Thursday, 25 October 2012

Labour Land Campaign Affordable Housing Supply Conference 2012

A Permanent Solution to the Permanent Housing Crisis?

Wed 14 November 2012 
 Directory of Social Change, London, NW1 2DP 
Cost £20 (Register using link below)
For further information please contact:                Mob. 078572 97049

Speakers include
Lord Larry Whitty, Chair, Housing Voice Alliance; Duncan Bowie, Senior Lecturer in Spatial Planning, University of Westminster & Convenor, Highbury Group on Housing Delivery; Eileen Short, Defend Council Housing; Gordon Nardell QC (Land and Environment); Stephen Hill, C20 futureplanners, RICS Sustainability Task Force Europe; Christine Whitehead, Professor of Housing Economics, LSE and Senior Research Fellow CCHPR; Frances Plimmer, Chair, Valuation and Real Estate Commission, International Federation of Surveyors; Jacky Peacock, Brent Private Tenants Rights Group; Bob Colenutt, Northampton Institute of Urban Affairs; David Drew, former Labour MP Stroud; Dave Wetzel, former Vice-Chair Transport for London, founder, Labour Land Campaign.
Register online

Wednesday, 24 October 2012

The Dash for Cash - the Great British Energy Rip-Off

British Gas announced a 6% increase on gas and electricity on 12 October, which will add an average £80 per year to bills (Npower will increase the gas by 8.8% and electricity by 9.1%).

Energy companies blame the rises on declining North Sea gas supplies, rising global prices, and costs of maintaining the UK distribution network. The reality is somewhat different.

Last year British Gas announced profits of £1.5 billion. It supplies to around 9.5 million households so is making £160 a year profit per household.

So even if we take British Gas at face value about their rising costs, they could have absorbed them and still made £750m profit.

But it's not just British Gas ... 

On 15 October, Scottish Power announced gas and electricity bills would go up by 7% in December. Scottish Power has 2.3 million customers – average fuel bill will rise by £100 per year.

Scottish Power made £1 billion in profits last year – this price rise will raise £230m – so just one-quarter of their profits!

This is the grotesque profiteering that has happened since our gas and electricity was sold off in the 1980s.

Last year British Gas put up gas bills by 18% and electricity bills by 16% - that’s how they made £1.5bn in profits.

We are being told we have to pay more so that the energy companies can invest in renewable energy, but this year, last year and every year for the last 25 years billions from our energy bills have been going to private shareholders’ dividends instead of into investing in the energy network.

We urgently need to invest in renewable energy. Sweden gets nearly half its energy needs from renewables, France is 12% and Germany around 10%. In Britain it’s less than 3%. 

A large reason for us lagging behind the rest of Europe is that energy companies have been siphoning every penny they can - and successive governments have done nothing to stop them.

Saturday, 20 October 2012

Can dodgy maths and economic theories ruin lives?

Mick Brooks 

The multiplier is a pretty recondite concept in Keynesian economics. Really it just expresses the fact that in the economy we’re all interdependent. So if I am plucked off the dole and get a job, I have more money to spend and my spending helps someone else to get a job. It’s called the multiplier effect.

The spool runs the other way too. If the government cuts public services and sacks public sector workers, that depresses economic activity generally.
The Tories don’t accept this. They argue that austerity and cuts will let the private sector grow instead of being ‘crowded out’, so cuts will make no difference to jobs. In effect they are arguing that economic activity will just be transferred automatically to the private sector to fill the gap. In their world everyone has a job all the time. What world is that?
If the multiplier exists, how big is it? The International Monetary Fund has reckoned in the past that it was 0.5. So if the government spends an extra £1 the economy will get an extra 50p for free. But if the government cuts £1, the economy gets 50p smaller. To that extent - 50p - the cuts haven’t worked. The IMF thinks the multiplier has changed because of the recession. It’s now between 0.9 and 1.7 (IMF-World economic outlook). As Wolfgang Munchau commented in the Financial Times (15.10.12), “It was disguised as a technical appendix, but it turned out to be an act of insurrection.”
So, on the most favourable assumptions, if the coalition cuts £1 it loses 90p of the effect in lost output. And, with a multiplier of 1.7, every £1 in cuts causes the economy to decline by £1.70. On most assumptions cuts are utterly self-defeating. Munchau goes on to calculate that, with a fiscal multiplier of 1.5, “A fiscal adjustment of 3% of Gross Domestic Product would translate into a GDP contraction of 4.5%. He explains, “The multiplier thus tells you what kind of recession Spain can expect. And it tells us that the Spanish government forecast of a 0.5% fall in GDP in 2013 is delusional.”

