The Carillion collapse is a textbook example of Tory economics

The collapse of the construction and outsourcing giant Carillion is a textbook example of the Tory privatisation ideology in action.

We now have 43,000 workers worrying over their jobs; hundreds of public services at risk (including hospitals, schools, prisons & other public infrastructure); a government in chaos because they carried on handing out £billions in contracts to this stricken company even after three profit warnings; and a pension fund with a £600 million black hole in it (which will be bailed out by the taxpayer).

Meanwhile executives at the company stand accused of rewriting their bonus rules in 2016 (when the company was already in huge trouble) so that they could keep all their bonuses, even in the case of corporate collapse.

A bunch of private profiteers has walked away with stacks of cash, leaving the public to pick up the bill for sorting out the chaos they've created.

However, the problem is that the Tories are pro-privatisation extremists. There's no way they'd bring the services back in house to protect jobs and public services. Their fanatical hard-right ideology prevents them from doing that, so they'll scrabble around trying to get other private sector profiteers to take over Carillion's contracts, and likely pay extortionate inflated prices, because other private sector companies know that the Tories need them to take over the contracts more than they actually need the contracts themselves.

The corporate executives got rich. The shareholders were handed dividends every year as the company drained vast sums out of employees' pension schemes. And now the scam has collapsed, the Tories are going to ensure that the taxpayer covers the cost by bailing out the pension fund, and by re-tendering all the contracts at inflated prices.

From a taxpayers' perspective, or from the perspective of good governance, the Carillion collapse is an absolutely scandalous failure.

However from a Tory party perspective it's actually another success story, because it's yet another example of the private sector soaking up all the profits at the taxpayers' expanse, then dumping the debts onto the taxpayer when the hollowed-out husk of the company collapses into liquidation.

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More blacklist victims receive compensation

Several of Britain's biggest building firms have agreed to pay £millions in compensation to 420 workers for destroying their careers through the use of an illegal blacklist designed to deny jobs to workers who did things like get involved in trade union activity or complain about safety violations at work.

This settlement follows on from a £5.6 million payout to 71 blacklisted construction industry workers in February 2016.

Another 90 construction workers look set to take their case to court in May rather than accept out-of-court damages. Hopefully this case will go all the way to court so that the appalling facts of the case can be given the full public investigation they deserve.

The companies who made use of the illegal blacklist (including Balfour Beatty, Carillion, Costain, Kier, Laing O’Rourke, Sir Robert McApline, Skanska UK and Vinci) have implicitly admitted their guilt by handing out compensation to many of the victims, however to hear an explicit guilty verdict declared in a court of law would be much more satisfying to the thousands of men who had their careers destroyed and their lives blighted as a result of this blacklist and it's widespread use across the UK construction industry.

The existence of this illegal blacklist has been known about since 2006 when a construction industry manager called Alan Wainwright blew the whistle. Since then, like so many whistleblowers before him, Wainwright has suffered severe repercussions for doing the right thing. It's hardly surprising that an industry that denied work to thousands of workers though a secret illegal blacklist now appears to be denying work to the manager who blew the whistle on these illegal practices.

It is incredible that it has taken ten years for these workers to get the compensation they deserve from the companies that colluded to deny them work. In fact, it's taken so long that the guy who profited from maintaining the illegal list (Ian Kerr) has long since died.
    

Astonishingly the companies responsible for this campaign of illegal discrimination tried to gloss over their culpability with absurd language, even referring to the compensation payouts as "fair and reasonable" and saying that they want to "draw a line under the matter"!

How these companies imagine that there has been a line drawn under the matter when they're facing court proceedings in May is anybody's guess, and I'm pretty sure that no amount of financial compensation would be enough to console the many workers who lost their families as a result of the severe financial stress caused by their inability to find work due to their name being on a secret and illegal construction industry blacklist.

Hopefully the 90 others will hold firm in the face of lucrative out-of-court settlement offers and ensure that the criminal behaviour of these construction companies is fully revealed in the courts.     

