There are two different universes at Westminster, completely disconnected. One is about Hester who has sacked thousands and still presides over RBS languishing at a share price only half of what taxpayers paid for in the bailout, but who has already on top of his £550,000 salary (£10,575 a week) gained £11m in bonuses and incentives and looks set to pick up another £6m for a fairly unexceptional performance. The other is about the poorest of the poor – those suddenly struck down by a breakdown or accident beyond their control, or evicted and made homeless, or an abused wife escaping a violent partner, or a man deprived of his job and left penniless by epileptic fits – the causes of human misery are endless – all of whom are about to lose their final lifeline, the Social Fund, which the IDS anti-welfare bill is abolishing. Does one impact on the other? Not for a second. (more…)
What political leader in Opposition has ever stopped in its tracks what looked like irresistible momentum towards a disaster? No, I can’t think of one either. Certainly not Cameron – can you remember any of the positions he took during the 5 years before the 2010 election, apart from slyly posing beside a dog-sleigh in the Arctic? Nor Blair, except his flying off to Hayman Island off Australia to pay sycophantic homage to Murdoch’s News International just before the 1997 election. Not even Thatcher who spent 4 undistinguished years as Tory Opposition Leader 1975-9 and failed to leave any mark whatever on the tumultuous struggles of the late 1970s. Yet Ed Miliband has now twice outmanoeuvred some of the most powerful forces in the land and forced the government on to a humiliating defensive. By any standards, given the lack of executive power, that is a stunning tactical and strategic achievement. (more…)
Hester’s virtual £1 million bonus is an icon of everything that is currently wrong with Britain. He is the personification of a self-engrossing greed that is destroying the moral fabric of society. He is being paid a so-called bonus, 40 times the size of the total pay of the average worker, simply for doing his job for which he already gets a base pay of more than £1 million – in other words, his pay has been doubled for a performance which has not by any standards been exceptional, having presided over a collapse in the RBS share price even further below the break-even level for taxpayers who contributed £35bn to bail out the bank. The Cameron-Osborne riposte – that the alternative to making the award would have been “worse for the taxpayer” – starkly demonstrates the government’s feebleness in succumbing to blackmail as Hester and his ilk hold the country to ransom. And it makes a monkey out of the government that Cable can say on Tuesday that shareholders should use their power to rein in excessive corporate pay and then on Friday the government, the shareholder holding 83% of RBS shares, caves in with such an egregiously excessive handout. (more…)
There seems to be a plague going round the Shadow Cabinet, which is quite catching, the symptoms of which appear to be seriously muddled economic and political thinking. After several comrades went down with this malady over the New Year period, the bug appears to have re-surfaced again, to judge by today’s remarks from the foreign affairs spokesman as reported by Guardian political journalists who seem intent on transmitting the disease. Apparently despite having committed the party (without any consultation or debate) to retaining all the Tory cuts and accepting the Tory pay freeze to 2020, we still need to talk “a lot more” about bringing the deficit down. He insisted that just because Conservative austerity economics failed, Labour would not become credible – to become credible, Labour needs to adopt the same kind of austerity policies as the Tories. Make what you can of that. (more…)
By any standards the IDS so-called welfare reforms are extremely harsh, victimising the poorest for the follies of the ultra-rich bankers, bashing families with disabled children, pressurising the unemployed with over-the-top work capability tests into jobs that don’t exist (there are only 400,000 vacancies for 2.64 million jobless to fill), and forcing some 80,000 families to decant because housing benefit cuts mean the rent is no longer affordable. So how do you sell a nasty, vicious package like this? The solution the Tories have come up with is to create one superficially plausible idea and then repeat it over and over again to prove that the whole package is OK. ’Nobody should get more in housing benefit than the average-paid hard-working employee gets from a week’s hard grind at work’ – who could possibly disagree with that? A lot of people if they were told the truth. But that’s not the point: it’s the Tories’ technique of under-the-radar attack that needs to be copied and used against them, because they are the ones who are far more vulnerable. (more…)
Cameron’s seeking to explain away yesterday that the national economy was now shrinking by 0.2% in the last quarter of 2011 won’t wash. He blamed high inflation, Labour mismanagement and the eurozone problems. High inflation is irrelevant to a contraction of national output which is clearly down to lack of demand because of squeezed incomes. So far from Labour mismanagement being the cause, it was Labour relaunching growth in the first half of 2010 after the deep slump of 2008-9 that produced an economy growing at more than 1% a year in the second half of 2010, which Tory austerity managed first to flatline through the first half of 2011 and then actually to contract at the end of 2011. As for the eurozone crisis last summer, the UK economy was already falling into decline up to a year previously. Cameron’s points are all bogus. (more…)
The news that the public sector net debt has now passed the £1 trillion mark isn’t really news since it’s long been on track to reach £1.4 trillion by 2014. What is far more disturbing is that the government, in its obsession to cut the public sector deficit regardless, has completely ignored the impact this is having on the private sector deficit in driving the slump. The government’s answer to drooping demand and consequential languishing growth is to pump colossal amounts of new money into the economy via so-called quantitative easing (i.e. printing money), first £200bn under the Labour Government and now a further £75bn under this government, but it has had virtually no impact at all in stimulating growth, either here or in the US, because the lack of base money (M0 in the jargon) is not the cause of the crisis. The real problem is what is happening to private sector debt.
