...a blog by Richard Flowers

Wednesday, July 08, 2015

Day 3502: Budget Summary – Conservatory Vote to Lift Ban on Shooting Labour's Foxes*


Master Gideon's it's-not-an-emergency emergency budget will be hailed as a triumph by all the usual suspects; the "living" wage announcement feted as a brilliant coup.

They'll love the Inheritance Tax cut; they'll delight in raising the Personal Allowance that goes to the well-off (and goes against everything the Coalition did); they'll relish the allowance for dividends (favouring unearned income once again); they'll thrill to the grinding oppression of the working classes.

It's a budget for rent seekers, not workers.

It's a budget for the old, not the young.

It's a budget for the dead rich, not the poor living.

In the Treasury, the Chancellor reviews those final Budget figures

The big flashy "rabbit from hat" moment was that introduction of a compulsory £9/hour "living" wage (by 2020), which – along with action on Non-Dom status taxpayers – was pinched straight from Hard Labour's 2015 manifesto. (In fact Mr Milipede was promising only £8/hour by the end of the decade, so that fox was well and truly shot).

Alongside their COMPLETE CAPITULATION on the Benefit Cap (caving in to the Conservatory rhetoric about "benefit street" culture, even though it's total Boss Hog Wash) leaves the Far Too Loyal Opposition floundering.

Even the "spending someone else's money"-ness of saying "Business must pay for a compulsory living wage!' is tres Milipede. But by foreswearing mere 1% pay rises for the public sector, isn't he saying: "Do as I say, not as I do"? (Clue: yes!)

The living wage according to the Living Wage Foundation should be £9.15 in London and £7.85 everywhere else.

So that £9 is does not sound too bad. (We cannot assume that inflation will be nothing forever, but even if it gets back on the 2% target from next year those figures are likely to be around a £9.90 and £8.50. So still okay for those not in the Capital, if a bit more squeaky for That Londoners.)

There's a sort of circularity to it all.

At the moment the (Tory) reasoning goes: the Government collects tax and then pays it back to people as Tax Credits thus subsidising jobs that do not pay a "living" wage – now they take away the tax credits but will force companies to pay more, and raise the personal allowance so that the income tax on that is well who knows more? Less? The same? All of the above?... but George will cut the companies' Corporation Tax rate to the lowest in Europe... so we are still subsidising the same companies to pay those jobs.

(Of course, I would usually point out that "not taxing" is not the same as subsidising… and that's true here too! If the companies lay off the "living" wage workers… they still get to keep the tax cut! Trebles all round!)

It's certainly not that I'm an enormous FAN of the Tax Credits system. Mr Frown invented it as a fix so that he could count it as "negative" taxation (while also Empire-building, so he could control a share of benefits from the Treasury). They ARE somewhat redistributionist, gathering up tax and giving it to lower income earners.

My main objection is that you have to fit into the right categories, you have to be deemed "worthy" by the Chancellor, in order to qualify and that strikes me as dangerous, handing largely unaccountable power to an office in Whitehall (and all the minions of the bureaucracy, with no offence to the Hon. Lady Mark). Mr Frown gained a moderate amount of infamy from the way that each year his budget would change who the "good" people were in a way that ENTIRELY COINCIDENTALLY reflected his own changing life circumstances – new baby = child trust fund; off to school = extended child tax credits and so on. That's moderately quaint. And also obviously massively corrupt.

(On top of that, I don't like that they're too complicated for anyone to understand, resulting in them going wrong all the time and causing hardship when the Government comes round to snatch back the money they've already given you.)

So I don't think there'd be anything terribly wrong in allowing the Tax Credits system to die a natural death by RAISING WAGES so much that Tax Credits became unnecessary.

What I don't think is a good idea is putting the cart as it were before the horse. And then flogging the horse to within an inch of its life.

As I said about Greece: making poor people poorer does not magically make them richer.

And the cuts to tax credits are a bit EYE-WATERING: currently there's a taper set so that you lose 41% of each pound you earn over £6,420; Gideon has upped that taper to 48% and almost halved the starting point down to £3,850. So – for those who jump through the hoops to qualify – that's an effective marginal tax rate of 48% on earnings at the bottom end, and you start paying it on a much lower wage. Compared to 45% on earnings over £150,000.

How all in it together are we?

And don't even THINK about trying to get out of poverty by working or educating yourself. In a calculated DOUBLE-SNUB to younger people, the living wage ISN'T going to apply if you are under 25 AND he's abolishing maintenance grants – adding another twenty-five grand to your student loans.

It would be TERRIBLY easy to say: "those students who wanted to punish the Lib Dems over tuition fees – how's that working out for you?".

But in truth this is just desperately COUNTER-PRODUCTIVE, undoing the GOOD that the Liberal Democrats in the Coalition tried to do for increasing social mobility, and undermining the ENTIRE COUNTRY by reducing the incentive to educate our workforce to higher-paying jobs.

Similarly, freezing all benefits for five years – billed without irony as "to allow salaries to catch up"(!) – goes against every effort that the Liberal Democrats made in Coalition to protect the most vulnerable. And slashing the Employment Support Allowance that enables people with disabilities to participate in the workforce is just going to damage not just their lives but the amount they contribute to the country.

Oh and he's chopped the cap on welfare payments from £26,000 to £20,000. For what can only be described as "reasons", we happen to know that finding an extra £500 a month is, ahem, "quite difficult" even when you're on Daddy Richard's salary. So goodness only knows how you're supposed to manage when you're on a low income and in-work benefits or no income at all.

And of course his TOTAL COWARDICE of making the BBC decide whether or not to cut the benefit of free TV Licences to the over-75s. (They decided to take the hit.) A kicking for Auntie Beeb always proving a real crowd-pleaser with the rabid right on the backbenches – not to mention the dead tree media barons.

"Hello, I'm George. Pwease can I be leader next!"

So them's the LOSERS; who's the WINNERS?

There are substantial tax giveaways… to the favoured middle-classes. The rise in the Higher Rate threshold on top of the rise in Personal Allowance is a complete reversal of the Coalition years' policy that NARROWED the band so that ALL of the benefit of raising the Personal Allowance went to Basic Rate taxpayers. Now, Higher Rate taxpayers will get TWICE the benefit of basic rate payers, plus extra ON TOP. (Combined I think they're worth about £200 a year.)

