The Rt. Hon. Gordon Brown M.P.
The Prime Minister
10 Downing Street
Thank you for your response regarding the financial collapse of Northern Rock at yesterday’s PMQs. However, I feel that this issue cannot simply be resolved by finding a new buyer for the troubled firm, for the following reasons:
1. The means by which Northern Rock and other banks turned profits, by buying and selling mortgage bundles to other companies which may not have fully understood the terms of such loans, signal a remarkable and alarming shift in the banking industry. While previously the emphasis was placed on long-term investments and success, there is now a demonstrated pressure within the financial services industry to turn quick profits at any cost. This change in perspective must be reversed industry-wide, if we hope to prevent another bank failure of this scale.
2. The Northern Rock crisis has cost the British financial services industry dearly, and may still cost a great deal more has been so far acknowledged when Ben Bernanke has already estimated the losses from bad mortgage loans at $150 billion, a figure that may itself substantially grow when no less than $1.3 trillions of sub-prime loans were set up in the two years to 2006, nearly half of which may be irrecoverable. Our economy cannot withstand another blow of this magnitude, considering mortgage and credit card debt already now amounts to some £1.35 trillions. In order to truly protect lenders and buyers, immediate action to improve regulation of the financial services sector is clearly overdue and very necessary.
3. It is evident that Northern Rock was able to conduct business in this matter because of the lack of an independent, regulatory agency that could effectively monitor individual financial transactions. The Financial Services Authority, it has emerged, does not have inspectors dedicated to the regulation of banks or to monitor potentially worrying investments or to test financial products against risk of serious public detriment. This urgently needs correcting.
4. No regulatory agency had demanded transparency and no auditor had condemned the securitisation process on the grounds that it confounded the valuation of risk. What is now needed is a Committee of Inquiry into the governance, accounting and auditing of the banks. This should investigate offshore structures, complex derivatives, the lack of accounting transparency, and the overriding need to align commercial incentives with public accountability.
I very much hope you may now decide to set these reforms in hand.
Rt. Hon. Michael Meacher M.P.
It is ironic, with the vision thing now raising its head again as the political parties jostle ever closer together, how much they struggle to find their own distinct visionary USP. The truth is that over the last 30 years an earthquake has reconstructed the contours of political space in Britain, leaving the parties nestling round its epicentre and large tracts of the outer landscape deserted and isolated. A vision that matches the real political needs of contemporary Britain will not be created until that deserted territory is convincingly re-occupied.
Britain today is composed broadly of three distinct classes. The first is those dependent on benefit, numbering some 17 millions, plus the marginally employed scraping by on bottom-level wages, intermittent work, or temporary, part-time or agency jobs, perhaps another 5 million. They are characterised by chronic economic insecurity, with incomes fluctuating below £250 a week. Second are the majority of the population clustered around the national average income of £420 a week, from skilled manual through technical, clerical, administrative grades to lower managerial and professional jobs. They number some 32 million, their employment is generally secure, and their incomes range from £250-800 a week. The third class are the well-off and the rich – senior managers, directors, top professionals, and financiers – who number around 6 millions and whose incomes average over £1,000 a week, with a lifestyle often demonstrating status, power and wealth. Within this small class is the key sub-set of the super-rich representing some 0.1% of the population whose annual incomes range from £ ½ – 10 millions plus. This is where the real power is concentrated.
The rhetoric of all the political parties claims that they are focussed on the ‘centre ground’, sometimes equally bemusingly referred to as Middle England. Yet their actions and policies don’t indicate that at all. Rather they are fixated on the interests and concerns of the dominant class in society, leaving more than half the population effectively disenfranchised and unrepresented.
This lop-sided political framework is directly responsible for the meagreness of the vision that is so depressing an aspect of the political culture today. The dominant ideology is the neo-liberal economic agenda of current Western capitalism – privatisation, de-regulation, globalisation, so-called flexible labour markets, and unabashed inequality. These are the emblems and instruments of the super-rich class, and so long as all the political parties assiduously court this basic philosophy and do not prioritise instead the interests of the majority, there will be no vision.
