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Fixing the economy

It is no secret that the government depends largely on taxes in order to finance its management of the country.  Even if things were massively stripped back as is proposed by William Hague and his colleagues there would still be a need for large amounts of money just for simple administration and political process, let alone welfare, health, ordefence.  At present there are a number of problems with trying to raise funds through taxation.  Firstly there are a huge number of people who pay hardly any taxes at all.  I do not mean the wealthy and large businesses who can afford to employ clever accountants and tax lawyers.  I am referring to those who earn so little that their wages are not high enough for them to pay tax, or only a little tax if any.  For those at this poorer end of society the idea of paying taxes is simply not feasible because if they did have taxes imposed on them they simply wouldn’t be able to afford to pay them.  For those who are a little better off and earn enough to become a target for the tax collectors the payment of taxes is a great weight to bear; the demands of their lifestyles, living in areas where they can get higher paid work or the expense of commuting mean that they are barely better off than those who do not earn enough to pay taxes.

The idea of fraudulent benefit claimants has been used as an explanation for the lack of money in public coffers, as has the idea of families that have lived from generation to generation wholly dependent on benefits.  It has been stated over and over again that these actually represent a tiny minority of those who are supported by the welfare system.  In reality it is largely ordinary working people who are being helped out by the welfare system.  One figure I recently read showed that the majority of housing benefit claims brought out during a one year period had been claimed by families which would have been considered to be middle class by most people.  During the time when I was lecturing in London a large part of my income was from tax credits rather than my wages.  My employer tried to claim that I was self employed in order that I should also have to pay taxes out of my wage.  Luckily one of the subjects on which I lectured was employment law otherwise I would be bankrupt at the moment.  Despite this a very English tendency towards fair play might have prevented me taking advantage of this if my employer had not also fully agreed with the principles on which I relied to argue my position.

Unfortunately it seems the vast majority of us are in a similar position, child benefits, disability payments, income support between jobs and housing benefit when rents are simply too high.  On the one hand we fear our country’s economy collapsing but on the other hand almost all of us are reliant on our country’s generosity to maintain our meager standard of living.  We want spending on education, welfare, health, etc cut, but at the same time we need spending on these things to be increased in order to maintain the living standards that we consider to be adequate, or in some cases, humane.

While we pay taxes from our earnings we receive them back in various payouts.  Our real tax payments are probably far less in many cases once our income is adjusted in this way.  So we have a government reliant on taxes, yet the vast majority of people pay little or no tax, even receiving benefits as tax in reverse.  This does not work for anyone.  It does not work for those wealthy enough as to be paying large taxes and receiving no benefits.  It does not work for those receiving a demeaning pittance that barely allows them to eat and live.  It does  not work for those who are working furiously hard to keep themselves above water.  It does not work for companies who are relying on the public to have money to buy their goods.

It might seem somewhat contrary to say it works for no one.  After all there is plainly a lot of wealth around.  It must work for someone.  There are of course individuals who will be doing well out of any situation but well is always relative according to the context within which these individuals find themselves.  The feudal system of medieval England appeared to benefit those who lived in large castles with tapestries on the wall and roaring fires over which they roasted whole cows.  However, that is only in the context of the era.  It might be argued that they could not have had the same level of luxury in medieval England as we have in the modern day but progress is not just the invention of technological devices, progress is also political and social reform.  If those feudal lords had cared less for their own personal comfort and had instead tried to increase the educational standards of their serfs then things would have been different.  If they had focussed on trying to make the lives of their serfs better then they would have had a healthierwork forcewho would have been better able to produce more wealth from the land around them.  Admittedly we didn’trealisein those days that education and health could reap benefits broad enough to change the world but today we have the advantage of knowing that these things can change societies.  We have the benefit of having seen it happen.  Yet we still fail to put great enough investment in because we have given over our whole societies to a fatally flawed faith in the wisdom of money makers acting in their own interest.

