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.

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).

5 reasons why you can't take this government seriously on tax justice

At the G8, the Prime Minister, David Cameron, sought to make clamping down on tax havens the centrepiece of the summit. As Prem Sikka explains, the post-summit communique was 'high on vague promises, low on delivery'.

But even before the inevitable puncturing of Cameron's hubris, there were several reasons why this government cannot be taken seriously on tax justice* ...

1. Government minister says he wants the UK to be a tax haven

Last year, Cabinet Office minister Francis Maude said it was "a compliment" for the UK to be described as a tax haven, and added: "That is exactly what we are trying to do."

2. George Osborne slashing taxes for big business and the rich

If there's one hallmark of a tax haven, it's low or minimal tax rates. Corporation tax was slashed from 52% in 1979 to 33% by 1997. New Labour cut it further, to 28%, and Osborne has already driven it down to 23% - and aims to get it down to 20% by 2015. This is how he described it at the last Budget:

"A headline rate that is not just lower than our competitors, but dramatically lower.
18% lower than the US.
16% lower than Japan.
12% below France and 8% below Germany.
An advertisement for investment and jobs in Britain." 

Actually, it's an advertisement to for big business to pay less tax - undercutting both other nation's tax rates and shifting the tax burden onto the working poor (as we have previously shown). Of course, cutting the top rate of tax from 50% to 45%, also facilitated avoidance.

3. Many government ministers' wealth is based on tax avoidance and evasion

As Guardian investigations have proven in the case of Cameron's family fortune, and as Channel 4 Dispatches showed in the case of George Osborne, Andrew 'plebgate' Mitchell, and Phillip Hammond.

4. You can't collect taxes without the resources to do it - and this government is cutting resources

HM Revenue & Customs is the body tasked with collecting taxes owed, tackling evasion and clamping down on contrived avoidance schemes. Combined the tax gap (uncollected, evaded and avoided) is estimated at £120 billion ... every year.

Yet the government is slashing the resources available to HMRC - as this PCS infographic shows:

5. Treasury minister in charge of tackling avoidance and evasion is in denial

Treasury minister David Gauke seems to be in a constant state of denial and cover-up

• When MPs investigated and found senior HMRC bosses to close to business, Gauke described the claims as 'absurd'. The same committee also found HMRC was "too poorly resourced" (see above).
• He approved a plan to persecute an HMRC whistleblower who exposed the 'sweetheart deal' with Goldman Sachs
• He claims the UK tax gap is 'only £35 billion' (still substantial) when all serious estimates put it at £120 billion (see Richard Murphy's analysis here)

Of course Gauke did used to work for a legal firm that specialised in tax avoidance.

There's five reasons why this government cannot be taken seriously on tax justice. Please use the comments to add more!!

* For a serious look at tax justice, see the Tax Justice Network

The UK minimum wage - flying at half mast ...

As previously reported on this blog, the UK minimum wage is being cut in real terms this October, and would be 7% higher today if it had increased in line with inflation over the past 5 years.

The infographic below shows just how much the UK minimum wage needs to catch up not only with inflation, but with rates in many other comparable countries.

(We're reliably informed that if the national minimum wage (NMW) had increased at the rate of that for FTSE100 Chief Executives since 1998, it would today stand at more than £19 per hour - equivalent to a full-time salary of £39,000 a year!)


A recently published infographic by the PCS union* shows that the UK NMW lags behind comparative rates in many other nations (though the UK edges the US on 32%).

The graphic also mentions that if our minimum wage was equivalent to that in France, low paid UK workers would be earning an extra £1.95 per hour - equivalent to nearly £4,000 extra a year. (If it rose to New Zealand levels, our NMW would be £9.55 per hour - equivalent to nearly £19,000 a year for full-time work).

For the national minimum wage to reach the UK living wage of £7.45 per hour would mean the NMW being equivalent of 42% of average earnings - the same rate as in Portugal, and just below that in Australia.

It's a commonly made argument that raising the minimum wage would increase unemployment. Indeed that same argument was made the NMW was first introduced. Study after study (including this one from the US) shows that not to be the case - and there are even Tories calling for an increase in the minimum wage.


It's quite clear that the UK's low wage economy is having a drag on demand (one that loosening credit doesn't solve). Indeed, a PCS report published earlier this year - Britain needs a pay rise - showed that the real value of wages has fallen by 7%, there has been a real terms drop in consumer demand of 5% over the same period.

And the misery doesn't end there for low paid UK workers - who are also facing a real terms cut in a range of in-work benefits, including working tax credit and child tax credit - while child benefit is frozen for the third consecutive year.