That would explain what is happening in Greece. The government there is cutting off arms and legs in order to go on a diet! It would also explain why austerity isn’t working here and why it won’t work. It explains why the government deficit is going up in Britain despite - no, because of - the cuts.

All this is from the IMF, which Anthony Sampson called the financial sheriff. The IMF has spent past decades rampaging round the world demanding that debtor countries cut, cut and cut again. They have destroyed millions of livelihoods in the process. Now they say they got their sums wrong.

Their fellow members of the troika which has put Greece on the rack, the European Central Bank and the European Commission, didn’t say the IMF’s findings were wrong; at the recent Tokyo summit they merely declared they were “not helpful.” On the other hand Jacob Funk Kierkegaard of the Peterson Institute (Financial Times 12.10.12) points out, “The WEO section on fiscal multipliers is a very important finding, which shows the IMF is a credible empirically driven institution not shy of giving up its own dogma on these issues.”

This evidence blows the austerity programme of the Tories out of the water. Not only are they inflicting terrible hardship now – it’s won’t ever work to get the economy going again.

Monday, 8 October 2012

No curbs on predatory and calamitous capitalism

Britain’s financial regulators are still asleep and more scandals could follow, warns Prem Sikka

The banking crash exposed the “London loophole” – a phenomenon associated with feather-duster regulation and ideology where regulators do little to check predatory practices. Nearly five years on and despite vast bailouts, the regulators in Britain have shown little backbone or interest in cleaning-up predatory capitalism.

Rather than taking responsibility, the United Kingdom is dragged along by others. Recent exposure of money laundering and London Interbank Offered Rate (Libor) are just the latest manifestations of a crisis which shows that this country lacks the structures and the political will to curb predatory capitalism.

Any mention of effective regulation sends corporate elites into a cold sweat. They use their chequebooks to fund political parties and find jobs for former and potential ministers with the aim of stymying regulation.

They refer to the bogey of higher costs of regulation, even though the absence of effective regulation has resulted in an unprecedented economic crisis.

The elites forget that the state is the ultimate sponsor of capitalism, and has to coerce and cajole corporate beasts to curb their self-destructive tendencies. That lesson has been learned in the United States, supposedly the home of free markets, but not in Britain. Here are some recent examples.

In August 2012, the New York New York State Department of Financial Services claimed that, for 10 years, the Standard Chartered Bank schemed with the government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion. It collected millions of dollars in fees, but left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity.

The report added that the bank carefully planned its deception and was apparently aided by its consultant, Deloitte and Touche, which intentionally omitted critical information in its “independent report” to regulators. Standard Chartered has agreed to pay a fine of $340 million. Britain’s regulators have done nothing.
In July 2012, a 300-page report by the US Senate Permanent Subcommittee on Investigations said that HSBC circumvented banking rules designed to prevent financial dealings with Iran, North Korea and Burma. Its lax systems and controls also facilitated financial movements for drug cartels and terrorists. The bank is accused of failing to monitor some $60 trillion of transactions.

HSBC has paid $27.5 million in fines to Mexico and may be fined around $1 billion by the US regulators. The revelations should have resulted in probes in the UK, too, but there is no sign of much action, aside from a belated report into the Libor rate rigging scandal concluding that the system is broken and suggesting its complete overhaul, including criminal prosecutions for those who try to manipulate it – things most observers had concluded rather earlier.

