Ed is not our nation’s salvation

27 Sep

Photo credit: Ed Miliband

Photo credit: Ed Miliband

This week, three years after becoming leader of the Labour party, Ed Miliband finally rolled out some policy. At this stage though it may be too little too late for those affected by coalition austerity.

Not that there is anything too disagreeable amongst the main headline announcements at this week’s Labour Party conference. The three that seem to have drawn the most attention on front pages and live rolling news are thus: the abolition of the ‘bedroom tax’, the announcement of free childcare for working parents, and a two year freeze on energy prices. Miliband’s tag team partner Ed Balls also proposed putting Labour’s next election manifesto to the Office of Budgetary Responsibility in what is likely an effort to earn some economic legitimacy.

Freezing energy prices will not go down well with the big six energy companies of course. The independent reported on Wednesday how energy firm Centrica had lost £950 million in its value on the stock exchange following the Labour leader’s announcement. The newspaper said ‘shareholders are concerned that their dividends will suffer as a result of the bill freeze’. This serves only to make the shareholders seems selfish and the Stock Exchange appear fickle.

If Centrica are expecting us to feel sympathy they are probably hoping we’ve all forgotten about the £16 million they could afford to pay their executives last year. The energy price freeze could be a lifeline for working people who have been hurt by the rising cost of living. With further energy price hikes imminent (most sources claim an increase of 5 to 10 per cent) the big six will certainly not be empty pocketed come the next election. It’s fairer they take the hit than struggling households.

The less said about the ‘bedroom tax’ the better. Freedom of information requests revealed last week that in the first four months of the ‘bedroom tax’ a third of council house tenants have found themselves in arrears. The obvious problem, a shortage of affordable housing, is known but is not being dealt with properly.

Miliband’s policies are well intentioned and will improve many people’s lives, but they are also calculated. The nod by Jonathan Freedland in the Guardian on Tuesday to Miliband’s focus testing of his energy price freeze is revealing. This Labour conference isn’t the beginning of a slew of announcements that will turn back the tide of welfare abusing Tory policy. Cameron and Osborne have still managed to make a disastrous austerity policy seem like it’s working (spoiler – it’s not).

I am certainly not in Miliband’s corner, but I can see he is hamstrung by the election cycle and Tory spin on the economy. Instead of fighting every Tory attack on the public services millions depend upon, Miliband has to concentrate on one day in May 2015. Much like the American television industry with its new TV shows, our political parties big ideas seem destined always to be pumped out over the space of just a few weeks each autumn.

Despite Toby Young’s assertion that Red Ed simply re-announced the 1983 Labour manifesto this week he need not panic (though it must be said the list he presents is probably far less repugnant than he thinks, and would likely receive greater public support than it did in the 80s). Miliband is trapped in a political climate where calling for a fairer tax system and a better welfare state is labelled the ‘politics of envy’.

The present terms of political debate will never allow Miliaband to truly follow through on this week’s announcements. This needs to change.

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A private Royal Mail is the wrong move

22 Sep

Photo by Elliott Brown, via Flickr

Photo by Elliott Brown, via Flickr

In many ways the Royal Mail’s relationship with privatisation has been similar to that of James Bond’s relationship with a super villain. No matter how many times it seems like privatisation is going to win the Royal Mail clings on to public ownership.

‘Do you expect me to talk?’ says the postman strapped to the table as the laser beam works its way towards his torso.

‘No, I expect you to be floated on the stock exchange’ is the reply. Well, something like that anyway.

This time, however, it looks like even a postal worker’s strike won’t stop the coalition government privatising the Royal Mail.

Ironically, just as the chances of the public sell off are at their highest, the excuses for privatisation seem to be at their weakest. The old argument about our public postal service making a heavy loss has been dismissed, with profits for the year ending in March 2013 at more than £400 million. The rational for the current privatisation effort seems to rest on a purported need for investment and improved efficiency.

In a piece declaring his general opposition to privatisation, former labour minister Brian Wilson conceded that Royal Mail did need huge investment to compete with ‘expansionist’ postal companies from elsewhere – in particular Wilson singled out Germany and the Netherlands. Wilson is right to oppose this privatisation, but given the £400 million profit, double that of the previous year, the Royal Mail already seems to be competing fairly well. Meanwhile, as Will Hutton points out, when it comes to major investment projects private owners often require significant financial guarantees from government. The plan to achieve universal broadband coverage in the UK has seen a government capital investment of £1.2 billion, along with significantly less from the privatised British Telecom.

