Wednesday, 22 December 2010

Latest growth forecasts show gloomy future for Britain

From the Morning Star

Economic growth forecasts have been revised down to 0.7 per cent in the latest quarter, according to figures released today.

The Office of National Statistics found that growth in the construction, mining and quarrying industries all fell and there was a recorded fall in service industry output.

The drop indicates that 2011 will be another tough year for the public, with the VAT rise to 20 per cent to dampen consumer spending, on top of the effects of government spending cuts.

Left Economic Advisory Panel co-ordinator Andrew Fisher said that prospects for the economy were "grim."

He added that, in the long term, Britain could be in the same situation as Ireland, which recently took out a controversial IMF loan to help keep its struggling economy afloat.

"Continued slow growth - or even a slip back into recession - will encourage the coalition government to make further cuts and could send the UK into a spiral similar to Ireland's.

"It is clear that the labour movement needs to force a major shift in economic policy in 2011 to prevent misery for millions."

More at diggersland blog.

Wednesday, 8 December 2010

Student economics




Why fees are unnecessary and how we can fund university education

The Government estimates that in 2010/11 there was 986,357 (full-time equivalent) higher education places.

If each one of these university places was charged at the maximum £9,000 per year, that the Coalition Government intends to allow institutions to levy, then this would raise just under £8.9 billion in annual revenue for higher education.

It is estimated by the Tax Justice Network that tax avoidance costs the UK £25 billion per year . Even if just one-third of this could be reclaimed to the Exchequer, it would avert the need not just for increased fees but for fees at all.

In 2008/09 tuition fees raised £5.8 billion in revenue for UK universities – about one-third of total university funding. This is less than the £6 billion Vodafone avoided in tax this year with HM Revenue & Customs complicity.

If the government fears frightening business, it could instead abolish the upper limit on national insurance contributions, which would raise £11bn enough to eradicate the need for fees and to fund a grant of over £2,000 per student.

But we should not forget graduates already repaying debt.

The total balance outstanding for the UK student loan book (including loans not yet due for repayment) at the end of the financial year 2009-10 was £35.95 billion .

According to the Sunday Times Rich List, the collective wealth of the 1,000 richest people in the UK rose to £335.5bn in 2010.

A one-off 11% wealth tax on this elite group would, at a stroke wipe out the debts of all those who suffered fees under New Labour. This would be a bail-out, although only 2.75% of the size of the £1.3 trillion bail-out of the UK banking system .

John McDonnell MP
LEAP Chair
Andrew Fisher
LEAP Co-ordinator

Download the LEAP Student Economics report, with full references.

Irish budget won't stop the rot

The Irish Parliament’s vote to implement a further, more savage €6 billion programme of spending cuts and tax increases has done nothing to stop the worsening debt crisis transforming the political landscape throughout Europe and beyond.

Quite the opposite. As Ireland follows Greece, and with Portugal and Spain jostling for position in the queue for aid, the conditions of the Intenational Monetary Fund-sponsored package for the Irish Republic are reverberating throughout the continent. And the pressure is mounting across the Atlantic too.

In the United States, Democrats are in open revolt against President Obama’s deal with the Tea Party-inspired Republicans to continue Bush’s 10-year-old tax breaks for the wealthy, which were widely expected to be allowed to expire at the end of the year.

This proposed new deal is part of the political price for agreement on a further debt-funded stimulus. But the markets are worried, and the cost of US borrowing has started to rise.

Dominique Strauss-Kahn the managing director of the IMF says the “piecemeal” country-by-country approach can’t solve the crisis but Germany’s chancellor Angela Merkel is not alone in blocking proposals for a Europe wide rescue scheme. In the Netherlands, Geert Wilders far-right Freedom party teamed up with the so-called Socialist Party to oppose the deal for Ireland.

For the Irish people, the new budget slashes social welfare benefits, public pensions and capital projects, whilst forcing the 45% of low wage earners to pay income tax for the first time in order to rescue the banks and pay the interest on government bonds.

Michael Noonan, finance spokesman for the centre-right Fine Gael party stated the obvious: "This budget is the budget of a puppet government who are doing what they have been told to do by the IMF, the EU Commission and the European Central Bank."

But what he didn’t say is that the demands of these agencies are themselves orchestrated and conducted by the much more powerful forces at work in the rapidly contracting global capitalist economy.

Even as the captive Irish government was applauding itself, warnings of further mass assaults could be detected in the absurdly optimistic growth forecasts underpinning the new budget.

Finance Minister Brian Lenihan pins Irish hopes on gross domestic product national income (GDP) expanding by 1.7 percent next year, nearly double the European Commission's forecast of 0.9 percent.

The government is forecasting growth of 3.2 percent in 2012, 3.0 percent in 2013 and 2.8 percent in 2014, but Danny McCoy, head of the Irish Business and Employers Confederation said he saw little in the budget to help job creation or restore economic competitiveness.

In reality, governments throughout the world are in a competitive race to destroy living standards, driven by the needs of an economic system of global corporations competing for declining profits as markets shrink and collapse.

The crisis began when credit-funded stimulus reached its limits. Political parties of the left and right are ganging up together to design and implement “austerity” programmes that can only accelerate the process of contraction. Despite the rhetoric of recovery it is what they are required to do.

Campaigns to resist the assault on people’s lives must be brought together with the democratic and legislative means to replace the moribund capitalist system rather than patch it up. People’s Assemblies can begin to construct a richer form of democratic control based on social ownership and not-for-profit production and finance. Check out A World to Win’s proposals for transforming social relations in our new Beyond Resistance booklet.

Gerry Gold
Economics Editor
reposted from www.aworldtowin.net

Monday, 6 December 2010

Tax justice becomes a movement

As we blogged on 30 November, tax justice has taken to the streets.


After years of painstaking research and lobbying by the Tax Justice Network, ably supported by PCS - whose members work, and are increasingly being cut from, HM Revenue and Customs - the campaign now has a movement to further raise its profile and popularise it: UK Uncut, which has branded the campaign 'Big Society Revenue & Customs'.

On Saturday 4 December there was, according to the BBC (though there's a better write-up in the Morning Star) actions in 21 towns and cities across the UK, including Birmingham, Brighton, Bristol, Cambridge, Edinburgh, Glasgow, Leeds, Leicester, Nottingham, Oxford, Portsmouth, Southampton, York

PCS General Secretary Mark Serwotka said:

"People are rightly angry that the government is targeting the most vulnerable in our society with massive cuts in spending and yet it appears to be very relaxed about rich and powerful tax dodgers.

"We have campaigned for two years for action to be taken to tackle the billions of pounds in tax lost to our economy every year because wealthy individuals and organisations avoid paying what they owe.

"The moral and economic case, particularly at a time when we are told action needs to be taken to bring down the budget deficit, is unarguable."


This video shows how unarguable these campaigners - shutting down Oxford Street Top Shop - know the case to be, and there's some great photos and reportage from harpymarx.



And you really know a campaign has caught the zeitgeist when even the Daily Mail begins highlighting further corporate tax avoiders to protest against!

Friday, 3 December 2010

Evidence of the 'squeezed middle'?



Labour leader Ed Miliband, and the rest of the Labour frontbench now seem to be triangulating towards a group they have dubbed the 'squeezed middle' although he seems a bit confused about who the 'squeezed middle' is.

The term has been coined by the Resolution Foundation (RF), which seems a fairly New Labour-ish kind of think-tank populated by the usual pretentious canape-devouring circuit that churns-out 'influential' waffle at an impressive rate.

Still at least RF knows what it means by the 'squeezed middle': "the 11 million households who (sic) earn between £12,000 and £30,000 a year". To most people that might look the vast majority of the working class, and really would be better described a low income households (full-time on the minimum wage is over £11,500), and indeed as well as using the political soundbite 'squeezed middle' they also use the more prosaic epithet "low-to-middle earners".

The language is important here: why from "low-to-middle earners" has Ed Miliband adopted "squeezed middle". Admittedly, "shat-upon-poor" is less acceptable to the Daily Mail, but it seems the concerns of the poor or low paid are so illegitimate as to be irrelevant to the new Labour leader (should that 'n' be capitalised?).

Miliband actually appears to be crow-barring higher earners into the "squeezed middle" too - stating those having child benefit removed are also the "squeezed middle".

Clearly Miliband is confused.

However, there is no reason for him to be: the low and middle income households are indeed being squeezed. Serious evidence of this was published this week by the Office for National Statistics in their Family Spending survey which showed for the first time (in the 10 years the data has been published in this way) UK household spending declined over the last year.

