Sunday, 27 April 2014

Credit, banks and democracy ... or Pettifor, Wolf and Positive Money

Andrew Fisher on a vital debate for left economics and politics

Following the economic crash and the credit crunch, you would be hard-pressed to find two better exponents that have helped people understand the role and creation of credit and money within the economy than Ann Pettifor, Director of Prime Economics, and the Positive Money campaign.

So successful have they been that even the Bank of England, a paragon of economic orthodoxy, has effectively admitted their analysis is right - and orthodox economic thinking baloney - with the publication of Money in the modern economy, which shares the shared Pettifor/Positive Money analysis that money is essentially an IOU, and that commercial banks create most of the money in our economy through credit.

As Karl Marx famously said, "the philosophers have only interpreted the world, the point however is to change it". It's at this latter point that the shared analysis evolves into divergence on the thorny issue of what to do about it.

As a massive admirer of the work of both Ann Pettifor and Positive Money, I hesitate to enter into this debate - especially to say that both are in part wrong in their proposals about what to do.

The debate sprung into life when long-time FT columnist Martin Wolf - who has travelled some distance to the left in the last fifteen years ("when the facts change...") - wrote a very readable piece entitled 'Strip private banks of their power to create money', which basically endorses the Positive Money analysis and remedy: "to give the state a monopoly on money creation" and "for 100 per cent reserves against deposits", i.e. "[banks] could only loan money actually invested by customers".

On initial reading, I was very sympathetic to this - why indeed do private banks essentially have a licence to print money? Why should they harvest profit from usury? If there is to be credit creation shouldn't the state have a monopoly on it - and the direction of investment being subject to popular control, in some form(s)?

Public ownership of the banks is something I argue for in the final chapter of my forthcoming book The Failed Experiment, because I believe it's the logical conclusion of the preceding chapters - which looks at how the crash happened in the UK, what caused it, and the state of our economy.

Ann Pettifor, quite possibly the stand-out campaigning economist of our time, responded with Why I disagree with Martin Wolf and Positive Money. Pettifor argues against Wolf's nationalisation of money issuance proposal because:
"The idea that society can set up a single “independent” committee of men to make far-reaching decisions about the quantity of money needed by a nation of sixty four million people, all engaged in varied and complex activities – is bordering on authoritarian. First there is no possibility of such a committee being independent. One has only to think of the “independent” UKFI committee – set up to oversee the banks, including RBS, in which the state has a stake – to question the possibility of such a body being independent"
I would argue there is nothing inherent in Wolf's or Positive Money's view that means there cannot be plurality within a nationalised banking sector - indeed few would argue against a diversity of regional public banks or indeed the continuation of mutuals and credit unions. Despite the articulation in Wolf's article, I'd be surprised if either Wolf or Positive Money would argue for such a centralised system - would you?

But I think Pettifor is chucking out the baby (public ownership) with the bathwater (the centralised Morrisonian model of state ownership and control). I hope I'm right in thinking she wouldn't do that either - or would at least be more favourable to the pluralistic model of public and mutual banking?

Of course, both may have good reasons for articulating their case that I have either misunderstood or that I just might disagree with. But I'm always optimistic that consensus is possible - even on the notoriously diverse left.

So here I am acting as a Relate counsellor trying to extend the marriage of analysis between Pettifor and Positive Money into a marriage of vision for the future.

But there is one area where there clearly won't be consensus - and on that issue I am undeniably Pettiforian: credit creation. I do not think credit creation is inherently damaging and must be banned (Wolf's point that banks "could only loan money actually invested by customers").

Firstly, I disagree because this weakens one of the key argumments made by Wolf for public ownership: the capture of seignorage revenues. And secondly, because with regulation (which Pettifor also advocates) and public ownership the likelihood of destabilising credit creation becomes much less likely. And of course if a democratically accountable body - the government or otherwise - did engage in risky behaviour we would vote them out: something we can't do to the corporate gangsters running the banks now.

So I'm 75% Pettifor and 50% Positive Money ... perhaps Richard Murphy (that other great explainer of banks and credit) could do me a Venn diagram?

This is a massive debate for the left - and one that should run and run. So credit (pun intended) to People's Parliament for putting on a public debate 'Making Money Work for People and Planet' on 25 June, which includes Ann Pettifor and Positive Money's Ben Dyson. Get along if you can!

