A blog for the socially and politically conscious, written by a young, gay activist who strongly believes in equality and justice.

Monday, 28 June 2010

Dr Strangelove rides again

Following the emergency Budget the BBC Radio 4 Today programme for once put the ruling coalition's politics under pressure. Its presenter demanded that Nick Clegg explain why he was supporting a Budget that hit the poorest the hardest. The Lib Dem's blustering and vague accusations about "unfunded cuts" did not really deal with the issue at all. The philosophy and economic strategy behind the Budget aims to roll back the welfare state. This is not a new idea - the same thing's already happening at great speed in Greece and Spain. Both are being forced to swallow a toxic medicine of cuts and redundancies among valued public employees. What we are seeing in Europe today is strikingly similar to the economic policies prescribed to indebted poor countries by the International Monetary Fund and the European Central Bank. They've long promoted cuts to public spending, privatisation of services and a reduced role for the state in all social matters. Internationally taxation policy has become a beggar-my-neighbour strategy where all are forced to compete in reducing corporate tax levels. And on Tuesday Chancellor George Osborne promised that Britain would see one of the lowest levels of corporation tax in the world. Gone is even any discussion of a "Robin Hood" transaction tax, better known as the Tobin tax, to enforce some taxation on the huge levels of capital flows around the world.

The Budget is the first of a long series of plans that the Con-Dems have in store. This week it was attacks on welfare benefits and housing benefit. Before that it was cuts to free school meals. In October the coalition will set out spending plans for the next three years which will wreak enormous damage to the welfare state. Despite Con-Dem claims about protecting health expenditure, it is clear that the NHS will suffer too as it struggles with the huge built-in costs of existing private finance initiative contracts and growing demand from an increasingly elderly population. On top of this our health service will have to deal with a wave of demand as poor housing, unemployment and poverty lead to greater sickness. A day before the Budget, Parliament had hosted a different debate on spending where talk of cuts, retrenchment or rolling back the state's role were off the agenda. MPs were discussing the Strategic Defence Review first announced by the outgoing Labour government, which made sure that our hugely expensive nuclear weapons and Trident programme were not included. Scottish Nationalists did try to get Trident into the review and managed to force a vote on its inclusion during a debate on the Queen's Speech. However the entire coalition voted against the SNP demand - a Liberal Democrat manifesto pledge - while the Labour front bench demanded that MPs abstain. This instruction was ignored by a large number of Labour MPs.

An air of unreality permeated last Monday's proceedings. Both front benches were agreed on Iraq, Afghanistan, nuclear weapons and essentially about interventions elsewhere. Tory backbencher Bernard Jenkin delivered a speech that underlined the position of those who favour arms spending. "In today's world overpopulation," he declared, "competition for food and resources, the risk of environmental catastrophe, mass migration, accelerating technological change, nuclear proliferation, nationalism and extremism are all on the rise. That is quite a list, aggravated further by the global recession. Is this the moment to substitute hard power for soft power?" He talked in the language of Bush and Blair, declaring the "right" of the powerful to intervene where they think fit. Mercifully his allotted eight minutes were up before we could learn more of his apocalyptic worldview. The same day the House of Commons library published an analysis of the financial costs of the Iraq and Afghanistan adventures. In total from 2004 to 2009 the British public have paid £11.8bn. In the last full year for which information was available, 2008-9, Iraq had cost £1.3bn and Afghanistan £2.6bn. The bill for the latter will be far higher in 2009-10. What's more the predicted cost of replacing the Trident missile-carrying submarines and their warheads stands at £76bn over a predicted 25-year life.

Those who support this strategy - including those who claim that Britain's nuclear arsenal are about deterrence - actually share Jenkin's swivel-eyed, Dr Strangelove worldview. If such a perspective were allowed to dominate, the 192 non-nuclear-weapons nations which do not wish to have WMD would do better to develop them as quickly as possible in preparation for a new era of resource wars. For the biggest corporations these kind of wars work. The bizarre auction of Iraq's oil reserves a year ago and Afghanistan's reported multibillion-pound mineral wealth show what is really behind such interventions. However they do nothing for ordinary people, the very people who are being asked to swallow huge cuts in social spending, lower tax for big corporations, an enormous defence budget and a new generation of nuclear weapons. As the cuts bite, the public focus will turn increasingly to issues of social need. It is time to promote an alternative view with social and economic justice at the forefront, at home and across the world.

