These tax cut whispers are about to get louder

Bizarrely, abolishing the 50p rate remains top of the Chancellor's list.

With summer over, the skies are darkening in more ways than one. Economic forecasts, previously strong for this autumn, have long been heading south. Last week sharpened the sense of impending crisis. The FTSE has been shaken more violently than at any time since the paroxysms of early 2009. On Wednesday, unemployment stats took their biggest quarter-on-quarter leap since March 2009. The US and German economies are flat-lining.

Whatever your favoured explanation for our worsening economic plight, one thing is increasingly clear: the UK economy is propped up on pillows, in desperate need of a shot in the arm. It may not be fashionable to say it, but that shot needs to involve a pickup in consumption and domestic consumer confidence. Yes, that jars with the consensus narrative about the need to rebalance our economy towards exports and investment, away from domestic consumption. But in times like these there's no escape from the cold hard reality: household consumption still makes up two thirds of UK GDP. Whatever our need for medium-term rebalancing, domestic consumption will play the star role in either lifting the UK economy out of danger or pushing it over the edge.

You only have to look at the periods following previous recessions to see how far we are now wavering from the 'normal' path to recovery. Figure 2 in this recent blog post compares the four major recessions that have hit the UK in recent decades, looking at the path of household consumption from their onset. In each case, it was at around this point - 10 quarters on from the start of contraction - that the spark of consumer spending re-ignited. As would be expected following a "balance sheet recession"', our current path to recovery looks decidedly different. Today, consumer spending is not a rocket booster but a millstone.

This economic misery is being driven by the coincidence of two things: households are seeing their disposable incomes fall steadily in real terms at the same time as they continue to carry a massive burden of debt. That leaves them facing a stark choice. Either falling incomes mean less spending or households will have to eat into their savings or take on yet more debt. (New research from the Resolution Foundation out this week will confirm the startlingly poor savings position of Britain's low-to-middle incomes households and reinforces just how vulnerable millions of households are to any future rise in interest rates). Only a pick-up in real disposable incomes will gradually free us from this bind.

So how is this harsh economic reality set to play out in our politics? Amidst all the unpredictability, we can be confident about one thing: in the coming months the current Westminster chatter about tax cuts will become louder and more volatile. Expect arguments over timing, over who to target, the potential impact on consumer confidence and spending, and perhaps loudest of all, over how any cut could be paid for.

In macroeconomic terms, of course, any plausible move on tax will pale in comparison to the decisions the Bank of England makes on further quantitative easing. But in the context of a long squeeze on living standards, all political parties have long realised that the lure of a targeted reduction in taxes for at least some groups would eventually become irresistible. Deteriorating economic news may expedite this.

So what's on the agenda? Bizarrely, given the economic context, the abolition of the 50p rate remains top of the chancellor's list, with a review set to report in the autumn as cover for a move. Even leaving aside the glaring question of equity, there will be grave doubts about the economic wisdom of trying to stimulate the economy - however modestly - with a tax cut for the very richest. Whatever you think of the 50p rate (and polls show that the public think quite a lot of it) cutting taxes for those at the very top is more likely to see money flowing into high-end savings accounts and central London property. By contrast, tax cuts for the bottom half of the working population - in particular those low income households who are now spending every penny they earn - are far more likely to help the high street.

Of course, the chancellor must know full well that, on its own, a tax cut for the richest 1 per cent would be the final nail in the coffin of his claim that "we're all in this together". If that is Labour's hope, there is a good chance they will be disappointed. It's no surprise, then, to see recent Lib Dem briefings talking up the idea of reintroducing the 10p rate of tax, backed by a clear message that they want to support those struggling on low and middle incomes.

Such a move may seem far-fetched but it has a powerful political logic. Many Labour backbenchers would retch at the prospect of Tories jeering from across the benches, hollering that they have put right the injustice of Brown's 10p abolition. The Lib Dems would of course revel at the prospect of claiming that it is they who have dragged the government's tax strategy in a more progressive direction.

Could it prove possible to make any sort of move on both 10p and 50p? That would be a significant fiscal stretch. It will depend in large part on the state of the economy; though paradoxically, if things suddently get worse, measures that currently sound implausible could gain a new respectability. It will also depend on whether the Coalition is willing to raise compensating tax revenue in a way that doesn't tilt the economy downwards. For that reason it's significant that some Lib Dems are now briefing aggressively in favour of a wealth tax (as well as green taxes) - and that prominent Tories are pitching in their penny's worth, from outright hostility from some cabinet ministers to more thoughtful support from commentators.

Of course, as the debate heats up, other options will also rise to the surface. For all its economic and political superiority over a tax-cut for the very richest, there are reasons to question the reintroduction of the 10p rate. Some will argue, for example, that reversing cuts to tax credits would better target money to those most in need. The fiscal position, combined with an unwillingness to raise other taxes, may in the end scupper any move in the near future in any case. But wherever the debate ends up, one thing is already becoming clear as the summer wanes: this game of Westminster whispers is set to get a whole lot louder.

