Winter Fuel Payment

Like many people, I am struggling to understand why the new government chose Winter Fuel Payment as an issue to make a stand. The difficult headlines are enduring; opposition to the decision is coming in from the right (more pensioners vote - and more vote Conservative), other opposition parties, many Labour MPs, as well as those to the left. However, the contribution that cutting the fuel payment makes to the budget deficit is relatively small. It will be even smaller if all of the pensioners who are still eligible for it via pension credit actually get the applications in. Why risk it?

One explanation of this I have heard is that the government wants to convey to the financial markets at home and abroad that it is serious about keeping the finances under control and filling in the £22 billion shortfall, which many (but not all) analyses believe is there. The problem for Labour is that it looks like they are making vulnerable people pay rather than those with more capacity to do so.

The problem with universal benefits is obvious. The point about Mick Jagger (or insert the name of any millionaire over retirement age) getting a winter fuel payment is a fair one. There is a significant cohort of pensioners who have good workplace pensions, have paid off their mortgage, and have better disposable incomes than many younger people struggling to buy homes or pay their rent. It is a legitimate question as to whether it is the best use of money to give more affluent retired people a fuel payment at all.

The difficulty in solving this is that means-testing benefits is often complicated and costly, not always saving as much as is hoped. Furthermore, any system that requires an application to be made (and these are always now online) has a number of risks - awareness, a certain stigma attached to applying for help, and not all older people are very confident with online applications.

Here's a suggestion: replace the one-off universal payment with a £300 supplement to the state pension that is in addition to any inflation increases, making it taxable. It doesn't take away all of Mick's £300, but it would at least claw-back money from the better off who will be paying tax on it - and for some that will be at the higher rate. It also uses existing systems, rather than requiring an fresh application to be made. For those without additional means, I think the pension is still below the threshold for income tax, so those with the lowest incomes would continue to receive the full amount with no further paperwork to complete. 

There may be other unforeseen problems with that, but I can't help but feel that it would have been a better and much less unpopular method to transition away from the blanket payment.

Politics has gone strange

This week has witnessed some strange goings-on in British politics. Brexit is, of course, dominating the political agenda for the UK government. Rivalries, splits and dissatisfaction have come out into the open and the Prime Minister seems to have held on to her job primarily because no-one really wants to contemplate the alternative.

For the first time that I can remember, supporters of Brexit on the right of politics started openly talking about the need for government spending to increase to prepare for a possible hard Brexit or even no deal. This was noteworthy for two reasons:

(a) Brexit was portrayed by its advocates as financially beneficial to the UK during the referendum and its aftermath. We know the £350 million per week was bogus, but there has been a continued narrative that Brexit would be good for Britain. However, it was already starting to look costly, as the devaluation of the pound had its impact on the costs of procurement for the NHS and the MoD. Now there is an admission that it will cost.

(b) Those on the political right are not usually very keen on increasing public spending. Indeed they are usually looking for cuts in spending to fund tax cuts. But in this case, even people like John Redwood were ready to spend big, and complaining that Hammond wasn't.

Meanwhile the Chancellor of the Exchequer was sticking to the cautious Treasury financial forecasts and stated his reluctance to spend on resources that shouldn't be necessary, were a tariff-free deal successfully negotiated.

This had a remarkable effect. The right-wing Brexit supporting tabloid press and the right of the Conservative party openly criticised their own Chancellor of the Exchequer for not being prepared to spend more public money. This was fuelled, of course, by the fact the Hammond was a strong supporter of remaining in the EU in the referendum, and they suspect he's still wanting to be a saboteur. For those of us who are not Conservatives, it's a bewildering and extraordinary spectacle.

It's obviously left Mr Hammond somewhat rattled. He's reported today as referring to EU negotiators as "the enemy", but later tweeted that it was a poor choice of words and was much more conciliatory.

None of this has been very edifying, and the clock continues to tick towards March 2019. As I have openly said all along, I would much prefer that we stayed in the EU, and that is what I would vote for again, given the opportunity. However, if we must leave, then chaos helps no-one. The poorest and most vulnerable members of our society need the best deal we can get in the circumstances, for they will pay the price if it all goes badly wrong. The signs are not promising. I hope I'm mistaken.

