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Westlake Legal Group > Posts tagged "employment"

Peter Ainsworth: Universities, rather than government, should lend to their students

Peter Ainsworth is the Managing Director of EM Applications and is the author of Universities challenged: funding higher education through a free-market ‘graduate tax’.

James Frayne astutely explains that once Brexit has occurred a major plank of the Conservative Party’s appeal to working-class voters falls away and it “needs to do a lot more for working class voters – and very fast.”

Perhaps anticipating this requirement, the Institute of Economic Affairs ran a competition over the summer to identify a policy proposal that would provide opportunity for all. The winning entry, announced last Thursday, could well be the proposition the post-Brexit Conservative Party needs as it distributes state largesse from the privileged and remain-voting university-educated to the broader population.

“EdEGG”, as the policy proposal was named, aka The Education, Enterprise and Giving-back Grant, is an innovative policy which, without costing the government a penny in additional expenditure, provides a nest egg of opportunity at age 18.

By re-arranging the flows of money into higher education so that universities, rather than the government, lend to their students, and receive income-related repayments from them, the taxpayer is saved the £10.6bn that is currently lost on student loans. Combined with the £2.7bn generated through the Apprenticeship Levy and sharing equally and fairly between all 18-year olds there is enough to provide each of them with a £20,000 credit. This can be used towards: (i) further education or training, (ii) the launch of a new business or (iii) voluntary activities. The money does not have to be used at age 18. It is a Lifetime Opportunity Credit, offering financial support at many different stages of life.

Rob Owen OBE, Chief Executive of the St Giles Trust, which helps people facing severe disadvantage to find jobs, says: “Many of our clients feel they have no stake in society. They don’t have a bank of Mum and Dad and have no access to even small pots of money to pay for training courses – especially pragmatic skills.”

Ironically, while St Giles’ clients receive little support, those children who attend university, coming predominantly from wealthier backgrounds, do benefit from significant state aid in the form of the subsidisation of their student loan. EdEGG’s re-distribution of this subsidy addresses a root cause of inequality and provides the same help for all, regardless of region or social background.

Under EdEGG, universities and other post-18 providers can set their own fee levels but must share the risk faced by the student, relying in part on post-graduation income-related payments in order to survive and prosper. With this alignment of interests, institutions will ensure that what is being taught is useful, they will re-design courses to make the most effective use of time on campus and provide “after-sales-support” to un- or under-employed graduates. Arts and Humanities courses will thrive as they develop the creativity needed in the robot age. The NHS will benefit from more doctors being trained as the limit on the number of medical students, a consequence of the government bearing the cost, can be lifted. The institutions will benefit from less red tape and a government guarantee on loans made to them.

EdEGG funds may also be used to help launch a business by providing the necessary initial capital. To give every start-up the best chance of success, EdEGG funds are only released after a bank has agreed to lend it at least an equal amount. As the bank will be at risk it will have a powerful incentive only to approve propositions that have merit.

Alternatively, EdEGG will help finance the creation of a Community Interest Company (CIC), to provide services – which could be a youth, elderly, music or theatre group – that benefit local people. To confirm that a CIC has popular support, and that the community is willing to share in the risk of the venture, a total of £1,000 must be raised from 100 local citizens.

Finally, any EdEGG credit that is unused by age 55 will be paid to that person’s pension plan, subject to them confirming that they have carried out voluntary work that benefited others equal in hours to the EdEGG credit divided by the minimum wage.

At launch, EdEGG will create a wave of optimism among the 18-year olds who receive the £20,000 credit. Over the medium-term it will make a university education always worthwhile – any career hiccups and the institution will be in touch, keen to help. Many more people will be able to afford vocational training, there will be a jump in new business start-ups and a leap in the formation of community-enhancing projects.

In the long-term it is a game-changer, transforming the mojo of the country as each new generation has opportunities opened to them.

Using free-market principles to achieve a progressive end at nil cost to the Exchequer, EdEGG is not merely feasible, it is politically compelling. By requiring universities to share in the risk their students take and freeing them from much red-tape, it directs help to the voting constituencies the Conservative Party needs to win over – the young and Frayne’s non-university-educated “working class”.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

James Frayne: To win working-class voters, Conservatives must start talking tax

James Frayne is Director of Public First and author of Meet the People, a guide to moving public opinion.

This coming election’s most important coherent block of swing voters live in provincial England. They’re mostly older and female, they’re mostly working class (C2/D), and they’re highly eurosceptic.

Other groups matter too, of course – such as the mostly Southern, suburban professionals – but they’re smaller in number. Things might change but, painful as it is for some to accept, this election will primarily be decided by the provincial English. This working-class group is emphatically not locked down for the Conservatives.

The Conservatives’ last campaign – with its threat to penalise careful, thrifty pensioners with massive social care costs, and implicit threats of general tax rises – prevented the Conservatives carrying working-class voters in what should have been a landslide.

Lessons have been learned and the announcements made by the Prime Minister and crafted by Vote Leave alumni to date have been crafted tailored to this group. The coming manifesto will be better targeted too.

Much of the manifesto writes itself, with obvious demands for action on Brexit, public services, and crime. But there’s an area slowly creeping onto the agenda in the same way crime did a year ago: tax. Long dismissed as an issue of limited electoral potency, things are slowly but definitely changing. In crafting an economic policy for working-class and lower-middle-class swing voters, the Conservatives need a set of attractive policies on tax.

