Tory councils cut services as demand surges

More and more working people are having to use more and more public services as the capitalist economy crumbles. Unemployment is in the millions, underemployment too.

Unlike the bankers and big businessmen, we can’t afford to hire financial advisers and accountants to help us deal with our problems, and if we lose the roof over our heads, we’re out on the street or a friend’s sofa – we can’t swan off to our second, third, or fourth home…

We need advice on housing and benefits, provided by local councils.

Unlike the bankers and big businessmen, we don’t have yachts or our own island to retreat to when we want to relax.

We might take a walk in the park, lend some books from the library, or visit the leisure centre to use the gym or have a swim in the pool – all provided by local councils.

Across England, Tory councils are preparing to slash spending, just when working people need help the most. Instead of boosting employment, Tory councils are ready to add to the dole queues. (But this won’t mean cuts in taxes – in fact, they’ll have to go up to help bailout bankers!)

Rather than expell these wreckers for the chaos they are planning, the Tory leadership in parliament is watching these councils and using their examples to draw up spending cuts top implement if they form the next government.

Yesterday the shadow chancellor, George Osbourne, claimed the Tories were a “progressive” party. Lord Mandelson responded by claiming this was laughable. Truly, this was two bald men fighting over a comb…

How to get credit flowing? Nationalise the banking sector, say Tories

(Only kidding about the Tories bit! The rest of it is true, but please, stay with me…)

Wonko, for one, is not happy. No wonder: Paul Mason noted that on Friday

Wrekin Construction – a business with £50m of orders reportedly on its books – went into administration. It told the press that RBS had refused to extend an overdraft: it needed £3m. Now 600 civil engineering and railway construction jobs are at risk – and we’re supposed to be in the middle of a government-driven civil engineering boom.

It was partly Paul Mason’s insightful post that made me pen the following comment atDuncan’s Economic blog

Arguably the best way to get credit flowing again is for the banks to be nationalised. I think this worked in Sweden quite well and here’s why:

Commercial decisions will still be made on who to lend to and at what cost to the lender – but public ownership will get around the one big obstacle, which is that the people running banks are looking to provide returns to the owners and so make decisions on lending in a different way. Instead of being cautious about lending because they are mindful that their job is to give a return to investors, they will be more eager to lend, but nonetheless mindful of risks, etc. We can see the government has reversed its previous policy with Northern Rock.

With public ownership it’s not about the sectional interest of shareholders (or even, the government as shareholder) but about the interest of the whole of our economy in the long term – ensuring that productive enterprises get the financing they need.

The big problem with all of this will be the EU’s rules on these matters. Sweden’s banking crisis and it’s recovery happened prior to the country becoming a member of the European Union. The political right likes to paint the EU as some kind of warmed-up Soviet Union, but in fact EU institutions would probably oppose nationalisation of the private banking sector on several grounds (competition rules, the rights of shareholders, etc.).

Now, it’s the kind of measure that might need EU approval, and might take a damaging length of time (look at the govt assistance to our car manufacturers – it was held up while the European Commission vetted it). But the government will have to be tough and say it will take the consequences from the Commission.

As to the future ownership in the banking sector, I think we would be wise to learn the lessons of this crisis: the shareholder-as-owner has proven dangerous.

Which financial institutions have been responsible and have not needed public money to bail them out? The building societies, owned by their customers: no one expects from building societies anything other than boring banking – no financial wizardry. Indeed, many of the failed institutions were once owned by their customers – Bradford and Bingley, Halifax, Northern Rock, etc.

As a customer and member of a building society, I don’t ask much more than a good service, either as a lender or saver; I certainly don’t demand of the people running it that they come up with more ways of making money. Now it might be argued that this kind of old-fashioned high-street banking doesn’t apply to the financing of bigger businesses – but my question would be, why not?

Govt response to recession’s mental health crisis is all talk

No, really. Talking therapy.

As the UK economy slides further into recession, the prospect of millions out of work is putting pressure on individuals and families. Health secretary Alan Johnson and the minister for work and pensions James Purnell have announced more funding for mental health services to assist those made redundant by the economic crisis.

But what help is “cognitive-behavioral therapy”? Is it just a way of pacifying people who will be angry and upset that their hopes of prosperity are being ruined by the chaos of the capitalist system?