In 2009 the average household spent £455, down from £471 in 2008. With unemployment rising, short-term working, and pay freezes it is not surprising that households tightened their belts over this period.

The risk must be that with unemployment still high, and likely to rise further, there could be a continued downward slump. It is also clear evidence of the need for policies that are redistributive rather than regressive. With the Coalition cutting jobs, freezing pay and slashing benefits household expenditure will tighten further.

The squeeze exists, but not exclusively for the middle.

Thursday, 2 December 2010

False Economy

The TUC has launched a new website - False Economy - spelling out "why cuts are the wrong cure".

This video sets out why we shouldn't be suffering for the crisis caused by the finance sector:

Why cuts are the wrong cure from False Economy on Vimeo.



There's also the ability to add details of the cuts in your area and provide testimony of how the cuts affect you.

Wednesday, 1 December 2010

The ultra-rich could solve this financial crisis


Surely it is far better to inconvenience 1,000 of the country's richest people than destroy millions of lives

The news that 'only' around 330,000 public sector jobs will be lost, is of little comfort to millions of people; especially as another 500,000 are likely disappear from the private sector. The government's austerity plans will hasten home repossessions, shop closures, increase hospital queues and condemn children to crumbling schools. Yet the chancellor has been quiet about the contribution expected from the ultra-rich.

Warren Buffett, the world's third-richest person, estimated to worth around $37bn (£24bn), has urged the US government to tax the rich more saying "people at the high end, people like myself should be paying a lot more in taxes. We have it better than we've ever had it". Yet there is deafening silence from his UK counterparts. The government can solve the financial crisis by inconveniencing the richest 1,000 people in the UK.

According to the Sunday Times Rich List, the collective wealth of the 1,000 richest people in the UK rose to £335.5bn in 2010. 53 of the richest 1,000 are billionaires. In 1997, when Labour came to office, the collective wealth of the richest 1,000 stood at £98.99bn. No other group has received such a massive boost in its wealth. Even if they have all the clothes, mansions, cars, yachts and jets they want, they still cannot spend it all. They came into this world empty-handed and will exit in exactly the same way, but leave behind impoverished citizens and employees when they could easily give 25%, or some £84bn of their wealth away without any noticeable effect on the quality of their life. This redistribution would reduce and probably eliminate the need for deeper cuts.

With a private fortune of £22.45bn, steel tycoon Lakshmi Mittal is thought to be Britain's richest man. He has connections with offshore tax havens, but his wealth has been amassed though cultivation of the UK political machinery. Tony Blair personally intervened to help him expand his empire in Romania and other places. Some years ago, he spent £38m on the wedding of his daughter and also bought her a £70m mansion in Kensington Gardens in London.

Others on the ultra-rich list include Chelsea football club owner and oil industry magnate Roman Abramovich, worth some £7.4bn; Gerald Cavendish Grosvenor, the 6th Duke of Westminster, whose company Grosvenor Estates is one of the largest property developer and landowner in the UK and worth some £6.75bn. Brothers Simon and David Reuben have amassed a fortune estimated to be around £5.5bn, largely through property, private equity and the Wellington Pub Company.

Sir Philip Green, owner of BHS and Top Shop, is estimated to be worth £4.1bn. Sir Philip, an adviser to the government, has registered the shares in his business empire in his Monaco-resident wife's name to avoid UK taxes. Sir Richard Branson has a fondness of tax havens and weighs in at £2.6bn. Sports entrepreneur Bernie Ecclestone, one-time donor to the Labour party, weighs in at £1.4bn.

Politics is about choices. The government can choose to punish millions of people for the recession that they did not cause, or inconvenience a few rich people. These rich people have gained the most in the boom years. The richest 1% of the population owns 21% of marketable wealth and the bottom 50% own just 7% of the wealth; and if the value of the dwellings is taken out then that figure stands at around 1%. The proportion of gross domestic product going to employees in the shape of wages and salaries has declined from 65.1% in 1976 and now stands at around 55% (see Table D). Ordinary people just don't have the capacity to take economic hits.

We have given the ultra-rich UK passports, peerages, knighthoods, public accolades and public services. Yet many respond by avoiding taxes and impoverishing employees. Without social stability and people's purchasing power they cannot keep or multiply their wealth. The prime minister, David Cameron, could ask his billionaire friend Lord Ashcroft to mobilise the billionaires and ask them to give 25% of their wealth to the country. He could be assisted by the "you've never had it so good" Lord Young.

Surely it is far better to inconvenience 1,000 people than destroy millions of lives. If rich turkeys don't voluntarily vote for Christmas they could be helped by a mansion tax, a wealth tax, the end of their offshore tax haven shenanigans, higher rates of income tax and a higher rate of value added tax on luxury goods.

This article first appeared on Comment is Free

See also proposals for a Wealth Tax

Contagion of revolt

Protests by students and teachers throughout Europe are mounting as governments try to offset savage reductions in education budgets with increased fees in the losing race to prevent state bankruptcy.

Students marched throughout Britain yesterday as well in Italian cities yesterday in protest against attacks on education, blocking roads and railway lines in some of the biggest demonstrations seen in decades.

Hopes that the feverish activity resulting in an €85bn loan package for Ireland would inhibit the debt contagion spreading throughout Europe and the rest of the world were dashed as global investors immediately sent the rates soaring for lending to Portugal, Italy and Spain as well as Ireland and Greece.

"The crisis is intensifying and worsening," said Nick Matthews, a credit expert at the Royal Bank of Scotland. "Bond [government debt] purchases by the European Central Bank are the only anti-contagion weapon left. It needs to act much more aggressively."

Agreement on a European Stability Mechanism (ESM) to be launched in mid-2013 will be far too late to prevent a string of state bankruptcies. The loan package for Ireland itself postpones the intention of the ESM to force banks and hedge funds to take losses if a country runs out of money. The UK’s contribution to the Irish package is an attempt to ease the strains on the interdependence of the failed Irish economy and UK-based banks.

The ESM, if it comes into force, will not only test the power of the Eurozone governments against the global banks and non-banks, but will require a long process to arrive at unanimous agreement among Eurozone countries that a country is insolvent and qualifies for help.

As the crisis continued to spread, French Minister for the economy, Christine Lagarde says that each European country is facing very different conditions and each should be treated on a case by case basis. Whilst it is true that the levels of indebtedness vary, the development of the global economy means that debt is universal and the fate of each country is entangled with the fate of the whole world system, not just that of the Eurozone or even the whole of Europe.

In the US, the fallout from the mortgage defaults that triggered the global meltdown in 2008 is continuing despite the launch of a second round of quantitative easing or printing of money. US house prices fell for the third month running in September and at a quicker-than-expected rate.

The end of the government’s tax incentive for first-time homebuyers joined persistent unemployment, high rates of foreclosure and an excess of vacant homes. Home prices have plunged by 28.6 per cent since peaking in June 2006.

As every desperate economic measure stokes up social unrest, the time has come for a new kind of politics. Iceland was the first country to be driven into bankruptcy by the global financial meltdown of 2007/8. It has just elected a 25-person Constitutional Parliament to re-write its constitution for the first time in the Republic’s history.

It is a small indication of the much bigger political changes needed to resolve the economic, social and ecological catastrophe caused by capitalist production. The December 11 event in London on creating People’s Assemblies would be a good place to start.(http://www.peoplesassemblies.org/)

Gerry Gold
Economics editor
December 1, 2010
reposted from http://www.aworldtwowin.net/

Tuesday, 30 November 2010

Tax justice takes to the streets




Yesterday, Top Shop in Oxford Street became the latest target on the high street as protesters blockaded the store as part of the campaign for tax justice.

Protesters blockaded the store chanting "Philip Green, national thief, pay your tax or we won't leave!" and "Philip Green's taxation could pay for Education". There's good reason to target Top Shop, whose owner is Sir Philip Green (knighted under New Labour and brought into government by the coalition).

A previous target was of course Vodafone and its missing £6 billion, as exposed by Private Eye.

Tax justice campaigner Richard Murphy also makes a good case for taking an interest in the tax paid by Marks and Spencer on his TaxResearch blog, under the title 'Knickers to Tax'.

Another potential target I'd suggest should be Boots, which has relocated its headquarters to Switzerland - presumably for the nicer views ...

Either way, it means protesters this weekend scouring the High Street for blockading opportunities, shouldn't struggle for legitimate targets.

Monday, 29 November 2010

Centre for Progressive Economics launch in Belfast


I was invited to speak at the launch of the Centre for Progressive Economics (CPE) at Queen's University in Belfast on Saturday, and I'll post links to some of the papers and my own contribution once they're online.

