Our response to Martin Horwood’s comments on this blog

On July 8th 2011 Martin Horwood left a long comment on this website in response to a blog posted in March 2011, entitled “Martin Horwood gives cuts the thumbs up”.  He makes a number of points (on the NHS, Unemployment, Taxation, Green Investment Bank, etc.).  Martin`s points appear below (in bold text), our response to each appears afterwards.

Martin Horwood says:

1. Yes, cuts are necessary because we’ve been spending £150 billion more than we’re raising as a government; no I don’t like them either and I particularly don’t like the way the Tories have done them locally (not inconsistent as you suggest: not one library has been closed by a LibDem council anywhere in the UK. There is some local choice here).

Cheltenham Against Cuts says:

We still remember the pre-election anti-cuts voice of the LibDems two days before the general election, when party leader Nick Clegg said:

“There isn’t a serious economist in the world who agrees with the Conservatives…that we should pull the rug out from under the economy with immediate spending cuts.”

The deficit climbed to £150 billion because of the bank bailout; public-sector borrowing before that was about £35bn. When governments keep on reducing corporation tax while retaining spending at levels that are not historically high this leads to a deficit. The solution is to increase corporation tax.  Instead, the Coalition has already reduced corporation tax and intends to lower it still further. This benefits the rich donors to both the Conservative and Liberal Democrat parties (and Labour for that matter), many of whom already practise tax avoidance.
There is a tried and tested method for getting the UK out of its economic stagnation and that is for the government to spend directly into the economy.  As economists Professor Victoria Chick and Anne Pettifor have shown for the period 1947-1976:

“higher rates of growth in real government expenditure coincided with reductions in the public debt, higher GDP growth and much lower unemployment – and vice versa”.


The Quantitative Easing (QE) already carried out demonstrates that there is no need for the government to issue bonds to finance spending.   The money used for QE was created out of thin air by the Bank of England.

2. You may have noticed that after the LibDem conference stood up for the NHS, the so-called privatisation elements of Lansley’s plans have gone into reverse. I didn’t vote for it first time round anyway.

We are no more reassured by the nominally reworked NHS plans than former LibDem MP Dr Evan Harris who said that:

“there are new threats to the NHS emerging as the Conservatives appear to try to bring in competition and privatisation through another route”.

In a leaked email Harris wrote that:
“having prevented the marketisation and promoting of competition via Monitor we now face exactly the same via the NHS Commissioining (sic) Board being given a mandate by the Secretary of State to promote competition.”
Harris is also concerned that the government is only placing on the secretary of state the “duty to promote” rather than the stronger duty to “provide or secure the provision of” a comprehensive NHS service.
Interestingly, in the same leaked email Harris wrote that:
“There is a view that we should keep quiet, say we had a victory and hope no-one notices this stuff – but I think that is not realistic. The plans remain bad for the NHS, go beyond the coalition agreement and we must insist on sovreignty (sic) of conference on major issues not in the CA [coalition agreement].”
You appear to be keeping “quiet” and saying that the LibDems “had a victory”!
We are not going to be fobbed off, there is very clearly still a huge threat to the NHS, and we call upon you to acknowledge this.
Here`s what you said in March last year in the LibDem Courier when you wanted our votes:

“The Conservatives’ track record on the NHS is one of running it to rack and ruin. But even more worrying are the constant stream of quotes from Conservatives suggesting deep cuts, new charges and plans for privatisation. I am determined to fight any Conservative cuts to our NHS. Tory MPs have voted against the extra money that has gone into the NHS over the last ten years and we have no reason to think that they won’t cut frontline service again.”

3. Unemployment is falling. Public sector job cuts – which are very painful – haven’t stopped new jobs in the private sector

Unemployment is obscenely high at just under 2.5 million, with low benefit levels causing hardship and stress for the unemployed and their dependants. Not only are benefits inadequate, but it was revealed in April (after initial denial by Iain Duncan Smith) that Jobcentres were set targets for deliberately depriving people of benefits.   This suggests that there is an effort to manipulate the claimant count figures, which you’ve taken at face value (N.B. the most recent figures show that unemployment has started to rise again).  You also make no mention of the knock-on effect of public-sector job cuts on the private sector, even implying there is an inverse relationship.  The Office for Budget Responsibility recognised this is not the case last year when a leaked document showed cuts of 600,000 public-sector jobs will lead to the loss of 700,000 jobs in the private sector.

