What's the deal with the New Green Deal?

The same old mistakes are made again today by those who pull the levers.

Britain is not heading for a new economic disaster; it has sustained one long-term national and personal debt crisis. One group, the Green New Deal Group, has been consistent with its critique: economic failure caused public debt to rise and this is where the crisis lies.

The same old mistakes are made again today by those who pull the levers. Unemployment figures are down but this is sustained by part-time or zero-hour contracts and underemployment. Tony Dolphin said in 2012 on these pages: "We know there are many reluctant part-time workers because the Office for National Statistics asks those who are working part-time if they would prefer to be working full-time and 1,418,000 are currently saying "yes" – the highest number since comparable records began in 1992 and an increase of 700,000 over the last four years.”

While the number of unemployed is reduced the amount of work being done doesn't rise. Jobs aren't being created quick enough, it's just more jobs have more people working them. That's not what we had in mind when criticising employment rates.

Another mistake is bank bonuses. In the days before the Big Bang (deregulation of the financial markets in 1986), back when bankers were more trusted than the police, the NHS, and the press, UK merchant banks paid bonuses of around 3-4 per cent of a salary, while some firms only gave Christmas hampers as thanks.

In 1997 the city bonus pool hit £1 billion for the first time. Ten years later: £9bn, 4,000 bonuses of which reached above £1m, a few hundred over £5m, and twenty-odd over £10m. Even after RBS was bailed out, post-Libor scandal, bankers were paid bonuses of £7bn.

And here's another kick in the teeth: according to the figures from the Office for National Statistics, banks and insurers delayed about £700m of bonuses so as not to pay the 50p top rate of income tax.

This is where better control of banks is needed. In 2008 the Green New Deal Group argued that, in the face of economic collapse, government should not revert to type, hoping the market would fix things, but actively intervene. In their second report in 2009, The Cuts Won't Work, the group warned of complacency around freezes to inter-bank lending and the rise of high city bonuses.

Cash injections to save the world, bailouts to save the banks – these are all vindicated in theory as in practice. Quantitative easing was not able to save the country from unemployment, low wages, and low investment because in the following years we had a government that were ideologically committed to austerity. But none the less creating more money and spending more to save later should appeal.

The Green New Deal would be funded through tackling tax evasion and avoidance, a programme of Green Quantitative Easing would generate jobs and economic activity, investment would be made through bailed out banks at sustainable rates of interest, and buying out PFI debt using Green QE money would ensure no more money is wasted through it.

But where further? A local Green New Deal could fund regional and community banks which in turn invests in small and medium enterprises and lends to local people at reasonable rates of interest, putting out of business payday lenders, home creditors, and loan sharks who suck money out of the real economy and profit from people's debt.

Giving this kind of boost to high streets and local communities would provide more jobs, more money in people's pockets, and stop high roads becoming a miserable mix of pawnbrokers, betting shops, and empty fronts.

As opposed to the political status quo, the Green New Deal Group called for a Keynesian solution of more spending to meet economic crisis head-on. It feels vindicated in its decision and continues the same for today. Seeing this through at a national and local would do a great deal to improve on what this government has done so much to ruin.

Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

Photo: Getty Images
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There are risks as well as opportunities ahead for George Osborne

The Chancellor is in a tight spot, but expect his political wiles to be on full display, says Spencer Thompson.

The most significant fiscal event of this parliament will take place in late November, when the Chancellor presents the spending review setting out his plans for funding government departments over the next four years. This week, across Whitehall and up and down the country, ministers, lobbyists, advocacy groups and town halls are busily finalising their pitches ahead of Friday’s deadline for submissions to the review

It is difficult to overstate the challenge faced by the Chancellor. Under his current spending forecast and planned protections for the NHS, schools, defence and international aid spending, other areas of government will need to be cut by 16.4 per cent in real terms between 2015/16 and 2019/20. Focusing on services spending outside of protected areas, the cumulative cut will reach 26.5 per cent. Despite this, the Chancellor nonetheless has significant room for manoeuvre.

Firstly, under plans unveiled at the budget, the government intends to expand capital investment significantly in both 2018-19 and 2019-20. Over the last parliament capital spending was cut by around a quarter, but between now and 2019-20 it will grow by almost 20 per cent. How this growth in spending should be distributed across departments and between investment projects should be at the heart of the spending review.

In a paper published on Monday, we highlighted three urgent priorities for any additional capital spending: re-balancing transport investment away from London and the greater South East towards the North of England, a £2bn per year boost in public spending on housebuilding, and £1bn of extra investment per year in energy efficiency improvements for fuel-poor households.

Secondly, despite the tough fiscal environment, the Chancellor has the scope to fund a range of areas of policy in dire need of extra resources. These include social care, where rising costs at a time of falling resources are set to generate a severe funding squeeze for local government, 16-19 education, where many 6th-form and FE colleges are at risk of great financial difficulty, and funding a guaranteed paid job for young people in long-term unemployment. Our paper suggests a range of options for how to put these and other areas of policy on a sustainable funding footing.

There is a political angle to this as well. The Conservatives are keen to be seen as a party representing all working people, as shown by the "blue-collar Conservatism" agenda. In addition, the spending review offers the Conservative party the opportunity to return to ‘Compassionate Conservatism’ as a going concern.  If they are truly serious about being seen in this light, this should be reflected in a social investment agenda pursued through the spending review that promotes employment and secures a future for public services outside the NHS and schools.

This will come at a cost, however. In our paper, we show how the Chancellor could fund our package of proposed policies without increasing the pain on other areas of government, while remaining consistent with the government’s fiscal rules that require him to reach a surplus on overall government borrowing by 2019-20. We do not agree that the Government needs to reach a surplus in that year. But given this target wont be scrapped ahead of the spending review, we suggest that he should target a slightly lower surplus in 2019/20 of £7bn, with the deficit the year before being £2bn higher. In addition, we propose several revenue-raising measures in line with recent government tax policy that together would unlock an additional £5bn of resource for government departments.

Make no mistake, this will be a tough settlement for government departments and for public services. But the Chancellor does have a range of options open as he plans the upcoming spending review. Expect his reputation as a highly political Chancellor to be on full display.

Spencer Thompson is economic analyst at IPPR