On the same day of course, south of the border, over 100,000 people marched through Dublin in a huge demonstration against the austerity measures there. If you want to see the impact Osborne's cuts will have there is no better crystal ball than Ireland.

CPE is an excellent initiative, bringing together academics, activists and trade unionists to put forward an alternative to the discredited neo-liberal economics that continues to dominate mainstream discourse. The CPE has similar aims, politics and organisation to LEAP, and I hope LEAP and the CPE will learn from each other and share information and research over the coming months and years.

This is the CPE's introductory statement:

For many, the coalition government’s emergency budget in July 2010 and the Comprehensive Spending Review in October were declarations of war on the welfare state. The cut on corporation tax on profits, whilst increasing VAT and attacking universal benefits are not fiscal decisions but ideological. The relentless propaganda about the budget deficit and the need for deep and quick cuts needs to be portrayed for what it is, a Conservative led attempt to use the economic crisis to break the welfare state and re-shape the economy in the interests of the few. This seminar begins a series motivated by asking the following simple question:

‘why when in politics we do not think it desirable to have ONE theory of how politics and society should be organised, should we accept that there is only ONE theory of economics?’


The Centre for Progressive Economics has been established following discussions between the labour movement and a number of academics in Northern Ireland and beyond. The discussions identified the need for a progressive economic and social analysis to counteract the disappearance of labour and left focused research in third level institutions and its replacement by a neo-liberal orthodoxy. In response an ad hoc labour and progressive think tank has emerged to comprising trade unionists and academics with a broad remit to identify relevant issues for labour and broad progressive politics. The Centre for Progressive Economics seeks to promote a genuine debate within our political, policy and public/media discourse about the ‘economy’ and ‘economics’. ‘Economics’ is not synonymous with the ‘free market’ or ‘neo-classical economic thinking’, and the ‘economy’ is not synonymous with ‘capitalism’. At this time of global economic crisis and the literal bankruptcy and socially negative impacts of ‘business as usual’ economics there is a pressing need for fresh thinking about our economic future. This is an alternative and the Centre for Progressive Economics will seek to provoke debate as to that future in the Northern Ireland regional economy and beyond.

Wednesday, 24 November 2010

The 'nether world' of capitalism

The propaganda that accompanies the cutting, slashing and burning of government spending is all about “securing the fragile recovery”. It is used in every country from Iceland, Greece, Ireland, Spain, to the US and Britain – to justify what in effect adds up to crashing the economy.

But don’t get the idea that anything else can be done within the capitalist framework. After decades of credit-led expansion, the logic of capital now demands its opposite – ruthless contraction. It turns public pronouncements into lies, and politics inside out. Ireland’s government won’t be the last to find itself in trouble.

The economic trajectory of country after country, region after region confirms the slide from recession to depression. The Organisation for Economic Co-operation and Development last week cut its forecast of UK economic growth in 2011 from 2.5% to 1.7%. The Institute of Directors is forecasting UK growth of 1.2% next year. In real terms, these figures represent a decline in activity.

The eurozone, having pumped billions of euros into recovery measures, achieved relatively strong second-quarter growth of 1% to the surprise of the markets. But the “recovery” was short-lived. Despite the export of capital goods from Germany to China, growth slowed to 0.4% in the third quarter. Euro zone unemployment rose to 10.1% in September and it is forecast to go higher next year. In the United States, another round of “quantitative easing” – aka printing money – is under way in an increasingly desperate bid to boost economic activity.

The World Bank predicts that China’s growth will slow in 2011 from attempts to constrain the country’s uncontrollable credit boom. Lending by its vast, unregulated underground financial market is sending the prices of staple foods soaring and triggering social unrest. The average price of 18 staple vegetables is 62% higher than a year ago.

Inflation is eating away at incomes not only in China. Commodity speculators have driven up the price of food worldwide, while transport and energy prices in Britain are set to soar. The inexorable fall in consumer spending power – VAT is going up to 20% in January – can only deepen the contraction.

Desperate times lead to panic measures, as the so-called rescue plan for Ireland’s bankrupt banks shows. Ireland, however, is only an extreme example of the rotten core of the global financial system, which has been on state life support since 2008. All the talk of the dangers of “contagion” and the threat to the euro itself indicates that another crisis-point has been reached.

We are not the first to analyse the destructive side of capitalism. In 1848, Marx and Engels wrote in their Communist Manifesto:

Modern bourgeois society, with its relations of production, of exchange and of property, a society that has conjured up such gigantic means of production and of exchange, is like the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells … In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed.

No amount of counter-propaganda against spending cuts can halt the inexorable contraction of the global economy. Avoiding the consequences means that the system must be replaced as a matter of urgency. Today’s general strike in Portugal against budget cuts and student actions in Britain against soaring tuition fees are only flashes of the struggles ahead. Going beyond resistance to putting an end to capitalism is the real challenge.

Gerry Gold
Economics editor
24 November 2010

reposted from www.aworldtowin.net

Friday, 19 November 2010

Tax Justice - Exposing the multi-billion fraud

The Tax Justice campaign has rightly increased its prominence in the current debate about cuts - thanks mainly to the incredible work of the Tax Justice Network and also of the PCS union (which represents staff working in tax collection for HM Revenue & Customs).

The most serious estimates are that around £120 billion in tax is evaded, avoided and goes uncollected - mostly from those most able to pay; big business and wealthy individuals. This is consistent with leaked Treasury papers in 2006, which estimated the tax gap between £97-150 billion.

When the country has an annual deficit of an admittedly high £155 billion, then missing around £120 billion of tax (before we even start collecting increasing some rates) every year is substantial.

There is also a certain hypocrisy at a time of unprecedented cuts that the rich are evading and avoiding tax while the poor are getting pay freezes, benefit cuts and losing their jobs. This hypocrisy is even greater when a Cabinet of millionaires is using tax havens to avoid paying their way - as opposed in the recent Channel 4 Dispatches programme, How the Rich Beat the Taxman.

Such is the success of this campaign that every Party now at least pays lip service to tax justice - yes even the Liberal Democrats and Tories.

However, the Labour Party (well it's conference rather than shadow Cabinet so far) has gone a bit further: passing the resolution below at the 2010 conference in Manchester.

The resolution passed was a composite, but based on the draft motion circulated by the LRC, and passed by Streatham CLP, and others, much of which still remains. Sadly though, some unions were influenced by former Treasury ministers who repeated the ridiculous (HM Treasury) line that the tax gap is only £50 billion.

Nevertheless, this is a victory that we must build upon - and ensure the Labour Party starts speaking up on tax justice.

(Perhaps someone should pass them this though too - Richard Murphy's 'Why HMRC has got the tax gap wrong').

Composite 8 – Tax avoidance

Conference notes that in his speech of 17 August George Osborne, Chancellor of the Exchequer, said “anyone who is serious about tackling the nation’s debts needs to come forward with an alternative plan”.

Conference believes strongly there is a credible alternative to the Chancellor’s Budget which many economists predict will hit poorest families hardest and increase the risk of economic slowdown, higher unemployment and a potentially disastrous ‘double dip’ recession.

Conference notes the HMRC high net worth unit tasked with investigating the tax affairs of the super rich has been cut by 20% - showing this isn’t a priority for government.

Conference notes tax avoidance, tax evasion and uncollected taxes are depriving the Exchequer of up to £50 billion a year when the national deficit is £160 billion while we are faced with cuts.

Conference believes that action against tax avoidance is a crucial part of tackling the fiscal deficit and if carried out effectively would reduce the level of cuts to public spending needed to meet the government economic plans.

Conference believes that an increased commitment to public investment coupled with a focused attack on tax avoidance will do much to keep unemployment down and to tackle the deficit.

Conference notes the vigorous campaign on PubCos and Tax avoidance schemes.

Conference opposes the rise of VAT to 20% announced in June’s Budget.

Conference notes the statement in the Labour Party manifesto highlighting the importance of tackling tax avoidance.

Conference urges Labour to commit to addressing the tax gap as part of its deficit reduction strategy.

Conference calls on the Labour Party:
  • Mount a campaign to highlight tax avoidance
  • Campaign to end the proposed VAT rise
  • Campaign for fairness and justice in the tax system as part of the alternative to the government’s cuts
  • Properly pursue a global Robin Hood Tax
Conference calls on the Labour movement to work to ensure that the coalition Government takes action to reduce as far as possible the level of tax avoidance by individuals and businesses in the UK as a means of ensuring that all members of society play a part in helping to reduce the deficit.