CBT encourages people to think about what they can do as individuals to improve their situation. Obviously, New Labour types like Johnson and Purnell would not naturally be promoting a therapy that encouraged people to look at how they can collectively overcome social problems – nor acting to prevent a mental health crisis by intervening in the economy to defend workers – but surely the failure of market fundamentalism to deliver “an end to boom and bust” should encourage politicians to think outside the box…

The Mental Health Foundation is calling on the government to treat the mental health epidemic caused by the recession as a public health issue:

The growing gap between rich and poor has caused a “social recession,” leading to low educational achievement, increased violence and poor community cohesion [...]

The Foundation warns that “perpetual stress” and depression linked to public concern over excessive earnings has led to widespread social and health problems.

Radical shift

The charity’s report, Mental Health, Resilience and Inequalities, calls for a “radical shift” in understanding mental health as a public health issue, citing research from around the world that shows that affluent but unequal societies can have many problems.

It also recommends assessing all future public policy for its impact on people’s mental health.

Social problems

The report’s author, Dr Lynne Friedli, said individual and collective mental health and well-being depended on reducing the gap between rich and poor.

“A large divide leads to a mentally unhealthy society, and many associated social problems. In the UK in particular, we’ve failed to acknowledge this link, preferring instead to blame the health and social conditions of those living on or near the poverty line on their own lifestyle choices. This in turn further stigmatises poverty, making disadvantage even harder to overcome,” she added.

Dr Andrew McCulloch, chief executive of the Mental Health Foundation, said living with inequality had “very real effects on the mind and body,” adding: “Given the huge social costs of poor mental health, it’s vital we begin to treat it as a public health priority.”

A bonus question: are you having a laugh?

As David Cameron urges us to have faith in the capitalists who have ruined our economy, Mark Steel squeezes a few laughs out of the sorry affair of greed and corruption:

The real point about a minister saying this is the worst economic crisis for 100 years, is it shows they haven’t got a clue. That figure was plucked out of nowhere, unless there was a really dreadful crisis in 1909 that no one ever noticed before. Maybe the minister’s just seen Mary Poppins, and the scene where the bank goes bust, he thinks is footage of a real financial crash.

So his next statement to Parliament will be “In order to steady the financial markets we are proposing tuppence tuppence tuppence a bag, feed the birds, tuppence a bag. THAT is the sound economic sense that can rescue our banks, rather than the ill-thought-out soundbites from the party opposite.”

Why not say it’s the worst for 2,000 years, when the great crash of 9AD was caused by the gross overvaluation of aqueducts? Or the worst for 65 million years, when the Jurassic currency disaster led to bankers throwing themselves from the top of brontosaureses, followed by the eventual disappearance of all dinosaurs, despite the Prime Minister having boasted: “We have finally put an end to the cycle of evolution and extinction.”

Next week a minister will announce that the Bank of England has revised its forecasts, and instead of the crisis getting as bad as diarrhoea, as it first thought, it now expects it could be as bad as gastroenteritis, and the IMF believe it could even reach the point where it’s like one of those days when it’s coming out of both ends at once. But with careful fiscal handling this should be easing by the last quarter of 2010.

You have to admire the front of these ministers for saying anything at all about what’s happening, given they insisted for years there would never ever again ever be a cycle of boom and bust.

Similarly an army of experts assured us on a daily basis that this boom couldn’t possibly crash like previous booms because this boom was still going on whereas all previous ones had ended, and previous booms were founded on a manic belief that wealth could go up and up without any basis in reality, whereas this one was built on the sound footing that everything really is somehow suddenly worth twice as much so TAKE AS MUCH AS YOU CAN RIGHT NOW IT CAN’T EVER STOP!!!

For example, one of the bankers questioned yesterday said it was “not possible to envisage” the banking crash. But in every office, every pub, every launderette, there were people who managed to envisage exactly that. If Gordon Brown had got them to write his chancellor’s speech, so that it went: “The bubble’s got to burst sometime. I mean, you can’t base an economy on pretending everything’s doubled in value, and who’s going to pay for these bankers’ bonuses – WE are, that’s who. I commend this budget to the House,” he might not be in his present trouble.

Instead the people who couldn’t possibly envisage what was obvious are allowed to carry on. To be fair, ministers have expressed their annoyance at the bankers’ bonus system, so presumably there will now be a series of adverts in which a furtive banker buys a boat, while the camera zooms in to his sweaty face and a voice says: “Banking cheats – we’re closing in.”