The issue of postal companies from Europe seems to be the point on which the current privatisation effort is hinged. It is true that both Germany and the Netherlands have privatised postal services. Unfortunately neither of them can be considered an argument for the Royal Mail to follow suit. Allow me to take a brief detour as I try to present a rough guide to the Dutch postal service.

In 2012 PostNL, the company with a near monopoly on the Dutch postal system, saw a turnover of over €4 billion. In February it announced its intention to cut more jobs in an effort to save a further €70 million and eventually start paying dividends to its shareholders again. This effort has also seen a ‘reorganisation’ involving the closure of local sorting centres in a centralisation exercise that will likely end in the gloomily predictable result of poorer service and overworked and underpaid workers.

Unfortunately you are unlikely to hear about this on the six o’clock news here in the UK. Many media outlets are too busy holding up the Netherlands (along with Germany) as examples of why the near 500 year old Royal Mail needs to be privatised pronto.  No one has achieved this better than Alex Massie of the Spectator, who masterfully points out ‘if Germany and the Netherlands can privatise their postal services – and make them work – there’s little reason to suppose that doing so in Britain is simply a question of crazy free market ideologues running amok’. Ironically, the sword Massie uses to slay his straw man argument about the rampant free market is weaker than the point his is trying to dismiss.

Of course there is the question of the German postal service, which has been privatised almost as long as its Dutch counterpart. But Deutsche Post DHL and its competitors in Germany are regulated by an entire Act passed by the German parliament to ensure a quality of service. Thanks in part to this regulation Deutsche Post behaves fairly and responsibly to its employees in Germany and Europe, even agreeing to a pay rise for more than 130,000 workers. Britain has a different attitude to industrial relations. It is unlikely similar protection will be afforded to a privatised Royal Mail and the Universal Service Obligation, which ensures letter delivery six days a week and a uniformity of price regardless of geography, will likely become a casualty of the private sectors need for profit.

Outside Europe, the German postal giant has reportedly behaved less fairly. A 2012 international report claims Deutsche Post DHL ‘systematically aims to limit freedom of association, collective bargaining and the presence of a union within its workforce’.

While the Royal Mail is currently making profits in excess of £400 million, a constant excuse for its privatisation over the years has been its inability to make money. This deeply mistakes the point of a public service. The profit provided by a public service is not economic, but social: being able to send a letter six days a week to every address in the country; having an affordable bus service which can get you to work on time even if you live on an unprofitable route.

If Royal Mail is privatised it will follow the same model as all such former public services: financial profits will be privatised and any need for risk or major investment will be shouldered by the state, or not at all. I don’t pretend that I can see into the future but  this has happened too many times before for me to expect a different result.

The government’s austerity project seems more like malice every day

27 Jun

By Chris Hansell

Photo by mjtmail (tiggy) via Flickr

Photo by mjtmail (tiggy) via Flickr

Question Time, the BBC’s flagship political debate programme, can be both intriguing and insufferable. Last week’s edition, with the Lib Dem’s Ed Davey and Labour’s Harriet Harmon using up lots of words but saying very little, was a paint-by-numbers example of this.

Dropping divisive comedian Russell Brand into the pot was not therefore unwelcome. It’s always nice to see someone on Question Time who isn’t weighing their every word against their own political ambition. But this post isn’t really about QT.

What I’d like to talk about is a comment that seemed to be ad-libbed by Brand. Speaking about the bankers and the crisis they created the comedian said ‘incompetence of that degree, with those kinds of consequences, is indistinguishable from malice.’

I haven’t decided whether I agree with this yet, but it’s an idea we should all give a lot of thought. Given the many people who have suffered, been plunged into poverty, had their safety nets yanked from beneath them, found themselves jobless, is there any difference between having caused this crisis through self-interest or ineptitude?

We should ask ourselves the same question about the calamitous economic policy of our dear Chancellor. On Wednesday George Osborne stood in the House of Commons and remarkably managed to surprise no one with another set of budget cuts. But at this point what can we really expect from a man who seems to lack the imagination of even an economist?

Way back in 2009, before the Cameron-Osborne Austerity project found its way into Downing Street, world renowned British economist David Blanchflower made an obvious point: ‘You don’t cut public spending in a recession’. The sense of this statement is obvious. If you have debts to pay back the absolute worst time to pay them off is when you have no money.

