A Tory England

October 21, 2010

Quote of the cuts day has to go to Shadow Chancellor Alan Johnson, to Nick Clegg in the Commons directly after the Chancellor’s cuts package was announced:

Somewhere between the ballot box and your ministerial car door opening, you changed your mind on everything.

This particular brand of Conservatism is interesting. It is of course very Thatcherite. It is no different to what it was in the 1980s. Actually it is different because it is far more severe. It can easily be dressed up in lovely new inclusive phrases like ‘The Big Society’ and ‘Progressive Conservatism’ despite the fact that in less than ten seconds, the Chancellor can announce 490,000 expected job losses in the public sector, whilst his backbenches cheer gleefully. It’s easy to call it fair and necessary. But when, along with half a million job losses, we hear the Chancellor say:

“The Employment and Support Allowance, given to people unable to work due to sickness or disability, will be restricted to one year”

… it is virtually impossible for anyone who has even a fundamental understanding of the word ‘fair’ to be able to justify the madness.

Yesterday’s spending review was ideological. It does not matter how many times Cameron says it isn’t, it is. It will devastate lives. £1bn is being saved by 2013 by cutting Child Benefit, yet £2bn is being given away to companies earning £350,000 a year, also by 2013. Most Conservatives are in politics for this very reason; to role back the Welfare State for the poorer and instead enlarge the Welfare State for their friends in business. When 490,000 people are instantly made unemployed, and the entire Conservative benches in Parliament stand up smiling and screaming, their faces beaming uncontrollably, waving their Parliamentary papers in the air with overwhelming joy; one finds it difficult to accept their rhetoric that this is ‘tough’ on them. It seems this is their moment in the spotlight. They were supremely happy yesterday. They have spent years hoping this moment would come.

It has been a successful attack by the Tories and they have, I will admit, been amazing at getting their side of events across and gaining mass support for their plans. They have achieved this, as far as I can tell, in four ways:

1) Absolutely 100% blame Labour for everything.
It is clear that the Coalition has been told to mention the debt left by Labour as much as possible. It is perfect justification. Every Minister interviewed will refer to Labour’s legacy within about five seconds of being questioned. It is largely illogical because the debt left by Labour was firstly, very much needed, and secondly, is not actually dire.
The problem with this view is that up until recession hit, the Tories pledged to back Labour’s spending pound for pound. So, by suggesting that Labour spent thirteen years on a spending spree, the Tories backed it fully. Then when the banks collapsed, and people’s homes and lives were put at risk, spending rose to keep people safe. This had to happen to offset the problems suddenly caused by huge unemployment. This isn’t the State’s fault. It isn’t the Government’s fault. Spending had to rise. What use is it cutting unemployment benefit during a time when unemployment is at an all time high? That is Tory logic. Allow the recession to run its course. Allow people to lose their homes and their jobs and to worry about how they are going to feed their kids. So next time when you complain about Labour’s debt, actually consider why we are in debt.

2) Make sure the faults of the Private Sector are ignored.
It was the financial sector that failed miserably. They risked everyone’s savings to enrich themselves further. But it isn’t just the banks that messed up. Since the early 1980s wages for workers have stagnated. They have hardly risen at all on average. Yet, the wages of the very wealthy; the owners, have increased ten fold. Take Sir Philip Green, the new Tory Party investigator of Civil Service pay; he owns a company called Taveta investments, which is registered in his wife’s name who happens to live in a tax haven. He has successfully avoided paying tax worth up to £285mn. At the same time, he awarded himself £1.2bn in a single year personally, whilst telling his work force (the people who actually make that money for him) that they must now increase contributions to their final pension scheme by half and work up to five years longer to receive it. He also uses sweatshops in India. BUT WE’RE ALL IN THIS TOGETHER. Now, you can only sustain unjustifiably large wages, like that of Mr Green if profit remains high. If your workers are being squeezed as much as possible, and have less disposable income to spend consuming and so enriching the very few, how do you do that? The solution was easy. You offer them easy credit, like a Topman Store Card. They then pay more than they usually would but over a longer period of time. Thus, the little man is squeezed further, but the guy at the top makes more. But apparently this is perfectly fine. The Public Sector, the sector that bailed out the Financial sector, is apparently entirely to blame.