What should these policies look like? Over the summer, I ran a detailed opinion research exercise for the TaxPayers’ Alliance to probe working class attitudes to prospective tax policies. Combining a 4,000 nat-rep poll with half-a-dozen focus groups of swing voters in seats with heavy working-class representation – Walsall, Stoke North, and Bristol North West – we tested a long list of options the political parties might realistically announce for the next election.

(While all polls date fast in the current environment, by polling at the high point of the Brexit Party’s prominence and the low-point of the Conservatives’ recent polling performance, we can at least gauge the softness of Conservative pledged support and therefore the number of their voters who are essentially swing voters in this block).

You can read the full tables and judge for yourself here. However, two main things stand out. Firstly, most importantly: working-class voters want a system that looks to them much fairer than the current system. Secondly, and more surprisingly: they want government to help businesses – mainly start-ups and local businesses, but businesses generally – because they’re worried about the state of the economy.

This second lesson contradicts popular wisdom in Westminster. Both require more explanation. Given a list of prospective tax cuts, working class voters have a clear view of who should be the primary recipients of help via tax cuts, and who should take on more of the financial burden through tax rises.

For example, we found support for: a reduction in the basic rate of tax; higher tax thresholds so people are not dragged into higher bands by rising inflation; an increase in the threshold at which stamp duty kicks in; and National Insurance rebates for those that don’t claim Jobseekers Allowance for five years.

On the other hand, we also found support for: a higher rate of tax on top earners; and higher taxes on second homes. Working class voters don’t just want a system that benefits “people like them” (although they do want that), they want a system that supports those that need it – and in their eyes deserves it.

This research showed not only that working-class voters are supportive of business tax cuts, but they’re also much more supportive of business tax cuts than middle-class professional voters. They have a bias towards supporting tax cuts for new businesses (for start-ups), for small businesses, and for local businesses. For example, they strongly favour start-ups paying no corporation tax (often a heavy burden) for their first three years of operation, and tax cuts for small businesses and the self-employed. But they favour generally pro-business tax cuts too: they favour a reduction in employers’ PAYE contribution, and a general cut in corporation tax too.

The focus groups help us to understand why this might be. Fundamentally, it’s because working-class voters are much more concerned about their jobs – generally, but specifically in the context of Brexit – and they see more clearly what their communities would look like with fewer jobs.

In places like Stoke, for example, where the potteries went a while ago, all that’s really left, in local people’s eyes, are distribution centres, warehouses, and call centres. Politicians and left-wing activists sneer at these sorts of jobs, but local people don’t and local people fear that higher taxes will drive businesses away and leave them with nothing.

Working class support for business has been a real phenomenon for a while now – certainly since the referendum – and I have been arguing here for a while these arguments about voters thinking “capitalism is broken” are miles off. I fear that – like the ideas the public want everything in optimistic Obama-esque language, or that every policy should be designed to help the very poorest – this has captured Conservative politicians’ minds.

Conservatives need to un-learn this “lesson”. Working-class voters want to hear policies that will help their employers, not that those that might drive them away.

Tax isn’t a tier-one issue yet, but it’s going up in the public’s mind – and particularly amongst working class voters. They are, after all, people that have not had a pay rise in a long time and who struggle with rising costs. They are also people that live side-by-side with those they think don’t work hard, and who live comfortable lives on welfare. And they are people that fear what a weaker economy might mean for their long-term financial health.

For all these reasons, tax will become an issue that politicians have to start talking about soon.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Nick de Bois: Conservatives must not fall into Labour’s trap on the four-day week

Nick de Bois is the former MP for Enfield North. He was a member of the Government’s Serious Crime Task Force until his appointment as Chief of Staff to Dominic Raab at DExEU. He is the author of Confessions of a Recovering MP.

A traditional conservative response to Labours promise to introduce a 4-day week would be to rubbish it as unworkable, and fraught with difficulties, particularly for small business.

In short, essentially a classic left wing intervention to implement unrealistic costs on the enterprise economy in a clumsy attempt to win worker votes. After all, four days’ work for five days’ pay – what’s not to like?

However, before Conservatives rush to dismiss this latest policy announcement as economic madness, it’s worth noting Labour’s pitch is not just an economic one. It is also an appeal to a fast-changing work ethic in employees that employers up and down the country will recognise.

But first, the economic case for the four-day week deserves examining. On one point that both left and right will agree is that UK productivity is woeful, and John McDonnell argues a reduced working week will solve that problem.

Productivity has indeed basically flatlined since 2007, and the UK remains way behind our fellow group of the worlds seven leading economies – the G7. This in part explains why wage growth is poor, despite welcome recent improvements.

It means profitability of ‘UK plc’ is less than it should be, and that our workforce is broadly under-achieving – although this should not be confused with being lazy, as so many political and media commentators imply.

The upside to this grim summary is that by improving productivity we are presented with a win-win for government, business and employees.

For example, according to the 2017 Stoddart Review a one per cent productivity gain would represent, across the economy, an additional £20 billion national output. Translated further, that would represent a reduction in annual deficit of £8 billion (it currently at £17 billion) and add another £250 a year to an average pay packet, whilst companies’ profits could increase by £3.5 billion.

The key question for McDonnell’s approach is: would a widespread, top-down imposition of a four-day working week deliver that increase in productivity? In short, the answer is almost certainly no.

This is because it cannot and will not work on a uniform basis across all businesses and workforces, and the strain on the public sector would be huge. The evidence clearly supports that contention.

Advocates of the reduced week often point to the success of Perpetual Guardian in New Zealand. They manage over £200bn of assets, and the CEO argues that the policy has improved staff wellbeing and dramatically improved productivity.