Even after four years you can feel Blanchflower’s exasperation when he says of the Tories’ austerity plan ‘I haven’t seen such blinding incompetence for a very long time’. There’s that word again: incompetence. But how many people really believe that anymore? Headlines from the 2013 spending review include a ten per cent cut to local government budgets, ten per cent from the Environment department and a new cap on welfare spending. This is just a slice of the cuts. Nearly every government department has seen reductions. A government department can seem a bit abstract but we shouldn’t forget how budget cuts will damage the services millions of us depend on every day.

Local councils will be next to useless once they have combined these latest cuts with the ones they already have to implement. The welfare safety net is clearly not something the millionaires and Eton alumni in Cabinet see as important. With the Work and Pensions budget slashed by nine and a half per cent and housing benefit and disability living allowance capped this message could not be clearer.

Yet can this economic policy be, as Blanchflower suspected in 2009, simply the result of economic incompetence? In May I wrote a blog post about the media buzz surrounding an IMF visit to the UK. Really it should not have been a big deal, but key members of the IMF had said some very surprising things about our economy. Someone else who wrote about the trip was Korean economist Ha-Joon Chang. Chang had this to say about our economic bind: ‘Current policies in the UK and other European countries are really about making poor people pay for the mistakes of the rich.’

For Chang the IMF’s trip showed that our government was persisting with a policy that unnecessarily hurt poorer people because the results would benefit the rich. I find it hard to disagree with this assessment when our Chancellor slashes vital public services so freely while multinational corporations are able to pay such low amounts of tax with only token political opposition.

Internet giant Google can pay only £6 million on UK generated profits of £2.6 billion while new university students must burden themselves with £9,000 a year course fees on top of living costs. Corporation tax is lowered by eight per cent in the space of three years but freezes to public sector pay and housing benefit make the cost of living more difficult to bear for hard working people.

When Russell Brand talked about incompetence and malice on Question Time last week he could just as easily have been talking about the policies of our government and our Chancellor. What has become clear though is that the UK’s grand austerity project is more about malice than incompetence.

Greece, Europe and an abandoned generation

4 Jun

By Chris Hansell

Photo by linmtheu, via Flickr

Photo by linmtheu, via Flickr

In April a bill passed in the Greek Parliament which will lead to a loss of 15,000 public sector jobs by the end of 2014. It’s just the latest wave of austerity measures that have crippled a country and left more than 60 per cent of its young people without work.

The bill was passed as part of an agreement with the so called ‘troika’ – the European Commission, the European Central Bank and the International Monetary Fund – who have in return obligingly supplied €8.8 billion to the cash strapped country. This money should be used to help Greece get back on its feet. Instead it will almost certainly be used to service an astonishing national debt burden.

In a complex but insightful analysis of the Greek debt burden Nikos Tsafos highlights a vital point. Between 2010 and 2012 the Greek government spent more than 50 per cent of the money it acquired from borrowing and privatisation on servicing its debt burden. This included €37.9 billion in interest on the debt. There is no doubt certain parts of Greek society (most specifically its government and the banks it borrowed from) have lived beyond their means. But like other countries across Europe, such as Spain and Italy, its young people are being unfairly punished for excesses they did not commit.

It does not need to be this way. The troika has already forced the Greek government into lowering the minimum wage and slashing social welfare spending. Austerity is slamming the brakes on economies across Europe, including the UK, and abandoning the youngest generation of workers to a job market that seems to fall away from under them. At the same time private companies like Google and Starbucks pay astronomically low tax thanks to shady but legal tax practices.

It’s hard to dismiss the idea that Europe is in the midst of some shock therapy a la Naomi Klein’s The Shock Doctrine. In the case of Greece it is most potent – cuts to pensions and public services, privatisations, immigration used as a spectre to divert anger away from brutal economic policy – but it’s evident across the continent.

The goal of this kind of austerity is alluded to in the IMF’s recent review of France’s economy. Among its main recommendations are less public spending and reforms to make it cheaper for businesses to hire workers. The message could not be clearer: France must become attractive to multinationals by making it easier to hire and fire workers who they are allowed to pay substantially less.

Last week figures published by the EU’s data office revealed that in the Eurozone nearly one in four young people (aged 16 to 24) were unemployed. April saw a rise in overall unemployment across the Eurozone of 95,000.

Reacting to this sort of news with anything other than a sense of cynical resignation is becoming more and more difficult. As someone who fits the age band for these statistics I cannot help but feel like the horse with the longest odds at the races. But in this case my entire generation is that horse – because we only turned up after the race had finished.

