Michael Meacher MP

The chances of a double-dip recession are growing every day, and are now more than 50-50 likely.   The ONS has just announced that the 2008-9 meltdown drained £22bn out of the economy, forced up unemployment by hundreds of thousands, and with a 6.4% slump in UK output was far worse than 5.3% in the Eurozone and 3.8% in the US.   The 2.6% pre-budget growth forecast for 2011 was cut post-budget by the OBR to 2.3%, and now has been lowered further still by the IMF to just 2.1%.   The faltering rise in UK output in the spring seems to have halted, and the rise in house prices has petered out or even fallen.   The key engines of growth – household spending (even before the rise in VAT) and exports – are both down.   So what is Osborne’s response? (more…)

Not another personal memoir, surely.   Apart from the obvious motive of trying to retain a drop of fast-fading publicity, this latest wallowing in an orgy of self-importance in Mandelson’s diaries is yet another painful reminder of the personality-obsessed, policy-vacuous utter lack of ideology, direction and vision of the New Labour years.   It’s almost as though the waste of more than a decade was merely a paver for a largely trite, always self-centred, stream of personal reminiscences.   O Crossman and Crosland, where art thou today?   Why have we descended so far to the pygmies? (more…)

Two big structural changes in the 1980s launched by its Tory predecessor are now coming back to haunt this Tory government.   Thatcher thought that the abolition of exchange controls in 1979 together with screwing down the trade unions in the vice of anti-union legislation throughout the 1980s would consolidate the market capitalism she so much cherished as well as crushing any working class threat to her own class dominance.   For a time they did have such an effect.   But now their long-term effects look very different and are undermining the very system she fought so hard to protect. (more…)

We have now just been told by the Treasury, with typical PR chutzpah, that government departments should prepare cuts, not just of 25% which is itself unprecedented, but of 40% which would be insane.   No doubt this is, in the way politicians usually manipulate bad news ahead of the event, to make people think, when the final tally comes out rather less, that the cuts were not really as bad as all that.   It’s also of course to open up a broader range of options for cuts – just in case the opportunity offers.

Worst of all, it’s keeping up the propaganda blitz driving us down the track of cuts inevitability.   Whilst Blair in 1997 had a once-in-a-century chance of radical reform to change the face of Britain – and blew it – the Tories in 2010 have a once-in-a-century chance of turning Britain back to its conservative past, and are grabbing it with both hands.   So who will now stand up for the real Britain? (more…)

Nobody emerges well from the heated exchanges at PMQ yesterday in the Commons.   The Guardian that morning had argued the Treasury estimated that the Budget would cost 1.3m jobs.   In the ensuing mele’e Cameron responded to Harriet Harman’s taunt in two ways by claiming that (a) “unemployment will be falling during this Parliament” (words that he may well come to rue) and (b) the rise in unemployment would have been worse under Labour.   He is vulnerable on both counts. (more…)

The G20 was a pretty listless affair (unlike the concurrent Bloomfontein debacle), with world leaders opting to go their own way, the deficit hawks in the ascendant, and no significant change agreed at all.   International settlement of the world’s most pressing problems is becoming ever weaker – nothing relevant decided at Copenhagen on climate change, nor on the Doha round of trade talks, nor at Basel III on capital reserves for the banks.   Now   Toronto adds to the vacuous list of politicos’ photo opportunities.

The obvious reason of course is self-interest.   The US where recovery is stalling is cautious about belt-tightening, Europe and especially UK  and Germany emphasise the risk of sovereign debt crisis more than a double-dip recession, while Asia whose banks were more resilient carp at paying any  bank levy because other countries’ banks were reckless.   But there is another aspect to this too which is more disturbing. (more…)

There is an extraordinary silence about the really big issues now facing Britain.   We are arguably on the cusp of the biggest downturn for a generation as all the sources of growth dry up.   The expansionary momentum from ultra-low interest rates and £200bn quantitative easing is clearly wearing off, export markets are flat or falling, and now Cameron warns us we face the most drastic spending cuts which will change the way of life of the entire population and lead (according to the CIPD) to 750,000 public sector jobs destroyed and unemployment pushed up to 3 million for 5 years.   So where’s the anguished debate about this fast-approaching Armageddon and the search for alternative policies to avoid it (which there are)?  (more…)

This is a funny old election.   Both the main political parties are focusing on one central issue (how far and how fast the budget deficit should be cut) when that is the wrong policy and the right policy is being rejected out of hand.   At the same time what should clearly be the central focus of this election doesn’t even get a serious mention.

Cutting public spending, whether drastically or sensitively and straightaway or a bit later, is not the right policy when the ‘recovery’ is so precarious and particularly when the deep recession is mainly due, not to the bank bail-outs, but to the collapse in private investment.   That investment, especially in housing and private transport equipment (buses, trains, cars, etc.), had already fallen spectacularly by 15% between the first quarter of 2007 and the second quarter of 2008, before the financial crash of September 2008.   The banking failures, which then exacerbated the collapse in lending to businesses and homeowners from a healthy 20% a year growth at the start of 2007 to nil or negative two years later, compounded an already dramatic fall in private investment. (more…)

So No.10 is worried that despite technically coming out of recession in the last quarter of 2009, the recovery may yet stall and the economy shrink again in the first quarter of this year, just before the election. But even if that were to happen, there’s still a measure that the Government could take in the March Budget which is eminently necessary and justifiable and would be highly popular with the electorate. People might think that as the banks now announce massive profits once again, at least they’ll be paying tax again. But they won’t. Tax law at present allows the banks to spread their colossal losses indefinitely forward offsetting them against tax, so that they won’t be paying tax again for years if not decades. Merrill Lynch actually applied its £16bn sub-prime losses to the UK in order to pay no British corporation tax for 60 years!
Other countries limit the spreading of losses to only 3 years; why not the same in Britain? Even in the UK a major change of ownership (e.g. RBS, Lloyds, Northern Rock) leads to a company forfeiting its former tax losses. But it doesn’t apply if the losses were in their subsidiaries; why then don’t we close that loophole? That would bring in at least £10bn a year for the Exchequer – a nice little earner that could hansomely reward electors who have suffered as victims of the downturn.