But at the other end of the scale earlier this year the Wellcome Trust rowed back on its plans to implement a four-day working week, announced to much fanfare in April. They gave the not-unreasonable explanation that it became evident to them that work could have become harder for employees in back-office and support functions, such as IT, finance, and human resources. Two large organisations, two very different responses.

Even less ambitious programs for reducing the number of working hour have met huge difficulties. An example is Gothenburg’s municipal local government, which trialled a six-hour working day (reduced from eight). They did see significant wellbeing advantages in healthcare workers, but recognised employers would struggle to meet the costs of reducing working hours yet maintaining a 24/7 healthcare provision.

“Could we do this for the entire municipality? The answer is no, it will be too expensive,” said Daniel Bernmar, the Left Party councillor responsible for running Gothenburg’s elderly care in 2017. Imagine the financial challenge of introducing a four-day working week into our biggest employer: the NHS.

Labour’s proposal mandating a four-day working week through a complex series of measures simply won’t be right for every business or organisation, as the Wellcome Trust and others have found. It is a recipe either for chaos or for a massive climbdown should the Opposition ever come to power.

What should the Conservative response be? Both business leaders and employees are not stupid and will recognise the sop to employees Labour are making for what it is, an election bribe. But equally, when Labour talk about building a society where we don’t “live to work, but work to live” it will strike a chord with millions of people.

Therein lies the answer as to how Conservatives should respond to today’s Labour announcement: advocate a progressive and light-touch regulatory approach to flexible working that goes way beyond the current focus on maternity and paternity rights.

It may be politically attractive to focus on rights for parents, and we have done some great work from which to build on. Yet it is plainly inadequate to stop championing flexible working there and Conservatives, not Labour, should be filling the policy vacuum on the issue.

Such a move makes both economic and political sense. It is striking, for example, that flexible working is presently pretty much the preserve of white-collar workers.

Conservatives would do well to recognise that the relatively untapped benefits, both for employees and national productivity, of the blue-collar worker being able to enjoy flexible working are substantial and politically attractive. As workforce management consultants Quinx identified in their report “Powering the Power House“:

“If a greater proportion of UK employers took steps to address barriers to the recruitment, retention and productivity of workers in manual and elementary service roles in the as yet relatively conservative Blue Collar workplace, estimates show up to 7.6bn of productivity growth”.

That’s quite a contribution to the productivity gap Britain faces.

Both attitudes and the compotion of the workforce have changed dramatically in the last decade, and whilst some employers have been slow to recognise this political parties have been even slower. It is time for Conservatives to take action.

As Karen Mattison from leading employment specialists Timewise noted after the publication of their 2018 employee survey:

“The fact that flexible working has been seen as a women’s issue has not done women or businesses any favours. Today’s new research shows once and for all, that flexible working is a preferred way of working for both men and women at all stages of their working lives.”

Most strikingly the Timewise employee survey also noted, and many employers will recognise:

“Today’s workforce not only want flexible working they expect it. It’s time for businesses to get smarter and use flexibility as a tool to attract and keep the best people. Those who lag behind in adapting how they hire, will risk losing out on millions of skilled workers.”

Government, take note.

Labour’s crude, authoritarian approach to flexible working, with its focus on a four-day week, may be politically attractive to some. But it runs the risk of introducing a simple left-right divide on that single issue, and we fall into Labour’s trap if our response is to dismiss it out of hand.

A Conservative response can be more nuanced and more practical if we become advocates for progressive, flexible employment practices. There is an audience ready and waiting to respond positively to this message, should we chose to offer it.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Damian Green: Labour’s dishonest attack on us this week will only work if we narrow our appeal

Damian Green is a former First Secretary of State.  He is Chair of the One Nation Caucus and MP for Ashford.

The cover of Labour’s Conference Guide this year is full of the usual upbeat (and of course impractical) promises: “More doctors and nurses”, “Free bus passes”, “Reduced class sizes”. You only have to turn the page to find what they really want to talk about-a distortion of what today’s Conservative is about.

The Welcome to Conference message contains a familiar dishonest litany. “The impact of almost ten years of Tory austerity is clear; in work poverty, Universal Credit, NHS Funding Cuts, regional inequality, and acts of malice like scrapping free TV licenses”……”We need a Government that will work for the common good, not just to reward the rich.”

Of course it’s unfair propaganda. The new element is that Corbyn’s Labour seeks constantly to make this attack personal. They want to create an atmosphere where every individual Tory must by definition be cruel and unfeeling, as well as rich and posh. From the “Never kissed a Tory” badges to Labour MPs saying they could never be friendly with Tory colleagues, the Labour attack is a calculated part of modern culture wars. The aim is not just short-term political advantage, but a long-term wish to make individuals who espouse Conservative values seem unfit for decent society. The more this attack succeeds, the more difficult it is for us to attract new supporters, particularly young supporters. So we have to refute it strongly and effectively.

As ever, the most effective argument follows the rule “show, don’t tell”. Throughout its history, the Conservative Party has been at the forefront of social reforms which have helped the poor and disadvantaged, flatly disproving the Labour thesis. Paul Goodman is writing a series of articles on ConHome this week showing this repeated phenomenon.

Modern history is equally full of evidence of this vital strain of Conservatism which seeks to bind society together by ensuring that no one is left behind. Some of the most neglected communities in the country in the early 1980s, from East London to Liverpool, have been utterly transformed by the practical energy displayed by Michael Heseltine. Where there was once dereliction and despair, there is now prosperity and hope, thanks to Conservative Governments.

