No curbs on predatory and calamitous capitalism

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

They are poorly equipped to call multinational corporations to account.

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

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

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

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

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

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

This article first appeared in Tribune magazine

Durable change a long way off for scandal-ridden UK banking system

The role of Barclays bank in manipulating the London Interbank Offered Rate (LIBOR) continues to dominate international financial media.

The bank has already attracted fines from regulators in the UK and theUSA.
But further revelations are likely as US Senate Committees are flexing their muscles, the UK parliament has launched an inquiry and the UK’s Serious Fraud Office (SFO) has announced a criminal investigation. The temptation will be to look for scapegoats and prevent consideration of the systemic factors.

Barclays has a dark history. For example, in 2010, Barclays Bank paid US$298m in fines for “knowingly and willfully” violating international sanctions by handling hundreds of millions of dollars in clandestine transactions with banks in Cuba, Iran, Libya, Sudan and Burma.

In February 2012, the UK government introduced retrospective legislation to halt two tax avoidance schemes that would have enabled Barclays to avoid around £500 million in corporate taxes. However, Barclays is not alone. Only last month, the UK financial regulator reported that Barclays, HSBC, Lloyds and Royal Bank of Scotland mis-sold loans and hedging products to small and medium sized businesses. The financial sector has been a serial offender.

Here are a few examples.

The UK experienced a secondary banking crash in the mid-1970s. The crash revealed fraud and deceit at many banks. The UK government bailed them out and in turn had to secure a loan from the International Monetary Fund.

In the 1980s, the financial sector sold around 8.5 million endowment policies, which were linked to repayment of mortgages. The products were not suitable for everyone but were pushed just the same, and the risks were not explained to the customers.

A 2004 parliamentary report found that some 60% of the endowment policyholders have been the victims of mis-selling and face a shortfall of around £40 billion. This was followed-up by a pensions mis-selling scandal where 1.4 million people had been sold inappropriate pension schemes. The possible losses may have been £13.5 billion.

The 1990s saw the precipice bonds scandal. Around 250,000 retired people been persuaded to invest £5 billion in highly risky bonds, misleadingly sold as “low risk” products. Thousands of investors lost 80% of their savings. Then came the Split Capital Investment Trusts scandal. Once again financial products had been mis-sold and deceptively described as low risk. Some 50,000 investors may have lost £770 million.

New millennium came with a new financial scandal – the payment protection insurance (PPI) scandal. People taking out loans were forced to buy expensive insurance, which generated around £5.4 billion in annual premiums for banks and provided little protection for borrowers. This scandal is still being played out and banks may be forced to pay £10 billion in compensation.

The above has been accompanied by money laundering, tax avoidance, tax evasion, fraudulent practices to inflate share prices and of course the banking crash, which has brought the global economy to its knees.

Whichever way you look at it, banks have been serial offenders and continue to act with impunity. The entrepreneurial culture of making private profits at almost any cost has had disastrous social consequences. Fines and forced compensations have just become another business cost and the usual predatory practices have continued.

There are two main drivers of the financial scandals. Firstly, markets exert incessant pressures for ever rising profits and don’t care much whether they come from normal trade, money laundering, tax avoidance and other dodges. Secondly, the idea of assessing people’s worth through wealth is deeply embedded in western societies.

Profit-related pay became the mantra from the 1970s onwards and has been a key driver of the abuses. The typical tenure of a FTSE 350 companies CEO is around four years and declining. In this time, people at the top need to collect as much personal loot as possible and have little regard for any long-term consequences. The performance related pay applies at the lower echelons as well and again encourages short-termism and neglect of any social consequences.

In principle, regulators and politicians should be able to able to check the abuses, but the UK political institutions are weak. There is little competition amongst the political parties to devise socially responsible policies.

For the last 40 years, they have all offered various shades of light-touch regulation and veneration of markets. There has been no attempt to alleviate market pressures by forcing banks to operate as cooperatives or mutuals. Corporate and wealthy elites fund political parties and have organised effective regulation and accountability off the political agenda.

The regulators of the financial sector come primarily from the same industry and have sympathies for the narrow short-term interests of that industry. After a stint as a regulator, they then return to the same industry. The revolving-doors and ingrained conflicts of interest have prevented effective regulation and accountability.

Reforming political institutions is a necessary condition of controlling banking frauds, but a durable change is not on the horizon.

