Wednesday, 22 July 2009

Public sector debt hits nearly £800bn

Figures out earlier this week showed that public sector borrowing has now soared to £798.8bn, equivalent to a record 56.6% of GDP.

The perverse and increasingly dishonest debate between the three main parties is how about how to cut out-of-control public spending - with public sector pensions, student grants, welfare, the fire service, Royal Mail, and a whole host of other useful items being bandied about without any consideration of why they exist now.

However, public spending in the year to June rose only by 0.9 per cent in real terms. Public spending is not out of control. We are in debt because of the bank bailout, and because of falling tax receipts.

If cuts are needed, then we should be happy to identify them: Trident and ID cards would be a good start. The 'Our Taxes, Our Lives' campaign is making exactly that point.

There's also a good article from Wednesday's Morning Star, 'Public spending is not to blame'.

Tuesday, 21 July 2009

Milburn misses the point on social mobility

Having been a leading figure in the only post-war Labour Government to have overseen an increase in inequality - as LEAP analysis found - Alan Milburn MP's commission today came to the unsurprising conclusion that top jobs "have become more and not less exclusive over time".

As John McDonnell MP said:

"The lack of social mobility is just a symptom of the grotesque inequality gap in our society which New Labour ministers like Alan Milburn caused to widen under their watch."

Milburn's solution? Redistribution of wealth and power? No, he told the BBC, "young people in England should have access to much better careers advice to boost their ambitions". Pure Thatcherism.

John McDonnell MP was interviewed on Channel 4 News about the report:

Monday, 13 July 2009

'Our Taxes, our Lives'

Come to the Campaign Launch of 'Our Taxes, our Lives' . . . . . . a major new campaign on public expenditure and cuts

'Our Taxes, our Lives'
Campaign Launch
Thatcher Room, Portcullis House, Westminster
Tuesday 14th July 2009
6:30pm – 8:30pm
Hosted by John McDonnell MP

Tony Benn
John Christensen
Tax Justice Network
Mark Serwotka
General Secretary, Public and Commercial Services Union
Tony Dolphin
Senior Economist, IPPR
Kate Hudson
Chair, CND
Ann Feltham
Campaign against the Arms Trade

"Spending decisions are financial but they are also moral; they are about values, identifying what and who, really matters"

Wednesday, 8 July 2009

Darling kowtows to finance sector . . . bank on it

Yesterday, the Chancellor Alistair Darling set out his proposals for banking reform and regulation in a White Paper. You can read his Statement to the House of Commmons here.

So what did Darling propose? The Guardian states that he "ruled out caps on bankers' pay or breaking up the biggest City institutions".

The Telegraph reports that "many experts expressed scepticism that the new body would achieve much more than the existing standing committee".

The Financial Times quotes an anonymous 'big bank', which "described the planned changes to the Financial Services Compensation Scheme as 'a massive failure of policymaking'. 'We still need to be convinced of the benefits of a pre-funded compensation scheme,' it said. 'A major bank failure will always need government intervention in any case'."

This makes our response all the more pertinent, John McDonnell, LEAP Chair, said: "There is nothing new, it is just a timid re-branding of little more than the existing system".

"Banking is a fundamental public service which should be under public control. The least the Chancellor could have done would have been to split speculative banking from retail banking, and to bring retail banking under mutualised public control".

Unsurprisingly, the British Bankers' Association welcomed the paper. Angela Knight, BBA chief executive, said: "Banking is a global business and reform needs to be thoughtfully handled so moves in the UK dovetail with those overseas, ensuring the UK sector remains competitive. Otherwise business could move again."

Yes, we should be thankful it was the UK that the banking sector nearly bankrupted, and has indebted for a generation or more, and not somewhere else . . .

Friday, 3 July 2009

If you think it's bad here . . .

The consumer comfort index in the US has declined to -53, which compares with what we call consumer confidence at -25 in the UK for June. Of course such measures are subjective, but such measures of collective subjectivity are often valid.

Data will soon be published for how the US economy performed in the second quarter of 2009, and it is expected to show another contraction. If confirmed this would be the first four quarter contraction in US post-war history.

And the signs don't look good. US manufacturing production declined in May to its lowest level since 1998.

It was confirmed on Thursday that US job losses were again high, with 467,000 people losing their jobs in June. This means 7.2 million US citizens have lost their jobs since December 2007. US Unemployment is now at 9.5%. As if to prove the old adage 'if the US sneezes, Europe catches a cold', Eurozone unemployment hit 9.5%, Eurostat announced this week.