It is extraordinary that, according to the first forecasts of the newly formed OBR in 2010, the government was expecting the level of private household debt, already £1.57 trillion, to rise to a staggering £2.13 trillion by 2014-5. It should be emphasised that this was not something they feared would happen or were simply allowing to happen, but rather it was a deliberate aim of monetary policy that it should happen. The plan was that the deficit provided the perfect excuse to squeeze the public sector, shrink the Welfare State, but ever-increasing private household debt would provide the extra demand to maintain at least some modestly decent growth. The opposite has happened.
In the private corporate sector deleveraging (i.e. paying off debt) has gathered pace because the corporates are sitting on mountains of cash (at least £70bn) but not investing because demand is being squeezed. Equally in the private domestic sector households are being forced to pay down their debts and cut their consumption as rapidly as they can as the only way to get by. The effect is massive private debt deflation, which is the real cause of the slump.
The debt deflation forces are far larger today even than those that caused the Great Depression in the 1930s. In the 1920s private debt rose by 50%; in the decade to 2009 it rose by 140%. The debt-to-GDP ratio is still much higher in both the US and the UK than when the Great Depression began. The only way to stop the slump, before it bottoms out with incalculable damage in joblessness and loss of national output, is to restore that level of private demand. There are two ways to do that. The better by far would be a jobs and growth strategy which would begin to pump demand back into the private sector. The other is (as in Greece) to write off a high proportion of the private debt and make the banks take a ‘haircut’ as a penalty for seeking to grow rich by showering the populace with mountains of irresponsible and unsustainable loans.
Why are the Tories now standing at their highest polls since the election? This has of course given Ed Miliband’s Blairite enemies, both in the Shadow Cabinet and the PLP, the chance to dump on the leadership which is always the silver lining for them when there’s bad news. They like to claim that, given the government’s vicious austerity programme, Labour should now be 10-15 points ahead, not 5 points behind. But the truth, as so often, is very different and much more complex than that. The real reason is that Labour has allowed the public to get imprinted on its mind (much assisted of course by huge right-wing media hostility) two crucial facts, both of which are wrong. In addition Labour has failed to get across – indeed not even seriously tried to do so – two other equally crucial facts about the deficit. For these reasons, if the austerity deepens and lengthens as it will, then so far from that experience forcing the electorate back into Labour’s arms, it will actually have the opposite effect and will likely increase the Tory lead. This is why. (more…)
By a striking coincidence turkey-fattening season in the City, otherwise known as bonus time, happens to be rolled out at the same time as the rest of the population is being told the pay freeze, after last year’s big 4.2% drop in real wages, is now expected to last till 2020. However, for the City’s 1,200 ‘code staff’, i.e. those ’responsible for taking and managing risks’, it’s not all gloom. They’ll be getting on average £1.8m this year, 78 times the average wage. Not bad for those who took and managed risks so skilfully in 2008 that as a result it required a UK bailout of £70bn, tore a hole in the Government budget amounting to 8.5% of GDP or £120bn (the difference between the deficit of 3% beforehand and 11.6% afterwards), and is still being projected to lead to a national debt of £1.4 trillion in 2013-4. Quite an achievement for just over a thousand people, some of the very richest in the country. (more…)
A Land Registry inventory of title deeds, just published, is yet another piece of evidence revealing the hypocrisy of Osborne’s “we’re all in it together” in austerity. What it shows is that in just two central London boroughs the ownership of property worth £88.5bn has been transferred offshore to escape payment of stamp duty and inheritance tax. It is estimated that this costs the Exchequer about £1.7bn a year in tax evaded. Whilst this is concentrated in the richest areas of London, this tax dodge is now spreading to other cities like Manchester, Derby and Leeds. We are told that money is so tight that the cap on housing benefit and the cutback for families of disabled children must be maintained whilst the super-rich are laughing all the way to their offshore bank. (more…)
The Cameron technique becomes clearer by the day. Pick up a problem that is causing public anger, make an instant speech declaring himself fully on-side, and then hit it with a wet flannel. Bankers crash the economy and spark a slump – set up a Commission years later, then endorse its conclusions that are too feeble to have much effect. Predatory capitalism – remove a knighthood from Fred Goodwin. Executive pay excesses – give shareholders a vote, which they’ve got already and don’t use. Obscene bankers’ bonuses – publicly state a cap of £2,000, but no sanction, so Stephen Hester of RBS and his ilk still each get £2.1 million or so. No money for anything – cheer up, we can still afford a new yacht for the Queen. And now lobbyists making millions out of an inside track to government contracts – we’re setting up a register, but it’s not enforceable and only covers a fraction of the lobby landscape. (more…)
