Hamstrung SFO not capable of holding bankers to account

Prem Sikka

Iceland has sent four former directors of its bank Kaupthing to prison for fraud. But the chances of similar legal action happening in the UK are low, where fraud investigators have a poor record.

The Serious Fraud Office (SFO) is the main agency for investigating and prosecuting major fraud. It was formed in 1988 after a spate of high-profile cases. A government-sponsored inquiry into share price rigging at Guinness in the 1980s concluded that too many executives at major corporations had a “cynical disregard of laws and regulations … cavalier misuse of company monies … contempt for truth and common honesty. All these in a part of the City which was thought respectable”.

But rather than changing corporate laws, amending personal liability of directors, or creating an effective enforcement agency, the government created the SFO.

Last week, the SFO’s case against businessman Victor Dahdaleh collapsed because at the last minute it could not provide evidence of alleged graft. This is not the only case the SFO has botched. It spent between £25-40m investigating price-fixing by pharmaceutical companies supplying the UK’s National Health Service (NHS), but the case collapsed because of errors in the interpretation of law.

Previously, the SFO was very slow in taking action against BAE Systems over allegations of corrupt practice. The SFO mislaid 32,000 documents relating to the case. It is currently facing a lawsuit for damages from the Tchenguiz brothers after dropping a three-year investigation into the collapse of Icelandic bank Kaupthing.

Bigger beasts

In 2012-13, the SFO brought 12 cases covering 20 individuals, eventually securing 14 convictions and recovering £11.4m from fraudsters. But it rarely went after the bigger beasts. Money laundering and sanctions busting by British banks did not appear on its radar. The SFO has hardly been visible in investigating and prosecuting the misdemeanours of bankers who brought the UK economy close to collapse.

In mitigation, it might be argued that the SFO’s failures are the outcome of the politics of government cuts. In 2008-09, the SFO had an investigations and prosecutions budget of £52m. Despite the banking crash, LIBOR rigging and other scandals, the UK government has drastically reduced SFO’s resources.

For 2013-14 its budget is £30m and will decline to £28.8 million for 2014-15. That is a cut of over 44% since the start of the global financial crisis.

Faced with a reduced budget and pay freezes, the SFO has been losing experienced staff and outsourcing a lot of its legal work, often paying very high fees. Such practices make it difficult to build in-house expertise and an institutional memory.

Other countries seem to assign higher priority to fraud investigation. The US equivalent, the Securities and Exchange Commission (SEC), has an annual budget of US$1.674 billion (about £1.1 billion). It is therefore in a far stronger position to take on the bigger beasts. The SEC has its shortcomings, but it is more likely to get a result than the SFO.

Ineffective patchwork

The SFO’s failures are indicative of Britain’s failure to build durable and effective institutional structures to fight financial crime. Rather than a single powerful and well resourced agency, there is an ineffective patchwork of institutions.

These include the Financial Conduct Authority (FCA), the Office of Fair Trading (OFT), The National Crime Agency (NCA) Her Majesty’s Revenue and Customs (HMRC), the Crown Prosecution Service, the London Stock Exchange and the Financial Reporting Council, to name just a few. The overlapping and often unclear boundaries result in duplication, waste, obfuscation, delays, poor accountability and outright failures.

Any effective fight against globalised financial crime needs to streamline its institutional structures. In the age of globalisation the UK cannot fight financial crime on a shoestring, with puny organisations. Large parts of the patchwork should be replaced by a UK equivalent of the SEC.

But a new organisation would not be able to combat wealthy elites or giant corporations without significant resources. This might be expensive, but it is an investment that would pay off.

• This article originally appeared on The Conversation website

Autumn Statement 2013: Evaluating Osborne ... 15% successful!

Are the austerians right and the opponents of austerity proved wrong? Is Osborne's strategy vindicated?

Let's judge by his own standards. In June 2010, just as the ink had dried on the coalition agreement, George Osborne rushed to the House of Commons to deliver an 'Emergency Budget'.

"It supports a strong enterprise-led recovery. It rewards work. And it protects the most vulnerable in our society. Yes it is tough; but it is also fair."

With this rhetoric, Osborne opened his remarks. But the devil was in the detail of the accompanying forecasts. So how has he done 3 years on? We evaluate:

Osborne predicted that economic growth would be 2.8% this year - a target he may get close to (we'll find out next month), but that was on the back on growth of 2.8% last year as well (instead, in 2012 the economy grew by just 0.2%). The OBR predicts that growth will be 1.4% in 2013 (but this is still an underestimate)

Far from being back on track, the UK economy still lags 2.5% below where we were in 2008. So at best half marks for Osborne on economic growth. And that's before we factor in growing concerns about the sustainability of George's recovery. Half marks.

• Economic growth 0.5/1

That same June 2010 forecast predicted that average wage growth in 2013/14 would be 4.9%. With average wage 'growth' currently at just 0.7% there is no gentle way to put this, that was woefully wrong.

While this year the FTSE100 directors will see their seven-figure salaries increase by an average of 14%, for the rest of us there is no recovery. People's incomes have been cut in real terms. The ONS points out that the median household income has dropped 6.4% for working age households over the last five years. Fail.

• Wages 0/1

Unemployment has declined marginally in recent months, but is still high at 7.6% of the economically active population. That figure however conceals stubbornly high youth unemployment and long-term unemployment - failed by shambolic government programmes.

In 2010, Osborne told us unemployment would today be just 6.8%. So 250,000 fewer people should be unemployed today had Osborne hit his target. Fail.

• Unemployment 0/1

Given Osborne erroneously said he would deal with "our country's record debts" (they were nowhere near record levels) with austerity, one would assume he would have at least had some success in reducing our debt (or at least stemmed the rate of rising debt).

By now, predicted Osborne in 2010, our debt should be 73.7% of GDP. Instead it's 75.5%.

But much of that is because GDP is far lower than predicted, so not even half marks for getting close, so quarter marks.

• Debt 0.25/1

The reason the Chancellor is not reducing the debt, is because the deficit has not been closed at anything like the rate he predicted. By now the deficit should have been just 5% of GDP. Today Osborne announced it would be 6.8%. In cash terms they predicted £63 billion in 2010, but today it's £111bn - 75% higher than the 2010 forecast. So he'll borrow £198 billion more than he planned. Fail.

• Deficit 0/1

Overall 0.75 out of 5 (or 15%)

Are you really worse off? Er, yes.

Labour has recently made some headway with its message that there is a cost of living crisis - which has continued despite Osborne's recovery. This feeds a number of other important messages, including that this is a recovery for the rich, and that you're being ripped off - and so the energy price freeze fits into the same narrative.

The average non-retired household is today 6.4% worse off since the recession - that was the finding of a report by the Office for National Statistics out earlier this week. It showed that the average household income fell from £37,900 to £32,600, in real terms over the last five years.