Master Gideon has also done a thing with dividends – pretty much making up a whole new tax, in fact, "Dividend Income Tax", separating the taxation of dividends from other income and giving it its own Personal Allowance. He toasted himself for saying that it would be possible to receive up to £17,000 in income without paying any tax, but a lot if not all of that would be from UNEARNED income – so it promotes "rent seeking", rather than working to or investing in creating wealth.

(On the good side, this may have slightly restored the tax credit for pension funds that Mr Frown raided back in 1998; that's good for me – or anyone with a pension – as there a better chance of them not going BUST before we retire. And it's good for City pension fund managers. But less so for the economy more widely, as money that is saved in pensions – i.e. sunk into the stock market – isn't circulating in the wider economy generating profits).

And of courses there's a million pounds free of Inheritance Tax.

It's almost as the though the Baronet doesn't WANT people to earn money. Why bother when he can get it for nothing from daddy?

On top of it all, his target for getting the budget into surplus has slipped another year (since March!) which suggests this really wasn't the time to be throwing tax away. Growth predictions are down as well – not a lot he can do about Greece or China, to be fair – but slashing capital spending on his "Northern Poorhouse" and withdrawing cash from the people most likely to spend it and giving it away to people to put in non-productive investments point very much the wrong way for growth and much more towards a repeat of 2011's short sharp STOP.

Does make you wonder where from his hat he plans to pull the EIGHT BILLION QUID he promised for the National Health Service. Again. And – in another multi-billion bung as a sop to those wingnuts on the Conservatory right – the 2% of GDP he's guaranteed to spend on guns and bombs. Maybe the RABBIT ate it?

On the whole I think it was a flashy and "clever-clever" budget, but lacking in any real substance, biased towards people who already have capital (in large supplies) and with the potential seriously to undermine the country's recovery by prolonging austerity and cutting the money being spent.

As an advertising feature called "What Did the Liberal Democrats Ever Do For Us?" I think this is a work of crazed genius. As a programme for recovery… well, I hear Yanis Varofakis is looking for a job

The proof of the pudding will be in how we all feel in a year's time when we'll know if he's killed growth stone dead. Again.

Or in 48 hours' time if it implodes the way his "Omnishambles" budget did.


*Yes, they tried to bury an announcement on lifting the hunting ban too.

Tuesday, July 07, 2015

Day 5301: Speaking Out Against Extremism


As a member of an ethnic community (namely white people*), it has been brought to my attention that we're in danger, as a community, of "tacitly condoning" extremist language from my fellows because they are "people like me".

These people prey on young British men and women, trying to persuade them to travel to foreign countries thousands of miles away, to perform acts of terrible violence with high explosives.

I mean, of course, people like Mr Michael Fallon, Secretary of the so-called Ministry of Defence (by which we mean Attack) who thinks we should be exploding things in Syria.

There seems to be something about Syria that EXEMPTS politicians from remembering what actually happened. If it's not Mr Milipede claiming he "stood up to President Obama" (when in fact he and Mr Balloon basically cancelled each other out with very similar "let's bomb Syria" motions) then it's Mr Fallon saying we should "think again" about attacking people who we were never thinking of attacking and defending the people who we WERE thinking of attacking!

I think there's a name for how this happens: it's called "lazy journalism" – "Oi! Newspapers! Look at the record and CHALLENGE people when they MAKE this STUFF UP!"

Of COURSE things are more COMPLICATED than just "bombing people bad".

Our history – in the last ten years, or a hundred years, or a THOUSAND years(!) – is one of sticking our fluffy noses into the Middle East and making a mess. So we've got RESPONSIBILITIES and AMENDS to make.

And the Not-Islamic Not-a-State terrorists (should we call them NINAS to keep the Prime Monster happy?) are, as far as I am able to judge from their actions, among the most horribly evil people on the face of the planet, and if they come anywhere near us then we would be quite right to fight them off with the full might and power that the West could deploy.

But they AREN'T anywhere near us. And we certainly do not seem willing to deploy enough might and power to defend the people in the region that we say are our friends. And deploying only the tiny fraction of the full might and power that we can be bothered to send – while still fully capable of flattening large areas of any Middle-Eastern country – doesn't half badword off the survivors!

If you want to intervene, then (a) get a UN mandate and (b) send enough troops actually to do the job. Lobbing bombs in the general direction of people you don't like just so you can feel better… that's what TERRORISTS do!

We have in the West an "ultimate weapon" that for all the undoubted impressiveness of all that might and power is INFINITELY more successful than ANY amount of ordinance: it is called PEACE. Sometimes it is called prosperity.

It is why Ukraine is willing to stand up to Vlad the Bad. It is why hundreds of thousands are willing to throw themselves in leaky boats to cross the Mediterranean.

So I KNOW it's COMPLICATED, but can we at least START from a position of HUMBLY accepting that we keep messing up and that SWAGGERING around THREATING to EXPLODE people is, to say the least, not helping.

Today is "7/7". We should remember. And we should do BETTER.

*white ELEPHANT people, thank you.

Wednesday, July 01, 2015

Day 5295: Making a Drachma out of a Crisis


Featured on Liberal Democrat Voice

The badly-wounded Greek economy lurches between survival and final total collapse.

When the Greek Syriza Government – elected on an unfulfillable promise to end austerity AND settle with their creditors – hit the brick wall of reality, they abdicated responsibility, punted it back to the people in a referendum where not even Nobel Prize-winning Economists understand the choice, and seemingly killed any chance of a last-minute rescue.

But now, as he's already over the brink, Prime Minister Tsipras appears to accept the demands of the people trying to save him.

Update: or would he rather his people voted no, and carried on into the abyss?

How can this rescue the Greek economy?

How much does a Greek... oh, you've heard it

This is what a taste of Economic Armageddon looks like: their banks are closed; their Euro lifeline is suspended; they've missed a payment to the IMF – though the IMF, obviously unwilling to pull the trigger, declares that they're "in arrears", rather than "default"; and they've managed to piss off most of their neighbours by apparently playing silly-beggars over this referendum…

There appear to be two – equally heartfelt – responses to the crisis unfolding in Athens and engulfing the Greeks.

The first is: Why should we (or at least Europe) continue to throw good money (raised from EU taxpayers) after bad when Greece has already been treated with incredible generosity – more than half of their debt was written off and the rest was effectively nationalised by the EU in the immediate aftermath of the global meltdown – while they have failed to do their part in reforming their pensions, government or tax collection?

