Afairdeal

The April 2009 Budget

2009-04-26T08:45:00.000-07:00

A Cheer for Alistair

Despite the fact that he doesn’t act on most of my recommendations, I like Alistair Darling. Crucially, he knows that ‘you cannot cut your way out of a recession’.

The measures the government has taken (fiscal and monetary) have not been bold enough. Nevertheless, it is likely that they will restrict the fall in output this year to around 4% (instead of 7 or 8%), and unemployment to around 3 million (instead of 4 or 5 million).

The Tory response is pathetic, dishonest and opportunist. Gordon Brown is right to call them ‘the do nothing Party’. They oppose government policies, without offering any of their own.

They are dishonest in blaming Gordon Brown, when the financial and economic mess we are in originated in the Thatcher years. New Labour’s mistake was to continue with the Thatcher policies (e g privatisation and low taxes for the rich).

Because they are the Opposition they cannot be blamed for opposing government policies. But their lack of any ideas of their own means they are not a credible alternative government.

Vince Cable and the Liberal Democrats are a different matter. They do have relevant policies, some of which Labour would do well to adopt (e g raising personal tax allowances to take the lower paid out of tax brackets).

A Missed Opportunity

However, sadly, the budget was a missed opportunity. The political context prevented the radical measures (requiring more spending) necessary for a speedy recovery.

Instead of apologising for the 50% tax on incomes over £150,000, it should have been accompanied by further measures: to raise revenue and to create a more equal society. For example:

(i) a wealth tax;
(ii) an increased capital gains tax;
(iii) a windfall tax on excessive profits;
(iv) a 55% tax rate on incomes over £200,000.

Such measures might, as vested interests claim, cause some to leave to reside in countries with lower tax rates. Why should we be concerned about this? The most likely to leave are the financiers who precipitated the current crisis.

Better Late Than Never

Such policies, along with cuts in expenditure (mainly on defence – e g Trident), must be matters for a late summer budget. The revenue raised must permit a credible strategy for repaying borrowing, and for further expenditure on:

(i) new jobs in the green energy sphere;
(ii) job support to keep people in work;
(iii) tax relief for the lower paid;
(iv) support for the housing market, especially first time buyers.

All of these measures require a political context which banishes any thought of returning to the capitalism which caused the crisis: instead, it must place the emphasis on creating a more equal, a more democratic and a more compassionate society.

DARLING'S LAST CHANCE

2009-04-09T13:52:00.000-07:00

Budget 22 April 2009

22 April 2009 is Alistair Darling's last chance to:

(i) end the recession and drastically reduce unemployment;

(ii) take major steps to create economic and social equality;

(iii)convince people to vote Labour when the general election comes.

Ignore the reactionaries

Reactionaries, who are determined to defend the unequal society, are advising the government not to spend to ease the recession. It is notable that the most vocal opponents of government expenditure are in well-paid (mostly very well-paid)jobs.

They must be ignored. The unemployed, poor families, pensioners, the disabled are the priority.

£100 Billion To B oast The Economy

£100 Billion is the minimum expenditure necessary to:

(i) create jobs to get people back to work;

(ii) increase pensions and allowances for families, the unemployed,the disabled;

(iii) build houses and flats for the homeless,schools, colleges, hospitals.

Borrowing and Repayment

The government is nervous about borrowing because it is reluctant to take the appropriate steps for repayment.

These steps, as I have argued in earlier Blogs, are to:

(i introduce progressively higher income tax rates on incomes over £80,000;

(ii) tax excessive company profits;

(iii) slash expenditure on defence, especially by abandoning Trident.

Without these bold moves, in the budget 22 April, the recession will not end, we shall remain a grossly unequal society, Labour will not be elected.

Spend and Tax

2009-03-27T14:43:00.000-07:00

Government Must Spend

The government must ignore the advice of the Bank of England governor - and those who agree with him.

As I have argued consistently in earlier Blogs, the April budget must include at least £100 Billion additional spending - to create jobs, take the lower paid out of tax brackets, increase benefits.

And all measures should aim to create a more equal society.

Repayment of Borrowing

What is not sensible is to borrow £100 Billion without a clear strategy for repaying it.

The repayment should be from taxing progressively incomes over £80,000, taxing excessive profits, and drastic cuts to expenditure on defence.

Defenders of the Status Quo

The reason for opposition to the new expenditure is a determination to defend our unequal society. It is a reasonable bet that almost all opponents of new expenditure would have to pay more tax as part of the repayment strategy.

Also, they yearn for a return to the capitalist dominated economies which caused the current crisis.

For these reasons they must be ignored.

DAVID BLANCHFLOWER: HE WAS RIGHT

2009-03-23T15:05:00.000-07:00

Blanchflower’s Predictions

In the Guardian last week (Thursday 19 March 2009), David Blanchflower reminds us that, a year ago, he told the Treasury Select Committee that 'something horrible might come’. He was one of the very few to predict a serious recession.

He was largely ignored. It took the Bank of England’s Monetary Policy Committee six months (after his warning) to even start cutting interest rates. Yet, well before then, it was clear to many of us (especially those losing jobs) that there was an economic crisis deepening by the day.

Blanchflower’s Guardian article is headed ‘Now for the Jobs Stimulus’ He expresses the fear, now shared by many, that, unless the government acts speedily and decisively, unemployment will exceed 3 million.

Labour’s Opportunity: £100 Billion Stimulus

In his article, Blanchflower is, in effect, arguing for government expenditure along the lines I have proposed in earlier Blogs. Gordon Brown and Barack Obama, we are told, will argue for a worldwide fiscal stimulus at the G20 meeting in London next month

Blanchflower’s emphasis is on creating jobs, and taking steps to prevent long-term unemployment, especially amongst young people,

I would add (and I have no reason for thinking that Blanchflower, Brown and Obama would disagree) that the action taken should also aim to create a fairer, and more equal, society.

Government Borrowing and Repayment

For a package on this scale it is obvious that there would be a major increase in government borrowing. However, this is a problem only if there is no clear strategy for repayment

Such a strategy should be developed in a context of creating greater equality. This means higher income tax for people earning over £80,000 a year, with progressively higher rates.

£80,000 45%

£110,000 50%

£150,000 55%

£200,000+ 65%

In this context, part of the spending should be used to take at least 1,000,000 of the lower paid out of tax brackets and increase unemployment benefits. For obvious reasons, this extra income would be spent - a stimulus to the economy.

The second element of the repayment strategy should be a windfall tax on companies with excessive profits (e g utilities and oil companies).

The third element should be cuts to expenditure on defence and government quangos (by abolishing them).

This is Labour’s opportunity. A recent opinion poll (also published last week) indicated that 82% of respondents supported higher taxation for the better off.

The Economy: Who Is In Charge?

2009-03-16T16:25:00.000-07:00

Action October-February

Although both were slow starters, the government and the Bank of England have taken significant action to end the recession. We have had:

(i) interest rate cuts - from 5.5% to .5%;
(ii) Alistair Darling’s £20 Billion Fiscal Stimulus;
(iii) hundreds of £ Billions to support banks;
(iv) a decision for the Bank of England to pump £150 Billion into the economy to increase lending (‘quantitative easing’);
(v) a number of small initiatives to support small firms and borrowers.

More could, and should, have been done – as I have argued in earlier Blogs. However, the above, and the fall in sterling and commodity (especially oil) prices, amount to a significant stimulus to the economy.

Why is it, then, that the doom and gloom persists – in forecasting, as well as in every day experience?

No Conviction

The crucial factor is that, with few exceptions (e g David Blanchflower), the government’s and Bank of England’s forecasters are useless.

When everything seemed to be going well in 2007, the majority of forecasts predicted that things would continue to go well. Now, when everything seems dreadful, most predictions are that things will continue to be dreadful.