In fact, the average household is £300 a year worse off than it was in 2002/03. There is therefore a 'lost decade' of stagnation for household incomes.

This decline in income triggered entitlement to extra benefits (e.g tax credits) so that benefits rose from providing 7.6% to 12.3% of gross income for the median household. This is fundamentally a redistribution in the cost of living from the employer to the state - as a result of pay freezes and pay caps. So when Labour talks about a structural welfare spending cap (not individual benefit caps which are disgraceful) it is alluding to this phenomenon, and pledging to deal with the structural issues - and advocating the living wage is a part of tackling low pay subsidies like tax credits.

The resonance that Labour has had with this line has rattled the Tories.

So, in a blatantly politically-driven misanalysis, HM Treasury has produced data that shows compensation for workers has stayed the same, but what they don't see is that employers are paying more in national insurance and pension contributions. The idea that wages have been cut to sustain or even increase profits is, apparently, a myth.

Sky's economic correspondent, Ed Conway, says the Treasury report explains:

"Overall compensation includes not just wages but also the social contributions made by employers, including pension contributions and National Insurance Contributions. Technically-speaking, these are forms of payment, except that because they don’t go straight into your pocket they don’t feel particularly obvious."

In fact a less kind interpretation of this Tory spin - still not on the Treasury website - is that because it doesn't goes into your pocket, it's not really payment.

So the Tory argument is that pay has gone down (Ed Miliband's cost of living crisis) due to NI contributions going up (all Gordon Brown's fault) and pension contributions going up (your fault for living longer).

However, the argument doesn't really stack up for several reasons:

1. Pension contributions have only gone up in real terms for funded pension schemes - which most workers don't have
2. Part of the reason extra pension contributions are needed are due to pension holidays taken by employers in the 1990s
3. Is the logic of the Treasury analysis of NI rise that a cut in NI would be passed on to workers in higher wages
4. If that's the case why have the cuts in corporation tax not been passed on to workers then? Because corporation tax has fallen from 33% to 28% under New Labour, and now down to 22%.
5. If we're all actually no worse off why - by official figures - are a million more of us living in poverty? Why are half a million of us using food banks this year?

(There's a more detailed and wonkish analysis by the TUC's Duncan Weldon here)

So was this just a political attack to try to blunt Labour's resonant cost of living line? If so, it's another sign of the civil service being used for party political purposes (and not the first time either).

But it's an indication that ahead of this year's Autumn Statement, Osborne has only spin to offer.

Tax justice undermined by cuts

As Margaret Hodge MP, chair of the Commons Public Accounts Committee, recently pointed out, the UK is at bottom of OECD league table when it comes to tax take.

Hodge specifically took aim at the government: describing the tax system for corporations and the super-rich as "increasingly voluntary".

She said there was a "growing gap between rhetoric and reality" from this government (we've pointed out there are several reasons why you shouldn't take this government seriously on tax justice).

And the HMRC's own half-year report should give further cause for concern - highlighting the impact of staff cuts. Their target is to 'clear' 80% of post within 15 working days. They achieved only 77%. This may not seem like much of a failure until you find the reason: "the deployment of teams from post to phone lines during peak periods of customer demand".

So how did call handling get on? They answered only 72.7% of calls, far short of their 90% target. If self-employed people, small and medium sized businesses don't get their inquiries, requests and queries answered - and answered satisfactorily - are they more or less likely to comply correctly with their tax obligations? And if the message is sent that the department is under-resourced, will wealthy individuals and big business be more or less likely to attempt to dodge their taxes?

It's not just the HMRC's call and post handling that is struggling. Last week it was announced that 1,500 staff in personal taxes and compliance and 480 in debt management are being targeted for a voluntary exit scheme to cut staff costs. These are the staff who collectively bring in billions of pounds of taxes - which fund public services.

As the PCS graphic shows, HMRC is suffering massive staffing cuts - with the latest tranche announced just this week with 3,000 staff brought in to cover short-staffing in the firing line. Since 2005, 34,000 jobs have gone from HMRC and another 10,000 are planned by 2015 under the government's spending cuts.

What's clear is that if we are serious about tax justice, then a big part of that campaign must be to ensure that HMRC has the staff required to take on the £75 billion of tax evasion, £25 billion of tax avoidance and over £20 billion in uncollected taxes.

The tax dodging of Amazon, Starbucks, Google, Boots and others has rightly come unders scrutiny. But there also needs to be rigorous scrutiny about the political undermining of our tax revenue collection system.

The problem of the buy-to-let parasites

There was a good report out yesterday by the Intergenerational Foundation (IF), which found that 'UK taxpayers provide £5bn annual subsidy for buy-to-let landlords', as the FT headlined its piece.

One of the key thrusts of the report is that buy-to-let properties are treated as businesses for tax purposes, although the IF believes they are more comparable to investments.

In tax terms, this means buy-to-let landlords can deduct interest on the mortgage of their rented property from taxable rent income. In addition, property owners can deduct 10% from rent received to account for repair and depreciation expenses - without having to provide any evidence of spending on the property.

It also found a number of 'loopholes' exploited by landlords, including that if the landlord occupies the property for as little as six months in the 36 months before it is sold, any gains accrued on the property in that period will not be subject to capital gains tax.

Having said all that, the framing of this by the IF is appalling. Ashley Seager, co-founder of the Intergenerational Foundation gave this quote to the media to coincide with the report's release:

"It is clear that most of these tax write-offs go to older landlords keen to take advantage of both the lack of housing supply and the demand for properties to rent by the under-35s"

As if the prime issue here is the old exploiting the young! No, no, no. This is an issue of a few wealthy individuals (the report says 4% of the population are landlords, which seems high) exploiting the mass of people who can't afford to buy.

The issue is the structures that allow the accumulation of wealth, and further allow those with accumulated wealth to live parasitically from the work of others. This is about wealth, not age (income inequality has a cumulative effect so of course those with wealth are likely to be older).

And it's not only an issue for those tenants (young and old) paying ever increasing rents, and increasingly unaffordable rents (especially in London as this website shows). It's an issue for us all as an increasing proportion of tenants are having to be bailed out by housing benefit - as wages have fallen relative to rental prices - and so the welfare state is helping to fund landlords too. In the last two years, 93% of new housing benefit claimants have been from households in which at least one person works.

To try to fit this good analysis and report within the IF's intergenerational divide narrative is mistaken and misses the point. (This is not the first time we've taken issue with IF analysis and the National Pensioners' Convention's Dot Gibson responds well to intergenerational divide framing in the Guardian letters page today).

The IF rightly argues that landlords' housing is comparable to an investment (and should be taxed as such), but housing is a basic human need. It is not comparable, morally, with other investments like stamp collections, fine art, wine collections, shares or savings accounts.

