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.

Breaking the unions is their aim

The three parliamentary parties offer a choice of serious, severe or savage public-service cuts. The only real choice is whether they hit us straight away under the Tories or a little later as promised by new Labour - unless we organise right now to defeat that predictable attack. This is the challenge facing our unions. Meanwhile, anything goes in terms of education policy as long as the result is fragmentation and competition between schools - and another step towards full-blown privatisation. We know that there won't be cuts to that growing part of public funding that goes straight to the private sector. That's what politicians mean by "protecting front-line services." PFI rocket-boosted academies, "Swedish model" free schools, more faith schools, independent trust schools, "parent power" voting out head teachers, parent-run schools, "increasingly independent chains of schools" run by "accredited status providers" and so on and so on. These dangerous "policies" would all lead eventually to turning education over to the "powerful and predatory entrepreneurial interests" identified by Education International. We're now facing an all-out offensive against the gains made by working people since the end of the second world war, including state education.

These gains were made at a time of widespread demand for change. In Britain, the Labour Party's landslide represented a real groundswell for social justice. Nationalisation and public ownership were widely celebrated. Outside Parliament, the trade unions and other workers' organisations were growing in strength - a trend to be sustained for the next 30 years or more. Then came the counter-attack. The Thatcher regime was determined to break organised workers and to reaffirm the rule of profit throughout the economy and politics. Wherever workers resisted, they saw the full force of the state used against them. Strikes were deliberately provoked on employers' terms. And the anti-union laws sought to nail our trade unions down.
When asked what she was most proud of achieving, Margaret Thatcher famously replied: "New Labour." Certainly the ruling-class offensive has continued since her time. The laws are still there. Tony Blair made the attack on the public sector his very own mission - and Gordon Brown has meekly adopted it. To turn our public services into a source of profit the ruling class will have to break the unions. And it is setting out to do exactly that. British Airways is just a start.

The assault on workers will accelerate after May 6, particularly but not solely if the Tories win. This cannot be beaten back if we just stick to simply doing our best to defend our own patch. First, unity within and between unions is an absolute necessity - a top priority, not a "choice." Yet teaching unions are disunited, seeing each other as "competitors." Continued competition and fighting for members is not a "strategy" - it's a recipe for disaster. Second, if we are to respond successfully to the government's tactic of fragmentation, we need to have informed, united and organised members in every school and strong workplace organisation in all services. Third, we need to stop avoiding the issue of the use against us of the most anti-working-class, anti-union laws in Europe. Of late, big majorities for action in the required ballots are being cynically overturned by the use of the courts. Could there be a clearer illustration of the unjust class nature of the law? Fourth, we need a big picture of the struggle ahead. Not just the defence of an individual bullied teacher, the defence of a school from Ofsted, the fight against an academy, not even the defence of the whole of education on its own, important and vital as all these are.

We must show that education, public services, jobs, pay and pensions are under threat from the same class that uses our money to bail out bankers, that is destroying the environment, that promotes the widening of the wealth gap, that ships jobs abroad, that fails to meet "targets" on child poverty, that creates a growth in homelessness, that leaves young men and women unemployed or in McJobs and that launches wars around the world. We need a strategy for success, not just the tactics of protest. That's why the NUT supports the People's Charter - to show that there is an alternative and that we can achieve it, to unite the trade union movement with all struggles for justice and progress. If we are to defeat this ruling-class offensive, we need to commit to a tough struggle - but a struggle that will allow us to look up and see a future based on the common good rather than dog-eat-dog competition, based on real need, not individual greed.

Rage against unemployment

The latest Office for National Statistics (ONS) figures showed a fall in unemployment from September to November 2009 of 7,000, to 2.46 million. For young people, the drop was more dramatic, down 16,000. The number claiming unemployment benefits also decreased, by 15,200, to 1.61 million. But this does not tell the whole story, as the number of people in full-time employment fell by 113,000 while part-timers increased by 99,000 to reach a record high of 7.71 million. There were 1.03 million employees and self-employed people working part-time because they could not find a full-time job. This is the highest figure since records for this series began," said the report. Also, the number of inactive people of working age increased by 79,000 over the quarter to reach a record high of 8.05 million. Some people choose not to work, but others give up the search for work because of the futility. For example, only one in four 18-24 year olds who stop claiming the dole, stop because they have got a job. But giving up the search for work decreases the unemployment figures, which the government can then selectively trumpet in the run-up to the general election. Also, the statistics are based on a random sample rather than every individual. Therefore, there is room for error; the ONS estimates that its figure on the number of unemployed people could be as much as 82,000 out. So a 7,000 drop for one three-month period does not signify a decisive change. And while there are less than half a million job vacancies for two and a half million jobseekers (plus one million part time workers), that will not change.