Mover: GMB
Seconder: Streatham CLP

The supermarket model of society

From Rosamund Stock:

In the Guardian's front page article on a UK happiness index (UK happiness index to gauge national mood, 15th November 2010) a Downing Street source is quoted as saying; "If you want to know, should I live in Exeter rather than London?...and if you have a big enough sample, and more than one [survey] a year, then people can make a proper analysis on what to do." But if everyone chooses to move to e.g. Exeter, what will that do to the quality of life of people in Exeter? It is not just the increased demand for schools, and public services, what will that do for house prices, and local jobs, and what will the people of Exeter feel about all these newcomers, since no one asked them?

This quote reveals the model of society of those now in government: society is like a big supermarket. You make your selection based upon the national equivalent of a comparison web site and buy what you want.

No thought of anything beyond the wants of the individual consumer, where the actions of any one economic agent have no discernible effect, and nothing is considered except the individual (economic) transaction. Nectar points anybody?

Thursday, 18 November 2010

Part-timers hide jobs fall

From today's Morning Star, by John Millington

Unemployment fell slightly in the last quarter - but only because a growing army of temps and part-timers masked the true picture.

The latest Office for National Statistics data showed unemployment fell by 9,000 to 2.45 million in the three months to September.

However part-time employment rose by 142,000 - the fastest rise on record - taking the total to 7.98 million, 5.94 million of them women.

And the number of 16 to 64-year-olds described as "economically inactive" now stands at 9.27 million.

The TUC warned that the figures showed no sign of a recovery despite claims that the private sector is leading an economic resurgence.

General secretary Brendan Barber said: "While any fall in unemployment is welcome, it would be dangerously naive to believe that these figures constitute a jobs recovery.

"The overall rise in employment is based on shaky foundations with a notable rise in involuntary part-time work.

"With unemployed people outnumbering job vacancies by five to one it's time the government focused on helping them back into work, rather than insisting that the labour market is flourishing."

Job vacancies fell 27,000 to 453,000 over the quarter.

Left Economics Advisory Panel co-ordinator Andrew Fisher said the figures made grim reading for workers and the unemployed, particularly with the VAT rise due to come into force in the New Year.

"The underlying data reveals there are 62,000 fewer people in full-time work, but 94,000 more in part-time work," he said.

"But there is other bad news too. The number of vacancies in the economy has again fallen - and all this is before the bulk of the job cuts announced in the spending review have been implemented.

"With no strategy for job creation, the coalition government will make 2011 a year of rising unemployment and misery for millions."

Trade unionists also had little to celebrate, with only a 2 per cent average pay rise including bonuses across all sectors.

Monday, 15 November 2010

Asset sales, privatisation and the Tory agenda

The Coalition government is a coalition in name only, it is pursuing a Tory agenda. That agenda is the same as it has been for 30 years: an attempt to roll back the post-war settlement - removing welfare rights and cutting public services.

While most of the attention and opprobrium has rightly been aimed at the £80 billion of cuts announced by George Osborne in the Comprehensive Spending Review, there has not been enough attention and analysis of the privatisation agenda.

The level of privatisation already announced are mind-boggling, both in their scale and economic ineptitude. The CSR announced the intention privatise the Royal Mail, the Tote, Royal Mint, Ordnance Survey and air traffic control. Of course this agenda is not new, and in fact is most a regurgitation of what New Labour announced in the 2009 Budget (which LEAP rightly condemned).

These aren't referred to as privatisations, but as "asset sales", but why would a country in debt, according to Osborne on the "brink of bankruptcy", sell off revenue generating assets? Each of the Royal Mail, the Tote, Royal Mint and Ordnance Survey generate income for the Exchequer - vital in closing the deficit and paying off the debt.

But, as Irish comedian Jimmy Cricket used to say, "c'mere, there's more": under the radar there's a huge swathe of privatisation planned for the NHS (as this wonderful video shows), for education (through 'free schools') and in welfare delivery where nearly 10,000 Jobcentre workers are set to lose their jobs and more jobcentres close to fund the private sector to deliver workfare programmes.

The Morning Star also features on its front page this morning a new report from the influential ResPublica think-tank which calls for "the government to privatise swathes of hospitals, schools and libraries". It is, as the Star titles it, "The Ultimate sell-off"

As I told the Star, the Tories plan is "to relieve the state of the burden of providing high-quality services". But that is only one side of the story - the other is that they wish to transfer publicly funded assets to the private sector.

We should never forget, privatisation is the redistribution of wealth from the public to the private; from communities to shareholders. It increases inequality by removing access to services from the poorest and by increasing the wealth of the richest.

Monday, 8 November 2010

Most workers take pay cuts

From today's Morning Star, by John Millington

Most workers have taken a pay cut over the past year, with the average deals lagging well behind inflation at 2 per cent, the Labour Research Department revealed today.

One in six pay settlements involved a wage freeze, with many workers not getting a pay rise for the second successive year.

Only a minority of deals kept pace with RPI inflation, which peaked at 5.3 per cent in April, and these mainly involved long-term agreements with a built-in inflation link.

Pay rises in private firms - such as inflation-beating deals at Jaguar Land Rover (5 per cent) and South West Trains (5.2 per cent) - remained exceptions to the rule due to high-density unionisation.

The report also revealed that public-sector workers faced pay freezes and there were plans to "undermine" wage bargaining in sectors including agriculture, schools and health.

The findings come just over a week after a study by Incomes Data Services, which said that over 80 per cent of pay settlements were actually real-terms cuts to workers' wages.

Labour Research Department pay and conditions researcher Lewis Emery said the research showed that disparities in pay could widen between "those able to push for a pay deal at least close to the level of inflation and the rest where job security and minimum standards become the over-riding priorities."

Leap co-ordinator Andrew Fisher said the evidence had to be put into the context of the overall cuts agenda.

"With utility bills, rail fares, food prices and housing rents all set to rise there will be a real squeeze on household income, especially as job losses increase too," he said.

"Wages as a percentage of GDP are already at a post-war low, while corporate profits are at a high.

"There is no economic reason why workers should accept pay freezes."

Communist Party of Britain general secretary Rob Griffiths said workers were being made to pay for the economic crisis and faced a "clear choice" on how to deal with it.

"With big increases to come in VAT, public transport and energy prices workers are faced with a clear choice - either defend their living standards and our public services or to let the corporate fat cats get away with crime of the century," he said.

"Workers, pensioners, the unemployed, students and benefit claimants are being called upon to pay the bill for bailing out the banks, boosting corporate profits and funding massive increases in directors' salaries and bonuses."

Friday, 5 November 2010

Osborne's class war


What Osborne unleashed on 20 October was an all out class war. It was comprehensive, as promised, and a precision assault on the working class. Let’s work through it:

Osborne pronounces his cuts will mean half a million public sector job losses, which the Chartered Institute for Personnel and Development says will be nearer 750,000. But before he does that his government is attempting to tear up the redundancy terms of civil servants, so that they can be sacked on the cheap.

For those that do remain, their pensions will be cut and he will perpetuate the lie about ‘rising’ and ‘unsustainable’ costs, when in fact the costs are falling as the Hutton report showed. Workers will also face a pay freeze for two years – a real terms cut of nearly 10%.

There is no strategy to create jobs, and rising unemployment is implicitly accepted. Since there will be a knock-on effect on the private sector from cutting public sector investment and capital spending, another million people will be out of work, and eligible for various elements of welfare.

Osborne is ahead of the game here, having now announced £18 billion of welfare cuts since June. Those still eligible to claim jobseekers allowance will face delays, a poor service and privatised contractors paid by results, profiting from your misery.

This is because the DWP is being forced to shed 15,000 jobs to help finance the new Work Programme, which will be run entirely by the private and voluntary sectors, which – DWP’s own research suggests – are less effective at supporting people into work than Jobcentre Plus staff

Then of course there’s the problem of getting to a Jobcentre since the network will be “rationalised” (i.e. cut). It will mean a bus or even train ride for many now – and the fares are about to skyrocket, as bus subsidies are cut and rail companies have been allowed to raise fares by 30% over the next four years.

There are further cuts to housing benefit and a huge hike to 80% of market rates for new social tenants (there won’t be many since the budget for new housing has been halved). Yet Osborne of course does nothing about private landlords’ inflated rent demands or investing in council housing. This is a recipe for mass homelessness. There are already 1.8 million families on council waiting lists and 100,000 families living in temporary accommodation.

For those on Incapacity Benefit, Employment and Support Allowance or Disability Living Allowance there are cuts and privatised profit-making and target-driven assessments to shift sick and disabled people onto the lower Jobseeker’s Allowance.
So Osborne is demonising those on benefits, and introducing new workfare policies, when there are already 2.5 million unemployed and less than 500,000 vacancies.