The Budget: a few thoughts in the aftermath

I don't judge budgets by the "what's in it for me?" criterion that most commentators tend to apply. There's this rather worthy-sounding streak in me that says they should be judged on what they do for the nation, and especially those in most need. It's also quite complex to assess the impact as it's being delivered.

George Osborne's latest budget has left us with plenty to think about. Beforehand, he passed on the cost of the free TV licence for over-75s to the BBC. That was a welfare top-up by Gordon Brown to win favour with pensioners At the time, the money would arguably have been better spent on more targeted help for those who really needed it. As my (now 87 yr old) dad said, it was very nice, but he could afford his licence quite easily. Now the cost is carried by the BBC, and by implication licence fee payers. Any attempt to remove or reduce the benefit will now generate ill-feeling for the BBC, not George Osborne. He has effectively delegated a liability and potential blame.

This tendency to offload things went through the Budget itself. Costs were passed on to businesses, and the big surprise was a new living wage (in fact a rebrand of the minimum wage, set below the level of what was previously known as the living wage) This passes on responsibility for lifting people out of poverty from government to business. At one level, that seems entirely reasonable. The tax credit regime may well have enabled businesses to get away with low levels of pay. But this budget sought to offload the responsibility for what will become about £4bn relief to business, whilst £12bn was cut from welfare (including 'in-work' benefits) not necessarily from people who would benefit from a minimum wage increase.

That brings us to the tax credit cuts. They seem to have had a peculiarly adverse effect on clergy. One friend of mine has 3 school-age children, and his wife has chosen not to take paid employment in order to give voluntary time in the community. He took advice and found he will lose £207 per month. That's a lot to readjust your domestic budget for. Other colleagues report annual cuts of £1700, £1500 and £1300. According to the BBC online calculator, we'll lose about £890. The changes in minimum wage won't make any difference and the changes in tax threshold are already taken into account.

Now it's true that the majority of clergy don't go into the ministry for the money - you'd be a mug to do so, and most of us accept that a call to ministry means sacrifice. But clergy don't run the risk of being made homeless, as the house is provided (although that's a problem at retirement!). For most of us, it will mean being a bit more careful with the heating, using comparison sites for every major purchase or utility, shopping around at budget stores and supermarkets and taking more modest holidays. Clergy are also fortunate enough to have some charitable grants we can apply for to help with finance in times of need. It all makes things a bit harder work, and bit more austere, but we won't be homeless.

What really worries me is that if it's bad for clergy, then what are the proposed cuts going to do to others who are struggling to pay their mortgages and other bills. These changes could mean families losing their homes, and all the problems of homelessness that follow. If the calculations are right, then some of the poorer families will be absolutely clobbered by this budget. Foodbanks have already seen a surge in demand in the cuts so far; I fear we will see much more in the weeks and months to come.

So is it really worth putting people's homes at risk to enable £1,000,000 to be left in a will, tax free? Were there no alternatives? Were the money markets really so worried that we had to cut back so quickly? Is it really such a pressing necessity to get a budget surplus? It hasn't been for most of the last century.

So thanks, Mr Osborne. I'm sure I'll find ways to save £75 per month from our domestic budget - we will cope, but don't try to fool us that we will be better off as a result of your budget. We won't.

I Don't Understand Economics Pt. 4

A few years ago, I posted parts 1, 2 and 3, so I thought it was time for another, as the news has had quite a bit to say about the deficit recently.

The Tories accused Labour of having £21 billion of plans that were not funded. Labour responded by saying the Tories were misrepresenting their commitments and doing the sums on the wrong basis. That's all the usual party political mud-slinging that we expect as an election approaches. Likewise, the Tories have planned tax cuts for the better-off, which are 'funded' from other savings. That left Labour asking the question as to why that money can't be used for the whole of society, rather than benefiting the few.

Putting the debate another way, the Tory attack reveals an assumption that there is a pot of government money, and when it's used up, that's it. The Labour reply is based on the same 'pot' assumption, but that there is enough money in the pot after all. Both parties show that they have a particular view of the deficit.