There is an tacit assumption in what you write that there is a genuine commitment by the government to reduce unemployment. It should be borne in mind that one of David Cameron’s advisers is Norman Lamont, who on 16 May 1991 notoriously said in Parliament that “Rising unemployment and the recession have been the price that we have had to pay to get inflation down. That price is well worth paying”. The following month Professor Sir Alan Budd while being interviewed about his time as Special Adviser at the Treasury in the period 1979-81 spoke of his concern “that there may have been people making the actual policy decisions, or people behind them,.. who never believed for a moment that this [Monetarist policy] was the correct way to bring down inflation. They did however see that it would be a very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes”. More recently in a Daily Telegraph interview published on 04 Feb 2008, former City financier David Freud (who had been appointed by Blair in 2006 to provide an “independent” review of the so-called welfare to work system) said: “we should have recessions every five or six years and we are due one”. So the man who was supposed to be getting people back to work was advocating a recession – which obviously causes an increase in unemployment.
Most people assume that governments are implementing policy that is designed to provide employment to those who are willing to work. In fact, as the minutes of the Bank of England`s Monetary Policy Committee (MPC) monthly meetings frequently reveal, the labour market is managed to ensure that unemployment is kept at a threshold level known as the “Non-Accelerating Inflation Rate of Unemployment” (acronym NAIRU).  This enduring piece of economic dogma insists that there is a “sustainable” rate of unemployment which has to be maintained to prevent inflation from accelerating upwards.  The effect of unemployment is to exert what is deemed to be the necessary “downward pressure on wages” (the phrase frequently used by the MPC). The MPC can (and does) raise the base rate when it judges that unemployment is too low.

4. We’re projecting far more extra public revenue from a crackdown on tax avoidance and evasion than under Labour

You neglect to mention that Sir Philip Green, the biggest tax-dodger in the UK  was appointed by David Cameron to be his “Cuts Tsar” in August 2010. This hardly suggests a commitment to do better than Labour! Several LibDem MPs made their dissatisfaction known at the time.  Interestingly, you weren’t one of them, and we can find no evidence that you have mentioned it since.  Here’s what those who objected said:

Andrew George, LibDem MP for St Ives, questioned whether Sir Philip would be of more use advising the Treasury on how to maximise their revenue: “I would have thought more useful in terms of advising on tax avoidance rather than deciding on the future job prospects of, particularly, the poorest paid public servants”, he told the Financial Times.
LibDem MPs, Mike Hancock and Roger Williams, called for an investigation into Sir Philip’s tax arrangements. Mr Hancock questioned whether the appointment could damage the Coalition: “If he is advising the Government on how to deal with others it is essential that he has a clean bill of health with his own tax arrangements. We do not want something that could hurt us if we do not ask questions before the process starts”, he told The Times.  He added: “I’m all in favour of anyone who avoids tax to be tackled firmly and I’m surprised that Clegg would want to appoint someone like that to advise him.”

In the March 2010 issue of the LibDem Courier, you told us that:
“The Tories are funded by the same old millionaires and bankers.  David Cameron’s top tax priority is lower taxes for millionaires.”
The implication is that the LibDems are not funded by rich donors – nothing could be further from the truth!
The LibDems have accepted donations worth more than £3.5m from four “non-doms”, even though Nick Clegg has said it is “wholly wrong” to have donors not fully tax-resident in the UK.

5. I just don’t agree that ‘vital public services’ are always best run by the state. Is palliative care in Cheltenham bad because it’s run by Sue Ryder Care? Or cancer screening by the Cobalt charity? Will post office and royal mail employees having a real say in how their businesses are run for the first time make those better or worse? (I’d doubt if you could get worse than Royal Mail’s current management). That doesn’t mean it’s always right – I’ve criticised the south-west NHS for rushing community healthcare into a version of ‘social enterprise’ – but just to oppose it on ideological grounds is silly. Liberals and many socialists have supported more democratic co-operative and mutual ownership for more than a century.

Anyone visiting Cheltenham General Hospital can’t help but be struck by the number of charity events organised to raise money for Sue Ryder Care and the Cobalt charity.  Do you think that the quality and quantity of palliative care and other services delivered by charities should be dependent on the amount of money raised by jumble sales, sponsored parachute jumps, and fun runs?  We are not aware that this funding method is used to provide for the bailing-out of  banks, MPs salaries, expenses & pensions, or UK military activity in oil-rich countries.
Sue Ryder has decided to exit the social homecare sector in England after nearly 20 years and is proposing to transfer all its English homecare business to private company Allied Healthcare. The disruption and anxiety this will bring to patients and staff is totally unnecessary. There is no guarantee that a similar fate won`t befall the hospices.
The Liberal Democrat manifesto advocated that 49 per cent of Royal Mail be sold to create funds for investment, with the ownership of the other 51 per cent divided between an employee trust and the government. The Postal Services Bill will give a mere 10% of shares to Royal Mail employees with the rest being sold off.  The future of the Post Office is made more precarious through the cuts which will rip the economic heart out of communities, regardless of whether it is mutualised.  The Liberal Democrat manifesto also sought to turn Northern Rock into a building society. Chancellor George Osborne has announced his intention to sell it off rather than mutualise it.
As far as proposing or opposing policies on ideological grounds is concerned we refer you to your party’s 2003 policy statement adopted at that year`s conference which said that “Liberal Democrats start with a bias in favour of market solutions”.  Expenses fiddler David Laws suggested the following year that the party should examine replacing the NHS with a system based on social insurance.