The Greeks are seen – largely legitimately – as the authors of their own downfall:

  • their now notoriously-generous pensions (retire at 55, receive £1000 a month for 14 out of 12 months a year… it seemed too good to be true, and guess what… it WAS!); a welfare system that appear to involve generously paying grannies to make sure their kids are all right: Greece has a population of 11 million, 2.6 million (24%) of whom are receiving their pension. No wonder the system is still going bust!
  • their kleptocratic government (who fibbed their way into the Euro, and, with the help of Goldman Sachs, were hiding some rather substantial "off-balance-sheet" debts until they were uncovered as the whole sub-prime derivatives market unravelled in disarray);
  • their cripplingly-expensive loss-making 2004 Olympic vanity project that left Athens bedecked with new ruins of abandoned stadia;
  • and their basic unwillingness to pay taxes (with tax evasion estimated to run at 40%-50%!); their spending has gone up with their post-Euro-entry GDP, but they are still collecting roughly the same amount of tax as they were in 2001.

It's not that Greeks do not work harder than Germans – if anything, the reverse is true. It's not even that they all retire at 55 to sit on an Aegean beach. It's because Greece is a small country largely dependent on a service sector economy.

80% of the Greek economy is in service sector jobs. To be fair, so is Britain's! But unlike Britain, where high-value financial services are by far the biggest part of that sector (40% of service sector; 30% of the total economy – don't look smug; that's why our economy was nuked in 2008), in Greece those services are TOURISM and SHIPPING, both of which pretty obviously take a hit during a global recession (when fewer people can afford to take a holiday and fewer goods are being bought and sold and therefore moved about) and both of which are given a relatively low value (while huge banking hubs like London are RARE, there are PLENTY of OTHER places to go on holiday or OTHER boats to ship your goods in).

The pre-existing infrastructure for manufacturing in Germany (or for finance in London) put Greece at an inescapable disadvantage. Nor do they have the massive population of a China or an India or a Brazil and even if they did certainly not one willing to accept the low standard of living that lets those countries (currently) undercut on cost of labour. Hiking their minimum wage probably didn't help, but really they were never going to go low enough to be cheaper than places where people live on a dollar a day.

They wanted all the benefits (and some) of a Northern European economy. Without the Northern European economy to support it. So they elected Governments who gave them what they wanted but paid for it on tick.

And by electing Syriza, who were committed to spending even more money that they don't have (and have already made a start by re-hiring 15,000 civil servants), the Greek people have given a pretty obvious gesture to their creditors.

The other response is to see this as tyranny, even cruelty, an immoral "moral crusade" by faceless, foreign, unaccountable, "neoliberal" (see my button eyes roll), capitalist bankers overruling the sovereign wishes of a democracy. If it's NOT the Greeks fault – they are hardworking but geographically unlucky – then it must be someone else's, it must be the sinister cabal of capitalism!

This view says that the conditions imposed on Greece – in particular the demand that the Government slash spending to the point where they were able to run a surplus – were (indeed still are) not only utterly unachievable, but actually at the root of why Greece's recession has persisted for six years. Making poor people poorer doesn't magically make them richer.

Great Britain, they remind us – no matter how smug Gideon is about our superior growth rates – has moved out of recession while continuing to run elephant-sized deficits and thus stimulating not smothering our recovery (though that's largely thanks to Liberal Democrat amelioration of the more insane Tory austerity plans).

But Greece HASN'T been running a surplus either – they've just not run ASTRONOMICAL deficits the way Great Britain or Americaland have; with Greek debts already 175% of their GDP they've had no flexibility to do so.

There are a FINITE amount of lenders to go around, If EVERYONE is running deficits because of the recession, OUR deficit – looking like a safer bet – has probably sucked up international lending making it harder for Greece to attract another sugar daddy. In fact, their membership of the Euro may have actually SAVED them by forcing this role upon the otherwise-unwilling Germans.

Eurosceptics (and idiots) insist that membership of the Euro effectively locks Greece into an unsustainably high exchange rate that continues to draw money away from the Mediterranean countries and into Germany, and they should crash out and devalue to regain competitiveness.

These are usually the same people who celebrate Mr Frown's intransigence in keeping Great Britain out of the Euro, saying "look, look how badly Greece and Spain and Italy are doing!" even though – by their exact same argument – the huge financial centre of London would have sucked money into the UK making us huge winners from the deal.

There IS some truth in saying that single currency areas need to make revenue transfers back to their economic peripheries – in the UK (sterling single currency area) payments go from London and the South East to other parts of the country; in Americaland (US dollar single currency area) payments go from the coasts to the central States.

European debt-forgiveness has achieved something like this but in a half-hearted and haphazard manner.

However*, the REAL impact of Euro entry saw Greek GDP per capita go from $12,000 in 2001 (when they joined the single currency) to $32,000 in 2008 (when the market hit peak just before the crash) and has so far fallen back to $27,000. So anyone who says that the Euro has been a bad thing for the Greeks is totally talking out of their hat; and anyone who thinks that things there are as bad as they could get has wilfully blinded themselves to just how much further the Greek economy could fall.

The great fear of Germany (and everywhere else), apart from being stiffed with the bill for all this, is "moral hazard" or the "how many people can you pull into your lifeboat before it sinks and you ALL drown?" problem.

Greece may (still) end up defaulting. And if they DO, they may "get away with it", that is, see their way through to an economic recovery.

Iceland did something similar a few years ago. Their banks went bust and their government simply refused to pay up and when they refused to pay their debts it meant that somewhere else a lot of people's money ceased to exist. Iceland "got away with it", and have seen an economic recovery. That recovery was largely paid for by YOU, the British Taxpayer, because a lot of that money that ceased to exist was ours. Lured by ridiculously generous interest rates that, as it turned out, like the Greek pensions, really were too good to be true, lots of people had put their saving into Icelandic banks. And several councils had put really silly amounts of money there too. And the Treasury forked out to cover those losses, paid for from your taxes.

Those losses were a lot easier for sixty million Britons to bear than three-hundred thousand Icelanders.

If Greece defaults, European governments – mainly the German one – will fork out and eighty million Germans will find it easier to bear than eleven million Greeks.

But where does it end?

Because if Greece can "get away with it" – goes the worry – what's to stop Ireland or Portugal or even Spain or Italy defaulting? At SOME POINT we will HAVE to draw a line. So draw it here and now, they say.

So how do we get these two views? And how do we resolve them?

Well, I think (and it may seem perverse) that the first view is the OPTIMISTIC people, who think that Greece's problems COULD be solved (if they'd just do something about some of them!).