Housing is a human right. Amassing wealth is not. Yet, this government is prepared to cap benefits, not rents. Even if it means homelessness for some - and the indignity of temporary or overcrowded accommodation for many more - in the Tory mind, nothing must interfere with landlords' inalienable right to own as many properties as they like and leech off of the hard-working tenants and taxpayers.

The IF's policy proposals are good (p.37 of the report) but could go further: why not limit the number of homes an individual can own? Why not restore the right of councils to control rents (which they had until 1989) to protect tenants? Why not introduce a Land Value Tax so that disused property is brought into use, and to fund new council build? Or why not introduce a Wealth Tax (as advocated here by Greg Philo here) or greater inheritance tax? And why not, perhaps least radically of all, ensure a much more progressive system of general taxation to restrict the accumulation of excess wealth in the first place?

Until we challenge the right of a few to accumulate excessive wealth, we will never end exploitation in either the housing market or the labour market.

Should Osborne be praying for the economy to stall?

After three quarters of economic growth, George Osborne has already transitioned from cautious optimism to full-on self congratulation. "The UK has been singled out as an example of the improvement and there is recognition that we have stuck to our economic plan", he said last month.

Let's leave aside that he hasn't stuck to his plan at all (the deficit was forecast in 2010 to be far lower today than it is, and as a result of two flatlining years he is borrowing over £200 billion more than planned). Let's even underplay that even today's public debt figures £8.1 billion this October, down from £8.2 billion for October last year, are hardly impressive.

Nevertheless the level of UK economic growth in the last three quarters (nine months) has surprised and exceeded most independent forecasts. The Bank of England declared earlier this week that
the UK is in "sustained recovery".

Three consecutive quarters of reasonable growth (by historical standards) is fairly hard to dismiss. What economists now disagree about is not whether recovery has been sustained, but whether it  is sustainable.

There's a good analysis of this question by the Independent's Ben Chu here. The key point is that the recovery is driven (largely) by debt, which has been both encouraged (through schemes like Help to Buy) and enforced (through declining real wages, benefits and high unemployment). As the chart below, personal debt remains at crisis-era highs

The question therefore is can growth continue with debt at high levels and real incomes declining?  The unstable retail sales figures - with October registering a fall that confounded predictions - are a warning sign to the optimists.

So the question is whether the recovery will stall - due to people reining in their spending without any compensating surge in government or corporate investment - or will it continue to grow as people take on ever greater debts?

If the latter is the case, then the ultimate result may be a sharp crash, caused by unsustainable levels of debt. That scenario should make George Osborne pray for the economy to stall (while he devises a sustainable growth strategy - something some of his opponents have been advocating and outlining since 2010).

Once more on the great disappearing unemployment mystery ...

Last week we reported on the great unemployment disappearing act, focusing on growing divergence between the claimant count and the ILO measure of unemployment (see graph).

But this growing disparity isn't uniform across the UK. As the chart below shows, there is a massive regional disparity between the claimant count and ILO unemployment in some UK regions, but a close correlation in others.

To make matters clearer the table below shows, for each region or nation of the UK the claimant count as a percentage of ILO unemployment:

Our 13 November analysis highlighted the growing divergence between the two unemployment measures (showing that in 1993 the claimant count was 96% of ILO unemployment, but today is only 53%.

Health warning: the figures used are from the latest ONS Labour Market Survey stats, which for claimant count are October figures and for ILO measure are July-September. However, this difference in monthly accounting does not explain the sharp differences either within or between regions.

However, across the UK there are massive disparities. So why is it that in London and the South if you're unemployed you are far less likely to claim jobseeker's allowance than if you're in the North East or Northern Ireland? And why does jobseeker's allowance reach so many more of the unemployed than everywhere else in the UK?

What explains the differences? I honestly don't know, but I've posited some options below - please leave your views in the comments ...

• Unemployed people in London and southern England are more likely to be ineligible for JSA due to household circumstances or personal savings
• Bad data - the regional data for ILO unemployment is dodgy (the claimant count won't be as it's simply the number of people claiming JSA)
• Sanctions are being unevenly imposed across different regions - disproportionately reducing the claimant count in some regions
• The stigma of claiming benefits is stronger in some regions than others
• Something else? Let us know in the comments ...

UPDATE (21/11/13): As was pointed out by Labour market stats wonk, Paul Bivand, Northern Ireland has some devolved powers over social security - and the UK sanctions data (analysed here) doesn't include Northern Ireland. So is that the answer - is it due to a less stringent sanctions regime there?

Ralph Miliband and the Politics of Class Today

Wednesday 27 November
7pm-8.30pm
Parliament, Committee Room 9

With speakers including:

John McDonnell MP (Chair), Colin Leys, Andrew Murray and Hilary Wainwright

Reserve your free place here.


The Socialist Register was founded by Ralph Miliband and John Saville in 1964 as ‘an annual survey of movements and ideas’ from the standpoint of the independent new left. It is currently edited by Leo Panitch, Greg Albo and Vivek Chibber, assisted by an editorial collective of eminent scholars in Africa, Asia, Europe and the Americas. Each volume is focused on a topical theme and characterized by the inclusion of relatively long, sustained analyses which cut across intellectual disciplines and geographical boundaries.

The 50th volume of the Socialist Register is dedicated to the theme of 'registering class' in light of the spread and deepening of capitalist social relations around the globe.

Today's economic crisis has been deployed to extend the class struggle from above while many resistances have been explicitly cast in terms of class struggles from below.

This volume addresses how capitalist classes are reorganizing as well as the structure and composition of working classes in the 21st century.

Tax Justice - Are you serious?

An event jointly organised by Action Aid, Christian Aid, Oxfam, Tax Justice Network, War on Want. 

Monday, 25 November 2013 from 10:30 to 17:00 
London, United Kingdom
Get tickets / register online

With a great line up of speakers and panellists this promises to be a day that will make you think seriously about tax justice.

Speakers and panellists include:

Margaret Hodge MP - Chair of the UK Public Accounts Committee
Richard Brooks - Private Eye,
Andrew Masiye - Activista Zambia,
John Christensen - Tax Justice Network,
Alex Cobham - Centre for Global Development,
Rosa Curling - Leigh Day,
Tim Dixon - Purpose,
Martin Drewry - Health Poverty Action,
Rich Hawkins - PIRC,
John Hilary - War on Want,
David Hillman - Robin Hood Tax Campaign,
Polly Jones - World Development Movement,
Government of Jersey representative,
David McNair - Save the Children,
Richard Murphy - Tax Research UK,
Louise Rouse - Share Action,
Professor Prem Sikka - University of Essex,
Michelle Stanistreet - National Union of Journalists


This past year has seen a momentous shift in public and political perception of the issue of tax fairness.