His answer is that the Big Society will step in – the social equivalent of laissez-faire – yet voluntary sector funding is being cut by central and local government and the Charity Commission (which regulates the sector) received a budget cut of 33%.

In case of any media dissent, Osborne has cut the only major not-for-profit broadcaster, the BBC, by 16%, while cutting the regulation of private media through cuts to Ofcom.

If that wasn’t enough, Osborne will also be handing over public assets like the Royal Mail, the Tote, Royal Mint, Ordnance Survey and air traffic control to his mates in the City. All of these bring in revenue to the Exchequer, and that’s why they are attractive to big business.

This government will also soon allow market rates of interest on student debt, making it attractive to the private sector, and the CSR again proposed privatising the student loan debt which will be big money once that debt amasses at £7-12,000 per year.

Osborne also announced he is giving up on child poverty – “the Spending Review has no measurable impact on child poverty over the next two years”, he proudly announced in his speech. There are currently nearly four million children living in poverty, and that will rise as more of their parents lose their jobs and have their benefits cut.

So it’s class war, all-out class war, and so to mitigate against people becoming aware of that Osborne is taking two logical steps – firstly lying about the necessity for cuts, but secondly to divide and rule: between public sector and private sector workers, and between those in work and those out of work.

There is a third step too – the devolution of many cuts to local government to implement, dividing the blame.

We therefore have to challenge each of these strands if we are to mobilise effectively. We must re-but his lies, and explain the alternatives at every opportunity: public ownership, tax justice, a wealth tax, a million climate jobs, etc. We also have to not let ourselves be divided – and say that there should be no cuts – not in welfare, public services, jobs or pensions – and no privatisation and marketisation of our public services.

The question of councils implementing the cuts needs serious discussions. In May 2011, Labour is likely to gain more councils as the backlash bites against the Tories and their Liberal lapdogs. These newly elected councillors will need to consider how they can resist the cuts. It’s a discussion that local LRCs and community anti-cuts campaign are having now.

Osborne has unleashed an all-out class war. If we are to defeat this we need to bring our trade unions and the Labour Party back into struggle – otherwise what do we replace this government with? It is not going to be easy, but there really is no alternative.

*This is the second part of an article that appears in the November 2010 issue of Labour Briefing.

Thursday, 4 November 2010

Osborne's unavoidable desire to roll back the state

To analyse the coalition government’s Comprehensive Spending Review (CSR) we have to understand its purpose. Was this the economic strategy to get "our country back from the brink of bankruptcy" as George Osborne said in the final rhetorical flourish of his Commons statement?

Let’s analyse that claim. As a sovereign country with its own currency bankruptcy is near-impossible – we can always print more money. But that technicality aside, Britain would have to be in unprecedented levels of crisis to become functionally bankrupt. The UK’s national debt is lower than that of Germany, France, the US – and about a quarter of Japan’s! Our debt, currently 56% of GDP is not high by historical standards, and we are able to borrow over long repayment periods at low rates. Our debt is nowhere near high risk.

Osborne and many monetarist economists would argue that the deficit – the annual gap between expenditure and revenue – is however a problem, wider than that of many nations and at an historically high level. He said in the Budget that the deficit was the result of Labour’s profligate public spending, amassed “from a decade of debt”.

A quick check of the figures proves this to be untrue. Labour inherited a national debt of 42% in 1997, which had been reduced to 29% by 2002, and rose slightly to 36% in 2008. Then the global banking crisis occurred and the deficit rocketed as unemployment rose, tax revenues collapsed and welfare spending increased.

But whatever the reasons, it is perhaps true that “tackling this budget deficit is unavoidable”. It is certainly desirable – as otherwise debt will increase and interest payments will eat further into spending and curtail useful expenditure.

If we accept that dealing with the deficit is desirable, that still does not make Osborne’s choices unavoidable.

There are three ways to deal with the deficit: I’ll characterise them as Marxist class war, Keynesian, and Osborne’s class war. Each could achieve the goal of closing the deficit, they are political choices.

The first is the ‘Marxist route’ – this is not deficit-denial, but debt denial – deny that we should pay. You either expropriate from the rich and big business to pay or risk the invocation of sanctions, embargos and even war by repudiating the debt and not paying at all. Argentina managed it a few years back, but it requires us to be in a revolutionary situation and we are not, yet, so let’s move on.

The next is the Keynesian path. This requires restoring revenues (rather than cutting expenditure) to close the deficit. It means deficit spending, public investment, job creation, probably aligned with redistributive taxation.

Of course what we got was the Osborne class war model: cutting capital expenditure, freezing pay, increasing VAT, cutting jobs and welfare, yet still expecting a private sector led recovery. It is not just anti-Keynesian, it is anti-logical.

It means rolling back the state, to cut expenditure to match reduced revenue. Growth is subject to a laissez-faire leave-it-to-the-market strategy, but public spending must be pared back.

*This is the first half of an article that appears in the November 2010 issue of Labour Briefing

Wednesday, 27 October 2010

Race to the bottom

Ireland’s already severe economic troubles just got a whole lot worse.

Its plan to reduce its budget deficit to 3% of GDP in four years by cutting spending by €7.5bn has been undermined by lower growth prospects both at home and abroad and higher debt interest costs.

So, in a warning of what is to come elsewhere, Ireland’s Fianna Fail government has DOUBLED its programme of cuts to €15bn.

And this comes only days after the UK's Lib-Tory Coalition announced the latest details of its own savage assault on the public sector intended to hit a strikingly similar target.

You can almost feel the brutal threat contained within the official Irish statement:

'The Government realises that the expenditure adjustments and revenue raising measures that must now be introduced will have an impact on the living standards of citizens. But it is neither credible nor realistic to delay these measures.'

And you can almost see the baseball bats wielded by the bailiffs sent in by the money marketeers who’ve driven up the price of borrowing for Ireland, and a long list of other highly indebted countries.

'Our obligations are clear. We must demonstrate that we are bringing sustainability to our public finances. We must stabilise our debt to GDP ratio over the period of the Plan. And we must set out our strategy for returning our economy to growth.'

Things are getting rapidly worse for the millions of ordinary people already struggling to deal with the costs of debt repayments incurred when governments decided they had no option but to bail out the bankrupt banking sector in 2007 and 2008 and issued monstrous amounts of new credit in the hope that it would stimulate a ‘recovery’.

Despite better than expected growth figures for the UK in the last half year, its economy hasn’t even recovered half of the production it lost during the first part of the dive into its worst post war recession.

Meanwhile, the world economy is heading into a renewal of decline. Look at South Africa for example. Unemployment there is growing relentlessly beyond 25%. If the workers who’ve given up looking for a non-existent job are included the figure is over 36%. Whilst carmaker Ford has used its government bailout to slash production, sell off Volvo and cut its involvement with Mazda and returned to profit, parts of America have an official unemployment rate of 20%. And one person in five out of work is the official rate for the whole of Spain.

With profit-seeking capitalist society no longer able to offer jobs to so many people – and forcing governments to slash support for the unemployed – belief in the system is being undermined. It’s no wonder that the dream weavers are hard at work spreading the myth of a ‘return to growth and prosperity’. As increasing numbers begin to realise that the game is up, the need for a society that is based on need rather than shareholder returns becomes increasingly urgent.

Cameron has just delayed the details of the growth package that was expected to follow the biggest assault on public spending since the post war creation of the welfare state. Could this be an admission that there’s nothing he can do besides opening the way for a few thousand jobs in off-shore wind turbine manufacture?

It’s high time people – workers, students, farmers, pensioners, the unemployed, communities – formed new kinds of democratic forums and began to explore how to use them to take things into their own hands. As illusions that the system can provide for people’s needs are broken up, there is nothing to lose and everything to gain.

Gerry Gold
Economics editor
http://www.aworldtowin.net/
27 October 2010

Saturday, 23 October 2010

Confirmed: Cuts will hit poorest hardest


Working people, the unemployed and the sick will be hit 10 times harder by spending cuts than previous Con-Dem predictions, a new TUC analysis revealed on Friday.

TUC-commissioned economists shattered myths peddled by Chancellor George Osborne and Deputy Prime Minister Nick Clegg that the spending review was about "fairness."

They revealed that the poorest 10 per cent will be hit 15 times harder than the richest 10 per cent.

The new analysis stands in stark contrast to government claims that overall the cuts would hit the worst off only five times more than the richest in society.