If you want an economic recovery, you need more £s in people's pockets. If you want more £s in people's pockets, you have to either legislate for a higher minimum wage (as many other nations have done) or restore some trade union rights, so that workers have greater bargaining power to win better pay.

*PCS has a great series of infographics which you can see via the PCS Facebook page

MPs expose tax firms' 'inside track' on loopholes

MPs and unions today fiercely criticised an "unhealthily cosy relationship" between the Treasury and big accountancy firms that enables wealthy people and companies to avoid paying tax.

The public accounts committee said that it was "very concerned" at the way the "big four" accountancy firms - Deloitte, Ernst & Young, KPMG and PwC - were able to exploit loopholes in the tax laws.

It noted that staff were regularly seconded from these accountancy firms to advise the Treasury on technical issues when drafting legislation, only to return to advise clients on how to use those laws to avoid tax.

This "insider knowledge" on changes to Britain's tax laws enables them to identify loopholes in legislation quickly, the committee said.

Committee chairwoman Margaret Hodge said the practice represented a "ridiculous conflict of interest" which should be banned.

"The large accountancy firms are in a powerful position in the tax world and have an unhealthily cosy relationship with government," she said.

She warned that HM Revenue & Customs was engaged in a "battle it cannot win" in seeking to stem the losses to the exchequer from tax avoidance.

It had far fewer resources than the big four firms which employ almost 9,000 staff and earn over £2 billion a year from their tax work in Britain.

Left Economics Advisory Panel co-ordinator Andrew Fisher called for an end to the "revolving door between HM Treasury and the tax avoidance industry.

"At a time when cuts are forcing millions into poverty and thousands into homelessness, the continued existence of the tax avoidance industry should shame any civilised nation.

"Trade unions like PCS and Unite and campaigners like the Tax Justice Network and UK Uncut should feel proud that they have forced this injustice into the public glare."

PCS general secretary Mark Serwotka said: "This cosy network around the Treasury and the big accountancy firms helps wealthy individuals and companies to deprive our exchequer of tens of billions of pounds a year.

"This then helps the government to peddle the myth that there's no money for our public services."

This article first appeared in the Morning Star

Pushing on a piece of string

The Funding for Lending Scheme (FLS) published its quarterly results yesterday. Announced at the 2012 Budget and established in August, the scheme aimed to boost lending by effectively subsidising it - £14 billion has so far been given to the banks.

In total £70bn is being made available to banks at reduced interest rates to lend on to small and medium-sized businesses, as well as individuals.

However, results announced yesterday for the last three months of 2012 show that bank lending fell by £2.4 billion. So despite giving cheap money to the banks, lending fell why?

The answer is simple: demand. With the average wage growing by just 1.3% in the last year - and inflation at 3.3% - people's living standards are falling, and have been for over four years now. You can supply as much cheap credit as you like, but if there's not sufficient demand then it's just pushing on a piece of string.

As I told the Morning Star:

"When people's incomes are being constrained and job insecurity remains there is no confidence to borrow money, even at marginally reduced rates.

"Likewise businesses know that consumers are spending less and are not borrowing to invest in expanding their operations,"

Consumer spending in the retail sector fell 0.6% in January from December which itself saw a 0.3% fall in sales. The January 2013 figure is also down 0.6% from January 2012. With wages lagging inflation a sustained upturn is highly unlikely to materialise.

That's why it's encouraging that members of the PCS union have voted to strike - primarily over pay - but this needs to be widespread and result in inflation-busting pay awards to boost demand.

Even some Tories are reaching the conclusion that the supply-side is not the problem. Step forward the Mayor of London's new economics adviser Dr Gerard Lyons, writing in the Telegraph today:

"The economy is suffering from a lack of demand. There needs to be more spending by the Government on both infrastructure and construction and people and firms with the ability to spend need to be given the confidence to do so"

On the business side, some have pointed to statistics showing that the number of small business loans rejected by the banks has quadrupled since the crisis - they say this is evidence of unmet demand. That may be true to a limited extent, but it ignores three salient factors:

1. Businesses are now making more loan applications to cover (what they hope are temporary) shortfalls, rather than to invest
2. Banks, whose reckless lending practices played a major role in causing the crisis, are now more rightly more cautious
3. The same business plan in 2006/07 at a time of high employment and rising real wages was a lot more attractive to invest in than it is in 2012/13

I expect that lending via the scheme will pick up marginally in 2013, as from the low base borrowing at reduced interest rates will be more attractive to some businesses and to some people. However, increases in FLS lending are not likely to be enduring until something happens to increase demand.