To be fair, today (16 March 2009) the Bank’s governor says that the period of deflation need not be long if there is ‘prompt and decisive action’. Although he does not specify, he presumably means government action.

And to be fair to Alistair Darling, he has not, so far as I am aware, departed from his October forecast that we would start to come out of the recession in the middle of 2009.

As I have indicated in earlier Blogs, I am in the Darling camp: my forecast in a February Blog was that ‘green shoots’ will start to appear April/May 2009.

‘Green shoots’ are not, of course, the same as significant recovery, which is why I added that government action on a large scale is necessary.

No Control?

Uncertainty about the future is very largely the result of the government’s, and Bank of England’s, limited control of the economy.

Banks are told to increase lending but they do not – even when it is part of a ‘deal’ when they receive £ Billions of taxpayers’ money.

My prediction on the bottoming out of the recession April/May is based on the fact that the Fiscal Stimulus, aggressive interest rate cuts, the fall in sterling (against the dollar and the Euro), the fall in commodity prices (especially oil), quantitative easing must have an effect.

Timing is clearly a difficulty. April/May will be more than 6 months from the time of the Fiscal Stimulus, and from the beginning of interest rate cuts.

But the recovery will be extremely slow without further government action. This must include taking more control. The priorities are:

(i) lending, to businesses and households, through institutions under government control (Post Office, Northern Rock, Bradford and Bingley, Royal Bank of Scotland, Lloyds Group);
(ii) assisting first time (house) buyers with deposits (e g an interest free government loan);
(iii) additional spending to create jobs, build houses etc along with a convincing strat al egy to repay borrowing from increased taxation (progressive rates on incomes over £80,000) and reducing expenditure (mainly on defence).

These should all be included in the Budget in a few weeks time.

For the details of these proposals see my February Blogs.

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Will Government Listen?

2009-03-09T04:45:00.000-07:00

Forget the City

The Blair governments’ strategy, which has persisted since he resigned, was to avoid upsetting the City at all costs. Favourable financial conditions (e g low taxes, the prospect of big bonuses, high returns on investment) would, it was argued, keep money flowing into London and support an expanding economy.

We now know where this strategy has landed us. Without government £ Billions, the banks would have collapsed – resulting in the collapse of the capitalist economy.

It is now clear that the position would have stabilised much more quickly if, instead of the half-cock arrangements we now have, the banks had been nationalised. The government could then have determined a level of lending (and interest rates) to save jobs and stabilise the housing market.

YouGov Poll (Guardian 9 March 2009)

This poll of Labour Party members found over 70% support for most of the measures advocated on this Blog over the past 3 months. There is support for:

A Windfall Tax on excessive company profits (e g the utilities);

Ending, or drastically reducing, bonuses;

Higher rates of tax on those earning over £100,000 a year;

Greater equality (through legislation).

The only major issue (which I regard as very important) not mentioned in the report is a large reduction of expenditure on defence.

The Budget and Economic Recovery

In 20 February Blog (Will April Be The Cruellest Month?), I predicted that there would be signs (green shoots) of the recession end April/May 2009. Significant recovery will follow, however, only if the government takes further action.

The action must include job protection/creation, taking at least a million out of tax brackets, increases in allowances and pensions - and, vitally important, a strategy for repayment of the necessary borrowing over a 5 year period.

The strategy for repaying the borrowing is a key factor in creating a fairer, and more equal, society.

My proposal, which the YouGov poll indicates would be supported by a large majority of Labour Party members (and, I believe, a majority of citizens) is for borrowing of £100 Billion to fund the above.

The repayment strategy, over a 5 year period, should be along the following lines.

Reductions of expenditure (mainly defence) £35 Billion

Windfall Taxes on Companies £25 Billion

Higher Tax Rates on Personal Income £30 Billion

A Wealth Tax £10 Billion

Without this kind of strategy, any claim that the government intends to create a fairer, and more equal, society will lack conviction.

2009-03-03T12:18:00.000-08:00

The Real Income Scandal

2009-03-03T05:07:00.000-08:00

Sir Fred’s Pension

A £650,000 a year pension for ruining a bank is clearly a scandal. In perspective, it is about 100 times what an old age pensioner gets. As Gordon Brown says, we are all entitled to be angry.

But what can be done about it? There is, the lawyers tell us, very little chance of any legal challenge succeeding. In reality, talk of legal action – or even M/s Harman’s act of parliament – is really a diversion.

The Real Scandal

The real scandal is that Sir Fred is not alone. Dozens, maybe hundreds (nobody knows how many) in the last ten years, have received similar awards. Indeed, we now learn that some (including at least one from the Royal Bank of Scotland) have been awarded much larger pay-offs.

To receive a large pension, you need a large ‘pension pot’. In Sir Fred’s case, this is said to be something over £16 million. In other words, without this, it would have cost the taxpayer (you and me) £ millions less to bail out the Royal Bank of Scotland.

£10 million, £20 million, £30 million ‘pension pots’ have been accumulated, significantly from tax free contributions. The first step in action to be taken is to impose, by legislation, a wealth tax which includes pension pots.

Wealth Tax on Pension Pots

In would not be at all unreasonable to levy a tax rate of 40% on that part of the pot which is assessed to provide a pension above £100,000 a year. In Sir Fred’s case, this would mean a one-off payment of around £4.5 million.

However, this would still leave him, and his like, with annual pensions of around £500,000. – still grossly over generous when an old age pensioner receives little more than £6,000 a year.

Higher Rates of Tax

These scandalous payments draw attention to the real issue – that the UK is a grossly unequal society. Because everyone is now aware of this, the government should act immediately.

Higher rates of tax (the existing top rate is 40%) on all incomes, including pensions, should be introduced along the following lines.

Incomes over:

£80,000 45%

£120,000 50%

£150,000 55%

£200,000 60%

£250,000 70%

These rates are not unduly punitive. I, and I suspect many readers, would support higher rates.

However, the above would make it possible to take a million of the lower paid out of tax brackets – a significant first step towards a more equal society.

And, as I have argued in earlier Blogs, more income for the poor would help towards economic recovery.

THE FAILURE OF CAPITALISM

2009-02-26T03:00:00.000-08:00

The global economic crisis is the strongest evidence of the failure of capitalism. It reveals the nonsense of the oft-made claim that only a free market can lead to prosperity and higher standards of living for everyone.

In reality, unregulated capitalism has always resulted in higher and higher booms, followed by deeper and deeper busts. The most serious consequence is persisting inequality with, worldwide, hundreds of millions living in poverty.

When the rhetoric is swept away, and the evidence examined, it becomes all too obvious that capitalism has failed even to provide stable economies.

The issue of inequality, and the determination of the establishment to maintain it, is the subject of the three publications described below. They provide the background to the articles on this Blog.

Capitalism in Crisis: a Socialist Solution

This pamphlet analyses the current economic crisis in the UK and demonstrates that a solution will emerge only when a socialist strategy is adopted.

Further Education and Democracy

This book illustrates inequalities in the further education system in the UK. It explains how more than half the population aged 16 and over (‘The Neglected Half’) are denied the education they need - to obtain jobs, and to become fully participating members of society.

Who Killed Bilston Community College?

Bilston Community College, the most successful in the country for creating new opportunities for working-class (especially ethnic minority) citizens, was closed illegally in 1999. The government’s decision to close the college resulted in the denial of opportunities for tens of thousands.

An appeal against the closure, supported by over 50 voluntary community organisations, was completely disregarded by the then Secretary of State for Education and Employment.

All the above are all available on ebay.co.uk, or from keithwymer@blueyonder,co.uk

WILL APRIL BE THE CRUELLEST MONTH?

