Darling begs the banksters, yet again

Bad news for Alistair Darling.

No, not that his cat’s just died, which is sad enough.

But that the banks don’t listen to his pleas to lend.

For months now he’s begged them to do something to help the small and medium enterprises, which are the back-bone of the private sector, get affordable credit.

But no, despite having nationalised much of the banking sector, the banksters aren’t listening. They’re profiteering.

To cap it all, John Kingman, the head of UKFI, the arms-length company which administers UK citizens’ collective stake in the banks, has announced that he’s stepping down to get a bigger pay-packet in the private sector.

If Darling is serious about wanting to help people through the recession – to keep businesses going and keep workers in their jobs so we can get out of it – then he should put representatives on the boards of the nationalised banks and make sure they give small businesses a fair deal.

We need democratic public ownership – with workers’ representatives on the boards of the banks.

In another months’ time there will be thousands of people out of work because the banks are being greedy – and they won’t be begging New Labour to change course…

Northern Rock – use it to set up a Post Bank, or sell it to Tesco?

The government nationalised the ailing bank, formerly a building society, but only after many months of foot-dragging. And only on a temporary basis, natch.

Word is, Northern Rock could be sold to Tesco, handing the supermarket even greater power in the economy. Given that a majority of shareholders voted against plans to improve workers’ rights at the company, we know that Tesco isn’t very socially-responsible – so why give them a stake in the banking sector?

There’s a better alternative, as Louise Nousratpour reports:

A coalition of unions and businesses will step up their campaign for a “post bank” tomorrow with proposals that government-owned Northern Rock be used to offer services via post offices.

The group will publish plans arguing that their proposal would give a boost to the Post Office network and provide a vital community service.

A Post Bank would “revive and protect” post offices, support local communities and help smaller firms, especially as the banking system was still in “disarray,” they argue.

The report Delivering the post bank outlines four options the government could follow to establish the post bank. These range from using Northern Rock as a foundation for a mutually structured people’s bank to buying out the current relationship between the Post Office and Bank of Ireland.

Support for the idea of a post bank is growing within all three main political parties as well as among a range of campaign groups.

Postal workers union CWU leader Billy Hayes urged Business Secretary Lord Mandelson, who has been pushing for the part-privatisation of Royal Mail, to endorse this “vote-winning” initiative.

“We have met the challenge to create a workable model for the creation of a post bank,” he said.

“Our new report builds upon the conceptual idea and provides practical blueprints that will appeal to the general public who are disillusioned with the old, tired banking model.”

Federation of Small Businesses chairman John Wright said: “Northern Rock presents the government with a considerable opportunity and it should not consider selling it off privately, but instead should use it to establish a post bank and invest in the long-term future of the Post Office.”

Finance union Unite national officer Paul Reuter argued that the ambition should be to “secure the future of the workers in Northern Rock as well as securing the Post Office network while, at the same time, resolving the problem of financial exclusion and meeting the needs of small businesses.”

Dot Gibson of the National Pensioners Convention added: “Ministers need to rise to the challenge and secure a future for the post office network that serves local communities rather than pander to those who want to run it down and sell it off.”

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.