Tax, who pays it and who doesn’t, has come to be the social and economic issue of the moment. And with good reason. Tax dodging is now a scandal in the minds of the public and politicians alike:

"Individuals and businesses must pay their fair share" David Cameron in his speech to the World Economic Forum in Davos in January this year.

Having already had huge tranches of public money shifted from public goods and services to bail out banks guilty of reckless lending; people have witnessed exposé after exposé of large multinationals and wealthy individuals refusing to pay back into the common weal and scorning their basic civic duty to pay a fair share of tax. People across the globe find themselves trapped in poverty while rich multinationals and individuals get away with not paying what they owe.

People are angry - it’s time to build on this anger. 

In the past month a number of organisations and individuals have been discussing how we can convert the peaks of media and public outrage at tax avoidance into a strong, grassroots and citizen-led movement call for tax justice that this and future Governments cannot ignore.

This event is an opportunity to join with other organisations, activists and thinkers, to hear from tax justice pioneers and critics, and to ask the hard questions and debate the tough issues.
Join us for the Tax dodging ‘Tax Justice – Are you serious?’ forum.

If you intend to join us for the UK Gold screening & panel discussion at 6.30 please do confirm your tickets for the film here.


See also:

• Tax justice - exposing the multi-billion fraud 
• Tax justice becomes a movement
• Mervyn King backs the tax justice campaign?
• 5 reasons why you can't take the government seriously on tax justice 

Read a report of the conference here (via In particular order)

Ripped-off UK looks for radical solutions

At the 2011 Budget, LEAP called for "a Windfall Tax on recession profiteers": UK banks, energy companies and supermarkets - to fund job creation and capital expenditure programmes (full report here).

John McDonnell MP, said in the 2011 Budget debate, "I think that a windfall tax on energy is appropriate. The current profits of British Gas average 24%, and Ofgem has reported an average profit margin of 38% per customer since last November. That is profiteering during a recession."

There are indications the British public agree - and may want to go further. A YouGov opinion poll commissioned by the Class thinktank found that 68% want the energy companies renationalised, while 35% believe the government should have the power to regulate grocery prices (rising to 44% among Labour voters - and 40% of UKIP voters!).

The poll coincided with Russell Brand's thought-provoking essay in which he wrote, "Profit is the most profane word we have". Indeed it is.

In the last few days Sainsbury's results showed like-for-like sales were up 1.4%, yet their profits were up 9.1% - which shows profit margins keep increasing.

And the energy companies are ripping off UK consumers with further price hikes - adding to inflationary pressures. The claim that this is a reflection of wholesale prices is refuted by this graph comparing causes of inflation between the UK and the Eurozone. The gross disparity between the Eurozone (where energy prices have fallen sharply) and the UK where prices have risen (and are bout to rise more sharply) clearly tells the story of the UK energy cartel ripping off consumers. No wonder 68% want energy renationalised.

Even John Major (the Prime Minister who privatised the railways, which 66% want renationalised) now supports a windfall tax on the energy companies.

And it's little better with the banks - as our European neighbours again show us up. The chart below shows the difference between the interest banks give to savers and the rates they charge borrowers. While UK banks have lower margins than US banks, they are far wider than Eurozone banks.

It would be interesting to work out the economic stimulus to consumers if UK banks reduced their margins to Eurozone levels (nearly half that of UK banks) ...

It is clear that rampant profiteering has, if anything, got worse since our March 2011 report - and it's no surprise that the public supports more radical solutions to address it. The vacuum remains the political movement to reflect those radical solutions ...

The great unemployment disappearing act

Today's unemployment figures revealed that the internationally recognised measure of UK unemployment fell by 48,000 and the claimant count (i.e. the number of people claiming jobseeker's allowance) fell by 41,700.

These two figures were remarkably close. To the uninitiated naively logical this might seem to corroborate that there are roughly 40-50,000 fewer unemployed people in the last 3 months.

However, with those subtractions ILO unemployment stood at 2.47 million, while the claimant count was only 1.31 million. So in relative terms the fall in the claimant count was nearly twice as sharp.

As the graph below shows - this is not a one-off occurence but part of a 20-year trend that has seen the ILO unemployment measure part company with claimant count.

Whereas the claimant count accounted for 96.6% of ILO unemployment 20 years ago in 1993, three years later the claimant count was only 83.2%. Five years on again - or twelve years ago - in 2001, the claimant count was just 64.5%.

Today, the claimant count was just under 53% of the ILO measure.

It is not entirely clear why this has happened. Certainly a part of the reason is the increased conditionality, and reduced eligibility that has applied to claiming unemployment benefit since the 1995 Jobseekers Act - and toughened by successive welfare reform acts under successive governments.

The recent sharp downturn in the claimant count - and sharp relative to ILO unemployment - is no doubt partially explained by the increase in sanctions (see LEAP analysis 6 November 2013).

But the rut set in slightly earlier. Under the Major government the claimant count averaged 93.3% of the ILO measure. In the Blair/Brown New Labour years, the claimant count averaged just 63.1%, and under Cameron's coalition government to date that has already dropped again to 59.9% (and was 53% in today's figures).

It means that the claimant count is becoming a less reliable indicator of true unemployment. With an increased sanctions regime, and extra conditionality generally (including workfare), and the demonisation of claimants as 'scroungers' and 'skivers', jobseeker's allowance has become a daunting benefit to claim.

As PCS research has found (see infographic here) the real value of unemployment benefit has fallen from 18% of average wages in 1990 to just 13% today.

With increasingly greater sanctions, more conditionality, less eligibility, more stigma and less value - is it any wonder the claimant count now represents barely half the true level of unemployment.

Help to Buy 'will fail if housebuilding slows'

Sharpest house prices increase since June 2002 sparks housing bubble fear

by Luke James

The thatcherite Help-to-Buy scheme will explode into another housing crisis if "soaring" demand is not matched by building, surveyors told the government yesterday.

Home sales are at their highest in over five years, according to monthly research by the the Royal Institution of Chartered Surveyors (RICS).

But its members also reported the sharpest increase in house prices since June 2002 - sparking fears over a new housing bubble.

Help to Buy's first phase offered a 15 per cent mortgage guarantee on new-build homes when it was launched in April.

That was extended to existing housing stock last month and over 2,000 people have since taken advantage.

Some were used as props at a Downing Street press conference yesterday as David Cameron hailed the scheme's success. He boasted: "This is all about helping hardworking people get on the first rung of the property ladder - and helping them get on in life."

But RICS chief economist Simon Rubinsohn called for the government to "urgently" address the imbalance between supply and demand.

"Housebuilding starts have picked up recently but we are still well behind in terms of the amount of properties needed," he reminded Mr Cameron.

Part-nationalised banks RBS and Lloyds, along with HSBC, have signed up to offer 95 per cent mortgages as a result of the scheme.

