Kelvin MacKenzie isn't a good macroeconomist

Transfers from rich areas to poor ones are really very useful for not screwing up the economy.

Former Sun editor Kelvin MacKenzie wrote a silly column yesterday. In it, he argued that "the middle class of London and the South East" are underserved by politicians, and called for a new political party which "believes that the striving classes in the South are overtaxed and overburdened".

It was, clearly, bunk. Charlie Hallam took most of it apart yesterday, pointing out that high pay is not the same as a large contribution to society, and that much of the boost London and the South East gets is merely entrenched advantage:

A start-up will find loans easier to obtain with a London address. Contacts are easier to make. Lobbying is easier. And there's that whole prejudice thing you don't have to deal with if you're based in the south.

The Economist's Daniel Knowles also points out that:

Every example he offers of London and the south being attacked takes the form of taxes on the rich—stamp duty for example—which also apply in the north. Meanwhile, the subsidy he says that the north gets is in the form of public spending: welfare benefits or social housing for example, which also apply in the south.

That is, far from wanting to fight for the South, MacKenzie is arguing for the rich of Britain and against the poor, wherever they actually are.

But there's a far simpler reason why MacKenzie is talking crap. The Telegraph's Ed West touched upon it in an otherwise faintly patronising post, writing:

Different parts of the economy require different economic policies, which is why the convergence of interest rates made the euro such a fundamentally bad idea for those countries on the fringe, such as Greece and Spain, since monetary policy would be set by people in Frankfurt and Brussels and therefore would be suited towards Frankfurt and Brussels. That’s a model that will work fine so long as the Greeks are prepared to live in perpetual poverty in the name of European solidarity, and that Germans are happy to pay the Greeks’ welfare bills.

The north and south of Britain are, by virtue of sharing the same currency, yoked to the same monetary policy. Short of some extraordinarily unorthodox economics – banknotes which catch fire south of Watford Gap? – that policy will be suboptimal for one or both areas of the country. Aggregate demand shocks rarely affect the nation uniformly, and so the Bank of England has to decide whether (say) inflation in the south is worth preventing a recession in the north.

But one way of lessening that impact is with common fiscal policy. That way, shocks in part of the country can be dealt with more quickly by transferring revenue from the healthy part to the struggling part. Which is, of course, exactly what MacKenzie was complaining about.

(It is worth noting that this analysis is roughly that which was relied on by every anti-Euro economist ever, who all feel very smug these days as Greece needs continual fiscal transfers just to stay in the economic bloc.)

The alternative – giving the north its own currency and monetary policy – may, I suppose, be what MacKenzie was angling for all along. It would certainly get those pesky Scousers out of his hair.

The North. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

How tribunal fees silenced low-paid workers: “it was more than I earned in a month”

The government was forced to scrap them after losing a Supreme Court case.

How much of a barrier were employment tribunal fees to low-paid workers? Ask Elaine Janes. “Bringing up six children, I didn’t have £20 spare. Every penny was spent on my children – £250 to me would have been a lot of money. My priorities would have been keeping a roof over my head.”

That fee – £250 – is what the government has been charging a woman who wants to challenge their employer, as Janes did, to pay them the same as men of a similar skills category. As for the £950 to pay for the actual hearing? “That’s probably more than I earned a month.”

Janes did go to a tribunal, but only because she was supported by Unison, her trade union. She has won her claim, although the final compensation is still being worked out. But it’s not just about the money. “It’s about justice, really,” she says. “I think everybody should be paid equally. I don’t see why a man who is doing the equivalent job to what I was doing should earn two to three times more than I was.” She believes that by setting a fee of £950, the government “wouldn’t have even begun to understand” how much it disempowered low-paid workers.

She has a point. The Taylor Review on working practices noted the sharp decline in tribunal cases after fees were introduced in 2013, and that the claimant could pay £1,200 upfront in fees, only to have their case dismissed on a technical point of their employment status. “We believe that this is unfair,” the report said. It added: "There can be no doubt that the introduction of fees has resulted in a significant reduction in the number of cases brought."

Now, the government has been forced to concede. On Wednesday, the Supreme Court ruled in favour of Unison’s argument that the government acted unlawfully in introducing the fees. The judges said fees were set so high, they had “a deterrent effect upon discrimination claims” and put off more genuine cases than the flimsy claims the government was trying to deter.

Shortly after the judgement, the Ministry of Justice said it would stop charging employment tribunal fees immediately and refund those who had paid. This bill could amount to £27m, according to Unison estimates. 

As for Janes, she hopes low-paid workers will feel more confident to challenge unfair work practices. “For people in the future it is good news,” she says. “It gives everybody the chance to make that claim.” 

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.