The problem as I see it, is that surplus profit was not being recapitalised in beneficial causes. Instead of expanding and looking into new forms of production, the owners of capital were buying up assets on the stock market. When this is amplified by million and millions of people, we suddenly have a problem. You buy assets on the stock market, hoping you will get a pretty handsome return in the future. But you understand that might not happen. You are gambling. The City of London and New York recklessly gambled our money away, they are entirely to blame.

Whilst David Cameron likes to suggest that National debt is like household debt; he’s wrong. Not only is household debt nothing like National debt (I can’t suddenly raise taxes, if i go into the red, nor can I print my own money), but this neoliberal experiment, that the Tories kick started in the 1980s, actively encouraged us all to get into debt. This is why the banking sector collapsed. Because debt was encouraged. Secondly, personal debt is not always a bad thing if it helps improve the future. I am in debt, to pay for my education, which I hope will allow me to get a better job and be able to provide a better life for my future family, than I would had I gone straight into a job I did not want to do. This debt is an investment. Public debt is also an investment, especially if it keeps as many people in their homes and jobs as possible; which Labour understood (bare in mind, I am not a Labour voter), and which the Lib Dems understood before they were offered a bit of power. Public debt is not always a bad thing. It is often needed. It provides investment and a safety net.

The Tories, with help from their friends in the Media (Conservative Director of Communications: Andy Coulson, used to be editor of News of the World) have shaped political discourse in this country to an apathetic and largely moronic population, beautifully. The Sun (owned by Murdoch, who also owns News of the World) ran a double page spread last Monday entitled “Britain’s benefit blackspots”. A guide to the worst areas of Britain for benefit fraud. Altogether, they noted that Benefit cheating costs the UK taxpayer £900mn. You may think that is a lot. But according to research by the TUC and Tax Research UK, Corporate Tax avoidance, and personal tax evasion (i.e – Lord Ashcroft and his non-dom status) costs the UK taxpayer close to £25bn. That’s about 30 times more in lost revenue. Enough to wipe out the deficit in about eight years, without the need for a mass of public service cuts.

It is also suggested that public service workers are over paid. Now, given that wages have stagnated for most workers in the Private sector, i’d suggest that this is the fault of the Private sector. These bastards should pay more, not attack the public sector.

The Tories ran the 2010 campaign on the idea that a rise in National Insurance was an evil ‘tax on jobs’. Today, they just killed off 50,000 jobs in 20 seconds. But, it’s the public sector, so apparently it’s okay. The massive consequences on communities and small private businesses, will become apparent very soon. The Tories will try to claim it is all Labour’s fault. It isn’t.

The public sector, furthermore, is not inflated. Public spending during the 1960s was far higher than at any time during the 00s. Wages were rising beautifully during the 1960s too.

3) Make sure the public believes, whether true or not, that this is the only way.
The cuts that have been made, did not have to be so severe. They are overly harsh. We are a Triple A credit Country. 80% of our debt matures in 14 years, not a couple of years. We have the 5th largest economy in the World still. And we have the 3rd largest currency reserve in the World. And a very strong currency actually. So whilst you may believe everything the Tories tell you about how awful Labour were; it suggests to me that if the Tories were in power when recession struck, they’d have offered no help, spent absolutely no extra to keep people in homes and jobs, and then most probably blamed Unions.

The current debt in the UK stands at 64% of GDP. After World War II, it was 180%. More than double now. Japan has a debt of 194%. The USA has a debt close to 73% of GDP. In fact, between 1920 and 1960, for that forty or so year period, UK government debt did not fall below 100%.

4) Gain support from sources that apparently are credible.
George Osbourne yesterday listed the people who agreed with him. We’ll take them one by one now. Firstly, he listed the IMF. The IMF is a neoliberal organisation that only ever proscribes harsh economic treatment to solve problems. They destroyed Ghana beyond recognition. Malaysia refused to accept anything the IMF demanded, and now Malaysia is doing just great. The IMF can also be blamed for half fucking up Ireland. Last week the IMF said that bank regulations were failing – We all fucking knew that two years ago. Nice of them to join us. Great source George. Secondly, he mentioned the CBI – the Confederation of British Industry. The business owners union. The same people who told us all that introducing minimum wage would destroy business in Britain. The same people who suggested that students are a drain on society, and yet they all went to university when it was free. They are businesses, looking to enrich themselves further, they have no sense of social responsibility, nor do they care if you cannot afford to eat. They would like to see no Welfare State and the NHS privatised. The CBI attempted to justify a huge amount of Corporate tax avoidance (discussed earlier) with….