Wednesday, 23 June 2010

The lowest assault

Well we knew that it was coming and we knew that it would be nasty, but it certainly didn't make Tuesday's Budget any more palatable. Truth has been turned on its head and the economy is being adjusted to deal with a fiction. That fiction is that swingeing cuts, the like of which we haven't seen in a generation, are necessary if the country isn't going to be thrust into chaos and bankruptcy; but they aren't necessary and the economy wouldn't have collapsed into entropic disaster without them. The truth is that the massive public-sector cuts and the vindictive attack on the benefits structure that Chancellor George Osborne has inflicted on us is a sop to the pressure from international bankers and speculators, to the grey men of the IMF, the European Union and the City. It's a capitulation to those who have said that, unless the government inflicts massive pain on the population, they will attack the currency and the country's credit rating with all the considerable weapons in their armoury, bringing about a crisis which would make the Greek disaster pale into insignificance. The poor are once again targeted disproportionately by this pack of coalition wolves, this collection of Tory class warriors and Lib-Dem turncoats.

There's £11 billion to be slashed from the benefits bill.That's a mind-boggling sum to rip off from those least able to defend themselves. And it's being done in the most dishonest way possible, by linking benefits to the CPI measure of inflation rather than RPI at a time when the RPI measure has gone up by 5.1 per cent in the past year , while the CPI has risen by 3.4 per cent. This will hurt households reliant on benefits significantly because of the way that spending in poorer households operates. And it will hurt even more when the 2.5 per cent VAT rise comes into effect on January 4, taking it to 20 per cent. Spending by government departments will, we are told, be cut by 25 per cent over the next four years - put like that, it doesn't seem to be that significant. But when you realise that government departments deal with everything in your life from schooling to health and safety at work, the impact becomes a little clearer. Public-sector wages frozen for two years will certainly not please civil and public servants. But this real-terms pay cut will hit the manufacturing and retail sectors as well, with the dramatic cut in the amount of spending power in the economy that it represents. And freezing child benefit for three years sounds like picking on families rather than saving the nation's credibility.

But perhaps abusing families is what it takes to win brownie points with the City? If we're all taking the hit equally, why is corporation tax going to be cut by 1 per cent every year for the next four? Doesn't sound all that equal to me at least. What this says is that we can forget about any recovery. The Tories and their Lib-Dem toadies are going for broke. They are front-loading a huge attack on working people early in their term of office and attempting to use phoney claims of a financial crisis to justify redrawing the economic map of Britain. Every service that is crippled will be accompanied with a transfer to the private sector justified by the specious claim of "attracting private capital," when what will happen in reality is that what will be attracted are profiteers and speculators. The leeches will have a field day and the profits will flow freely - as freely as the lifeblood of an economy that is being hijacked by those who see public service as an opportunity to milk the public purse and benefit recipients as mere parasites and scroungers, not people in need of help and support from their society. It's an attack of huge proportions and unlimited malevolence and we are going to have to tell this government that we are having none of it. It's an assault that will have to be resisted by every parliamentary and extra-parliamentary resource that we can summon. And it's a fight that must be won.

Tuesday, 15 June 2010

Winners & losers of the crisis?