The second view is from people who think Greece's problems are UNSOLVABLE, and therefore want to bung the problem to someone else (someone with enough money to cope with it – meaning Germany… but… moral hazard…).

In a way this is because there are really TWO problems: lack of LIQUIDITY (i.e. no cash in the banks) v lack of SOLVENCY (i.e. expenditure exceeds – all possible – income).

What we NEED to do is SEPARATE the unsolvable problem (the ever-expanding debt that is soaking up all the money) from the (possibly) solvable one (the imbalance in the Greek economy).

So step one: quarantine the existing debts at zero interest. Postpone any further repayments by Greece.

Step two: rather than the random method of letting them borrow willy-nilly and then cancelling some arbitrary chunks of the debt, agree revenue streams from the EU that will allow Greece to BALANCE THEIR BOOKS in return for them implementing reasonable controlling of their spending (and tax raising).

Step three: be aware that every other country in Europe is going to want in on this scheme and immediately begin the work to create accountable democratic control, otherwise Germany will secede from the EU even before Britain manages to vote in Mr Balloon's daft referendum.

*Bite me, Michael Gove (the goft that keeps on goving)

Friday, June 26, 2015

Day 5289: Fluffy footnote: what IS this DEFICIT thingie, again?


I cannot emphasise the following enough: The Deficit is NOT the National Debt. The deficit ADDS TO our National Debt.

I'm sure that Tim Lord Tim (@timfarron) and Mr Norman Conquest (@normanlamb) get this. But too many politicians clearly DON'T.

So: Economics for Elephants 101…

The Government raises about seven hundred billion quid in taxes.

But they spend nearer to EIGHT hundred billion pounds on health, pensions, benefits, schools, guided missiles and Boris' hairdo and the rest.

The difference, the amount extra needed for that spending, about a hundred billion pounds last year, is what is called the DEFICIT and we need to BORROW that from somewhere.

(Mostly, actually, it's borrowed from pension funds more that international banks, but the boys in the City still get a nice cut).

I'll say it again because I really cannot emphasise it enough: The Deficit is NOT the National Debt. The deficit ADDS TO our National Debt.

As of March 2015, the total National DEBT amounted to ONE THOUSAND, SIX HUNDRED BILLION pounds (£1,598.5 billion) or 86.6% of GDP*. That's SIXTEEN times (or SIXTEEN years of) the annual deficit.

And it's going UP.

The INTEREST that the country pays on the debt we owe already is forty-three billion pounds (£43 billion) or around 3% of GDP. Or about the same as we spend on the Department for Education or the Ministry of Defence.

Even if Master Gideon were to eliminate the deficit tomorrow – and the cuts to do THAT would be STAGGERING – we would STILL owe sixteen-hundred billion pounds, so we would STILL have to pay that forty-three billion pounds EVERY YEAR just to stand still.

(Like an interest-only mortgage, or just paying the minimum on your credit card – the debt NEVER GOES AWAY!)

And I'll say this YET again: running a deficit ADDS TO our total national debt.

Running a SURPLUS, on the other fluffy foot, (raising more than we spend; the OPPOSITE of a deficit) means reducing the total debt.

And it’s ONLY a surplus if you reduce debt

(*Or, in an extreme case, where you have NO national debt running a surplus would mean paying in to a sovereign wealth fund.)

– if you spend it on absolutely anything else then you are SPENDING, and NOT running a surplus.

Spending is still spending, even if it’s spending on things we’d rather wish away.

When people say "it’s BAAAAD to cut spending!" my Daddy often replies: "I want to cut the amount of spending that goes to international bankers. You want to give them more and more".

A surplus gives us a CHOICE. We can choose to run a LARGER surplus to build reserves – or rather, as our financial advisors usually advise us, to pay off debts first – OR we can to run a SMALLER surplus and spend a bit more (or even cut taxes a bit).

Though at some point – probably about 2018 – Master Gideon will say "…and now that we're running a surplus I can give you tax cuts…"

At which point, obviously, it STOPS being a surplus again.

IF we reduced the TOTAL debt, we could reduce those £43billion interest payments. And cutting down the amount that we have to pay in interest lets us spend more in future on other things, like schools, hospitals, soldiers, and hairdos.

Why do we not just run a surplus?

Well, as the man said when asked for directions to Tipperary, I wouldn't start from here.

There are a frustrating number of left-wing commenters who will say the likes of: "the Coalition borrowed umpty-billion more in 3 years than Labour borrowed in 13." Clearly without the slightest recognition that what they are saying is that they wanted the Coalition to not run a deficit, i.e the cuts to be a hundred billion pounds a year more savage. Often, and with no sense of irony, while saying that austerity is unnecessary.

The Government is committed to a great deal of spending – salaries for doctors, nurses, soldiers, teachers; building projects; aircraft carriers; £43 billion in interest… They cannot very simply just hit the "stop" button on paying those and many other things, any more than you could, say, cancel your rent or heating bill.

In 2008, tax incomes contracted very sharply. It was ALWAYS going to take TIME for spending to be brought down in line with the new fiscal (meaning how much money the government gets) reality.

i.e. in 2010, a deficit was INEVITABLE.

On top of that there is a question of POLICY. Overspending by the government when the economy is going down the tubes is supposed to HELP. At least that's what Liberal Economist JOHN MAYNARD KEYNES says, anyway.

The strength of the economy is (forgive the waving of fluffy feet) connected to the amount of money and goods moving about in it.

(You CAN get into an argument about there being too much money chasing too few goods driving up inflation, but go too far in that direction and you'll wander into controlling the economy by cutting the money supply through the hiking of interest rates and that way lies the failed madness of monetarism.)

Government raising taxes is taking money OUT of the economy.

(So is putting it in your piggy banks by the way, but that's not a lever the government controls.)

Government spending puts money back IN to the economy.

So running a DEFICIT is a BOOST to the economy because the Government ADDS more money (strictly, adds more than it takes away, or what we call adds "NET").

(And the FLIP side is that running a SURPLUS… or in fact ANY actions to cut a deficit – raising more from taxes or putting less back in spending – tends to SLOW DOWN the economy. As we saw in 2011, following the Coalition's first economic rescue remedies, raising VAT and cutting capital spends.)

So why not just run a deficit forever?

Some people actually suggest that we should! And they often point out that most governments for most of the time DO run deficits (and get away with it).

