Michael Meacher MP

A compass survey has found that Britain tofay has the highest levels of personal debt in the world – a staggering £1,460bn, equal to the entire economic worth of all the products and services that Britain produces in a year.    But the levels of indebtedness become so high that debtors accept, or are forced into, any deal with private loan sharks that will roll over their debts for a few weeks or months, even though this will only make things much worse within a very short time.   When the Bank of England base rate is at the rock-bottom rate of 0.5%, loan and credit companies have been found exploiting victims with rates as high as 2500%!   So what should be done? (more…)

Last week it was £6.5bn cuts announced by Danny Alexander (the former PR chief for the Cairngorms), yesterday another tranche of £1.5bn cuts from him, pepped up by Michael Gove’s scrapping 715 new school-building schemes (including 8 in my own constituency) in order to make way for his so-called ‘free schools’ and academies.    This is just one tiny part of the additional Tory public spending cuts of £32bn a year by 2014-5 which will be brought about by slashing Government departmental budgets by a zany 25%. (more…)

What a crisis!   Bank profits + 20%, public spending – 25% (might it be – 40%?).   The nation (or at least the government) seems to have forgotten about ‘moral hazard’ – that if people aren’t punished or properly brought to book for their bad bahaviour, they may draw the lesson that they can do it again with impunity.   The City of London is certainly an immoral place, but we should hardly encourage it – yet that’s exactly what the government’s doing.   And it’s not just an abuse of morality, it’s hard-headed economics that is being abused, in two clear ways. (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…)

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…)

The latest study of the impact of the Budget by the Fabian Society, published today, using a plausible quantitative model of the effects of public service cuts, confirms what we suspected, namely that the poorest tenth in the population will be hit much harder – 6 times harder – than the richest tenth.   This is in no way a fair Budget and we’re not all in it together.

But that’s not the only bit of the Budget that’s being ripped up – as well as Nick Clegg’s reputation over the VAT increase.   The whole narrative of the Budget is falling apart: (more…)

Osborne’s constant repetition that the Budget was fair, even “progressive”, reveals not that it was (the IFS and all other analysts show conclusively that it was not), but rather how exceedingly anxious he is that we should be conned into thinking it was.   He’s trying to learn the lessons of the Geoffrey Howe budget of 1981 which contained (till then) the biggest spending cuts since the Second World War, but made no pretence of fairness or proportionality, and provoked a huge political backlash.   Four factors however are working strongly against Osborne.

One is that a stark austerity programme now in the UK will not be compensated for, as it was in 1947 and 1981, by an expansionary international economy inviting a surge in private investment and exports.   Britain’s manufacturing industry has suffered a long-term decline, the US recovery is fading, and the Eurozone which normally takes half of all UK exports is still gripped in crisis and flat.

The second factor is simply that Osborne’s claim is downright wrong, on several counts: (more…)

This is a Budget full of untruths, half-truths and misleading statements.   It is not true, as Osborne repeatedly said, that it was unavoidable – the better option of deficit-cutting economic growth was discarded.   It is not true that the balance between spending cuts and tax increases had to be 80-20 (or more precisely 77-23%) – it could easily and better have been 60-40 or even 50-50 provided the tax increases were focused on the very rich.

Nor is it true that this is a ‘fair Budget’ as Osborne keeps strenuously asserting since the VAT increase to 20% is a regressive tax which will really hurt poor households, while the new impositions on the rich – the very modest increase in CGT to only 28% (not 40%) and the bank levy raising £2bn – are just peanuts for the super-rich.   Whereas hundreds of thousands of public sector workers, the victims of the financial crash, will lose both their jobs and their incomes, the bankers and the hyper-rich who were the architects of the financial crash will lose neither their jobs nor their incomes nor their wealth.   Is this what Cameron/Osborne mean by our being all in it together? (more…)

This is one of those watershed budgets where the governing party tries, not simply to make budgetary adjustments to the nation’s finances, but to change profoundly the ideological underpinnings of the State itself.   But the whole project is built on a string of fundamental myths which give an almost surrealistic atmosphere to today’s proceedings.   Here are the main myths.

1  The financial crash and economic downturn have been caused by Big Government, not by the markets,

2  The budget deficit is out of control, and if not brought rapidly under control it will lead to disaster like the Greek collapse,

3  Excessive public spending is the central cause of the problem, and needs to be drastically cut back,

4  If the public sector is cut back to a much smaller size, the suppressed private sector will emerge to fill the space as the engine of sustainable expansion,

5  Balanced budgets are the right way to run the economy, like balanced household budgets, and the only way to produce stable prices,

6  The precedent of other countries, like Canada, show that harsh cuts, however painful, are the quickest and most effective way to generate strong growth thereafter.