The free market is one simple idea.  One idea that could have come from the head on one man, yet an idea on which most of humankind is relying to achieve a better future for us all.  It is an idea that works, at least it works in certain contexts and certain environments with certain variables.  Similarlymarxismworks in certain contexts and environments with certain variables.  Religion works in certain contexts and environments with certain variables.  Rather unfairly they are popularly derided now while the free market ideal is theflavourof the day.  In their time they were ideas that were very useful for those in power to build and maintain their power.  This is yet another parallel they share with the free market.  The lesson to be learned is that circumstances change.  The great thing about government is that regulation deals with changing circumstance.  The ludicrous thing about government is that overwhelming faith in the idea of the free market leads to the idea that regulation should be reduced as much as possible.

If the free market was a cathedral then regulation would be the buttresses.  Any builder can tell you that the ideaof building a cathedral of greater purity and majesty to tower above all other cathedrals is not going to be helped by removing the buttresses that marr its purity.  You may end up with smoother greater expanses on the walls but only for so long as the walls remain standing before they fall.  Nowadays we are so used to the idea of buttresses on a cathedral that we consider them to be part of the beauty and part of the design but when they were first conceived they were a compromise to hold the buildings up against gravity, arguably the will of God trying to pull them down.  Regulation might be seen as petty bureaucracy getting in the way of business but over time regulation becomes part of the beauty of the entire system.  Nostalgic old lawyers would tell you this straight away.  They still have so much nostalgia for the past that they continue to use Latin terms and dress in 17th century wigs.

So despite a lifelong disdain for those who are usually in political power I find myself infavourof regulations.  The tendency when wealth is not guided by regulation is that it ends up being hoarded.  Thomas Piketty has told us how the wealthy families of several hundred years ago barely needed to get up in the morning to see their wealth grow at a faster rate than inflation.  Those who were wise enough to buy extrahouses thirty years ago are now living comfortable lives on the rents of whomever lives within those houses now, while people now can’t afford to buy one house.  Them that’s got shall get, them that’s not shall lose, so the bible says and it still is news.

This brings me back to my starting position.  Governments need money.  Money comes from taxes.  It is therefore vital that as many peopleas possible can afford to pay as much tax as possible.  Ideally as many people as possible should be earning so much money that they can afford to throw it at civic projects with joyful abandon.  Instead we have a situation where those who have proven themselves to be most adept through nature and nurture at clinging to and amassing wealth, are the ones who are expected to pay the most tax.  In the case of companies we also have rules written into the Company Act 2006 which state they should do whatever they can to keep as much of their wealth as possible by whatever means possible within the law.  Although I am certain that last condition is more implied than stated.  Unfortunately for everyone loopholes are legal.  If they weren’t legal then they wouldn’t be loopholes, they would be crimes.

Naturally the closing of tax loopholes is important but more important is the encouragement of greater levels of employment and security for the greater number of people.  I hardly think that the most utilitarian view would be that the greatest good of societylayin ensuring that the largest companies could gather as much power and wealth as possible while thousands ate fromfoodbanksand fell into worse health while all the hospitals were being closed down.  The more people who are working, the more people can afford to home themselves, feed themselves, educate themselves, etc,etc.  Irritatingly I find myself sounding very much like any politician at this point.  The main difference being that the current crop of politicians have a solution to getting people into work that they don’t seem torealiseis not going to work.  The solution being offered at present is to take away as many advantages as possible because if people have no food to eat and no clothes to wear then they will be forced to find a job, thereby increasing employment.  Unfortunately they will be so desperate for a job that they will undercut other folk who are already in employment who will then lose their jobs to make way, so will have to also be encouraged back into work.  Mind you the solution for people taking jobs that pay too little is to take away more advantages so that they are forced to find better jobs.  If this wasn’t stupid enough already then the fact that there are not enough jobs for all those looking for jobs in the first place probably won’t have the impactto make it seem even more stupid.