Let's just suppose we had a balanced budget. Don't laugh. If we knew the economy was growing, and we guessed that we would have, let's say, £20 billion more next year…

(As I said yesterday, the Bank of England expect growth to increase the economy this year and next, which will – everything else being equal – increase the Treasury's tax IN by about £20 billion.)

…then we could have two choices for next year's budget.

Number One: increase spending (or cut taxes) by £20 billion, keeping everything in balance. That would be the CLASSICAL economic approach.

Or, Number Two: we could say: "well, how much could we BORROW so that the INTEREST PAYMENT on that would be £20 billion…" and if interest rates are 2% then that's a TRILLION (a THOUSAND billion) pounds. Which would pay for a LOT of hairdos. So why not have that trillion pounds NOW.

(Though, you may observe, this is kind what we have actually already done!)

In theory, then, if the economy is growing, you COULD continue keep increasing the total borrowing, and with it increase the interest we have to pay, so long as the increase in interest keeps pace with the growth of tax revenues.

And indeed this is probably the thinking behind those people who say that thing about most governments running deficits most of the time.

But it doesn't work.

(If it did you'd have invented a perpetual motion machine, and that's impossible!)

It doesn't work because you are GAMBLING. Gambling in the biggest way. You are gambling that the economy will grow FOREVER. Not just that, that it will grow in every year forever, that it will NEVER, EVER NOT Grow.

Because in ANY year that the economy shrinks, then you cannot afford as much future payments of interest so you have to PAY BACK some of the TOTAL DEBT… and – as the man said in the note – all the money is gone, you've spent it. Go directly to the IMF, do not pass go.

And after 2008, do you REALLY REALLY REALLY believe in betting that the economy will grow forever? Can you with a straight face say you can "abolish boom and bust?"

(If you do, I have a perpetual motion machine I would like to sell you!)

Trickle-down economics, by MC Escher

So we shouldn't borrow at all?

Borrowing money that you spend on building your economy, that is borrowing for INVESTMENT, can WORK.

But a LOT of the time, it's borrowing just to SPEND, which is actually a PONZI SCHEME – a very famous kind of FRAUD.

It pays the REWARDS now (more spending) out of the money drawn in as investments (more borrowing) rather than as a return on those investments actually generating anything.

"Investment" is a word that has become very DEBASED since the time of New Labour, because they would SPIN things and used "investment" (because it sounded good) when they actually just meant "spending" (which sounded all "tax and spend" bad!).

It's the difference between borrowing money to buy a FARM, which then grows things so you can feed yourself and sell the extra which makes new economic growth, plus you've still got a farm; and borrowing money to buy FOOD, which you then eat and you're left with only the debts.

Things are slightly different for COUNTRIES than they are for PEOPLE. If people run out of money for food, they go to the food bank. If countries run out of money they go to the WORLD Bank…

What happens to countries in real life is that the more they borrow, the more EXPENSIVE it gets to borrow MORE.

Interest rates are (partly) to do with how much RISK a loan has.

(A "secured" bank loan like a mortgage has lower risk, because the bank can take your home back if you stop paying. That's why unsecured WONGA loans have much higher risk and so much higher interest rates than bank mortgages which are secured on your home. That and Wonga being EVIL.)

If you borrow a LOT, then the lenders start to think you are less likely to be able to pay them back. So the RISK is greater. So they charge you MORE in interest.

Eventually, you get to the GREECE-style position where more lending is SO risky that there's no way you can afford the interest payments let alone repay the original loans.

How are we supposed to bring balance to the force, then?

In the age of MR GLADSTONE, what we now call CLASSICAL economics taught that Governments shouldn't mess up the economy by interfering, so they should try to run a BALANCED budget (i.e. only take as much tax as they were going to spend; and only spend as much as they raised in tax).

But what Professor Keynes thought (remember him!), in the light of the GREAT DEPRESSION (aka Mr Frown) was that the economy would still go through cycles of BOOM and BUST.

So what the Government OUGHT to do was to try to act like a COUNTERWEIGHT: overspend during the recession years to add stimulus to the economy and speed up recovery; AND run a surplus during the boom years to try to reduce the overheating and make the next crash smaller when it came.

(Clue: Mr Frown OVERSPENT by OVERBORROWING during the BOOM years and we had the BIGGEST BUST IN HISTORY. This is NOT coincidental, whatever Hard Labour apologists may say!)

The REAL truth though, is just how POWERLESS people feel in the face of these enormous and sort of nebulous "economic forces". "Globalism" and "Austerity" have a huge impact on people's lives, often directly when it comes to Disability Living Allowance or Bedroom Tax, or pay freezes and redundancies, or immigration and off-shoring. But nobody really "gets" where all the money went, and so it feels as arbitrary and capricious as those old (ironically) Greek gods randomly smiting us mortals.

The old economy – the one where Labour and Conservatives are alike in only seeing one "good", which is to shackle yourself to one job – is entering a death spiral.

What we need to look at next, is how a Liberal economy would start to empower people against the "new economic gods", to share our resources better, freeing people both from poverty trap AND wage-slavery, and giving them back the power to change their local, national and ultimately global economies.

Fluffy footnote to the fluffy footnote: and GDP? What's that?

*"GDP" or "Gross Domestic Product" is a way of measuring the size of the economy; it is the total value of everything produced in the country, and is sort of like the country's "salary". It is a useful benchmark to compare against.

In 2014, the United Kingdom had a Gross Domestic Product of roughly one thousand, eight hundred billion pounds (that is about £1.846 trillion).

(This, incidentally, makes us the FIFTH largest economy on EARTH, overtaking France.)

The Government took about 37.5% of GDP in taxes, about seven hundred billion quid (£690 billion).

But the Government SPENT about 43.2% of GDP, or nearer to EIGHT hundred billion pounds (£795 billion).

The difference is the DEFICIT (about a hundred billion pounds in 2014).

Remember, in case I haven't mentioned it enough: The Deficit is NOT the National Debt. The deficit ADDS TO our National Debt!

Thursday, June 25, 2015

Day 5288: Only Fools and Tories


"No Income Tax, No VAT;
"No Deficit, No Guarantee."

Master Gideon would appear to have taken Steve Bell's gimp-suit-wearing cartoon of himself as a role model, judging by his justifiably-mocked announcements that he will be trussing himself up in legislation to stop himself doing things that he shouldn't ought to do anyway.

First, during the election, he promised to pass a law to stop himself raising taxes; then, in his Mansion House speech, he said he'd make another law that he would run budget surpluses in "normal times".

