Too little, too late: demutualisation a mistake, admits Tory spokesman

Whatever next? They’ll admit privatisation of the utilities has landed us with multinationals holding us to ransome?

Interesting comments from New Labour minister Hazel Blears, too:

Demutualisation was a mistake, says shadow Treasury minister
December 29 2008

Building society demutualisations had been wrong, a Conservative Treasury spokesman admitted at the first ever Mutuals Forum.

“We can see with hindsight what a mistake they were,” said Mark Hoban, the shadow Treasury minister. “Those institutions were too small as listed entities to survive.” However, Hoban resisted a suggestion from conference delegate Vivian Woodell — Chief Executive of the Phone Co-op and representing Midcounties Co-op at the London event — that the Government should now ‘re-mutualise’ Northern Rock. “I can see the attraction of it,” responded Hoban, “but I am not sure that you can do that now.”

Adrian Bailey, a Labour/Co-op MP speaking alongside Hoban at the conference plenary, reported that he and other MPs had unsuccessfully tabled an amendment to the Banking Bill currently going through Parliament that would enable Northern Rock to be remutualised. “There has to be a balance between the [Government’s] responsibility to taxpayers and the benefits of mutuality,” said Bailey.

The Forum’s keynote speaker was communities secretary Hazel Blears, who told delegates she was a long-time and committed supporter of co-operatives, other mutuals and community organisations.

“I think we need to do more [as a government] than just have a level playing field [between mutuals and PLCs] and see where mutuals can offer us an opportunity to do things,” Ms Blears said.

She added that mutual organisations were already doing the kinds of things “we are trying to do in communities across the country”. Blears explained that she believes that mutuals “are better placed” to weather the recession than are PLCs. “There is a new hankering for solidarity and a new interest in people taking control of their own affairs,” she suggested.

Ms Blears made a promise to delegates on behalf of the Government that further legal reforms would be introduced to enable co-operatives and other mutuals to run their businesses more effectively, including reforms of the need for paper-based communication.

New legislation will be proposed to allow mutuals to make greater use of electronic communication. Other intended measures include helping mutuals to bid to act as agents for the Government in its welfare reform and other programmes. Ms Blears said there was more of a mood to support co-ops and mutuals following the collapse of the banking system.

In return, Ms Blears said, the mutual and co-operative movement should do more to explain to the public how big, how important and how useful the sector is. Ms Blears added that the first ever Mutuals Yearbook was an important step forward in achieving this. The Yearbook — which was launched at the Forum — contains statistical information and key facts about the largest parts of the mutual movement.

The Forum heard from executives of the Building Societies Association, the Association of Mutual Insurers, the Association of Friendly Societies and the Employee Ownership Association, who each explained how large their sectors were.

The 58 remaining building societies have nearly 52,000 staff, 23 million members and £380bn in assets. Mutual insurers in the UK control £83bn in assets and have 15 million policyholders. And employee-co-owned businesses — not including workers’ co-operatives — have an annual turnover of £25bn.

Closing the Forum, David Anderson, Chief Executive of Co-operative Financial Services and Chair of the Mutuo think-tank, which organised the event, told delegates that they should expand the size of the sector by increasing inter-trade at the expense of existing contracts with PLCs. “Let’s get out of our silos and start doing business with each other,” he urged, to enthusiastic support from delegates.

The event attracted 200 delegates from the co-operative, building society, mutual insurance, co-operative trust schools and foundation trust sectors.

Is progressive taxation is back on the agenda?

The Compass group has welcomed the Pre-Budget Report with as much optimism as the Chancellor’s asessment of the depth of the recession:

Neal Lawson chair of Compass said: “Today’s Pre-Budget Report marks a move away from the Neo-Liberal/free market economic consensus pursued by both Labour and Conservative governments of the past 30 years – but this should not just be a blip before normal service, in the shape of speculative consumer capitalism, is resumed – the government needs to make this a turning point that leads to the moral transformation of our society”.

Jon Cruddas MP said: “This is exactly the kind of measure that we’ve been advocating for a while now and it’s good news for people like my constituents in Dagenham. This should be the first stage in re-balancing the tax system so it’s fairer for middle and low income earners, as well as kick-starting the economy in the short term. When the new US administration takes office then we have the chance to move in to another phase – an international crackdown on corporate tax evasion. Meanwhile, Cameron is now retreating from New Conservatism into orthodox Thatcherite economics and we have to expose that.”