These ideas have been insidiously and relentlessly imprinted on the nation’s consciousness over the last weeks and months to lay the foundations for today’s measures.   Yet every one of these prescriptions is utterly wrong.   This is why. (more…)

There are 3 key criteria for judging tomorrow’s Budget.   One is the composition of measures for reducing the £155bn deficit.   The emphasis of pre-Budget leaking has been heavily on public spending cuts, much more moderately (20% as opposed to 80%) on tax increases, and no reference at all to economic growth.   You wouldn’t guess it from the PR softening-up process, but the latter is actually the most important of the three options.   Here’s why. (more…)

As the Budget approaches, the first evidence of the approaching cataclysm has already been delivered deadpan by a struggling Danny Alexander in the Commons 3 days ago.   But the scale of it has not sunk in.   Twelve projects were chopped with a total lifetime cost of £1.9bn, plus a further dozen suspended with a total lifetime cost of £8.5bn.

Two cutbacks in physical assets stand out.   One is the chopping of the Sheffield Forgemasters International in order to save £80m, but at the cost of having to import foreign plant and equipment to build the new nuclear reactors on which the Government (with the Liberals again conceding) has set its heart.   The other is shutting a hospital in the North-East at Hartlepool in order to save £450m.   (more…)

Previously the top banks were ‘too big to fail’; now under Osborne’s new system unveiled today the top man at the Bank of England is too dominant to fail.   But the omens aren’t good.   Mervyn King was the man who didn’t wake up quickly enough to the risks of Northern Rock’s use of the wholesale markets for mortgage funding, refused help to ailing banks because of the dangers of ‘moral hazard’, and perhaps most significantly of all laid the foundations for the financial crash through overly low interest rates which precipitated the credit bubble and excessive leveraging.

Having now watched Osborne several times at the dispatch box in the House, one sees a Chancellor far too obsessed with scoring political points rather than thoroughness of economic or financial analysis.   Winding up the FSA is a political hit against Gordon Brown’s distinctive regulatory reform in 1997, but it’s not the root of the problem.   Shifting around the institutional furniture is rarely the solution, and concentrating power in the Bank of England, as Osborne now proposes, will itself open up plenty of new problems including the potential conflict between monetary and financial stability.   Nor will it solve the following old problems either. (more…)

Ernst & Young, one of the world’s ‘Big Four’ accountancy forms, has been found to have allowed Lehman Brothers, the vast US investment bank that collapsed in September 2008, to hide $50bn (£34bn) of debt off its books in an effort to show its financial position was much stronger than it was.   This misled investors, as it was intended to do, and fundamentally distorted the market until the bank finally crashed for other reasons.

The device used was a sales programme known as Repo 105 which via the artificial sale and buy-back of deals made it look as though a company or bank hadn’t borrowed as much money as it actually had.   The trick has been described as ‘window dressing’ or an ‘accountancy gimmick’.   It may seem arcane, but the deceit is deliberately perpetrated on a scale to enrich or impoverish millions.   No burglary or larceny gets within a million miles of it. (more…)

The prophets of doom are now lining up.   The OECD, the Governor of the Bank of England and the G20 are now all  cheerleading the drive for fiscal conservatism.   Sir Alan Budd, the Head of the new Office of Budget Responsibility, is today announcing that UK economic growth is expected to be much less than Alistair Darling’s estimate of 3-3.5% in his last Budget, perhaps 2%, hence the greater need for big and immediate spending cuts.   The idea that the most drastic public expenditure cuts for a generation are now necessary and inevitable has become the conventional wisdom.   And it is wrong, wrong, wrong, as history demonstrates unmistakeably. (more…)

Given that the bankers’ malfeasance is the root cause of the present economic misery, which with going-for-broke spending cuts about to be inflicted will soon get much worse, it seems almost unbelievable that, 3 years on, next to nothing has been done to avert yet another (possibly greater) crash.   The financial meltdown began on 9 August 2007, slowly accelerated through 2008, exploded on 15 September 2008, and cost governments in 2009 about £3-4 trillions in bail-outs, including some £650bn in the UK.   Now bonuses (which drove the original recklessness) are back in full swing with £6bn paid out last year in the UK, derivatives trading (the dark heart of the City of London) is bounding ahead, and speculative lending still overwhelmingly takes precedence over lending to business and manufacturing.   How have the vested interests got away with it?   What should be done? (more…)