Saturday, 26 April 2014

Government vetoes huge payouts for RBS bankers - while fighting to scrap EU cap

Ryan Fletcher, in the Morning Star

Attempts by gluttonous bankers at Royal Bank of Scotland (RBS) to hand themselves bonuses twice the size of their salaries were blocked by the government yesterday.

But the Unite union accused the coalition of hypocrisy for continuing its legal challenge against the EU cap on bankers’ bonuses — the very same legislation used to leash state-owned RBS.

Under new European rules banks require shareholders’ approval to award bonuses up to 200 per cent of fixed pay, otherwise they can be no more than a banker’s salary.

As the government owns 81 per cent of RBS it was able to veto executives’ attempts to award themselves the massive cash handouts.

Using the powers has not stopped the Tories launching legal action to scrap the cap. 
Unite national officer Dominic Hook said: “The truth is the UK government opposes the EU cap on bankers’ bonuses and is even challenging the cap in the courts on behalf of their pals in the City. 

“The Treasury knows its real position on bankers’ pay is deeply unpopular so it’s blocking RBS.

“If the government wants to put its money where its mouth is and really change the bonus culture then George Osborne has to stop wasting taxpayers’ money defending fat bonuses in Europe.”

Barclays won the support of shareholders for payments of up to 200 per cent of salary yesterday while also introducing new role-based pay awards that mean staff can still pick up bumper handouts. 

The payouts come despite a wave of redundancies for ordinary staff at the bank.

Left Economics Advisory Panel co-ordinator Andrew Fisher said: “The bonus culture at Barclays is only a facet of its unadulterated antisocial behaviour: despite making a profit of £5.2 billion last year, the bank announced it would shed 12,000 staff. 

“And it maintains a network of around 300 subsidiary companies based in tax havens, to facilitate the sort of tax avoidance that saw it pay UK corporation tax of just 2.4 per cent in 2009.

“Barclays is the epitome of a nihilistic cannibal capitalism that strips jobs, pay and wealth from the many to give riches to the few.” 

Labour welcomed the reining in of RBS but queried the government’s permission for Lloyds, in which the Treasury has a 25 per cent stake, to pay 200 per cent bonuses.

Shadow Treasury minister Cathy Jamieson said: “The government has bowed to pressure on RBS and finally admitted that bonuses of two times salary would be unacceptable at what remains a bank in government ownership.

“But confusingly at the same time the Chancellor is supporting higher bonuses in Lloyds Bank and elsewhere.

“The Chancellor should accept the logic of today’s announcement and drop his legal action to block the bonus cap.”

A Treasury spokesman said Lloyds could award the bonuses because the bank has completed its restructuring, whereas RBS has not.

Thursday, 24 April 2014

A long term economic plan subject to short-term revision

Andrew Fisher

There's few soundbites in modern politics as clunky as the coalition government's oft-repeated "long term economic plan". This hit the news and Twitter (with its tweet-limiting hashtag #longtermeconomicplan) as the media dutifully parroted the government's propaganda on the "long term economic plan".

The BBC proclaimed UK government hits borrowing target, reporting: 
"The UK government borrowed £107.7bn in the financial year to April 2014, lower than the £115.1bn amount it borrowed the previous year. In the Budget, the Office for Budget Responsibility (OBR) had estimated a deficit for the full year of £107.8bn.
"The government wants to eliminate the budget deficit by 2017-18."
The same statistics and interpretation were strewn across the media: the government is on course, everything is as the OBR predicted, and then add a quote from George Osborne and the success of his apparent "long term economic plan".

I remember Osborne announcing his long-term economic plan, in the emergency budget of 2010:
"The formal mandate we set is that the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget."
And the accompanying OBR documentation set out that on the road to that balanced budget in 2015-16, the deficit by the end of the 2013-14 would be £60 billion (a £40 billion surplus on the current budget) or 3.5% of our GDP.

So, four years on, how is the "long-term economic plan" doing?

The deficit is not £60 billion, but £107.7 billion - so Osborne has borrowed nearly £50 billion or 80% more than planned. And far from the deficit being 3.5% of our GDP, today it is actually 6.6%.

So why is the media heralding the Chancellor's self-proclaimed success?

Because the "long term economic plan" has been subject to frequent short term downward revision - due to Osborne's stunning ability to stagnate the economy in his first three years - and so, based on rather more short-term predictions, the Chancellor has hit his target.