One answer may be a review of how this bonus system came about. As if the Government’s making out it’s only just heard about it and they’re as outraged as everyone else. Maybe Brown will make a statement to the nation in which he says: “HOW much do they pay themselves? Well no WONDER we’re in a pickle, you just wait ’til I get my hands on them.”

But New Labour urged and encouraged every aspect of this corporate avarice. It was defined from the beginning by characters like Mandelson making speeches such as: “In the modern Labour Party we are relaxed about those who express an insatiable and pathological desire for self-enrichment at the expense of our fellow man that borders on the truly evil.”

They grovelled to every banker, and now they want to set up a review to see how that happened. If only Karen Matthews had thought about it, she could have said: “Instead of going to jail, why don’t I set up a review to see how I kidnapped my own daughter,” and got herself six months’ work.

Peter Taafe continues on this theme in the latest edition of The Socialist:

When John ‘Two-Jags’ Prescott – a willing participant in the New Labour project that spawned these financial creatures – inveighs against the bankers and calls for a public campaign against the proposed bonus payouts of £1 billion at Royal Bank of Scotland (RBS), it indicates the mass rage on this issue.

Prescott even mentioned the ‘C word': “This is raw capitalism and this country rejects it”! Correct! But didn’t he serve in the government alongside Gordon Brown and Tony Blair which supported and did everything to strengthen neo-liberal “raw capitalism”?

When questioned on Newsnight, he wasn’t able to answer the accusation that it was him and his government that helped to create this situation. They promoted ‘performance related pay’, though for the bankers with the perversion that no satisfactory performance was even necessary.

Vince Cable, the Liberal Democrat spokesperson, pointed out that following the bursting of the ‘South Sea Bubble’ speculation in 1720, a parliamentary resolution proposed that bankers be tied up in sacks filled with snakes and thrown into the river Thames!

However it is guaranteed that the parliamentary committee that is ‘interrogating’ bankers this week will be full of ‘sound and fury signifying nothing’.

Alistair Darling and Gordon Brown are intending, under the enormous pressure that has built up, to introduce some curbs. But so far they have not even proposed what Barack Obama has suggested for the US, a ‘cap’ of $500,000 on the pay of what he has correctly described as the “shameful” US banking fraternity who want federal bailouts.

Economic abyss

In fact, the proposal is $500,000 too much. The overwhelming majority of the American people on the edge of an economic abyss clearly believe they shouldn’t get a cent.

In reality, all capitalist politicians are only proposing minimal action because of the public clamour against the greedy bankers. Obama remains firmly within the framework of the capitalist system; “we do not disparage wealth” (of the rich) he has said.

Their dilemma was summed up by Barney Frank, the chairperson of the US House of Representatives Finance Committee, who said of America’s bankers: “People really hate you. And they are starting to hate us because we have been hanging out with you. You’ve got to help us deal with that”.

The argument that RBS, which has received £20 billion from us, the ‘taxpayers’, ie the working and middle classes, must pay at least £500 million in bonuses because of “contractual obligations” is completely spurious.

This in a week when The Guardian has revealed that so-called ‘British’ companies, including banks like Barclays, use tax avoidance schemes to prevent payment of anything between £3.7 billion to £13 billion to HM Revenue and Customs.

Prescott also correctly stated that “these bankers would have been on the dole” if RBS had been allowed to go to the wall. He fulminated: “No ifs, no buts, don’t pay the bonuses”.

Amen, says every worker and middle-class person in Britain facing the burden of this crisis. The problem is how to carry out Prescott’s laudable aims. The government is once more merely proposing a delaying mechanism, another “review”.

Headed by a failed banker

Moreover, this is to be headed by a failed banker from the tottering investment bank Morgan Stanley, who himself has taken multi-million pound bonuses – a classic case of the proverbial “poacher turned (tame) gamekeeper”.

Neither Prescott nor the MPs on the House of Commons committee foresaw the pernicious effect of the work of the financial plutocrats and the breathtaking arrogance of them daring to suggest that they continue to profit from their past misdeeds.

