Why is Labour so quiet and timid about the super-rich, those on more than £3,000 a week, and the ultra-rich, the FTSE-100 bosses who now average $.4 million a year remuneration, or to put in more readily used terms, £86,000 a week? There are 3 good reasons why Labour should open up a major broadside against the very rich and the stratospheric rich. One is that it would be very popular. The public hostility towards the bankers and their multi-million bonuses (NB the outrage of some bankers reported a few weeks ago that they were only being given bonuses of £4 million compared with the £6 million given to some others) and the visceral hatred felt towards the greedy profiteering of the Big Six energy companies are an open invitation to Labour to go over on to the attack relentlessly and persistently, and not just because it would be popular, but because it’s right. There is no justification for these obscene levels of pay and remuneration appropriated by the wealth elite, it has nothing to do with the national interest, it is no reflection of merit – it is simply a reflection of their power in the market-place and their insatiable self-interest. That’s why the public hates them so much and why they offer such a tempting target to Labour on moral and ethical grounds and not just for funding reasons. Read more “The Labour Party needs to shout much louder about inequality” »
The public’s demand for re-nationalisation is steadily growing, partly because the record of privatised companies has been so poor, partly because the excuse of globalisation is now seen not to betoken greater efficiency but rather funnelling increasing assets to the very rich and undermining job security for workers, and partly the big new outsourcing companies have so blatantly abandoned the national interest in pursuit of gross profiteering. The Big Six energy companies have become a byword for greed and exploitation. The water companies have indulged in a bonanza for directors and shareholders, but have set aside wholly inadequate sums for necessary investment and Thames Water is even refusing to pay for the £4bn necessary new London super-sewer and demanding that the taxpayer should instead, i.e. privatising the profits but still repatriating the cost to the public sector. The banks have repeatedly been found guilty of rigging interest rate benchmarks (Libor, Euribor, forex market), mis-selling faulty or irrelevant financial products on an industrial scale, money-laundering, massive tax avoidance across the globe, closing down viable businesses in order to profit from the proceeds (RBS) – every misfeasance you can think of except meeting the loan requirements of UK industry. Read more “The Autumn Statement tomorrow will push privatisation even further when the record is already deplorable” »
The roll call of shame and disgrace about the record of the private banks, privatised utilities and outsourcing companies has now reached such a pitch that surely Labour must now challenge the whole culture of ‘the market knows best’ and in the extreme form of the neoliberal ideology that ‘government should get out of the way and leave it all to the market’. That is now so utterly discredited that patching up a failed system or tweaking at the edges the overblown corporate power or regulatory cosiness simply will not do. As everyone can see, the marketising obsession that Thatcher and Reagan initiated in the 1980s has now run its course, disastrously, not only in bringing about the worst financial crash for a century and the prolonged austerity that has followed, but now an almost daily succession of scandals that should destroy any political party that continues blindly to pursue it.
The worst recent example of banking misfeasance is the claim made by Vince Cable’s adviser that RBS deliberately wrecked viable small businesses in order to make profits for itself. If that charge is proven, then there is a strong case for bringing a criminal prosecution against RBS. But that is only the last of a very long list of criminal misdemeanours by the big banks that exposes them as out of control. That list includes Libor rigging (Barclays and many others), money-laundering for drug cartels and pariah states (HSBC), mis-selling of pensions & product protection insurance & interest rate swaps, and now the likely manipulation of the foreign exchange market for the benefit of the banks’ trading at the expense of millions of clients. The penalties which run into billions of pounds are paid at the expense of shareholders, but at no financial or occupational loss to directors, and no custodial sentencing even for the worst offenders. The current banking system is now so rotten, it is so over-powerful and yet so unwieldy and unmanageable, that it should be broken up. Either, as Cable’s adviser proposes, no bank should have more that a 10% market share, or RBS and Lloyds should be retained under public control and if Barclays and HSBC do not conform to the national interest, they too should be brought into public ownership.