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

The Super-rich shall inherit the Earth

When you mention the word 'oligarch' it has a particular resonance with the clique of men whose fortunes were made pillaging Russia following the collapse of the Soviet Union - most famous among them Chelsea owner Roman Abramovich and the now jailed oil tycoon Mikhail Khodorkovsky.



However, as journalist Stephen Armstrong proves in his book 'The Super-rich shall inherit the Earth' oligarchs are not solely the preserve of Russia. While, the not-quite-post-cold-war media is keen to emphasise corruption in Russia, we know very little of the internal affairs of the other 'BRIC' nations: Brazil, India and China - which all have very similar oligarchical systems in which a super-rich elite evades any government regulation or control and in which government seemingly serves their global power interests.



The sub-title of the book, 'The new global oligarchs and how they're taking over our world' reflects the emphasis that is given to these emerging world power states. It describes the litany of corporate manslaughter, government corruption, embezzlement, defrauding of entire population's resources. After six chapters one could easily get the disconcerting feeling a message of 'and that is why we must defend the West!' coming at the end.



Those hoping for a comfortable portrayal of the evils of Johnny foreigner, against the great democratic [sic] Anglo-Saxon model will be disappointed. The brickbats aren't just reserved for the BRICs.



In the final four chapters, Armstrong looks with intense scrutiny at the global oligarchs in the US and the UK, including - in a move bound to delight all UK Uncutters - chapter 9 'In which Philip Green couldn't give a fuck'. This book sadly written before the incoming coalition government had appointed the knighted-under-New Labour Sir Philip to carry out a review of government spending and procurement.



Another chapter details the in-crowd of Goldman Sachs as they migrate from government to investment bank and back again. It also explains why Lehmann Brothers was left to collapse while Goldman Sachs was saved.



All in all this is a refreshing look at the global economy: massive and growing inequality, freedom for the super-rich and increasing authoritarianism for the poor, and government no longer able or willing to defend its citizens against mobile global capital.



While Marx argued that the working man has no country, it is very clear that the super-rich require a sponsor nation - and they have several corrupt jurisdictions to choose from.

Are the banks about to fail again?

Last month the Irish government bailed out the banks again, forcing their budget deficit to balloon to an astonishing 32%. It was all too familiar, the banks have once again been bailed out with public money, yet remain in private control and with very little regulation or oversight. There was even the Irish Finance Minister, Brian Lenihan, popping up to say the biggest bank, Anglo Irish, was too big to fail.

People of course said that about Lehman Brothers, but it failed and the world did not implode. What has vanished though is many Irish jobs, welfare rights and public services - all apparently necessary to avoid a crisis. Instead the collapsing demand in the economy caused credit rating agencies to downgrade Ireland back in July.

And so to the UK, and today the New Economics Foundation (NEF) has published a report Where did our money go? Building a banking system fit for purpose, which warns "[UK] Banks set to demand fresh bail-out in 2011" and cites increased borrowing by them.

It also highlights the a "shocking" lack of information on how banks had used the bail-out money. Like Ireland a lack of ownership and control accompanied the bailout - criticised with great foresight by LEAP Chair John McDonnell at the time - and now we may be on the brink of further collapse.

Referring to the NEF report, LEAP's Graham Turner, from GFC Economics, said "the Bank of England also warned in its June Financial Stability Review that there will be a huge increase in refinancing requirements for UK banks in 2011. This remains a systemic threat."

Like Ireland again, the UK is about to embark on unprecedented mass public spending cuts - which would sap demand from the economy, and could possibly simply be the precursor to funding another bailout for the bankers.

If the UK banks do suffer a second round of collapse, then it is time to nationalise the assets as well as the losses and control the sector for public good not shareholder and speculator gain.

There's an excellent piece in today's Morning Star on this, Banks on the brink yet again - well worth a read.

Bank Aid

There'll be a return to serious blogging soon, but for now Happy New Year - 2010 will be a bumpy ride - and here's a bit of light relief:

Red Papers Editorial - Cuts: an easy alternative to systemic change

Over the coming days, we'll be posting the papers in the latest collection of LEAP Red Papers 'The Cuts', available to download and discuss in full.

Today we post the Editorial - Cuts: an easy alternative to systemic change

The label of choice for the current systemic turmoil has evolved from the 'credit crunch', 'global economic crisis' and 'recession' to 'public sector debt'. This is quite an achievement.

The finance sector that brought the global economy to its knees in 2008 and 2009 will be written out of the story in 2010 as a new consensus solidifies among the political elite, parroted by the mainstream media, that the real crisis is public sector debt.