On Friday it was reported that US salaries have dropped 2.3% in the year to May 2009. With rising job losses and pay contracting it is hardly surprising that mortgage foreclosures are rising - hitting a record high in the three months to May.

This in turn explains the low level of 'consumer comfort', despite Obama's much heralded $787bn fiscal stimulus. As the world's major power in the global capitalist economy, what happens in the US ultimately affects us all.

Thursday, 2 July 2009

Off the Rails - 1st crack in franchise model

Yesterday the Government nationalised the East Coast Mainline rail franchise, which had been run by National Express.

As LEAP research for the RMT shows, passenger numbers, and therefore revenue, may continue to decline for several years - even after the recession ends (which as previous posts show may not be very soon) - as unemployment lags behind the GDP data of a recession.

The finances behind National Express's default highlight why several other franchises may follow suit over the coming months. Their franchise agreement committed National Express to a repayment of £1.4bn in premium payments to the Government until 2015. This included £87m this year and £140m next year. The amount was based on bullish predictions for passenger growth that would not have been achieved.

To try to protect its profit margin, National Express East Coast regulated fares had increased by 6% (7.4% for unregulated fares) in January 2009. National Express Group had previously announced a total loss of 750 jobs across the East Anglia and East Coast franchises.

And this is how private franchises will seek to protect themselves in a recession: cutting jobs, above-inflation fare increases, and cuts in services, removing buffet cars, cutting ticket office opening hours, etc.

It also goes to show, yet again, that when essential services are privatised the risk remains nationalised.

Read what RMT General Secretary Bob Crow and John McDonnell had to say about the nationalisation on the RMT website

Wednesday, 1 July 2009

'Honey - I shrank the economy', a nightmare by Brown & Darling

Andrew's post about the ONS report is highly significant.

This graph of Real GDP Growth accompanying the report, showing Britain’s incredible shrinking economy, surely has a much bigger immediate impact on our ability to grasp what is happening than the many thousands of words pouring from journalists’ keyboards and spewing from politicians’ mouths.

What it reveals is that the recession is rapidly turning into another Great Depression.

According to economic historian Angus Maddison, this contraction is the biggest since 1931, the year when the Ramsay MacDonald Labour government collapsed and the prime minister formed a national coalition with the Tories.

"Clearly this is now the worst peacetime recession since the 1930s," said Michael Saunders, chief UK economist at Citigroup. "The worst contraction then was a year of around -5pc; this year will not be hugely different."

The Great Depression only ended when preparations began for World War Two.

It is important to understand the reason for the sharply downward revision: the rate and scale of the collapse are both so great that they overwhelm the predictive statistical techniques which the ONS use. Largely based on inferring trends from historical data, the ONS is no longer able to accurately approximate the immediate past, let alone say much about the present or the future. When more of the real concrete evidence came in, the shock of the new took most of those supposedly in the know by surprise.

Put simply, things are getting much worse and faster and are set to deteriorate further, as investment in machinery and new buildings has slumped by 13.2% in the last year.

And what of the future? With tax income declining and having tested the limits of its ability to issue new debt, the New Labour government is caught between denial and a charade of lies about the cuts it will have to make if it remains in power after the next election. So much so that, according to the unelected autocrat-in-waiting Lord Mandelson, it has either postponed or cancelled its comprehensive review of public spending.

The Bank for International Settlements (BIS), in its annual report is forced to acknowledge that the crisis shows that the “presumed benefits of diversification derived from the creation of financial conglomerates” were – wait for it – “an illusion”. Well, who would have thought it!

The shattering of the financial illusion resulted in a financial collapse, which in turn precipitated the economic collapse now taking place, ending another delusion – a boom based on debt-driven consumer spending. As to the notion of a swift recovery, the BIS report is sobering. It warns: “The very speed of the recent downturn could create larger than average second-round effects. In particular, if the propensity to save were to rise further in the industrial economies – as could easily happen, given the high overhang of household debt and dramatic reduction in household wealth – contractionary impulses in the global economy could be prolonged.”

Don’t say we haven’t been warned. The echoes of 1931 are resounding across the globe, reinforcing the urgency of our developing practical alternatives to capitalist slump which tackle the roots of the crisis by replacing a profit-driven economy that relies on illusions with one designed to meet the needs of people and the planet.