Ed Miliband scores again, with Cameron forced on the defensive over crony capitalism and hopping about like a half-swatted fly. Miliband is a much under-rated man. Having won the leadership with steely determination and against all the odds, he achieved more than any Opposition leader has ever done by bringing to heel the most powerful media organisation the world has ever known. He has avoided cheap gibes and easy pot-shots, which Cameron to his discredit excels at, and has concentrated on the big things that really matter, not being afraid to take on the vested interests and risk the ire of the rich and powerful. You can always tell when you’re winning in politics – it’s when your opponents, having roundly abused you, then meekly succumb and join you in attacking what up till then they had been defending till it became indefensible. (more…)
There could not be a clearer signal that the ultimate goal of this Tory government (forget the Coalition myth) is the full-scale commercialisation of all Britain’s public services than the latest plan to bring in the credit-rating agencies to monitor and control NHS hospitals. This is taking the country back to pre-1948 when finance, not health, ruled the roost. Monitor, the NHS regulator, is replacing assessment based on clinical quality with a purely financial regime, calling in the credit-rating agencies to assess the financial strength of hospitals. For the first time for 70 years the key requirement will not be whether the hospital is delivering high-quality healthcare to those who need it, but simply whether it’s safely making a profit. There are several reasons why this is profoundly wrong.
First, whilst of course financial viability has to be secured in all organisations, the prime purpose of a hospital is to restore ill people to health, one of the most fundamental of human needs, and a civilised society will ensure that that takes precedence both in terms of the allocation of national budgets and of individual treatment being optimised irrespective of income. The credit-rating plan will reverse this priority, even to the point of forcing hospital trusts or private companies that fail to get ‘investment grade’ ratings to cease to operate.
Second, even in terms of their narrow remit to judge financial strength, credit-rating agencies have an appalling record. The provided triple A rating to many financial derivatives during the 2000s which caused the global crash when it turned out they were next to worthless. The US Financial Crisis Inquiry Commission concluded that the 3 big credit-rating agencies (Standard & Poor’s, Moody’s, and Fitch) “key enablers of the financial meltdown”.
Third, many of the hospitals currently in financial difficulties are not badly managed but rather saddled, through no fault of their own, with enormous PFI liabilities that were forced on them against their will. The credit-rating plan will mean that, not only is public expenditure for those hospitals top-sliced to give priority to paying off PFI debts to private consortia, but the range and quality of healthcare provided will be significantly diminished to fit with whatever funding is left over.
Fourth, and most profoundly of all, the fundamental values on which British society has been built since the Second World War are being overturned. The IDS so-called Welfare Reform bill will put a funding cap on the abolition of poverty, the Gove proposals for ‘free schools’ and academies aim to make education a profit-yielding enterprise, social housing is being all but squeezed out, and now NHS hospitals will be subjected to the unalloyed dictates of the financial market.
I’m not sure what is the correct collective noun for a pack of editors whingeing, but they were certainly in full cry yesterday at the Leveson inquiry. It’s a pity it didn’t reflect the extraordinarily candid, and accurate, admission in The Times yesterday that News International was “unable or unwilling to police itself” and that it was “a disgrace” that it had failed to do so. Amen to that. But inveighing against State control as a means of heading off any regulation at all simply won’t wash. Should any one person or organisation control more than one daily and one Sunday paper? I thnk not. Should the law restricting monopolistic cross-media ownership between the broadcast and print media, which Thatcher swept to one side in the 1980s to start Murdoch on his way to power, be consolidated and strengthened? Surely it should. Should a right of reply be instituted as elsewhere, giving space and prominence equal to that of the offending article? Surely yes. How best can new entrants to the media market be encouraged to increase diversity and improve balance in the press? Not by licensing, but by finding new ways to stimulate such diversity and better balance. Nearly all of this will require new legislation. (more…)
There is no doubt this is a defining moment for the Labour Party. No-one questions that Ed Balls cannot, with 3 years or more to go to the next election, promise to reverse this or that particular cut, because nobody can anticipate in this exceptionally fluid and febrile situation what will be the state of the economy so far ahead. But it is a totally different matter to say, as Ed Balls did at the weekend: “the starting point….is we’re going to have to keep all these cuts”. It is also a totally different matter to say that Labour is signing up wholesale to the government’s present pay freeze and future pay cuts. So why has he done it? Not a single argument has been used to justify it except “Labour must be seen to be making tough choices”, which is simply a parroted mantra, not an explanation. (more…)