This is rather like me confidently predicting at kick-off that Spurs will beat Manchester City 4-0 then, in the 70th minute when we're 2-0 down, revising my estimate to a 3-0 defeat and claiming credit for my long term forecasting prowess when that comes true. I suspect my mates down the pub might not be as easily impressed as the BBC, probably because they would remember what I said at kick-off. So why is no one at the BBC able to evaluate a "long term economic plan" in the long term?

The cumulative cost of Osborne's failure against his 2010 plan is being paid for in cuts to people’s public services, attacks on pay and pensions and with fire sales of public assets like Royal Mail.

And of course, he has simply deferred some of the deepest cuts to 2015-16 ... so there is worse to come - especially since Labour pledges to stick to Tory spending plans.

Wednesday, 23 April 2014

Don’t be misled by Vince Cable’s talk of corporate transparency

Prem Sikka

Business secretary Vince Cable has announced his intention to create a public register of UK company ownership in a bid to tackle tax evasion and money laundering by shady corporate bodies. But don’t believe the hype just yet. The “tax efficiency” industry will simply see this as the latest loophole to be exploited.

It is about time the issue of unclear company ownership was addressed, at least. Some years ago, I co-authored a paper on money laundering in which a well known UK accountancy firm was complicit. The case involved political skulduggery and a series of shell companies registered in London and elsewhere.

These companies did not trade, but lots of money passed through their bank accounts. After a few transactions, the companies were liquidated and new ones were formed to obscure the money trail. For a fee, accountants and lawyers acted as nominee shareholders and stooge directors to conceal the identity of the owners and economic beneficiaries.

The above case is by no means unique, as the illicit use of shell companies and trusts has continued and can no longer be ignored. For example, an anonymous UK shell company part-owned the former Ukrainian president’s opulent palace. The same anonymous entities facilitate bribery, tax avoidance, drug trafficking and terrorist finance.

The battle against such practices is not aided by UK laws. Sixteen-year-olds can’t purchase alcohol and cigarettes, but they can become company directors. People who live outside the UK qualify too, making it very difficult to take action against errant directors. The checks are fairly superficial. Some 4,000 individuals appearing on international lists of alleged fraudsters, money launderers, terror financiers and corrupt officials were directors of UK registered companies in 2008 (the most recent data).

Humans and shells

Public companies in the UK, as defined by the Companies Act 2006, need to have at least two directors. One of these needs to be a “natural person” – a real human being – who can be a nominee or a stooge; the other director can be a company. This company need not be in the UK and can indeed be in a tax haven that does not reveal the names of shareholders and directors or require companies to publish any accounts. So the public has no way of knowing who it is dealing with.

Trusts are another cause for concern. Trusts generally refer to arrangements where A appoints B to manage his or her assets; C, D and E receive the income; F, G and H might receive the ultimate proceeds. There is no public register of these vehicles anywhere in the world and tax authorities are frequently left chasing shadows.

Trusts were most used by Baroness Thatcher, former UK prime minister, allegedly to avoid inheritance tax. Baron Elie de Rothschild, the guardian of the French branch of the famed Rothschild banking dynasty, built a complex network of offshore trusts and shell companies to stash away a fortune. Trusts have become the vehicles to enable companies to avoid asbestos-related liabilities.

Public register of company ownership

Following a campaign by civil society organisations, the UK government has promised legislation to enhance transparency. Vince Cable claims the reforms will tackle the “dark side of capitalism”.

The key proposal is the creation of a public register that will identify the name, date of birth and nationality of individuals who ultimately own or control more than 25% of a company’s shares or voting rights in a company. This would extend to control of companies through trusts. In addition the government, subject to discussions with business, is considering prohibiting the use of one company as the director of another company, but with specific exemptions where the use of corporate directors is of higher value and lower risk.

Despite the government spin, the reforms are certainly not going to usher in some new era of corporate transparency and accountability. The 25% threshold can easily be bypassed through careful shareholding arrangements. It would be far simpler to say that all shareholders would be identified. Companies will still continue to act as directors of other companies, albeit with some restrictions. There will be plenty of loopholes for continuing with the shady business.

The government says it will be tough on rogue directors, but it has not allocated any additional resources for staffing regulatory agencies. The government has shied away from controlling the use of nominee or “front” directors who won’t even be required to name the parties pulling the strings. There will be no central register and no identification of the parties, assets, incomes and resources behind it.

