Wednesday, 22 December 2010

Latest growth forecasts show gloomy future for Britain

From the Morning Star

Economic growth forecasts have been revised down to 0.7 per cent in the latest quarter, according to figures released today.

The Office of National Statistics found that growth in the construction, mining and quarrying industries all fell and there was a recorded fall in service industry output.

The drop indicates that 2011 will be another tough year for the public, with the VAT rise to 20 per cent to dampen consumer spending, on top of the effects of government spending cuts.

Left Economic Advisory Panel co-ordinator Andrew Fisher said that prospects for the economy were "grim."

He added that, in the long term, Britain could be in the same situation as Ireland, which recently took out a controversial IMF loan to help keep its struggling economy afloat.

"Continued slow growth - or even a slip back into recession - will encourage the coalition government to make further cuts and could send the UK into a spiral similar to Ireland's.

"It is clear that the labour movement needs to force a major shift in economic policy in 2011 to prevent misery for millions."

More at diggersland blog.

Wednesday, 8 December 2010

Student economics

Why fees are unnecessary and how we can fund university education

The Government estimates that in 2010/11 there was 986,357 (full-time equivalent) higher education places.

If each one of these university places was charged at the maximum £9,000 per year, that the Coalition Government intends to allow institutions to levy, then this would raise just under £8.9 billion in annual revenue for higher education.

It is estimated by the Tax Justice Network that tax avoidance costs the UK £25 billion per year . Even if just one-third of this could be reclaimed to the Exchequer, it would avert the need not just for increased fees but for fees at all.

In 2008/09 tuition fees raised £5.8 billion in revenue for UK universities – about one-third of total university funding. This is less than the £6 billion Vodafone avoided in tax this year with HM Revenue & Customs complicity.

If the government fears frightening business, it could instead abolish the upper limit on national insurance contributions, which would raise £11bn enough to eradicate the need for fees and to fund a grant of over £2,000 per student.

But we should not forget graduates already repaying debt.

The total balance outstanding for the UK student loan book (including loans not yet due for repayment) at the end of the financial year 2009-10 was £35.95 billion .

According to the Sunday Times Rich List, the collective wealth of the 1,000 richest people in the UK rose to £335.5bn in 2010.

A one-off 11% wealth tax on this elite group would, at a stroke wipe out the debts of all those who suffered fees under New Labour. This would be a bail-out, although only 2.75% of the size of the £1.3 trillion bail-out of the UK banking system .

John McDonnell MP
LEAP Chair
Andrew Fisher
LEAP Co-ordinator

Download the LEAP Student Economics report, with full references.

Irish budget won't stop the rot

The Irish Parliament’s vote to implement a further, more savage €6 billion programme of spending cuts and tax increases has done nothing to stop the worsening debt crisis transforming the political landscape throughout Europe and beyond.

Quite the opposite. As Ireland follows Greece, and with Portugal and Spain jostling for position in the queue for aid, the conditions of the Intenational Monetary Fund-sponsored package for the Irish Republic are reverberating throughout the continent. And the pressure is mounting across the Atlantic too.

In the United States, Democrats are in open revolt against President Obama’s deal with the Tea Party-inspired Republicans to continue Bush’s 10-year-old tax breaks for the wealthy, which were widely expected to be allowed to expire at the end of the year.

This proposed new deal is part of the political price for agreement on a further debt-funded stimulus. But the markets are worried, and the cost of US borrowing has started to rise.

Dominique Strauss-Kahn the managing director of the IMF says the “piecemeal” country-by-country approach can’t solve the crisis but Germany’s chancellor Angela Merkel is not alone in blocking proposals for a Europe wide rescue scheme. In the Netherlands, Geert Wilders far-right Freedom party teamed up with the so-called Socialist Party to oppose the deal for Ireland.

For the Irish people, the new budget slashes social welfare benefits, public pensions and capital projects, whilst forcing the 45% of low wage earners to pay income tax for the first time in order to rescue the banks and pay the interest on government bonds.

