Private and public debt

I’m catching up late with this, but this is indeed an excellent post (and, indeed, blog) on the Office for Budgetary Responsibility’s revision of its forecasts on what is going to happen to private debt over the next few years. As public debt is being reduced, private debt is now likely to expand.

Inevitably, government cuts to public services will lead to people paying for them separately, thus squeezing household finances further and driving up household debt; while an economy actively flirting with depression will cause further problems to household debts as people lose their jobs, on top of the impact of the falling value of real incomes, as people seek to maintain living standards as far as possible. That’s not rocket science – except, it would seem, to a government intent on blazing a path back to the 80s.

This may well spell bad news for the 2012 pensions reforms: rising private debt, on top of household savings apparently resuming pre-recession trends, is likely to cause further pressures on peoples’ ability to save (more) for their retirement. At the same time, rising debt is likely to increase pressures for people to have access to their pension pots early. This has already been the subject of a Treasury consultation. Evidently, pensions are not savings per se – rainy days are what savings are for; pensions are for your retirement – but seeking to encourage people to save more while engaging in policies that are driving up their debts is an unhealthy and short-sighted combination.

At the wider, political level, we may well here be sowing the seeds of a future financial crash – but it is clear that the intentional driving up of private debt, despite the lessons of what the economy has been through in the past few years, itself underlines the sharply ideological nature of this government’s intensifying onslaught.

[Edit 1 April: And for living proof that, if you sit an infinite number of bloggers down in front of an infinite number of keyboards, you will get, if not the works of Shakespeare then more or less similar posts, within almost literally seconds of posting this, I discovered that Duncan Weldon over at False Economy had made most of the same points, and better, and with more links, too. Damn!]


Equality and the Budget

A brief word for the Fawcett Society’s day in court on Monday challenging the Budget on the grounds that the Treasury had not conducted the appropriate equality impact assessment – and that the Budget was, thereby, unlawful. The Fawcett Society is appealing for supporters to attend the Royal Courts of Justice, in the Strand, where the case is being held, to show their support for a judicial review of the Budget.

At a time when the ConDem’s true colours are being shown in the decision to hold s.73 of the 2010 Equalities Act in abeyance, thus allowing businesses the room voluntarily to decide whether or not publicly to disclose information on the gender pay gap in their own firms, the case is a timely reminder that not only is the Budget inimical to women’s interests, so is the coalition government. It seems increasingly the case that equal pay can only be delivered by greater transparency over pay decisions, but a government which is so evidently not committed to transparency is not only clearly in hock to business interests, but is also in no place to advance the equalities agenda.

Equalities challenge to the Budget

The Fawcett Society is seeking a judicial review of the ConDem coalition’s ’emergency’ budget, on the grounds that it is detrimental to women and that the Treasury had not undertaken the required equalities impact assessment.

The Fawcett Society believes that 72% of the cuts proposed in the budget (£5.8bn out of £8bn) will come out of the income of women, since the majority of cuts are to benefits on which women rely while changes to the tax system will benefit more women than men. Given that 65% of public sector workers are women, public sector cuts are also likely to have a disportionate impact in this respect, too.

An equalities impact assessment must be conducted under the law before policy decisions are taken, so that steps can be taken to mitigate any adverse impact identified. However, the Fawcett Society reports that, ‘despite repeated requests’, the Treasury has produced no evidence that such an assessment took place.

The Society may not be successful in getting the whole budget declared unlawful. But the Treasury does need to come up with some proof that it has considered, and sought to mitigate, the impact on women as identified in the Society’s headline figures. Especially in a time of recession, the need for equality must remain a prime consideration and the Treasury needs to be held to account for its apparent failures.

Hat-tip: the TUC’s ToUChstone blog.

Abuse of the language: independent

At the weekend, the government appointed Lord Hutton, former Secretary of State for Work and Pensions, to head a commission reviewing public sector pensions. Accepting the job was a controversial move, for evident reasons of Hutton’s political affiliation and the evident remit to ‘contain’ public sector pensions costs, but the commission is intended to be ‘independent’, as George Osborne confirmed to Andrew Marr not once, not twice but three times.

But, just how independent the (other) Hutton commission is going to be able to be is a moot point. We’ve had already the unedifying spectacle of Clegg sticking the boot in on the basis of some rather spurious accounting via the (similarly ‘independent’) Office of Budget Responsibility; the apparent remit of the Commission to come up with ‘early savings’ does, as The Guardian commented (first link above), provide not so much as a clear steer towards, but a pointed indicator of, an increase in member contributions; and today’s Budget reports that public sector pensions in payment will be indexed in the future not by the Retail Price Index, but by the Consumer Price Index.

(Incidentally, as the following graph shows, CPI is habitually lower than RPI: in 14 of the 21 years since 1988, the annual rate of change in RPI has been higher than that of CPI in the September which is used for uprating benefits, including pensions, while CPI has been higher in just three; while £1 in 1988, uprating for CPI, would be worth £1.74 by 2010, compared to £1.99 where uprating was by RPI – 14% more in this period.)

Today’s announcement would appear to restrict the Commission’s room for manoeuvre by taking away one of the negotiations options which might be otherwise have been used to ‘sell’ reform to a sceptical workforce.

Independent? I wouldn’t bank on it. Another fig leaf for long-held Tory ambitions to cut public sector pensions? Probably.

[Edit 23/6: as Cameron seems to have confirmed today in another undermining of the independence of the Hutton Commission: not only was the total bill for public sector pensions becoming ‘unaffordable’ but ‘major changes’ would be needed for the future based on ‘no longer final salary schemes or having to put more money in’.]

Finger on the pulse

So Georgie Boy has decided not only not to proceed with, but to abolish ‘before it is even introduced’, the landline duty to contribute towards the financing of broadband outside high-populated urban areas.

Funny, that – the landline duty was dropped from the Finance Act prior to the election, on the grounds of the convention that controversial fiscal measures are not proceeded with immediately before an election. What was never legislated for cannot be abolished, surely? But no – Georgie wants to tell us all in the Budget what a great favour he has done by abolishing it (p. 39). So: cheers for that, George.

Not only that, but rural broadband is to be supported ‘in part from the Digital Switchover under-spend.’ Well, I thought that the coalition government’s plans were to extend the portion of the licence fee earmarked for the Digital Switchover fund beyond when it runs out in 2012. (In the meantime, up until 2012, the shortfall in this part of the licence fee is intended to finance the 2 Mbps universal service commitment.) For an ’emergency’ budget intended to set out fiscal plans for the lifetime of this parliament, it’s a bit surprising to see this extension not referred to.

However, I’m sure the coalition knows what it’s doing.

In the meantime, it’s worth recalling that rolling out high-speed broadband ‘beyond the market’ is not going to be achieved on the basis of the coalition’s current approach. Once more: merely shouting ‘ambition’ (just like shouting ‘fairness’ or ‘progressive’, or ‘we’re all in this together’) isn’t going to see it mystically materialise; and neither is it any the more likely to come true the more, or the louder, you shout it.

[Edit 23/6: And, as these slides from the Institute for Fiscal Studies demonstrate, even the claim that yesterday’s Budget was ‘progressive’ is actually false. Or a bare-faced lie.]