The Environment is another issue where lazy or malevolent commentators assume the left must have the best tunes. In fact, the first prominent British politician to realise its central importance was Margaret Thatcher. Bringing the story more up to date, David Cameron was equally seized of its importance (at least in his younger, more idealistic days). We still remember the huskies. The current Conservative Government will certainly continue this honourable tradition, and we should all publicly proclaim it. Vote Blue Go Green should be a slogan for the ages.

We should also be relentless in pointing out how the children of poorer households have benefitted from Conservative education reforms over recent years. All of this was outweighed by the anger of teachers at the last general election over spending levels during the period of austerity, so it is very important that the extra spending that will be made in schools in the coming years is accompanied by a continuing commitment to reform. For example, Michael Gove’s Free Schools are a great innovation which would certainly be killed by a Labour Government.

Equally, for all of its teething problems we can be proud of Universal Credit. The best argument for how it is helping benefit recipients is the historically low level of unemployment. The fact that it is always better to work, and always better to work longer hours, is the biggest single change in the benefit system since Beveridge, and it is good news for those on benefits as well as for the general health of society. Work is always the best long-term route out of poverty, and we should happy to argue with the Left on this point.

So we are able to show numerous examples where practical Conservative policies are hard-headed but not remotely hard-hearted. By contrast, they are helping people who have no advantages make the most of themselves and share in rising prosperity. Now we have moved out of the period of austerity this is an easier argument to make, so we can be more aggressive in calling out Labour’s attempts to demonise all of us.

At the same time, we must be vigilant in not giving Labour the chance to claim that the moderate Conservative tradition is in danger. This is not the article in which to discuss in detail the removal of the Whip from some of my colleagues, but it is absolutely the place to remind us all that the One Nation tradition is a central part of conservatism, and its underlying insight that the Conservative duty is to bind society together is more important than ever in these troubled times.

The biggest task for any Conservative is to convince a dubious electorate that properly regulated capitalism is the best system both for creating wealth and for spreading it fairly. We will need the maximum number of supporters, and the full breadth of all Conservative traditions to make this argument with force. At a time when Labour is determined to convince the non-political majority that Conservatives are basically evil, it is more important than ever that we demonstrate on a daily basis that we are the normal, decent majority in this country.

Even in the short term we should remember that the Liberal Democrats attract some normally Conservative voters in the same way that the Brexit Party does. We need to be careful on both our flanks. A strategy of delivering Brexit and simultaneously demonstrating that we can improve public services to the benefit of everyone is not just the best approach for the coming election, but the most convincing way of dismissing the Labour smear about our underlying motives.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: To help grow prosperity, let’s focus on people and not places – such as towns

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Stian Westlake describes it as the “Strange Death of Tory Economic Thinking”. Conservatives have ceased telling an economic story about why they should govern, and how. Sure, there’s still the odd infrastructure announcement, or tax change. But, since Theresa May became leader, the governing party has shirked articulating a grand economic narrative for its actions.

This is striking and problematic. From Macmillan to Thatcherism to deficit reduction, the party’s success has coincided with having clear economic agendas, gaining credibility for taking tough decisions in delivering a shared goal. But, arguably, deficit reduction masked a secular decline in interest in economics. David Cameron and George Osborne, remember, wanted to move on to social and environmental issues until the financial crisis and its aftermath slapped them in the face.

Now, with the deficit down, economics is in the back seat. Fiscal events are low key and economic advisors back room. To the extent the dismal science is discussed, it’s as a means to other ends, or a genuflect to “Karaoke Thatcherism.”

In short, I think Westlake is right: the Tories do not have an economic story and, post-Brexit, it would be desirable if they did. So we should thank both him and Sam Bowman (formerly of the Adam Smith Institute), who have attempted to fill the vacuum. In a rich and interesting new paper, the pair set out to diagnose our key economic ailments and develop a Conservative-friendly narrative and policy platform to ameliorate them, even suggesting reform of the Right’s institutions and think-tanks in pursuit of the goals.

Such an effort deserves to be taken seriously, though not everyone will agree with their starting premises. It is assumed, for example, that Conservatives believe in markets and want to maintain fiscal discipline, which bridles against recent musings from Onward or thinkers such as David Skelton.

But, again, the key economic problem they identify is incontrovertible: poor economic growth. Weak productivity improvements since the crash have been both politically and economically toxic, lowering wages, investment returns, and necessitating more austerity to get the public finances in structural order. And the nature of modern innovation, arising from clusters and intangible assets, means that growth that is experienced isn’t always broadly shared.

Their agenda’s aim then is to achieve both concurrently: maximize the potential of the economy by taking policy steps on planning, tax policy, infrastructure, and devolution, to increase investment levels, allow successful cities and towns to grow, and to connect “left behind” places to local growth spots through good infrastructure. None of their ideas are crazy. Indeed, I would support the vast majority of them.

And yet, something bothered me about their narrative. In line with the current zeitgeist, they too discuss “places” and their potential, as if towns and cities are autonomous beings. My fear is this focus – shared by those who want to regenerate “left behind” areas – creates unrealistic expectations about what policies can achieve in a way that undermines a pro-market agenda. Importantly, it warps what we should really care about: “left behind” people, not left behind places.

A people-centred narrative recognises that just as firms fail in the face of changing consumer demands and global trends, so high streets, towns, cities, and even regions will shrink too. As Tim Leunig once said, coastal
and river cities that developed and thrived in a heavy manufacturing, maritime nineteenth century world might not be best placed to flourish in a service sector era of air and rail.