The New Year has begun with a stark reminder of the human cost of the bosses' economic crisis: young people are likely to suffer 'permanent psychological scars' as a result of unemployment, according to the newly released Prince's Trust YouGov Youth Index. The report shows that being unemployed affects young people's health, friendships and family life. This is hardly surprising. Unemployment for under-25 year olds means living on Jobseeker's Allowance of just £50.95 per week. On this poverty income young people cannot afford to go for a night out, buy a CD or DVD, let alone think of a holiday. Even something as simple as using the bus becomes a difficult financial decision. It is no wonder that personal relationships suffer and that unemployed youth are 'significantly less happy' than those in work when forced to live in these circumstances.When you factor in the reduced housing benefits that under-25s are entitled to, the reality is that young people are forced into dependence on friends and family. With so many families struggling to get by anyway, it is no wonder that 25% of the young people questioned said that their unemployment had led to arguments with parents and friends.

The overall impact of this according to Professor David Blanchflower is "an unhappy and debilitated generation of young people who...become decreasingly likely to find work in the future".Young people are being asked to put their lives on hold until the bosses' profits are restored and recruitment picks up again. Unemployment is a cruel punishment inflicted on the young for the failure of the free-market system. The fat cats have messed up people's lives by wrecking the economy and making working-class and young people pay for it. The situation facing young people will only get worse as the politicians line up to take the axe to the public sector, doubtless scaling back the already meagre help to the unemployed. Measures to tackle what many experts have called a 'national emergency' have so far been inadequate in every respect. Young people need permanent jobs that are socially useful and pay a living wage. New Labour undertook the biggest intervention in the economy in history when they bailed out the banks. Why can't the government intervene to help the next generation? Why can't it bail out young people? Capitalist politicians will claim the cost is 'too high'. This report shows the cost of doing nothing is far greater.

Labour cuts = public service war?

In its prebudget statement, the government last week claimed it planned to squeeze the rich in an effort to boost income, and spare “core” public services from any serious cuts. In reality, Chancellor Alistair Darling declared war on working people on a scale not seen since Margaret Thatcher’s Tory government in the 1980s. Darling wants to cut £47 billion from public spending over the next four years—and the true scale of the assault could be much higher. As the chancellor announced his plans, the Tories rubbed their hands with glee, knowing he had opened the door to even more savage slashing if they come to power next year. Public services will face brutal cuts. The Financial Times newspaper estimates that, excepting police, hospitals and schools, most will face a 14 percent spending reduction over three years; that will mean hundreds of thousands of jobs will be lost.

Even the so-called ring fenced services, such as the NHS, are to feel the pain. The government wants to slash an astonishing £20 billion from the health service. And, as the government measure of inflation rose to 1.9 percent, Darling declared that six million public sector workers will have their pay and pension “rises” capped at 1 percent from 2011. Working people will also be hit hardest by the rise in VAT to 17.5 percent on 1 January, as the tax takes no account of income. The government claims that its increases to National Insurance contributions will only affect the well off. The reality is that everyone who earns more than £20,000 a year will lose out. David Phillips, an economist at the Institute for Fiscal Studies, points out, “National Insurance is, ultimately, paid by workers. In the short-term, bosses might take on the cost themselves. But, in the long-term, employers will cut gross pay.”

The response of the union leaders to this assault is mixed. Unite’s joint general secretary Derek Simpson said, “When it comes to a choice at the next election voters will reflect on who acted to save jobs, protect our services and build a fairer future.” If the choice is reduced to Labour’s pay cap or the Tories’ pay freeze then it is no choice at all. Dave Prentis, general secretary of Unison, was more outspoken. He said, “I am not going to sign up to this. It is just not on to make nurses, social workers, dinner ladies, cleaners and hospital porters pay the price for the folly of the bankers. The people who earn most should pay the most.” We need immense pressure on the union leaders to get them to actively campaign for, and to organise, action to defend jobs and living standards. That means that every service threatened by cuts must be defended by the most militant means possible. If the axe falls on your local library, organising a community sit-in that involves workers and service users could save it. If council bosses shut your child’s nursery, occupying the building is one of the few weapons capable of making them change their minds. Now it’s up to us all to ensure that working people aren’t made to pay for their crisis.