Legitimate tax planning – undertaken by companies that operate globally – should not be confused with so-called tax avoidance

Thirdly, he mentioned the Bank of England. The institution responsible for the welfare of the economy. The institution that failed to see the biggest financial crises ever from taking place, even though that is its specific job. The same institution whose Deputy Governor Sir John Gieve admitted that they knew that the financial sector was out of control, and had no idea what to do about it. Another great choice for a source.
And lastly, he mentioned the 35 businessmen who signed a letter and sent it to the press advocating everything they are doing. These businessmen are not economists. They do not know how to run an economy. They are under the impression that a business haven is ideal for all of us. Contrary to that opinion, i’d say otherwise. Nevertheless, they signed the letter. Who are these businesses? Well, one of them is Paul Walsh of Diageo, who I shall mention shortly. He has been given a role as an advisor to David Cameron. Vested interest number 1. Another is Nick Prest, Chairman of AVEVA. AVEVA has just been awarded a contract to supply Babcocks, who are to build the two new aircraft carriers unveiled by the Tories. Vested interest 2. Another, is John Nelson of Hammerson Investors. Massive tax avoiders, and are quite happy to even tell us that’s what they do, on their website. Perhaps I will refuse to pay any tax ever again and refer to it as ‘tax efficient’. Vested interest 3. Another is Moni Varma, Chairman of Veetee who admitted that Conservative HQ asked him to sign the letter. Not a vested interest, but an idiot nonetheless. Another is Philip Dilley, Chairman of Arup, who has just been given a place as an advisor to David Cameron. Vested interest 4
The letter itself was drawn up by Next Chief Exec. Lord Wolfson. Wolfson has donated close to £300,000 to the Tory Party and is now a Tory Lord. Vested interest 5. Another is Sir Christopher Gent, non-executive chairman of GlaxoSmithKline. Gent has donated around £113,000 to the Tory Party. Vested interest 5. Isn’t it amazing? Why are we taking them seriously? Why aren’t their vested interests mentioned? I think I will email my logic Tory MP and let you know what his response is.
Next, David Cameron has created a sort of business council. This includes Paul Walsh; the CEO of Diageo PLC, who has moved ownership of British alcohol brands offshore to avoid tax. Martin Sorrell, whose company WPP has moved entirely offshore to avoid tax. And CEO of Glaxosmithkline, Andrew Witty who avoids paying million in tax due to offshore accounting.
None of these sources are credible. None have the Country’s best interest at heart. None care if a few hundred thousand lose their jobs, and their homes. This is Tory bullshit.

It has been a very clever four pronged attack to win support for a program that would usually take months and years to thrash out the details of. The proposal yesterday was horrific. It is not Progressive or fair in any way. The Liberal Democrats should be utterly ashamed. They are finished. Out of protest, I will not vote in favour of AV, even though I once would.

At the moment, the public is suffering from political apathy. They assume this is all necessary. It isn’t. It is dangerous and it is a complete attack on a decent, caring Nation in an attempt to turn us all into bitches of the business World. Labour are not all that much difference, hence the lack of credible opposition. They are not progressives. By moving to the centre, and even the centre-right, they have backed themselves into a corner. They no longer represent the Progressives. Their needs to be vast civil action. Unions need to step up, students need to step up, everyone needs to step up and let these people know that we should no longer be controlled or live in a society entirely shaped by a very select few old grey rich businessmen. I hold out hope and I have faith in this generation of anti-Tory opposition.


The USA & Greece

May 13, 2010

The above, shows (if you can make out the words, i know it looks ridiculously small) that the US is not going to be the next major economic casualty, after Greece. It just isn’t going to happen.

My knowledge on economics is supremely limited. So please bare that in mind!

Even the UK, which is in a far worse position than the US, is not even slightly as bad as Greece. We here in the UK have had two quarters of positive growth. I accept that given the bail out, and fiscal stimulus package, the growth figures are ridiculously low, but we are in a period of economic recovery. It is going to take a while to see the benefit.