A vision will only resonate if it reflects the unmet needs and unrealised aspirations of major classes in society. In Britain today that means championing causes that have either become taboo subjects or marginalised extras.
The first is the distribution of power. Power is now held more unequally than at any time since the 1930s. Britain is now run essentially by private deals secretly undertaken between No.10 and business leaders in industry, finance and the media, with the security services playing a much larger role behind the scenes than is commonly recognised. The last thirty years particularly have seen power draining upwards to the largest corporations and to Downing Street, leaving Parliament and even the Cabinet increasingly sidelined. The biggest businesses, so far from being closely regulated in the public interest, have increasingly harnessed State power for their own commercial ends against the interests of the wider community. The loosening of controls over major power station, airport and incinerator developments, the failure to regulate unhealthy food advertising despite the dangerous growth of obesity, the withdrawal of the SFO investigation into corruption allegations against BAE, and the relaxation of the gaming laws to permit a flood of gambling casinos are just a few recent examples.
The checks and balances against the arbitrary use of power have all but collapsed. Civil liberties have been drastically eroded, and the introduction of ID cards and 3-month detention without charge are still being mooted. Workers who have been in their job less than two years can be arbitrarily dismissed without any rights, and temporary and agency workers remain an exploited underclass. Accountability, or indeed any redress, against alleged misdemeanours by police, judges, banks, private utilities or big corporations generally is almost non-existent. Today powerlessness is widely felt to be endemic throughout society, and it will require an awful lot more than focus groups or citizens’ juries to overcome it.
The second scandal that cries out to be dealt with is inequality which has now reached grotesque levels. A worker on the minimum wage is now paid £200 a week whilst his boss, if he works for one of the top 100 FTSE companies, is now paid £55,290 a week, 276 times more. With private equity excesses, capital and business taxation the lowest for a century, and both direct and indirect taxes highly regressive, we are back to the income-polarised class system of the Edwardian era.
There will be no vision to excite political action unless this unfettered greed of private power is brought to heel. This might involve a Pay Commission established to set down guidelines, backed up by tax sanctions, for what is a reasonable range of pay from top to bottom, with incentives applied consistently and fairly across the range. Equally, people should be asked if they think it right that in all large and medium-sized organisations representatives of all the main grades from the boardroom to the cleaners should, at an annual meeting, have to justify the pay claims they are making at the expense of potential pay increases for all other grades. And if people do think that right, implementing it would inspire a vision of real fairness unmatched by all the rhetoric today.
A third component for a vision to redress the slide into privatised power and money must be the restoration of the high ideal of public service. Currently, putting some of the largest US healthcare corporations in charge of commissioning the bulk of NHS services and spreading privately sponsored academies throughout the education system has, on all the empirical evidence, much more to do with market dogma and business lobbying than with improving performance on the ground. Equally, cutting Council house-building to just 200 a year (it was 14,000 in Thatcher’s last year), insisting on owner occupation as the keystone for government action when a quarter of the population can never afford it, privatising the probation service and other parts of the criminal justice system, and outsourcing local government to private Strategic Services Development Partnerships are undermining the whole ideal of public service – its accountability, equity, universality, professionalism, and altruism – which underpins the best of British society. The time for a counter-revolution here is now.
Class is everywhere redolent throughout Britain today, and these three goals would address it. But a fourth – making a world that is safe and sustainable for our children – is overriding and would inspire all classes. Yet government clearly does not accord it the centrality it deserves. Once again the power of the old vested interests obtrudes, which explains why preference is given to tripling airport capacity, promoting a third runway at Heathrow, undermining EU renewable energy targets, cancelling a requirement on the top thousand companies to report annually on their carbon emissions, and deferring household carbon allowances. This is so short-sighted. The fight against engulfing climate change is so imperative that it must rapidly transform the global economy towards a non-fossil fuels civilisation. A government that genuinely displayed world leadership here, in action not just in rhetoric, could arouse a positive political appeal that would be overwhelming. Are we ready?
This article appeared in Tribune on 15 December 2007.
On 9 December, I attended a mass rally in Grosvenor Square to call attention to the threat that climate change presents to us today. It was great to see 5,000 people there, marching to highlight the biggest single threat facing the planet at the time of world conference now taking place at Bali, demanding much tougher action both here in the UK and abroad.