Gavin Kelly is Chief Executive of the Resolution Foundation. James Plunkett (twitter.com/#!/jamestplunkett) leads the Foundation's Commission on Living standards.

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Fake news sells because people want it to be true

The rise of bullshit, from George Orwell to Donald Trump.

When is a lie not a lie? Recently, the Daily Telegraph reported that university students had demanded that “philosophers such as Plato and Kant” be “removed from [the] syllabus because they are white”. Other outlets followed suit, wringing their hands over the censoriousness of today’s uninquiring young minds. The article generated an extraordinary amount of consternation click bait. Angry responses were written and hot takes were quick-fried and served up by outlets anxious  to join the dinner rush of  ad-friendly disapproval.

It’s a story that could have been designed to press every outrage button of the political-correctness-gone-mad brigade. It has students trying to ban things, an apparent lack of respect for independent thought and reverse racism. It seemed too good to be true.

And it was. In reality, what happened was far less interesting: the student union of the School of Oriental and African Studies (Soas) at the University of London had proposed that “the majority of philosophers on our courses” be from Asia and Africa, and that the Western greats be approached from a “critical standpoint”. Some might consider this a reasonable request, given that critical analysis is a component of most philosophy courses, and Soas has a long tradition of promoting the study of the global South. Yet a story about students declaring Kant irrelevant allows the Telegraph to despair for the youth of today and permits advertisers to profit from that despair.

People didn’t start pumping out this stuff because they decided to abandon journalistic ethics. They did so because such principles are hugely expensive and a hard sell. Even those of us who create and consume news can forget that the news is a commodity – a commodity with a business model behind it, subsidised by advertising. Rigorous, investigative, nuanced content, the sort that pays attention to objective facts and fosters serious public debate, is expensive to create. Talk, however, is cheap.

Fake news sells because fake news is what people want to be true. Fake news generates clicks because people click on things that they want to believe. Clicks lead to ad revenue, and ad revenue is currently all that is sustaining a media industry in crisis. Journalism is casting about for new funding models as if for handholds on a sheer cliff. This explains a great deal about the position in which we find ourselves as citizens in this toxic public sphere.

What has this got to do with Donald Trump? A great deal. This sticky, addictive spread of fake news has fostered a climate of furious, fact-free reaction.

Press outlets give millions of dollars of free coverage to Trump without him having to send out a single press release. The reality TV star is the small-fingered god of good copy. The stories write themselves. Now, the stories are about the threat to the future of journalism from the man who has just entered the Oval Office.

Trump’s first press conference in six months, held at Trump Tower in New York on 11 January, was – by any measure – extraordinary. He did not merely refuse to answer questions about unverified allegations that he had been “cultivated” by Russia. He lost his temper spectacularly with the assembled press, declaring: “You’re fake news! And you’re fake news!”

Trump did not mean that the journalists were lying. His attitude to the press is straight from the Kremlin’s playbook: rather than refute individual accusations, he attempts to discredit the notion of truth in journalism. The free press is a check on power, and Trump likes his power unchecked.

Writing in the Guardian in 2015, Peter Pomarantsev noted of Putin’s propaganda strategy that “these efforts constitute a kind of linguistic sabotage of the infrastructure of reason: if the very possibility of rational argument is submerged in a fog of uncertainty, there are no grounds for debate – and the public can be expected to decide that there is no point in trying to decide the winner, or even bothering to listen.”

If people lose trust in the media’s capacity to report facts, they begin to rely on what “feels” true, and the influence rests with whomever can capitalise on those feelings. Donald Trump and his team know this. Trump doesn’t tell it like it is. Instead, he tells it like it feels, and that’s far more effective.

Fake news – or “bullshit”, as the American philosopher Harry G Frankfurt termed it in a 2005 essay – has never been weaponised to this extent, but it is nothing new. George Orwell anticipated the trend in the 1930s, looking back on the Spanish Civil War. “The very concept of objective truth is fading out of the world,” he wrote. “Lies will pass into history . . . In Spain, for the first time, I saw newspaper reports which did not bear any relation to the facts, not even the relationship which is implied in an ordinary lie . . . In the past people deliberately lied, or they unconsciously coloured what they wrote, or they struggled after the truth, well knowing that they must make many mistakes; but in each case they believed that ‘facts’ existed and were more or less discoverable.”

This is the real danger of fake news, and it is compounded by a lingering assumption of good faith on the part of those who believe in journalistic principle. After all, it’s impossible to prove that a person intended to deceive, and that they didn’t believe at the time that what they said was true. Trump may believe in whatever “facts” he has decided are convenient that day. When he insists that he never mocked a disabled reporter, whatever video evidence may exist to the contrary, he may believe it. Is it, then, a lie?

Of course it’s a lie. People who have no respect for the concept of truth are still capable of lies. However, they are also capable of bullshit – bullshit being a register that rubbishes the entire notion of objective reality by deeming it irrelevant. The only possible response is to insist, and keep insisting, that the truth still means something.

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era