Saturday, December 24, 2011
Wednesday, December 21, 2011
Turns out that Francois Baroin, the French Finance Minister, wasn't far wrong last week. The most hated man in the City of London said that Britain was in just as bad financial shape as eurozone countries like France, and that the rating agencies should be downgrading British debt. We have higher inflation, lower growth and larger debts than France which is currently on the downgrade 'list of shame'. Now Moodies has put the UK on credit death watch too.
Thursday, December 15, 2011
The clear implication is that Labour at least are no longer viewing the Calman Commisson report, and the Scotland Bill it inspired, as the last word on Scottish home rule. Or rather, Labour is no longer prepared to go into the Scottish referendum allowing Alex Salmond to have an each way bet on the result, by supporting devolution max and independence. Alexander is unspecific about exactly how far he is prepared to go down the road towards "devolution max" but there is no doubt that Labour is now resolved not to go die in the last ditch defending the status quo, while the SNP adopt the mantle of devolution. I talked with him in the BBC studios on Saturday, and his irritation at the way the SNP have claimed credit for home rule, and made the Scottish parliament their own, even though they boycotted the Scottish Constitutional Convention, is very clear.
If there is a better devolution available, Labour will sponsor it.
This is an astonishing moment. The ground is moving under our feet. If Labour is now contemplating fiscal independence, and though Alexander has not said this, I believe that is what he means, then we are on the verge of a constitutional revolution. Let me explain: the Calman Commission was, in a sense, unionism's last throw of the dice. Professor Calman made what I argued at the time was a compelling argument for the Scottish parliament to have tax raising powers. A grown up parliament must take on the responsibility of raising the money it spends, he said. It must be accountable for its actions, transparent, fair, efficient. However, the Calman solution, a fifty fifty split of income tax, was never very coherent and had all the hallmarks of a Whitehall fudge. Even its supporters have difficulty explaining how it would work, or be an improvement on the present arrangements of a bloc grant from Westminster.
The only way forward from Calman is a form of fiscal autonomy where the Scottish parliament raises the vast majority of the money it spends. This has the advantage of moral clarity, and fiscal transparency. There is no jiggery pokery with revised Barnett Formulas, no deflationary fiscal devices. There will be tax sharing, as there is in all federal arrangements, but the fundamental principle that parliament should be accountable is upheld. Scots would no longer, under fiscal autonomy, be able to blame Westminster for "fiddling the figures". The responsibility falls on the Scottish parliament to balance its books, pay its way, tax as well as spend. Make the hard choices. And they are hard. Fiscal autonomy is no easy ride for the SNP because it's main propaganda message - 'it's all London's fault' - is whipped from under them.
No wonder Douglas Alexander/s namesake, Danny - the Treasury (?) is sounding increasingly desperate. The unionist coalition built around the Scotland Bill has fallen apart. But this is only a recognition of reality. Calman was a victim of the May election, when the SNP won an absolute majority in the Scottish Parliamentary elections. Alex Salmond can do exactly what he wants in Holyrood, and he has made clear he is not going to vote through the Scotland Bill in its present form. Since the passage of the bill requires the consent of the Scottish parliament this has killed the bill because the SNP will simply it. What is Westminster going to do? Impose a radical new tax regime which has been rejected by the Scottish Parliament? Hardly.
Douglas Alexander is a gifted political strategist and he saw the meaning of May long before his Scottish party had woken up from their post election hangovers. It changed everything. Not just the balance of power in Holyrood, but the whole trajectory of Scottish, and British politics. His sister, Wendy Alexander, may have set up Calman but that was in a different age. Labour now faced the danger of being left out of the new order - forced to go down with a bill that has been moved by the hated Liberal-Tory coalition. Labour had no option but to change course, as he tried to tell them in October when he reminded them that they had been "gubbed". If Labour go into the independence referendum chained to a Tory bill they will be gubbed for good.
Wednesday, December 14, 2011
Tuesday, December 13, 2011
David Cameron's decision to take the UK out of Europe will take Scotland out of the UK. The Prime Minister's use of the veto against the EU treaty on budgetary reform looks like the game-changer that the SNP leader Alex Salmond has been waiting for. Attachment to the Union in Scotland is likely to evaporate as Scots realise that they have become an appendage to an essentially isolationist England with a sceptic media saturated with an ugly chauvinism. The hostility shown towards European nations is like a bad version of the hostility that old school Scottish nationalists used to show towards England. Only they grew out of it.
David Cameron's narrow nationalism, putting the interests of the City of London above those of resolving the EU budget crisis, has fatally undermined the moral case for sticking with Britain. If the UK is now a Banker's Union, dedicated to protecting the privileges a delinquent financial elite, what price internationalism, democracy, social welfare or any of the values that were supposed to define the common British project?
The SNP has suffered greatly in the past from accusations that it is a "separatist" party, seeking selfishly to divide the UK, and pit nation against nation. But who are the separatists now?
