An economy as if people mattered

Andrew Fisher's speech for People's Budget at the Southampton People's Assembly

After a minute's applause for both Tony Benn and Bob Crow, these are the notes from which I made my speech (with a few ad libs!)at the Southampton People's Assembly on 20 March, responding to the Budget and arguing for an economy as if people mattered:

Well I hope you’re grateful.

Two years ago the Chancellor was taxing your pasties – that is what you people eat isn’t it?

And taxing your caravans – that is how you people holiday?

But now look:

You’re getting tax cuts on beer and bingo (or working class culture as the Chancellor calls it). See, tax cuts aren’t just for big business and millionaires, they’re for you – the little people – too!

Budget 2014

So aside from the Tories'  lame efforts to persuade us they're on our side, what were the main things we learned in the Budget?

• No end to austerity: because it’s ideological - by 2018 public spending will be lower than at any time since 1948 - the year in which the NHS was founded. "Rolling back the state", but going further than Thatcher ever managed. And if anything austerity is being ratcheted up. Public spending has risen by less than inflation (so a real terms cut), but his estimate for 2015-18 is for cuts to public spending in absolute terms 
• ISAs – who can save £15,000? Someone working full-time on the minimum wage doesn't even earn £15,000 a year.
• And what's underpinning Osborne's forecast for more growth? The assumption is more household debt - which will rise to the levels that precipitated the crisis. There's also some utterly delusional figures for business investment rising between 8-10% year-on-year for the next three years.
• An array of green taxes were scrapped or capped in the Budget, making more of a mockery of the Coalition's "greenest government ever" rhetoric.

What the Budget didn’t address

• Pay – it did nothing for people's wages and falling living standards. As Bob Crow said: 

• The Housing crisis – nothing in there that will build the homes our country needs, nothing to tackle rising homelessness or the rising costs of paying the rent. We are back to a pre-war situation where more of us are dependent on private landlords, with not enough council housing and fewer able to afford a mortgage.

• Jobs or industrial strategy – far from being a budget for 'doers', following his 'march of the makers' budget, OBR projections show UK exports falling in future years. This is a government - to be fair, like those before them for the last 35 years - without a serious labour market or industrial strategy. The recovery in unemployment is due to low wage, insecure jobs.

• And the energy crisis – nothing to tackle the fuel poverty which disproportionately affects the poorest pensioners; and nothing to address the UK's woeful investment in renewable energy, in which we lag behind the rest  of Europe.

What sort of economy we want

While Osborne rattles on about his modest and delayed economic growth, and the 24 hour news tells us every hour how the FTSE is doing, what would an economy look like as if people mattered?

Five questions, I think would matter to most people:

1. Are we reducing poverty and inequality?
2. Is unemployment falling?
3. Are people's living standards rising?
4. Is the tax gap - the £120bn of avoided, evaded and uncollected tax - reducing?
5. Is the economy stable and environmentally sustainable?

If we want that economy, an economy that acts in our interests, then we need greater economy democracy. Tony Benn said:

And you can see how that happened, we built the NHS, the welfare state, council housing, comprehensive education, and brought the utilities under public control. And sadly we can see how that has been reversed through privatisation - anti-democratically transferring power back from the ballot to the wallet, from the polling station to the marketplace.

For me anything too important to fail should be in public ownership - if we want an economy where people matter. And we need economic rights, individually and collectively. The right to a minimum income, protection from being made redundant - why on Earth are profitable companies allowed to make people redundant - taking away people's jobs to give bigger bonuses to directors or higher dividends to shareholders?

And trade union rights restored, so that we can protect our jobs, pay, pensions and fight for better working conditions.

I hope that's a good basis for discussion. Thank you.

• Andrew Fisher is LEAP Co-ordinator and author of the forthcoming book The Failed Experiment ... and how to build an economy that works

Tony Benn: "What a world we would have created if we had listened to him"

LEAP Chair John McDonnell MP pays tribute to Tony Benn

LEAP chair John McDonnell MP spoke in Parliament yesterday (20/03/14) paying tribute to Tony Benn (click to watch via Youtube).