The Left Economics Advisory Panel pointed out that it was a huge gamble to increase personal debt when wages are stagnant and jobs are at risk.

Co-ordinator Andrew Fisher said: "If the dangers of rising house prices, greater borrowing and suppressed incomes sound familiar, then that is because it was this combination that in large part contributed to the 2008 crash.

"Unless accompanied by a massive programme of housebuilding, Help to Buy will continue inflate house prices - making home ownership even more unaffordable for most families - and lead to another crash."

Mr Fisher added that the scheme could land taxpayers with huge liabilities if people default on loans as a result of austerity.

This article first appeared in the Morning Star

Robbing from the poor ... £328,000 taken from unemployed daily

IDS...thieving from the poor

DWP sanctions data published today revealed benefit sanctions are robbing £328,767 from unemployed people every day - based on the new sanctions regime imposed since October 2012.

If you're thinking well, that's fair enough, they can't have been looking for work then I can only point you in the direction of the excellent report by Manchester Citizens Advice Bureau on people's real experience of being sanctioned.

If you don't have the time to read that report, then I'll appeal to your logic. The data shows that sanctions have increased by 137% compared with figures for between 2000-2010. Have claimants suddenly become so much worse? In the last two and a half years, the number of unemployed people sanctioned has averaged 64,307 a month, compared with 27,108 a month between 2000 and 2010.

N.B. And even the above may be a severe underestimate, due to sanctions decisions being deferred in 120,000 cases due to the 'Poundland case'.

In cash terms, the figures are even more stark: in 2009/10, £11 million of jobseeker's allowance (JSA) benefits were sanctioned, but in first six months of 2012/13 alone it was £60 million. This is because not only are more people being sanctioned, but more of their benefits are being removed - and for a longer period. The stats since October 2012 (when the new sanctions regime was introduced) show over 52,000 people have lost their benefits for 3 months or more.

This is about a far more brutal regime, not claimant behaviour. As the PCS union's Mark Serwotka said:

"The new sanctions regime damages the relationship between Jobcentre advisers and claimants, and is entirely counterproductive in helping people to find work

"The government’s perverse and punitive approach is a collective punishment on the unemployed and the disabled for its own failure to create sufficient jobs."

Over 4,300 lone parents have been sanctioned every month under new sanctions regime - and 230 a month have received high level sanctions involving loss of benefits for 3 months or more. The effect of this on children will be appalling - and surely constitutes cruel and unusual punishment, by reducing to abject poverty the children of those who have (supposedly) breached the rules.

In nearly a third of cases (31%) under the new rules, the sanction was directly related to failure to participate in the Work Programme, mandatory work activity or some other scheme. Given international research and Work Programme figures show the abject uselessness of these schemes in assisting in securing paid work, this is being sanctioned for avoiding doing something counterproductive.

For disabled people on employment and support allowance, sanctions have increased by 156% in the last year. These sharp increases highlight how the use of sanctions has been cranked up as part of the coalition's drive to reduce the deficit on the backs of the poor, while slashing corporation tax and the top rate of tax for the richest 1%.

The JSA data also shows non-white claimants are slightly more likely to get an adverse decision than white claimants. For all three categories of sanctions, non-white claimants got a higher proportion of adverse decisions: for low level, white claimants 56%, but for non-white 60%; for intermediate level white claimants 81% compared with 83% for non-white; and for high level sanctions (losing benefits for 3 months or more) white claimants referred for sanctions had adverse decisions 33% of the time, compared with 38% for non-white claimants. Although the differences are marginal, they are consistent across all three sanction levels.

Likewise for young people, while 16-17 year olds were sanctioned 64% of the time (after being referred for sanctions), for those over 55 it was 48%, and there was a direct correlation through the age brackets: the younger the claimant the more likely to be sanctioned. This is even worse given that young people inexplicably receive a lower rate of JSA (£56 per week compared with £71).

These data beg the question about whether the policy was subject to equality impact assessment - and if so whether this was predicted? (any insights welcome).

Remember, "It wouldn't be happening without the Liberal Democrats"

The two strongest periods of growth for three years, 0.7% followed by 0.8% and the Tories and Lib Dems hangers-on are jubilant. Chief among the examples of this heady growth jubilation is Financial Secretary to HM Treasury Danny Alexander, who wrote in the Telegraph:

"Britain is on its way back. We need to stick to our plans to make sure this is a recovery that is built to last. That is the only way to improve living standards.

"Our economy is growing because of the hard work of people and businesses throughout Britain. But the coalition's economic plan is the rock on which our recovery is being built - so it wouldn't be happening without the Liberal Democrats."

On almost every count, he is wrong. This 'recovery' is doing nothing for living standards, which continue to fall. Wages are rising at just 0.7%, while inflation is four times that at 3.2% (RPI, 2.7% CPI).

For people on out of work benefits (and indeed those on low pay whose incomes are topped up by tax credits) benefit increases were capped by this government at 1%.

Put that alongside rents rising way above wage increases, energy prices rising at 8-9%, and the forthcoming 6% rail fare increase in January - and you can see the problem isn't being resolved soon. Figures show that workers have collectively lost £50 billion a year in real terms cuts in pay.

For many of the lowest paid - and those on out of work benefits - the impact has been devastating:

• an extra million people are, by the government's own figures, living in poverty since the coalition was elected;
• half a million people have had to use food banks in the last year;
• homelessness is rising, and the number of families housed in B&B accommodation now stands at a ten year high, and the number of households in rent arrears is increasing sharply;
• unemployment remains stubbornly high at around 2.5 million - with long-term unemployment and youth unemployment unaffected by failing privatised government schemes

So when Danny Alexander says that this 'recovery' is the only way to improve living standards, it is an evidence-free assertion, a delusion and, since he probably knows this, a flat-out lie. Of course living standards are improving for some people: the 1000 richest Britons increased their wealth by £35 billion last year (if you wanted to know where your missing pay rise ended up).

So where has the recovery come from? Mostly, debt. Consumer and mortgage debt to be precise. Yes, exactly what caused the crash, an unsustainable credit bubble. George Osborne (Danny Alexander's boss at HM Treasury) is huffing and puffing into that bubble with his Help to Buy scheme - re-introducing 95% mortgages at a time of rising house prices and falling wages ... what could possibly go wrong?

The "rock on which our recovery [sic] is being built" is that least rock-like of entities, a bubble. The question for the government is whether that bubble will burst before or after the 2015 election ... they may hope after, but the longer it inflates, the worse it will burst.

Alexander is right about one thing: "it wouldn't be happening without the Liberal Democrats", it's just that the "it" he refers to is rising poverty, homelessness, inequality, and a credit bubble that could spell further disaster for the UK economy and his government.

Remember, "it wouldn't be happening without the Liberal Democrats."