A true pro-market policy agenda would admit -and that’s ok. Or at least, it should be, provided we understand that raising growth and sharing prosperity requires adaptation, not regeneration. That means removing barriers for people either to move to new opportunities or have control to adapt their situations to ever-changing circumstances. This might sound Tebbit-like (“get on your bike”), but really it’s just saying policy must work with market signals, not against them.

Today though, interventions actively work in a sort of one-two-three punch against inclusive growth and adjustment. First, we constrain the growth of flourishing cities. Tight land use planning laws around London, Oxford, and Cambridge contribute to very high rents and house prices, and prevent these places benefiting from growing to obtain thicker agglomeration effects.

This contributes to the “left behind” scandal, but not in the way people imagine. When rents and house prices are higher in London and the South East and we subsidse home ownership or council housing elsewhere, it’s low productivity workers from poor regions that find it most difficult to move given housing cost differentials. As a result, they get locked into poorer cities and towns that would otherwise shrink further. That’s why Burnley, Hull and Stoke are the most egalitarian cities in the country, whereas prosperous London, Cambridge and Oxford are the most unequal, even as inequality between regions has intensified.

Having restricted people’s mobility through bad housing policy, we then impose one-size-fits-all solutions and subsidies which dampen market signals further. National minimum wages, fiscal transfers, national pay bargaining, and more, might be designed to alleviate hardship, but they deter poorer regions from attracting new businesses and industries by trading on their market cost advantages. Then, to top that off, we compound the problem further by centralising tax and spending powers, preventing localities from prioritising their spending and revenue streams to their own economic needs.

Now, as it happens, Bowman and Westlake’s policy agenda is perfectly compatible with assisting  “people” rather than “places,” precisely because it’s market-based. They advocate planning liberalisation, a flexible right to buy, and stamp duty, all of which would improve labour mobility. They prioritise infrastructure spending based on benefit-cost ratios, making investments more profitable with sensible tax changes, and devolving more transport power to regions and localities. All, again, will help facilitate areas adapting to changed economic conditions, rather than reviving Labour’s failed top-down regeneration attempts.

But pitching this as a city and town agenda still risks creating the false impression that the net gains from “creative destruction” nevertheless can be achieved without the destruction, and that all places can thrive in the right policy environment.

One can understand why they framed it in this way. Their aim is to persuade the party and its MPs of their platform. Anti-market commentators would call them fatalistic and “abandoning” places if they acknowledged the downside, as if facilitating more free choice amounts to design.

Successful past Tory economic narratives, though, willingly acknowledged hard truths. Deficit reduction entailed tough choices to curb spending. Thatcherism entailed making the case for letting inefficient industries fail. If a new Tory vision is serious about raising productivity growth and spreading opportunity for people, it will have to confront the inevitable market-based adaptation for some places.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Neil O’Brien: Corbynomics – and why it means that your house, business and savings don’t really belong to you,

Neil O’Brien is MP for Market Harborough.

What is Corbynomics? It goes without saying that it’s a much more extreme economic programme than Labour have ever had before. And that government will spend, tax and borrow more. But Labour have a lot more damaging, half-baked and dangerous ideas.

No-one is thinking about them at the moment, but the scary thing is that within weeks these ideas could be affecting your house, your pension and your job.

For me, the most frustrating thing is that Labour have identified various important issues, but their proposed “solutions” would make matters worse. Let’s look at a couple of examples.

Seizing 10 per cent of all large companies’ shares

Lots of people, including me, worry that current corporate structures create pressures that make managers behave in a short-termist way, squeezing investment to hit short term profit targets and dragging down productivity growth. I’m concerned that publicly quoted firms are beholden to increasingly transient shareholders, interested in immediate returns. They certainly invest far less than privately owned firms who can take a longer-term view.

But my answer to this would be to change the tax treatment of investment, and increase capital allowances so that there’s no disincentive to invest.

Labour’s answer, in contrast, is to forcibly transfer 10 per cent of all companies shares to create a sort of employee-ownership-at-gunpoint.

This is a terrible idea, which would make investment into the UK dry up overnight. After all, if government can steal ten per cent of your shares, what’s to stop them coming back for the rest? Labour protest that the shares are not being stolen – just given to the workers. But that’s a lie, as they also propose that a Labour-run Treasury would take the great majority of the dividends that those shares attract. At the moment, these are owned by savings and pension funds – so the money is ultimately coming out of your pocket.

The total value of the shares stolen by government would be around £300 billion, according to the Financial Times. For comparison, raising the basic rate of tax by one per cent raises £4.5 billion a year, so you can see what a vast tax grab this would be.

Forcing people to sell their properties at a price set by government, and control rents

There are major issues about the balance of rented and owner-occupied property in Britain. We had a long period when the number of properties being moved into the rent-to-buy sector was outstripping the number built, meaning owner occupation fell dramatically. Between 1996 and 2016, the home ownership rate among middle income people aged 25-34 fell from 65 per cent to 27 per cent.

However, in 2015 the Conservative Government reformed the tax treatment of rent to buy and second homes, and in the years since we have seen homeownership rebounding upwards, with both ownership and the rented sector growing in a more balanced way. There are lots more things we could do to grow home ownership.

Corbynista Labour doesn’t really believe in home ownership. They are nostalgic for the world of the 1970s, where around two thirds of households in places like Islington lived in social housing. But they know ownership is popular.
So they have announced the “private sector right to buy”. This will give private tenants the right to make their landlords sell their properties to them at a discount.