John, who also chairs the Socialist Campaign Group of Labour MPs (founded by Tony Benn), said:

"I want to go back not to the manifesto of 1983, but to Labour’s programme of 1982, which was the Bennite programme, and virtually all of it was written by Tony Benn. It is worth looking back at what it said. It was absolutely prophetic. It basically said, “We will create a society that is more democratic, more fair, more just and more equal.” How would we do it? Tony’s ideas in that programme were straightforward: we would undertake a fundamental, irreversible shift in the redistribution of wealth and power. How would we do that? Through a fair and just tax system, tackling tax evasion and tax avoidance, taking control of the Bank of England, preventing speculation in the City and the banks because it could be dangerous to our long-term economic health, and creating full employment. That is what he was about. That is what he inspired us to do.

"It is interesting that he said we should invest in housing, health and education; give all young people the opportunity to stay on at school with an education maintenance allowance; and make sure that they had a guarantee of an apprenticeship or training and the opportunity to go to university, not by paying a fee but on a grant. That was his programme in 1982. It was prophetic and years in advance of its time. He said that what we needed to create the wealth was an industrial strategy—a manufacturing base based on new technology and skills. Actually, I remember him talking in one of his speeches about alternative energy sources, well in advance of the debate about climate change.

"He inspired my generation and he inspired generations to come. What a world we would have created if we had listened to him. But more important, what a world we can create now if we listen to him.

"Solidarity and go well, comrade. You made a significant contribution to all of our lives. I hope we will be able to implement the lessons you taught us, when Labour next gets back into power."

The above are extracts from John's speech. Read it in full

Tony Benn - a tribute

Tony Benn: "Democracy transferred power from the wallet to the ballot"



For all British socialists - and many around the world - Tony Benn was an iconic and inspirational figure. He perhaps developed the political philosophy of 'democratic socialism' more than any other Labour politician. In the video clip above, from the 2008 LEAP conference, Tony explained how democracy challenged capitalism - and how capitalism fought back against democracy.

LEAP Chair John McDonnell MP tweeted: "Tony Benn was the articulate advocate for socialism who inspired my generation and gave people hope of a fair and equal society."

LEAP Co-ordinator Andrew Fisher posted: "Tony Benn - inspired generations of socialists (including me) with his warmth, integrity and ideas"

John Hilary of War on Want tweeted, "RIP Tony Benn: a true internationalist, comrade in the fight for global justice and long-term friend of @WarOnWant"

Tax justice campaigner Richard Murphy, said: "Tony Benn: simply a hero. RIP"

Katy Clark MP posted on Twitter: "Very sad news about Tony Benn. A great socialist thinker who made a massive impact. A huge loss. My thoughts are with all who loved him."

Paul Mason, former Newsnight economicscorrespondent, tweeted, "At Labour conf in 1980 & heard #Benn riveting call for 1) abolish the Lords 2) industrial democracy act 3) repeal EU powers - like detonator"

Having a Laffer

Earlier this week Mehdi Hasan wrote a Guardian column entitled 'Why are deficit-cutters so afraid to talk about tax?' - a well-argued piece that said taxation should form a bigger part of deficit reduction than it presently does relative to the massive cuts.

It also quoted US judge Wendell Holmes "I like paying taxes, with them I buy civilisation" to make the pertinent point that taxes are what fund everything around us - the pavements we walk on, the schools our children use, the hospitals, the roads, the street lights, etc. A similar point has been made by Tony Benn who argued that suffrage (i.e. democracy) transfers power from the wallet to the ballot - what people couldn't afford themselves they could now vote for at the ballot box. Likewise Richard Murphy makes the case for tax very strongly in his new book 'The Courageous State' (which will be reviewed on this blog shortly).

Like Murphy, Mehdi Hasan wants courageous politicians - ones who will make the case for taxation - and more of it if necessary. As he righty says, "'deficit reduction' has become a convenient euphemism for cutting public expenditure" and "senior politicians of all stripes daren't refer to the T-word in public" as they are decried by the vocal right.

As if to prove that, when Mehdi tweeted* a link to his article it got a near instant response from the right. Toby Young replied "Two words Medhi [sic]: Laffer Curve". This is the argument that increasing taxation rates doesn't necessarily raise revenues, since it might provoke avoidance or damage the economy.

However, the Laffer Curve is not a tool solely of the right. Toby Young - a man whose knowledge and arrogance seem to have an inverse relationship - obviously hasn't read much about the Laffer Curve. If he had he might not be advocating a 70% taxation rate. That according to Mathias Trabandt & Harald Uhlig in 'How far are we from the slippery slope: The Laffer Curve revisited' is the income tax rate after which revenues start declining.