Britain needs a pay rise

The PCS union today launched a new report 'Britain needs a pay rise' looking at the effect of falling wages on the UK economy.

The report shows that UK workers (public and private sector) are collectively losing £50 billion a year since austerity pay policies were introduced from 2008.

As today's inflation figures show RPI inflation at 3.3%, this looks set to continue and worsen - as the average pay settlement has been 1.5% over the last year.

The report notes that since the onset of recession in 2008 the real value of wages has fallen by 7% (£50 billion a year). During the same period there has been a real terms drop in consumer demand of 5%.

This is not a coincidence - freezing or capping wages sucks demand out of the economy. It also forces more workers on to tax credits, housing benefit and other welfare payments costing the government more.

For public sector workers in general, and civil servants in particular, there are lots more facts specific to them in the report - including comparators with the private sector. In the public sector, where all increases are capped at 1% this year (for many for the second year after a two year pay freeze), pay policy will cut £7 billion a year until 2015 (at least).

Whatever sector you work in, the report highlights the necessity for workers' wages to improve for any recovery to take hold.

Launching the report today, PCS general secretary Mark Serwotka said:

"Almost everyone can now see that austerity is not working. The chancellor George Osborne is borrowing more for failure, we are on the verge of a triple dip recession, food banks are on the rise and pay day loan sharks are preying on the vulnerable.

"We believe the government's pay policy, built on the lie that hardworking civil servants are paid too much, is having a seriously damaging effect on the whole economy.

"Instead of burying their heads in the sand and hoping for the best, ministers can and should act now to put money into people's pockets and back into our economy."

Read the report

Ditch austerity and try another route

Two letters from The Guardian on 17/02/12:


As the Greek public order minister says his people "can't take any more", it's timely that Simon Jenkins (Austerity fails, yet we're too shy to think outside the box, 15 February) says the failure to take economic management beyond the diktats of austerity has become the great intellectual treason of today.

It is not just in Greece that austerity is failing but in the UK, too. George Osborne's emergency budget was supposed to bring Britain back from the brink but has, instead, pushed us closer to the precipice. Where he predicted growth of 2.3% last year, we got 0.3% – less than in the US, Germany, France, and even Italy where their leader's economic incompetence got him deposed.

This failure to generate growth – which Osborne pledged to create by cutting the public sector, which he said had been "crowding out" the private sector – means his government is borrowing billions more than planned, necessitating further cuts. Unemployment is the highest for a generation, with youth unemployment the highest ever on record.

The alternative required is the exact opposite of austerity; it is investing for growth, creating jobs to get people working again, and raising wages and benefits to create demand. We have distributed over 250,000 copies of our "There is an alternative" pamphlet, explaining how this would work. Even the modest stimulus in the US has meant falling unemployment and higher growth. Mr Osborne should at least aspire to that, rather than following Greece into a death spiral.

Mark Serwotka
General secretary, Public and Commercial Services Union


• Simon Jenkins rightly wails that "thousands of citizens across Europe are having their lives ruined ... because a financial elite, once burned, is too shy to think out of its box". Fair enough, but maybe part of the problem is that the Guardian, like most of the media elite, is itself too shy to publish outside the box. With the unemployment trajectory on course this week for 3 million by the end of the year, it is remarkable that the renowned policy analyst Peter Taylor-Gooby was not even mentioned when he recently published his research study linking the potential for civil disorder and riots to the legitimacy of the austerity measures taken by western governments over two decades and suggesting that without change further unrest will follow.

Similarly, when tackling the economic deficit Greg Philo offers a radical proposal of a wealth tax of 20% on the assets of the richest 10%, but his work never gets beyond the Guardian's website. There's a comforting staleness in reading the same old establishment faces in the Guardian and watching them on Question Time or the Politics Show. Exceptions apart, to have a Guardian journalist decry others for a lack of radical thinking when the paper has been a fervent advocate of the timidity of British politics is a bit rich.

John McDonnell MP
Hayes and Harlington

The millions should control the billions

Mark Serwotka, PCS General Secretary, argues that banks should be publicly owned

To know where we should go on bank reform, we have to understand where we have been. The banking crisis that swept the globe in 2008 was not a crisis of the banks alone, but a crisis of government: the failure of successive governments in the UK and globally to have any oversight of the banks. It was negligent.

Many of us as parents know what would happen if we were negligent: if you let a toddler dictate what they wanted to eat, the diet of jelly, ice cream and cakes would probably leave them obese or in a diabetic coma, while the sugar-induced highs and crashes would bring trauma to the household. Never mind the nanny state, the government has been a bad parent to the toddling banks. It has allowed them unsupervised access to the biscuit barrel. The banks are now even more like toddlers, unable to stand without government support.