Gavin Hayes General Secretary of Compass said: “A financial crisis that was in part caused by the excesses and risky behaviour of those at the top should not be allowed to unnecessarily hurt the rest of us, so today’s announcement on reducing VAT, whilst at the same time announcing plans to increase the tax burden on the super-rich should both be welcomed, it is absolutely right for government to limit the impact of the recession by using pragmatic and sensible measures such as these.”

As Richard Murphy points out, cutting VAT by such a small amount isn’t likely to impact upon retail prices for consumers:

On an item costing £4.99 the VAT saving will be under 11p. Can you see anyone shifting that price to £4.89?

On £500 (VAT inclusive price) the saving is £10.60. That’s neither here or there: if you are going to spend £500 then £10.60 or so will not change the decision. Other influences are much stronger.

So at low price points this is a boost for the retailer who will take much of the gain. I really do not expect them to pass this on. At high price points I doubt the impact.

Either way the saving goes to marginal jobs in the UK, and Woolworths won’t be saved by this, whilst cheap imports are the only likely sector to see a boost. The business to business sector will see none at all: VAT does not impact them.

But it’s more than that: this might fuel deflation, which we can ill afford. So it’s a mistake.

VAT is regressive, but not as badly as some taxes (e.g. council tax) so the poorest who need help will not benefit most.

John McDonnell MP, chair of the Left Economics Advisory Panel said of the tax changes:

“The introduction of a higher rate of tax for high earners is long overdue but the Government’s proposals are hardly a revolution, and delaying them until after the next election is pointless. The higher rate should be the start of creating a fair tax reform agenda, redistributing wealth from the super rich in order to take the low paid out of taxation altogether.

“The Government should also move immediately to tackle the large scale tax avoidance by the corporate sector, introducing legislation to outlaw tax havens, mirroring the Obama bill in Congress. The public revulsion over City bonuses and bank executive salaries has opened the way for radical tax reform. Government must seize the moment.”

The Public and Commercial Services Union warns of the impact of so-called “efficiency savings” and points out that billions of pounds in taxes go uncollected:

Commenting, Mark Serwotka, PCS general secretary, said: “Further efficiency savings of £5 billion should not be a prelude to yet more job cuts, office closures and privatisation.

“Key public services, such as justice, welfare and tax are already struggling to cope against a backdrop of massive job cuts and office closures.

“Whilst the promise of additional funds for jobcentres is welcome, the government needs to reverse its job cuts programme across civil and public services to safeguard their delivery.

“Whilst the promise of additional funds for jobcentres is welcome, the government needs to reverse its job cuts programme across civil and public services to safeguard their delivery.

“For example the government should be looking at tackling the £21.5 billion worth of uncollected tax and £25 billion lost through tax evasion, by putting more resources into HMRC to claw back the billions in lost revenue, which could be ploughed into public services and stimulate the economy.”

The Morning Star‘s editorial is critical of the direction of travel signalled by the Pre-Budget Report, not so much a return to Real Labour but a continuation of Blue Labour:

Out of his own mouth
(Monday 24 November 2008)

CHANCELLOR Alistair Darling condemned himself out of his own mouth when he said that the central objective of his unambitious pre-budget report was to support firms and businesses going through difficult times.

That is why he opted for a cut of two-and-a-half percentage points on VAT, which will be absorbed into business income rather than find its way into lower prices.

Working people, especially those wondering how long they will be in a job, are unlikely to run out on a spending spree on the basis of a VAT cut.

And, if Mr Darling really wished to spark economic activity, he should have helped those on the lowest incomes whose extra cash would certainly have increased demand.

Those robbed when Gordon Brown abolished the 10 per cent tax rate should be compensated by being lifted out of income tax liability entirely.

State pensioners, whose living standards have been eroded every year since the Tories abolished the link with wages, those working for a totally inadequate minimum wage and others forced to exist on the jobseeker’s allowance pittance should receive a boost in their income.

It is pathetic that the Chancellor should be posing the possibility of no more than a 5 per cent increase to 45 per cent for tax on annual incomes over £150,000 and then only on condition that Labour wins the next general election.

This proposal will not bring any additional income to the Treasury in the life of this government. It’s not even of sufficient scale to encourage the electorate to vote Labour in the hope that it will switch the burden of taxation from working people to the rich.

Government failure to tackle the spiriting away of potential tax revenues of at least £25 billion a year through overseas tax avoidance centres, mainly in British crown territories, emphasises once more its priorities.