A similar pattern of incompetence, mismanagement and fleecing the public revenues for private profit can be seen in the record of privatisation and outsourcing. The nationalised industries which were subject to real accountability have been replaced by private semi-monopolies that are virtually unaccountable – the likes of G4S, Serco, Capita and Atos. All of these have been found seriously failing, whether over the Olympics, claiming huge taxpayer funding for tagging prisoners who were either dead or had left prison, or making work capability assessments of the disabled which were wildly inappropriate and often made by staff without the relevant skills. The energy companies and the water companies have become bywords for exploitation and profiteering. These broken systems will not be made good by tighter regulation. They are corrupted from within and will only regain the public’s trust and display the integrity and high standards the public demands if their free-wheeling market deregulation if reversed. It is time Labour took a stand.
The Tories suffered a miserable debate yesterday, and I hope my remarks contributed to it:
The cost of living crisis has had a fairly good airing in this debate and has been poignantly described in some detail, so I intend to concentrate on the second part of the motion, which concerns the Government’s economic policy and, on the cost of living crisis, to ask the obvious question: was it all necessary? The Government’s answer, as provided by the Financial Secretary in a rather frivolous and provocatively partisan knockabout, was, predictably, yes. He simply repeated the well-worn Tory mantra that we all know: Labour left behind a huge economic mess; there was no other way to deal with it other than through massive cuts in public expenditure; we were “all in it together”; and now the Chancellor’s policies have been vindicated as it has all come right. All four of those statements are flat wrong.
First, Labour did not leave an economic mess. The budget deficit in 2007-08, just before the crash, was 2.6% of gross domestic product—one of the lowest in the OECD and about the same as Germany’s. It rose to 11.6% in 2010 only as a result of the bankers’ bail-out. I noted that the Financial Secretary did not even mention the banks today, so I was beginning to wonder whether he had even heard of the bankers’ bail-out. [Interruption.]I am prepared to give way at this point, before going on to answer in some detail
Perhaps the Financial Secretary did not mention the bail-out because he was working in financial services as a banker himself? Graham Jones (Hyndburn, Labour
That may well have had something to do with it, but it happened also because the Tories decided to blank out the bankers’ bail-out and put the whole blame on the Labour party. For any objective economist or objective observer of any kind, that is obviously absurd.Michael Meacher (Oldham West and Royton, Labour)
Secondly, there was another and much better way to deal with the budget deficit than through semi-permanent austerity. It is costing the country £19 billion a year to keep 2.5 million people unemployed. I simply say that it would have been far better to get these people off benefit and into work through public investment, so that they could earn and contribute to the Exchequer through taxes and national insurance contributions. I well know that the question will come, “How do we pay for that?”, so I shall answer it. This can still be done—and it could have been done three years ago—without any increase in public borrowing at all, despite the Chancellor’s continuous jibes to the contrary, by a further tranche of quantitative easing targeted not on the banks but directly on industry, or by instructing the publicly owned banks RBS and Lloyds to prioritise lending to industry, or by taxing the ultra-rich. Read more “Osborne’s ‘recovery’ – as in First World War we have advanced a few dozen yards, but absorbed fearful casualties to take it” »
The decision by RWE/nPower, the big German energy company, to drop the £4bn Atlantic Array windfarm project in the Bristol Channel sends out alarm bells in all directions. First, it shows the unreliability of depending on foreign suppliers of energy who, when in economic difficulties, will cut back on commitments abroad in order to maintain their focus on domestic customers unscathed. Half the Big Six energy giants are now foreign-owned, and will feel no compunction in disadvantaging other nations in a way they could not easily get away with at home. RWE claims the economic no long add up with Atlantic Array, yet none of the economics have changed. What has changed is that RWE now has debts of £30bn, so they have to make cuts, and Britain is an easy target. It is already clear they may their sights on pulling out of other projects in Dogger Bank, Hornsea and East Anglia. Read more “Axing of big offshore windfarm exposes serious breakdown in Govt energy poliucy” »