The fact that these two laws pull in opposite directions only adds to the madness.

Fiscal Rectitude, Steve Bell style (c) Grauniad

Swearing off ANY rise in taxes – particularly for a whole five-year term, when you've NO IDEA what's coming even in the next few WEEKS with the Greek bailout/crash out saga – is just silly. In fact dangerously silly.

When the books don't balance, you've got THREE* ways to address yourself to the problem: ONE, cut spending; TWO, raise taxes; THREE, a mix of the two.

Master Gideon's first pledge robs him of TWO of the THREE ways out of this mess.

(Full disclosure of wiggle-room here: he could raise taxes other than the "big three" of Income Tax, VAT or National Insurance. But no other taxes raise anywhere NEAR the kind of money those three do, not even Corporation Tax and he's very keen to keep lowering THAT one as well. So this law will stop any SERIOUS closing of the deficit through tax.)

So he's making it very much harder to run a surplus… at the same time as saying it's the law to run a surplus.

Minister, is this entirely wise?

Running a budget surplus is, in and of itself, not a bad idea. In fact, it's one that good old Keynesian Economics says we SHOULD do when times are GOOD (which they're sort of not quite at the moment, but they might still be the best they are going to get in this cycle).

But the way to run a budget surplus… is to run a budget surplus.

The way to not raise taxes… is to not raise taxes.

Who is going to enforce these laws? What are the penalties if Master Gideon breaks them?

In the last parliament Master Gideon promised to eliminate the deficit. For various reasons – some of them his own fault, but mostly things that are entirely out of his control (or possibly ANYBODY'S control!) like the Eurozone or the cost of energy shooting up and then crashing down when the Saudis forced the price of oil to drop – this he totally failed to do. Well, HALF-failed to do, anyway.

Mr Frown repeatedly broke HIS own "golden" rules too. Nobody came to slap HIM on the wrist either. Unless you count the SPANKING handed out by the global economic meltdown.

It's bad enough the Home Office pumping out SECURITY THEATRE without the Treasury starting to perform ECONOMIC THEATRE!

But, what is worse, they are a DIRECT ATTACK on a hundred years of democratic accountability and constitutional settlement.

Oh yes.

Because they're not really FOR holding Master Gideon to account. These laws are REALLY a BOOBY TRAP for Hard Labour.

If a future government, say a Hard Labour Government, wants to run a budget deficit – which they might have entirely good reasons for doing – they first need to repeal these "financial responsibility" laws.

One of the written bits of our unwritten constitution is the Parliament Act that says the House of Lords will not vote down a Government's Finance Bill, so that if a Party (or Coalition!) in the Commons can pass a Budget, then the Lords won't block it. But these "responsibility" laws are NOT Finance Acts.

(There's also the – unwritten – Salisbury Convention that the Lords will not block things that are in a winning Party's manifesto, but can you see "We Will Repeal the Financial Responsibility Act" making to ANY manifesto of a Party that expects to come out alive?)

So you can expect to see Conservatory Lords shamelessly delaying and derailing a future Government's budget, ignoring the Parliament Act on Finance bills under the pretext that the Government is "breaking the 'responsibility' law"; you can look forward to Conservatory millionaires getting their highly-paid lawyers to demand judicial-review of the repeal to drag things out further.

You can see that these "responsibility" laws are ACTUALLY an excuse to play fast and loose with BANKRUPTING the COUNTRY!

In other words, these are laws for the most appalling Financial IRRESPONSIBILITY!


*OK, there IS actually ANOTHER way of cutting the deficit. But it's the one over which the government has very little control beyond crossing its fingers and WISHING.

If the economy is GROWING, then you will get more tax IN just because the economy is bigger. So long as the increase in tax is more than the increase in costs (i.e. so long as economic growth is more than inflation) then with no other changes next year the deficit will be smaller.

This is where Mr Ball's mantra of "the deficit falling as a share of national income" comes from; it's the "Hope that SOMEONE ELSE fixes the problem" approach from the Party of "Let's Spend Someone Else's Money" solutions.

To illustrate: the Bank of England currently estimates growth this year will be 2.5% and next year will be 2.6%.

Assuming that this translates straight into the tax take, that's worth about an extra £20 billion a year this year and next. ALSO inflation is currently next to nothing. (Good if you're shopping; not so good if you were hoping for a pay rise.) So tax coming in goes up and spending does not. Which means the deficit will be £20 billion LESS without Gideon having to do anything.

The Conservatories ACTUALLY want to cut the deficit about £30 billion each year – so £100bn last year goes down to £70bn this year, then £40bn, then £10bn and then into surpluses by the end of the Parliament. Honest, they really mean it this time! – which is why they need MASSIVE CUTS on top of the rest of the country providing growth.

It's more complicated than that because they are pledged (or even triple locked) into increasing money for pensions and the health service, so the cuts to other areas have to be EVEN bigger.

And it's even more complicated because cutting government spending (at least in some of the things government spends on) can slow down the needed growth, which cancels out your savings.

To an extent this is what happened at the start of the Coalition, when Gideon slapped up VAT and followed Alistair "Captain" Darling's plan and cancelled a load of capital investment.

This made it harder for the least well-off to buy "stuff" and at the same time took away a lot of jobs from people who might buy "stuff", and if "stuff" isn't being bought and sold – i.e. if there is less economic activity – then your GDP and hence tax receipts go down.

Slashing away at people's benefits – which is the Conservatories' preferred method of cutting spending – may well have a similar effect.

Which just makes it even more stupid to swear off raising tax!

(And tomorrow, we can talk a bit more about Mr Balloon and the Magic Money-go-Round!)

Monday, June 22, 2015

Day 5286: Game of Drones


I've been talking about the leadership contest between Tim Lord Tim and Mr Norman Conquest.

But the Liberal Democrats aren't the only Party to find themselves in need of a new leader. And it makes me realise just how VERY lucky we are – even after the disaster of May – still to have two candidates with two brains between them!

We watched the hour-long Newsnight hustings with the four candidates for leader of Hard Labour and I swear beyond the nebulous and vaguely-xenophobic call for "controls on immigration" there wasn't a single mention of policy from any one of them.

And is THAT mug, really the thing they want to take away from the 2015 manifesto?!

Labour Leadership - spot the difference

Instead, what was striking was how all of them (ok the three of them who are "serious" candidates) were snaffling freaking great chunks of… the Liberal Democrat 2015 campaign!