Politicians look indignantly at big business

17 May

By Chris Hansell

Photo by graziano88

Photo by graziano88, via Flickr

What happens when politicians are feeling particularly hated and scorned? They have a bash at a group even more disliked and reviled.

This seems to be what took place at a hearing of the Public Accounts Committee in Parliament on Thursday, with MPs taking the collective chance to look indignant at big business.

The issue is plainly stated in the Independent: Google have paid only ‘£6 m in UK corporation tax in 2011 despite generating more than £3bn in advertising revenue in this country’. Now to ensure  there’s no risk of me breaking defamation laws (don’t worry – probably not a strong possibility) I should clarify a few titbits. Google’s Northern Europe boss Matt Brittin says while UK staff are involved in encouraging advertises to buy ad space the actual transaction of buying ad space takes place in Ireland.

What seems to have been at issue at the committee on Thursday is just how much of the ad selling process took place in the UK. Committee chair Margaret Hodge repeatedly talked of whistleblowers who offered payslips showing ‘substantial bonuses’ based on ‘sales’. As Mr Brittin was quoted as saying in the Telegraph “’the UK team are selling, but they are not closing’”. Still, legally speaking it seems that if the ad transaction takes place in Ireland it cannot be taxed in the UK. I’m not a legal expert.

This is not to say it is morally right. If, as Mrs Hodge claims, much of the ad selling process takes place in the UK then I think it is fair that it be taxed here as well. If what Mr Brittin says about selling and closing is true I imagine it would be quite hard for Google to generate the amount of ad revenue without the UK team. This is where the circle closes itself because the only people who can make the tax system fairer and more comprehensive are the people sitting in Parliament and looking aggrieved at Mr Brittin.

On the 17th of June the Prime Minister will host G8 leaders in Northern Ireland. One of the key points of discussion David Cameron says he intends to pursue is the issue of international tax law. Perhaps it’s time Mr Cameron pulls his finger out.

Here’s some extra content I’ve produced relating to the whole tax issue.

Some other articles worth reading on the subject:

Amazon and corporation tax

Google boss to meet Prime Minister

IMF visit sparks media buzz

9 May

By Chris Hansell

Photo by altogetherfool, via Flickr

Photo by altogetherfool, via Flickr

For the next two weeks the UK will be haunted by a gang of economists from the International Monetary Fund (IMF). The 67 year old organisation has let slip a few surprises in recent weeks, but the amount of media attention on the visit has also left me a little surprised.

At one time our Chancellor may have welcomed the visit, reasonably expecting a public pat on the back and a few positive column inches on the side for his austerity programme. This may not be the case for this visit. The IMF’s Chief Economist, Frenchman Olivier Blanchard, has recently been making comments suggesting the Chancellor needs to rethink his plan and perhaps ‘slow down’ the deficit reduction programme.

To ramp up the pressure on George Osborne the Trade Union Congress (TUC) craftily chose this week to publish a report on the economy. Some of its findings will have pleased union leaders, providing probably enough ammunition to last the entire two weeks of the IMF visit.

The news media have so far stuck to their respective political trenches on the IMF visit, churning out the kind of opinions and observations we have come to expect from each of them.

The Spectator likened the visit to an Ofsted inspection. Spectator blogger Isabel Hardman said IMF reports have tended to be ‘so oblique that anyone occupying any part of the political spectrum can find something to cheer them and something else with which to prod their enemies’. This is obviously intended to undermine the visitors before they have had the chance to say anything, but I find that I must agree despite myself.

The Chancellor will still not be getting my pity though, and the idea that Mr Osborne might feel sympathy for teachers seems a little comical considering the government’s education policy.

In a foreseeable move the Guardian married the IMF visit with the TUC report in an article that labelled the recent comments of Mr Blanchard and his colleagues as an ‘embarrassment for Osborne’. Economics reporter Katie Allen also described the UK economy as ‘flatlining’ and pointed to the IMF’s reduced forecast for UK growth.

IMF growth projections for 2013 and 2014 (Made in April)

IMF growth projections for 2013 and 2014 (Made in April)

The intention here is clear: point to how the IMF has cast doubt on the government’s austerity drive.  The intention of the Independent seems to be much the same in their article. Of course the IMF has spent decades producing forecasts and has often got things wrong. While I agree with the anti-austerity sentiment using IMF figures to build a case may not be the best strategy.