We should be clear: the banks are indeed too important to fail. Millions of working people depend on banking for their savings, their pensions, their mortgages and for the daily management of their finances. The assets traded and gambled around the globe are people’s life savings, their security in retirement and their family homes. The current situation is even more precarious than in 2008. Several banks and governments teeter on the brink of collapse. A Greek default could result in a domino effect. While the UK was in a financially secure enough position to offer bail-outs in 2008, it is doubtful if today that would be politically acceptable or economically affordable.

Any rational observer would concede that anything vital to our society demands close oversight. The shocking thing about the banking collapse in 2008 was how the regulators were unaware of, and did not understand, many of the intricate schemes and processes operated in the banking system. It is time the public interest became a factor in our banking system. Given the importance of banking – not as an end in itself but because of what it facilitates – and because of its vulnerability, it is essential that the rebuilding of the system is done in the public interest.

My trades union has a clear policy: the banks should be publicly owned. Some might say this is ideological. I would say it is logical. Banks are so vital that they have to be underwritten by the public – just like public transport and utilities such as gas, electricity and water. If British Gas or Thames Water went bust, the government could no more shrug its shoulders and say “that’s the market” than it could when the UK banking system teetered on the brink in 2008-09. But there are several other reasons why the banks should be publicly owned.

First, a bank underpinned by the state could lend at lower rates and offer savers higher rates. When Northern Rock was nationalised, Sir Richard Lambert, then CBI director general, told the Treasury Committee: “It is critically important that state ownership of the bank should not be allowed to distort the savings market, through access to government funds on favourable terms”. In other words, offering the public (and businesses) a better deal would “distort the market”. Just as private finance initiatives have proved incredibly wasteful, the inherent stability of the state makes it the natural home for secure banking.

Second, we are suffering from a crisis of investment. Banks are cautious about lending yet there is no end of investment opportunities from much-needed housing to redressing the UK’s woeful underinvestment in renewable energy infrastructure. Investment is essential to creating jobs, cutting the welfare bill and increasing our tax revenues – closing the deficit. At the moment we have the worst of all worlds: a government irresponsibly cutting capital spending and private banks that are unwilling to lend. Too much of the money banks have gained through quantitative easing has been speculated with or invested overseas.

Third, we should act in the public interest. While my union members are demonised in the rightwing tabloids as feather-bedded pen pushers with gold-plated pensions (the average member is on £22,850 and will get an £80 per week pension), the fat cats are rewarded with obscene bonuses and huge salaries. We could direct investment to where it is socially useful, ensure savings are encouraged and get a better grip on the housing market and mortgage finance.

The question is one of democracy: it is the wages, pensions and mortgages of millions that create the wealth banks have squandered. It is time those millions controlled their billions.

• This article first appeared in the November 2011 issue of Financial World

A good reading list

I spoke at a meeting of Croydon Trades Council last Thursday on the current economic situation, and a full write-up will follow of the debate and discussion around the origins of the debt and deficit, the attack on public sector pensions, tackling unemployment through investment in capital spending projects, and what to do about the banks and the stock markets.

But this is just a quick post with some of the books that came up in the debate from those in attendance:

• Injustice by Danny Dorling
  
• The Spirit Level by Richard Wilkinson & Kate Pickett
  
• The State and Local Government by Peter Latham
  
• There is an Alternative by PCS
• Treasure Islands by Nicholas Shaxson

It's an impressive and excellent contemporary reading list for anyone trying to understand our current situation.

What other contemporary books have you found useful? Let us know in the comments.

Dismantling the government’s ideological economic argument

Mehdi Hasan is a prolific tweeter, blogger and writer, and the senior political editor of the New Statesman. Earlier this year he also found time to write a
biography of Ed Miliband.

The Debt Delusion would be of great use to Ed Miliband since Hasan has assembled an array of arguments that dismantles the government’s economic agenda far more effectively than the official opposition has so far managed.

The short book takes aim at 10 myths perpetuated by the coalition about the debt and the deficit – and what remedies are most effective to reduce the debt, close the deficit and get the economy growing again.

One of the most alluring arguments deployed by the prime minister and the chancellor has been their equating of the national debt with a credit card, accusing Labour of
“maxing out the nation’s credit card”. But, as Hasan points out:

"Governments can increase their revenues by raising taxes; households cannot. Governments can print money and issue currency; households cannot."