2009-02-25T08:24:00.000-08:00

Inexcusable Late Start

The Bank of England did not spot the recession until October 2008: the warnings of David Blanchflower (a lone voice on the Bank’s Monetary Policy Committee) were ignored for more than 6 months. Interest rate cuts, October-February, should have started at least 4 months earlier.

We cannot know how many lost their jobs and/or homes as a consequence of this delay. Whatever the number, it was unnecessary and in excusable.

The government, despite its many advisers and consultants, was also a late starter. Thousands had been made redundant, and tens of thousands more were facing redundancy, when Alistair Darling launched his, extremely modest, Autumn Fiscal Package.

‘Too little, too late’ is the, not unreasonable, criticism levelled at both the Bank and the government; although the situation is rather more complex. The Bank was certainly a late starter but, apparently not knowing what else to do, has continued to cut interest rates beyond the point of their effectiveness.

It would have been much more sensible for the Bank to start its ‘quantitative easing’ (pumping more money into the economy) in December rather than March. Late again! Incidentally, the public would be much better informed if the Bank, and the media, explained, clearly, what was happening, instead of using obscure terms like ‘quantitative easing’.

Full-Hearted Recession: Half-Hearted Response

The criticism of the government is not so much that it has failed to act but that it has acted half-heartedly. A string of minor initiatives to halt the recession do not amount to a convincing strategy. What should have been done (e g a much larger Autumn stimulus) is described in detail in my Blog: March 2009? It’s too Late.

The £14 Billion for Northern Rock to lend (announced 23/2/09) is a case in point. The figure should be at least £56 Billion: £14 Billion each, for lending, for the other institutions owned by the government – Bradford and Bingley, the Post Office; Royal Bank of Scotland.

The £14 Billion is intended, particularly, to help first time buyers. Yet, coinciding with the announcement, Gordon Brown wrote an article in the Observer arguing that a 10% deposit should be a minimum requirement. Although this is clearly sound in principle, it is no encouragement for first time buyers - until the government explains how it intends to help them to acquire such a deposit.

The government is unable to act on the scale required because it has boxed itself in. It is afraid to launch a £100 Billion expenditure plan because it lacks the convincing repayment strategy I described in my last Blog.

Will April 2009 be the Cruellest Month?

With the exception of a few ‘Blanchflowers’, experts failed in their predictions. While the sun was shining (people in jobs, house prices rising etc) they, in broad terms, predicted that the sun would continue to shine. Now, when all is gloom and doom, they predict more gloom and doom.

Because the downturn is global, it is impossible for the UK to recover in isolation. However, it seems likely that the action taken by USA’s new President, and his decision (implied in Hilary Clinton’s comments last week) to work more closely with China, will result in greater stability in the next few months.

It is in this context that the UK’s prospects must be considered. My view is that, if the Bank and the government had acted when Blanchflower gave his first warning, the bottom of the recession would have been reached January/February 2009. Their tardiness makes it look more like April/May 2009.

This prediction is made on the assumption that the belated action taken by the government, and the Bank of England, will begin to have an effect from March. The bottoming out of the recession is not, of course, the same as recovery.

The downturn would have been worse without the action taken but it is difficult to see significant recovery without further action.

Action for Recovery

I have been assisted in my predictions by an excellent article by Kevin Daly and Ben Broadbent (Goldman Sachs economists) in The Sunday Times (22/2/09); although the judgements below are, obviously, my own.

My view is that the situation in April will be ready for recovery but that this will not occur without a government expenditure stimulus of, at least, £100Billion, along the lines outlined in my last Blog. As I emphasise there, the key for the government to get out of its box is a convincing repayment strategy.
Providing the government acts now, the factors which will assist the recovery (as Daly and Broadbent point out) include:

(i) the reduction of interest rates (from5% t0 1%);

(ii) the fall in sterling, which makes exports cheaper;

(iii) import substitution – for example, people taking their holidays in the UK, instead of overseas.

In the current global crisis, the fact that the UK relies less on exports than, say, Germany and Japan means that government action can be more effective. It can be more effective because government expenditure can support the production of goods to replace imports, and also because governments can give people money spend.

With regard to ‘import substitution’, Pontins and Butlins are creating new jobs in anticipation of expansion of the home tourist trade. In the retail sector, a number of companies (including Asda, Tesco and Morrisons) have announced the creation of thousands of jobs.

The bringing forward of a number of government capital projects, and the boost to green energy will also create jobs.

Although these are ‘green shoots’, significant reduction of unemployment depends on further government action – quickly, and on a large scale.

For a more detailed discussion of these issues see me two previous Blogs: March 2009? Its Too Late, and A Clear and Convincing Strategy is Required – Gordon.

A Clear, and Convincing, Strategy is Required - Gordon

2009-02-10T12:42:00.000-08:00

Saving the Banks

The Brown government took decisive (if belated) action when banks reached the point of collapse last October. Hundreds of £ Billions was provided, mainly as loans to be repaid over years. It is important to emphasise that this is not expenditure – in the longer term, there could even be a profit for the taxpayer.

The banks have been ‘saved’ but they have not kept their part of the bargain - to increase lending to the level the economy, and individuals, need. The reasons for this must be addressed urgently. Steps are likely to include extending the period for repayment to the government, and perhaps a lower interest rate on the loans.

If the privately-owned banks do not co-operate to the full, they must be nationalised. In any case, the banks already controlled by the government – Northern Rock, Bradford and Bingley, Royal Bank of Scotland (and the Post Office) - should be developed as a People’s Banking System.

Make Do and Mend No Good

The banks have been supported with hundreds of £ Billions. In comparison, the rest of us have received very little. Alister Darling’s £ 20 Billion package was woefully inadequate; as are the small ‘make do and mend’ measures to help the unemployed.

The government gives the impression that it believes the financial markets will recover in their own time, and that we shall eventually be back to where we were in 2007. This seems most unlikely and, in any case, this is not where we want to be.

The state, albeit reluctantly, is heavily involved in the financial markets. It must stay there and take the steps necessary to create a much fairer and more equal society. The challenge is not to mend a broken system, which has undermined the economy and caused large-scale unemployment, but to create a new system.

The new system must function in the interests of the whole nation, not just a few speculators.

2009 Priorities and Cost

‘Make do and mend’ will not do. Because there is no convincing strategy, the government is boxed in. It recognises that borrowing is necessary but is afraid to borrow on the scale required because it refuses to make the policy changes required for repayment.

The priorities are to:

(i) keep the elderly alive, by ensuring that they are warm and properly fed;

(ii) keep families in their homes;

(iii) ensure that children have proper care;

(iv) prevent unemployment and to create new jobs.

This requires £200 Billion, rather than the £ 20 Billion of the Autumn Package This obviously requires government borrowing but there must be a clear and convincing strategy for repayment.

Strategy for Repayment

Repayment is a major problem only if it is believed that restoring the old, free market, system is the solution. Even if restored, it would be a pale shadow of its former self – and, even more important, the old inequalities would continue.

Gordon Brown and Alister Darling are nervous about the necessary expenditure because they do not have a convincing strategy for repayment. Without it, they are open to the charge of ‘irresponsible borrowing’.

To repay the £ 200 Billion, the first step is to stop spending on what we do not need and cannot afford. The obvious example is Trident and armed services geared to intervention in the affairs of other countries (e g Iraq and Afghanistan).

The second step is to crack down on tax avoidance (companies and individuals) and to impose a windfall tax on companies which make excessive profits.

The third step is progressively higher rates of tax on incomes over £80,000 a year.

Over a 5 year period, starting 2010, these steps would more than repay the 200-300 £ Billion of borrowing to see the country through the recession. They would also result in a fairer, and more equal, society.

March 2009? It's Too Late

2009-01-27T11:30:00.000-08:00

Action Now

We are told that Alistair Darling is considering further action to end the recession - to be included in his budget statement in March. Why wait until March? It is obvious that people need help, and jobs are needed, NOW.