Naturally it is not possible to simply tell employers to give jobs to those who need them.  Things need to be done gently for a start.  Employers cannot necessarily afford to employ huge numbers of people.  There must be reform to the way the stock market works to prevent large companies being punished for employing people and rewarded for dismissing them.  There should be encouragement, politically, economically and publicly to companies who take on extra workers.  There should of course also be greater encouragement for those who are seeking the jobs.  Not the stick that is currently being used but rather a carrot.  Give greater benefits to those who are working in educational possibilities.  Good managers are well aware that people appreciate recognition in thework place.  This is not because they like praise or pats on the back, this is because they assume it will lead to greater opportunity.  Not greater opportunity to take on more responsibilities and stress, greater opportunities to get into positions where they can make positive changes, earn more money and lead a more fulfilling life.  It is true that far fewer managers seem to understand the whole complexity within the equation but this is something that should be regulated for.

CPD should be offered to all workers; there will be many workers who will not want CPD, it is probable that these workers might prefer to be in different jobs.  The free market solution to this is to show them the door and let them work it out for themselves.  That should not be the solution in a society that is aiming for the greatest overall profit and utility for all.  it is because people fear losing their jobs that they never speak out truthfully about how they feel and it is for that reason that so many workers are disgruntled and doing less than stellar work.  It is in the interests of companies to have the best and most suitable workers, and it is in the interests of government to aid the companies in achieving that end.

Ideas such as making difficult to claim benefits also do not work.  The harder it is to claim benefits the more likely it is that claimants will not give up their benefits, especially for jobs that offer little security.  When there is a spate of zero hour contracts across the country then there will be a great many people who will actively avoid gaining such work for fear it will make it more difficult for them to keep their benefits without having to wait for a protracted period to open a new claim.  Even if it works out in theirfavourfinancially they are unlikely to see this because, lets face it, if the intricacies of economics were so open to them then they would not be on the dole, they would be holding down positions atcanarywharf.

Ultimately there are many ways in which employment can be encouraged when a government accepts that not all citizens act according to the idealbehaviourhoped for by free market theorists.  When the citizenry of a nation is looked at from ademographicallevel then it is probable that starving people will encourage some to find work and to progress into better work.  But we are not numbers, we are people, and people are not that easy to predict.  What is easy to predict is ideal economicsituations.  Economics in general is very difficult to predict because situations are complicated and there are many variables.  However once almost all variables are reduced until all you have is more people in more employment, earning more money and paying more tax, then you don’t need to be Keynes to see that this means more money for government.  That is easy to predict, but it is the individuals within thework forcethat are beyond the ability of so many politicians to understand.

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Political point scoring? Politics by penalty shootout.

I am guessing anyone who has found their way to this page has seen Question time this week in which Shadow Cabinet Minister, Angela Eagle MP, was accused of political point scoring in demanding the resignation of Lord Freud for stating that those who were not ‘worth’ the minimum wage due to disability should be permitted to accept a lower hourly wage.

Lord Freud has been quoted out of context in many places.  In reality the question seems to have been posed by a father who was concerned about the future employment prospects of his disabled daughter.  Without this context the appearance is that Lord Freud is a heartless Conservative ogre with little respect for human rights.  I kind of get the impression that a similar description would suit most MPs so I am not going to dwell on it.  I have certainly met many MPs who have impressed me with their humanity but it seems that once they are given positions of power in the executive they have to make choices between their principles and practicality.  For a prime example of this I would consider the pleas to end ‘Punch and Judy Politics’ before the election by Mr Punch David Cameron.  Another example would be the pro-Europe attitudes of many MPs until UKIP started doing well, whereupon their principles were pushed to the back of the shelf.

Certainly one aspect of the Punch and Judy system of politics is that one must always try to stick the dagger in when the time seems appropriate.  Those who succeed in achieving positions of power seem to have got there partially due to this particular skill.  Naturally Angela Eagle would say that Lord Freud should resign; it is probably the opinion of most people in the shadow cabinet that the entire Tory government should resign, so that can’t really be held against her.  Of course she did seem somewhat surprised that her failed attempt on the point scoring goal seems to have been met with complete hostility by so many people that even those who agreed with her (all across the nation) quietly started examining a bit of fluff they hadn’t realised was stuck on their sleeve whilst feigning a moment’s deafness.