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Image credit: Daily Mirror

Austerity and economic illiteracy

Since the Tories were enabled into power by the Liberal Democrats in 2010, the national debt of the United Kingdom has soared enormously. Despite their campaign of "austerity", the debt grew more in the first three and a half years of this Tory led government than it did in the entire 13 years of New Labour rule (despite the fact that in 2007-08 New Labour had to deal with the largest global financial crisis in generations ). As regular readers know, I'm no fan of New Labour, however the economic evidence speaks for itself - this Tory government is far worse for borrowing money than the New Labour one that preceded it.

Austerity

So, despite using their mantra of austerity to justify their campaign of social security cuts, infrastructure neglect and hasty privatisations, the Tories haven't saved any money at all. In fact they've borrowed and borrowed and borrowed. One of the most obvious indicators that austerity is a failure is the fact that in 2010 George Osborne and the Tories came to power promising that they would cut the deficit by 2015, an objective that they now admit is impossible. Instead they now talk of making austerity permanent.

It is easy to conclude that the reason austerity is failing is that the Tory party are a bunch of economic illiterates that have built their economic policies upon a foundation of defunct economic pseudo-babble called neoclassical economics. However this is a false conclusion based on a faulty premise. The faulty premise being that austerity is meant to reduce the indebtedness of the UK, rather than it being nothing more than a simplistic justification narrative for a programme of harsh cuts and hasty privatisations that the Tories have always wanted to conduct, long before the economic crisis ever came along. 
 
Austerity is a scam designed to do nothing more than transfer wealth from the poor and ordinary to the super rich. It has nothing to do with "saving money" and it never did.

It is the same old neoliberal pseudo-economic ideology that caused the global financial sector meltdown, crudely rebranded as the "only solution" to the economic crisis that was triggered by the global financial sector meltdown.

Essentially the Tories have found a way of selling gullible people the cause of the crisis as the solution to the crisis.

From an economic perspective there are two very big reasons that austerity is a false economy that could never have achieved what the Tories falsely claimed that it could. To the layman, terms like Fiscal Multiplication and the Marginal Propensity to Consume may sound like highly complicated gobbledygook, but they are not actually that difficult to understand. I'll do my best to provide simple and concise explanations of what they mean and why they show that austerity is an ideological agenda which has nothing to do with "saving money".

Fiscal Multiplication
[Main article]

A fiscal multiplier value tells us how much money is returned to the economy as a proportion of the cost. A project with very poor returns on investment (such as a tax cut for the rich or a stupid government vanity project) might have a fiscal multiplier of 0.29 (29 pence returned for every £1 of investment) whilst any project with a fiscal multiplication value of above 1.00 would actually create more economic returns than it cost.

It is absolutely clear that any government with the slightest intention of "saving money" would carefully consider the fiscal multiplication values of the infrastructure and services that they are planning to cut. If this is not done, then they'd undoubtedly end up cutting a load of stuff that actually returns more to the economy than it costs.

The Tories (and the neoclassical economic wonks at the OBR) didn't bother to do this kind of careful analysis, instead they simply assumed a fiscal multiplier of 0.5 for all government spending. They worked on the assumption that all government spending is essentially 50% waste.

The problem of course is that not all government spending is 50% waste. The construction of flood defences has a fiscal multiplier of 8.00, health service spending has a multiplier of 4.30, and investment in housing and infrastructure often creates fiscal multipliers of well above 2.00. All of these things have been ruthlessly slashed by the Tories.

It may seem paradoxical, but if the Tories were actually intent on "saving money", they would have increased spending on things like health service provision, flood prevention schemes, infrastructure projects and social housing, because if managed efficiently they are all capable of producing very strong returns on investment.

Marginal Propensity to Consume
[Main article]

The Marginal Propensity to Consume is just a economists way of saying that poor and ordinary people tend to spend a much higher proportion of their wealth than the very wealthy.

If a government were intent on getting more money circulating around the economy, they would ensure that the poor and ordinary have a bit more money and prevent so much going to the super-wealthy minority who tend to try to hoard their wealth by investing it in housing or stock market Ponzi schemes, or extract it from the economy entirely through elaborate tax-dodging scams.