There is no case for delay. There is much uncertainty about: one certainty is that it is impossible to give too much help to struggling people, or to create too many jobs.

The Banks

In dealing with the banking crisis the government has done only half a job. We all agree we need a banking system. But we need a system which serves the people, not bankers and shareholders.

The banks owned by the taxpayer – Bradford and Bingley, Northern Rock, Royal Bank of Scotland (along with the Post Office) must be converted to a People’s banking system.

Instead of state control through nationalisation, which the government does not like, these banks should be established as Mutual Societies. They would then be owned by their members, which was the position of Bradford and Bingley and Northern Rock before the stupid Thatcher policy allowed them to convert to banks.

In the re-organisation, the commercial bits of RBS should be separated from the domestic bits. It could then operate as a separate company to take the lead in implementing government policies for the commercial sector.

The message from anyone (which appears to include government ministers) opposed to these proposals is that such matters are best left to the capitalist financial markets: this position is obviously out of touch with reality.

Action on Unemployment and Poverty

Some government ministers have made vague noises about measures taken creating a fairer society, as well as ending the recession. This is not true in any significant sense of the measures taken so far. Vague statements about the borrowing being repaid from ‘government receipts in the upturn’ are not good enough.

The vagueness gives some creditability to the Tory’s claim that the borrowing is irresponsible. It is not the borrowing, so essential to ending the recession, that is irresponsible but the vagueness on repayment.

A package to stimulate the economy at the same time (now) as President Obama’s will be much more effective than waiting until March. It should be more ambitious than the November £20 Billion: a £100 Billion, at least, but with a convincing strategy on repayment.

The priorities for the £100 Billion are to:

(i) take at least one million out of income tax brackets and increase allowances, including pensions;

(ii) provide finance for local authorities to support families unable to pay their mortgages (either by offering easier mortgage repayments, or renting arrangements);

(iii) create jobs, especially in the sphere of green energy.

Repayment of the £100 Billion Borrowing

A convincing repayment strategy, over a 5 year period, is aim to acquire the finance from:

(i) cuts in defence expenditure, where £50 Billion could be found (including £20 Billion from abandoning Trident);

(ii) Progressively higher tax rates for incomes over £80,000, and measures to prevent tax avoidance;

(iii) Windfall taxes on excessive company profits and, again, steps to prevent tax avoidance.

It is only with a strategy along these lines that movement towards a fairer society will be convincing. Until such a strategy is launched voters will continue to believe that government is on the side of bankers, not the people.

The UK Banks and the Wider Economy

2009-01-19T13:02:00.000-08:00

Banks With No Money

The UK government’s £200 Billion package, announced 20 January 2009, follows worries about the banks. Their shares appear to be in freefall. However, the Prime Minister, and the Chancellor, insist that the purpose of the package is not to bale out the banks, but to support the wider economy - by increasing lending to companies and individuals who need mortgages.

Is this convincing? Companies and people who need mortgages have been pleading for help for months, yet the action was not taken until it became clear that the banks were in difficulty. Even more important, will the £ Billions made available end the recession?

There will obviously be some easing in the lending market as a result of the terms which accompany the £ Billions provided for the banks. This will apply especially to the government controlled Northern Rock (which is nationalised), and the Royal Bank of Scotland (where the government has a majority shareholding).

It remains to be seen how far the other banks will keep their promises. Although they have an incentive to increase lending, because they need new profitable business, they will weigh this against other considerations (such as how to maintain their dividends).

A More Radical Approach

The fundamental problem is that the government fails to recognise that the old free market system has collapsed. This would have been more obvious if the banks had collapsed, which would have happened in November if taxpayers’ money had not saved them.

Using our money in this way is justified only if it is seen as an interim measure while a new system is created. There is, sadly, no sign of the intention to build a new system. The government appears to believe that, given Billions of £s, the old system will be restored to health.

Yet, every day, it becomes increasingly evident that this will not occur. The obvious message from the past 18 months is that economies cannot be left at the mercy of the financial markets. If governments had not stepped in, especially in the USA and the UK, unemployment would be even higher than the dreadful figures reported almost daily.

Obama and the World Economy

The most promising development is the election of Barack Obama as American President, with his commitment to take urgent action to save the economy. Unlike his predecessor, he is not reluctant about government intervention. He has promised over $800 Billion to create jobs, support householders, and move towards a more equal society.

Although economic recovery in the USA is the most important single factor, the challenges are global. Ending the recession requires other countries, especially in Western Europe, to follow the new President’s lead. And the importance of the involvement of Russia, China and India in economic recovery action must also be recognised.

Where Next For The UK?

For the UK, it is essential to match (in comparative terms) Obama’s job creation and householder support measures. As I have argued in an earlier Blog, there is no danger that too many jobs would be saved, or created.

However, fundamental to success is a co-ordinated approach to the government’s involvement in the economy. It will not be possible to end the recession unless the availability of finance (for companies and mortgages) is ensured.

This will occur only if the government determines that relevant financial support is available: this cannot be left to market forces. The obvious solution is to co-ordinate the state controlled entities so that they function as a state bank. A co-ordinated operation through the Royal Bank of Scotland, Northern Rock, Bradford and Bingley, The Post Office should lead the way.

With the prospect of competition from state controlled lenders, the other banks would be more likely to co-operate. To do business, and make profits, they would have to focus on consumer need, rather than dividends and bonuses.

A New Financial World

The reality is that financial systems are now inevitably global. The UK and other West European countries must work with the new USA President to restore order and lead economic recovery.

Policy must be determined by governments working together, not by market forces. Stability is essential for greater prosperity in developing countries, as well as for the wealthier nations.

The Brown Government Must Govern

2009-01-14T04:18:00.000-08:00

Help for Small Businesses

The help for small businesses announced today (14/1/09) must be welcomed, mainly because it will keep a few workers in jobs. But, regretably, it is a much smaller step than is needed.

While it would be a mistake to rely on the gloom and doom predictions of experts (almost all of whom got it wrong last year), unless we have government action on a much larger scale it is clear that thousands more will lose their jobs this year.

In my last Blog (Who Runs the Country?) I argued that the government, not bankers or financiers, must be seen to govern. The Brown government must get ahead of events and take action on a much larger scale. There is no danger whatever that too many jobs would be saved or created.

Tackle Inequality

There are claims by ministers that the action being taken aims to create a stronger economy and a fairer society. But, as I pointed out in an earlier Blog (Gloom and Doom: Kick It Out), there is a reluctance to tackle the unfairness issue.

A great deal more government spending (and, in the short term, borrowing) is required. However, the Conservative Opposition must not be allowed to get away with their 'saddling of future generations with debt' argument. The scale of national debt (incidentally a much lower % than other G7 countries) is the result of allowing the wealthy to keep too much money in their pockets or boardroom coffers.

The answer is to take action to demonstrate that the repayment will be from policies which (i) create a much fairer society and (ii) end damaging military intervention across the world. In other words, the money must come from wealthy individuals (eg the bonus gang); companies with excessive profits; drastic cuts in expenditure on so-called defence.

Intervention in, for example, Iraq and Afghanistan, and investment in Trident, have nothing to do with defence. They are to do with illusions on our world role, and individuals' world leader aspirations.

World Leadership

The £ Billions saved from the defence budget could not only repay debt but also make a major contribution to eradication of world poverty. This is where we should aspire to world leadership.

WHO RUNS THE COUNTRY?

2009-01-09T03:49:00.000-08:00

We must address this question because the message from the media is that control of events is with the Bank of England, the City of London, the High Street Banks and, a poor fourth, the government.

The Brown government must assert itself and take urgent action to address the challenges we face. This must include, if necessary, taking control of institutions to ensure that government policies are implemented.