Help to Buy won't Help, says Labour Land Campaign

 

In his Financial Times article (10 October 2013 “Buyers beware of Britain’s absurd property trap”) Martin Wolf exposes the real reason for the Government’s Help to Buy Scheme – to stimulate land speculation in the UK and give land owners even more unearned income as the next property bubble grows and grows at the expense of the economy. 

Land values are created by our collective demand for public and private services and production; it is our taxes, our investments and our consumption that create land value. Because we have monopoly ownership of land in the UK (70% of land is owned by less than 1% of the population) we have monopoly ownership of land wealth. The poorest taxpaying commercial and residential tenants are subsidising the richest land owners.

Carol Wilcox, Secretary of the Labour Land Campaign, says:

"The mythical housing ladder is unattainable to a growing number of households and the UK’s tax system sustains this economic injustice and actually encourages land speculation. This is now so hideous that blocks of apartments are being built in London that have already been sold to overseas speculators before completion.

"We don’t need a government that fuels land price rises through subsidies which make homes even more unaffordable to a growing number to buy or rent. We need a courageous and imaginative government that tackles our tax system by shifting taxes off earned incomes and on to unearned incomes that the owners of our land and other natural resources take as theirs. By taxing the annual rental value of all land at its optimum permitted use value, the government will capture wealth that the whole of society creates to be reinvested in our public services."

 For more details visit www.labourland.org.

What's wrong with Help to Buy?

Those who can afford mortgage payments but don't have large deposits can get on the property ladder with #helptobuy launching today
— George Osborne (@George_Osborne) October 8, 2013

The flagship announcement from Conservative Party conference was the bringing forward of stage two of the Help to Buy scheme. To encourage mortgage lending by the banks, the government will guarantee 15% of the loan value.

RBS, Lloyds and HSBC are among the banks that have signed up to the scheme and today announced 95% mortgages - something that had largely withered post-crash as banks (understandably) became more cautious in their lending.

Home ownership has been a central plank of the Conservative narrative for over 30 years now - but this government has been the first post-war which has overseen a decline in home ownership. Home ownership peaked at 72% of households, but it has now dropped to 65%. The Daily Telegraph described it as "a national crisis".

Leaving aside the Telegraph's attack of the vapours, I'd argue there's a lot wrong with Help to Buy - including:

It doesn't help those in the most housing need
The real national crisis is not the nature of housing occupancy, but the rising homelessness, chronic housing waiting lists, and the soaring cost of private rent - exacerbating the cost of living crisis. The number of households living in temporary accomodation has risen 10% in the last year. These households need social housing (preferably council housing).

It won't build the houses we need
While stage one of Help to Buy (began in April 2013) applied only for new build homes, stage two applies to existing housing stock. Last year, the number of homes built in the UK was the lowest on record since the 1920s. But the scale of house building required to meet housing need, cannot be driven by the mortgage market.

It will increase house prices - making home ownership even more unaffordable
House prices are rising due to constrained supply. Increasing the availability of credit to borrow to buy housing can only push up house prices (increased competition for the same number of units). This will make home ownership even more unaffordable. As wage increases remain stagnant, the average house
price has risen to 6.74 times the average wage. For comparison it was only 4.21 in 2000, but reached 7.23 in 2007 at the peak of the housing boom - and we know what happened then.

It helps private landlords more than aspiring homeowners
Help to Buy is available to buy-to-let landlords. Capital rich and in no housing need, it is hard to make a case for a government subsidy for buy-to-let - though of course the Tories did it in the 1980s too. Buy to let mortgages are already subsidised through the tax system as mortgage interest is tax deductible. Help to Buy is therefore a further taxpayer subsidy to the rich. The return of 95% mortgages still means an  deposit of over £12,000 is required on the average house price - not inconsiderable (according to the MoneyMood survey, the average household is saving just £42 a month).

It will push up private rents
The cost of private rents have outstripped wage rises in recent years. If house prices are inflated and more homes become buy-to-let investments (see above two points), the most likely outcome is that rents will rise as well - increasing the risk of those renting falling into arrears or debt, while pushing them further away from the stated goal of home ownership.

It's a crap economic stimulus
We have argued that there is a strong case for public borrowing for growth, but what Osborne's Help to Buy scheme does is land the public with potential liabilities, with nothing to show for it. If these loans default, then either tax rises or public services are cut to ensure the banks don't take the hit.

It could cause another crash
While Ed Balls has been among those calling the recently more positive economic growth figures "the wrong sort of recovery" - something we have also alluded to, twice - Help to Buy could tip that 'wrong sort of recovery' into another crash. Increasing debt levels when wages are stagnant and the labour market far from stable (not to mention any risks from global instability), increases risk and the government could end up with considerable liabilities if defaults rise.

In short, Help to Buy does nothing to solve the UK crisis in housing affordability (of whatever tenure), may actually make it worse, and comes with not inconsiderable risks to the wider economy - and the Prime Economics website thinks the EU may even rule the scheme to be 'illegal state aid'.

This is a government with no housing policy, only a mortgage policy ... and a pretty crap one at that.

Google and ExxonMobil run rings around outdated tax laws

Prem Sikka

Tax avoidance shows no sign of abating. Google, the company with the slogan “Don’t be evil", is at it again. The company has been named and shamed by the UK House of Commons' Public Accounts Committee, but that has not persuaded directors to change their ways.

According to information filed with the US Securities and Exchange Commission (SEC), the Google group of companies generated global revenues of US$50.175 billion last year. Some US$4.872 billion (nearly £3.25 billion) of revenues came from the UK.

Google explains these revenues are “based on the billing addresses of our customers for the Google segment and the ship-to-addresses of our customers for the Mobile segment”. But this does not mean the revenues are necessarily booked in the UK, which acts as a marketing mechanism for its Ireland operations. As the Public Accounts Committee heard, through careful attention to detail, a large part of the revenues is booked in Ireland.

Despite the US data, Google’s UK operations reported a revenues of just £506m in 2012, some way short of the figure reported to the SEC. This gave rise to a UK profit of £36.2 million and a corporate tax bill of £11.2 million.

Google’s Irish arm reported revenues of €15.5 billion (£13 billion), of which €11 billion is wiped out by “administrative expenses”. The Irish operations reported a profit of €154m (£131m) in 2012, but paid just €17m (£14.5m) in tax.

Google uses complex corporate structures. Royalty payments, masquerading as administrative expenses, are a key part of the profit shifting strategies. For example, its intellectual property is held in Bermuda, which does not levy corporate taxes. Various subsidiaries pay royalty fees which result in tax deductible expenses in Ireland and elsewhere, but tax-free income in Bermuda.

Google’s SEC filing shows the company had foreign income before taxes of just over US$8 billion for 2012. Most of the income from foreign operations was recorded by an Irish subsidiary. The foreign tax paid/payable was US$358m, equivalent to a rate of 4.43%. The accounts received the customary clean bill of health from auditors Ernst & Young.