If the government wanted to stimulate economic activity they would redistribute money from the extremely wealthy to the poor and ordinary, however the Tories are quite clearly doing precisely the opposite.

The poor and ordinary have borne the brunt of austerity (wage repression, service cuts, social security cuts, "Bedroom Tax" disability cuts...), whilst the super wealthy minority have continued getting richer than ever thanks to extremely favourable Tory policies (the 50p tax cut, corporation tax cuts, new tax loopholes, ludicrously extravagant outsourcing contracts and the vast ongoing firesale of state infrastructure).

Conclusion
 
The Tory party have absolutely no interest in "saving money". They are just doing precisely what they have always done - which is to serve the interests of the wealthy establishment minority at the expesnse of the rest of society. They have dressed up their same old Thatcherite policies (hasty privatisations, deregulated financial markets, defunding of government services, wage repression for the majority, tax cuts for corporations and the super rich, attacks on labour rights and the right to protest, consolidation of executive power ...) as the medicine to cure an economic crisis that was caused by these exact same policies.

If Tory austerity was designed to "save money" then it has abjectly failed, and only an economically illiterate fool could conclude that an austerity programme that has added more to the national debt in 3.5 years than New Labour added in 13 is some kind of justification for even more austerity.

The problem is that there are an awful lot of economic illiterate fools that can't see Tory "austerity" for the obvious con that it actually is and even cry out for even more of the same, because it hasn't saved enough money yet.

The problem isn't that the Tories are economically illiterate, it is that the majority of their supporters are. If you earn well over £150,000 per year it might serve your selfish self-interest to support the Tories, but if you're an ordinary person with an ordinary income, you're a gullible and economically illiterate fool if you support the Tories and cheerlead for even more socially and economically destructive austerity.

 Another Angry Voice  is a "Pay As You Feel" website. You can have access to all of my work for free, or you can choose to make a small donation to help me keep writing. The choice is entirely yours.

More articles from
ANOTHER ANGRY VOICE    
                  
David Cameron's austerity to infinity speech

Flood Defences and Tory false economies

What is ... Neoliberalism?

The JP Morgan vision for Europe

What do Tory donors get for their money?

Tory priorities: Serve the rich, smash the poor
      
What is ... Quantitative Easing?
       
Margaret Thatcher's toxic neoliberal legacies

What is ... Fiscal Multiplication?

The forgotten victims of 9/11
     
The corporate media oligopoly
                         
Secret Courts and the very Illiberal Democrats
                  

Why I tend to swear

I try to avoid using filthy language because I know that swear words tend to drive moderate people and older people away from the debate, thus undermining the message I am trying to get across. I rarely swear on the actual blog, but I do occasionally lapse into profanity on the Another Angry Voice Facebook page.

There are two main reasons that I tend to resort to bad language. The first one is quite obvious and needs little explanation. Sometimes I just get so angry and frustrated at the sheer scale of fraud and corruption amongst the political and corporate elite I just can't help it. After all, the occasional well placed swearword is actually very effective.

The second reason takes a little more explanation. I tend to swear more than the average intelligent, educated bloke with a huge vocabulary because I spent a decade working on building sites, industrial units and other extreme "bad language environments" all over Yorkshire, County Durham and Lancashire.

I picked up habitual swearing because to millions of Brits these days, swearing is simply a form of verbal punctuation, and if you don't swear in "bad language environments" you soon get labeled as a fucking "Lord Chuffington" type with a superior attitude and get yourself ostracised as a snob. I mean I was already skirting quite close to snobby "Lord Chuffington" territory by virtue of being university educated (in a subject most of my work colleagues wouldn't even understand the definition of) and having very liberal political views.

Given the general tide of racism, homophobia and misogyny in these work environments it was absolutely necessary to cloak my liberal and educated ideas in a cloud of filthy language. I mean, when you're trying to argue with a bloke who's only reading material is copies of the S*n or the Daily Heil from one week to the next, you've got to try to present your counter argument (based on nuanced political ideas) in an accessible style.