The argument for sticking with Britain was always that this gave Scotland representation at the highest levels of decision-making in Europe. This is clearly no longer the case. The UK is marginalised in Europe, whatever the Prime Minister may say - a "union" of one against 26. This isolation is the culmination of decades of revanchist anti-Europeanism, which has coincided with the decline in popular attachment to the symbols of Britishness on both sides of the border.
As England turns in on itself, lapsing into a financial parochialism, Scotland turns out - seeking to rediscover in Europe the communitarian values that it believed underpinned the UK. The SNP used to be criticised for demanding "Scotland's Oil", for seeking to grasp the nation's natural resources for itself. Well, Scotland gave the oil away, and now finds that it was used, not for the common good, but to build an evil empire of greed. It surely won't get fooled again.
Tuesday, December 06, 2011
Friday, December 02, 2011
The basic state pension in Britain is worth only 17% of earnings the lowest in Europe, £102 pw for a single person, or just over £5,000 a year. The average in Europe is 57% of average earnings, around £14,000. Even in the Netherlands, the second lowest, pensions are worth twice what they are here. Hardly luxury, but at least it is just about possible to live on it. The UK pension simply isn't enough to live on.
People here are expected to save for their retirement. But the iniquitous means testing that is applied to the pension credit actually discourages people from saving. Which is why so many don't. The average private sector pension is only worth around £20 a week, and yet this can disqualify a pensioner from receiving the pension credit which bumps the state pension from a £102 to £137 for a singe person. And to add insult to injury, this is classed as taxable income - unlike tax credits or interest on an ISA. Britain has the most complicated pensions system in the world, and many people who are eligible for the pension credit don't manage to complete the pages and pages of form filling.
Let the public sector workers keep their pensions - but only if the rest of the working classes are given similar security. The danger is that the majority of workers, who are not employed by the state, and who cannot afford any pensions, will refuse to continue to pay, through their taxes, for the relatively generous pensions of public sector workers. There has to be some kind of equity here.
Tuesday, November 22, 2011
There is no conceivable economic justification for their extravagant wealth, which has arisen largely through regulatory indolence and public ignorance. Remuneration committees composed of highly paid executives naturally acquire an exaggerated sense of their own worth. The idea that those dull boardroom suits, with their bad breath and stale management speak, are 'masters of the universe' is laughable.
The capitulation of successive governments to neoliberal fantasies about how the productive economy actually works has allowed a climate of kleptocracy to command Britain's boardrooms. If even Labour politicians are "relaxed about people getting filthy rich so long as they pay their taxes" (Peter Mandelson, 01) then it is hardly surprising that the wealthy have filled their boots.
The trouble is that moral condemnation of this kind of elite behaviour doesn't work. They don't have any morality beyond brute self-enrichment. What is needed is a critique of the economic implications of allowing he top 1% to acquire 40% of the wealth. In a British context it is about looking at the way this concentration of wealth undermines the productive economy.
The kleptocrats don't spend their money in productive ways, they use it for speculation in property, commodities and other assets. This leads to stock market instability, spikes in the prices of property, oil and food, and to the creation of sophisticated financial products designed to increase yield, like hedge funds, special purpose vehicles, private equity. Poor people spend their money on food, clothes and other consumer goods all of which generate economic activity and employment.
Grotesque inequality of wealth is not just an abomination, it is an economic depressant in the truest sense. It creates stagnant pools of wealth, sucking the vibrancy out of the economy and depressing growth. Roosevelt had the right idea when he slapped initially a 70% tax and then, ultimately, a 90% tax on incomes above $200,000. If you look at the history of taxation rates in the UK and US over the last eighty years, it is no accident that the most productive years of the capitalist economy were in the 1950s and 1960s when tax rates were double what they are today.
That's the trouble with capitalism today. They don't know what side their bread is buttered.
Monday, November 21, 2011
There's a very good reason why building societies and banks are asking for deposits: because house prices are falling. Houses are still far too expensive in Britain, compared with continental Europe or America, and subsidising the sale of them will only keep prices unaffordable a bit longer. What first time buyers need are houses that they can afford, not yet more debt. Those lured into this scheme are likely to find, in future years, that they have taken on negative equity. Anyone who seriously believes that house prices are going to rise during a double dip recession needs to be saved from themselves.
The government also intends to increase the discount on the sale of council houses so that people will be able to pick them up for half of what they are worth. This is an unwarranted extension of the policy that has virtually destroyed social housing in Britain. Selling council houses for a fifty percent discount to the market rate is immoral and should be illegal. It is the taxpayer who paid for the construction of these houses and it is unforgivable to hand the capital gain to private home owners, many of whom will sell to buy-to-let landlords. These houses will then be let at rents that can't be afforded by most working people, let alone the unemployed or low paid. The inflated private rents will be paid by the government, the taxpayer, through housing benefit. This amounts to a systematic asset stripping of public assets.