Britain's super-rich have done amazingly well out of the crisis. According to the Sunday Times, the wealthiest 1,000 people have increased their assets in just one year by £77 billion. That's a gain of 30 per cent, bringing their total wealth up to £333 billion. This is an interesting figure. It's more than twice the size of the £156bn annual deficit which we are told has to be eliminated by all-round sacrifice and massive cuts in the welfare state. Is there a connection? Indirectly, yes. And it is vital that we understand it - because currently across Europe people are being subjected to a confidence trick so gigantic and dangerous that it would make even Bernie Madoff blush. The same financiers who precipitated the economic crisis are now demanding that working people pay the cost. They are doing so to ensure that the profits of the very rich are maintained even if the result is deeper crisis and recession. Governments in virtually every EU country have been bullied into announcing cuts in public expenditure that will reduce economic activity by between 1 and 2 per cent annually for the next four years. Japan has just announced it will do the same. The cumulative result can only be long-term economic depression. Governments are taking this action in the middle of the world's worst economic crisis since the 1930s at a time when those who control the capitalist world's assets are not investing but hoarding and speculating. So are those who advise governments mad? Well, no more so than the inventors of the dodgy "financial products" that precipitated the crisis in 2008 - which were also very profitable for some.

On this occasion, however, the proposals are designed to benefit the whole class of the very rich. The destruction of the welfare state will push a massive amount of provision back into the private sector. It will directly attack the main surviving bastion of trade union resistance which is now concentrated in the public sector. It will increase unemployment and reduce wages. And it will cut taxes. As they say, never waste a good crisis. If any apologists of the existing order are reading this article, they might now object, saying: "But you are all shareholders. Your pensions and savings are invested in the stock exchange. They depend on corporate profitability." True - but only up to a point. Has any wage or salary-earner seen their bank savings gain a 30 per cent rate of interest in the past year? There is a reason why they haven't. It's called finance capital. This is the result of the massive concentration of capital ownership in the course of the last century and the use of this capital to dominate and control the banking system. Last September former senior official in the Office for Fair Trading John Chapman, writing in the Financial Times, effectively exposed finance capital's present-day workings. He focused on what is called the "alternative investment" sector. It is made up of the investment banks, hedge funds and private equity companies that manage the wealth of the very rich. It currently manages about £1,000bn - as against the £5,000bn invested in pension funds across Europe, mainly workers' savings.

In the years running up to the 2008 crisis the alternative investment sector was marking up average returns of over 15 per cent. It did so mainly through "leverage" - borrowing from retail banks and pension savings of ordinary people who have to be satisfied with a much lower level of interest. As Chapman noted, the alternative investment sector is only open to the "very wealthy" - effectively those with investable wealth of well over £3m. In Britain this amounts to a minute fraction of the population, roughly 0.2 per cent, at most 50,000 adults. They have the privilege of being able to invest through institutions that are not regulated, generally not taxed and can borrow unlimited amounts from the retail banking sector. It was of course the speculative leveraged borrowings by some of these alternative investment banks that precipitated the 2008 crisis - precipitated, but not caused. For causes you have to go deeper - to the age-old contradictions of capitalism. Exploitation expands capital and impoverishes workers. Profits can't match the increase in capital and workers can't afford the expanded production. Temporarily bank lending was used to sustain demand - and lending to the poor is always very profitable until people cannot afford to pay it back. Then the retail banks were left without the minimal interest to cover workers' savings. As a result Northern Rock went bust, the mortgage banks did the same in the US and the crisis began. This is why the current actions of governments are so dangerous. Poverty was the immediate cause of the crisis. Poverty and unemployment will perpetuate it. The level of average household indebtedness in Britain remains 150 per cent of household income. So what is the government proposing? Sack another 300,000 people and cut benefits. It may not make sense to you. Yet, as we have seen, it may do for the very rich.