But socialists and Marxists did. Tommy Sheridan, for instance, when Brown himself knighted Fred ‘The Shred’ Goodwin, declared: “It’s an absolute outrage that this man is to receive a knighthood for ‘services to the community’ when all the community has received from him is low wages and unemployment” (Daily Mirror). Tommy’s reward is to be pilloried and dragged once more, this time with his wife, before the capitalist courts in a case he has already won once!

Moreover, this was at a time when Jeff Randall of the Daily Telegraph was hailing Goodwin as a “world-class banker” and another characterised him as a “genuine business hero”. The whole of the ‘business community’, and all of the three major capitalist parties, were in reality on their knees singing hosannas to the City of London and the financial ‘wizards’.

Osborne and Cameron, the Tory leaders, would have us believe they and their party are innocents in all this. In fact, the roots of this crisis were created by their party when led by Mrs Thatcher and her massive ‘big bang’, the deregulation of finance capitalism. The result has been a huge polarisation of wealth which has ended in a devastating economic crisis and the ‘big bang’ of mass unemployment. The economic forecasting think tank ITEM now says that three and a half million workers could be ‘out on the stones’ in Britain, with one and a quarter million of this horrendous figure being under the age of 25.

This whole sorry bunch of capitalists, rooted as they are in a system that elevates the lust for profit over social need, cannot be expected to take effective action against their ‘own’, the bankers, other than to trim one or two fingernails. Why in any case do bankers under capitalism ‘need bonuses’ for super-exploiting the rest of us? They are on stratospheric salaries already. Managers, for instance, as late as the 1980s took home perhaps 20 times the average wage of their workforce, a managerial wage which was too high even then. Today, when the average wage is put at £25,000 a year (not an hour), their ‘remuneration’ is on average 275 times this figure and some receive a lot more than this.

And what is the net result of this? An anonymous cabinet minister told The Guardian: “The banks are f***ed, we’re f***ed, the country’s f***ed”. But not as much as the working class and the poor because they are the ones expected to carry the can. Therefore we must demand not a penny in ‘bonuses’ for bankers, both in the ‘nationalised’ and the private sectors.

But how can this demand be enforced? Darling the Chancellor says “commercial interests” are best at running the banks. Really? After 30 years when they have had the full ‘freedom of the park’ and have consequently wreaked havoc? Nationalisation, not in the capitalist, pro-boss way but in a democratic socialist fashion, is the first step in beginning to use the economic levers of power to benefit the majority, working and middle class people. Then Northern Rock for example, which has been bailed out by us and expects to dole out £8 million in bonuses to its executives while turfing workers out of their houses, may begin to act in the interests of ordinary working-class people.

Open the books

A precondition for effective action is to open the books of the banks. The argument that “bonuses need to be paid for specialised staff” is so much hooey. An average bin worker, car worker, steelworker or teacher, especially if they came together collectively in democratic committees controlling the banking industry, could do a lot better than these bankers, who did not even understand what they were doing with their financial alchemy.

A democratic form of organising a nationalised banking sector would draw in bank workers and other workers and their representatives, delegates of small business people, homeowners, etc. The organisations that represent working people, the trade unions, should be involved, as should ‘consumers’, including mortgage holders.

But, argue the opponents of nationalisation, “there would be a flight of capital”. The capitalists will always seek to sabotage measures they think are against their interests. The way to deal with this blackmail is to introduce a state monopoly of foreign trade, as a means of controlling all imports and exports including capital. Bold action is required, not tinkering, if a new road of prosperity and hope is to be opened up to the British people.

* Not a penny to the bankers in ‘bonuses’!
* Open the books to inspection by committees of workers, householders, consumers and small business people!
* No compensation to the financial ‘wizards’ who have ruined the economic position of Britain and with it the lives of millions!
* For a socialist, democratic, nationalised banking and financial sector.
* For a state monopoly of foreign trade.
* For a socialist plan of production democratically drawn up and implemented by committees of workers, trade unionists, small business people and consumers.

Above all, for the creation of a powerful movement now for a new mass workers’ party that can make these demands relevant and realistic for millions of workers who are looking for a lead.

Amen to that.

Myners strike – words of wisdom from City insider turned govt advisor

Yet another reject from the square mile has made it into government, take note!

Says Paul, who joined Labour because it was more “left wing” than the Liberals:

The capacity for soundly managed banks and markets to support the generation of wealth in the economy could never be matched by the public sector. That is why the government has a policy of supporting a return to an effective commercial banking sector, rather than nationalisation.