But the worst thing about both these policies is that it is all about trying to solve a debt crisis by yet more debt. You would have thought after the last three torrid years that we had learned something about the dynamics of the debt economy, but apparently not. All we need now is for the newly privatised Northern Rock (or rather the profitable bit, since the £50bn in dud NR mortgages has been retained on the state's books) to start offering 95% mortgages and the cycle will be complete. If the government wants to help young people it should be taxing the profits and bonuses of UK banks who owe their existence to the tax-payer. It should restore the cheapest and most effective means of building affordable homes, which is council housing. And it should tax the speculators who sit on building land and make unjustifiable profits out of the housing shortage. Ultimately, the UK housing crisis cannot be addressed without some form of site value taxation.
Monday, November 14, 2011
Sunday, November 13, 2011
Thursday, November 10, 2011
Monday, November 07, 2011
Wednesday, November 02, 2011
Thursday, October 27, 2011
Of course, this is out of national self interest not ideology. Britain realises that if the euro collapses so do we, not least because our banks are so heavily involved in European sovereign debt and because half our exports go to the EU. The City of London is a europe's leading financial centre. The economic destiny of these islands is therefore increasingly dependent on the success of the euro and the resolution of the crisis through the creation of a central european treasury.
But hang on - if we are so up to our necks in europe, and indeed have a potential noose around our necks if the project goes under, should we not be in there fighting to get the crisis resolved in a manner that benefits, er, the UK? And if there is no economic future for Britain without the euro, does that not mean that - defacto - we now accept it as the economic reality of the world economy. And if we accept that, should we not be a part of it, if only to ensure that Britain's interests are safeguarded. It's all very well to jeer from the sidelines - ha ha clever us for not adopting the euro - but the whole history of British involvement in the EU since the 1950s has been like this. We say no no no until economic interest forces us to say a belated yes yes yes.
This latest crisis summit over sovereign debt is a case in point. If we are so happy to be out of the eurozone, why are we so desperate to be involved in saving it? Surely if it is a busted flush , we should be urging teh EU to restore national currencies not set up a multi trillion euro bail out fund. And why are British Tory politicians arguing the case for fiscal union? George Osborne has for months now been calling for a fast forward to the "ever greater union" that Tories are supposed to despise. If integration is so good for Europe, and for the British economy, why are we so hostile to it?
Wednesday, October 26, 2011
Sunday, October 16, 2011
Gay marriage is now supported by the Quakers, the Episcopalian Church and unitarians. The Church of Scotland has opened the door for gay marriage by accepting in principle the presence of openly gay and lesbian ministers. It would surely be inconceivable for the Kirk to allow homosexuals to speak God's word from the pulpit and yet not allow them to marry each other. Why is it that the Roman Catholic hierarchy seem to want to make this a political issue rather than a moral one?
Sunday, October 09, 2011
Perhaps that's the key. Sir Mervyn worries he might be the Montague Norman of the 21st Century, forced to preside over the collapse of the international financial system. Norman took to his bed when the British banks nearly went under in unison during the Great Depression as Britain's gold reserves dried up. He had been governor during the roaring 20s and was a bit of an international financial celebrity, like Alan Greenspan until the crash of 2008.
Sir Mervyn presided over what he called the "NICE age" of the noughties. "Non-Inflationary Continuous Expansion". This turned out to be a massive Ponzi scheme built on a massive property bubble. Right until it went pop, King insisted that there was no unsustainable inflation in property prices - even when banks like Northern Rock were handing out 125% mortgages.
He thought he had saved the day by cutting interest rates to the lowest in 300 years and by printing money. But clearly, he hasn't, and now the chickens are roosting all over Threadneedle St.. And all over Europe. The coillapse of the French-Belgian bank Dexia suggests that another wave of banking collapses is in the offing. King has warned banks not to expect another bail out, which can only mean one thing: that governments will have to step in and do the restructuring of the debt - seizing bank assets and managing a mega default.
Banks make money because of a trick called fractional reserve banking - lending money they don't actually have. At any one time a bank may only have £1 of capital for every £100 lent out. If only 1% of the bank's loans go bad, that means they are insolvent. Businesses, bond-holders and ordinary depositors will queue up to find that the money they thought they had safely in their accounts is no longer there. Fractional mass destruction then wipes out huge swathes of the economy. This is unlikely to make people well disposed to the central banker who didn't see it coming.
Saturday, October 08, 2011
Monday, September 26, 2011
And in Europe, who was it who blocked any political union and urged the EU to extend its boundaries while not deepening its union? It was Britain above all who wanted a `”wider but shallower union”. Randall writes as if Britain played no role in shaping the EU. Wrong. We have been in there all along, keeping alive the flame of economic nationalism.
But as I say, I actually find I agree with Randall's conclusion. Let me quote him in full: “This illusion of political primacy is perpetuated because a confession of impotence would not only undermine the worth of those in power but also expose the euro's fatal flaw: monetary union without fiscal union is a marriage that weds the prudent to the profligate with no control over the latter's spending” . He is dead right there. There is no solution without 'more Europe'.