In an interview last week, John McDonnell made it clear that government would set the price: “You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy,” he said. “You (the government) set the criteria. I don’t think it’s complicated.”

It’s not complicated. But it is deeply unfair. It would be a retrospective raid on people’s assets. People, including some who are not so rich, have invested in property under certain rules, and would have their savings ripped off them, while other people who invested their money in other things would not. This is arbitrary and unreasonable and would I’m sure be challenged in the courts.

Labour would also set rental prices, promising in a recent document that “There should be a cap on annual permissible rent increases, at no more than the rate of wage inflation or consumer price inflation (whichever is lower).”

This is unworkable or will lead to under investment in rented properties. Why spend lots doing up a flat if you can’t charge more for an improved property? We would quickly be heading back to the 1970s, when there wasn’t enough rented accommodation to go round, and conditions were squalid because of rent controls.

Sectoral wage bargaining

With the National Living Wage, the Conservatives have introduced one of the highest minimum wages in the world. For the lowest paid, the National Living Wage plus the cuts in taxes for lower paid people mean that they take home £4,500 more than they did under the last Labour Government – while employment has soared to a record high. We should be really proud of our record.

However, the National Living Wage is still set by an independent body, and as percentage of average pay in the market, so there is a sensible link to what businesses can afford without sacking people.

In contrast, under Labour politicians would just set rates directly. Labour have also pledged to “roll out sectoral collective bargaining”. Labour said it would “fix the going rate” in each industry and “set fair conditions” for the sector. This would represent an end to the system whereby unions negotiate company by company and, instead, give them power effectively to set national standards on pay and conditions. A new government unit would work with unions to bring firms into line.

This means that if politicians or trade unions decide your business is part of a particular “sector” (a pretty subjective question) then you would be in line for a change in wages which your business might simply be unable to afford. The scope for union bullying and endless court cases and demarcation disputes is obvious. In the car industry, wages are high, so a sectoral wage would be high. If I make plastic bits for the car industry but also other industries, is my business in or out of the automotive sector?

Rebecca Long Bailey has also said that “Labour will also legislate to reduce pay inequality by introducing an Excessive Pay Levy on companies with staff on very high pay.” There is no detail on what the rules will be, but the idea of having wages directly controlled by Jeremy Corbyn is likely to deter inward investment.

What do these ideas have in common?

When New Labour left office, a million people had been thrown on the dole, we’d had the deepest recession since the second world war and government was borrowing more than at any time in our whole peacetime history. In the final year alone, they borrowed £7,900 for every family in Britain.

And that was New Labour. Imaging what the country would look like after Corbyn and McDonnell.

Where Corbyn’s ideas really differ from previous Labour leaders is that he doesn’t really believe in the rule of law. Your house, your business, your savings: all these things don’t really belong to you, in Corbyn’s eyes: you have them only as long as the government suffers you to have them, and they can be retrospectively taken away if he sees fit. In the week Robert Mugabe died, we’ve seen underlined just how important the rule of law is. But under Corbynomics, it would be the first casualty.

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Uh oh: BLS preliminary recalculation sheds half-million jobs in 2018-19

Westlake Legal Group trump-rose-garden Uh oh: BLS preliminary recalculation sheds half-million jobs in 2018-19 The Blog jobs GDP employment Economy Bureau of Labor Statistics

Every year, the Bureau of Labor Statistics recalculates its benchmarks for employment calculations. It’s not every year, however, when those revisions chop a half-million jobs out of its previous estimates. In its preliminary calculations, the new benchmark does just that — although it remains to be seen whether those benchmarks will hold up for their final implementation next February:

Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. For national CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus two-tenths of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2019 total nonfarm employment of -501,000 (-0.3 percent).

Preliminary benchmark revisions are calculated only for the month of March 2019 for the major industry sectors in table 1. The existing employment series are not updated with the release of the preliminary benchmark estimate. The data for all CES series will be updated when the final benchmark revision is issued.

The chart shows how broadly the retrenchment goes in the US economy. Nearly every industry appears to have had its employment levels overstated:

Westlake Legal Group bls-benchmark Uh oh: BLS preliminary recalculation sheds half-million jobs in 2018-19 The Blog jobs GDP employment Economy Bureau of Labor Statistics

Keep in mind that this is only a proposed new benchmark. The BLS will continue working on it to tweak it for better accuracy, although this release shows that this is well advanced from the spitballing stage. The new preliminary calculations have some economists already assuming the figures are solid, which would be a mistake:

The economy had about 501,000 fewer jobs as of March 2019 than the Bureau of Labor Statistics initially calculated in its survey of business establishments. That’s the largest revision since the waning stages of the Great Recession in 2009.

The newly revised figures indicate the economy didn’t get a huge boost last year from President Trump’s tax cuts and higher federal spending. They also signal the economy is a bit weaker than previously believed and could give the Federal Reserve even greater reason to cut interest rates in September.

“This makes some sense, as the 223,000 average monthly increase in 2018 seemed too good to be true in light of how tight the labor market has become and how much trouble firms are said to be having finding qualified workers,” said chief economist Stephen Stanley of Amherst Pierpont Securities.

The average 223,000 monthly increase in employment in 2018 — the strongest in three years — could be trimmed to 180,000 to 185,000, economists estimate.

That’s certainly possible, but it’s not certain yet at all. There’s reason to think that this understates reality too, especially when it comes to wage growth. That has objectively accelerated over the last couple of years, which only makes sense if job growth was pitched high enough to put pressure on employers to increase compensation more rapidly.

