Bury the neoliberal agenda!

Washington summit should bury Washington consensus
TUC General Secretary Brendan Barber will be joining an international trade union delegation to lobby the Washington Summit of G20 leaders called to discuss the economic crisis. The union delegation will argue that the Washington consensus of deregulation, privatisation and unfettered markets must end.

The union statement drawn up by the International Trade Union Confederation (ITUC) says:

‘A national and global regulatory architecture needs to be built so that financial markets return to their primary function: to ensure stable and cost-effective financing of productive investment in the real economy. Beyond this governments and international institutions must establish a new economic order that is economically efficient and socially just – a task as ambitious as that confronted by the meeting in Bretton Woods in 1944.’

The ITUC calls for further co-ordinated interest rate cuts; governments to bring forward infrastructure projects; a ‘Green New Deal’ to create environmental jobs; and tax and expenditure measures to boost the incomes of low and middle income families.

The unions will also press for a new system of global financial regulation to ensure that a financial crisis of this type never occurs again. This will involve:

‘counter-cyclical asset requirements and public supervision for banks; the regulation of hedge funds and private equity; the reform and control of executive compensation and corporate profit distributions; the reform of the credit rating industry; the ending of offshore tax havens; the taxation of international financial transactions; proper consumer protection against predatory lending and aggressive banking sales policy; and active housing and community-based financial service public policies.’

TUC General Secretary Brendan Barber said: ‘There is change in the air. The collapse of the right-wing economic consensus that said markets would look after themselves, wealth would trickle down and that Government should keep out of the way has already delivered a new US President. The Washington summit should bury the Washington consensus.

‘It took the world-wide convulsions of the Great Depression and the Second World War to produce previous significant movements of progressive economic change. With imagination world leaders could start to do the same today, and produce a global response that ensures the recession is short and shallow, and makes sure that the world emerges fairer, more stable and more sustainable from the effects of the crisis.’

Arms-length banks? Take them in hand!

Even the Liberals are calling for an interventionist role.

We need representation for workers and consumers as well as the government on the boards of these part-nationalised banks – not Sir Philip of Sainsbury’s!

From the FT:

The state’s £37bn stake in Britain’s part-nationalised banks will be held at arms-length with no direct boardroom representation, according to the two men charged with managing the investments.

In an article in Friday’s Financial Times, Sir Philip Hampton and John Kingman emphasise giving the banks commercial freedom to “protect and create value for the taxpayer”. They write: “We must operate on a commercial basis at arm’s length … our job [is] to manage the taxpayer’s investments, not to manage the banks.”

Their approach, spelled out for the first time, contradicts earlier statements by Alistair Darling, the chancellor, who last month said the taxpayer would have “appropriate representation” on the boards of Royal Bank of Scotland and a merged Lloyds TSB/HBOS, and the government would make the appointments. Neither now appears to be the case.

Sir Philip, chairman of J Sainsbury, and Mr Kingman, a senior Treasury official, insist that the government will “engage robustly” with the banks’ boards, warning it wants them to pay executives “fairly but not beyond fairly”.

But they stress: “We have not been asked to act as some sort of general regulator of the recapitalised banks in difficult times.”

The new non-executive directors that the government insisted were a condition of the partial nationalisation “will not … be our representatives and will not report directly to us,” they state.

This lack of direct representation on the boards will alarm MPs who believe the government should use its power as a shareholder to bring the banks to heel.

Vince Cable, Liberal Democrat Treasury spokesman, said the assurances extracted from the banks had proved “worthless” and called for the state to have an “enlarged and interventionist” role.

Clarification of the government’s arms-length role will also put further pressure on Barclays to explain why it rejected an injection of government capital in favour of raising £5.8bn from investors in the Middle East.

Barclays executives are expected to discuss the deal on Friday with leading investors some of whom have threatened to vote against the capital increase this month.

It emerged that RREV, the voting advisory service, had recommended that shareholders express their dissatisfaction with the deal by abstaining.

The government’s reassurances over its role are crucial for Lloyds TSB, HBOS and RBS, all of which are hoping to persuade existing shareholders to exercise their right to buy some of the new shares they are issuing to the Treasury.

If shareholders decide to “claw back” some of the shares, it would reduce the amount the taxpayer would have to invest.