Ah, no comrade. The reason is that New Labour is committed to securing the power and wealth of the super-rich, as opposed to using the country’s wealth to re-invest in productive activities…

If Gordon Brown had really wanted to abolish the boom and bust of the capitalist economic cycle, he would have expropriated the banks years ago – not merely part-nationalise them by buying worthless shares.

As it stands, turbo-capitalism of the sort backed by New Labour has destroyed the manufacturing base of this country and damaged the social fabric of the country with mass unemployment. Many were bought off with the promise of a “housing ladder” to climb out of the working class, but now this bubble has burst along with the dream of a “popular capitalism”

The relentless pursuit of profit for the few has brought misery for the many. Now it has brought chaos for those who benefit the most – and they’ve called in the government, which has stepped in with wads of borrowed money which we will have to pay back in years to come (with interest!).

But never fear, we have utopians like Paul Myners in government. Men who can imagine a time when capitalism serves the many not the few. How fortunate he is to have such dreams – the rest of us must bear the reality of the recession: indebtedness, mass unemployment, and a rise in homelessness and crime.

The bailout has failed – time to nationalise the banks

Word is that the Treasury is thinking of bailing out the banks again.

The Prime Minister denies its a priority, preferring to talk about how he’s going to create jobs to curb rising unemployment.

But it’s clear that the stated aim of the bailout – to increase lending to businesses and to new start-ups and small businesses in particular – has failed.

And without strong action, the recession will deepen – schemes to curb unemployment will have no effect unless they are matched by efforts to stop jobs being lost in the first place.

The only solution to the credit crisis is spelled out in the latest edition of Red Pepper:

Rebuilding banking

Leo Panitch argues that what is needed is for the banks to become a public utility

First, let’s be clear about capitalism – and with it the character of the state under capitalism. There is a conventional assumption, a leftover of the cold war perhaps, that somehow capitalism is essentially about the market and socialism is essentially about the state. In fact, a central historical feature of the state in capitalist societies is the role it plays as guarantor of private property and, most importantly for the smooth running of the financial markets, that it will always honour its bonds – that is, its borrowing from the private banks.

Because of this guarantee – the promise to pay others back from taxation revenue in the future – government bonds, whether issued to finance war or to finance welfare, constitute the least risky form of lending. As such, it forms the foundation of financial markets’ role in sustaining the ability of capitalists generally to accumulate – to continue to invest and make profits. This centrality of the state for capitalist accumulation is most notable with respect to those dominant states, like the USA, whose bonds are the foundation on which all calculations of value in global capitalism are based; states that host and support the main centres of international financial markets, such as New York and the City of London.

Understanding the role of the state in a capitalist society helps us to see why, when a government bails them out with public money, the bankers do not see this as the start of socialism. On the contrary, they see it as the government fulfilling its duty to the financial markets – whose smooth running it both depends on and sustains, by providing the basis of confidence in the credibility of the banking system.

So it is misleading to see government involvement in the banks – whether it be the pure bailout of the original Paulson program in the US, or the subsequent non-controlling equities taken by the US, British and other governments – as per se a move away even from neoliberalism. (It is also misleading to see neoliberalism as being about the withdrawal of the state from the markets – and therefore this current involvement of the state as a defeat of neoliberalism. The state under neoliberalism has been very active in promoting the vast expansion of financial markets and facilitating their volatile growth; and, as this volatility inevitably led to repeated financial crises, in keeping the financial system going from moments of chaos to moments of chaos.)

Does this mean that this present crisis of the financial markets is not an opportunity to debate and press for alternatives? And where do we start?

It is an opportunity because in this crisis it is clear that what has been misleadingly billed as the ‘free market’ has failed and is seen to have failed, and also because it is clear that states have been responsible for promoting what has now failed, and that they now need to come to the rescue of the banks. This concentrates the minds of most people on the problem: their pay cheques are deposited with banks, their pension savings are invested in the stock market, their consumption is reliant on bank credit, and is the roof over the heads, as heavily-mortgaged home owners.

It is notable in this respect that going back over the last century, alongside the various movements that arose to struggle for the vote for working people, there has always been pressure to control the financial system, and even to bring the banks under public ownership, reflecting a certain common sense that the financial system ought to be accountable to or even belong to the people – that money should be become a public resource and banks a public utility. Indeed, this democratic pressure system was not without results: some of the regulations that states did put on the banking system after previous crises were also a response to demands from below that people should not be fleeced by the bankers.