6. Your chart shows spending as a % of GDP not whether or not there was overspending. I agree you should spend more during a recession when you need to stimulate the economy – we supported that, remember – but you can’t keep on doing it for decades. Labour had been spending more than it raised since 2002, long before the financial crisis – and apparently believes you could carry on way after 2015 by which time the coalition is aiming to have balanced the books. That’s why we’re spending £40 billion a year on debt interest, more than we spend on transport. Keep on overspending and you put that bill up and up and up and eventually wreck our credit rating, putting household interest rates up and up and up too. And that means far more savage cuts in public spending, as Ireland and Greece and Portugal have now discovered

It is very revealing that you regard the fiscal behaviour of the last government as an overspend, rather than an undercollection of corporate taxes! We put the chart on the website to illustrate that there was no overspend, despite the mantra parroted endlessly by those whose agenda is to cut corporate taxes while simultaneously gutting our public services to ensure that “the books balance”. Yet still, even when faced with the evidence, you ignore the consequences of ever lower rates of corporate taxes!

Your scaremongering about our credit rating clearly shows that you don’t understand the crucial significance of monetary sovereignty.  The money used for quantitative easing was not obtained from issuing bonds, it was created out of thin air by the Bank of England and used to buy back government bonds (this is an option not available to any Eurozone countries). Unfortunately, instead of being spent directly into the economy it was handed over to the banks, who were rightly unfazed by its provenance, and promptly used it to award themselves bonuses.

Regarding the £40 billion a year we’re spending on debt interest, the Bank of England can service this debt by creating money (often misleadingly described as “printing” money). In a rare moment of candour, former Federal Reserve Chairman Alan Greenspan made this very clear in an interview he gave on 7 August when he said  “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default”.

The scaremongering over the ratings agencies` pronouncements by politicians (like yourself), journalists and economists is all the more remarkable bearing in mind these are the same ratings agencies that so recently gave triple A ratings to junk mortgage securities created from sliced and diced mortgages granted to people in the US with no jobs, no (other) income and no assets. They did this because of their corrupt relationship with their clients to whom they are a de facto lobbying organisation. They are now giving lower ratings to government bonds than they gave to junk mortgage securities, and for equally corrupt reasons. Instead of calling out these “ratings agencies” for what they are, you are helping to rebuild their credibility.  Would you care to explain why you’re doing this?

7. People who voted for me did keep the Tory out. Mark Coote would have voted for the original NHS plan, early renewal of Trident, the superannuation bill that attacked civil servants’ terms and conditions, and nuclear power. He might well have opposed Lords reform, the pupil premium that’s shifting school spending to the least well-off kids in the least well-off schools, taking the lowest earners out of income tax and a fully fledged Green Investment Bank – none of which you’df have seen if we’d let them go into government on their own – the only mathematical alternative given the election result. And you could have added attacks on the human rights act and (like Labour) unlimited increases in student tuition fees without any of the safeguards that Vince Cable managed to negotiate.

Green Investment Bank
Your description of the Green Investment Bank as “fully fledged” is highly misleading.  Implementation of the bank`s borrowing powers has been delayed until at least 2015 and is subject to the Government meeting its debt targets.  The U-turn done by your party over nuclear power means that, as Vince Cable has acknowledged, there is a distinct possibility that the bank’s funds could be used to provide the huge public subsidy that the nuclear industry requires. This would explain the choice of Sir Adrian Montague to chair the Green Investment Bank, since he chaired the nuclear operator British Energy until 2009!
The shocking and scandalous public relations support given to the nuclear power industry by two British government departments just 2 days after the Fukushima nuclear accident in Japan led senior Scottish Lib Dem Andy Myles to call for the resignation of energy minister Chris Huhne.

Human rights
The amendments to the law on Universal Jurisdiction already made by the Coalition  are a very serious blow against the protection of human rights. The amendments allow political interference in any application made to obtain an arrest warrant for a visiting politician against which there are well-founded allegations of war crimes or other human rights violations.
Last December leaked US embassy cables revealed that the British government (as recently as last October) has been training a Bangladeshi paramilitary force condemned as a “government death squad” by human rights organisations in “investigative interviewing techniques” and “rules of engagement”. The notorious Rapid Action Battalion (RAB) is estimated by some human rights activists to have been responsible for more than 1,000 extra-judicial killings, and was deployed earlier this year to intimidate protesters and guard the office of UK-based corporation Global Coal Management which is trying to reopen a mine in Phulbari, West Bangladesh.

Student tuition fees
It was revealed in November last year that a month before Nick Clegg pledged in April 2010 to scrap the “dead weight of debt”, a secret team of key Lib Dems made clear that, in the event of a hung parliament, the party would not waste political capital defending its manifesto pledge to abolish university tuition fees within six years. In a document marked “confidential” and dated 16 March, the head of the secret pre-election coalition negotiating team, Danny Alexander, wrote: “On tuition fees we should seek agreement on part-time students and leave the rest. We will have clear yellow water with the other [parties] on raising the tuition fee cap, so let us not cause ourselves more headaches.”.
In a choreographed “debate” in the House of Commons in March 2010 you asked a fellow Lib Dem MP if he was “immensely proud” that “only one political party is going into this election….with a fully costed proposal to remove the burden of tuition fees and the debt that accompanies them from future generations of students”. Would you now describe yourself as “immensely ashamed” of your party`s cynical vote-grabbing behaviour?

We look forward to your response.

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