Saturday, 28 February 2015

REVIEW: The Cost of Living Crisis


Simon Hewitt reviews The Cost of Living Crisis: Time to End Economic Injustice by
Michael Calderbank, published by Radical Read £9.95 


Like any minimally sentient Labour Party member I occasionally have my doubts about Ed Miliband. His timid flirtations with social democracy may be the political equivalent of a nervous teenager shuffling on the PE bench towards that girl they've always fancied, wholly inadequate to achieve the desired end. Yet there's a case to be made that even a furtive shuffle is better than running away.

Under Miliband's leadership we've seen a Labour leader, for the first time in a good while, talking about the lives of working class people in a manner that's half-way relevant. In increasing numbers we can't afford our housing, our gas bills, and the food on our tables. Ed, or at least one of his policy advisors, has realised this. Thus all this talk of “The Cost of Living Crisis”.

Michael Calderbank's timely contribution joins this discussion. Real wages are flatlining at best, the welfare state is under sustained attack, and employment is increasingly insecure. The reality of millions living at, or below, the breadline is meticulously documented in this well-researched and readable book. I will keep it near to hand as a very useful source of facts about life in Cameron's Britain. We learn that, disgracefully, 60 people a day die in the UK because they are unable to heat their homes properly. We are told that benefits make up more than half the entire income of 9.6 million families, a statistic that supplies context for the misery caused by sanctions, described by Calderbank with proper indignation.

But diagnosing the disease is one thing, proposing a cure is another entirely. It's here that Calderbank thinks the Labour front bench fall short. Austerity has tied their hands needlessly. While some policy initiatives are welcome – the energy price cap and Mansion Tax get a mention – what Miliband, Balls and friends have on offer is wholly inadequate. Calderbank has alternatives to suggest, presented helpfully as bullet points at the end of each chapter, and these give us some idea what a left programme for Labour could look like.

The Cost of Living Crisis points to deeper issues with the society that has produced it. One word that
captures much of what is at issue is “class”. Revealingly, Calderbank quotes Warren Buffet in his final chapter: “There's class warfare alright, but it's my class that's making war and we're winning”. Uniting the labour movement around the kind of alternatives courted in this book would be a modest, but welcome, step towards rallying the forces on the other side.

Tuesday, 24 February 2015

What's so tricky about borrowing?


Andrew Fisher has some advice for Natalie Bennett following her 'car crash interview' on LBC this morning

Like many I listened online to Natalie Bennett's interview about Green Party housing policy this morning on LBC radio. It was embarrassing, awkward and a wasted opportunity for a left voice to make the case for building more "homes for social rent" as Bennett put it.

You can listen to the interview, and Bennett's continued insistence that it's all "fully costed" without being able to explain how - either what is the cost of building the 500,000 homes or how it will be funded.

But all this was painfully unnecessary because when Ferrari asked "how will you pay for it?" the one word reply should have been "borrow". Infrastructure investment that creates skilled jobs is exactly the sort of thing I thought Greens backed to invest in the future.

Of course Ferrari would have attacked the "borrow" answer, but then you patiently explain that "like you Nick, when you bought your house, I expect you took out a mortgage - massive borrowing - like thousands of us do. You take on that massive debt because in the long run you're better off by doing so."

"But the country is already in massive debt - and you want to add to that?" Ferrari might have responded. "The UK can borrow at historically low levels currently, and look at all the council housing that we have today - that was built on debt. We borrowed to build it, and it gave us a return because people pay rent."

"Not all of them", says Ferrari, "most are on housing benefit". "In some cases yes, but at the moment we're paying higher than council level rents to private landlords. Instead we'd be paying lower rents to another arm of government."

And that is what Natalie and the Greens should be saying.

Instead though we have a stupid consensus that seems to be advising both Labour, and now the Greens too, not to commit to any borrowing, as if it's a bad thing. This is the consensus of the terrified, afraid to break the anti-debt consensus.

It is ironic when Osborne has spent the last five years borrowing for failure, we should be borrowing for growth to actually close the deficit. The left can win the debate on borrowing, but only if we make the sensible argument.

Bias?