Despite the fact that the private finance sector collapsed in a heap of fraud and lies, and was bailed out by the public sector, it is now the public sector that is routinely labelled ‘wasteful’, ‘bloated’, ‘feather-bedded’ and ‘out-of-control’.

While calls have been made for systemic changes in the global financial order and to the UK banking sector – even by Government ministers on occasion – the pre-existing regulatory structure remains largely unchanged.

The problem now is the public sector. By taking on all that debt created recklessly by the private sector, the public sector is now in trouble. Banks were ‘too big to fail’ yet no area of the public sector will emerge unscathed from the UK cross-party consensus.

The message is clear: banks (and all the bonuses, profligacy and speculation that go with them) are essential; healthcare, education, welfare, and pensions are all to be sacrificed on the altar and offered up to the Gods of neoliberal orthodoxy.

The cheek of RBS

Last year the Royal Bank of Scotland would have gone to the wall if it was not for the Government bailout it received. None of the directors would now have jobs with the firm, let alone the potential for a bonus payout.

Given that it was the ingenuity, entrepreneurial guile, and business acumen of these directors that led the bank to the brink of oblivion some might suggest they have a bit of a cheek to demand £m bonuses - especially at a time when the Government bailout for those who have lost their jobs (due to the bank-led recession) is a paltry £64 per week.

Nevertheless I was pleased when I heard on the BBC News last night, City Minister Lord Paul Myners appear to rebuff the bankers, telling them "to come back into the real world".

The bankers are now threatening to resign if they don't get their bonuses. I hope Lord Myners' next quote will be "Goodbye".

However, as is often the case, I seem destined to be disappointed by New Labour. Lord Peter Mandelson immediately pulled rank on his junior colleague, saying:

"I understand the point that RBS directors are expressing - they say they have to remain competitive in the market in recruiting senior executives, and this is why it's important that all the banks are equally restrained, and RBS is not singled out."

The Morning Star covers the story excellently in today's paper.

Labour MP "staggered" at secret funding for banks

The Governor of the Bank of England, Mervyn King, has today admitted that he lent Royal Bank of Scotland and HBOS £61.6bn in secret emergency funding in autumn 2008. Labour MP, and LEAP Chair, John McDonnell said he was “staggered” at the revelation.

John McDonnell MP, LEAP Chair, said:

"I am staggered at the affrontery of the Governor of the Bank of England to risk £61bn of public money covertly, and without any accountability to Parliament.

"At that time I expressed the concerns about the instability of a number of financial institutions and called on the Government to nationalise to stabilise, in order to plan the long-term rebalancing of our economy. This view was derided by the Chancellor and opposition parties but we now know the Government had pumped into these banks enormous sums of taxpayers’ money, seemingly without any enforceable conditions.

"This is no way to run a finance sector, an economy or a government."

Also see Paul Mason's report on BBC Newsnight on 24/11

'Superbank' throws 5,000 on scrapheap

From today's Morning Star

Lloyds Bank has been accused of "corporate arrogance" and forcing workers to pay for fat cats' mistakes after it announced plans to slash thousands of jobs.

In a fresh wave of cuts designed to reduce costs, Lloyds Banking Group will axe up to 5,000 jobs across the country next year within the group-operations, insurance and retail sectors as a result of a series of reorgnisational moves.

Lloyds has already cut around 10,000 jobs since it took over the failed Halifax Bank of Scotland (HBOS) at the end of last year to form a "superbank."

The impact of the recession caused the government, which holds a 43 per cent stake in the bank, to bail it out to the tune of £17 billion. And only last week the government announced a further £5.7bn investment.

Left Economics Advisory Panel (LEAP) chairman John McDonnell MP said: "The government has just handed another £5.7bn in public money to Lloyds and within a week the bank has announced a further 5,000 job losses.

"This is another slap in the face for the Chancellor and is another reason why we have consistently called for full nationalisation and public control so that public money is not used to subsidise job losses and bankers' and shareholders' greed.

"Yet again this demonstrates that it is the working people who are paying for this recession while the bankers profiteer."

Unite national officer Rob MacGregor has called on Lloyds to put all job losses on hold until it agrees not to enforce any compulsory redundancies.

He said: "This announcement of 5,000 job losses demonstrates the depth of corporate arrogance within this taxpayer-supported bank.

"This country's financial sector should be looking towards the future rather then continuing to slash jobs without proper consideration of how to rebuild the public's confidence in our tarnished banking sector.