The UK also has a legal and moral responsibility for its network of tax havens – Jersey, Cayman, British Virgin Islands and so on. But these places ask no questions and hold no useful information about their registered companies, their shareholders and directors. The UK government protects the economic interests of these territories, but the reforms mentioned above will not apply to them.

Closing ranks

The UK proposals won’t worry anyone engaged in shady practices, but the establishment is worried in case political parties start listening to ordinary people. The Law Society, for instance, claims:
[The] proposals may damage the attractiveness and competitiveness of the UK as a jurisdiction for the incorporation of companies. We believe that the effect of introducing the proposals will be to drive investors to form companies outside the UK and that the UK could therefore lose a considerable amount of business as a result.
A partner from accountancy firm Deloitte chipped in with the claim that a public register would discourage foreign investors in UK property and “over-expose the financial position of potentially vulnerable individuals such as children who are the beneficiaries of trusts, or indeed any beneficial owner who has valid reasons to want to protect their privacy”.

These quotes represent a new low, as economic elites invoke the interests of children to defend the privileges of their wealthy clients. How about sparing a thought for millions of children who go without food, healthcare, education, shelter and clean water because corporations and wealthy individuals use shell companies and trusts to avoid taxes?

It would have been more honest to say that they don’t like any improvement in public accountability because it would make it difficult to sell tax avoidance, opaqueness and regulatory arbitrage and thus result in lower profits for accountants and lawyers.

This article first appeared on The Conversation website

Friday, 18 April 2014

Labour market analysis: jobs recovery or jobs illusion?

All hail George Osborne? Maybe not, says Andrew Fisher

The figures are impressive - unemployment is down by 320,000 in the last year, and the unemployment rate is now under 7%. Unemployment is a quarter of a million lower than when the coalition government was elected.

The employment rate is 72.6%, nearing the levels reached before the crash (73.0% in 2008), and there are around 1.5 million more people in work than when the coalition government came to office.

And as was much heralded, CPI inflation is 1.6% and the average wage is now increasing at 1.7% a year - and so the six-year living standards squeeze is claimed to be over, apparently blunting Labour's #costoflivingcrisis campaign ...

But is everything as it seems? To deal with the pay issue first, the data is actually a little more complex. Firstly, while CPI inflation has dropped to 1.6%, RPI inflation is 2.5%. CPI does not include housing costs, and although mortgage rates are low, house prices are rising sharply and in many areas rental costs are too.

And what of pay? Pay including bonuses is rising at 1.7%, but regular pay (excluding bonuses) is only rising by 1.4%, below even the CPI inflation measure.

And the public sector remains largely subject to the 1% pay cap - so those getting a 1% pay rise this year will continue to get worse off (albeit at a slower rate than before). Likewise, most social security benefits are also capped at 1%, and so the squeeze continues for many millions more.

As the research company Capital Economics told Reuters, "Keep the champagne on ice. Real earnings in the UK are still 10% below 2008 peak". Although, David Blanchflower points out that average pay is down 14% since February 2007.

On employment, the figures have surprised many, but the headline figures do not tell the whole story.  Since the coalition was elected, the number of people employed full-time has increased by over 1.1 million, employed part-time by 400,000 and registered as self-employed by around 500,000. Of course some of this rise is accounted for by the increased size of the labour market.

So what is the shape of the economy now? How does it compare? In 2008, just before the crash took hold 64.4% of those in work were employed full-time. That slipped to 62.7% by the time Labour left office in 2010. And under Osborne's recovery? It has fallen further to 62.1% of the working population.

The figures for part-time employees over the same period are: 21.8%, 22.8% and 22.2% respectively. So although there is a small rise in the proportion of workers in part-time employment since 2008, the fall since 2010 shows that part-time working does not account for the drop in full-time employment.

So where have the workers gone? Look to the self-employed. In 2008, 13.1% of people were working as self-employed. This rose to 13.7% in 2010, but since the coalition was elected has risen sharply to 14.8% - an astonishing rise.

In the last quarter, self employment rose 146,000 in last quarter, while the number of employees was up just 99,000.