As well as arming activists with some useful conceptual arguments, the book also puts
its case with some indisputable facts and statistics: like how there are only two cases out of 15 studied by the International Monetary Fund when cuts preceded economic growth.

There is also an interesting international comparison demonstrating that in 2009 the
UK took less as a proportion in tax than Denmark, Sweden, Italy, Belgium, France, Luxembourg and Germany – and yet George Osborne’s first move as chancellor was to cut business taxes.

The conclusion is straightforward: the government’s economic policy “is part of a
political and ideological project to roll back the frontiers of the state”. As Hasan says: “The debt is just a distraction.”

For activists it is a useful complement to our own union’s pamphlet ‘There is an Alternative’ – see pcs.org.uk/alternative – which has helped change the terms of the debate and won praise from other unions.

• Download The Debt Delusion, published by Vintage Books.
• This review first appeared in the October issue of PCS Activate

Unemployment: the tragedy continues, as does Osborne

Today the ONS revealed that there has been a big rise in unemployment over the last three months. The jobless rate rose to 7.9%, meaning there are now 2.49 million people without work.



According to the BBC and a Press Association newswire this was a "surprise", with most economists apparently believing unemployment would fall. Quite why this should have been the case is not clear. Then again these same 'expert' economists also thought the economy would grow by around 2.3% this year, and the 2008 crash came as a surprise to them. You might as well ask your cat!



While 2.49 million people are unemployed, there are another 1.26m working part-time who are looking for full-time work, which means there are 3.75 million looking for work. Compounding this misery is the news that the number of vacancies has fallen again to just 449,000.



Tragically, 409,000 people have now been unemployed for over 2 years. Welfare cuts and more conditionality cannot possibly work when there are no jobs (and there's no evidence they do even when there are). Training opportunities are also being cut.



Youth unemployment rose to 20.2%, up 15,000 to 949,000. Male youth unemployment makes particularly grim reading: 40.8% of 16-17 year olds + 19.9% of 18-24 year olds. Of course the persistent and unprecedentedly high youth unemployment levels are entirely coincidental to the recent riots that swept London and spread to many other UK towns and cities.



Economic growth is stagnant, inflation is rising, unemployment is up, real wages are falling, and more cuts are promised. Osborne's policies are "sheer criminality, pure and simple".



The PCS union is right to highlight the idiocy of closing jobcentres at time of rising unemployment. That policy has a rival for most stupid of the day in enterprise zones, which will apparently solve everything (Cameron told the press today that they will be "trailblazers for growth, jobs and prosperity throughout the country"). Yet they are only projected to create 30,000 jobs over four years, when unemployment is nearly 2,500,000 and rose by 38,000 in the last 3 months alone.



Instead, the clue to recovery lies in revealing where the biggest slump in employment has been: the worst hit public sector employment sector has been construction, down 8.5% over the last year. This has happened due to the massive capital spending cuts made centrally and enforced upon local councils. The solution to this malady must be to invest in infrastructure: renewable energy, public transport and council housing - which would create jobs and help to solve the environmental and housing crises that we also face.



Osborne though seems set on more of the same failed hard right dogma: tax cuts, spending cuts and more privatisation. It will fail and the misery will continue for the swelling ranks of the unemployed.

Public sector pensions: the economic crisis debate in microcosm

It occurred to me today that the debate over public sector pensions is actually the debate about the economic crisis in microcosm.

Few deny we have a large deficit. Few would deny that the UK economy is in its most fragile state for a long time. Fewer still would argue that 'something' needs to be done about it. What that 'something' is the subject of vociferous debate.

For the Conservatives (the right, politically and economically) this is the time to wheel out the classic Friedmanite arguments. The crisis, so they allege, was caused by a 'bloated public sector', us 'living beyond our means', 'maxing out the nation's credit card' and 'not fixing the roof when the sun was shining' - from the ideological to the hokey.

Hence why the government states that public sector pensions must be slashed by £2.8 billion per year to pay for the deficit as they are part of that bloated public sector. They'll tell you that 85% of public sector workers have an occupational pension compared to less than 35% of private sector workers, that pensions are gold-plated, that "the pension system is in danger of going broke".


As we know from the Hutton report, the National Audit Office, the Institute for Fiscal Studies and the Public Accounts Committee (and this humorous interview with the witless Francis Maude) public sector pension schemes are not on the verge of implosion, and the pensions are not gold-plated, in fact they average about £5,500 per year. But why let the facts get in the way of a good ideological crusade against the public sector.