That leads us to another point: the measures from BLS do not create reality but reflect it, as best as surveys can do, anyway. During this same period, US economic growth as measured by the Bureau of Economic Analysis ran higher than 3% annualized GDP growth in four of the last nine quarters. That itself would indicate a higher level of sustained job growth than the 180K level, although that would be an indirect measure of job growth, to be sure, about which more in a moment.

Still, the BLS release has begun to catch eyes, and one surprising set in particular:

It’s a legit headline, and a legit story — as long as the proper context is provided. This is an adjustment of measures rather than reality, and job growth is itself an indirect measure of economic growth. The GDP reports provide the direct measures of economic growth, and those have been reviewed repeatedly over the last two-plus years.

The bottom line: This doesn’t actually change anything about the economic reality of the moment. It’s not a massive job loss, but rather a recalculation of previous growth intended to better reflect that reality — and even that’s a preliminary change to a previous survey model, not the data itself.

The post Uh oh: BLS preliminary recalculation sheds half-million jobs in 2018-19 appeared first on Hot Air.

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Joe Shalam: Modern employers are learning the Bournville lesson – better housing for workers benefits them, too

Joe Shalam is Head of Financial Inclusion at the Centre for Social Justice.

In-work poverty has been described as ‘the problem of our time’. But making progress in tackling it will only be achieved if the true complexity of poverty is taken into account. While income is critically important, raising wages above an arbitrary poverty threshold, as has been prevailing wisdom for many years, simply does not account for range of issues that serve to hold people back.

For example, at the Centre for Social Justice we hear increasingly regularly from our alliance of 350 poverty-fighting charities about the ways insecure, cramped or otherwise inadequate housing is undermining people’s ability to address the problems in their lives: be that their family instability, their reliance on alcohol to get through the day, or the barriers they face progressing in work and boosting their earnings.

The CSJ’s Housing Commission has therefore called on the Government to dramatically increase the supply of truly affordable homes, so that more people have a stronger foundation from which to escape poverty and thrive. Yet, as the Commission argues in its latest interim report, the Government will not be able to achieve this alone. Business and philanthropy can play a role, too.

Looking at history we are reminded of this. One often celebrated example is George Cadbury, whose enterprising family give their name to the Victorian chocolate brand still enjoyed by millions today.

Cadbury was no ordinary chocolatier. An enthusiastic social reformer in the Quaker tradition, he and his brother sought to offer workers an alternative to the life they had come to expect in the rapidly industrialising and grimy cities of 19th Century England. So they founded a village, named ‘Bournville’ for its quaint French twang and proximity to the Bourn river, providing garden cottages in sharp contrast to the neighbouring city slums.

Still, Cadbury was a businessman. He knew that an inadequately housed workforce was an unhealthy and unhappy workforce. As such, they were also less productive for the company – particularly when stricken by what he described as the ‘evils of modern, more cramped living conditions’.

This fact remains as true today as it was then. While we have come a long way since the familiar slums of Dickensian Britain, the housing crisis gripping parts of the country is having a profoundly negative impact on businesses, the wider workforce and their families.

The report reveals that half of UK companies with 1,000+ employees say that housing issues are adversely affecting the wellbeing of their staff, compounded by long commutes to work and rising housing costs.

The economic consequences of an increasingly overburdened and low-morale workforce are also emerging. We found that a shocking two-in-three companies are concerned about how the affordability of housing is impacting their business. And 43 per cent of employers say that housing issues are having a negative effect on their business’ productivity.

Yet the report also reveals that, like Cadbury, employers today are responding to these pressures in innovative and impressive ways.

Take Nationwide, for example, who are proceeding with a multi-million pound not-for-profit housing development in Swindon. Drawing inspiration from Bournville, where ‘Ten Shilling Houses’ were offered to the workforce beyond the Cadbury payroll, Nationwide’s Oakfield development aims to provide a high proportion of affordable homes and lease these without giving preferential treatment to employees.

Elsewhere, Pret a Manger recently opened the Pret House in Kennington. Building on their long-established homeless trainee scheme, they recognised that even the most supported trainees on the programme were suffering as a result of returning after a day’s work to the chaotic ‘temporary’ accommodation they had been placed in by local councils.

As Nicki Fisher, the Pret Foundation’s head of sustainability, told us, ‘If you can imagine, having to get up at 5am after spending a night in a homeless shelter, where they’re often very crowded, very noisy, quite chaotic… we were starting to see a couple of people dropping out because it’s just very difficult to maintain coming to work normally every day’. The Pret House provides a safe and secure home for trainees to return to, thanks to a number of conditional ground rules.

We also looked abroad for inspiration. The expansion of technology firms in coastal areas of the US has resulted in the creation of new jobs in cities with limited housing, such as Seattle and San Francisco. This has contributed to steep increases in housing costs. Companies like Google, Facebook and Microsoft are responding by investing millions of dollars in affordable housing programmes.

In partnership with the Mayor of Seattle, Microsoft alone has pledged $500 million for programmes supplying ‘housing that is within the economic reach of every part of the community, including the many dedicated people that provide the vital services on which we all rely’.

Where employers are leading the way in championing housing support, they should be recognised and supported to do more. Schemes like private tenancy deposit loans, on the familiar model of a season ticket loan, are relatively inexpensive for businesses, but can be life changing to those unable to afford the (sometimes eye-wateringly expensive) upfront costs of rented accommodation. The Government should be rewarding the companies that offer this type of support with a new ‘Housing Confident’ accreditation.