Here's a typical example of the kind of "conversation" I had many, many times over many years:

Work Colleague: "Don't you just hate fucking Paki scum? they're all fucking terrorists innit?"

Me: "Actually mate I reckon that most 'Pakis' are just ordinary fucking blokes, just like us, who don't give a shit about fighting in any stupid ideological war because they're too busy working their bollocks off to put food on the fucking table for their family."

I've also worked in environments (such as the charitable sector and in local government) where such racist  language is considered completely unacceptable, however what choice did I have? Can you imagine how long I would have lasted if I'd retorted with what I was actually thinking ("That is an absurd racist generalisation and you are an unthinking reactionary idiot that soaks up revolting views like that because you have no critical thinking skills and you read nothing but the Daily Mail") then gone to complain to the site supervisor?

Anyone that is familiar with my written work will know that I'm not the kind of bloke to bite my tongue and let abject reactionary nonsense pass, especially if it is racist, homophobic or misogynistic gibberish. The only choice I had was to grow a thick skin and argue my case. This often left me in the situation where, despite my aggressive and swearword laden responses, I was derided for being a "pussy" and a "Paki-lover". However I actually consider the accusation of being a "Paki-lover" to be a badge of honour when it has been hurled at me by a bloke that takes his political views directly from the pages of the Daily Mail, supports the divisive activities of the EDL and votes for the fascist BNP.

The crazy thing about these cultures of racism and intolerance in the UK is that the majority of people that express this kind of view are actually functionally intelligent and reasonably decent people, they love their wife and kids, they wouldn't hesitate to offer a helping hand, they are hard workers that are good at their jobs, and they like a laugh and a beer just as much as I do. It is just that the insidious influence of the right-wing press has pushed them into the fascist mentalities of "blaming the victim" and "seeking scapegoats".

The workers of London famously united to resist Oswald Mosley's
fascist blackshirts at the "battle of Cable Street" in 1936.

It is really sad that the fascist mentality has been allowed to take hold in Britain, especially given the proud British history of standing up to fascism. Some of Britain's proudest moments can be seen in our resistance to fascism; from the working classes of London blocking the march of Oswald Mosley's British Union of Fascists at "the battle of Cable Street" in 1936 to Britain's brave and lonely resistance against Nazi Europe, supported only by the Commonwealth countries and a small band of European exiles (Free Poles, Free French, Free Czechs, the Norwegian resistance...) between June 1940 and June 1941 (when Axis forces invaded Russia). The Americans continued to stand by (and cash in by selling us the arms and supplies we needed) and watch Britain's desperate struggle against fascism until December 1941 when they were dragged into the conflict by the Japanese attack on Pearl Harbour.

If picking up the habit of casual swearing is the price of making an accessible argument against the rise of modern day fascism, then to me, this is a price more than worth paying.

Someone once told me that as a teenager, when he started to swear in an argument with his father, his father retorted "If you have to revert to swearing you have lost the argument, you have nothing intelligent to say." Whilst I agree with the general sentiment, I prefer to think about it like this:

For millions of people in modern Britain, swearing is not particularly offensive, it is just a form of verbal punctuation, however if you resort to personal abuse and insults (ad hominum attacks) against the person you're arguing with, that's when you lose the argument by default.

See also
 

The Daily Mail: Fascism, racism and homophobia 
  
What is... a justification narrative?

George Galloway, "Islamophilia" and his far-right critics

The contrasting fates of Alan Turing and Lord Sempill
  
Tory immigration policy: Lies and spin 
  
           Tory immigration rules: Discrimination against ordinary British families
 
Rupert Murdoch and his evil empire
 

The end of the British Transit van

In October 2012 Ford announced that they are to close their last remaining vehicle manufacturing plant in the UK. The move to close the Transit van factory in Southampton will put an end to more than 100 years of Ford vehicle production in the UK. The closure will result in 500 job losses in Southampton and a further 600 losses at the Ford Dagenham plant, which supplies the Transit van parts.