Yvette "the Snooper" Cooper was the first out of the traps to claim she wanted a "stronger economy and a fairer country" (nearly right, there, Yve) but very soon Liz "Tony Blair in a Wig" Kendall was all over our positions like a particularly Blairite rash. And even Andy "Crash and" Burnham wanted a country where "everyone can get on".

This seems very odd for two particular reasons.

First: our campaign "Look Left, Look Right, Then Get Mown Down By Oncoming Traffic (Mr Balloon's Bentley and Nicola the Insturgent in a yellow three-wheeler)" did even less well than Labour's "Oh Go On: Vote for Us, he's harmless".

Second: it's not entirely clear if there actually ARE any voters to target in the mushy centre; liberal voters seem to have stayed with the Liberal Democrats; the ones that Labour gained and then lost in their deservedly-doomed 35% strategy seem to have been the "protest" voters who supported the Lib Dems as anti-establishment outsiders in 2010, but moved to UKIP or Greens in England, or nationalists in Wales and by a long way Scotland. The people Labour seem to be after now – voters who were frightened into voting Conservatory by the thought of the SNP – would surely be the very people who given the choice between Conservatory and Conservatory-lite will chose the genuine brand because they know the real Conservatories know how to do it.

How it looked on the tellybox:

Andy and Yvette were sat at either end like particularly smug bookends.

Yvette, campaigning as the compromise candidate between a vacancy and a waste of space, was trying to be as "mumsy" as possible – as mumsy as you can be with a Mother of Dragons reputation for wanting Home Office policy to start at roasting immigrants alive, before going on to do lots of nasty things to British people too – snooping, banning, locking up without charge, feeding them to the flying lizards if their still hungry…

Andy gabbled on at great length given the slightest opportunity. Or even sometimes when he wasn't and had to be put on the naughty step by Liz.

Liz, in between, kept talking slowly and deliberately, as though she was a supply teacher trying to manage unruly five-year-olds. (She knows her audience, then.)

And Jeremy… well…

Jeremy Corbyn was a BIG disappointment. We had been promised that he had been hoisted into the ballot by people wanting to "hear the debate". It would have been helpful if he'd actually had some debate to contribute. Where were the fireworks? Where were the calls for big ticket renationalisations, nuclear disarmament, abolition of academy schools or introduction of 94% squeeze-the-rich tax bands? Maybe he wasn't on his game. Maybe he was just looking forward to getting back among real friends at the anti-austerity rally at the weekend. But in a contest to decide Labour's future – or even if it HAS a future – he seemed quite content to sit quietly in a comfort zone in the past.

Early on he mentioned Iraq. And it's true that Labour has never really confronted what they – collectively – did over Iraq. But just condemning your own side for that disaster does not amount to much more than trying to have your cake and eat it. "Hard Labour were awful; I believe in the Hard Labour Party as the only Party of goodness." And presumably – to quote that other lefty Jeremy, incumbent misery of the News Quiz Mr Hardy – he sees no contradiction in that. There's a genuinely hard question here for Corbyn and others, like Diane Abbott, who were anti-war but remain in the Labour Party – namely: "how do you even justify that? What possible good does supporting Labour do that outweighs all those deaths?". But to Labour's shame it seems that raising Iraq is greeted with rolling of eyes and groans of "not that again, grandad". They know he's not serious about it because he never resigned the whip, so why treat him or the issue seriously in return?

If anything, Corbyn felt like a flashback even further – to the Eighties. And not even the good Eighties; the wet-flannel years of Neil Kinnock when the red flag was lowered in favour of the red rose, and Labour were content to be a protest movement.

But we know – and he knows – that he's not in there to "contribute" but instead so that Labour can say they've "heard the debate" and the left wing ideas (if they ever get voiced) have been "democratically" voted down and can we get on with trying to outflank the Conservatories from the right now, please.

They all remained in total denial about the deficit, trotting out the same old flim-flam: "Labour's overspending didn't cause the crash" – so fluffing what? The austerity was a direct economic consequence of losing 20% of the government's income; if Labour had been spending less, the cuts would not have been so severe and we'd have had more room to manoeuvre on borrowing. That's not monetarist (nobody's a monetarist anymore, whatever Mr "Eighties" Corbyn thinks or says); that's simple Keynesian economics, which Labour supposedly believe in. Labour would not have done anything differently, they know it, they know they were in no position to, and it hamstrung their every attack during the Coalition and yet at the same time prevented them arriving at any alternative thought either.

They ought to have SOMETHING to say on the economy.

I do not subscribe to the "blame Ed" excuse that Mr Milipede did Labour a disservice or behaved dishonourably by resigning once his defeat became clear instead of sticking around to be an unloved piƱata while the rest of them got their act together. It is NOT unfair to expect candidates at this level to have SOME idea of how they would steer Labour's policy.

It is EXTREMELY clear that BOTH candidates for the Liberal Democrat leadership HAVE invested thought into policy and strategy and are coming out with excellent ideas. That's why OUR leadership campaign is inspiring people and Labour's is an hour of the dullest television in history.

Those Labour leadership contenders in full:

Yvette Cooper

Liz Kendall

Andy Burnham

and Jeremy Corbyn

Sunday, June 21, 2015

Day 5283: Elephant v Home Office


The story so far…

At the Leadership hustings on Wednesday, Mr Tim the Tim Lord challenged us not to let the Party of Grimond, Penhaligon and Kennedy die on our watch*.

And Mr Norman "Conquest" Lamb impressed me with his radical proposals on prison and drugs policies.

And I described the Home Office as our "natural enemies".

In reply to a comment, I said I would defend this idea. The Home Office want increased security. It's their job. But mostly they do this by reducing liberty. Defending liberty is OUR job. This very naturally puts us on opposite sides.

(Though, as I also said, as with most things I say, it WAS supposed to be amusing/satirical rather than extremely literal, too.)

This is ALREADY a big issue, what with the Conservatory Government dropping their manifesto pledge to abolish the Human Rights Act even before Mrs the Queen had sat down for her first speech.

Lord Chancellor Michael "Gollum" Gove Sheepishly Presents the Speech to Her Majesty, sans British Bill of Rights

But the Speech did contain

…an "Investigatory Powers Bill" aka Return of the Snooper's Charter, to collect your every random browse on the Internet;

…and a "Psychoactive Substances Bill" that plans to ban anything that might legally give you pleasure;

…and an "Extremism Bill" to ban "extremist groups", "extremist mosques" and "extremist broadcasts"… presumably to be followed by "extremist thought crimes";

…and an Immigration Bill to make "illegal working" a criminal offence and extend the principle of "deport first, worry about whether they've survived to appeal later" to all immigration cases;

…and a "Police and Criminal Justice Bill" because, what the heck, it's an annual tradition nowadays and we can sweep up anything left we've forgotten to criminalise into that.