Writing in City AM, Allister Heath was effusive about the revolution in the jobs market:
"This is clearly a golden age for entrepreneurship, especially in London, but there is more to it than that. Self-employment surged 17 per cent over the past five years and is still rising ... Self-employment jumped 6.8 per cent year on year in the last three months ... this accounted for over half of the rise in total employment"

So is the rise in self employment due to a surge of dynamic entrepreneurs, inspired by Alan Sugar's atrocity of a programme and the institutionalised begging to have your creativity exploited that is Dragons' Den? Perhaps, but the data suggests otherwise. In fact, it suggests these new entrepreneurs are not very successful at all.

Analysis by Richard Murphy shows that in the last decade the average income of the self-employed (excluding consultants earning over £100,000 a year) has dropped from £15,000 a year to a little over £10,000.

The median self-employed income in the UK today is just £9,724 a year - significantly less than working full-time on the minimum wage (£12,304).

It is no wonder that even among the self-employed themselves there is little entrepreneurial zeal to be found. Research by the Resolution Foundation shows that 28 per cent of people declaring themselves self-employed over the last five years would prefer to be employees. Separate research by the TUC finds that the UK's rising self-employment is being driven by people working for themselves, rather than starting job-creating businesses.

And this brings us back to pay. The ONS data that reports pay is rising at 1.4% (1.7% including bonuses) does not include the pay of the self-employed. HMRC publishes this separately once a year, and as Murphy points out their pay is shrinking fast. So with nearly 15% of workers self-employed with a trend of absolute declining incomes, it seems likely the pay squeeze is even further from being over.

But it's not just on self-employment where we need to exercise caution, there are 586,000 people (50,000 more than in 2010) who are working in temp jobs who want permanent jobs, and 1.4 million people (350,000 more than in 2010) who are working part-time but want full-time work. These figures show the jobs market remains fragile.

To emphasise the point that jobs are also about quality not just quantity, the figures also show that ther has been a 21% rise in jobs in "real estate activities", but a 9% decrease in staff working in the state education system: fewer teachers, more estate agents?

Finally, to say unemployment is under 7% may also be stretching the facts, despite the ONS assuring us that unemployment is now 6.9%. In addition to the unemployed, there are 135,000 people classified as on government supported training and employment schemes (i.e. workfare in many cases). This would put real unemployment rate at 7.3%.

So the squeeze on living standards continues. And that means we are likely to see food bank use continue to rise. In fact if you want to know if the cost of living crisis is over you'd be better off checking the queue at your local food bank than reading the newspapers or listening to government ministers.

Thursday, 17 April 2014

Big auditors must be made accountable to the public

Prem Sikka 

What should we do with producers who routinely deliver faulty goods and services? Producers of cars, food, medicines, aeroplanes and even financial products are forced to compensate injured parties, recall their goods and face the possibility of being forced out of business. But such niceties do not apply to the auditing industry.

The silence of the auditors at distressed banks is well documented though this has resulted in little effective action. No auditing firm has returned the fees for dud audits. Earlier this year, nearly six years after the banking crash, a US auditing regulator reported that more than one in three audits inspected were considered to be deficient and did not provide enough evidence to enable auditors to reach a conclusion.

Now there is a more damning report from the International Forum of Independent Audit Regulators (IFIAR), an organisation representing audit regulators of 49 jurisdictions, including Australia, France, Germany, Italy, Japan Spain, UK and the US. The IFIAR report is compiled from the audit inspections carried out by national regulators and focuses on audits of major listed companies. The audit market for these companies is dominated by the Big Four accountancy firms – Deloitte Touche Tohmatsu, Ernst & Young, KPMG and PricewaterhouseCoopers – and smaller rivals Grant Thornton and BDO. Their combined global revenue is around US$120 billion and the “too big to close” syndrome continues to prevent effective regulatory retribution.

The IFIAR report says that there are persistent deficiencies in critical audit areas. These relate to audit work on the controls within companies designed to prevent abuses, valuation of assets and liabilities, and disclosures of crucial information to the public. The report is concerned that auditors of financial institutions pay inadequate attention to the likelihood of losses and the valuation of investments and securities. The age-old response to any criticism is for the auditing industry to deny the problem or tweak auditing standards, audit reports, codes of ethics and promise tougher action against laggards. But none of these solutions is adequate.