The bulk of taxation should fall on the shoulders of those able to pay rather than those too poor to afford avoidance schemes.

And the government should also lift the cap on National Insurance contributions, which is a hidden tax benefit for the better-paid, and introduce a wealth tax.

But the government must not restrict itself simply to measures calculated to increase demand.

It has a responsibility to intervene actively in the economy, especially since the banks have been quick to accept cheaper Bank of England lending and government investment but have not passed benefits on to small businesses seeking to weather the recession.

The government must put substance behind its much-vaunted commitments to environmental issues and to higher employment levels.

Financing at least 100,000 new council homes a year and a nationwide programme of renovating and insulating existing local authority properties could begin to tackle the housing crisis, improve energy efficiency and cut fuel bills.

Similarly, a crash programme of expanding the railways would not only improve the transportation network but increase demand for steel, concrete etc, safeguarding jobs in these industries as well as construction.

Unless the government adopts an economic programme with social justice at its heart, its cosmetic measures will simply prop up big business and ensure that costs of the recession will be paid for by workers.

Manufacturing meltdown! Productive economy faces catastrophy

It’s a funny old world. At the moment, I mean.

The Chinese saying goes: may you live in interesting times. I’m not sure if this is a friendly or unfriendly wish. Certainly the times are interesting, but also worrying.

Job “losses” are coming thick and fast. The old economic orthodoxies are being abandoned as the free market goes into free fall.

We’ve had a bailout of the financial sector – the government acting for the banksters, rather than for workers and customers.

But will there be a similar bailout of the productive economy?

After years of deindustrialisation we need to rebuild the manufacturing base of our economy with the aim of full employment, environmental sustainability, and workplace democracy.

A weak pound alone won’t save manufacturing…

The FT reports that:

Manufacturers are expecting the sharpest contraction in output in 30 years, according to a CBI survey published on Wednesday, which noted that the only time that a deeper decline had been expected was for two months in 1980 as the UK entered a recession.

The CBI Industrial Trends Survey, which covers October, came as the EEF, whose members are largely manufacturers, reported that one in four companies which had negotiated a pay deal in three months to the end of September had either deferred a decision or elected to freeze pay.

Separately, the Bank of England’s Agents’ Survey showed that companies last month pared back their investment plans to cover only essential expenditure as reports of small-scale redundancies and plant closures became more widespread.

Together, the three surveys point to a rapid deterioration in Britain’s manufacturing sector in recent months as the UK heads into a recession.

Commenting on the EEF and CBI surveys, David Yeandle, EEF head of employment policy, said: “The severity of these changes over such a short period of time indicates the extent to which companies are having to take immediate action to control their costs. It seems hard to believe it is only a few months since fears about wage inflation were so prevalent.”

Yeah, and it’s hard to believe that anyone took seriously the government claim that if public sector workers didn’t get a pay cut, there’d be rampant inflation…

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.’

TUC calls for Green Industrial Revolution

Sustainable endogenous development of our economy?

An audacious hope, indeed:

TUC urges Government to follow Barak Obama’s ‘green industrial revolution’
The TUC will today (Tuesday) urge the Government to follow Barak Obama’s lead and launch a ‘green industrial revolution’, as part of a long-term strategy for a more balanced, sustainable economy.

Addressing the annual Crystal lecture at Wolverhampton University, TUC General Secretary Brendan Barber will say: ‘While short term measures are needed to minimise the impact of the economic downturn, the Government also needs a long-term strategy to ensure that the UK emerges with a more equal and sustainable economy.

‘We must restore a sense of balance to an economy that has become heavily dependent on the finance industry – and where the South East has overheated while other regions have struggled.

‘At the core of the Government’s strategy should be a green industrial revolution to make our economy more sustainable and competitive in the long term. Investing in areas such as clean coal technology and micro-generation will create jobs and give our manufacturing industry a much-needed boost. It would also help the UK to meet our ambitious target to cut CO2 emissions by 80 per cent by the middle of this century.

‘If this all this sounds like wishful thinking, consider that a key part of Barak Obama’s economic strategy is to create a green industrial revolution. He plans to invest 150 billion dollars over the next decade for renewable energy. He believes this strategy will create five million new jobs in the US.

‘So, just as the US has followed our lead in bank recapitalisation, we should follow their lead by investing in green technology.