For example, the nationalisation of the Bank of England was meant to bring the government’s agent in the financial markets under democratic control – although in fact the Bank of England now acted inside the state as the voice of the City within the state, representing the power of financial capital.

The lessons began to be learnt in the wake of the rise of the new left and the crisis of the Keynesian welfare state in the 1970s. It was recognised that the only way to overcome the contradictions of the Keynesian welfare state in a positive manner was to take the financial system into public control. (The best popularly written example of this, and still worth reading today, is Richard Minns, Take Over the City: the case for public ownership of financial institutions, Pluto 1982.) The left in the British Labour Party was able to secure the passage of a conference resolution to nationalise the big banks and insurance companies in the City of London, albeit with no effect on a Labour government that embraced one of the IMF’s first structural adjustment programmes. We are still paying for the defeat of these ideas (and the industrial strategies referred to by Stuart Holland on page 22). It is now necessary to build on their proposals and make them relevant at the current juncture.

The scale of the crisis today provides an opening for the renewal of radical politics that advances a systemic alternative to capitalism. It would be a tragedy if a more ambitious goal than making financial capital more prudent was not on the agenda.

It is hard to see how anyone can be serious about converting our economy to green priorities without understanding that we need a democratic means of planning through new sets of public institutions that would enable us to take collective decisions about allocating resources for what we produce and how and where we produce the things we need to sustain our lives and our relationship to our environment. The reasons why trading in carbon offsets as a solution to the climate crisis is a dead end are shown in this financial crisis. It would involve depending on the kinds of derivatives markets that are so volatile and are so inherently open to financial manipulation and to financial crashes. (The recently published Green New Deal begins to address these questions.)

In terms of immediate reforms – in a situation where the only safe debt is public debt – we should start with demands for vast programmes to provide for collective services and infrastructures that not only compensate for those that have atrophied but meet new definitions of basic human needs and come to terms with today’s ecological challenges.

Such reforms would soon come up against the limits posed by the reproduction of capitalism. This is why it is so important to raise not merely the regulation of finance but the transformation and democratisation of the whole financial system. What is in fact needed is to turn the whole banking system into a public utility so that the distribution of credit and capital would be undertaken in conformity with democratically established priorities rather than short term profit. This would have to involve not only capital controls in relation to international finance but also controls over domestic investment, since the point of taking control over finance is to transform the uses to which it is now put. And it would also require much more than this in terms of the democratisation of both the broader economy and the state.

Of course, without new movements and parties that can rebuild popular class forces this will fall on empty ground. Crucial to this rebuilding is to get people to think ambitiously again. However deep the crisis, however confused and demoralised the financial elite inside and outside the state, and however widespread the popular outrage against them, this will require hard and committed work by a great many activists. We will need to put our minds to the hard questions of what the new institutions of democratic public finance would look like – and what kinds of movements would be needed to build them.

Leo Panitch’s book Renewing Socialism is published by Merlin Press. A further article on ‘The Current Crisis and Socialist Politics’ by Leo Panitch and Sam Gindin can be read online at http://www.socialistproject.ca

TUC calls for a worker-friendly new year

TUC new year message

In his new year message to trade union members published today (Tuesday), TUC General Secretary Brendan Barber said:

‘2009 has to mark a decisive turning point, away from the neo-liberal market-always-knows-best conventional wisdom that brought our economy to the brink of a catastrophic collapse, towards a fairer, more balanced economy delivering sustainable prosperity.

‘This is going to be a grim year. Unemployment will increase every month. Some predict it will hit three million, but in truth no-one knows.

‘First because we have little experience of a recession driven by a financial collapse, and secondly because we do not know how bold our Government – and as importantly, other governments meeting together as the G20 in April in London – will be.

‘Government therefore has three priorities in the year ahead:

* it must take every action necessary to make the recession as short and as shallow as possible;
* it must develop the proper policy response to mass unemployment;
* it must use these and other policies not just to ensure that we do not repeat the mistakes that led to the financial collapse, but also to ensure that we emerge from recession as a fairer, greener and more sustainable economy.

Action to tackle the recession

‘The Government must be prepared to take further bold action to counter the recession and to save jobs.