Another company using complex corporate structures and intergroup transactions to avoid taxes is ExxonMobil. Its Spanish subsidiary operated for a while from the same address as its auditors PricewaterhouseCoopers. The Spanish company apparently had one employee on an annual salary of €55,000, but it reported net profits of €9.9 billion for the period 2009 to 2011. The key to this was a strategy designed to take advantage of Spanish laws for attracting foreign investment. The company shuffled the payment of dividends and avoided taxes in the US elsewhere.

We can all ask companies to honour their promises of ethical and responsible conduct, but such calls have little effect. All over the world tax authorities are overwhelmed by the tide of avoidance and lack the financial and political resources to investigate giant corporations.

Yes, they can be more aggressive and governments can move to deprive tax dodging companies of any public contracts. But such efforts need to be accompanied by a fundamental reform of the way corporate profits are taxed. The current system is over a hundred years old and is fundamentally flawed.

For example, Google, ExxonMobil and other companies may have hundreds of subsidiaries, but they are unified entities with a common board of directors, common share ownership and a common strategy that directs their operations. The companies publish consolidated financial statements for the group as a whole, which recognise that transactions within the group of companies, do not add any economic value. These transactions have zero effect on their consolidated profits.

Yet the tax treatment is entirely different. For tax purposes Google and ExxonMobil are not treated as a single entity. Instead they are treated as hundreds of separate entities. This encourages them to play royalty and other games and shift profits through artificial transactions and arbitrage the global tax systems.

So the obvious solution is to treat multinational corporations as single unified entities. Their global profit, with some modifications, needs to be allocated to various countries on the basis of employee, sales, assets or other key determinants of profits and taxed at the appropriate rates.

Such a system already operates within some federal states, most notably the United States, Canada, Switzerland and Argentina. It prevents companies from artificially locating domestic profits to internal tax havens. Thus, a company trading in California cannot easily avoid taxes on its local profits by claiming that it is a located in Delaware, which offers minimal taxes on varieties of corporate income.

The above reforms do not necessarily need international agreement and can be implemented unilaterally by any government. It has considerable similarities with the Common Consolidated Corporate Tax Base proposed by the European Union.

The EU’s plan could make a serious dent in tax avoidance, but is opposed by the corporate dominated Organisation for Economic Co-operation and development (OECD). The OECD’s preference is to tweak the current system, which cannot address the fault lines.

Without a fundamental reform companies like Google and ExxonMobil will continue to deprive national governments of much needed revenues.

• This article first appeared on The Conversation website.

Why - and how - Labour should pledge to renationalise Royal Mail

Yesterday, Labour's shadow Business Secretary Chuka Umunna - tipped as a possible future leader by some - announced that Labour would keep Royal Mail in private ownership if, as is likely, the Tory-led government pushes through privatisation before 2015.

Writing for the Huffington Post, Umunna argued:

"I have been very clear that we are not in a position to pledge to renationalise the Royal Mail if we get into government in 2015. I do not know how much Royal Mail shares will be trading at in May 2015, so I do not know how much it would cost to renationalise. No credible future Business Secretary would therefore make such a pledge"

What struck me was how woefully unaware Umunna seems of Britain's long history of nationalisations. But, first some good news to be read into Umunna's otherwise depressing statement: if Labour won't nationalise because of cost, then rail renationalisation is on the cards - since the franchises can be brought back under public control as they expire, cost-free. Come on Maria Eagle, you can do it!

But I digress. Labour has of course already said it will stick to the Tory spending plans that it criticises as being flawed, and therefore Mr Umunna is unable to make spending commitments, unless funded by some other cut (like Trident perhaps?).

But still, governments have rarely used current expenditure accounts for nationalisations. Even the colossal shovelling of public money at the banking system in 2008/09 was done through an arcane stand-alone Bank of England fund.

The largest swathe of nationalisations occurred under Clement Attlee's 1945 government, and included coal, steel, electricity, gas, electricity, railways, road haulage - alongside a massive expansion of publically-owned social security, public health, education and housing.

Now you might say, 'that's all well and good, but Labour will come to office in 2015 with a very different inheritance. Didn't you hear Liam Byrne? There's no money left!'. To which the reply is 'I never listen to Liam Byrne. Why on earth would anyone? But I see your point, Attlee only took office after six years of war, with the country's infrastructure and labour force decimated, and with a national debt nearly four times what it is today. But I just think maybe today's Labour could manage one relatively small renationalisation...'

Attlee's government also reduced the national debt during its term in office. 'But how?' you ask, 'when they must have spent billions on all those nationalisations'. Attlee's government largely exchanged shares for Treasury bonds - sustainable low cost funding of the purchase of assets that often generated revenue in return (Royal Mail made a profit of £430m last year) or were steered in the public interest to underpin economic growth and to meet social need ('meet social need' aka 'predistribution'). Another question Mr Umunna should be asking is why would any government wanting to reduce the debt, sell off a steady income stream?

But of course saying now that if the Tories privatise Royal Mail, Labour will renationalise will drive away the vultures circling over Royal Mail. Who would pay for shares now, knowing they'll be exchanged in less than 18 months. Labour committing itself now to renationalisation in 2015 could scupper the move entirely.

All is not lost if Labour waits. The inevitable result of Labour committing itself to renationalisation next year would be to reduce the share price of a privatised Royal Mail. Look at the impact of Ed Miliband's modest price freeze announcement for energy companies. This would make even a cash buyback considerably cheaper.

The Attlee government did something very simple, it told the electorate what it would do - boldly - and it won a landslide. Until it finally announced some policies at its conference last week, today's Labour was barely ahead in the polls, against a deeply unpopular government. It went from being level to four points ahead before, to 8 to 11 points ahead after the announcement to freeze energy prices and repeal the bedroom tax.

There's a lesson there. One is that, if Labour wants to look 'credible' it shouldn't oppose privatisation only until it happens. That's rather like being a vegetarian between meals.

UPDATE (05/10/13): It is now estimated that Royal Mail will be valued at around £3 billion for the sell-off. Chuka Umunna has described this as "on the cheap", stating that two of Royal Mail's sites in London are alone worth £1.5 billion - and that these sites are at risk of being sold off once the shares are sold to private investors.
Such asset-stripping is common in privatisation - and occurred following the privatisations of the railways and of the water boards. If such asset-stripping occurs, then Labour should renationalise in 2015 by compensating shareholders on the basis of the valuation of the company at time of privatisation, minus the value of any assets sold off. If they can privatise on the cheap, we can renationalise on the cheap!

