Category Archives: Corporate Accountability

251,417 votes. Wow!

With 4 contestants in the running, to achieve 60% of the leadership vote in the first round is an outright landslide.   Jeremy Corbyn has secured a higher percentage than Blair got in 1994.   Even more significant, Corbyn’s electorate at 554,272 was more than double Blair’s, and no less than 76% of them actually voted, a higher percentage turnout than Blair got.   And another pointer to the overwhelming inspiration that Corbynmania achieved – no less than 160,000 volunteers were recruited to the Corbyn campaign – far, far bigger than in any similar campaign in the past.   This is a seminal day in British politics, marking the coming together of the two great conditions needed for transformational change – radical new ideas and a burgeoning social movement on the scale required to push through major change.

Why did it happen?   The defining moment for today’s denouement was the catastrophic crash of 2008-9, from which 7 years on there is still no sustainable recovery in sight.   It represented the unambiguous bust of the free-wheeling unfettered capitalist business model which had prevailed in the Western economies over the last 3 decades since Thatcher and Reagan.   The essence of this dominant ideology was: leave it all to the markets and let government get out of the way.   It was supposed to be self-regulating and efficient; it was neither.    Worst of all, when it did crash, the Tories imposed all of the pain in remedying it on to the squeezed middle and the battered poorest while letting the bankers, the real perpetrators, off scot-free.   The roiling resentment of the public at this monumental injustice has finally burst out, and Jeremy Corbyn was the right man to articulate this at this moment.

The central demand is for an end to austerity.   Quite apart from the immiseration it has caused, it is the wrong policy for reducing the budget deficit and is being pursued for the wrong reasons (to shrink the State, as Osborne himself has told us).   The right way to cut the deficit is by expanding the economy, creating sustainable well-paid jobs and real sustainable growth, not by contracting the economy, and that steady expansion towards full employment is what Corbyn has made clear he stands for.   Alongside this major revival of British manufacturing industry, which is the only means to pay our way in the world and preserve our living standards, there needs to be tighter regulation of the banks to prevent another crash, a halt to privatisation of our public services, and an end to suppression of the trade unions.   All of those are very powerful reasons why an unprecedented number of people voted for Jeremy Corbyn – ane they were absolutely right!

Osborne’s giveaways come back to haunt him

Following Osborne’s triumphant releasing of pensioners to unlock their annuity contracts to spend how they will, there were many siren voices raised that that risked exposing many vulnerable elderly people to crooks and scammers selling dud investment projects as the road to riches.   The results have turned out even worse than feared.   City of London police are now having to wage a huge campaign against the use of some of the Square Mile’s most prestigious addresses as a cover for scams purporting to sell overseas land for investment as well as wine, diamonds, etc.   Police say such scams cost mostly elderly and vulnerable people at least £1.7bn last year, with fraudsters typically returning to their victims a second timein the guise of ‘asset recovery specialists’ who pursue lost money for a fee.
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Tory privatisation scams (2): the Hinkley Point C nuclear payola guaranteed by UK taxpayers for Chinese investors

If you think the London super-sewer is merely the exception in Tory privatisation economics, dream on.   It’s more the norm in a whole string of colossal financial scams, all put in place secretly and never sent to Parliament for approval.   Another flagrant example of privatising the gains and socialising the losses is the nuclear power station planned at Hinkley Point C in Somerset at a cost of £24.5bn, three times the original proposal, and using the UK taxpayer to guarantee to its French builder EDF  a price per unit of output no less than double its current UK wholesale price.    The government agreed this in November 2011, yet since then wholesale power prices have fallen by 16%; nevertheless the Tories are still guaranteeing the price of £92.50 a megawatt hour, inflation-linked for 35 years and funded through household bills.   So far from being the heroes of competition as they regularly claim, the Tories are driving a pernicious, underhand contempt for market forces to subsidise State-owned foreign companies whilst refusing to offer the same aid to a UK State-owned venture for the same project.

Just how bad a deal this is is shown by the fact that Hinkley will provide just 3 gigawatts of capacity, yet for the same price gas-fired turbines could provide about 50 gigawatts, onshore wind 20 and offshore wind 10.   The plant will not open till 2023 at the earliest, well past the date of the most acute energy shortage at the end of this decade.   And it will cost as much as the combined bill for Crossrail, the London Olympics and the revamped Terminal 2 at Heathrow – beat that for the most expensive white elephant of modern times!