Before I move on I’d like to tackle one more example. Financial news website this is money has been showing up in my news searches a lot recently (isn’t my life just rock n roll?) so I thought I’d have a peek at what they say.

The website lines up a number of arguments the Chancellor could utilise against the IMF, but one nugget stood out for me. ‘Osborne’s hand has been strengthened by reports that more than forty global companies are considering moving to Britain to take advantage of low corporation tax rates’ the article says. One industry insider tells the website that this could raise £1 billion in tax revenue.

This is not the trump card it seems, and cuts to corporation tax are not really austerity policies. The cut of corporation tax from 28% earlier this year to 20% by 2015 will no doubt cost the Treasury so much a boost of £1 billion will be redundant.

Now let’s get to the point. You might have noticed in the first paragraph I said how surprising I have found all this coverage. Well, here’s why:

That an IMF visit warrants this much coverage confuses me. Don’t get me wrong – as someone well aware of the IMF’s less-than-polished record I am glad they’re being given the kind of scrutiny they should get every day of the year.  What confuses me is that so many news outlets have decided they should all cover the story at once.

A stuffy, Washington based institution that has usually only ever had real clout in developing countries pops in for a look around and it’s in almost every paper. Looking around perhaps it isn’t so confusing. The economic disaster that was Greece planted the IMF in the public consciousness for better or worse. Austerity has put the economy at the heart of the news cycle and everyone has an opinion. It will probably even decide the next general election.

In the meantime the economic debate is still open and despite everything else this at least is something we can be pleased about.

The UK, South Africa and the aid disagreement

7 May

By Chris Hansell

Photo by rabble via Flickr

Photo by rabble via Flickr

Last week a disagreement between the UK and South African governments briefly broke the surface of the UK news cycle. The story trod water for a day or so before being pushed back under by the pressure of other stories.

The disagreement began when our government announced that it would be ending its aid programme to South Africa from 2015. As the BBC reported this costs around £19 million a year, and the feeling amongst the coalition seems to be that middle income countries (as South Africa appears now to be defined) do not need the kind of aid money that poorer, less developed countries do.

Last year the government amicably made a similar decision to end financial aid to India by 2015. The mantra looks now to be that aid is out and trade is in.

But still, the South African government seem to be annoyed about what they say was a lack of consultation before the decision. The problem is that it is difficult to say who is really in the right here.

In the UK the government’s aid budget is controlled by the Department for International Development, which I sometimes think was named so to ensure people’s eyes immediately glaze over when they hear it. Development, for non-politics nerds, is the idea that through lots of complicated schemes poor countries can develop into well off ones like the UK or the USA.

Withdrawing money from a country that’s well on its way to becoming more like us seems like a sensible step. South Africa is considered one of the world’s big up and comers. It is a BRICS country (Brazil, Russia, India, China and South Africa), one of the big players in the developing world.

So what’s the big deal? India and South Africa both have the same problem. They are becoming more unequal. In South Africa the richest 10% account for 51% of the income. India is as bad, with the top 10% of earners taking home 12 times more than the bottom 10% according to The Times Of India. Between them the two countries still account for a large number of people in poverty.

When the UK stops giving aid to South Africa in 2015 this means projects that tackle AIDS or improve maternal healthcare will be left without further support. Will these issues really be solved by then?

Data from Department for International Development via Guardian Data blog

Data from Department for International Development via Guardian Data blog

And, ultimately, should developing countries really want to aspire to be more like us? In the USA the last 30 years have seen the richest 1% have their incomes increase by 275%, the BBC reported last year. In the UK the bottom 90% saw their average incomes improve by less than £2,000 between 1997 and 2007. Factoring in inflation this is a shrink in spending power. Meanwhile in the same period the top 1% increased their average earnings go up by over £100,000 a year, and the top 0.1% saw average incomes rise by more than £500,000.

As Wolfgang Sachs pointed out in the recent 40th anniversary issue of New Internationalist ‘politicians as well as populations in many countries set their hopes on the model of a Western-style consumer economy’. Manybe that’s not what everyone should be shooting for.

Aid shouldn’t be about trying to make countries more like us. It should be about making life better for the poorest people in society. When the aid stops coming in 2015 those who rely on it to make their societies better and their lives more tolerable will be worse off.

Other articles of interest:

Mining in South Africa and the rest of Africa

Guardian Poverty Matters blog

Tim Ballantine's Blog

A desperate attempt to understand the world, using only misconceptions and non-sequiturs

Completely Unravelled

The messiness of life

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