Nasty Tory plans against working class

“The Conservative Party has changed. Rich or poor, from north to south, there is an alternative to Labour.” So says David Cameron, in a week where the Tories are desperately trying to claim that their party is somehow different to the party that made working class people’s lives a misery throughout the 1980s and 1990s. Many Tory policies are dressed up as ways to “help” working class people who have been “abandoned” by Labour. But the Tory party is the same nasty party it has always been. That was made clear late September, when it launched an attack on the unemployed and the sick. The Tories want to use medical assessments to force those on incapacity benefit into work; they claim that at least 500,000 of the 2.6 million claimants are capable of working. These policies will leave many people recoiling in horror.

Not surprisingly, they make no sense. The theme of the conference was “Get Britain Working”. But the Tories are saying that they will cut £25 a week from incapacity benefit claimants’ benefits. This is the difference between incapacity benefit currently £89.90 a week - and jobseekers’ allowance - £63.40 a week.  So those removed from incapacity benefit won’t be “getting back to work”—they will simply be forced to exist on even lower benefits. And the public sector spending cuts that the Tories want to implement will result in the slashing of thousands of jobs.

So David Willetts, the shadow universities and skills minister, spoke of young people who are “so alienated from education” that they can’t go into an apprenticeship immediately. The solution, he says, is to get them to do work that may lead to an apprenticeship or a job - presumably in the meantime they will be working for free. What’s more, the Tories will pay bosses to take on workers. So unemployed people will have to work for no wages. The bosses will be paid for the strain of taking on unpaid workers. The Tories are still the party of the bosses. Kenneth Clarke, the shadow business secretary, spoke about the need for “tax incentives” and the need to “get rid of red tape” to help business And what has been Labour’s response to all this? To say that most of the proposals are already government policy. So Labour has said that it is already using the private sector to get people off benefits. It has plans in place to force 10,000 medical assessments a week on incapacity benefit claimants—and boasts that the Tories won’t be able to do any more than that. It is a measure of Labour’s betrayal of working class people over the last 12 years that, even when faced with the Tories, so many people will still find it impossible to stomach voting for the Labour Party.

Tory plans to cut benefits and services are a chilling reminder to working class people of the true nature of the bosses’ party. But just as depressing has been Labour’s response. Its reaction to every Tory attack is, as Labour work and pensions secretary Yvette Cooper put it, it’s “a rehash of what we’re already doing”. So the Tories want to raise the retirement age from 65 to 66 by 2016. But this is not an original policy - Labour plans to do the same, only ten years later. And Labour tried to pull the rug from under the Tories’ feet on Tuesday when chancellor Alistair Darling announced a pay curb for hundreds of thousands of public sector workers—a pledge the Tories had planned for later that day. The media focused on the more well-off people that the freeze would affect. But around 700,000 workers will face either a freeze or increases of just 1 percent. The way to beat the attacks will not be to back one neoliberal party to stop the other—it will be to start organising resistance on the ground.

Part of the Tories’ attempt to wipe out the terrible memory of their previous governments is to claim that working class people are backing them. Eric Pickles, chair of the Tory party, opened the conference by making a particular appeal to trade unionists. “I say to union members worried about spiraling debt, job losses and the neglect of thousands of young people consigned to life without a job and a sense of purpose—vote for a party determined to get Britain working, to give our young people a life-changing experience that only a job can bring.” At least ten unions were holding fringe meetings at the Tory conference this year—a worrying and unusually high number. Most shockingly, Brendan Barber, the TUC general secretary, is set to speak at a fringe meeting titled “Finding the path to economic recovery”. He was to share a platform with Tory policy chair—and bank director—Oliver Letwin. The Tories say that this is the first time they can ever remember this happening. Union leaders may think that because a Conservative government is looming, they need to get a foot in the door to try to have some influence over its policies. But the Tories have made their anti-union agenda clear. The job of trade unionists is not to try and cosy up to them or debate where the cuts will fall—it is to start organising now to stop them.