We are making progress. Now that Australia has removed John Howard from office and ratified the Kyoto Protocol, we must hope that the US does the same. The US, with only 5% of the world population, is causing 25% of global warming damage. As the Bush presidency comes to an end, the US should only elect a president who is fully committed to international action to stop climate change, and to take the lead in making necessary and drastic cuts in carbon emissions.
Even Bush’s climate change guru, James Hansen, has admitted that we have at most 10 years to make the drastic cuts necessary to head off the worst effects of climate change.
Yet global emissions have actually risen since Kyoto, and that is why we must cut 50% of current carbon emissions by 2030, and move to cut 80% (or even 90%) cuts by 2050.
Emissions are still rising fast across the world because only 30 countries have committed themselves to making carbon emission cuts in the Kyoto Protocol, not the other 150 which include China, India, Brazil, Indonesia, and Mexico. But they’ve made clear they are only prepared to cut their emissions if we rich countries take the lead, because we caused the problem and should fix it first – and they’re right.
Our second demand to the UK, EU, and the rest is – show some real leadership.
Rhetoric is not enough – we need a lot more action.
So today, we need to demand the following from the British government:
1. Our carbon emissions in the UK have actually risen since 1997, not fallen. There is no sense in setting ever tougher targets for 50 years if we haven’t made any significant cuts to our carbon emissions in the last 10 years. If we expect developing countries to cut their emissions, we’ve got to cut ours first – and massively.
2. Our record on renewable energy is pathetic. The rest of the EU regenerates 15-25% of its electricity from renewable energy, Scandinavia 35-50%. The UK, as an offshore island, has more windpower capacity than the rest of Europe put together. We need to learn how to take full advantage of these of offshore winds, and significantly lessen our dependence on other forms of carbon-based energies.
3. We need a Climate Change Bill (which incidentally heeds annual targets, not a leisurely five-year review) that is not much use if at the same time the Government approves a third runway at Heathrow, commits to triple airport capacity by 2030, begins a huge road construction programme, or annexes 1 million square acres of seabed off Antarctica in order to pre-empt the world’s last repositories of oil.
4. And another thing – if Gordon Brown is as much in favour of renewable energy as he claimed on 19 November, why is he undermining renewable energies by promoting nuclear energy, which is more costly, more dangerous, and leaves behind vast piles of unsafe, toxic materials which lasts for hundreds of thousands of years?
And if we are to make real progress in combating climate change:
• Air travel and shipping emissions must be included in both UK and international carbon targets
• The top 5,000 companies must report every year on how they are bringing down carbon emissions with penalties for those who fall short
• Household carbon allowances must be established so that every family in the country reduces their carbon emissions year by year
• The creation of an international programme to support developing countries to halt deforestation completely
The Planning Bill, up for second reading in Parliament today, gives business exactly what it wants – de-regulation of the current planning system in order to prioritise economic growth over environmental, social and democratic objectives.
The Bill sets out that new National Planning Statements will be drawn up for an array of major developments – nuclear power and nuclear waste facilities, coal-fired power stations, airport expansions, major road schemes, and large waste incinerators. These Statements will pre-determine such issues as the need for, the safety of, and even the location of some projects, and will have more weight than any other statement of national, regional or local policy.
Then a new body, the Infrastructure Planning Commission, will decide on major project proposals in accordance with the National Policy Statements. The decisions of this new quango will be final, with Ministers no longer able to take decisions in this area. In other words, it removes all direct democratic accountability.
The public will also lose the right to be heard and to cross-examine witnesses in public inquiries. Instead, the Commission will decide whether individuals can give evidence, and in what way. But no questions can be asked about whether the project is really needed, or whether it’s safe, or where it’s located. Most people would describe this process as a complete bureaucratic stitch-up.
Even more extraordinarily, it is proposed in the case of major infrastructure projects that the community consultation will be carried out by the developer himself! As though the promoter of the development will seriously examine alternative development options!