For months it has been recognised that the crucial issue is lending - to householders and companies. Despite the £ Billions of support from the government, the banks are not lending at the rate anticipated when they received the £37 Billion for re-financing.

There are genuine reasons for the drying up of lending - for example, that the Bank of Ireland has retreated from the market, and that Northern Rock is reducing its mortgage loan book as part of its recovery plan. The other banks are either unable, or because of their strategy, unwilling, to fill this gap.

The government acted with commendable speed when the banks were in danger of collapse.
But they have not shown the same urgency in addressing the dearth of credit which is resulting in loss of jobs and difficulties in the housing market.

The Bank of England's .5% reduction of interest rates will have only a very marginal effect, and this is likely to be true of any further reductions. There are rumours that the government is likely to announce measures to address the credit crisis 'in weeks'.

However, the action will be effective only if the requirements of the banks are supported by legislation, which could include nationalisation - a step which, it is noted, was not ruled out by the Governor of the Bank of England when questioned last year.

As an alternative to further nationalisation, the government could arrange the necessary lending through the institutions it already controls - Northern Rock, Bradford and Bingley, the Royal Bank of Scotland, the Post Office.

There is a proposal to use the Post Office as a State Bank in John McFall's article in the Guardian today (9/1/09). It must be clear to all (with the exception of the Conservative leadership) that current problems cannot be solved without a great deal more state involvement.

The government must overcome its reluctance about this.

Gloom and Doom: Kick It Out

2009-01-04T09:18:00.000-08:00

In my last blog (Urgent Action To End Recession) I pointed out that most of the forecasts for 2008 were widely inaccurate. So what notice should we take of what they are predicting for 2009?

It is obvious that we are in a recession and almost all the news is bad: indeed, it sometimes appears that the media has resolved to report only bad news. So the forecasters join in, with most of them predicting that things will get either worse, or much worse.

The underlying belief is that market forces beyond our control will continue to cause havoc and hardship. Governments, most commontators believe, can do very little to end the recession.

When the government takes action, the standard response of the Conservative opposition, and in much of the media, is to claim that it will not work. What they do not explain is what will work.

The impression they give is that they do not believe any government action will work - so do nothing, and leave it all to 'market forces'.

'Doing nothing' cannot be regarded as an acceptable response of politicians who are elected to serve all members of society. It is likely that over 70% of the population will survive the recession largely unscathed: it is for the other 30% that urgent, and radical, action is required.

The relevant criticism of the government is not that it has taken too much action, but too little. What it should do is outlined in my previous blog: Urgent Action To End Recession.

Pessimism will continue to reign if it is believed that government will allow thr recession to take its course. The challenge is that the action required can occur only with radical policy changes; changes which not only stimulate economic recovery, but also create a more fair and equal society.

Although there is no objection to government borrowing in the short term, a convincing strategy for repayment is essential. As I have argued in previous blogs (see The Current Crisis: A Layman's Perspective) , the resources can, and must, be acquired from:

(i) a windfall tax on excessive profits;

(ii) closing tax loopholes used by companies and wealthy individuals;

(iii) progressively higher rates of tax for incomes over £100,000 a year;

(iv) heavy cuts in defence expenditure (including Trident), based on a policy of not getting involved in wars.

This is not only the appropriate and necessary action but it would, I am convinced, receive widespread public support.

Urgent Action to End Recession

2008-12-31T10:13:00.000-08:00

A continuing recession throughout 2009 is inevitable only if the government fails to act decisively NOW.

The predictions of the majority of experts for 2008 were wildly wrong. For at least half the year they failed to grasp what was happening - apart from the honourable exception, David Blanchflower, a lone voice on the Bank of England's Monetary Policy Committee.

The government was slow to act (it took over four months to deal with Northern Rock), and the Bank of England even slower. The failures of the high street banks, and the tardiness of the government and the Bank of England, are the reasons there are now predictions of up to another million unemployed in 2009.

This must not be allowed to happen. All three owe it to us to act, urgently and decisively, in January 2009.

(i) Banks The banks must move to a reasonable level of lending to businesses and individuals - if necessary as a result of nationalisation. In any case, the government already controls (and, therefore, can act directly with) Northern Rock, Bradly and Bingley, Royal Bank of Scotland, the Post Office.

The freeing up of credit is urgent to keep people in jobs and in their houses.

(ii) The Bank of England Apart from further cuts in interest rates, which are expected, the Bank of England must also make significant funds available to support lending by the the high street banks.

(iii) The Government The government must ensure that (i) and (ii) happen quickly. Gordon Brown and Alastair Darling must show the same urgency when people's jobs are collapsing as they did when the banks were in danger of collapse.

The new USA President is, we understand, poised to introduce an economic recovery package of around £700 Billion (perhaps more). The UK must act at the same time, with at least £50 Billion - to reduce taxes for the lower paid, and to increase benefits for families and pensioners.

Obviously, this will mean additional borrowing in the short term but it is sensible to show the means of repayment. The repayment strategy should include:

(a) closing tax loopholes used by companies and the rich £20 Billion
(the trade union UNITE estimates £30 Billion could be acquired);

(b) a higher percentage tax on higher income earners £5 Billion
(over £100,000 a year);

(c) expenditure cuts, mainly defence £25 Billion

Without prompt action along these lines, no significant number of jobs will be saved.

BROWN GOVERNMENT: GET OFF THE FENCE:

2008-12-27T11:52:00.000-08:00

£ Billions have been provided to support the banks. Northern Rock and Bradford and Bingley have been nationalised; a majority share-holding has been bought in Royal Bank of Scotland; the government will be the largest share-holder in Lloyds/HBOS. In addition, the Post Office is publicly controlled.

The current policy is to sell the government's stakes to the private sector at an appropriate time, which means, presumably, when taxpayers' support is no longer needed.

This policy is seriously mistaken. Instead, these banks should (in combination) be developed as a People's Bank to provide services in accord with government policies - to increase lending, provide financial services in areas where they do not exist. The latter applies particularly to the post offices - an alternative to closing them.

In addition, there should be negotiations with banks not controlled by the government, backed up by regulation to ensure services in the public interest.

Urgent Government Action December 2008

2008-12-02T09:30:00.000-08:00

the Current Crisis: A Layman’s Perspective

The media is awash with experts, especially economists and financiers, telling us what to think. Although we are grateful for their specialist knowledge, there is an important distinction between technical expertise (how banking works, or doesn’t work. for example) and a perception of the economic and social reality experienced in communities.

I am not an expert. My perception of the 2008 crisis is shaped by a life-long interest in politics and world affairs; perceived as a member of the Labour Party for over 50 years. In a genuine democracy it would be accepted that the thousands with experiences similar to mine are able to make a useful contribution to the debate on what is to be done.

In our, increasingly undemocratic, society voters’ views are considered less relevant than, for example, the pontificating of the Governor of the Bank of England. For months we have had to listen to his increasingly obvious nonsense about interest rates, without any possibility of calling him to account.

The government, and the Bank of England under pressure, have taken decisive action in October and early November. But many of us, as well as some experts (for example David Blanchflower, David Smith, Larry Elliott and Will Hutton), saw the need for urgent action more than six months ago.

The October/November action, including the government’s fiscal measures, should have been taken earlier and it is certainly not sufficient. The focus, now, must be on countering the recession with measures which create not only a stable society, but also a much fairer one.

On responding to the crisis, how have the various ‘responsible’ parties performed?

The Bank of England

By refusing to cut interest rates until compelled by international and government pressure, the Bank has landed itself in the category of those who have acted irresponsibly. If David Blanchflower, the only member of the Monetary Policy Committee (MPC) to vote for interest rate cuts for 6 consecutive months, could see what was coming, why did the other members fail to notice?