The TUC originally predicted in its Where The Money Goes report that cuts of 25 per cent by 2012-13 would mean that the poorest 10 per cent of households would lose around 20 per cent of their income.

But using data from the Spending Review the TUC showed that overall cuts to public spending - excluding benefits and tax credits - of £48 billion by 2014-15 will be even more regressive, partly because of deep cuts to services which are disproportionately used by the poorest households, such as social housing and social care.

TUC commissioned economist Howard Reed pointed out that if the cuts were examined by their social "function" rather than by department, the picture looks even bleaker.

"Social care will be cut by 20 per cent, social housing 24 per cent, policing 20 per cent and higher and further education 27 per cent," he said.

TUC general secretary Brendan Barber said: "Even when the effects of benefit changes are taken out of the equation, cuts to services surgically target the poorest households and leave the rich relatively untouched."

And Haringey Council leader Claire Kober warned that cuts to local budgets, services and housing allowances will make it impossible for local authorities to cope with the influx.

"We are being set up to fail," she said.

Left Economics Advisory Project co-ordinator Andrew Fisher called on the TUC to co-ordinate resistance to the coalition's "obscene attacks."

He said: "The TUC analysis of Osborne's spending review is to be congratulated and confirms what the IFS said the day before and what our instincts told us all immediately: the CSR was all-out class war.

"At the June Budget and again this week, Osborne lied to us that his cuts would be fair.

"Within a matter of hours again his lies have been irrefutably exposed."

*This article appeared in the Morning Star on Sat 23 Oct

Friday, 22 October 2010

Time to end the profit system

The Lib-Con Coalition government’s Spending Review is an attempt to rescue an already bankrupt economy. With £81bn cuts in public spending, it is the biggest and most sustained assault on the public sector since the creation of the welfare state sixty years ago.

But the reality is that despite the ruthless measures announced yesterday, the cuts will hardly make a dent on Britain’s budget deficit, which at £162 billion is the largest of the world’s major economies.

The plan is to bring government borrowing down by £149 billion in four years. This is a 19% per cent cut in real terms, as opposed to New Labour’s proposed 12 per cent. But can this gamble succeed? The very measures intended to reduce the deficit will deepen the crisis.

The one million people who will be thrown out of work and those made homeless will need some kind of support. And whilst blighting the lives of countless citizens, especially the most vulnerable, government spending will continue to rise by an additional £38 billion over the coming four years. As Chancellor Osborne announced: “total public expenditure – capital and current – over the coming years will be £702 billion next year, then £713 billion, £724 billion and £740 billion in 2014-15.”

An additional £7 billion cut brings the total cut in the welfare budget to £18 billion so far. The poorest ten per cent of the population stand to lose the most. It is a monstrous bludgeon expected to achieve just a £5 billion reduction in the £43 billion per year interest payments.

The measures include:

  • a 30% cut in funding for local authorities
  • a 74% cut in the budget for house-building combined with a trebling of rents for new tenants in social housing
  • insecure tenancy of council house dwellers
  • the minimum possible increase for the NHS, that will leave health care struggling to keep up with an aging population and scientific advance
    ending the universal right to Child benefits
  • a 3.4% real cut in education
  • cancellation of major infrastructure projects, like the renewal energy from the Severn Barrage
  • a 10% increase in rail fares
  • a £7 billion cut in the welfare budget
  • Culture Department to be cut by 42% with almost 30% cut for Arts Council
  • up to 30% cuts in budgets for government departments
  • 20% cut in funding for the police
  • rapid acceleration in the process of adding a year to the working life of a man and six to that of a woman before they can claim a state pension
  • huge and damaging reductions in the settlements for Scotland, Wales and Northern Ireland.

    There is certain to be much more pain as the contraction of the global capitalist economy tightens its grip. The attempt to reduce repayments to the money markets will be undermined by tax revenues falling faster as the recession turns to slump. The populist gesture of £2 billion to be raised from a permanent levy on banks will surely be passed on in the form of higher costs of borrowing.

    Cuts in administration of around 30% over four years will lead to a loss of an estimated 490,000 public sector jobs, 8% of the total. The effects of the overall programme confirms consultancy PriceWaterhouseCooper’s estimate of a further 500,000 jobs evaporating in the private sector as spending is reduced and contracts are cancelled.

    The Coalition has issued a sinister threat with its promise that it will always be better to be in work than on benefits. It means that they’re hard at work on schemes to reduce wages across the board. No doubt employers will be rubbing their hands at the prospect of new sources of cheap labour from the enlarged European Union and beyond.

    This is only the beginning. The Spending Review spells out that the capitalist state can no longer afford to fund any of the rights or life-support benefits won by unions in a century of struggle.

    The intention to reduce the wide and complex range of benefits needed by millions of people suffering the effects of three decades of profit-chasing globalisation to an all-encompassing single payment, and a time-limit on the Employment and Support Allowance reflects a profound contempt for the individuals whose needs have been assessed by cohorts of public sector workers. Capitalism in crisis wants to reduce millions of people to bottom-line cyphers of cost before trying to eliminate them altogether.

    Calls outside Downing Street for “French-style” strikes are a welcome move from the total inaction of the Trade Union Congress. But even industrial action needs a political purpose. The desperate gamblers in No10 and 11 are driven by a real economic crisis of the capitalist system itself.

    The solution to the debt mountain comes in the shape of action by People's Assemblies, formed locally throughout the country with a view to defending services, livelihoods, jobs, and homes. Eventually a government formed from a network of people's assemblies will need to take control of the financial sector, cancel the debts and turn it into a not-for-profit service.

    The global capitalist classes are watching to see the results of Osborne’s cruel experiment. It’s time to realise that we too must enter new territory.

    Gerry Gold
    Economics editor, 21 October 2010
    reposted from http://www.aworldtowin.net/

  • Thursday, 21 October 2010

    Why trade union rights matter


    Tomorrow morning (Fri 22 Oct), John McDonnell will be moving his Lawful Industrial Action Bill, which would tackle the increasing practice by employers of using minor technical errors in the balloting process - which have no material effect on the outcome - to take unions to court in order to prevent them from taking industrial action.

    It would mean the repeal of one of the most pernicious pieces of Thatcher's anti-union legislation, just one of many - but it would be a step forward. The Bill itself is sponsored by a dozen Labour MPs, and was unanimously backed at TUC Congress in September.

    When we look across the Channel to France, the importance of a fair legislative framework for trade unions is immediate. France has only 8% union membership in its workforce, compared with around 24% here yet their workers and unions are able to take effective action to resist attacks on their living standards.

    And it's not just France, in South Africa public sector workers have won a 7.5% pay rise after 3 weeks on strike, with an 800 rand housing allowance thrown in too.

    Gone are the days, as many will have seen in Made in Dagenham, when workplace votes could initiate strike action. In fact, it's fair to say the Equal Pay Act would not exist if Thatcher's anti-union laws had been in place.

    In the UK the effects of the anti-union laws are clear: the value of wages has declined from nearly 65% of GDP in the mid-1970s to 55% today. Over the same period, the rate of corporate profit has increased from 13% to 21%. A large part of the reason for the global economic crisis, argues Graham Turner in his book, is the global squeeze in wages which has sapped demand out of the economy.

    Whether or not John's Bill passes the first hurdle tomorrow - it needs 100 Labour MPs to attend to make sure - UK unions are going to have fight vigorously and innovatively despite the anti-union shackles around them. It's essential they do - people will suffer immensely, and the poorest most, if these cuts go through.

    John McDonnell will be presenting his Bill tomorrow in Parliament from 09:30 tomorrow (Fri 22 Oct). You can watch live on the BBC Parliament Channel.

    Update, Fri 22 Oct, 2:30pm: Unfortunately only 87 Labour MPs could be bothered to attend the debate and so the Lawful Industrial Action Bill fell. Very disappointing, but well done to all those who lobbied their MPs - and to those MPs who did attend and support the Bill.

    Wednesday, 20 October 2010

    Initial thoughts on the CSR announcement

    George Osborne announced his Comprehensive Spending Review - we'll do a more considered response in time, but a few initial thoughts:


    • We're told this CSR will be fair and hit the richest hardest ... he said that last time. It's not true this time either.

    • The Government will invest £900 million in HMRC can bring in £7 billion in tax evasion. Spending 90p gets you £7, that's a good return on investment. There's a £120 billion tax gap - maybe invest a bit more?