So the left should embrace the Laffer Curve and argue that income tax rates for the richest should rise from 50% - why not make that rate 60%, throw a 50% rate in at £100,000 and let's hit £200,000+ earners with 65%?

If Trabandt & Uhlig are right and revenues do slip off above 70%, then is that a reason not to have them? That might sound like a silly question, but that judgement is based on the assumption that the sole purpose of taxation is to raise revenue. It's not.

The London congestion charge does raise revenue, but its main function is to deter some traffic from central London and achieve what transport planners call 'modal shift' - getting people to use the bus to you and me. And using the bus becomes more attractive when there are bus lanes and clear roads: post-congestion charge and bus lane investment, journey times reduced. Taxation achieved that. Better for the environment, for the economy, and for you and I sitting on the 159.

Likewise the Tobin Tax (aka financial transaction tax or re-branded Robin Hood Tax) was designed to shift behaviour: to deter financiers from speculating on markets (which can have highly volatile and disruptive effects on the real economy) and to instead invest in something productive, like businesses or infrastructure.

So is there a deterrent effect (with a potentially beneficial outcome) reason to go over the peak of the Laffer Curve? Possibly. Let's consider an 80% tax rate on all incomes over £300,000 (about double what the Prime Minister receives or about 1/15th of the average FTSE 100 CEO's salary). Would a company set a salary at £4.5m knowing their employee was receiving less than £1m of it and the rest was going straight to the Treasury?

So, if we could effectively cap salaries at £300,000 (and therefore also reduce the ridiculous pension pots to the super-rich) that money could then be spent more productively - on research and development, or improving the wages or working conditions of general employees. Then the right would cry that British business could not compete. But the German Commerzbank caps its top pay at 500,000 euros or £416,000 - about one-third of what Stephen Hester will receive as his basic salary, even without his now defunct bonus.

*LEAP tweets @LEAPeconomics - follow us on twitter

The Tories - but where's the opposition?

Over the last few days David Cameron and George Osborne have finally elucidated the nightmare vision of what a Tory Government will look like: attacks on welfare, public sector pay freezes, raising of the state retirement age. The Morning Star spells it out in stark detail on its front page 'Tories aim to hit the poor hardest'

. . . and yet. Where have we heard all this before? The Tories say they will move 500,000 off incapacity benefit, but New Labour's stated aim is to move 1 million off incapacity benefit. They both say they will privatise welfare delivery and introduce workfare schemes - which is why the Tories supported New Labour's Welfare Reform Bill through the Commons earlier this year.

Darling and Osborne made almost identical statements on public sector pay freezes, and the Tories, who supported New Labour's Pensions Act to raise the state retirement age to 66, now say it should happen in 2016 rather than 2026.

It all reminds me of what Tony Benn - a dissident prisoner in the Callaghan (IMF cuts) Cabinet - wrote in his diary on 24th June 1977, "we have provided a blueprint . . . and we will have no argument against it". New Labour has provided a blueprint for the Tories and can have no argument against it. Tony Benn continued, "it is an outrage". Indeed.

It's also economically incompetent:

1) On its own terms, raising the state retirement age in 2016 won't save a single penny for another seven years, so it does not make sense as Osborne presented it as a solution to the deficit. It's also incredibly regressive, DoH figures suggest that someone in Social Class V has a life expectancy of 72; while social class I averages 79. This means the poorest will get 6 years of pension, the richest 13 years. Any raising of the state retirement age is regressive.

2) Cuts in pay and benefits will mean less being spent in the economy and undermine attempts to reflate. In a recession you need to put money in the hands of those who will spend - not take it away.

3) The deficit is not a problem (immediately) - the UK has less deficit then many other countries (as % of GDP) and should be investing in jobs and industry to give the economy a shot in the arm - and if cuts need to be made (or funds diverted from elsewhere) then Trident, ID cards, and the war in Afghanistan would be almost universally popular choices. This is basic Keynesianism, but instead we seem to have a austere monetarist consensus now for cuts towards a balanced budget.

There is now a massive gulf opening up on the left - and yet New Labour continues to move to the right . . .

Since Osborne and Darling want to talk up 'crisis' - while painting themselves as the saviours - then perhaps we need really drastic solutions: the appropriation of the 200 largest companies and their profits used to pay off the national debt?

For an alternative to cuts, see the LRC / LEAP briefing 'Cutting our way to defeat?'