There are seemingly no limits to how far this government will crawl into the pockets of the private sector to do them a favour to maximise their profits at taxpayers’ expense. Greenpeace has just discovered via freedom of information (FOI) rules that a major state subsidy scheme for gas-fired power stations in the UK is being designed by an executive of a gas company (ESB, which owns 3 gas-fired power stations in this country) who has been seconded to work in DECC for 2 years. He is described in another industry document as head of capacity market design at DECC, but significantly also as ‘a government representative’. The ‘capacity market’ is a subsidy scheme intended to induce the building of more gas power stations by companies, and it is extraordinarily generous to the private sector in that it will pay the Big 6 energy companies huge sums running into millions of pounds whether the plants are generating or not. Read more “Government corruptly seconds gas executive to DECC to draw up state subsidy scheme for gas industry” »
I had expected a very well prepared and incisive rejoinder from the government when the Opposition chose to use their supply debate to press the case for a temporary energy price freeze now. I was however astonished at how contrived and unconvincing the response was. Ed Davey, the DECC Secretary leading the counter-attack for the government, was a mixture of noisy, patronising, shrill and blustering. He produced no more thoughtful answers than the Labour proposals were completely wrong and would put up prices, the Tories were the defenders of the consumer, and that the best way forward was what the government was already doing. If you believe that, you’ll believe anything. The only real point made by the Tories was that a price freeze would discourage the investment that was needed and would turn the lights out. But so far from it being the case that the companies were pouring their profits into investment before the price freeze announcement which then discouraged them, the reversxe is true that despite egregious profits there was such a dearth of investment as to lead to a warning years ago that there was likely to be a capacity shortage (i.e. the lights would go out) in the middle of this decade.
The other charge made by the Tories was that the companies would sidestep the freeze by either jacking up prices beforehand or afterwards or both. But that is easily refuted. First, if the Big 6 tried to do this in concert in the months just before the next election in 2015, even a weak regulator like Ofgem would have to take action because cartelised price-fixing of this kind is illegal, and anyway a new Labour Government would take powers to adjust the licences of the Big 6 to deal with price rigging. If an attempt were made to hike prices after the election when the freeze was over, i.e. in or around January 2017, the structural changes put in place during the 20-month freeze would operate to prevent it, namely a return to trading energy through a pooling system (as in Germany), the separation or ‘unbundling’ of the generation and retail arms of the Big 6, and the establishment of a more powerful and vigorous regulator with significant new powers.
OFWAT has just turned down as “unjustified” an 8% hike in customer bills proposed by Thames Water, the biggest UK water company. So shouldn’t OFGEM take a leaf out of OFWAT’s book in dealing with proposed energy price hikes? The same profiteering has appeared in the water industry, with huge sums being set aside for dividends and fancy remuneration packages for senior managers, but too little for long-term investment. But OFWAT has hit back with plans to cut bills by 13% by the end of the decade. Thames Water is currently trying to add £29 to the water bills of its 14 million customers in London and the South-East, on the grounds that they should contribute to the cost of the planned Thames tideway ‘super-sewer’ in London, plus also pay for higher Environment Agency charges and recompense the privatised water company for the recent spike in unpaid water bills. The price rise that Thames Water are demanding would hoist bills to nearly £400 a year by 2015. Read more “If OFWAT refuses price increases, why not OFGEM too?” »
We should be thankful for the Big Six Ugly Sisters. Nobody makes the case better than they that private markets are often wholly uncompetitive, allowing a small dominant clique to gain a stranglehold and ruthlessly advance their own greed without regard either for the national interest (investing to keep the lights on) or for their poorer customers (over 5 millions pushed down into fuel poverty). Nobody makes a better case that exploitative private markets in areas of basic public need repeatedly evade proper regulation and can only be made to serve the public interest by being brought back, whether whole or in part, into public ownership. This truth was highlighted by none other than Cameron himself at PMQs 3 days ago. Read more “Cameron’s targetting green levies to reduce energy bills hits poorest hardest” »