour is relying on its core tribal vote of state sector employees and beneficiaries, and hoping to capture a broader set of middle class voters disappointed at the performance of the economy. 

Yet what does it offer them? Envy and disdain for those on higher incomes and demands to tax wealth, as well as income. A war on those minimising their tax bills legally, rather than a war on complex tax rules that benefit tax lawyers more than anyone. More regulation of energy companies, rather than efforts to boost supply. More council houses, and no efforts to ease up the socialist style planning system that places property rights at the mercy of the “people’s committees” in local authorities. 

Ed Miliband likes to think he has shaken off the “Red Ed” moniker, but his unwillingness to admit the last government overspent, his unwillingness to propose spending cuts, and his continue class warfare like attacks on “the rich” (a class he belongs to) and big business, are tiresome and not inspiring the middle English voters he needs to win an election. His best hope is that they’ll vote UKIP so he wins by default. The emptiness of his rhetoric and vision deserves more scrutiny.   He's a Labour leader for the unions, for public sector workers and beneficiaries. He wants to use the phrase "One Nation Labour" to be a unifier, but he is a divider.  His answer to fiscal incontinence is to deny it, and want more tax from those who impose the least burden on taxpayers.  

He is in fact a "Two Nation" Marxist - promoting "them" (the rich, excluding he and his comrades of course, as rich and privileged as they are) against "us" (the proletariat).

Old Labour tribalism, and it's the kind that could (and should) cost him an election.  

1 comment:

  1. There is only one solution to the UK's problem - it's called capitalism. And it doesn't cost another cent.

    * end welfare benefits, including National Insurance & other pensions
    * end all state funding to education
    * end the NHS

    Anyone who can read a balance sheet knows that the UK will have to do this sooner or later - and better sooner, when it will be easier to make the transition to a free economy.