Michael Noonan, finance spokesman for the centre-right Fine Gael party stated the obvious: "This budget is the budget of a puppet government who are doing what they have been told to do by the IMF, the EU Commission and the European Central Bank."

But what he didn’t say is that the demands of these agencies are themselves orchestrated and conducted by the much more powerful forces at work in the rapidly contracting global capitalist economy.

Even as the captive Irish government was applauding itself, warnings of further mass assaults could be detected in the absurdly optimistic growth forecasts underpinning the new budget.

Finance Minister Brian Lenihan pins Irish hopes on gross domestic product national income (GDP) expanding by 1.7 percent next year, nearly double the European Commission's forecast of 0.9 percent.

The government is forecasting growth of 3.2 percent in 2012, 3.0 percent in 2013 and 2.8 percent in 2014, but Danny McCoy, head of the Irish Business and Employers Confederation said he saw little in the budget to help job creation or restore economic competitiveness.

In reality, governments throughout the world are in a competitive race to destroy living standards, driven by the needs of an economic system of global corporations competing for declining profits as markets shrink and collapse.

The crisis began when credit-funded stimulus reached its limits. Political parties of the left and right are ganging up together to design and implement “austerity” programmes that can only accelerate the process of contraction. Despite the rhetoric of recovery it is what they are required to do.

Campaigns to resist the assault on people’s lives must be brought together with the democratic and legislative means to replace the moribund capitalist system rather than patch it up. People’s Assemblies can begin to construct a richer form of democratic control based on social ownership and not-for-profit production and finance. Check out A World to Win’s proposals for transforming social relations in our new Beyond Resistance booklet.

Gerry Gold
Economics Editor
reposted from

Monday, 6 December 2010

Tax justice becomes a movement

As we blogged on 30 November, tax justice has taken to the streets.

After years of painstaking research and lobbying by the Tax Justice Network, ably supported by PCS - whose members work, and are increasingly being cut from, HM Revenue and Customs - the campaign now has a movement to further raise its profile and popularise it: UK Uncut, which has branded the campaign 'Big Society Revenue & Customs'.

On Saturday 4 December there was, according to the BBC (though there's a better write-up in the Morning Star) actions in 21 towns and cities across the UK, including Birmingham, Brighton, Bristol, Cambridge, Edinburgh, Glasgow, Leeds, Leicester, Nottingham, Oxford, Portsmouth, Southampton, York

PCS General Secretary Mark Serwotka said:

"People are rightly angry that the government is targeting the most vulnerable in our society with massive cuts in spending and yet it appears to be very relaxed about rich and powerful tax dodgers.

"We have campaigned for two years for action to be taken to tackle the billions of pounds in tax lost to our economy every year because wealthy individuals and organisations avoid paying what they owe.

"The moral and economic case, particularly at a time when we are told action needs to be taken to bring down the budget deficit, is unarguable."

This video shows how unarguable these campaigners - shutting down Oxford Street Top Shop - know the case to be, and there's some great photos and reportage from harpymarx.

And you really know a campaign has caught the zeitgeist when even the Daily Mail begins highlighting further corporate tax avoiders to protest against!

Friday, 3 December 2010

Evidence of the 'squeezed middle'?

Labour leader Ed Miliband, and the rest of the Labour frontbench now seem to be triangulating towards a group they have dubbed the 'squeezed middle' although he seems a bit confused about who the 'squeezed middle' is.

The term has been coined by the Resolution Foundation (RF), which seems a fairly New Labour-ish kind of think-tank populated by the usual pretentious canape-devouring circuit that churns-out 'influential' waffle at an impressive rate.

Still at least RF knows what it means by the 'squeezed middle': "the 11 million households who (sic) earn between £12,000 and £30,000 a year". To most people that might look the vast majority of the working class, and really would be better described a low income households (full-time on the minimum wage is over £11,500), and indeed as well as using the political soundbite 'squeezed middle' they also use the more prosaic epithet "low-to-middle earners".