Next we come to the middle of the road. Some would call this the centre, but that gives it the illusion of reasonableness, careful impartiality and a thought-out position. Whereas the middle of the road is a completely illogical place to stand. Indeed, as Aneurin Bevan once said, "We know what happens to people who stay in the middle of the road. They get run down". In this group we find the hapless Ed Miliband, leader of the Labour Party, who I think it's fair to say bears a certain resemblance to soon-to-be roadkill; that caught in the headlights blank stare reflecting a completely illogical reaction to the current circumstance.


In Ed Miliband's case this is because the last Labour government, of which he and most of his shadow cabinet were members, re-negotiated public sector pensions - and as such made them entirely affordable. In fact as the Hutton report shows, the costs are falling. Nevertheless, Ed Miliband is determined to stand in the middle of the road and look stupid. So he condemns the Tories for not negotiating seriously, and also condemns the unions for striking against the Tories.

Sadly for Labour this same half-arsed mess is mirrored in their economic policy. They too think the public sector got a bit too big, especially on welfare (Byrne, Miliband, Purnell, etc) and there's too much immigration (Glasman, Miliband, Rutherford). What to do then? Well they've moved away a little bit from the clearly right wing response of Alistair 'cuts deeper than Thatcher' Darling, and now think the cuts are too far and too fast. So they would cut less and slower, but nobody likes to mention what (except for welfare and immigration, to triangulate to the Daily Mail because voters will clearly not see the Tories as more active on those issues). Remember, middle of the road = stupid.

Finally, we have the left represented today by only a handful of politicians, but more importantly by the trade unions and a number of other democratic civil society organisations. They, like the right have a narrative. In short, 'the finance sector caused this crisis, those on low and middle incomes shouldn't be made to pay for it'.


On pensions therefore they point out the voluminous evidence produced by mostly centrist organisations (see above) that show public sector pensions are affordable, sustainable and fair - and make reasoned arguments to that effect.

On the wider economic question too, the trade unions have also put forward a clear alternative (see Unite and PCS for example) that also rejects the needs for mass public spending cuts as counter-productive for the economy.

And so the fight to defend public sector pensions is really about who was to blame for the economic crisis and what we do about it. Like 1974, it's the government or the unions. Which side are you on?

Top Tax shirkers - HMRC makes its case

The Guardian today reports an amazing story today. The much debated 50% top tax rate, which came into effect in April 2010, has raised precisely £0 so far.

Why's that (i hear you ask)? Has Will Hutton's Pay Commission enforced that no one should earn over £150,000? Don't be silly. Has the right-wing media prediction that all talent (aka overpaid people) will leave the country come true? No.

In fact, the reason the new 50p tax band has raised not a penny is because HM Revenue & Customs only had one year to adapt its computer system to collect the tax. Apparently that is insufficient time. Seriously.

HMRC has written out to 24,000 people affected by the new tax rate. The letter reads:

"Although the new rate started in April 2010, you may be aware that you are only being taxed through the Pay As You Earn (PAYE) system at 40% on some of your jobs or pensions, rather than at 50%. We were unable to introduce the changes needed to PAYE to collect the 50% rate from people who had more than one job or pension for the tax year 2010/11. This is because the start date was brought forward a year to April 2010 by budget 2009."

Corporation Tax is being reduced to 27% within a year, then 26% then next year, 25% the year after that and 24% the following year. I'm not a gambling man, but I'm willing to bet there's no delay in adapting systems to reduce tax for big business.

Mark Serwotka, the general secretary of the Public and Commercial Services union, which represents workers at HMRC, said:

"It defies belief that HMRC wasn't able to get its computer system geared up for this and it now means high earners will be getting away without paying their dues while ordinary taxpayers face a VAT rise and cuts in public services.

"It also effectively gives the wealthiest taxpayers time to limit their tax liability, which would just add to the tens of billions of pounds that is avoided, evaded or uncollected every year. After a succession of embarrassing episodes, senior management need to get a grip and the government must see there is an alternative to cuts that have been so damaging to the department."

The PCS website also puts the case for Barclays and KPMG today - and there's every reason to vote for either of these facilitators of 'tax shirking'.

You can also vote for HMRC at: http://falseeconomy.org.uk/tax/hmrc. I just have - because the cuts in HMRC are the biggest gift to corporate and super-rich tax avoiders.

Targeting the Tax Dodgers

Voting has started to find the UK's biggest tax shirker.

People can decide which corporation or individual has made the biggest contribution to the cause of robbing the poor to pay the rich.

There is a shortlist of 10 on the False Economy website.

Read the details behind the logos of the finalists – like Boots and Vodafone – and vote for the top shirker. There's also good reason to consider Barclays, which is being targeted by Right to Work.