The removal of the needs test will hugely favour supermarkets like Tesco and Wall Mart in getting more out-of-town supermarkets. If we didn’t already pick up the Government’s biases over the planning system, the Planning White Paper says that it aims to “promote competition and consumer choice, and not unduly or disproportionately constrain the market”.
The Government justifies all this by saying it is necessary to make it easier to get these major infrastructure projects through in order to tackle climate change. But the opposite is true, because these are precisely the projects that increase carbon emissions and increase pollution in the first place. The real way to tackle climate change is a massive increase in renewables and decentralised low/no carbon energy systems while phasing out fossil fuels.
These ‘reforms’ are fundamentally anti-democratic because they remove the need for the developer to consult and to gain consent. The public will not even have a right to be heard when far-reaching policy is being drawn up in the National Policy Statements, let alone when decisions are made on the ground. There will be no trust in this new process if people’s involvement is at the discretion of unaccountable bodies with (appropriately) ugly titles like the Infrastructure Planning Commission.
Ominously, this introduction of faceless grey bureaucratic quangos is paralleled by a similar device in the Government’s recent Housing Bill – OFTENANT, who will replace elected local Councils in setting criteria for allocating tenancies, determining rents, deciding how far housing need will be met and in what way, dealing with tenants’ complaints, and even regulating anti-social behaviour on housing estates.
Doing deals behind-the-scenes with the vested interests involved in big infrastructure projects is yet another example of this Government giving priority to corporate power over the public interest. That’s what we would expect of the Tories, not of Labour.
As growth begins to slip, for the first time in a decade the economic record is coming under critical scrutiny. Ten years of steady growth, inflation under control, rising incomes, low unemployment, and huge increases in public expenditure in health and education had seemed to make an unanswerable case. Neo-liberalism – the Anglo-Saxon model of flexible markets – appeared in the ascendancy. Or is it?
If the relevant indicators of economic performance over the last period for which comparative OECD figures are available (1999-2004) are taken to be growth of GDP, unemployment, consumer prices, income inequality, and balance of trade in goods and services as a percentage of GDP, the overall ranking of the UK among seven leading industrial nations is middling (3rd). The UK lies behind Sweden and Norway in 1st and 2nd positions, with the Netherlands, Germany and France (4th, 5th and 6th), and the US at the back of the pack (7th). On the key issue of competitiveness – as measured by relative unit costs in manufacturing, relative consumer prices, growth of exports of goods and services, and export-import performance – the US and UK come out 5th and sixth, while Sweden again is 1st, and Germany, France and Netherlands 2nd, 3rd and 4th, with Norway down at 7th after an ill-fated experiment with neo-liberal macroeconomic policies.
Even these figures don’t tell the full, or even the main, story. These indicators of macroeconomic performance measure essentially the means to important ends, not whether those ends have been secured. The ends are the achievement of a sufficient standard of living and economic security for all that will render society more stable and as a consequence more likely to reach a higher level of economic efficiency. As Ricardo noted nearly two centuries ago, the principal problem of political economy is how the gains from economic growth are distributed.
On that basis the neo-liberal economies, the US and UK, score far the worst and the Nordic countries, Sweden and Norway, far the best, with the central European states – the Netherlands, Germany and France – again in between. In the UK-US the richest 10% now take 15 times more of national income than the poorest 10%, whereas in Sweden-Norway it is only 6 times more. Similarly, in the US 17% are assessed as living below the poverty line (and 13% in the UK), but only 6% in Sweden and Norway. The proportion of adults lacking basic literacy skills is 21% in UK-US, but only 8% in Sweden-Norway. And the economic security index is very low in the US at 0.61 (and 0.74 in the UK), but extremely high at 0.93 in Norway and 0.98 in Sweden. Perhaps most significant of all is the social trust index. In the US only 36% say they trust ‘most people’; in the UK it is even lower, at 30%, while in Sweden and Norway it is 76%.
The story behind all these statistics is quite clear. In terms of economic performance and competitiveness, individual welfare and social well-being, the Nordic countries consistently score highest, the central European economies achieve the next best results, and the neo-liberal economies – the UK and the US – score worst. The conventional wisdom has got it spectacularly wrong.
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