    • Raising the state pension age to 66 will have a disproportionate impact on the poorest who have shorter life expectancy and are less able to afford to retire early

    • Osborne implied that public sector pension costs are rising. In fact the costs are falling as the Hutton report showed

    • the new 'Work Programme' (workfare/welfare conditionality) will be entirely delivered by the private and voluntary sectors with payments by result (profiting from welfare) even though the DWP's own research shows Jobcentre Plus staff more effective and efficient

    • The extra £7 billion cuts in welfare, on top of £11 billion announced in June, is effectively taking £1000 from 18 million people

    • Another attack on housing benefit - this time people under-35 targeted, and their housing benefit will be effectively halved. Disgusting.

    • Further attacks on Working Tax Credits, including reducing childcare element

    • George Osborne said "the Spending Review has no measurable impact on child poverty over the next two years" as if that was something to be proud of?! Also the CSR period is 4 years so what about the last 2 years? There are over 3m children living in poverty ...

    • "By cutting business taxes we are giving business the freedom to compete" - what a load of nonsense

    • Administration budgets across departments will be cut by 34%, overall expenditure down 19% - 490,000 job cuts across public sector as Danny Alexander 'told' us yesterday

    • Train fares will rise 3% above RPI inflation for the next 3 years - RPI is currently 4.6% - FFS nationalise!!

    • He used "will be protected in cash terms" a lot - what that translates as is a real terms cut.

    Tuesday, 19 October 2010

    Osborne cuts 'will wreck economy'

    How the Morning Star covered the publication of LEAP's dossier on Osborne.

    by Roger Bagley in Parliament

    Left-wing economists stripped the facade today from Chancellor George Osborne's disastrous attack on public services and the poor.

    Mr Osborne's big lie that Con-Dem spending cuts are "fair" was also punctured when a bunch of 35 super-rich big business bosses signed a letter to the Daily Telegraph expressing their fulsome support for the Chancellor's policies.

    On the eve of tomorrow's Comprehensive Spending Review containing further huge cuts, the Left Economics Advisory Panel (Leap) issued a dossier highlighting Mr Osborne's flawed assertions, mistakes and U-turns since his June Budget.

    Leap chairman John McDonnell MP accused Mr Osborne of being "wrong time and time again."

    Mr McDonnell said: "Our community is now about to be devastated by four years of cuts in valuable public services with hundreds of thousands losing their jobs as a result of his faulty economic calculations and recklessly risky policies."

    The bosses of Marks and Spencer, Asda, Alliance Boots, BT, Diageo, Microsoft and GlaxoSmithKline were among 35 big business chiefs signing the Telegraph letter, which claimed it would be a "mistake" for the Chancellor to water down his cuts.

    "Addressing the debt problem in a decisive way will improve business and consumer confidence," they argued.

    But Leap co-ordinator Andrew Fisher accused Mr Osborne (pictured, left) of pursuing "a pessimistic strategy based on failed monetarist policies."

    He added: "Fundamentally, the Osborne economic strategy is simply a Thatcherite ideology that wishes to roll back the state. Today, the small government idea is the Big Society, which is not about strengthening society, but burdening it."

    The Leap dossier pointed out that cutting the public sector would not "make room" for the private sector, but would sap demand and weaken the private sector as well.

    A leaked document from the Office for Budget Responsibility had recognised this by estimating that cutting 600,000 public-sector jobs would lead to a knock-on loss of 700,000 jobs in the private sector.

    Leap also pointed out that, since the June Budget, leading economic forecasters had downgraded prospects for growth in the British economy.

    In addition to Mr Osborne's U-turn over withdrawing child benefit from households with a higher rate taxpayer, the overall three-year freeze on child benefit would mean a 10 per cent cut in real terms.

    Monday, 18 October 2010

    LEAP publishes 'Ready Reckoner' on Osborne’s economic strategy

    Ahead of the Comprehensive Spending Review later this week, LEAP has published a dossier 'The Osborne Ready Reckoner' (free download) testing the statements the Chancellor of the Exchequer, George Osborne, made at the June Budget Statement.

    The dossier highlights the flawed assertions, mistakes and u-turns contained within that statement and puts the arguments against the coalition government's economic strategy.


    John McDonnell MP, LEAP Chair, said:

    "In the short space of time George Osborne has been Chancellor he has already been proved wrong time and time again.

    "Our community is now about to be devastated by four years of cuts in valuable public services with hundreds of thousands losing their jobs as a result of his faulty economic calculations and recklessly risky policies."

    Fundamentally, the Osborne economic strategy is simply a Thatcherite ideology that wishes to ‘roll back the state’. Today the small government idea is the ‘Big Society’. This is not about strengthening society, but burdening it.

    The same Party that tells us the Big Society will take on the role of the state in key areas, also tells us we are living in a ‘broken society’. The effect of the cuts planned on this scale would be, if implemented, to leave Britain with a legacy of a ‘broken government’ to match the Tories’ broken society.

    Government revenues have fallen due to the recession – there are more people out of work claiming benefit and paying taxes, because there are fewer jobs. Today there are 2.5 million people unemployed and less than 500,000 vacancies.

    The Tories have no strategy for job creation or economic growth – only for cutting spending down to the level of revenues from an underperforming economy. The only outcome of their pessimistic strategy is misery for millions of families.

    This dossier puts the economic arguments against the Osborne strategy. Download here.

    Sunday, 17 October 2010

    One Million Climate Jobs


    Earlier this week I went to the launch of the new and expanded 'One Million Climate Jobs' pamphlet, which sets out a strategy to solved both the economic and environmental crises.

    In 50 pages it sets out a comprehensive argument for funding one million climate jobs now. It argues that the jobs and investment can be funded by the reduced unemployment and extra tax revenue from getting one million people back into work, and from addressing the tax gap. The investment required is just £18 billion - a fraction of the £1.3 trillion that bailed out the banking system. As Jonathan Neale, the pamphlet's editor, said at the launch,
    "if the planet was a bank they would save it"

    It argues that the dangers of abrupt climate change require us to act now to reduce our polluting ways. It is estimated that the one million climate jobs, costing just £18 billion could cut UK emissions by 80% in just 20 years, but the pamphlet is realistic: "of course cuts in the UK on their own will make little difference to global climate change. But if we campaign for a million new jobs, and win them, people all over the world will see what we have done".

    The jobs themselves cover our electricity and energy production; refitting homes, public buildings and businesses, and building new homes to strict environmental regulations; building new transport infrastructure; as well as other industries. As Philip Pearson from the TUC pointed out, we have lost over one million manufacturing jobs in the last decade. This is the industrial strategy we need.

    The pamphlet concludes with a chapter on what you can do. As John McDonnell MP, speaking at the launch, said:
    "we need greens and trade unionists campaigning alongside each other, and to become one another"

    The pamphlet is produced by the Campaign against climate change trade union group and is sponsored by the CWU, PCS, TSSA and UCU trade unions. Free download here or order from Bookmarks (£2.50)

    Friday, 15 October 2010

    No cuts! Introduce a Wealth Tax instead

    LEAP met with Professor Greg Philo yesterday, who presented the case for a Wealth Tax to solve the deficit.

    It certainly put things in perspective. The UK has a national debt of £800 billion. By comparison, the total personal wealth in the UK is £9,000bn. It is mostly concentrated at the top, so the richest 10% own £4,000bn (by contrast, the poorest half have less than one-tenth of the total UK personal wealth).

    What Professor Philo proposes is a 20% wealth tax on the wealthiest 10%, which would pay off the national debt and dramatically reduce the deficit, since interest payments on the debt are a large part of government spending.

    The richest 10% have only to assume liability for their small part of the debt. They can pay a low rate of interest on it and if they wish make it a charge on their property when they die. It would be akin to a student loan for the rich.

    Polling suggests a Wealth Tax would be popular, a YouGov poll of over 2,000 people found very strong support, with 74% of the population approving (44% strongly approving). Only 10% did not approve.

    Footage of Professor Philo propounding a Wealth Tax on the Politics Show, to a rather bemused Tory MP and Labour's Yvette Cooper, is embedded below:



    You can also read more about the Wealth Tax on the Glasgow Media Group website.

    Wednesday, 13 October 2010

    Osbornomics unravels


    Look beyond the big society rhetoric and there's a very flawed theory at the heart of George Osborne's chancellorship. It was outlined in the June 2010 Budget, when Osborne advoacted:

    "An economy where the state does not take almost half of all our national income, crowding out private endeavour"


    This 'crowding out' theory managed to infiltrate the independent Office for Budget Responsibility which stated in June that although the government's cuts would cost 600,000 public sector jobs, with a knock-on loss of 700,000 in the private sector, the private sector would also create 1.6 million jobs over the same four year period (a net gain of 300,000 jobs).