The language is important here: why from "low-to-middle earners" has Ed Miliband adopted "squeezed middle". Admittedly, "shat-upon-poor" is less acceptable to the Daily Mail, but it seems the concerns of the poor or low paid are so illegitimate as to be irrelevant to the new Labour leader (should that 'n' be capitalised?).

Miliband actually appears to be crow-barring higher earners into the "squeezed middle" too - stating those having child benefit removed are also the "squeezed middle".

Clearly Miliband is confused.

However, there is no reason for him to be: the low and middle income households are indeed being squeezed. Serious evidence of this was published this week by the Office for National Statistics in their Family Spending survey which showed for the first time (in the 10 years the data has been published in this way) UK household spending declined over the last year.

In 2009 the average household spent £455, down from £471 in 2008. With unemployment rising, short-term working, and pay freezes it is not surprising that households tightened their belts over this period.

The risk must be that with unemployment still high, and likely to rise further, there could be a continued downward slump. It is also clear evidence of the need for policies that are redistributive rather than regressive. With the Coalition cutting jobs, freezing pay and slashing benefits household expenditure will tighten further.

The squeeze exists, but not exclusively for the middle.

Thursday, 2 December 2010

False Economy

The TUC has launched a new website - False Economy - spelling out "why cuts are the wrong cure".

This video sets out why we shouldn't be suffering for the crisis caused by the finance sector:

Why cuts are the wrong cure from False Economy on Vimeo.

There's also the ability to add details of the cuts in your area and provide testimony of how the cuts affect you.

Wednesday, 1 December 2010

The ultra-rich could solve this financial crisis

Surely it is far better to inconvenience 1,000 of the country's richest people than destroy millions of lives

The news that 'only' around 330,000 public sector jobs will be lost, is of little comfort to millions of people; especially as another 500,000 are likely disappear from the private sector. The government's austerity plans will hasten home repossessions, shop closures, increase hospital queues and condemn children to crumbling schools. Yet the chancellor has been quiet about the contribution expected from the ultra-rich.

Warren Buffett, the world's third-richest person, estimated to worth around $37bn (£24bn), has urged the US government to tax the rich more saying "people at the high end, people like myself should be paying a lot more in taxes. We have it better than we've ever had it". Yet there is deafening silence from his UK counterparts. The government can solve the financial crisis by inconveniencing the richest 1,000 people in the UK.

According to the Sunday Times Rich List, the collective wealth of the 1,000 richest people in the UK rose to £335.5bn in 2010. 53 of the richest 1,000 are billionaires. In 1997, when Labour came to office, the collective wealth of the richest 1,000 stood at £98.99bn. No other group has received such a massive boost in its wealth. Even if they have all the clothes, mansions, cars, yachts and jets they want, they still cannot spend it all. They came into this world empty-handed and will exit in exactly the same way, but leave behind impoverished citizens and employees when they could easily give 25%, or some £84bn of their wealth away without any noticeable effect on the quality of their life. This redistribution would reduce and probably eliminate the need for deeper cuts.

With a private fortune of £22.45bn, steel tycoon Lakshmi Mittal is thought to be Britain's richest man. He has connections with offshore tax havens, but his wealth has been amassed though cultivation of the UK political machinery. Tony Blair personally intervened to help him expand his empire in Romania and other places. Some years ago, he spent £38m on the wedding of his daughter and also bought her a £70m mansion in Kensington Gardens in London.

Others on the ultra-rich list include Chelsea football club owner and oil industry magnate Roman Abramovich, worth some £7.4bn; Gerald Cavendish Grosvenor, the 6th Duke of Westminster, whose company Grosvenor Estates is one of the largest property developer and landowner in the UK and worth some £6.75bn. Brothers Simon and David Reuben have amassed a fortune estimated to be around £5.5bn, largely through property, private equity and the Wellington Pub Company.

Sir Philip Green, owner of BHS and Top Shop, is estimated to be worth £4.1bn. Sir Philip, an adviser to the government, has registered the shares in his business empire in his Monaco-resident wife's name to avoid UK taxes. Sir Richard Branson has a fondness of tax havens and weighs in at £2.6bn. Sports entrepreneur Bernie Ecclestone, one-time donor to the Labour party, weighs in at £1.4bn.