Poor audits are a systemic problem. Auditing firms are the private police force of capitalism, but are not subjected to pressures and incentives normally associated with the private sector. The market for external audit is created by the state and guaranteed to accountants belonging to a select few trade associations. In the absence of effective accountability and liability, this rarely encourages reflection on poor practices.
Most markets need competition, but the auditing market is highly segmented and big firms dominate the sector. By colonising bodies such as the International Auditing and Assurance Standards Board and the UK’s Financial Reporting Council, big accounting firms control the production of auditing standards. Various international auditing standards, codes and related pronouncements, for instance, cover about 3,000 pages but remain silent on auditor accountability to the public.

The public bears the cost of audits and audit failures, but has no right to see audit files or to make an assessment of the quality of audit work. Legal cases show that, even despite an admission of negligence, auditing firms escape liability because under UK law they do not owe a “duty of care” to any individual shareholder, creditor, employee, pension scheme member, or any others affected by their negligence.

The post banking crash auditing reforms recently announced by the EU require that financial institutions and listed companies change their auditors every 10-24 years, something which will not prevent collusive relationships between companies and auditors. The EU will impose further restrictions on the auditor’s ability to sell consultancy services to their clients, rather than imposing a complete ban. So auditors will continue to audit the very transactions that they themselves have created.

The minimalist reforms are welcomed by the auditing industry, but do not address the problems identified above. For example, there are no additional suppliers of auditing services and the size of the big firms is not reduced. This could be done, for example, by delegating audits of all financial institutions to a designated state regulator and requiring it to conduct audits on a real-time basis and pass all information immediately to the regulators. This would increase the supply of auditing services, reduce the size of the big auditing firms, enable medium-size firms to compete and end the “too big to close” regulatory inertia.

The banking crash has shown that audits have an effect on the distribution of income, wealth and taxpayer funded bailouts. Therefore, only bodies representing a wide variety of interests should be involved in creating auditing standards. At the very least, all auditing standards should be approved by parliament. Auditors should owe a “duty of care” to all stakeholders who have reasonably relied on audit reports. The consumer rights revolution which applies to even mundane things like toffees and potato crisps also needs to apply to producers of audit opinions. All auditor files should be publicly available so that interested parties can make their own assessment by considering the composition of the teams, time spent, horse trading with company directors and conflicts of interests.

The above proposals can stimulate competition and public accountability and thus create incentives for accounting firms to escape the cycle of institutionalised failures. No doubt, auditing firms would oppose any proposals that strengthen their public accountability, but the reforms can save them from their own follies.

This article first appeared on The Conversation website

Tuesday, 15 April 2014

A Radical Read - The Failed Experiment

The first book in the Radical Read Series

The Failed Experiment – and how to build an economy that works
by Andrew Fisher

Publication date: 20th May 2014

It is politicians not bankers that must take most of the blame for 2008 financial collapse. This is an unusual analysis that cannot be ignored. It was the credit crunch that exposed the frailties of a failed economic experiment.

In the last thirty-five years, politicians of all parties in government ceded power over fundamental sectors of our economy to a new oligarchy of corporations. Government has become the servant, not the master, of corporate interests. Andrew Fisher describes this as a failed political experiment; an analysis that makes this book very different.

It is not about blaming the bankers, or even high powered financiers – though much blame and opprobrium has rightly been apportioned to them. Nor is it a partisan attack on the failures of Conservative or Labour governments. Instead, this is a book about the much larger political crisis that still threatens our living standards – and how we can resolve it.

Pre-Publication Reviews

“This book sets out to explain those economic concepts and practices which most economists and commentators will not deign to explain. Understanding these are vital if you do not want to be helplessly buffeted about by mystical economic forces. That's why it is a must-read.”
Ann Pettifor, Director of Prime Economics and a fellow of the New Economics Foundation

“The crash of 2008 wasn’t only financial or economic in nature. It was a failure of our democracy, in which politicians of all sides have handed over power and wealth to narrow elite. In this book, Andrew Fisher anatomises that political failure and makes clear that fixing our economy requires political solutions. The result is a lucid and compelling manifesto for change.”
Aditya Chakrabortty, Senior Economics Commentator, The Guardian

“Andrew Fisher has given us a compelling account of all that's wrong with the British economy - and what's needed to put it right. Great analysis, strong politics and an inspiring call to arms.”
John Hilary, Executive Director of War on Want and author of The Poverty of Capitalism
“This is the best thing I have read in years. It will be readily used by campaigners as a basic handbook to explain our recent history.”
John McDonnell, Labour MP for Hayes & Harlington
 crucial expose of neoliberal dogma, crammed with fact and detail, making it wonderful ammunition in the fight for social justice.”
Owen Jones, journalist, broadcaster and author of Chavs: the demonisation of the working class