Ford justified their decision to shift production of Britain's favourite van to their Kocaeli plant in Turkey by claiming that production costs are "significantly lower" in Turkey, than elsewhere in Europe. This will be of scant consolation to the hundreds of Ford workers and their families thrown into uncertainty and poverty by this move, not to mention the hundreds of other supply and service industry workers that will adversely effected by this closure. One hopes that any extra profits Ford make by shifting production to Turkey will be cancelled out as loyal Transit van drivers switch their allegiances to makes and models that are still produced by UK workers.

The unions have described the closure plans as a betrayal of the Southampton workforce and called on the government to fight the closure. here's what Len McCluskey, the General Secretary of Unite said:

"Only a few months ago Ford was promising staff a new Transit model for Southampton in 2014. The planned closures will really hurt the local economies and the supply chain will be badly hit - up to 10,000 jobs could be at risk...The Transit has been the best-selling van in the UK for over a quarter of a century. It has a future in the UK if this Government is prepared to fight for real jobs and persuade Ford to keep manufacturing vehicles in the UK."

This union plea to the Tory led coalition is nothing but another example of the absurd optimism of "the left", the Tory track record is an absolutely clear demonstration that they simply don't give a damn about British manufacturing, preferring instead to maintain their absurd fantasies about Britain becoming a "post-industrial economy" based around the City of London financial sector. Given the openly venomous hatred of the unions amongst the Conservative party leadership and rank and file Tories alike, a union plea to save the Southampton plant would probably only have the effect of inspiring the Tories to implore Ford to speed up the closure.

Since Transit van production was established in the UK back in 1972, more than 2.18 million of the iconic vehicles have rolled off British production lines. When I was a kid in the 1980s my Dad used to drop me off at primary school in his old style Ford Transit on his way to work. When I worked in construction I spent many thousands of hours in Transit vans and I even owned my own £500 Transit van for a while, a tired but reliable old beast with 245,000 miles on the clock, that had averaged more than 70 miles a day, every day, since she had rolled off the production line in Southampton ten years previously. I've probably spent more hours in Transit vans than any other make of vehicle and I feel a real affinity for them.

The Transit is an iconic vehicle, and Ford cashed in on this iconic status with a series of adverts that described the Transit Van as "the backbone of Britain". By 2013 all Transit van production will have been shifted to Turkey. I wonder if they will relaunch their "backbone of Britain" slogan as: British backbones, now manufactured in Turkey.

Fiscal Multiplication explained

I've been banging on about fiscal multipliers for some time now. Given the revelation that false assumptions by the Office for Budget Responsibility in fiscal multiplication values mean that George Osborne's ideological austerity has damaged the UK economy by an estimated £76 billion more than he claimed it would, I believe it is about time I presented a simple definition of what fiscal multipliers are.

Definition

The term "fiscal multiplication" sounds complicated, but in reality it is a fairly simple concept. Fiscal multiplication values are used to determine the economic benefit of government spending. Calculating the fiscal multiplication value of an area of government spending is simply a method of measuring the returns on government investment.

A form of government spending with a high fiscal multiplication value of 2.5, would return £2.50 to the economy for every £1 of investment, whilst a form of government spending with a low fiscal multiplication value of 0.3 would only return 30p to the economy for every £1 of investment.

The use of fiscal multiplication estimates is absolutely essential for any responsible government concerned with ensuring taxpayers get good value for their money. 

If it can be shown that a government service creates a strong fiscal multiplication effect, the government should consider increasing their investment in that sector. On the other hand, if an area of public policy creates extremely low fiscal returns, this is where governments should make cuts or introduce reforms.

Specific examples 

It has been shown that capital spending on infrastructure improvements and the construction of social housing have particularly strong fiscal multiplication effects. In the US, infrastructure investment is estimated to have a fiscal multiplication effect of 1.59 and the UK construction sector multiplier has been estimated at 2.84. 