It’s an anachronistic behemoth from the bygone age of energy dinosaurs when the world is rapidly moving towards distributed power via renewable energy.   It’s far too costly, and is it even needed?   First there is the UK’s declining demand for power, currently falling at a rate of 1% a year as energy-saving measures steadily take effect.   Then there is the expected threefold jump in the UK’s Interconnection capacity with continental Europe by 2022 which increases the ability to import cheaper supplies.   And third there is the litany of setbacks in price overruns and huge delays that have afflicted Finland, France and China over EDF’s European Pressurised Reactor which is the same type as is planned for Hinkley Point.

However nothing distracts the Tory nose from a good old-fashioned financial fix behind the scenes, especially when in this case it plays to their abhorrence of UK State involvement in meeting a public need.   So Cameron is off to Beijing in October to sign a final deal wit the Chinese president from which only Chinese investors will gain at UK taxpayer expense.

 

Tory privatisation economics: try the London sewer, the mother of all scandals

As an illustration of what the Thatcherite privatisations of the 1980s now mean, you could not have a better example than the London super sewer.   It costs £4.2bn, and you might expect that Thames Water, the privatised company that controls the whole of its length, should obviously be expected to pay for it.   Not a bit of it.   They will fund just a third of it only, and the rest will be met by a team of investors which will own, manage and finance the projedt during construction and then supply sewerage services to Thames Water on a 125-year concession!   But that’s just the start.   Unusually for a construction project, the investors will receive an income from the first day, paid for by Thames Water’s 15 million customers.   The surcharge on London water bills is likely to be £80 a year in perpetuity.

But here’s the main point.   The risks of construction, including cost overruns, accidents or any other incidents at the project’s 42 sites, as well as any financial risks – such as another global collapse in credit – will be borne by taxpayers because the government is acting as guarantor.   This is common for infrastructure projects where traditional insurers won’t cover the risk, so once again the privatisers take the gains and the public take the potential losses which could be billions of pounds, and Thames Water walks off all the way to the banks.   There are two enormous scandals here.   One is that if Thames Water were a publicly owned company or part of a national water company, the sewer could be built far more cheaply because governments can borrow money more cheaply than anyone else.   Second, why shouldn’t Thames Water be made to pay for the project themselves when they have paid out dividends of £1.1bn over the past 5 years?

Then there are the tax implications.   Thames Water is owned by a Luxembourg-domiciled consortium which includes the (Australian) Macquarie European Infrastructure Fund as well as Abu Dhabi and Chinese sovereign wealth funds.   So Thames Water is racking up huge debts using EU-blacklisted tax havens to pay out massive dividends and executive fees, at the same time as expecting household consumers to pay a big chunk more themselves.   Alongside a one-third increase in billing to its consumers, Thames Water have seen fit to grant a 60% pay increase to £2 millions a year to its chief executive – what for exactly?    The mother and father of all financial skulduggery?

 

The ugly face of Tory callousness exposed

With the world’s biggest refugee crisis since 1945, it is perhaps predictable that the Tories’ reflex response is to sensationalise the issue, lie about the facts, and pull up the drawbridge.   May kicks it off with the falsehood that the vast majority of migrants to Europe are Africans motivated by economic self-interest, when in fact 62% reaching Europe by boat this year were escaping persecution from Syria, Eritrea and Afghanistan.   Foreign secretary Hammond portrayed them as marauders risking the collapse of European civilisation, when in fact the number of migrants who have arrived so far this year is precisely 0.027% of Europe’s total population.   Cameron himself described them as a swarm intent of getting welfare benefits, when in fact the number of migrants reaching Calais of those arriving in Europe this year is just 1% and each asylum seeker in Britain gets a measly £36.95 a week to live on, only just over £5 a day, and is not allowed to work to supplement this sum.

Nor has Britain taken anything like its fair share of refugees under the vindictive and callous standards of the Tories.   Last year 25,870 people sought asylum in the UK, but only 10,050 were accepted.   Germany took 97,275, France 68,500, Sweden 39,905 and Italy 35,180.   Calculated as a proportion to population size, Britain comes even lower.   Calculated on 2015 rates, Britain has been even meaner in its reception of asylum seekers than impoverished Greece!   Against the hysteria the government has generated, you would scarcely believe it that the number of refugees in the UK has actually fallen by over 75,000 in the last 4 years.