 Buy the book now at a special pre-publication offer rate

Thursday, 10 April 2014

Tony Benn's legacy: ideas that could shape our future

Andrew Fisher

Last night I was privileged to speak at the People's Parliament meeting on The Legacy of Tony Benn to a packed meeting of over 200 people, alongside John McDonnell MP, Ian Lavery MP, Jeremy Corbyn MP, Ellie-Mae O'Hagan and Hilary Wainwright via Skype from South Africa!

Below is roughly what I said ... 

Tony Benn said Parliament should be the buckle between the street and the statute book. There's no better example of that buckle than the MPs on this panel tonight - but in recent years Parliament has overwhelmingly acted as the buckle between finance capital (the City of London just up the river) and the statute book.

Tony Benn understood political economy. He believed that the economy was not something that was separate from politics, but something that had to be brought under political control if we were to truly live in a democracy.
"Democracy transferred power from the wallet to the ballot, from the marketplace to the polling station. What people couldn't afford to buy, they could vote for."

If we look at what democratic gains the vote achieved: comprehensive education, the NHS, the welfare state, council housing, trade union rights ...

But then look at the what capitalist class has achieved in the last thirty years: the transfer of electricity, gas, water, the railways, bus services, telecommunications (not to mention companies like BA and BP) from the ballot box to the market place - and increasingly the NHS, schools, colleges and universities are being put back into the marketplace too.

This is a huge redistribution from the democratic public realm into the private profit realm.

To get true democracy you have to democratise the economy too. In his 1979 book Arguments for Socialism, Tony asks:
"Do the British people really want a society in which industrialists and bankers have more power over Britain's economic future than the government they elect?"

The fact that in the years since that was written every government have had an economic policy of handing over power to bankers and big business - through privatisation and deregulation.

I read Arguments for Socialism  again recently. It's astonishing how prescient Tony was in foreseeing the rise of monetarism and the dominance of finance capital and indeed how much of an influence Tony's ideas had been on what I'd written in my book.

So in the spirit of Bennism, I want to suggest some new economic rights of which I hope Tony would have approved. In The Failed Experiment I call them rights for an economy as if people mattered:

Right to co-operativise: Workers should also have the right to co-operativise their company - in other words to transfer the company from private ownership to co-operative. This could operate through a majority vote of workers, which if passed would give workers the right to co-operativise their company.

This could operate in two ways: state-backed whereby, the government issues Treasury bonds to the owners as compensation; or by the workers collectively buying out the owners, perhaps through their union.

Right to job security: a proposal put by left candidate Jean-Luc Mélenchon in the 2012 French Presidential election that profitable companies should not be allowed to make compulsory redundancies. After all, Mélenchon argued, if the company is profitable what need is there to lay off staff? The provision does not of course preclude staff being re-trained or moved into a different role to reflect technological advances or changing public needs. But what it shifts is the primary purpose of a business operation - from making profit for a few to ensuring stable employment (and therefore decent income) for many. And, if technological advances necessitate fewer jobs and the company remains profitable, why not reduce working hours of staff while maintaining wage levels?

Right to sell: Should mortgage holders who get into financial trouble have the right to sell? If someone is at risk of losing their home as they can't keep up their mortgage payments, should they have the right to sell the property to the council, and the accompanying right to remain in it under an assured tenancy. The property would become a council home meaning the council gains an asset, and the householder stays in their home. All that would happen is a transaction between the council and the newly public bank offering the mortgage.

And if we have to keep the right-to-buy - though I think we should abolish it - then let's extend it to those living in the private sector too, with the same discounts. Let's see if they want to keep it then?

Right not to live in poverty:  living wage for those in work; and end poverty-level benefits. Currently we institutionalise poverty - we set benefit levels below the poverty-level and we set a minimum wage at just 70% of the living wage.

The question we have to ask ourselves is: in whose interests should our economy be run? Is it all about ever-rising stock values on the FTSE or is it about raising living standards for all? Is it about bigger profits for a few or better pay for the many? Is it about cutting taxes or about better public services and welfare?