The Governor’s advice was clearly wide of the mark. He should, at minimum, apologise and act quickly to compensate for his ineptitude. The 1.5% cut in November (again, strongly influenced by outside pressure) is a belated recognition that decisive action is required: it must be followed by two more cuts in December and January. Without further reductions, there is still a high risk of a long recession, with the likelihood of deflation.

The Bank of England’s inflationary fears of the past few months were unrelated to reality in the world outside. Recent inflation was the result of the rising costs of energy and food, where the Bank has no control. Rising prices were not the result of excessive wage settlements, and related UK factors - factors which can be directly affected by our interest rates.

These failures demonstrate the dangers of giving to experts powers which are not subject to any kind of democratic influence or control.

The Opposition Parties

The proposals of the Liberal Democrats’ Vince Cable have been more relevant than anything from other front bench persons this year. His criticism of the government is not for the action it has taken but for the delay in taking it. Incidentally, his excellent performance appears to have done his Party little good in the opinion polls.

The Conservatives, however, have appeared to be completely at sea (which, we now know, is where George Osborne actually was this summer). Everybody knows that the problems (especially in the City) originated with the Thatcher deregulation and privatisation; although it must be accepted that the Blair governments were remiss in allowing the markets to continue to enjoy their excessive freedom.

The Cameron Opposition appears to support the part nationalisation of the banks, while claiming that they oppose state intervention. On Channel 4 news 20 October, the Tory spokesperson claimed to be opposed to borrowing and tax increases but argued for the postponement of VAT payments and the reduction of national insurance contributions to help struggling companies.

When asked by the interviewer where, if not to be borrowed, the money was coming from, the interviewee replied ‘corporation tax’. It was pointed out to him that his Party is pledged to reduce corporation tax. This interview is typical of the Conservative’s contribution to the debates on the crisis.

Although the Blair governments (and the Bank of England) should not have allowed house prices and consumer debt to rocket, there is scant evidence of the Conservatives advocating alternative policies. They continue to criticise Gordon Brown, without offering any solutions of their own, and they appear to have little understanding of the international dimensions of the crisis.

The Conservatives’ opposition to borrowing to counter the recession obviously implies that their ‘remedy’ is to allow the market to take its course - with unemployment continuing to rise, as under the Thatcher governments of the 1980s.

Government Borrowing

First, it necessary to recognise that the £ billions made available to the banks is not public expenditure: it is investment, which could, and should, result in a profit. Of course there are always risks with investments, but the reasonable assumption is that there will be a positive benefit from the interest the banks pay on loans, and from a rise in the shares the government holds when normality returns to the markets.

Second, although rising (e g as a result of falling tax receipts) as the recession starts to bite, our government borrowing, as a % of Gross National Product (GDP), is lower that all G7 countries - with the possible exception of Canada.

Against the G7 average of around 80% of GDP, the UK’s borrowing is around 50%. Japan is almost 200%, Italy 100% and the USA, France and Germany in the 60%-70% range.

This means that the option of borrowing short-term to counter recession is available to the U K government. It is the only realistic option if millions are to be saved from the misery of long-term unemployment and its crippling consequences.

However, it is essential (i) to target expenditure to create a fairer society in the longer term, and (ii) that there is a strategy to repay the borrowing (say, to a national debt level of 40% of GDP) over a 5-7 year period.

Strategy for Recession

The government has already recognised that the appropriate response is to increase, not reduce, public expenditure. It is bringing forward projects, especially in construction. This is a modest step which will save some jobs; although it is likely to take time for any significant impact.

However, the urgent need is measures to make an immediate impact. The obvious answer, to stimulate the economy and create a fairer society, is policies for a redistribution of wealth. This implies radical policy changes, likely to cause the government to hesitate, but they are the only sensible and fair way forward.

More money must be put into people’s pockets - because they need it, especially for food and warmth, but also because it will have a positive effect on the economy. People struggling to make ends meet will spend any money they receive, with an immediate stimulus to retail sales.

In addition to the steps the government has already taken, I envisage something along the following lines:

(i) taking one million of the lower paid out of tax brackets;

(ii) doubling the winter fuel allowance;

(iii) a scheme to guarantee new mortgages, especially for first time buyers.

It appears that the government has already decided to invest in green energy projects, which will create some new jobs in the medium term.

Paying For It

It would be irresponsible, as well as damaging to the economy, to take these steps without a strategy to repay the borrowing – over a period, say, of 5-7 years. The policies for funding should include a windfall tax, a more progressive tax system, and a drastic reduction of public expenditure on defence.

The windfall tax should be levied on companies making excessive profits, especially the oil companies and the utilities. A major benefit of such a tax is the speed with which the income could be available to the government. It should be levied on profits 2007/2008 and paid 2008/2009.

People at the lower end pay a higher proportion of their income in tax than any other group, which is the main reason for taking at least a million out of tax brackets. If the means used were to increase allowances for all tax payers, the majority of working people would benefit.

I leave to the experts to cost the programme I have described. If my estimate of £100 billion is too low, the answer is not to reduce the programme but to increase the income to fund it.

Most of this funding must come from a windfall tax and from reducing expenditure on defence, including abandoning Trident. However, more must be acquired from a more progressive income tax system, with, instead of the proposed 45% rate, new rates along the following lines:

- a 50% rate for incomes over £75,000

- a 60% rate for incomes over £95,000

- a 65% rate for incomes over £120,000

This would raise some of the revenue to pay for the tax reductions: equally important, it would also be a first step towards the fairer society the Prime Minister is committed to create.

Tinkering Had To Stop

2008-10-13T03:10:00.000-07:00

Brown and Darling: The First Step

It was bolder than many of us expected. Give Gordon Brown and Alistair Darling some credit but its a pity they are so reluctant to exert public control.

Because it is clear to everybody that the banks cannot be relied upon to act in the national interest, part nationalisation is second best to proper democratic control - in the long-term, not just in a crisis.

The issue is not saving bankers but providing a reliable service to all members of our communities.

The Next Step

Stabilising the banks is only the beginning. Without delay, the challenges in the wider economy must be addressed. There is no need to 'wait and see', which has made the situation so much worse with the Bank of England's dithering on interest rates.

A minimum of £500 Billion (Stage I) must be made available to support employment and housing. Keeping people in work, and in their homes, is the key to economic stability and enhanced quality of life. This should be announced, along with a .50% cut in interest rates.

Persisting recession is not inevitable but avoiding it cannot be left to the market forces which have got us into the current difficulties. It is likely that it will require 4 stages (4 x £500 Billion), with proper planning and democratic control, to restore growth and prosperity.

Greater equality, green energy creation, adressing poverty here and internationally, must be the priorities of the evolving programme.

Policies For Funding

Funding the 4 stages, and paying back what the government borrows (including for the commitments already made) requires radical policy changes.

These include cutting expenditure on defence (e g wars and Trident) and introducing a tax system to increase government income from the wealthy.

There is detail on the above in Capitalism in Crisis: A Socialist Solution available on ebay, or from D J Kyte, Flat 27, No 1 Parkhill, Moseley, Birmingham (£4, including p&p).

Stop Tinkering: Govern and Inform

2008-09-08T03:12:00.000-07:00

Who is in charge?

The government is so poor at communicating that we have to guess what is going on. Gordon Brown and Hilary Benn tell us that there will be no immediate cash payment (£100 was floated) for pensioners - because the priority is long term measures (10 year,20 year) to save energy. This is likely to be of small comfort to people in their 80s and 90s.

From press reports, we learn that the reason for the non payment is that the energy companies will not play ball. The foreign controlled companies (French, German) fear that, if they agreed to the £100 payment, their own governments would demand the same.