In June 2012, the US regulators took the lead in exposing the Libor scandal. Barclays Bank paid a total fine of £290 million, including £59.5 million to the UK’s Financial Services Authority, to settle allegations of manipulating Libor and the Euro Interbank Offered Rate (Euribor) lending – the rates at which banks lend to each other in the wholesale money markets. Citigroup, Deutsche Bank, JP Morgan, UBS, HSBC and the Royal Bank of Scotland are also thought to be on the US regulators’ radar.

With its reputation irrevocably tarnished by the banking crash and its imminent replacement by the Prudential Regulation Authority and the Financial Conduct Authority, the FSA now claims to be looking at some banks, but so far there is no tangible evidence of this.

The UK is a soft touch compared to the US where the Securities Exchange Commission and Department of Justice have shown some willingness to investigate, prosecute and fine corporations, although the scale and severity of this have been insufficient to curb predatory capitalism.

In contrast, the UK regulatory impulse is to protect elites by sweeping things under dust-laden carpets. A couple of examples serve to illustrate these points.

Sani Abacha, the late Nigerian dictator is estimated to have looted between $3 billion and $5 billion of public money. Despite the extensive anti-money laundering legislation, most of the loot ended up in Western banks. Around $1.3 billion is estimated to have passed through 42 bank accounts in London. Unlike Switzerland and even Jersey, the British Government has neither named the banks nor repatriated the stolen money.

The Bank of Credit and Commerce International was the biggest banking fraud of the 20th century. The Bank of England, then the banking regulator, closed it in July 1991.

Some 1.4 million depositors lost around £7 billion of their savings. In the US, Senate hearings were held and the CIA published some of its reports on BCCI’s activities. A US Senate Committee report concluded that the Bank of England and BCCI auditors Price Waterhouse (now part of PricewaterhouseCoopers) were engaged in a cover-up”.

It also released 99 per cent of a report, censored by the Bank of England, codenamed the Sandstorm Report, which described some of the frauds and named the wrongdoers and various movers and shakers.
However, the Sandstorm Report has remained a state secret in the UK. Various parliamentary committees held hearings on the BCCI scandal, but none were given sight of the Sandstorm Report.

Last year, after some five-and-half years of legal battles against the Treasury and the Information Commissioner, I managed to secure the names of the wrongdoers and some related parties.

These included members of the Abu Dhabi royal family, prominent Middle East businessmen, the head of Saudi intelligence, prominent political advisors and even the biggest funder of al Qaida, then considered to be an organisation friendly to Western interests.

Evidently, the British Government prioritised the appeasement of commercial interests over its citizens’ right to know, or even the desire to create effective banking regulation.

The UK lacks an effective regulatory system and a political culture to curb predatory capitalism. Its patchwork quilt of regulators includes the Financial Services Authority (and its successor bodies), the Bank of England, the Serious Fraud Office, Her Majesty’s Revenue and Customs, the London Stock Exchange, Office of Fair Trading, Financial Reporting Council and myriad private sector regulators.

They are poorly equipped to call multinational corporations to account.

With an annual budget of £37 million, the SFO is incapable of mounting effective corporate prosecutions. In contrast, the US SEC has an annual budget of $1.3 billion.

Almost all of Britain’s watchdogs come from the private sector and are usually too sympathetic to the games played by corporations. After a stint as a regulator, they return to the private sector and know the hands that they must not bite.

The UK’s patchwork system encourages duplication, buck passing and obfuscation. And it is hard to think of any timely intervention by any regulator.

Britain needs to replace the ineffective patchwork of regulators with its own equivalent of the SEC, which could be called the Business and Finance Commission. This would need to be controlled by a board representing a plurality of interests, including taxpayers, employees, customers and other stakeholders, so that elites could not easily sweep matters under the carpet.

The board should be required to meet in the open and its files should be publicly available so that we could all judge its efficiency and effectiveness. No document should be withheld from parliamentary inquiries into scandals.

All political parties need to recognise that additional financial and human resources are needed for swift investigation and prosecution of corporate misdemeanours. Without change, the UK will not have an effective regulatory system.

This article first appeared in Tribune magazine