I see Alistair Darling is telling us he’s sure the recession is over. Presumably that’s why he’s been aggressively asserting the Treasury line this last week about the magnitude of the cuts he intends to impose on the economy, to rival the Tories. But the latest economic data is telling a very different story. David Blanchflower, previously a member of the Bank of England Monetary Policy Committee, argues that there are at least four reasons for believing the UK economy has taken another turn for the worse. Consumer confidence has suddenly dived, not only in the UK but also in the EU. The number of staff placed in permanent jobs has fallen compared to a month earlier. The latest quarterly CBI survey is decidedly downbeat, suggesting that the last quarter of 2009 did not see the economy strongly rebounding into growth. And unemployment almost everywhere is rising, particularly in the US, but also in nearly every EU country. That puts an entirely different picture on the landscape for the general election.

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As the New Year dawns the latest evidence on living standards is ominous for the Government facing election in little more than 4 months time (a March election can be discounted). The best official indicator is real personal disposable income (RPDI), but those figures will not be available for some months yet. Meanwhile the independent think tank Oxford Economics has produced estimates for gross domestic product per person which on a 12-year time series, adjusted for inflation, still accurately measures the change in sense of economic well-being. Between 1997-2001 GDP per head grew 12.6%, a healthy 3% a year. During 2001-05 it dropped slightly to 8.3%, still 2% a year. During 2005-09 however it has turned negative, a fall of 1.3%. People on average therefore (though not the filthy rich, as Mandelson would put it), are worse off than 4 years ago. GDP per person was some £23,000 in 2005, but it is now estimated to be only some £22,700, and by next year even after some anticipated economic recovery it will still be only some £22,775, a drop of about £225 on average (inflation adjusted) compared to 2005. That is not good news.

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The possible default by Dubai World and Nakheel, the region’s major property developer, could cause more than a blip in the world’s fragile financial-economic recovery. The main exposure of Western banks lies through £14bn of syndicated loans made to Dubai World, of which RBS had helped to arrange £2.3bn, though it may have passed some of that on to other lenders. Altogether the Dubai city state has run up £37bn of outstanding debts, and British banks are the biggest lenders to the Emirates. HSBC as been the largest lender with £17bn of outstanding borrowings which have played a major part in funding the rapid expansion in the region. The reason this is potentially so serious is that Dubai’s request for a repayment standstill on its multi-billion dollar debts has triggered fears of debt defaults elsewhere in the global economy. As with the Lehman Brothers debacle, it could spread a contagion generating a second wave in the global credit crisis. This is especially likely if Dubai’s debt includes off-balance sheet liabilities that carry its total debt burden well above the £60bn estimated so far.

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There are several remarkable aspects to Osborne’s statement to his party’s conference yesterday – its dramatic candour, its shortfall far below what he himself said was required – but the most extraordinary thing about it was that it was made at all. The Tories could easily have stuck close to Labour’s spending plans in order to avoid being too frank about their real intentions on handling the budget deficit. Grtuitously to throw away this option whilst at the same time revealing so close to the election that one intends to impose a pay freeze on 5 million public sector workers as well as to raise the age for entitlement to the State pension to 66 shows just how cockily sure the Tories have become thathtye’ve got the election in the bag. And it also shows how pathetically imitative the Government have become of Tory initiatives that Liam Byrne, the Chief Secretary to the Treasury, actually hurried out his public sector pay freeze first a few hours earlier in order to pre-empt Osborne’s main announcement — all the more contemptible when it is completely the wrong policy. Nor is this the first time this has happened.

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This must be the most bizarre election in recent history. Osborne’s speech to the Tory conference today and Liam Byrne’s response to it echo yet again the same weird scenario, that both parties are competing to outdo each other in pursuing the same wrong, misguided policies and nobody is putting forward the obvious common-sense alternatives. Both New Labour and the Tories, for the same ideological reasons, refused to nationalise the banks, which would have been far cheaper than bailing them out at a cost of up to £1.4 trillions and far more effective in ensuring control of them. Both New Labour and the Tories, for the same reasons (hands off the banks), have opposed forcing them to lend to businesses and homeowners (which was the ostensible reason for bailing them out in the first place). Both parties refuse to impose any significant regulation on the banks, even though their greed and recklessness nearly capsized the entire world financial system. And now to cap it all, both parties are competing in their fixation on public sector cuts which is not only grotesquely unjust, but even more importantly is the utterly wrong way to deal with the budget deficit.

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The central problem in Britain today is the relentless rise in unemployment and where it is heading – and what should be done about it. The pace of the downturn has been faster than in the worst recent recession in 1979-82 when unemployment eventually 4 years later peaked at well over 3 million. It is disproportionately hitting the younger generation, nearly a million of whom are now out of work, and who as we know from historical experience could be scarred for life. It is also disproportionately hitting the lowest paid: unemployment over the last two years has nearly tripled from 3% to 8% for classes D-E, while for the A-B classes it has risen from 1.2% to only 1.8%. And on the profile of the downturn so far, estimates are already being made that, long after a so-called recovery is under way, unemployment will continue to climb almost to 4 million, the highest level since the 1930s. This is not an act of God. What is deplorable is that almost every economic decision taken over the last two years is now worsening the unemployment trap.

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