The poll is organised by False Economy, PCS, War on Want and the TUC.

It highlights the fact that the public sector is being slashed while billions of pounds of tax is avoided, evaded, or uncollected.

PCS general secretary Mark Serwotka said:

“It is a national scandal that tens of billions of pounds are being sucked out of our economy every year by some very wealthy people, particularly at a time when we are told cuts are unavoidable.

“It is even more of a scandal that the government not only knows this is happening, but is pressing ahead with even more cuts to HMRC, the very department that should be taking action to ensure the tax dodgers are stopped in their tracks.”

Brendan Barber, TUC general secretary said:

“While ordinary people have no choice but to pay higher VAT, big corporations and the super-rich find it all too easy to get out of paying a fair tax contribution - we are certainly not all in this together.”

War on Want executive director John Hilary said:

“Every day brings a new revelation of yet another company failing to pay its tax dues. Now we learn that Barclays has more than 300 subsidiaries in tax havens, just as City bankers line up for their new year bonuses.

“The government must crack down on all tax dodgers as an urgent measure to rebalance public finances and stop the cuts.”

Tax justice becomes a movement

As we blogged on 30 November, tax justice has taken to the streets.


After years of painstaking research and lobbying by the Tax Justice Network, ably supported by PCS - whose members work, and are increasingly being cut from, HM Revenue and Customs - the campaign now has a movement to further raise its profile and popularise it: UK Uncut, which has branded the campaign 'Big Society Revenue & Customs'.

On Saturday 4 December there was, according to the BBC (though there's a better write-up in the Morning Star) actions in 21 towns and cities across the UK, including Birmingham, Brighton, Bristol, Cambridge, Edinburgh, Glasgow, Leeds, Leicester, Nottingham, Oxford, Portsmouth, Southampton, York

PCS General Secretary Mark Serwotka said:

"People are rightly angry that the government is targeting the most vulnerable in our society with massive cuts in spending and yet it appears to be very relaxed about rich and powerful tax dodgers.

"We have campaigned for two years for action to be taken to tackle the billions of pounds in tax lost to our economy every year because wealthy individuals and organisations avoid paying what they owe.

"The moral and economic case, particularly at a time when we are told action needs to be taken to bring down the budget deficit, is unarguable."

This video shows how unarguable these campaigners - shutting down Oxford Street Top Shop - know the case to be, and there's some great photos and reportage from harpymarx.



And you really know a campaign has caught the zeitgeist when even the Daily Mail begins highlighting further corporate tax avoiders to protest against!

Tax Justice - Exposing the multi-billion fraud

The Tax Justice campaign has rightly increased its prominence in the current debate about cuts - thanks mainly to the incredible work of the Tax Justice Network and also of the PCS union (which represents staff working in tax collection for HM Revenue & Customs).

The most serious estimates are that around £120 billion in tax is evaded, avoided and goes uncollected - mostly from those most able to pay; big business and wealthy individuals. This is consistent with leaked Treasury papers in 2006, which estimated the tax gap between £97-150 billion.

When the country has an annual deficit of an admittedly high £155 billion, then missing around £120 billion of tax (before we even start collecting increasing some rates) every year is substantial.

There is also a certain hypocrisy at a time of unprecedented cuts that the rich are evading and avoiding tax while the poor are getting pay freezes, benefit cuts and losing their jobs. This hypocrisy is even greater when a Cabinet of millionaires is using tax havens to avoid paying their way - as opposed in the recent Channel 4 Dispatches programme, How the Rich Beat the Taxman.

Such is the success of this campaign that every Party now at least pays lip service to tax justice - yes even the Liberal Democrats and Tories.

However, the Labour Party (well it's conference rather than shadow Cabinet so far) has gone a bit further: passing the resolution below at the 2010 conference in Manchester.

The resolution passed was a composite, but based on the draft motion circulated by the LRC, and passed by Streatham CLP, and others, much of which still remains. Sadly though, some unions were influenced by former Treasury ministers who repeated the ridiculous (HM Treasury) line that the tax gap is only £50 billion.

Nevertheless, this is a victory that we must build upon - and ensure the Labour Party starts speaking up on tax justice.

(Perhaps someone should pass them this though too - Richard Murphy's 'Why HMRC has got the tax gap wrong').

Composite 8 – Tax avoidance

Conference notes that in his speech of 17 August George Osborne, Chancellor of the Exchequer, said “anyone who is serious about tackling the nation’s debts needs to come forward with an alternative plan”.