Politics is about choices. The government can choose to punish millions of people for the recession that they did not cause, or inconvenience a few rich people. These rich people have gained the most in the boom years. The richest 1% of the population owns 21% of marketable wealth and the bottom 50% own just 7% of the wealth; and if the value of the dwellings is taken out then that figure stands at around 1%. The proportion of gross domestic product going to employees in the shape of wages and salaries has declined from 65.1% in 1976 and now stands at around 55% (see Table D). Ordinary people just don't have the capacity to take economic hits.

We have given the ultra-rich UK passports, peerages, knighthoods, public accolades and public services. Yet many respond by avoiding taxes and impoverishing employees. Without social stability and people's purchasing power they cannot keep or multiply their wealth. The prime minister, David Cameron, could ask his billionaire friend Lord Ashcroft to mobilise the billionaires and ask them to give 25% of their wealth to the country. He could be assisted by the "you've never had it so good" Lord Young.

Surely it is far better to inconvenience 1,000 people than destroy millions of lives. If rich turkeys don't voluntarily vote for Christmas they could be helped by a mansion tax, a wealth tax, the end of their offshore tax haven shenanigans, higher rates of income tax and a higher rate of value added tax on luxury goods.

This article first appeared on Comment is Free

See also proposals for a Wealth Tax

Contagion of revolt

Protests by students and teachers throughout Europe are mounting as governments try to offset savage reductions in education budgets with increased fees in the losing race to prevent state bankruptcy.

Students marched throughout Britain yesterday as well in Italian cities yesterday in protest against attacks on education, blocking roads and railway lines in some of the biggest demonstrations seen in decades.

Hopes that the feverish activity resulting in an €85bn loan package for Ireland would inhibit the debt contagion spreading throughout Europe and the rest of the world were dashed as global investors immediately sent the rates soaring for lending to Portugal, Italy and Spain as well as Ireland and Greece.

"The crisis is intensifying and worsening," said Nick Matthews, a credit expert at the Royal Bank of Scotland. "Bond [government debt] purchases by the European Central Bank are the only anti-contagion weapon left. It needs to act much more aggressively."

Agreement on a European Stability Mechanism (ESM) to be launched in mid-2013 will be far too late to prevent a string of state bankruptcies. The loan package for Ireland itself postpones the intention of the ESM to force banks and hedge funds to take losses if a country runs out of money. The UK’s contribution to the Irish package is an attempt to ease the strains on the interdependence of the failed Irish economy and UK-based banks.

The ESM, if it comes into force, will not only test the power of the Eurozone governments against the global banks and non-banks, but will require a long process to arrive at unanimous agreement among Eurozone countries that a country is insolvent and qualifies for help.

As the crisis continued to spread, French Minister for the economy, Christine Lagarde says that each European country is facing very different conditions and each should be treated on a case by case basis. Whilst it is true that the levels of indebtedness vary, the development of the global economy means that debt is universal and the fate of each country is entangled with the fate of the whole world system, not just that of the Eurozone or even the whole of Europe.

In the US, the fallout from the mortgage defaults that triggered the global meltdown in 2008 is continuing despite the launch of a second round of quantitative easing or printing of money. US house prices fell for the third month running in September and at a quicker-than-expected rate.

The end of the government’s tax incentive for first-time homebuyers joined persistent unemployment, high rates of foreclosure and an excess of vacant homes. Home prices have plunged by 28.6 per cent since peaking in June 2006.

As every desperate economic measure stokes up social unrest, the time has come for a new kind of politics. Iceland was the first country to be driven into bankruptcy by the global financial meltdown of 2007/8. It has just elected a 25-person Constitutional Parliament to re-write its constitution for the first time in the Republic’s history.

It is a small indication of the much bigger political changes needed to resolve the economic, social and ecological catastrophe caused by capitalist production. The December 11 event in London on creating People’s Assemblies would be a good place to start.(

Gerry Gold
Economics editor
December 1, 2010
reposted from