They both need to be challenged by the fact that there is no 'pot' of money fixed by any absolute standards. Governments have to manage the gap between their income and their spending, and in the majority of recent years, the UK has spent more than it got in (a deficit). In other words, governments nearly always have to borrow to supplement what gets put in the national piggy bank from tax etc. (Incidentally, a lot of recent borrowing has been done quite cheaply by historic standards.) The running total of all these debts (and occasional surpluses) is the national debt.

This makes sense. We know that if our government said it would only spend what it got in during 2015, many essential services would collapse, and the economy would plunge into deep recession, putting many more out of work and doing untold damage to society and the economy. It's also true that if the government didn't address the deficit at all, then confidence would be lost, and it would have a very bad effect on the pound and also our country's ability to borrow money.

Somewhere between those two extremes there is a significant amount of room for manoeuvre. In other words, the amount of money in the government's 'pot' is a set of decisions, not an absolute figure defined by some unassailable authority sitting somewhere else.

It's the result of a series of judgments, such as:

• how much tax can be gathered, and where from?
• how much should be spent, and on what?
• how big a deficit is the system prepared to take?

And, of course, even when you have done all the calculations and plans, sometimes things work out worse than forecast (as they have for George Osborn) or sometimes better than forecast (as they did for Gordon Brown in some of his years at 11, Downing Street).

So it seems to me that the kinds of questions we should be asking over the next few weeks are these:

• why have you decided on cutting/increasing/freezing _________ tax (fill in the blank)
• why have you decided on cutting/increasing/freezing spending on _____________?
• why have you decided that our country can/can't afford more/less deficit in this tax year?

It's actually quite disappointing that there are few significant voices challenging the current assumptions. Labour are committed to cuts as well, albeit a bit gentler than the Tories. Obviously the deficit needs to come down, but I wish more were asking whether our society's present needs don't justify taking a longer view, and giving more time for balance to be achieved.

Fairmined gold

It's great to see that the Fairtrade movement has now managed to get a standard for gold, called Fairmined. As well as offering a fair price to small scale miners, the certification requires that the extraction of the gold is done without toxic chemicals (such as cyanide and mercury) and with a regard for the environment.

It is estimated that 100 million people depend on small scale mining, but they find it hard to get a fair price on the open market.

The good news is that the royal jewellers, Garrard, have already indicated that they wish to use Bolivian Fairmined gold.

Anti-Apartheid Movement logo

It's not the first time that the sourcing of gold has been used as a way of achieving greater justice. In 1991, we bought a wedding ring for me from Traidcraft, who offered rings made entirely free from South African gold. The negotiations for transition from white minority government to democracy were underway, and this was a small gesture to maintain pressure. It also  gave other gold producers a place in a market dominated by South Africa. As well as the usual hallmarks, my ring has the anti-apartheid logo stamped into the metal. A reminder of very different times

Thankfully that era is over, but a fair deal for small, responsible producers and the campaign to stop "dirty mining" are still greatly needed.

Related articles

• Fairtrade hallmark sets the gold standard (guardian.co.uk)
• Fairtrade gold in pictures (telegraph.co.uk)
• Fairtrade gold to protect miners (independent.co.uk)

A Very Quiet Protest

The cuts in public spending pose threats to many aspects of life at the moment. Today will be a day of action to protest against the possibility that up to 400 libraries might close. It's all very polite - as you would expect from the library service. Read-ins, storytelling sessions, and a library where everyone has been asked to turn up and borrow their maximum allowance to empty the shelves are some of the eye-catchingly discreet protests.

In the midst of the flashmob book-reading and other protests, there's a serious point. Libraries have had to change as technology, access to information and culture moves on. But libraries give people access to a huge resource, and they are places where people find new possibilities. There is strong evidence that children, in particular, benefit greatly from access to public libraries.

Whisper it, if you must, but save our libraries.

Related articles

• The fight against library closures: will you be protesting? (guardian.co.uk)
• Save Our Libraries day: map your protest via Twitter (guardian.co.uk)
• Libraries protest day to be held (bbc.co.uk)

Child Benefit and the rich

My immediate reaction to the news that child benefit was to be cut for those on the higher tax rate is very positive. It does seem odd to be giving benefits to people who can't possibly need them in the same way as those on lower incomes. Universal benefits can just end up subsidising extra recreational activities for middle-class kids, which can't be priority in the present climate. As I understand it, however, there will simply be a cut-off, so that when you hit the higher tax rate, it stops.