If we want a just society, we need to democratise the economy - give people power. And that also means public ownership. I think there's a simple test: if something would have to be bailed out if it collapsed then it should be in public ownership.

Because if we want the railways, energy markets or water industry run in the public interest, they need to be under our control. As John McDonnell said in paying tribute to Tony Benn:
"What a world we would have created if we had listened to him. But more important, what a world we can create now if we listen to him."
 Let's create that world.

Tuesday, 8 April 2014

Iain Duncan Smith's backyard gives a clue to the real problems

Andrew Fisher

Allegedly ballooning welfare payments have spurred the Westminster political consensus (available in blue, yellow and red) to advocate a welfare cap. This comes after most welfare benefit rises were capped  at 1% and a household benefit cap has been legislated.

But what causes benefit costs to increase? Two major drivers are low pay and rising housing costs - these drive tax credit payments and housing benefit costs.

The problem with these facts is that they identify as the problem low-paying employers and overcharging landlords as the problem. Given the Westminster consensus loves  to laud capitalists, it won't problematise these people - instead it labels those in receipt of benefits as scroungers, skivers and slackers.

Earlier this week, the TUC identified strong evidence for our thesis on Iain Duncan Smith's doorstep. His constituency of Chingford & Woodford Green (shame on them for electing him) is the low pay capital of the capital - with 43.4% of jobs paying less than the London living wage (£8.80 per hour). And across the whole country, one in five jobs pay less than the living wage.

This means Duncan Smith's constituents are more likely than any in London to suffer from the welfare cap. And under his Universal Credit (now rescheduled to go live across Britain in 2017) they are the most likely to face "in-work conditionality", i.e. the threat of sanctions to payments if they don't make effort to increase their working hours or their pay to reduce their dependency on government subsidies (for low pay and high rents).

In searching for an image to accompany this piece, I typed "Iain Duncan Smith" into the search engine of an infamous tax dodger - the three most common accompanying words for that image search are "evil", "wanker" and "angry".

But as well as low-paying employers and overcharging landlords there's another category who deserve reproach: a generation of government ministers who have overseen declining real wages, encouraged loss of bargaining power through anti-trade union laws, rising house prices through insufficient house-building, and the absence of any industrial strategy capable of providing sufficient skilled jobs - let alone anything approaching full employment.

So now this incompetent generation of politicians, who have failed to address these issues, instead demonise the least well-off. No wonder the users of Google associate those three adjectives ...

Saturday, 5 April 2014

Welfare, tax and the civilised society

LEAP Co-ordinator Andrew Fisher on welfare spending and our own retreat ...

Alongside tax forms this year, HM Treasury will be sending out a breakdown of where your tax goes. Their pie chart and breakdown has been doing the rounds on Twitter

Declan Gaffney, an expert on social security, corrected the pie chart for them, using the same data - but importantly the government's own catergorisation in its own data. The key point (in red text in the table) is separating social services from welfare. This sees 'health' become the largest part of government spending

But, then others decided to break the welfare spending down further - so that major elements like 'sickness and disability' payments, tax credits and housing benefit were clearly visible, and with smaller elements like unemployment benefit detectable only by those with good eyesight. The revised pie chart (by @StrongerInNos, aka Michael O'Connor) is copied below:

But why have we on the left got such anxiety about welfare spending (even if more broadly defined than honesty would permit) being seen as the biggest chunk of government expenditure?

Have the attacks on welfare and the demonisation of claimants cowed us so much? Have they blinded us to what welfare actually delivers? Did educationalists look at the initial table with embarrassment and remake it with education separated out into primary, secondary, further and higher? Or am I just over-analysing some wonkish debunking in response to more government lies on welfare?

Welfare saves lives. Yes, it does, repeat it. It puts a roof over people's heads, it prevents absolute poverty, it reduces inequality. It means people too old, too ill or too disabled to work have at least some level of dignity. It reduces child poverty, alleviates the poverty of the low waged and helps towards childcare costs. It's magnificent.

As the US judge Oliver Wendell Holmes Jr famously said, "I like paying my taxes, with them I buy civilisation".

So, yes we should debunk the government's misleading propaganda and outright lies. But we must also never take even a half step backwards in accepting the government's terms. That way leads to the capitulation of accepting benefit caps and the structural welfare cap - as if meeting need is something to be ashamed of.

As a coalition of welfare organisations have come together to say: Who benefits? We all do. Say it loud, say it proud!