I quite like Natalie - she's the only party leader I can say I've met socially (before she was leader) - and I support many of the Green Party's policies, and next month will be happily sharing a platform with London Assembly member Jenny Jones. Unsurprisingly, I'm no great fan of Nick Ferrari, LBC's interviewer, but in this interview the problem was all Bennett not Ferrari.

As a Labour Party member I don't make these points for sectarian point-scoring - I posted similarly about Ed Miliband when, nearly two years ago, he made a similar hash of this point on the World at One - and if you look through my posts on here, you'll find I'm not slow to criticise Labour either ...


UPDATE: This document shows how the Greens say they would pay for 500,000 homes for social rent by 2020 (see p.5). I still think borrowing is easier and the money raised from cutting landlords' reliefs could be spent elsewhere - for example investing in renewable energy!

Monday, 23 February 2015

The moral of Chingford & Woodford Green ...


Andrew Fisher

Last year we reported that the constituency of Work & Pensions Secretary Iain Duncan Smith was the "low pay capital of the capital - with 43.4% of jobs paying less than the London living wage" (then £8.80 per hour).

As in 2013, in 2014 the economy grew in every quarter - the Tories have boasted that we are on the "road to recovery" and their much mentioned but ill-defined "long term economic plan" is working.


Today the TUC has updated its analysis and reveals that now 48.3% of jobs in Chingford & Woodford Green are paid less than the living wage (now £9.15 per hour).

This means that Iain Duncan Smith's constituents working in the area are very likely to rely on tax credits and housing benefit to make ends meet.

If Duncan Smith is re-elected along with a Conservative government then under his Universal Credit (eventual roll-out likely between 2018-2067) almost half his working constituents may be facing "in-work conditionality", i.e. the threat of sanctions 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).

And this exposes the fundamental rationale of this government: they do nothing to tackle the problems of low pay or high housing costs, but punish low paid workers and overcharged tenants simply for being low paid or overcharged.

Aneurin Bevan was right: "no amount of cajolery, and no attempts at ethical or social seduction, can eradicate from my heart a deep burning hatred for the Tory Party ... So far as I am concerned they are lower than vermin"

People of Chingford & Woodford Green, use your power on 7 May.

Thursday, 19 February 2015

UK labour market update - February 2015




A brief analysis of the ONS Labour Market Statistics published on 18 February

Unemployment
ILO unemployment:                                                  1,862,000
Claimant Count:                                                        843,000

Underemployment
Temporary workers wanting permanent work:        581,000
Part-time workers wanting full-time work:             1,312,000
Economically inactive, wants a job:                        2,282,000

Vacancies:                                                                718,000

Ratios
Unemployed : vacancies                                          2.6:1
Underemployed/unemployed : vacancies                8.4:1              


Commentary
Unemployment has fallen in the last year, but there is considerable underemployment remains, with many people looking for additional work. It is also worth noting that while the labour market figures were broadly positive, for 18-24 year olds unemployment was up 3,000 and employment down 5,000.

While the headline figure of 2.6 people unemployed for every vacancy is low; the number of people actually wanting (more) work is over 8 for every vacancy.

Research also needs to be undertaken into the quality of those vacancies. For example, of the 13,771 vacancies advertised in Merseyside at the end of last year nearly half – 6,600 – were for temporary agency work.

Tuesday, 17 February 2015

Time for radical solutions to housing crisis


Andrew Fisher calls for housing to be redefined as a social good not a market good

Yesterday I found myself briefly joining in an occupation of Lambeth Town Hall by housing campaigners protesting at the failure of the council to meet housing need and give people secure housing.

Today, the ONS released new figures on UK house prices. They are truly astonishing and explain why housing is rapidly becoming one of the biggest political issues. Yet no political party is offering any policy that stands a chance of resolving the crisis.

In the past year UK house prices have risen by an average of 9.8% - at a time when wages are increasing by just 1.6%. House prices are rising six times faster than wages - so that now the average London home costs £502,000, while the UK average is £272,000. For comparison the median inner London wage is £34,500 (in outer London it's £24,200) while the median UK wage is just £22,000. So house price to wage ratios in London are now around 14.5:1 (inner) or an eye-watering 20.5:1 (outer), and in the UK house around 12.5:1 - meaning even a couple both earning the median wage could not feasibly get a mortgage - they are priced out.

This phenomenon suggests that the historic link between average house prices and average wages has decoupled.