So it's not like the Home Office ISN'T BUSY driving a tank across everything the Liberal Democrats were protecting during the Coalition.

Not to mention Mr Balloon's frankly TERRIFYING speech stating that:

"For too long, we have been a passively tolerant society, saying to our citizens 'as long as you obey the law, we will leave you alone'.".

So, even if you obey the law they're STILL going to come and get you.

What happened to Habeus Corpus? Did Magna Carta die in vain?

And now the Prime Monster is saying British Muslims are (quoting the BBC's headline): "…'quietly condoning' IS ideology"; perhaps it's time someone told him to stop LOUDLY ADVERTISING for the terrorists!

(and things are getting pretty DIRE if I'm agreeing with the Grauniad's numpty Owen Jones .

Next thing, I'll be saying Pollyanna Toytown is right about wind farms!)

In a time of AUSTERITY, people feel afraid, afraid for their jobs and the security of a roof over their families' heads. And it's all too easy for politicians to tell them that (to quote Tim again) the blame lies with the foreigners for taking their houses rather than the politicians for not building the houses in the first place or the voters for not voting for politicians who’ll build and reduce their house prices.

The treatment of migrants and asylum seekers and the people daily being people-trafficked across the Med (or drowning in the attempt) is urgently topical.

Government ministers' talk about "pull factors" and "encouraging more" is, quite simply, OBSCENE when people are dying. These are human people and they have left their homes, fled across continents, because of PUSH factors – War, Famine, religious genocidal maniacs – which massively outweigh any trifling "pull" considerations.

It seems there are really only three possible solutions:

  1. Let them drown!
  2. Annex dirty great chunks of the Middle East and North Africa to establish new, secure safe zones where they can build cities and jobs for themselves protected by our military, i.e. a new IMPERIUM, exactly what we're accusing Russia of doing (and bearing in mind that we would need to spend an awful lot of money and possibly lives to do this properly)!
  3. Actually do our bit and let them come here.

Call me old fashioned, I favour option THREE.

Iraq, and to a lesser extent the bombing in Libya, has demonstrated the limits of our ability to control foreign interventions given the amounts of money and lives that we are willing to expend (i.e. not very much of either).

Instead it seems that we are going to leave them either in the water, in terrible danger in their own countries, or in effectively concentration camps in Italy and Greece (Greece! As if the Greeks weren't in enough trouble!).

Immigration is GOOD for the country – any country! It drives growth in GDP. It could be good for OUR country.

But to feel that benefit we need to ensure that we build the houses, services and infrastructure to support the people here. But building those things CREATES jobs, including the fabled "British jobs for British workers" (and also British jobs for anyone else willing to do them!).

We should be LEADING the call – as Paddy Ashdown did when saying we should give British passports to citizens of Hong Kong in the lead up to the hand back to China – for not a few hundred or a few thousand but for a few HUNDRED THOUSAND rescued migrants to come here to start a new life. Britain will DO OUR DUTY and stop blaming it all on poor, impoverished Greece and the EU.

Meanwhile, a lot of anti-EU rhetoric is being driven by the spurious claim that we are unable to deport foreign criminals.

We should be telling people loudly that this is a sign of PATHETIC WEAKNESS in a Home Secretary!

If people are criminals then we should be prosecuting and punishing people HERE. If you are so WEAK that you need to chuck them out of the country and make it someone else's problem, then probably you are not FIT to be Home Secretary let alone Prime Monster.

And IF we are so PROUD of British Justice, then why would we NOT be willing to hold it up to international scrutiny? Our record is INCREDIBLY GOOD, and we win VERY NEARLY ALMOST ALL of the cases that go before the Court in Europe.

(And let's be clear: it's a Court of UNIVERSAL Human Rights IN Europe, not Rights OF Europeans or OF Europe – we'd have a GLOBAL International Criminal Court one excep, China and America refuse to live up to their protestations of upholding Human Rights! Even Russia is technically a signatory!)

Once again, we should say that if you think we need to withdraw from scrutiny then you clearly don't think British Human rights are UP TO MUCH.

Well, I rather think they ARE, and that the Conservatories are a bit PATHETIC for not trusting that we DO uphold Human Rights.

But nobody is perfect, and having an outside body that can look from time to time and say where we might – might – have to consider that we could be wrong… only a SOCIOPATH thinks they're never wrong.

As I went on to say in that comment: I think saying the Home office wants to increase security is being NICE to them. I'd suggest that very often the Home Office does things that reduce liberty and do NOT increase security:- counter-productive measures like stop-and-search or "go home poster vans" which generate resentment and breed threats to security; and ludicrous security theatre - like ID cards or the snoopers charter - which is in the business of looking like it's doing something but actually wastes resources, money, time, manpower, on activity that achieves NOTHING.

We have had more than three decades of the Home Office making more and more grabs for power – and over the same time saying that they can do less and less to protect us; three decades of Home Secretaries and Shadow Home Secretaries trying to outbid each other on toughness, outflank each other to the crackdowns, racing to the bottom of the Civil Liberties barrel. Michael "of the night" Howard sending pregnant women to give birth in chains; Tony "Lord" Blairimort, brutally profiteering from the horrible death of Jamie Bulger; Jack "the sinister minister" Straw; David "detention without trial" Blunkett, and the declassified reclassified cannabis; Charles Clarke, the safety elephant; "nice" Dr John Reid and the I.D.iot cards; Jacquie Spliff, the Second Home Secretary… the list goes on, each more authoritarian than the last; most recently we've had Teresa "nuts in" May and Yvette "the Snooper" Cooper vying to be worst yet.

And yet for all their "strong on crime" posturing, for all their "not giving in to terror", every last one of them CAPITULATES instantly, the moment someone (from security or the police) comes along and SCARES them with talk of "the bad people".

"Oh, we need more money, or more powers to arrest people, or to intercept their Instagrams, or to look inside their fluffy brains. Only then will you be safe, only then can we protect you from the paedo-terror-drug-militants… at least until the next time we ask."

It is, quite literally, a PROTECTION RACKET.

And if Her Majesty's far too loyal Opposition will not OPPOSE the madness, then by all that's fluffy WE fluffing well should!