The Office of National Statistics report revised their original estimate for growth in the fourth quarter, to a much higher figure. We are actually in a much stronger economic position in the UK, than we first assumed. Government spending was needed to prop up the economy during recession. But, given that we are still only in recovery, I believe it’d be a massive mistake to withdraw that support as the new Conservative government plans to do shortly. In fact, i’m not entirely sure where the benefit of withdrawing support now, actually is? I accept in the future, we need to cut spending. I think though, forcing tax evading corporations to pay what they owe, should be the prime target. But cutting now, seems dangerous. Surely, when we are a growing economy, and the World itself is growing economically, that then would be a good time to cut. Not when people are struggling the most. I fear that it is just Tories being Tories. Cut spending, give people the option “Work where ever we say, or lose your home and starve to death…… and work twice as hard, for minimum wage…lower if we had our way!!! Whilst we give your boss a tax cut, so he can enjoy another game of golf a week“, and eventually the Nation’s money pot may improve, at the expense of social cohesion and morale.

Fox News today asked if it were possible, that the U.S could become Greece economically. They all answered “yes“. Scare tactics.
So I did some research, on the fundamental differences between the economy of Greece and the economy of the US.

To fill the hole in the budget, both Greece and the US need to find around 6% of GDP, according to a report by economists Auerbach and Gale. My limited understanding of economics tells me that just because that number is true for both Nations, the measures needed to fill the gap, are nothing like one another.

Greece’s budget deficit is 14% of it’s GDP. America’s is 9.3%. They are both pretty harsh figures, I accept.

National debt in the US is apparently likely to hit 140% of GDP in the next twenty years. That doesn’t take into account policy changes, technology advancements, or any other sort of externality. It does not take into account growth as a result of investment in infrastructure etc. That figure simply goes by what it would be, if twenty years from now, were the same in every way, as today.

Spending cuts, tax raises are obvious. But they do not need to be harsh as they do in Greece. Greece is in a far worse position. The US’s economy is growing, whilst Greece’s economy is shrinking. In order to protect itself from bankruptcy, by appealing to the IMF for a loan, Greece is being forced to reduce spending. Reducing spending during such a huge recession, is only likely to make that recession far worse. America is not in recession. It does not have to appeal to the IMF for a loan, it is not likely to fall back into recession any time soon. The growth will eventually provide the revenue to fill that 6% gap. When the US economy picks up, then spending cuts and higher taxation will further help the US bring down its cyclical deficit.

The US dollar is still strong. Despite growing deficit and debt levels, the US is in a prime position to deal with its problems, because the dollar will be the leading currency for many many years. America is the largest economy in the World. Greece, is the 27the largest economy in the World. And whilst China is growing, it is not in a position to catch up to, or overtake America for quite some time. Investors simply do not trust the Chinese all that much, whilst at the same time, investors flee Greece. Whilst reserve currency status is not guaranteed to last, it certainly provides protection for the US, which provides 60% of the World’s reserve currency.

Greece has to fill that gap within the next year. If they don’t, they risk pushing Greece into an even greater recession, which will inevitably lead to even greater structural deficits. Greece is in a mess. They ran up huge budget deficits during the good economic times. They inevitably ran up even larger budget deficits during the bad times. Greece’s structural deficit is horrendous. America’s, is not. The structural deficit in the USA is not perfect, true. And it is going to take some harsh measures over the next few years to help. But, the US can fill that 6% gap, over two entire decades. Greece has two years at the very most. It is also worth pointing out, that it was the Republican Party, the party of fiscal responsibility that spent away their budget surplus during the good times. And not in a positive way either. It was not Obama. America needs to simply slow down a little, not drastically cut.

America obviously has to change over the long term, whereas Greece has to change immediately. The problem America has, is its particular brand of Capitalism; irresponsible consumerism. Growth for the benefit of growth. Wall Street offering no real social good. They simply exist to fatten their pockets. Your money, placed in banks, being used in dodgy dealings, rather than productive investments. Responsible Capitalism, in which the success of a Nation is in measuring how low the inequality gap and how low the poverty rate is, rather than the accumulated riches of the very wealthy. That is the only way the entire World will escape another preventable Global recession.