Barclays and KPMG involved in $660m tax ‘sham structure’

Prem Sikka

What are the chances that in the face of public criticisms, big business would curb its tax avoidance practices? Well, not much, as evidenced by a case decided by the US Court of Federal Claims.
Salem Financial Inc v United States relates to a complex financial transactions known as STARS (Structured Trust Advantaged Repackaged Securities). The case involved Salem Inc, a subsidiary of North Carolina based bank, BB&T.

The scheme was designed by Barclays Bank, a major UK financial institution; KPMG, one of the world’s biggest accountancy firms; and Sidley Austin, a US law firm. At the centre of the dispute is a tax liability of some US$660m.

Through collaboration with Barclays, KPMG specialised in developing transactions that took advantage of differences between international tax systems. Barclays marketed some versions of STARS to a number of corporations, including AIG, Microsoft, Intel, and Prudential. KPMG introduced the STARS transaction to BB&T at a January 17, 2002 meeting and used a slide show to outline the steps necessary for the scheme to work. KPMG had little prior business relationship with BB&T.

Contrived transactions

The key idea of the tax avoidance scheme was to generate large-scale foreign tax credits which could in turn be used to enhance revenue and reduce taxes payable by BB&T in the US. A series of transactions with circular cash flows were designed to create the tax savings.

The court noted that in essence the scheme called for BB&T to establish a trust containing approximately US$6 billion in revenue-producing bank assets. The monthly revenue from the trust was then cycled through a UK trustee, an act that served as a basis for UK taxation. Although the revenue was immediately returned to BB&T’s trust, the assessment of UK taxes generated tax credits that were shared 50/50 between Barclays and BB&T.

A US$1.5 billion loan from Barclays to BB&T was also part of the structured transaction, although the loan was not necessary to the objective of generating foreign tax credits. The Barclays monthly payment to BB&T represented BB&T’s share of the tax credits, and had the effect of reducing the interest cost of BB&T’s loan.

The main question for the 21-day court hearing was whether the STARS transaction had any purpose other than to generate tax savings, and if not, whether penalties should be assessed against BB&T. The 67-page court judgment found in favour of the government and the company has been ordered to pay US$680 million plus penalties of US$112 million.

After examining some 1,250 exhibits the judge referred to the scheme as “an abusive tax avoidance scheme” and said that the “conduct of those persons from BB&T, Barclays, KPMG, and the Sidley Austin law firm who were involved in this and other transactions was nothing short of reprehensible”.

The judge went on: “The professionals involved should have known better than to follow the STARS path, rife with its conflicts of interest, questionable pro forma legal and accounting opinions, and a taxpayer with a seemingly insatiable appetite for tax avoidance”. The whole STARS set-up was described as “a sham structure”.

Controversial pasts

Barclays and KPMG are no strangers to tax avoidance controversies. After lengthy investigations by the US Senate Permanent Subcommittee on Investigations and action by the US Department of Justice, KPMG were fined US$456 million for “criminal wrongdoing” in tax matters and a number of its former personnel were also given prison sentences. The firm has also been the subject of investigation of the UK House of Commons Public Accounts Committee, but this has not dulled its appetite for profits through the sale of tax avoidance schemes.

Barclays relies upon taxpayer guarantees for its core business, but operates a very lucrative tax avoidance business which is estimated to have generated around a billion pounds in fees each year between 2007 and 2010. Last year the UK government had to introduce emergency legislation to negate two avoidance schemes used by Barclays for its own business which could have deprived the UK Treasury of around £500 million. Despite fines and prison sentences major businesses remain addicted to tax avoidance. Public opprobrium has become just another cost of doing business.

It is time to shut down businesses who routinely pick citizens’ pockets through tax avoidance. Their schemes are undermining revenues that are much needed to revive the economy and provide education, healthcare, pensions, security and other public goods that distinguish civilised societies from the rest.

Yet the UK government continues to shower gifts on tax avoiders, KPMG continues to receive public contracts and Barclays is propped up by taxpayer-funded guarantees and loans. Only this week Ed Miliband hired KPMG’s deputy chairman for advice on low pay. Rather than giving them another consultancy job, politicians should be asking KPMG to explain the firm’s role in the erosion of social fabric.


This article first appeared on The Conversation website

John McDonnell MP's verdict on Ed Miliband's conference speech

Since Ed Miliband became leader, the strategy of the left has been to make issues safe for him by building support within and outside the party issue by issue. Only when it's safe is he confident about moving on an issue. Today's speech demonstrated that we are setting the agenda but there's so much further to go. A major housebuilding programme is needed, but it needs to be public housing alongside rent controls to stop landlords profiteering from housing benefits.

Challenging the scapegoating of unemployed and disabled people needs to be made a reality by scrapping the rigged capability tests associated with Atos and abolishing workfare. Time limited price controls won't end the rip-offs. A clear commitment to end privatisation is needed, especially in the NHS, and to bring rail, water and energy back into public ownership plus, if it goes ahead, Royal Mail. 

To tackle low pay, we need to make the minimum wage a living wage by right, re-establish trade union rights and restore a commitment to full employment. People already suspect this is a recovery for the rich and ongoing recession for the rest. This is exactly the time when people want more radical action. Make today's speech a beginning.

Osborne ‘slays Lloyds goose for quick buck’

Chancellor sells £3.2bn stake in profitable bank 

MINISTERS began reprivatising Lloyds yesterday, flogging off a £3.2 billion stake in the once failing bank.

Chancellor George Osborne hailed the sell-off as evidence that Britain was “turning the corner,” but economists raised concerns that the banking sector was merely returning to the light-touch approach central to the severity of the financial crisis in the first place.

Investors snapped up the stock at 75p a share – just above the 73.6p average the Treasury paid in the £20.5bn bailout the bank at the height of the financial crisis.

The taxpayer’s stake has been reduced from 38.7 per cent to 32.7 per cent, with no further sales for at least 90 days.

Mr Osborne said the sale eased the national debt by £586 million, based on a paper valuation of the shares on government books, though that figure is subject to Office for National Statistics approval.

The Tory Chancellor said: “This is another step in the long journey in putting right what went so badly wrong in the British economy.”

But left economists warned that the fire sale would be bad for Britain in the long term. Left Economics Advisory Panel co-ordinator Andrew Fisher said: “Lloyds was bailed out by the state, and propped up with public money.

“Now Lloyds has returned to profit, rather than maintaining a long-term income stream, it is being sold off for private profit.

“This is slaughtering a goose that lays golden eggs for a one-off fry-up, even leaving aside the government’s criminal failure to use its public stake in the banks to change banking culture or invest in the public interest.”

And the Socialist Economic Bulletin’s Michael Burke warned that the sell-off was “a return to the system we had before.”

“It’s a drive by the government to bail out the most failing aspects of the private sector – that of light-touch regulation in the financial sector, while imposing austerity cuts for the rest of society.

“They’re selling off one of our assets instead of using the profits for regeneration.”

This article first appeared in the Morning Star