Such a decoupling has historically meant that we stand on the brink of a housing crash and 'market correction' back to the historical trend (see the 1989 blip - the 'negative equity' crisis as it was popularly known), but this may not necessarily be the case this time. Instead, an alternative interpretation is that what we are seeing is a paradigmatic shift from the age of home ownership (post-WW2 to c.2007) to the age of rent.

In this new era, house prices are more likely to be correlated with rates of executive pay or to the rate of return on investment - since the buyers of homes are increasingly investors and/or landlords.

Housing has shifted from being a social right - the post-war provision of mass council housing (in which nearly one-third of people lived in the mid-1970s) - to a market good in which those with capital are accumulating more and more of what are (by necessity) in limited supply. Only around 10% of people live in council housing today.

So if we allow housing to become a market good, we can expect to see more evictions and more homelessness - which is of course precisely what we have seen in recent years. Likewise if people are spending more of their incomes on paying a mortgage or paying rent that means less is being spent elsewhere - damaging the real economy.

All that matters to the property speculators is what return they can expect from their investment - whether that's immediate from rental return or long-term on an asset which is appreciating in value at a rate of nearly 10% a year (9.8% this year, 9.9% last year). But the rental return is not entirely constrained by workers' wages, as there has been a huge rise in the number of working households claiming housing benefit - to compensate for rising rental prices and falling real wages.

So landlords are currently insulated from this, while the very poorest (those on benefits) are capped, effectively deporting them from their communities in a forcible act of social cleansing.

Several punitive taxes are being proposed - from Labour's mansion tax on properties worth over £2 million to Osborne's higher stamp duty for the most expensive properties (though with overall lower stamp duty). However, neither tackles the problem of very rich people owning mulitple properties of lower value or of lack of supply.

So I propose two things: rent controls to stop the social cleansing of parts of the UK - a conventional policy that existed in the UK til 1989, and that must again include caps; and secondly an ownership cap to limit the number of properties that an individual can own. This could be implemented gradually, say at 10 at first, gradually reducing to 2 over the course of a parliament.

London (and only slightly less acutely the whole of the UK) needs more homes to be built, but they will only be of limited use if they end up in the hands of the speculator and landlord class. As Yanis Varoufakis might say, "we are going to destroy the oligarchy". It must be our aim to move housing from being an oligarchical good to a social good.

If we don't implement these policies we are saying to people, "you don't have the right to live here, because it's more important to enshrine the right of a few rich people to make ever more money". That is not a democratic or moral economy.

Another step would be for Labour's commitment to 200,000 homes a year to have a minimum council housing proportion (say 80%) to ensure that social rights are prioritised over accumulative rights.

If our economy doesn't make you angry then you're not paying attention


Andrew Fisher, author of The Failed Experiment ... and how to build an economy that works

Some plain speaking inspired by speaking at the Lambeth Pensioners' Action Group and joining an impromptu occupation of Lambeth Town Hall by housing campaigners

The economy is not the performance of the FTSE index, whether economic growth is up 0.2 or 0.5% - and it's not whether business profits are up or down. The economy is the pound in your pocket, whether your pay, pension or benefits make ends meet.

We live in a society in which it is acceptable for someone to own hundreds of homes, but for others not be entitled to just one. People get evicted from their homes because their incomes do not make ends meet. Due to landlords (social and private) wanting to sell off higher value property, poor people are being kicked out of the homes and communities they live in. For profit.

In fact, evictions of tenants are at a record high.


We cap people's benefits, but not the amount of rent a landlord can charge, not the number of homes one person can own. The laws governing our economy state that the rich have a right to buy as many properties as they like, but the poor have no right to their stay in their home. Housing should be a right, not a commodity.

People die from cold-related illnesses in the sixth or seventh richest country in the world because they worry about turning on or turning up the heating due to the exorbitant energy prices charged by highly profitable companies (and excess winter deaths this year look like they will be very high - despite a relatively mild winter). Many homes are not properly insulated because landlords haven't invested or householders can't afford it. Profit kills.

We're told austerity is necessary, that there is no alternative, that the money isn't there. Yet corporate profits are at record highs and the richest 1,000 Britons last year increased their already gargantuan wealth by £70 billion. The money is there, it's just in the wrong place - and that's the philosophy of the last 35 years: belief in the trickle-down effect - the belief that if you put money in the wrong place it will end up in the right place. It doesn't and the result is poverty, inequality, homelessness and death.