Conference believes strongly there is a credible alternative to the Chancellor’s Budget which many economists predict will hit poorest families hardest and increase the risk of economic slowdown, higher unemployment and a potentially disastrous ‘double dip’ recession.

Conference notes the HMRC high net worth unit tasked with investigating the tax affairs of the super rich has been cut by 20% - showing this isn’t a priority for government.

Conference notes tax avoidance, tax evasion and uncollected taxes are depriving the Exchequer of up to £50 billion a year when the national deficit is £160 billion while we are faced with cuts.

Conference believes that action against tax avoidance is a crucial part of tackling the fiscal deficit and if carried out effectively would reduce the level of cuts to public spending needed to meet the government economic plans.

Conference believes that an increased commitment to public investment coupled with a focused attack on tax avoidance will do much to keep unemployment down and to tackle the deficit.

Conference notes the vigorous campaign on PubCos and Tax avoidance schemes.

Conference opposes the rise of VAT to 20% announced in June’s Budget.

Conference notes the statement in the Labour Party manifesto highlighting the importance of tackling tax avoidance.

Conference urges Labour to commit to addressing the tax gap as part of its deficit reduction strategy.

Conference calls on the Labour Party:

• Mount a campaign to highlight tax avoidance
• Campaign to end the proposed VAT rise
• Campaign for fairness and justice in the tax system as part of the alternative to the government’s cuts
• Properly pursue a global Robin Hood Tax

Conference calls on the Labour movement to work to ensure that the coalition Government takes action to reduce as far as possible the level of tax avoidance by individuals and businesses in the UK as a means of ensuring that all members of society play a part in helping to reduce the deficit.

Mover: GMB
Seconder: Streatham CLP

Is the cuts consensus crumbling?

Since the story switched from 'bad banks' to 'bloated public sector', at some point in 2009, there has been a political consensus in the UK which included the three main political parties and the mainstream media. This consensus was that cuts on an unprecedented scale where necessary to avoid economic oblivion, caused primarily by lavish public spending.

The consensus was economic nonsense, but ideological cover for attacking the last vestiges of public ownership (e.g. Royal Mail, the NHS and education) and the welfare state.


Finally, this consensus seems to be crumbling. The TUC in September highlighted the unions' opposition to cuts, and the pamphlet published by the PCS union 'There is an Alternative' probably the most articulate destruction of the cuts consensus. Tens of thousands of copies have been distributed at the TUC and party conferences, to PCS activists, and to the wider movement. Tax justice campaigner Richard Murphy said of it "This is very good, from PCS. I know because people in the Treasury told me so."

Following on from the TUC, the Labour Party's new leader Ed Miliband used his first speech to chart a different course from the Darling-Brown axis (which was championed by the defeated David Miliband). The excerpts are below - it's not quite earned him an invite to LEAP, but it does represent a shift in direction:

Economics teaches us that at a time of recession governments run up deficits.

We were too exposed to financial services as an economy so the impact of the crash on the public finances was deeper on us than on others.

We should take responsibility for not building a more resilient economy.

But what we should not do as a country is make a bad situation worse by embarking on deficit reduction at a pace and in a way that endangers our recovery.

The starting point for a responsible plan is to halve the deficit over four years, but growth is our priority and we must remain vigilant against a downturn.

You see, it's obvious really, when you cancel thousands of new school buildings at a stroke, it isn't just bad for our kids, it's bad for construction companies at a time when their order books are empty.

It's not responsible, it's irresponsible.

When you deprive Sheffield Forgemasters of a loan, a loan from which government would be paid back, you deprive Britain of the ability to lead the world in new technology.

It's not responsible, it's irresponsible. And we should say so.

And when you reduce your economic policy simply to deficit reduction alone, you leave Britain without a plan for growth, which is what this government has done.

No plan for growth means no credible plan for deficit reduction.

Ed Balls, who to be fair was heading in this direction earlier, used his speech to Labour Party conference to say we had to "put growth and jobs first" and he reminded delegates that Ramsay MacDonald had said there was no alternative to cuts (he didn't add that much of the previous new Labour government said that too and many of them have joined: Hutton, Milburn; and Mandelson offered to).

This shift in Labour policy will also be bolstered by the Guardian/ICM poll published today, which shows that "43% now saying the cuts have gone too far compared with the 37% who think the balance is right. By contrast, in July 39% thought the balance right, and 38% said too far".

Given the cuts have yet to be outlined in full until 20 October, and many of those announced have yet to impact, this should be a worrying trend for the coalition government.

It's up to all of us to kill off this consensus, and build the opposition. Today, there are reasons for optimism.