‘Our European competitors have already shown that there are jobs and money in green technology. Germany’s renewable energy sector employs half a million people and has a turnover of 24 billion euros. In contrast, the UK employs just 7,000 in renewable energy, generating 360 million euros.

‘We have a lot of catching up to do. But manufacturing heartlands such as the Midlands could benefit enormously from a green industrial revolution.’

Meanwhile, the Greens have launched their Euro 2009 elections campaign with a call for green-collar jobs:

Green MEPs and European candidates from regions across England and Wales joined workers at the London headquarters of solar water heating manufacturer, Genersys, today, to call for ‘Green Jobs Now’.

The Green Party launched its campaign for the 2009 European elections with a series of pledges to create thousands of green-collar jobs in new green industries.

The UK has more than 40% of Europe’s wind resources and, off our shores, marine energy from waves and tides could generate up to 20% of our electricity. The Green Party claims that, like Germany, we should already have created more than 250,000 jobs in renewable energy.

However, our failure to develop this industry means we are lagging behind, with only 26,000 green energy jobs at most.

Many thousands more jobs could also be created in recycling and repairing goods and in local food production. Add an effective programme of insulation and energy efficiency and the total number of jobs would increase even further. In England alone there are more than nine million homes with unfilled cavity walls.

The plans are part of a Green New Deal that will focus European institutions on creating a millions of new green jobs, energy security and a stronger, more resilient economy.

The six key Green New Deal pledges aimed at creating green jobs are:

  • Provide free insulation for everyone, using energy company profits to cut bills and create jobs
  • End subsidies for fossil fuels and nuclear, and use the money to build world-class green energy industries
  • Train the workforce we need, with a strategic approach to providing new training places for the green industries of the future.
  • End soft touch regulation on polluting power stations and give the renewables industry the break it needs
  • Regulate big banking to stabilise the financial system, and close the loopholes that allow tax havens to operate.
  • Transform rules on procurement to help schools and hospitals buy from local producers.

The Green Party aims to double its number of MEPs in next June’s European Elections. These are held under proportional representation rules, which means that every vote counts and can help elect new Green MEPs. Voting takes place across ten regions in England and Wales (and one each in Scotland and Northern Ireland) and there are currently two Green MEPs – for the South East and London.

Caroline Lucas, Green Party Leader and MEP for the South East, said:

“Green MEPs are some of the most effective in the European Parliament and our pledges today show how serious we are about increasing our numbers and getting even more done after the European elections next June.

“Europe faces not just an economic crisis, but an accelerating climate crisis too. We need secure jobs and we need new green industries. Greens will help build up both with their Green New Deal for Europe – a major, Europe-wide investment in good green jobs, combined with the re-regulation of big finance.

“We can make Britain the green jobs capital of Europe with these plans, making the transition away from fossil fuels, creating thriving new industries and helping pull ourselves out of economic crisis at the same time.”

Jean Lambert, Green MEP for London, has recently published a key report on the skills gap for green industries in Europe, and on the wider issues surrounding green work. She said:

“Getting a Green New Deal right in Europe will depend on addressing the green skills gap. An ambitious European-level green skills and jobs programme has never been more urgent and will only be achieved with public investment and planning.

“We will not be able to deliver on climate change targets unless we have an appropriately skilled workforce. The greenest job of all will be making it happen, and that’s what Green MEPs are pledging they will do today.”

Tory think-tank calls for internal mass migration

The Forgery Exchange has embarrassed Tory leader David Cameron with its call for people in Northern England to migrate to the South East en masse.

While it’s true that investment in “regeneration” usually results in gentrification and the decline in manufacturing hasn’t been halted or reversed, the suggestion that there should be internal mass migration shows how much worse than New Labour the Tories would be if they form the next government.

Doubtless, the capitalist class would be delighted to see workers from the North of England being encouraged (which usually means coerced) to travel in search of employment. This would add to the pressure on infrastructure but crucially it would increase competition in the labour market, driving down pay and conditions.

It is possible to revive those parts of England which have suffered because of the policy of “managed decline”, but this would be resisted by the ruling class who prefer to see public money used to boost profits or bail out failing banks.

A strategy of endogenous development could be pursued, but as we’ve seen with New Labour’s failure to announce a New Green Deal and willingness to bail out the banks, and the report by the Policy Exchange and Cameron’s call for the poor to help themselves, the political elite will continue to ignore the millions and bow to the millionaires.