What is the solution to this? It has to be a democratic economy which gives us, not a few rich people or big businesses, control over what matters.
"Earth provides enough to satisfy every man's needs, but not every man's greed"
- Mohandas K Gandhi

Wednesday, 11 February 2015

Extracting ourselves from neoliberal energy failure


Andrew Fisher

The UK is third largest consumer and producer of energy in the EU, but still relies on imports for 46.4% of our energy needs (roughly the same as France at 47.9%) - though lower than the EU average of 53%.

Norway is apparently the only European country that is energy independent and a net exporter of energy.

But where the UK really lags our fellow Europeans is on renewables, with an absolutely dire performance, that sees the UK just edging out the Netherlands to escape the bottom spot among EU economies:

The UK produces just 7.7% of its energy from renewables - less than half of that achieved by poorly performing France.

However, the above chart is a little misleading as some nations import large proportions of their energy, so even if renewables forms a large part of their production, it is only a small percentage of their total consumption. So here's renewable energy production as a percentage of total consumption in each nation:
Although the differences are less stark, the UK remains in a woeful position - with our renewable energy consumption less than 5% - half of that of France or Germany, and one-third of Italy or Spain (author's calculations, using Eurostat data).

In her book, The Entrepreneurial State, Mariana Mazzucato describes the UK and US as "without a clear vision" on energy and as "lagging behind". She also reveals that UK research and development spending on energy is the lower than in the Germany, Japan, France, Finland, Korea, Sweden, Norway, Italy, Denmark and the US.

Mazzucato is scathing about the current government, despite its pledge to lead the 'greenest government ever': "the UK has in reality cut spending for established programmes, scaling back investment in green technologies" and hoping incentives to the business sector will fill the void. They haven't and they won't.

Energy production and distribution is an extractive industry, but not just in the sense of using extracted materials: oil, gas and coal. It is a deregulated, financialised industry that is extractive (parasitic) on the economy. UK energy bills have risen faster than anywhere else in Europe and at nearly twice the rate of inflation between 2009 and 2013. In that same period the big six energy companies' profits have risen by 73%.

The price is not just paid in higher bills, but in excess winter deaths which are 23% higher in the UK than in Sweden, despite our milder winters (join Fuel Poverty Action to campaign on this).

The energy companies have not invested in renewable technology because it is not profitable - in the short or medium term at least - to do so. In the absence of any market shaping intervention from government, they will not. The only solution is a publicly owned strategy to deliver the renewable energy revolution that the UK so desperately needs.

That may and probably should include public ownership of energy - as the FBU advocates - not least because 68% of the public wants energy in public control (YouGov poll, p.4), but also because if the public is to invest it should also capture the return and distribute it socially. That of course means tearing up decades of neoliberal orthodoxy that the losses shall be nationalised and the profits privatised.

It's time to tear up our dirty and extractive energy market

Sunday, 8 February 2015

Beating austerity, shifting Labour left and building an economy that works


Andrew Fisher

I attended the Left Platform meeting in London yesterday that was co-ordinated by John McDonnell MP and attended by 200 or so activists on the Labour left  - including several MPs, PPCs, and trade union leaders - to discuss the sort of policies we need from a Labour government. I was asked to open the session on the 'Alternative to Austerity'. Below is roughly what I said:

Balls to austerity!

We have to bust the myth that there is "less money around" and the next Labour government "will have to govern with less money around", as Ed Balls is fond of saying. There is no less money around, it's just in the wrong place.

There is no austerity in corporate Britain. Last month, official figures showed that UK company profits are at a record high.

I'm sure I don't have to convince anyone here of the nonsense of trickle-down economics - the idea that if you put all the money in the wrong hands it will somehow end up in the right ones - because what we have in this country is not a trickle down effect but a vacuum effect sucking money to the top.

That doesn't happen by accident. Our economy is built to enable it, to generate inequality [I explained how based on this blogpost: 'The economic architecture of inequality']

Where Labour is ... and what we can build on?