But it is based on a gigantic confidence trick. Public spending did not cause the deficit. Expenditure on public services is less today than it was in 2007. The deficit was caused by two things - the money used by the government to bail out the banks and the economic crisis triggered by the banks - which reduced the number of employed paying tax and increased the cost of benefits paid to the unemployed. In historical terms the deficit is not even very large. Even at its biggest, as forecast for next year, the total national debt will be less than that in the late 1940s when the welfare state was created or during the full employment of the 1960s. What is enormous is the aggregate private debt of the banks - that falling due in 2010 is equivalent to 23 per cent of national income in Britain compared with 7 per cent in the US (IMF figures). This is what really frightens the managers of finance capital and the bankers of the EU.  And this is why we need an alternative to this mad system. Remember, the richest 1,000 alone increased their wealth last year in Britain by £77bn. The deficit is £156bn. In 2009 the TUC backed the People's Charter and its demand for the government to take control of the banks, ban hedge funds, close down tax havens and use our savings for productive investment. Wouldn't that be a good start?  "We're all in this together," Prime Minister David Cameron announced on June 7. Public spending cuts, he declared loudly, would be carried out in a way that "protects the poorest and most vulnerable in our society." The next day Chancellor George Osborne scrapped plans to extend free school meals to children of the 500,000 lowest-paid workers in Britain.

Presumably this will hit all those bankers and business moguls earning below £307 a week, whose kids would have qualified for a buck-shee dinner every day. Still, at least all those big shareholders, company directors and non-doms on income support or jobseekers allowance will continue to enjoy that much-needed assistance, worth around £600 a year. Yes, we're all in this together. It also seems likely that the blue-yellow Tory coalition will scale down its plans to increase capital gains tax (CGT), whereby income is received in the form of shares, property and other assets. These can then be treated as a "capital gain" and taxed at 18 per cent, as can be subsequent profits from their sale. This 18 per cent compares with an income tax rate of 40 per cent on income above £37,401 - reduced to 32.5 per cent for income from dividends - and 50 per cent above £150,000, down to 42.5 per cent on dividend income. The first £10,100 in capital gains is exempt from CGT altogether. Osborne's Budget on June 22 will show us how the pain will be shared. Will he raise CGT from 18 per cent to 40 or 50 per cent? Will the rich continue to reap enormous tax benefits from receiving their income in the form of shares, property and other financial assets instead of paying income tax? We're all in this together, after all. Osborne has already revealed that some government departments will lose up to 20 per cent of their money over the next four years. Based on leaks to the press in April and September 2009 and corroborated by First Division Association general secretary Jonathan Baume, we warned that there would be two waves of massive public spending cuts in 2010, whatever the pro-capitalist parties might claim to the contrary. Osborne's emergency Budget will unleash the second wave.

Before then, government ministers must justify their spending plans to a "Star Chamber" comprising the Chancellor, Cabinet Office Minister Francis Maude and his deputy Oliver Letwin, Foreign Secretary William Hague and Treasury Chief Secretary Danny Alexander. Maude is a former managing director of investment bankers Morgan Stanley and chaired the last Tory government's deregulation tax force, reinforcing "big bang" freedom for the City of London, while Letwin is a former director of NM Rothschild Corporate Finance Ltd. Alexander is former head of communications for the European Movement and the Britain in Europe campaign. He can be trusted by the EU Commission and ECB to champion their drive to police and impose public spending cuts and privatisation across the continent. He succeeded David Laws as Treasury chief secretary, a multimillionaire who supplemented his fortune with a £40,000 rent subsidy from the taxpayer.  We're all in this together, remember. Laws, who may rise from the dead in record time, is a former vice-president of investment bankers JP Morgan and managing director at Barclays de Zoete Wedd, where he headed currency speculation in dollars and sterling. In his spare time, Osborne himself cavorts aboard billionaire yachts with Lord Rothschild, former EU Trade Commissioner Baron Mandelson and a Russian oligarch, in between flipping his homes for tax purposes. One of his first decisions as chancellor was to appoint Sir Alan Budd to head a new Office for Budget Responsibility. The OBR will take over economic and financial forecasting from the Treasury. This is an important function, not least because it sets the framework within which the government plans public finances and helps to shape public debate about economic and financial policy. Budd is very much an Establishment figure with many quango notches on his belt. Most importantly, at the time of his appointment he was a senior adviser to the Credit Suisse First Boston bank, having previously served as an adviser to Barclays Bank. Budd was also a founding member of the monetary policy committee when it was first set up by then chancellor Gordon Brown in 1997 and given powers from the Treasury to set interest rates. The MPC was later put on a statutory basis and attached to the Bank of England, which is the likely trajectory of the OBR as well.