It is easy to see how some infrastructure improvements create strong fiscal multiplication values. Construction projects are often strong fiscal multipliers because they are labour intensive, meaning that much of the expenditure goes directly back into the economy through wages. Once a bridge, tunnel, bypass or rail improvement project is open, it may continue to provide significant economic benefits for decades, with little need for further investment. 

The same can be said of social housing; much of the initial investment returns to the economy via wages and the stimulation of economic demand for building materials. Once the unit of affordable social housing is completed, a family can escape the economic exploitation of paying someone else's buy-to-let mortgage and pay rent to the state instead (further return on investment). This fall in rent will dramatically increase their disposable income meaning that they can either stimulate the consumer economy by spending their extra cash or they can save it to perhaps start their own business and stimulate the economy through productive enterprise.

It has been shown that tax cuts for the wealthy are particularly poor fiscal multipliers. The Bush tax cut (50% of the benefit of which went to the 1% of wealthiest people) had a pathetically low fiscal multiplication effect of 0.29. For every $1 in lost government revenue, the economy grew by just 29 cents. It is quite obvious why: Many of the super rich beneficiaries of these tax cuts paid tax lawyers to siphon their wealth out of the US into tax havens, invested their cash in the Chinese manufacturing sector, spent their windfall on imported luxury items (yachts from South Korea, fancy European sports cars...), made additions to their foreign property portfolios or invested their excess wealth in the untaxed, unregulated global derivatives casino.

The dismal economic returns on tax cuts for the wealthy contrast sharply with the strong returns on welfare spending. Two of the strongest fiscal multiplication effects from the US have been the increase in food stamp provision (1.73) and the extension of unemployment benefit (1.64). Again, it is fairly easy to understand how such measures stimulate the economy. The poor and unemployed are extremely unlikely to spend their money on fancy Italian sports cars, evade tax by siphoning it into the British Cayman Islands, build factories in China to undercut their own national industries or invest in the global derivatives casino. Instead, they spend it in their local economy.

Of all of the fiscal multiplication values I've come across, one stands out above all others; spending on flood defences. It has been estimated that for every £1 the UK government spends on building flood defences, the economy saves £8 in avoided economic damage. This means that making severe cuts in flood defence construction is an extremely short-sighted way of saving money. The Tory environment minister Caroline Spelman didn't care about that though. She slashed spending on flood defences in order to curry favour with George Osborne, then in 2012 the town of Kendal was badly flooded causing £millions worth of damage. Had Spelman not axed the Kendal flood defence scheme, all of that economic damage (not to mention social suffering) could have been avoided.

Fiscal multiplication assumptions

(Main article)

After the IMF revised their use of fiscal multipliers in October 2012, the issue of fiscal multiplication should have been front-page news. Everyone in the UK should have become familiar with the concept. However the mainstream media basically ignored the story, perhaps because they thought the concept is too difficult and boring to capture public attention, or perhaps because they would rather not expose the brazen incompetence of the government and the Office for Budget Responsibility (Office for Budget Recklessness, more like it).

For decades the IMF maintained that fiscal multipliers were around 0.5, which suited the hardline neoliberal agenda they were pushing, (state spending is inefficient, deregulate the economy, privatise everything, attack welfare provisions...), however in October 2012 they finally admitted that they have been grossly underestimating fiscal multipliers and that the "real values" range between 0.9 and 1.7, meaning that by their own admission, their previous estimates had between an 80% and a 320% margin of error!

Unfortunately for the UK, the OBR (established by George Osborne) had been using the IMF's false fiscal multiplier values to forecast the effects of Osborne's ideological austerity experiment. Instead of undertaking real evidence based analysis on the economic returns from various and diverse forms of government spending, the OBR simply typed the IMF's absurd under-estimates into their equations, which gave them precisely the result they and Osborne wanted; that austerity would create economic growth by eliminating "wasteful and inefficient" government spending.