The Government could also be better at harnessing employers as fuel in the engine of housing supply, by setting up an Innovation Fund in Homes England to support more not-for-profit developments that don’t fit the conventional mould. And it should do more to facilitate ambitious partnerships between both public and private employers to secure new investment in affordable Build-to-Rent developments, with thriving and mixed communities of working families.

In short, though there have been profound changes to our society, economy and labour market since Cadbury first set eyes upon the Bourn, the same level ambition is already being displayed by some employers today in seeking to improve the workforce’s housing conditions and address poverty in its true complexity. For all the government can do, we should also aim to unlock the spirit of Bournville and extend the ‘opportunity of a happy family life’ that he believed everyone deserves.

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Patrick Spencer: Some advice for the new Conservative leader. Stick to these three ideas to boost productivity.

Patrick Spencer is Head of Work and Welfare at the Centre for Social Justice.

The Conservative leadership contest has proved to be the battle of ideas that the party wants, needs and should probably have had back in 2016. Yes, Brexit has dominated the discussion, but in amongst chat of proroguing, No Deals and backstops, we have heard interesting ideas about, for example, tax reform, a national citizens’ service and early years support for young mothers. During the Parliamentary stage of the contest, the Centre for Social Justice hosted the Social Justice Caucus of Tory MPs, holding their own hustings event for the Conservative leadership, and the candidates didn’t disappoint.

The litany of new ideas stem from the fact that most of the candidates felt it is time to reshape the Government’s fiscal strategy. The last nine years have been defined by successive Coalition and Conservative government’s support for fiscal rebalancing. David Cameron and George Osborne successfully formed governments after two general elections on a platform of fiscal prudence.

However, the political landscape has changed. Younger voters who weren’t around to vote in 2010 now make up a sizeable chunk of the electorate. Years of austerity, job growth and a much healthier national balance sheet has meant that ‘austerity’ is increasingly unpopular.  Combine this with the perceived economic harm that a No Deal Brexit may cause, and the case for loosening austerity is compelling.

In this vein, Boris Johnson has argued for lower taxes on higher earners as well as increased spending on education. Esther McVey wanted to cut the International Aid budget and spend savings on the police and education. Dominic Raab called to raise the National Insurance Threshold and cut the basic rate of income tax. Michael Gove hoped to reform VAT so that it becomes a Sales Tax. And Sajid Javid said he would slow the rate of debt reduction, which would free up £25 billion for new spending commitments.

Even outside of the leadership circle, Tory MPs and right-of-centre think tanks are advocating for a new spending strategy.  Neil O’Brien has coined the ‘O’Brien Rule’, which allows for budget deficits as long as debt as a percentage of GDP is falling. This sentiment was echoed by Philip Hammond, who called on every leadership candidate to commit to keeping the deficit under two per cent of GDP as long as the national debt was falling.

Considering the appetite to do something, the next leader of the Conservative Party and Prime Minister should be warned that spending for spending’s sake is not a good idea. If the decision is taken therefore to loosen the fiscal taps, it should be carefully targeted so that this increases growth and more importantly, productivity.

The Centre for Social Justice released a report in 2017 that highlighted a clear policy agenda that used tax and spend policies to boost productivity across the UK. It is roundly recognised that the productivity conundrum in the UK has not been the result of any one issue but, rather, is a confluence of factors that have taken hold of our economic and social machine.

First and foremost, British companies do not invest and innovate enough. Compared to other countries we have lower levels of capital investment, lower uptake of new-generation technologies such as robotics, and entrepreneurs sell out too early. Britain has a proud history of innovation and technology, and yes we do have several world beating unicorn companies, but in recent years we have lost ground in the innovation stakes to the US, Germany and the Asian economies.

The CSJ recommended a raft of policies that could help reverse this, starting with a ramp up in public funds available for research and development. Public cash for R+D has a crowding in (as opposed to crowding out) effect. We also called (counter-intuitively) for the scrapping of Entrepreneurs Tax Relief. It is expensive and does little to help real entrepreneurs, and only acts as a tax loophole for asset strippers (this policy has recently been advocated by the Institute for Fiscal Studies and the Resolution Foundation). We also called for simplification of the tax system. Look at the Annual Investment Allowance, for instance, that was decreased by 75 per cent in 2012, increased by a factor of 10 in 2013, doubled in 2015, only for it to then be almost cut in half in 2016.

Second, the CSJ called for a radical increase in support for vocational education in the UK. While businesses needed some help to innovate and compete, the labour market needs support in terms of skills and competencies. Recommendations included a new spending commitment for FE colleges and more support for adult learners who are in low skilled work. The Augar Review called for the Government to make £1 billion available for colleges, a good start but realistically the Government will have to go much further in the future. here is an example of where public money can make a big difference in public policy.

Last, if the next Prime Minister wants to support productivity growth, they can look at rebalancing growth outside of London across Britain’s regions. London is home to less than a quarter of the UK’s population but contributes to 37 per cent of our economic output. It attracts a disproportionate number of high skilled and high paying jobs. Public spending on infrastructure in London dwarfs that spent in the North and Midlands. Reversing this trend will of course take a generation, but by boosting transport spending on inter-city transport (most obviously Northern Rail), tax breaks for companies that set up in struggling cities such as Doncaster, Wigan or Bradford, as well as more money for towns and cities to spend on green spaces and cultural assets (such as museums, public art, restaurants and bars) that attract young people.

These three productivity-generating policy areas will allow any Government to loosen the fiscal taps without bankrupting the country. When the next Prime Minister appoints his Chancellor, he or she would be well advised to stick to the basics of cutting taxes, spending more on education and rebalancing growth outside of London.

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