Who better than Budd to continue the "privatisation" of economic and fiscal policy-making, transferring it from the democratically elected government and its Treasury to the friends and former employees of City banks and big business? And what further proof is needed that this Blue-Yellow Tory coalition is a government of the City, by the City for the City? It was cobbled together under pressure from "the markets" - the gamblers and speculators of the banks and other financial institutions - who wanted a regime that would cut and privatise public services sooner and more extensively than new Labour. These demands were dressed up as a plea for "fiscal responsibility," but behind them lay the threat of a spot of Greek treatment from the bond and foreign exchange markets in collusion with the European Commission and European Central Bank. That's why, just one week after taking office, Osborne announced a £6.2 billion cut in current spending this financial year, to add to the £10 billion cut in capital spending already contained in ex-Chancellor Darling's March budget. All in it together? Britain's monopoly capitalists won't be sharing any pain with the rest of the population. The class nature of this Tory coalition needs to be exposed, stripped of its "liberal" veneer. Certainly the trade unions, regional and national TUCs, the left and the Labour Party need to be all in together, building a united mass movement against the dreadful austerity programme. Trades councils can play an invaluable role in uniting trade union, community and other organisations to launch or support local campaigns. The impact of public spending cuts on jobs, wages and pensions in the private sector should also be emphasised, to counteract attempts to split the working class along public-private sector lines. But we should also be arguing that cuts in public services, pensions and benefits are not necessary. A people's alternative to the City's agenda would be to tax the super-rich and big business monopoly profits, cancel Trident replacement and withdraw the troops from Afghanistan. Such policies are reflected in the People's Charter, which could provide a powerful focus for the labour and progressive movements in the battles ahead.

Wednesday, 2 June 2010

Back in the old routine

It's been a bit of a rough start for our new coalition government as far as its personnel is concerned and it didn't look to be getting any better at the weekend. Firstly, Tory leader David Cameron was handed a personal kick in the teeth when Sir Anthony Bamford, the chairman of the JCB construction equipment firm and Mr Cameron's personal nomination for elevation to the House of Lords, was blocked from becoming a peer because of apparent concerns on his tax affairs. Sir Anthony had his nomination rejected by the House of Lords Appointments Commission when the tax authorities declined to support it, although neither they nor anyone else has made any suggestions of improper conduct. He had been a generous backer for the Tories, with his firm contributing to the tune of a cool £1.5 million and the knight himself coughing up £86,000. So no seat in the Lords for him, then. And it left the Tories even shorter in the upper house when Lord Laidlaw, another of the Tories' big backers, who has contributed more than £3 million to the party's coffers, forfeited his seat in the Lords because he was unwilling to lose his non-dom status and face the resulting tax bills. The noble tax exile apparently promised to become resident in Britain when he took the title in 2004, but has never honoured that pledge. Mind you, it's not surprising, because he's worth £700 million and would face a £50 million tax bill if he had. And, of course, we're still waiting with bated breath to see if Tory donor Lord Ashcroft follows suit or if he values his Lords seat enough to come back and cough up.

But it's not just the nobility or would-be nobility that is giving the coalition problems at the moment. The new austerity seems not to have sunk in with the new ministers in the Commons and that's left egg on a few faces. Defence Minister Andrew Robathan raised more than a few eyebrows when, instead of following the new ministerial guidelines about using public transport wherever possible, he took a chauffeur-driven government car across the Channel to attend the veterans' anniversary assembly in Dunkirk - a means of transport that he described as "appropriate and inexpensive." 'Nuff said. And now, as if all that wasn't sufficient, Treasury Chief Secretary David Laws has had to resign after it was revealed that he had paid £40,000 of public money claimed as expenses to his partner James Lundie for renting rooms in Mr Lundie's home, in clear breach of the Commons rules on expenses. The expressions of support for him have been effusive, from both Tory and Lib Dem sources, but he has admitted his guilt and is repaying the claimed cash. That won't give him many sleepless nights, of course, since he is, like so many others in this government, a millionaire in his own right. But it really can only be in this coalition that you can cheat the taxpayer out of £40,000 and be described by the Prime Minister as a "good and honourable man." Mr Cameron was joined by Business Secretary Vince Cable in his appraisal of Mr Laws, saying that "it is a big loss, but he has done the right thing." The right thing? Ripping off £40,000 of our money and only owning up to it when exposed by the press? And to cap it all, Iain Duncan Smith says that he "has the talent to come back." Words fail.