I think we have to acknowledge that Labour has moved leftwards in opposition, there is still some way to go, but we have some policy positions that we can build on:
  • Build 200,000 homes a year - this policy is important, we know if we invest (and Ed Balls has dropped his silly announcement at Labour Party conference that there would be no extra capital spending) that we can create jobs, real apprenticeships and create decent skilled jobs. It needs just a single word amendment: let's insert 'council' between '200,000' and 'homes'. Our housing policy means we pay enrich landlords with housing benefit. Let's have that money enriching councils.
  • Raise the minimum wage to at least £8 a year by 2020 - the minimum wage has lost value in real terms in recent years due to successive below inflation rises, so increasing the minimum wage is not good enough, so let's have the minimum wage increased to the level of the living wage, or why not £10 an hour like the Fast Food Rights campaign is demanding, and with no exceptions - no youth rates, no £2.73 apprenticeship rate. 
  • Restore the 50% tax rate at £150,000 - good, we should, but why not at £100,000 and let's have a 60% rate at £150,000
  • Mansion Tax - we have to welcome this as it's a form of wealth tax. But let's also look at a Land Value Tax too
  • Freeze energy prices / allow a public sector bid for rail franchises - this is a departure from New Labour, intervening in the oligopolistic markets. Privatisation is a licence to shovel money upwards, and it has to end: two-thirds to three-quarter majorities in opinion polls want energy, water, rail and the Royal Mail back in public ownership - even a narrow majority of Tory voters want this. This isn't left-wing extremism, this is the centre ground. 
  • Sanction the tax havens that are UK overseas territories like Bermuda - the last Labour government came into office and maintained sanctions in Iraq that killed half a million children. Ed Miliband is now talking about sanctioning tax havens, that's progress.
  • Co-operativise private businesses - I nearly fell off my chair last night when I heard this: in the conclusion of my book I talk about giving workers the right to buy-out and the right to co-operativise their workplaces, now it's Labour Party policy!
Moving the debate on ...

My point is that there are things that are good and we can build on them, but we also have to be making demands that go beyond this, so here's a couple of ideas:
  1. We use the slogan 'cap rents, not benefits'. That's right because the morality of capping benefits and not rents says that landlords can charge what they want and make as much as they want, but we have to cap poor people in need. But let's go beyond that. There's a housing crisis, so let's have ownerships caps: a limit on the number of homes that anyone can own - say two, maybe start it higher and bring that figure down, so that landlords with property portfolios are forced to sell up and bring house prices down.
  2. We have to change company law. Companies cannot just be a means of sucking money from consumers and workers to people at the top through high salaries, big bonuses and ever larger dividends. We have to put a duty on companies to provide employment: so, as Jean-Luc Melenchon advocated in the 2012 presidential election in France (yes, I'm nicking his idea, but we're socialists so we share ideas), let's say that profitable companies are not allowed to made workers redundant: they can retrain and redeploy but not sack.
If we want an economy that works for us, that operates as if people mattered, these are the sorts of things we should be discussing so we stop an economy funnelling more upwards to the rich and growing only inequality.

[It was also great to hear from Richard Murphy, Prem Sikka and Michael Roberts too at Left Platform - hopefully video should be available soon]

Friday, 6 February 2015

Has Ed Miliband been radicalised?


Andrew Fisher finds himself astonished at becoming mainstream ... or has he radicalised Ed Miliband?

There you are innocently eyeing Twitter and you find that the Labour Party leader has (albeit tentatively) backed one of the policies in the conclusion of your book:


What Ed writes in full is:

"Employee buyouts show how self-help and mutuality can build resilience into our economy, saving productive businesses and decent work. These buyouts can be an attractive route for business succession because they transfer ownership to people with a genuine interest in an enterprise’s long-term success. That’s why we should explore giving employees a statutory right to request employee ownership during business succession"
Which isn't too far away from what I write in the final chapter of The Failed Experiment ... and how to build an economy that works which outlines both the 'right to buy-out' and the 'right to co-operativise':
"So workers should be given the right to buy too ... they should have the right to buy out owners (with government subsidies to encourage) ... could involve workers teaming up with regular customers to collectively raise the funds and then to jointly run the company in the interests of workers and customers."