The problem is of course, that simply using arbitrary and grotesquely underestimated fiscal multipliers obscured the fact that a lot of the eliminated government spending is actually extremely beneficial, returning much more to the economy than the initial investment cost. As the Tories slashed away at this beneficial public spending, the economy contracted, hence the litany of excuses from the OBR for the poor economic performance (the cold winter, the Japanese tsunami, the wet spring, the royal wedding, the Eurozone crisis, the Jubilee, the wet summer...). The reason the economy was contracting when their models said that it should be growing has little to do with any of those excuses and everything to do with the fact that they just bunged a load of arbitrary and inaccurate figures into their calculations to create the fiction that Osborne's fiscal austerity agenda would (or could ever) work.

It has been conservatively estimated that this poor use of fical multipliers has allowed Osborne's ideological austerity experiment to cause £76 billion more in economic damage than he, or the OBR had been claiming it would. It is absolutely no wonder that the UK economy has been contracting (it is smaller now than when Osborne came to office in 2010) given the reckless incompetence of simply using arbitrary figures from the IMF to do economic forecasting at the national scale, instead of carrying out evidence based analysis.

Criticisms

Crowding out

One of the main criticisms of fiscal multipliers relies on the right wing fallacy of "crowding out". This is the theory that it doesn't really matter how efficient government spending is, it "crowds out" private sector investment which otherwise would have happened. The argument against bothering to calculate the efficiency of state spending is built on the fallacious generalisation of state sector inefficiency, (the assumption that private sector is always, by definition more efficient than the state sector), which is clearly just a simplistic justification narrative aimed at promoting the favoured policies of privatisation and welfare destruction.

There are a number of examples that can be used to demonstrate the inaccuracy of the crowding out theory. Social housing and health policy are the two I've selected here.

After Margaret Thatcher's government came to power in the 1979, government investment in social housing was slashed, local authorities went from constructing between 100,000 to 200,000+ houses a year in the 1960s and '70s, to practically zero from the mid 1980s onwards. 

 If "crowding out" were real, then given this huge decline in state "interference" in the housing market, one would expect to see a large increase in private sector housebuilding and an overall increase in annual new builds (since the private sector is supposedly always more efficient than the state sector). In fact, what has happened since the destruction of social housing policy, is a long stagnation in private sector housebuilding, followed by a significant post Millenium decline, and dramatic decline in the overall number of houses being built each year.

In fact, since the mid-1990s the total number of annual house completions is lower than the average number of completions in the social housing sector alone during the 1960s and 1970s and this is despite a dramatic increases in demand due to the rising UK population.

In healthcare it is useful to consider the difference between the largely private sector system in the United States and the universal state healthcare systems in Western Europe. If the "crowding out" effect actually existed, one would expect European healthcare to be significantly less efficient and the European health indicators (life expectancy, child mortality, preventable diseases...) to be worse. However what we find is that countries with universal state sector health provision generally have more efficient healthcare systems (in terms of GDP% expenditure) and better health outcomes (longer life expectancy, better child mortality statistics, fewer preventable deaths...) than the private sector dominated system in the United States.

Marginal Propensity to Consume

Another criticism of fiscal multipliers, is that the calculations don't take sufficient account of the Marginal Propensity to Consume. This sounds complicated but it isn't. Marginal Propensity to Consume (MPC) can be seen in the aforementioned disparity between the spending habits of the rich and the poor. Rich people are much more likely to save any extra income, invest it in untaxed markets or to stash it in tax havens, whilst poor people (low income workers, pensioners, students, the disabled, the unemployed...) often don't have any choice but to spend every extra Pound they receive in order to meet their immediate needs. 

A wealthy individual that shifts all of their extra income to a tax haven would have an MPC value of 0 whilst a pensioner, student or low income worker could have a MPC value of 1.00 or even higher. This higher value is possible when the extra income is seen as regular and future guaranteed, allowing the low income worker, student or pensioner the confidence to spend more than the extra £1 in anticipation of future income.

Aside from the individual, there is another tier of MPC to consider; the organisational level. I'll use an hypothetical example to illustrate this. If a scheme to provide food vouchers is initiated where the vouchers are only redeemable at one particular supermarket, one which pays poverty wages and avoids tax on their profits, the MPC value of the scheme is going to be significantly lower than had the scheme allowed recipients to use their vouchers at local businesses too. This is because local businesses are much more likely to pay out this additional voucher income in wages and less likely to siphon it straight out of the UK economy via complex tax loopholes. 