So, when you next hear that we're all in it together, that a new age of austerity has dawned and because of it your wages are cut or your job vanishes, bear in mind that the "all" who are in it together excludes Tory donors, tax-dodging multimillionaires, filthy rich "sex addicts," coalition ministers and all the rest of the rag-tag bunch of money-hungry parasites grouped around this disreputable coalition of profiteers and big business stooges. We're not all in it together. They are in power and in the money. We're in trouble and being squeezed until the pips squeak. It's a great world in Cameron's coalition. Once again, this government has announced new policies - and, once again, they have proven to be just old Tory policies dragged out of storage, dusted down and prepared for use yet again, a couple of decades later than their last airing. This time it's unemployment and the benefits system that comes under the coalition's scrutiny and, appropriately, it's a recycled Tory laying out the recycled policies. But, since Iain Duncan Smith, yet another unsuccessful Tory leader who has popped up in this Cabinet of all the failures, has spent the last few years developing policies to deal with worklessness and welfare benefits, you might have hoped that he would have come up with something new. No such luck, unfortunately, it's just the same old Tory whinges about benefit scroungers and the same old attacks on the least well off in our society. On he spouts about people becoming "parked" on incapacity benefit, whose 2.5 million recipients face a status review in the coming months designed to force them off benefits and back into work. Just what work he means isn't made clear. The 2.5 million people already fruitlessly searching for non-existent jobs are soon to be joined by as many others as the Tories can bully off incapacity benefits, presumably to take the millions of jobs that they have accidentally overlooked in the meantime.

And that's without counting the tens of thousands of civil servants and local authority staff who are destined to join them on the dole queues once the coalition gets into the swing of cutting the services that the unemployed and benefit recipients rely on for survival. It's all so old hat, really. It's the Tories falling back on the same mantra of beating up those least able to defend themselves that they have always employed.There is nothing new about it and nothing of real substance, either. And this supposed concern for those trapped on benefit it doesn't sit terribly well with the announcement in the recent Queen's Speech that the coalition is to scrap the regional development agencies. Not much help there in solving something that is a heavily regionalised problem and one, incidentally which dates back to the last time the Tories held office, when they decimated whole communities in their attacks on the coal and steel industries. Mr Duncan Smith makes great play of the fact that 1.4 million people in Britain have been on an out-of-work benefit for nine or more of the last 10 years and that income inequality in the UK is now at its highest level since comparable statistics began in 1961. But he gives little hope that any government in which he participates will do anything to improve matters. He highlights that people are better off claiming dole rather than in a job paying £15,000 a year or less.

But, unfortunately for all concerned, the problem is seen by Mr Duncan Smith and his Cabinet allies as benefits being too high and easily available, rather than wages being so bloody low that bare subsistence benefits can overtake them. "One of the biggest problems is that, for too many people, work simply does not pay," says the Tory gentleman. So make it pay, Mr Duncan Smith. Force your mates in the boardrooms to forgo a few billion out of their bonuses and jack up the minimum wage to a decent level. That will do a bit to solve income equality and it will give you clear blue water between wages and benefits. It will also inject some much-needed spending power into the economy and boost demand. But, for God's sake, don't fall back on battering the claimants again. Haven't you learned anything in 13 years out of power? Then again, you're a Tory, so perhaps you haven't. It is to be hoped, however, that your Lib Dems allies are getting a feel of just what they've allied with.