Not being in a position to do the maths properly, I had wondered whether it would make more sense to make child benefit taxable, but I guess that may yet come!

It isn't decided yet

And that's only the football. I'm looking forward to the last home league match at Christie Park on Saturday. Morecambe play promotion rivals Aldershot and one point would be enough to guarantee the Shrimps make the League 1 play-offs, which is quite an achievement for a club still fairly new to the League. It's great that the final match will have a cup-final feel. Morecambe are one of three Lancashire seaside towns with serious promotion hopes. Blackpool play Forest for a chance of Premiership football next season, and a bit further down the football hierarchy, Fleetwood are in the Blue Square North play-off final. Sadly Lancaster City FC lost their final to Colwyn Bay, having finished over 20 points ahead of them in the League.

Given the season has been full of surprises (who's have guessed Spurs 4th and Fulham in a European final?) I wouldn't want to make any firm predictions, but wouldn't it be great for the Shrimps to start their first season at the new stadium in League 1? I hope they make it.

This morning I also heard an item on the potential for the great British seaside to have a good season with the recession (not to mention volcanic ash) limiting people's ambitions to travel abroad. The reporter was in Skegness, which was the nearest seaside to where I grew up in Nottingham. When I was a kid, I remember Skeggy and Mablethorpe were full of Nottingham people, the shops sold the Nottingham Evening Post and the pubs sold Nottingham beer. In the same way, I gather that Morecambe was the resort of choice for some northern cities and towns, especially Bradford. Hopefully this trend for domestic holidays might bring new money, jobs and prosperity here this year.

I don't understand economics Pt. 3

The third in a very occasional series. (click here for part 1, part 2) There's a lot of hot air around concerning a hung/balanced parliament and the economic uncertainty that is feared as a consequence. One thing's for sure: the Murdoch press and Daily Mail have made instability much more likely by talking it up. A sort of 'second-strike' revenge if they fail to get the Conservatives elected, I suppose. If it's not "the Sun wot done it", then they're talking us all down to show what a rotten lot the others are.

Anyway, one of the key points of the argument is that "business leaders" (whoever they may be) are concerned that a clear deficit reduction plan is in place - whether spending cuts, tax rises or some combination of the two. What no-one seems to be addressing is that the deficit, originally expected to be £178 bn was expected to be £167bn by the time of the last Budget. On top of that, major companies seem to be rather more profitable than was expected - BP and, surprisingly Lloyds Banking Group. That means extra tax receipts and, potentially a profit for the exchequer when Lloyds is eventually returned to the private sector.

Ok, I haven't got a degree in economics (but neither had Alastair Darling or George Osborne last time I looked), but those figures mean that at the very least we're in an £11bn better position than we thought (and also in following years). It may even prove to be slightly better than that. It's still a huge task, but the graph seems to be going in the right direction.

So even if there are a few days delay in sorting out exactly who does what job in the next Parliament, there's no reason for the roof to fall in. We just need the papers who are so keen on patriotic headlines and "backing Britain" to show a bit of genuine support for their country and to stop sowing seeds of doubt in the minds of investors and markets.

Related articles by Zemanta

• Lloyds: Black is the colour of spring (bbc.co.uk)
• Lloyds Banking Group announces return to profit (newstatesman.com)

I Don't Understand Economics pt. 2

There's been a row for some time about the fact that the police weren't given they pay rise the independent commission proposed. (click here for Q & A). The main argument was that it was part of controlling inflation to keep government spending pegged back.

Wind forwards to today. Harriet Harman on the Today Programme on the BBC gave an interview where she said that the government were not only compensating people for the withdrawal of the 10% tax rate, but also giving a much-needed boost to the economy with the £2.7 billion rebate recently announced.

So if £2.7 billion isn't going to set the economy on fire, why would a much smaller sum honouring police pay? It would certainly have saved a lot of hassle!

I don't understand economics

There's been a lot of economics on the radio recently:

1. Fear of house prices falling
2. The pound dropping against the Euro
3. Shortage of mortgages

Now I remember a few months ago, it was:

1. Fear of house price rises triggering inflation
2. A high pound inhibiting exports and flooding us with cheap imports
3. Economic growth being fuelled by ever higher levels of debt.

Some contradiction there?