Once more MPC values can rise above 1.00, if the small local business owner sees these food voucher schemes as regular future guaranteed extra income, they may borrow (to fund improvements or expansions for example) against this fixed future income stream.

Unlike the crowding out criticism, the MPC criticism is a methodological, rather than a conceptual criticism. It is a complaint that, although useful, fiscal multiplication statistics are far from reliable if they don't take the spending habits of recipient individuals or organisations into account.

Externalities 
 
Another methodological criticism is that fiscal multipliers don't take externalities into account. Again "externalities" is a complex sounding word but in essence it is very simple. An externality is a cost or benefit that is not transmitted through prices. If fiscal multiplication is the only tool used to determine government spending priorities, there could be a number of negative consequences, from the increase in negative externalities or the decrease in positive externalities.

To give a few examples:

If a government finds that investment in loans to heavy industry create good fiscal multiplication values, this kind of investment could create strong economic returns but at the cost of several negative externalities (air pollution, water pollution, land pollution, unsustainable resource depletion, climate change...). 

Other negative externalities include; anti-competitive practices, increased crime, nuclear pollution, decreased economic diversity, negative health outcomes, antibiotic resistance and many more.

If a government finds that investment in education creates poor fiscal multiplication values and sets about slashing funding for schools and universities, the negative externality would be a gradual decline in educational standards. Although the immediate impact of these funding cuts would be small in economic terms, eventually the externality of a less educated workforce would feed through into the economy, because less educated workers are less productive workers, and the potential of high-tech industries would be severely diminished by a shortage of suitably skilled workers. 

Other positive externalities that could be overlooked in the search for ever higher fiscal multiplication values include social cohesion, positive health outcomes, sustainability, positive environmental consequences, social and economic freedoms and economic diversity.

Conclusion

Fiscal multiplication values are a useful tool, if they are used as part of robust evidence based analysis methodologies for determining the value of government investment. These methodologies should also include the calculation of externalities such as pollution, resource depletion, social outcomes, etc.

However, it has been demonstrated that in the wrong hands fiscal multiplication statistics can be extremely destructive. If economists see them as numbers that can just be typed into their economic models based on IMF guesstimates, the consequences can be catastrophic. If economists can't be bothered to actually carry out their own fiscal multiplication analysis on the government spending they are reviewing, it would probably be better if they simply admitted their policies were ideologically driven, rather than maintaining the fiction that they care about facts and analysis. Anyone that is vaguely familiar with science and maths knows that you will ruin the whole equation if you simply shove in a load of arbitrary guesstimated numbers because you can't be bothered to do the research to find out what the real numbers should be.

I believe that the most vocal opposition to the use of fiscal multipliers as part of an evidence based methodology for determining the value of government spending, would come from ideologically driven Conservatives. This opposition arrises because fiscal analysis has repeatedly shown that several fundamental Conservative policies such as tax cuts for corporations and the super-rich and rises in regressive taxation create extremely poor fiscal returns, whilst policies that are traditionally opposed by Conservatives, such as investment in public infrastructure, social housing and welfare provision, often create extremely strong fiscal returns.

If you hear anyone arguing against the proper use of fiscal multipliers or against evidence based policies in general, you should ask yourself what agenda it is that they are trying to protect.

I believe that I have demonstrated that fiscal multipliers should only be used if they have been carefully calculated (rather than just pulled out of an IMF manual and arbitrarily applied) and that they should form only part of the government spending considerations, alongside analysis of wider implications such as the environmental and social consequences of changes in government spending.

One other, more general conclusion is that like so many other economic words and phrases, the name is far more complex sounding that the actual idea. If Fiscal multiplication was actually called Returns on Investment, I believe a lot more people would be able to grasp the meaning instinctively, simply from the context in which they read or hear the words.

 

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