Some large shareholders have been waiting for a clear indication of the influence the government intends to exercise over the banks before deciding whether to buy more shares.

All three banks are trading below the price at which the government has agreed to buy new shares. At Thursday night’s closing price, the government is in effect sitting on a £4.9bn paper loss.

Unless the shares recover, the government is likely to be left with all the shares, giving it a 60 per cent stake in RBS and 43 per cent of Lloyds and HBOS.

U-turn over New Labour’s plans to privatise Post Office services

This is probably part of Mandelson’s game plan. I imagine he hopes that by giving in to this, the back-bench and union rebellion over part-privatising Royal Mail won’t come.

We know that introducing private capital into Royal Mail won’t help it become independent of government subsidy. Just look at the privatised railways – they get more money from the public purse than when they were publicly-owned!

So, good news, but beware the Blairites, they are staunch defenders of big business!

Ministers axed a £1bn ($1.48bn) procurement on Thursday, allowing the Post Office without competition to renew its five-year contract to run a card account for 4.5m people and averting a serious Labour revolt by staving off the closure of a further 3,000 post offices.

James Purnell, the work and pensions secretary, told MPs that the bidders would be compensated for costs incurred as a result of the cancelled tender. He refused to disclose the costs of this compensation or the terms of the cancelled tender. The main rival to the Post Office for the contract was Citibank. Paypoint, the supplier for the Citibank bid, said in a one-line statement that it was “disappointed with the decision”.

The new contract to run the Post Office Card Account, which pays out pensions and benefits, will run from April 2010 to March 2015 “with the possibility of an extension beyond that”, Mr Purnell said. He told MPs the account was “central to the viability of the network”.

The decision will be seen as reflecting the influence of Peter Mandelson, recently appointed business secretary. Lord Mandelson is keen to reassure backbench MPs that the post office network need not be threatened by any shake-up of Royal Mail, following publication of the Hooper report which is likely to call for private capital to be brought in to sustain the postal service.

Labour risked an enormous backlash from its own backbenchers as well as opposition parties if the contract was not awarded to the Post Office. Ministers were warned by the National Federation of Sub-Postmasters that up to 3,000 more post offices could close as a result. But the terms of the competitive tender precluded them from rejecting the Citibank/Paypoint bid on political grounds.

Mr Purnell said the government had taken fresh legal advice before deciding to cancel the procurement. The government said in 2006 that its legal advice was that the contract had to be put out to tender. Government advisers suggested they were confident the decision would stand up to a legal challenge and would be cleared by Brussels under European state aid rules.

The recession has affected the basis for the decision, Mr Purnell told MPs. “Now is not the time for the government to do anything to put the network at risk, particularly as post offices are often the only providers of financial services in remote areas,” he stated.

Compass welcomes the news as “a signal to show they recognise the game has changed. The obsession with pro-market rhetoric may be over.” (I very much doubt this, and so should Compass…)

The Post Office is a trusted public service; it is an essential institution that meets the needs of pensioners, poorer individuals and rural communities, all of whom would have lost out through privatisation.

At a time of looming recession with the collapse of the banking system, people more than ever are looking to institutions they trust for the support they need. Which is why, while this move is applauded, we must go further a create a universal People’s Bank, based on the Post Office and the Post Office card account with its 5 million card holders and network of 14,000 branches.

A People’s Bank would provide the service the banking system failed to deliver.

Neal Lawson, Chair of Compass, says: “The government have seen sense. This decision will help quell the social recession just as the economic recession begins to bite. People need institutions they can trust, that are on their side and which build society. The Post Office is such an institution. Now Royal Mail needs more investment and modernisation based on the principles of universalism and a public service ethos. The next step is the creation of a People’s Bank on the lines of the Kiwi Bank to provide financial services accessible to the whole community and trusted by everyone.”

Jon Cruddas, MP for Barking and Dagenham, says: “This is a very welcome first step and I know my constituents will be delighted. But we need to go further in future – there are over two million people unable to get a bank account and they are going to increasingly feel the pinch from the credit crunch, extortionate credit card rates and rising bills. We need the Post Office to become the People’s Bank and the card account to become a real alternative to a bank account. That will not only help secure the Post Office as a vital public service but also open up basic financial services to those who most need them. We need to show some real joined-up thinking.”