‘The roots of this recession lie in the failure of the finance and banking sectors, and while the Government deserves praise for setting the international pace on the bail-out of banks, we do not yet have a banking system that is truly serving the interests of business or household borrowers. Banks are putting building up their own balance sheets and paying back government loans as their top priorities. But they also still hold high levels of ‘toxic’ debts which prevent them from dealing with other banks in a normal way. The Government and the Bank of England must therefore consider injecting even more support into the financial system to get credit flowing again.

‘The Government cannot be expected to come to the aid of every company that faces difficulties but it must be prepared to look at providing short term assistance to strategic companies in sectors vital to the future of Britain.

‘The Government should consider a further stimulus package in the Budget. Barack Obama’s team are already talking of a big package to boost the US economy. The UK should follow suit – and also use the April G20 summit in London to create a coalition of the willing to wage war on unemployment, poverty and recession.

‘As well as bringing forward planned infrastructure projects, ministers should be fast tracking new projects to ensure that further work can start when these finish. The UK is still suffering from a lack of investment in the key infrastructure a modern low-carbon economy requires.

Action to help the unemployed

‘Too much government policy towards the unemployed still tends to be trapped in the idea that there are enough jobs to go round, and that the unemployed either lack the skills or the motivation to get work. While of course with rights come responsibilities, the thousands of people losing their jobs every week throughout 2009 should not be treated as potential scroungers but victims of economic forces well beyond their control. They will need help through benefits and support through training and job search.

‘Despite its tough presentation and some objectionable policies such as workfare, there were some good proposals in the welfare reform Green Paper to make Job Centre Plus services better tailored to individual needs. Mass unemployment will make it even harder for those who normally find it more difficult to get work such as disabled people and those juggling child care and work. There needs to be specific help for such groups – such as an increase in child care, which in turn creates jobs.

‘The TUC has already called for better benefits, higher statutory redundancy pay and a bigger tax allowance for redundancy pay to provide more help for the newly unemployed. We now look for action in the Budget on these issues.

Action to create a fairer, greener and more sustainable economy

‘2009 is going to be tough, but it can still be made positive if it becomes a turning point – the year in which we set out to build a deliberately different kind of economy.

‘That first means recognising the mistakes of the past – made not just by this Government, but by governments and the economic and political establishment almost everywhere.

‘We have given far too much weight to the interests of the finance sector, and began to believe it could create wealth simply by moving it around, rather than through long-term investment in the goods and services that people want and need.

‘The challenges we face are clear. Even before the recession we were scarred by poverty, particularly child poverty. Our society was coming under increasing strain from growing inequality as a new class of the super-rich escaped their responsibilities to pay a fair share of tax. We had neglected important sectors of the economy as we gave preference to financial services. We have failed to do enough to meet the environmental imperative.

‘This challenges us all to put the measures we will need to beat the recession to a longer term purpose of building a better greener and fairer economy that can emerge the other side of the downturn.

‘This will require:

* a new kind of industrial strategy – not a return to picking winners and easy hand-outs, but strategic support to the sectors where we are already strong but could do better. Some will be in manufacturing, but others will be in services and parts of the economy often neglected in such discussions such as the creative sectors.
* A green industrial revolution that recognises that many industries will have to adapt to survive, but that also that the environmental challenge can generate thousands of productive worthwhile jobs, and build on the strength of our science base.
* An intensification of efforts to make society fairer – the recession should encourage the government to speed up efforts to eliminate child poverty.
* A fairer tax system. The government is right to increase borrowing to maintain the strength of the economy. But this borrowing and decent public services will have to be paid for, and 2009 must see a real debate on how to make the tax system fairer. There is a real demand for the super-rich to pay a fairer share. President Elect Obama has been a long-time supporter of a crack down on the tax havens used by multi-nationals and the mobile super-rich to avoid tax.
* A new kind of banking system that no longer threatens international economic stability and instead serves the rest of the economy and society. Britain’s banks already look very different. Some are now state-owned, some have large public stakes and all have received substantial help from the Bank of England and the taxpayer. At the very least we will need new regulatory structures to enforce stability but also to protect the consumer in a sector with less competition.

‘2009 will not be easy year, but it could be the turning point that will make 2010 not just the start of recovery, but the first steps in building a new economy.’

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