Since then there appear to have been a constant barrage of penalty shootouts against Angela Eagle for having used the opportunity to try and make Lord Freud look bad.  Aside from the fact that Lord Freud was doing perfectly well with making himself look bad already it is the Punch and Judy nature of her response that lost her the opportunity to make an extremely valid point.  In fact she did make the exact point she wished to make but it was completely missed on two occasions because the audience was too intent on scoring points against her for her attempt to score points.  The newspapers have now gotten hold of the political football and are hurriedly scoring political points all over the place.  Angela Eagle only tried to score one point and now there are balls flying all over the place.

The one thing she repeated which should have been heard was that it should not be an issue of money.  It was put to her that Lord Freud’s intent was fully reasonable and everyone knew what he had meant, as though what he had meant was eminently sensible.  Angela Eagle suggested that it was a weakness of the Conservatives that they always brought things down to the issue of money.  The point she wanted to make, at which she should have stopped, is that there could be other ways of doing things.  Employers could be shown how their businesses could benefit from the diversity offered by disabled employees.  There could be ways to balance the work done so that those whose abilities didn’t cover all tasks could take up the slack in areas where they might excel, whilst more able bodied workers could cover for them in other areas.  The efforts of disabled workers could be coordinated to make them more effective.  Fittingly this task could be done by someone who had knowledge of what it is like to be disabled, this would enable many disabled people to be employed in this capacity as well.

Some of those were my own ideas rather than ones put forward by Angela Eagle.  The point I wish to make is that she was right to the extent that all issues cannot be solved by simply throwing money at them.  Whilst one way to get employers to take on disabled employees would be to subsidise wages this is not an ideal solution in our current economic climate.  When all that is on George Osborne’s mind is austerity and saving money the first option in any situation should not be to pay out money to deal with every issue on the agenda.  Subsidising the wages of the disabled is akin to paying employers to make the disabled go away.  Whilst it is the disabled who should be getting paid for the work they are doing, it is the employers who are being paid to hide them from public view.  The system would be ripe for abuse.  At present there are a huge number of people with disabilities in employment and the reason for this is that it has been discovered that many people on the autistic spectrum are actually far better than mentally typical people in many technology jobs.  By subsidising the wages of the disabled, government would only be encouraging employers to continue seeking out the best candidates for positions at a fraction of the cost.  Large companies would become expert in sourcing the best candidates for the lowest prices.  Also how would government accomplish the task of grading each individual to judge how great a subsidy they should receive?  Throwing money at situations leaves them ripe for abuse by those who are most adept at abusing situations for monetary gain.

The most ironic thing is that it was a Labour politician who was complaining about the idea of government paying out more money versus a Conservative politician that was suggesting there might be a way of dealing with the issue by the government paying more money.  It is my belief that most of our problems can be solved through methods other than spending cash.  We have all heard stories where the official line in some organisation has been that things must be done in a certain way that costs hundreds of pounds while the people involved have been saying something like, “If you just gave me the £2.50 for the bus fare I would do it myself.”  Again and again we hear tales of ridiculous amount of money being wasted not because the system allows it but because the system demands it.  During the MP’s expenses scandal there were tales that the clerks involved in controlling the expenses were the ones making the suggestions of how best to take the most money.

There are many times in our daily lives when we can see the absurdity of pricing and costs with the implications that they will eventually have on our environment.  I could waffle on for ages about ways in which money could be better used.  I don’t think that Angela Eagle’s point was too difficult to understand; it was just too easy to miss, especially in the noise of the furor over her ‘point scoring’.  Behind the call for Lord Freud’s dismissal she did make a very good point, one I think could be listened too and adopted by Conservatives, Labour, Libdems, Greens, whoever.  Our first approach to solving any political problem should never be to simply throw money at it.  We are all short of money, government included, but one thing that we all have in excess is common sense, but most of us rarely exercise it.