All of this, of course, demonstrates the folly of privatisation. The position would, clearly, have been very different if energy companies had remained under public control.

Does Democracy mean anything?

We do not elect energy companies: we elect governments. We expect them not only 'to feel our pain' but to do something about it - and to remember that our gas and electricity bills have to be paid NOW.

The finance to support people, and the economy, at the level required (£20-30 Billion) could be acquired from two sources - and the action would receive overwhelming public support.

The first source is a windfall tax on companies (especially energy companies) making obscenely large profits. The government, we are told, hesitates because this would upset the City of London and result in companies moving their bases to other countries.

This would probable not happen on any significant scale. If it did, we should be pleased to say goodbye. The City of London (especially banks etc) contributed significantly to the current economic difficulties. They must not be allowed to govern the country.

The second source is to slash the defence budget, and borrow now against the funds which would become available next year and the year after. This means withdrawing from Iraq and Afghanistan and developing an international policy based on support for the United Nations.

This would, no doubt, upset the USA. But government from Washington is no more acceptable than government by the City of London.

Radical Policy Changes

For detail, including fuller explanation of the policy changes necessary, go to Ebay and buy (at cost £4, including p&p) Capitalism in Crisis: the Socialist Solution - which could be as aptly entitled 'the Common Sense Solution'.

This booklet is also available (same cost) from John Kyte, Flat 27, No 1 Park Hill, Moseley, Birmingham B13 8DU.

Buying Houses and the Government

2008-09-03T02:40:00.000-07:00

Government's Small, Faltering Steps

Any help for people struggling in the housing market must be welcomed. It can only be hoped that the measures announced 2nd September will be followed by others in days rather than weeks.

What is striking is the contrast between the seriousness of the economic situation, as reflected in Chancellor Darling's recent comments, and the comparatively minor measures just announced.

The other depressing factor is the continuing evidence that the government is on the side of big business, rather than ordinary citizens.

For example, it appears that the bulk (if not all) of the additional funding for Shared Equity house purchases is to be allocated for new houses property developers wish to sell.

The shortage of funding to help young people to buy (and private citizens to sell) older houses in the housing market gives the impression, again, that the emphasis is on helping developers to sell houses, rather than helping young people to buy them.

If this is not the case, why is there no more support for individual citizens who wish to sell, and buy, houses?

What follows is an account of the experiences of one young couple who attempted to buy a house using the Government Shared Equity Scheme.

The Government’s Shared Equity Scheme and First-Time Buyers

Introduction
A scheme with a government backed loan at low interest acting as a deposit (say 25%), plus a mortgage at a competitive interest rate, appears ideal for First-Time Buyers on modest incomes.

For this reason, we attempted to buy a house for approximately £110,000 – an amount which our joint incomes matched comfortably for repayments.

Unfortunately, although we responded promptly to all requests for information - and met the criteria of the Scheme, when we finally had an offer for a property accepted we were told that the money had run out.

Yet, immediately before we made the offer, we had been told that the money was available for us to go ahead. As any reasonable interpretation of this must be that the money had been allocated, an explanation of what happened to it is obviously required.

The purpose of this report is to draw attention to the difficulties, especially for young people, arising from the way in which the scheme is operating.

Apart from the facts recorded below, there have been innumerable telephone calls and Emails.

There is supporting written evidence for the factors listed below.

Operation of the Shared Equity Scheme 2008

The details which follow show how the scheme operated in our case.

(i) 4^th April MY 4 Walls assessed, and approved, our application for a loan to support (as a deposit) a Shared Equity Scheme purchase.

(ii) 18 April we received a letter from MY Choice Homebuy to confirm notification from our local Homebuy agent.

(iii) We made an application for a mortgage to the Halifax to supplement the loan.

(iv) 20 May we received confirmation from Connells that an ‘in principle’ acceptance had been received from the Halifax for up to £90,000. This was confirmed on a Priority Card.

(v) 23 May we received an Email stating the fees for buying a house for £110,000.

(vi) 10 June we received confirmation to go ahead and make an offer.

(vii) In this context, we made an offer of £90,000. This offer was not accepted.

(viii) We then made an offer of £105,000 for a house in Cromwell Street.

30 June we were informed that our minimum purchase price was £107,000.

This mystified us, as it appears totally unreasonable that there should be a minimum purchase price. In any case, why were we not told this before we made the offer?

(ix) 30 June we received a letter confirming the Scheme acceptance of our application.

(x) As our offer of £105,000 was not accepted, we increased it to £110,000.

(xi) Our offer of £110,000 for 65 Cromwell Street was accepted by the estate agents, Saxon Mee on 11 August.

(xii) 12 August the Scheme administrator was informed (by Email) that our offer had been accepted.

(xiii) 18 August we received forms to be completed from the Scheme Administrator.

(xiv) 19 August the completed forms were returned to the Scheme Administrator.

(xv) During the afternoon of 19 August, the Scheme Administrator ‘phoned and stated that the money had run out.

This was a shock and, obviously, extremely disappointing. We cannot understand how, within days, we were told that the money had been allocated, and then that it had disappeared.

Policy Alternatives: Urgent

For alternatives to the Government's current policies see Capitalism in Crisis: A Socialist Solution. This is available on ebay at cost (£4, including p&p), or from John Kyte (same cost) Flat 27, No 1 Park Hill, Moseley, Birmingham B13 8DU

Capitalism in Crisis: A Socialist Solution

2008-08-28T04:49:00.000-07:00

Government Action?

The 'credit crisis' has been with us for more than a year. The government, acting in days and weeks, has provided £s Billions to bail out the banks. This includes Northern Rock, which has been nationalised.

Wealthy bankers, largely responsible for the scale of the credit crisis, have been given what they asked for. But what about the rest of us?

A minor initiative to help first time house buyers is unbelieveably bureaucratic. I know of applicants who spent 3 months filling in forms, were frequently mislead, and then (having been told that their application had been accepted) were informed that the money had run out.

What a ridiculous situation, when the government claims to be concerned about the state of the housing market!

Action This Day

If the government is genuine in claiming to 'feel our pain' it must act immediately. It acted in days to save the banks but has not stopped the banks making people homeless.

It could have impossed a windfall tax in May (at the latest) and used the proceeds to keep families in their homes and help the poor with their food and fuel bills.

A radical programme is needed but, given performance so far, expectations cannot be high for the measures we are told the Chancellor will announce next month.

The Solution

The type of radical programme required is described in Capitalism in Crisis: A Socialist Solution. This booklet is available on ebay at cost (£4), including p&p. Or send £4 to John Kyte, Flat 27, No1 Parkhill, Moseley, Birmingham B13 8DU.

Buy it and, even more important, join the campaign for a fair deal for all - not just for bankers.

Callaghan's Defeat and the Country's Wrong Turning

2008-07-24T04:23:00.000-07:00

It was after the weak and befuddled Callaghan government was defeated in 1979 that the country took a wrong turning. The first Thatcher administration started retrogressive policy trends that have continued until the present – through 18 Tory and 11 Labour years.

The key policy drivers throughout this, almost 30 year, period have been:

(i) the transfer of powers from local authorities, as part of a general intention to undermine democracy;

(ii) attacks on, and measures to weaken, the trade unions, as part of a general attack on workers’ rights;

(iii) the, in effect, giving away of the main benefits of North Sea Oil to commercial interests, and the privatisation of a whole range of other national assets.

Democracy was undermined by the transfer of powers from local authorities, controlled by elected councillors, to unelected quangos and other nominated bodies, such as school and college governors. Policies, and their implementation, were dictated from Westminster and Whitehall, with insignificant consultation.

Because local councillors no longer had the powers to address issues, for example in education, raised by members of their communities, citizens became increasingly divorced from the political process. The feeling that they do not matter, and they cannot make a difference, is why so many do not vote.