Then there is the deeply unsavoury Tory involvement in trafficked workers debt-bonded and forced to work in slavery conditions that has just come to light.   Noble Foods, the UK’s largest egg company, used labour provided by DJ Houghton, a gangmaster operation run by Darrell Houghton and Jacqueline Judge at Maidstone, Kent, and its chairman has been a major Tory party donor and lent Cameron a helicopter for the election.   The Lithuanian workers were held in overcrowded accommodation riddled with bedbugs and fleas, denied sleep and toilet breaks, and had their pay repeatedly withheld while Lithuanian supervisors acted as the Houghtons’ enforcers intimidating the workers with fighting dogs and threatening them with instant eviction if they complained.   So much for Cameron’s promise earlier this month to tackle modern slavery in Britain.

Now that the election is safely out of the way, other Tory acts of harshness and vindictiveness have started to trickle out.   They have shelved their manifesto commitment to cap care costs for the elderly in order to save £100m (out of a deficit still stuck at £90bn), on top of cutting by a quarter of a million the number of elderly and disabled persons receiving social care at all.   They have concealed till now that 1 in 6 of all job seekers are hit by benefit sanctions even though the independent social security advisory committee, chaired by the ex-permanent secretary of DWP, have made the case that there is no certain evidence that sanctions actually work in forcing people back into work, but they do cause hunger and impoverishment.

 

Why Blairites are going hysterical

In 1994 Blair took over the Labour party and made it safe for British capitalism.   Which is why so many top companies and banks were content to contribute large sums to the party in order to hedge their bets – they gained whichever party won the elections.   Up till now they have dominated the Labour party for the last 20 years.   Blair’s abiding legacy, apart from the Iraq war, was to abandon the fundamental principles of the party and to assimilate it instead to the Thatcherite ideology of ‘let the markets rule and the State get out of the way’.    When Mrs. Thatcher was later asked what was her greatest achievement, she replied without hesitation: ‘New Labour’.   And the Daily Telegraph 6 months into Blair’s premiership published a half-page photo of Blair standing in front of a large picture of Thatcher in No.10 with the inscription underneath: ‘To Thatcher, a son’.   By accommodating the ruling corporate class the Blairites used the Labour party as their avenue to power, and it’s hardly surprising now that they are in such a state of denial and disbelief at their abrupt fall from power over the last month.

Of course the Blairite faction is sincere in believing that they alone know how things should best be run and that, as Blair himself has constantly reminded us, any millimetre departure from his prescribed course will bring chaos and disaster.   Not only does that show their unwillingness to listen (the party was virtually disbanded under Blair into a press release and door-knocking organisation), but it also exposes a deep arrogance about their own invincibility and their contempt for any radicalism from the Left.   The writing was already on the wall in Greece, Spain, and Scotland, but still they thought they could muffle dissent and ignore it.   It is a lesson in political nemesis.

Of course the Blairites will protest that they, and they alone, won three elections in a row.   The truth however is that the Tories threw away the 1997 election rather than that Labour distinctively won it, the second election was marked by stasis after an undistinguished 4 years, and the third saw the loss of 4 million votes after Iraq.   They will also appeal to the huge investment in health and education.   But a large part of the former was spent on building (fine for the construction industry rather than the essentials of health) and on outsourcing and privatisation (again good for the corporates rather than patients), whilst in the case of the latter there were huge building programmes inaugurating academies and free schools which have never proved their worth and have never been popular.

 

Blairites still don’t get it over public ownership

So the latest Blairite plan to derail the Jeremy Corbyn steamroller is to try to label him as rewriting clause 4 when it is perfectly clear that what he is really trying to do, rightly, is to re-start the debate about public ownership which is now so badly needed.   Thatcher’s dominant ideology was ‘let the markets run the whole show and the State get out of the way’ .   That was the route to the efficient allocation of capital underpinning a strong economy, offering big rewards for innovators and entrepreneurs and a trickle-down of prosperity for all.   Blair if anything took it even further with privatisation of public services and regulation-lite hands-off the City of London.   So was it a phenomenal success?   Unrestrained free-market capitalism led directly to the biggest financial crash for a century, the banks massively abused the power of de-regulation as we keep seeing day after day in the papers, and the privatisation of energy, water, rail and the Royal Mail have even Tories demanding the restoration of public ownership.   And even that’s without the scandals of behemoths like G4S, Serco, A4E, Atos, and Capita.