    However, a report published by Pricewaterhousecoopers today shows in fact that the private sector will only create 1 million jobs over the four years, so that becomes a net loss of 0.3m jobs. It undermines Osborne's claim that cutting the public sector can be compensated by private sector growth (definitely not in a weak economy). I think the PWC report still might be a bit optimistic.

    Data released since the Budget seem to be proving the PWC right and Osborne wrong. Both the IMF and the Bank of England have downgraded UK growth prospects. As the Morning Star points out, both the British Chamber of Commerce and British Retail Consortium have warned that growth in the service sector had been "slow" and was showing no signs of picking up before the VAT rise in January next year.

    BCC chief economist David Kern said: "The dismal performance of the service sector is particularly disturbing since it occurs even before VAT is due to rise to 20 per cent."

    It goes to show cutting the public sector won't 'make room' for the private sector, but will sap demand and weaken the private sector too.

    For an excellent brief history and demolition of 'crowding out' theory see Aditya Chakrabortty's piece in the Guardian earlier this month.

    Update:
    There's more on this story in the Morning Star, with quotes from Len McCluskey and Dave Prentis.

    Thursday, 7 October 2010

    Perpetuating the myths on public sector pensions


    There is no greater mythology than that surrounding public sector pensions. There second great mythology is that John Hutton (now Lord) was ever anything but a Tory - he was picked to write a report on public sector pensions (interim report published today) because he would write exactly what the Tories wanted to hear.

    The infamous and ubiquitous “gold-plated” public sector pension is of course largely a myth. The average local government pension resides at just under £4,000 per year. Excluding the upper echelons of the senior civil service, the average civil service pension is only slightly higher at £4,200 per year (a positively tin-plated £80 per week). For teachers the average is a more healthy – yet far from gold-plated – £9,000 per year. Overall, the TUC suggests the average public sector pension is £5,500 per year.

    Public sector pensions have already been attacked though by the indexation changes announced in George Osborne's Emergency Budget in June. According to TUC research, an eighty year old pensioner with an average public sector pension would be more than £650 a year worse off – equating to £12.50 per week.

    The net cost of paying public sector pensions in 2009/10 was a little under £4 billion. The cost of providing tax relief to the one per cent of those earning more than £150,000 is more than twice as much. The cost of providing tax relief to all higher rate taxpayers, on their private pensions, is more than five times as much.

    Ignoring all the facts, Hutton today said "This is a problem and we can't go on as we are."

    So he recommended higher employee contributions, raising the retirement age, and ending final salary schemes.

    Osborne will indicate government thinking on public sector pensions in the Comprehensive Spending Review on 20 October. When setting up the commission Osborne described public sector pensions as "unsustainable". Thing is they're not: the cost of public sector pensions today is 1.9% of GDP in 2010-11, but by 2060 that will have fallen to 1.4%.

    Of course, the other calculation to make is that if public sector pensions are reduced, it will simply result in more people being entitled to means-tested benefits such as Pension Credit.

    The final report will be published just prior to the March 2011 Budget - and then the attacks will start. Until then expect to hear lots more about 'gold-plated', 'unsustainable' public sector pensions. Just remember, it's bollocks.

    Update: great article in the Morning Star on unions' responses to the report

    Update 2: Great letter from Richard Murphy in today's Guardian: "in 2007-08, private pension funds in the UK received subsidies amounting to £37.6bn while paying pensions in that year of just £35bn to those in retirement. The result was that in that year every single penny of pensions paid in the UK were paid at direct cost to the UK taxpayer, and none in effect by anyone else. The question Hutton should therefore be asking is not whether pensions should be paid by taxpayers or not, but whether there is in fact any viable, working alternative to pensions being paid by taxpayers?"

    Wednesday, 6 October 2010

    International currency war under way

    The Bank of Japan’s decision yesterday to further reduce its close to zero interest rate looks suspiciously like one of the opening shots in an exchange rate war that will intensify the problems besieging the already weakened major economies.

    In dropping below its lower limit of 0.1%, and looking at a small programme of quantitative easing (QE) (aka printing more money), Japan managed to get the yen to fall on currency markets. This has the effect of making its exports cheaper.

    But Tokyo didn’t start it. They just followed Brazil’s finance minister who, on Monday, took measures to hold down the value of the real. Guido Mantega warned:

    'We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness.'

    Both Japan and Brazil pre-empted the widely expected “return to QE2” – a sequel to the fading effects of the previous programme of money creation by the now struggling Obama administration. Washington wants the lower dollar to fall to give its exports an edge.

    So the alarm bells are ringing at the International Monetary Fund, which is warning that the “recovery” has run out of steam. IMF head Dominique Strauss-Kahn told the Financial Times:

    'There is clearly the idea beginning to circulate that currencies can be used as a policy weapon. Translated into action, such an idea would represent a very serious risk to the global recovery.'

    It’s not long since world’s leaders in government, banking and finance came together to hammer out the agreements that enabled at least the semblance of a co-ordinated programme of measures designed to restart lending and bring about a return to growth.

    Whilst the previous concerted action is credited with averting a financial and economic Armageddon, its effects are best described as a phony recovery. And that is now over. The optimism induced by unprecedented measures couldn’t and didn’t overcome the uncontrollable logic of the capitalist system of production.

    The global crisis may have erupted in the financial system but its roots are elsewhere.

    Throughout its short period of existence on the planet, the capitalist system has been racked by contradictory forces. Competitive pressures have obliged companies to invest in productivity enhancements which, whilst giving the front runners a temporary advantage, inevitably reduce costs, prices and profits for all.

    To offset the tendency for profits to fall, greater volumes of every product have to be cranked out and sold, and the pressure for even more productivity accelerates and accentuates the growing economy.

    This irresistible objective logic created the globalising corporations that came to dominate the world. And when the surging millions of cars, computers and mobile phones overwhelmed the market, a house of (credit) cards and mountains of debt were created so that consumers could buy them up. At least until we, and the rest of the economy found ourselves drowning in that very same debt.

    Optimism is now being replaced with realism. Cuts in government spending to reduce the budget deficits they’ve accumulated over years of trying to keep growth on track are just one part of the story.

    The phony recovery allowed manufacturers to restock their warehouses and showrooms, but there’s still not, and won’t be enough buyers. So the factories that restarted production after the 2008 collapse will go back onto short time and no time.

    Competition for the remaining market will sharpen, and the intensification in the rate of exploitation will prove truly shocking, sparking social unrest to match. These are the objective laws which shape the decisions in the boardrooms and in government buildings.

    Successful resistance will depend on individuals and communities creating new forms of democracy – People’s Assemblies with the power to terminate the web of contracts and property relationships that tie workers to capitalist employers and ensnare us all in debt. The system of profit-chasing growth must be torn up at its roots. Let’s compost capitalism!

    Gerry Gold
    Economics editor
    A World to Win
    http://www.aworldtowin.net/
    6 October 2010

    Monday, 4 October 2010

    Are the banks about to fail again?

    Last month the Irish government bailed out the banks again, forcing their budget deficit to balloon to an astonishing 32%. It was all too familiar, the banks have once again been bailed out with public money, yet remain in private control and with very little regulation or oversight. There was even the Irish Finance Minister, Brian Lenihan, popping up to say the biggest bank, Anglo Irish, was too big to fail.

    People of course said that about Lehman Brothers, but it failed and the world did not implode. What has vanished though is many Irish jobs, welfare rights and public services - all apparently necessary to avoid a crisis. Instead the collapsing demand in the economy caused credit rating agencies to downgrade Ireland back in July.

    And so to the UK, and today the New Economics Foundation (NEF) has published a report Where did our money go? Building a banking system fit for purpose, which warns "[UK] Banks set to demand fresh bail-out in 2011" and cites increased borrowing by them.

    It also highlights the a "shocking" lack of information on how banks had used the bail-out money. Like Ireland a lack of ownership and control accompanied the bailout - criticised with great foresight by LEAP Chair John McDonnell at the time - and now we may be on the brink of further collapse.

    Referring to the NEF report, LEAP's Graham Turner, from GFC Economics, said "the Bank of England also warned in its June Financial Stability Review that there will be a huge increase in refinancing requirements for UK banks in 2011. This remains a systemic threat."

    Like Ireland again, the UK is about to embark on unprecedented mass public spending cuts - which would sap demand from the economy, and could possibly simply be the precursor to funding another bailout for the bankers.

    If the UK banks do suffer a second round of collapse, then it is time to nationalise the assets as well as the losses and control the sector for public good not shareholder and speculator gain.

    There's an excellent piece in today's Morning Star on this, Banks on the brink yet again - well worth a read.