The most serious consequence of the Tory governments’ anti trade union measures is the removal of worker protection. The ‘free’ employment market enables employers to drive down wages and dismiss employees much more easily, often unfairly.

The enormous potential of North Sea Oil to raise the living standards of the poor was squandered. Effective control was given to multi-national oil companies and the £ billions the government received in tax were used to fund rising unemployment. The number out-of-work rose to over 3 million, as manufacturing industries were allowed to disappear.

The Thatcher and Major governments regarded a thriving City of London, not a buoyant manufacturing sector, as the measure of success. The Tory conviction was that if controls were removed the free market would solve all economic and social problems. The 2008 disasters in the housing market originated with these free market policies.

Building societies, in effect owned by their customers, were allowed to become banks. Many then embarked on irresponsible lending binges and paid large bonuses to employees who sold the most loans. It ended in tears, as the collapse of Northern Rock, and the difficulties of other banks, have demonstrated.

The Tory position, in accord with its tradition, has been that public expenditure is an evil and should be reduced to lower the ‘burden’ of personal taxation. In addition to giving the better off a good deal on tax, the Thatcher and Major governments gave them, what were, in effect, one-way bets: they were able to buy shares below market value when the public utilities (gas, electricity, water telecommunications etc) were privatised.

It took a long time for the majority of people to recognise the damage inflicted by these policies on the public services. However, by the end of the 20^th century, Labour, along with citizens who had experienced the damaging effects of the Thatcher cuts, recognised that public expenditure, especially on the health service and education, needed to be increased.

It was because, in so many respects, it was recognised that the Major government’s policies were heading in the wrong direction that a Labour government was elected in 1997. Many of us in the Labour Party believed that a Labour government would:

(i) improve public services by increasing expenditure;

(ii) transfer powers from unelected quangos;

(iii) take steps to create greater fairness and equality.

The next blog will show how naïve we were.

The Labour Party and Socialism 1950s-1970s

2008-07-21T07:16:00.000-07:00

The Labour Party and Socialism I 1950s-1970s

The Failure of Capitalism

With a few notable exceptions, such as Tony Benn and Eric Robinson, people move to the right as they grow older. There are plenty of examples of this in the present government. Instead of challenging the Establishment, most cabinet ministers become part of it.

Although not notable, I have moved in the opposite direction. I have never doubted the relevance of socialism: with the experience under new Labour, I am more convinced than ever that if offers the only solution.

No doubt this is the reason I have been ignored for the last 30 of my 50 years membership of the Labour Party. Nevertheless, I am willing to help the present government in its hour of need. All it has to do is to ‘turn a deafen’ to the City of London, Washington, the Daily Mail and listen to me, representing (as I’m sure I do) the views of some 3-4 million people in the Labour Party and the trade unions.

As opponents of privatisation, and of restrictions on the range of public services, we are not associated with the policies of recent years. What we are saying, in a general sense, is that rampant capitalism has had its chance and has landed us in an almighty mess.

‘Socialism’ must not only dare to speak its name, but also have the courage to explain how its policies are the most relevant for addressing the economic and social challenges we currently face.

Labour in the 1950s

In the 1950s there appeared to be a real prospect of improvement in the quality of life of all citizens. A free health service had been established by the Attlee government, and the railways, coal mines and utilities (gas, water, electricity, communications) were under public control.

The post-war re-building by the Attlee governments 1945-1951 placed the economy on a firm footing. By the mid 1950s the standard of living had developed to the point where Harold Macmillan’s ‘we have never had it so good’ was widely recognised.

The ‘we’, however, was far from including everybody and there was a great deal to do to create a fair and equal society.

Labour in the 1960s

Harold Wilson, who had resigned with Aneurin Bevan when Gaitskell imposed health charges in 1951, believed that people could be lifted out of poverty as a result of the economic benefits flowing from ‘the white heat of the technological revolution’.

The strategy of raising the living standards of the less well off from economic growth, as an alternative to a more progressive tax system to redistribute wealth, has persisted throughout all Labour governments since.

By the 1970s it was clear that the ‘equality from economic growth’ strategy did not work and only very modest progress had been made towards a fairer society. However, taking a world view, the balance of power between capitalism (led by the USA) and communism (led by the USSR) appeared to be maintaining a relatively stable world.

For the UK, North Sea Oil held the prospect of improved living standards for all UK citizens with, in addition, sufficient resources for investment in developing countries. It was also possible to be optimistic about democracy; particularly given the balancing powers of government, local authorities and trade unions.

Rights, laws and recognised procedures to protect employees, won by working-class struggles over the previous century, provided reasonable protection for citizens threatened by vested interests and bureaucrats. Although there was a great deal to do to eliminate poverty, create equality, and improve public services, it appeared doable.

However, at the end of the 1970s, the country took a wrong turning which will be described in the next blog episode.

Who is well placed?

2008-07-18T02:57:00.000-07:00

A frequently comment by members of the government is 'we are well-placed to survive the economic storms raging around us'.

I don't want to hear this any more. The 'we' may refer to senior members of the banking fraternity who, having been bailed out by the government, will continue to receive their obscenely large bonuses - or to hedge fund managers taking advantage of companies in difficulty to buy them on the cheap (and then make £ millions).

The 'we' is certainly not senior citizens struggling to pay their electricity and gas bills, or families with growing mortgages, or young people trying to buy a house.

Yes, the government has taken some minor steps to help, but nothing on the scale of the £ billions made available to the banks. We are a rich country (5th richest in the world, I believe).

But the riches are most unfairly distributed and the posts which follow will describe what must be done about this - not next year, or next month, but action now.

WHY SOCIALISM?

2008-07-15T04:44:00.000-07:00

WHY SOCIALISM?

Policies and Principle

This Blog is not about intellectual reflections on socialism. But neither is its concern limited to a political programme. Its purpose is to explore the thinking and experiences of those who have gone before - as the basis for a strategy to address the political, economic and social challenges we face in 2008.

However, if the policies proposed are to have a beneficial, and lasting, effect on our quality of life, we must have a clear understanding of the principles on which they are based. The action taken by government must lead to a more fair and equal society.

From my own experience of 50 years in the Labour Party, I hope to strike a cord with other members - and ex members who have left disillusioned. Even more important, I urge them to agree that it is the members, and only the members, who can save the Party and the Brown government.

But there is no time to lose. In the present, difficult, economic circumstances millions of people need help – and they need it quickly. Unless the government acts immediately, there is no chance that Labour will win an election in 2010.

We Must Act Together

I am convinced that we, the members of the Party, can make a difference – providing we act together. We can play a particularly important part in convincing our friends and workmates that there is an alternative to our unfair and unequal society.

What I describe as a socialist programme is also easily seen as a common sense response to the political challenges of 2008. The policy strategy I propose is a number of urgent initiatives made necessary by the, very obvious, failures of capitalism.

There are several reasons for the current economic difficulties; especially the rising price of oil, gas, raw materials and food. Although these increases are not the responsibility of new Labour, Blair governments must take responsibility for the freedom they allowed the banks to act so recklessly in the mortgage market.

New Labour A Spent Force

It is now blatantly obvious that new Labour is disorientated because its supporters do not have the policies to address the 2008 crisis. The banks, which are largely responsible for the housing crisis, get what they ask for – for example, over £50billion in loans – without giving anything significant in return. Meanwhile, victims of the irresponsible lending are having their houses re-possessed.

However Labour, Clause Four and all, does have the answers. Blair treated members of the Party, and the trade unions, with contempt. The only hope for the present government is to ignore the advice of the captains of industry, the Daily Mail, Washington and return to democracy as a basis for decision-making.

The immediate task is to restore democratic decision-making in the Labour Party - because this is the only means of acquiring the policies needed to address our current economic and social challenges.