With the dominance of corporate power has come unrestrained market greed and a collapse of accountability.   Private markets have proved a bonanza for shareholder dividends and executive bonuses, but a millstone round the neck of (to use the uncomfortable cliche’) ‘hard-working families’.   The housing market has reduced owner occupation by 12% over the last decade and has made home ownership a no-go area for millions of young couples.   The energy cartel has exploited its pricing power ruthlessly till Ed Miliband threatened to impose a price freeze and to restructure the industry.    The pensions market abounds in steep hidden charges which enrich the City of London and impoverish millions of public sector workers who are reduced in retirement to penury.   The fragmentation of rail in the precipitate and ill-thought-through privatisation of 1996 has been seen as a costly mistake even by most Tories.  And part-privatisation of both health and education is rejected by a majority of the electorate.

Corbyn’s opponents bluster against public ownership as a ‘throwback to the past’.   But in truth what they’re advocating is a throwback to the private market heyday economics of the 1920-30s – and where did that lead to?   The real point has nothing to do with purity or ideological dogma: it’s about what works best, and the record of private markets in the last 30 years of the Thatcher-Blair imperium has not exactly excelled itself.   Moreover the record does not, or at least should not, turn on money-making and profit, but rather on quality of output, service to the customer, and benefit to the wider community.   We badly need a public debate on how public and private markets perform under those criteria as well as efficiency, and how sometimes co-operation serves the public better than mutually destructive competitiveness.

5 good reasons why Osborne’s selling off RBS and Lloyds is wrong

Osborne as usual is taking advantage of Labour’s distraction at this time to sell off RBS and Lloyds to the private sector at a huge losses to the taxpayer, to accountability of the banks, and to the future of the British economy.   This is motivated by his ambition eclipse even the Thatcherite privatisation boom of the 1980s and to oversee the biggest ever sale of publicly owned corporate and financial assets in one year, as well as of course elevating his prospects for the coming Tory leadership race and premiership.  But what may be good for his party and for him will certainly not be good for the country.

First, it is a thoroughly bad deal for the taxpayer.   Osborne has agreed to cut the public shareholding in RBS from 79% to 73%, but at a loss to taxpayers of £1bn.   The scandal of this unnecessary sale is one main reason why it was announced in the summer recess when Parliament wasn’t sitting so that he could avoid hard questioning about its implications.   The £2.1bn of RBS shares were sold at 330p per share, far below the average of 502p per share that the helpless taxpayer was forced to purchase them.

But that is not the real reason why Osborne’s policy is downright misguided.   The banks’ overmighty arrogance, recklessness, and incompetence were the prime reason behind the worst global financial crash for a century, and there not a jot of evidence that they have accepted their responsibility, shown any remorse, or are committed to any serious reform. Indeed they have fought tooth and nail against reform, have extracted major concessions from a weak Osborne like his caving in by reducing the bank levy in response to their lobbying, have pushed back the time limit for any statutory changed to 2019, and are demanding a very early return to pre-crash business as usual.

Moreover there are 5 specific reasons why the banks should NOT be returned to the private sector.   Their deregulated lending – for overseas speculation, for deployment of artificial tax avoidance devices on an industrial scale, for exotic derivative financial constructs which were highly lucrative but were at the heart of the crash, and for for prime property sites in central London – do not benefit British industry, but only their own selfish interests for profit maximization.   Only 8% of their lending last year went towards productive investment in Britain.

There has been far too little reform to prevent another massive crash, mainly confined to increasing the capital reserve ratio and setting up ‘Chinese walls’ between the retail and investment arms of banks.   They are still ‘too big to fail’, so that the implicit taxpayer guarantee is still in place.   There is no structural reform: Britain needs smaller, regional, specialist banks that helps Britain in the same way as the German Mittelstand.   And the dark forces of the next crash – the rise of shadow banking and a re-run of the most dangerous derivatives  – are not being countered.

 

Osborne shows his true colours: in the pocket of the banks

Osborne’s sacking of Martin Wheatley, head of the Financial Conduct Authority (FCA) says it all.   His sin was that he was too tough on the banks.   The banks are the most powerful section of the Establishment which runs Britain, and Osborne is one of their chattels who does their bidding when half of the Tories’ annual income comes from the UK finance sector, so Wheatley had to go.   This is a political ousting of the worst kind.   Wheatley was a tough regulator which was needed, and is still needed, when almost every week new scandals are unearthed in the finance sector, when the banks cost the UK £70bn in bailouts and a doubling of the national debt to £1.4 trillions, and when new areas of systemic financial risk including the revival of derivatives that caused the crash in the first place and the growth of the shadow banking sector threaten another financial armageddon.
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