"Another option would give workers the right to co-operativise their company in other words to transfer the company from private ownership to co-operative ... Current owners could be compensated by the issuance of Treasury bonds - meaning that the ownership of the company transferred to the state, but the day-to-day operation would be managed co-operatively by the workers."
I thought a friend of mine had mocked this up using photoshop, but maybe it's a genuinely unadulterated photograph:
A note of caution: despite by jubilation at inadvertently becoming Ed's new SPAD, of course Miliband does only say that "we should explore" such proposals, and only that there is a "right to request" employee ownership (...to whom the request is made is not yet clear). So stand down Andrew ... you're not in the inner circle yet.

But let's keep a watchful eye on this and see how far Ed's exploration gets ...

UPDATE: In an interview in tomorrow's Guardian, Ed Miliband said:
“Cameron made this big promise 18 months ago that he was going to force UK tax havens in crown dependencies to open up and he has totally failed to meet that promise. We are sending a very clear message today.

“A Labour government is not going to have endless consultation and dithering. We are going to give six months to these tax havens to agree to publish a register of beneficial ownership, and if they do not act we will recommend to the OECD that they are put on a blacklist.”
In The Failed Experiment ... and how to build an economy that works, Andrew Fisher writes:
"The UK must also take on its tax havens - the crown dependencies like Jersey and the Cayman Islands. They are the arteries of the global tax avoidance system. These corrupt island nations could be stopped by the UK, their sponsor, at any point."
Chalk it up as another win!!

Monday, 2 February 2015

MEPs must back LuxLeaks inquiry




MEPs from across Europe have been demanding an inquiry the “LuxLeaks” revelations. Ahead of this week’s key decision, Michael Calderbank asks whether Labour MEPs will still be sat on their hands?

Over the weekend, Labour supporters and others have – quite rightly – been getting hot under the collar about the subject of corporate tax avoidance. Boots CEO Steffano Pessina made a stinging attack on the policies of Ed Miliband, but neglected to mention his company’s involvement in a complex web of tax avoidance schemes that have robbed the UK taxpayer of in excess of £1 billion. 

At a time when spending on essential public services is being threatened on an unprecedented scale, closing the “tax gap” by recouping even a fraction of the £80 billion per year from those refusing to pay their fair share of tax, could make a massive difference to the lives of millions of people.

Political leaders in the European Union, too, have often paid lip-service to the need to close tax loopholes. Imagine their embarrassment, then, when the International Consortium of Investigative Journalists (ICIJ) published leaks from accountancy giant PwC catching one EU member state – Luxembourg – red-handed, working hand-in-glove with over three-hundred major corporations to systematically avoid paying tax, at the expense of the tax take of other member states.

Billions which could have gone into providing a decent standard of welfare, healthcare or education have instead been re-routed to avoid tax on an industrial scale, with the full knowledge and complicity of political leaders. And who were these leaders?  Why, Luxembourg’s Minister of Finance at the time was none other than Jean Claude-Juncker, who was recently chosen as President of the European Commission.

194 MEPs – over a quarter have put their names to a call for an inquiry into these “LuxLeaks” revelations, which would bring much needed openness and transparency into the murky world of government complicity with corporate tax dodgers, and even to ban the 340 companies from access to EU funds, state aids or public contracts until they come clean and pay non-negotiable taxes where their profits are made.

You would’ve hope that Labour MEPs would have been four-square behind such a proposal, right? Wrong. The Socialist grouping in the European Parliament, to which Labour is affiliated, backed the appointment of Juncker, and would seem to be reluctant to risk the public finding out exactly what a close ally of multinational capital he had already proved himself to be. For all their talk of making companies pay their fare share, Labour’s elected politicians in Europe have been remarkably unforthcoming when it comes to shining a light on what has been happening under their noses. 

John McDonnell MP – in his capacity as Chair of the Bakers, Food, and Allied Workers Union, as part of their FastFood Rights campaign – has just written to Labour MEPs urging them to give their full support to the holding of an inquiry, and asked them not to block such an initiative later this week (5 February) – despite intensive lobbying in Brussels from the multinationals to do just this.

Not only are the giant fast food corporations exploiting workers by paying poverty wages and forcing workers onto exploitative zero hours contracts – which an incoming Labour government must urgently remedy – but it looks like they’ve been conniving with EU governments to rob us of vital tax revenues. It’s not enough for elected politicians to talk about tax avoidance. It’s time for Labour MEPs to stop sitting on their hands and take real action on Thursday.