"Today marks the start of another dark week for finance workers.

"The government cannot afford to continue to look the other way as hard-working families are punished in this manner."

Ged Nichols, general secretary of the Accord union which represents the largest number of former HBOS staff now working for Lloyds, added: "We always recognised that some job losses were inevitable as Lloyds TSB integrated HBOS operations, but the scale of the changes will leave many staff in shock.

"Some of those who are affected will have a long wait before anything definite happens and they may find the uncertainty very difficult to cope with."

But a statement from the bank has argued that the cuts will be "significantly mitigated."

Lloyds group integration director Mark Fisher said: "We have mitigated the impact on positions through redeployment and the release of contractors and temporary staff."

Breaking the consensus on cuts

At the Labour Party conference, LEAP and the LRC will be handing out a flyer-briefing 'Cutting our way to defeat? There is an alternative'. Read more about this and download the flyer from the LRC website.

On Sunday, as Labour Party conference (well, rally) kicks off, so does the Jobs, Education, Peace demo supported by PCS, NUT, UCU, NUJ, Stop the War, Right to Work and Unite Against Fascism. Mark Serwotka, PCS General Secretary, will tell the rally:

"The main political parties have forged a damaging consensus on public sector cuts when it was the greed of the City that caused the financial crisis."

Quite right. The demo is also on the front page of today's Morning Star under the heading 'Lobby Labour to save our public services'.

ILO G20 report, and the UK

The ILO has published a report in advance of the G20 summit in Pittsburgh later this week. The report, Protecting people, promoting jobs: A survey of country employment and social protection policy responses to the global economic crisis, compares measures taken by 54 countries in the wake of the global recession. It makes interesting reading.

Apologies for being a bit nationalistic, but here in short is what it shows about the UK:

• UK unemployment is slightly below the G20 average of 8.5%
• However, UK unemployment has risen more quickly in the last year than on average: up 38% here, compared to the average of 29.6%
• We are one of the select few countries where manufacturing has fallen more than 10% in the last year - alongside the US, Spain and Canada
• Of the countries that have had similar declines in GDP to the UK (i.e. more than 4%) only Spain has also had such a "sharp" increase in unemployment. Germany, Italy and Japan have all managed to stop job losses rising so quickly with comparable GDP drops.

The report also shows that many countries have done more to expand welfare programmes: for instance France, Germany, Italy, Netherlands, Hungary, Japan and Canada have all increased the coverage of unemployment benefits - Canada, the US and the Czech Republic have all increased the value of unemployment benefit; Japan and the Netherlands have introduced measures to protect migrant workers.

My favourite graph though is on page 20 of the report about comparable fiscal stimulus packages for 2008-10. Here the UK is well below the average, committing only 1% of GDP, compared with over 1.5% in Denmark, Germany, Finland, Sweden, New Zealand and Spain; and over 2% in Canada, Japan, Australia, the US and South Korea.

Why is it, despite Brown's modest press briefings at the G20 in London, that the UK cannot do more? It might be to do with the massive debt from our dodgy banks which were deregulated under Brown's chancellorship, and bailed out at huge cost under his Premiership.

Darling kowtows to finance sector . . . bank on it

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

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

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

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

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

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

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

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

Mutualisation the solution to 'out of control' banks

Leaked plans by the Tories propose to abolish the FSA and hand banking regulation to the Bank of England. Meanwhile, the Government continues to fail to intervene to control the banks that have been nationalised, and to rule out any major steps on regulation.

John McDonnell MP, LEAP Chair, said:

"The banks remain out of control, with the City ratcheting up the prospects of a return to the casino banking, sky-high bonuses, and all the associated risks to the stability of the economy.

"We cannot leave the control of our banks in the hands of a small group of speculators and a Government unwilling to act decisively.

"It is time now to develop new forms of public ownership and to bring forward proposals to mutualise the banks to develop a co-operative model of accountability."

25/06 update: Prem Sikka has an excellent article on Guardian Comment is Free on the Banking Crash and Lack of Reforms.

Banking sector greed continues

Yesterday it was announced that the new Chief Exective of the Royal Bank of Scotland, Stephen Hester, is in line for a £9.6 million pay package this year.

It's worth bearing in mind that RBS would have gone to the wall without the state bailout last year. We warned at the time that owning the banks without controlling the banks would lead to a return to the same greedy practices which caused the UK banking collapse.

Since being saved with taxpayers' money, RBS has announced over 10,000 job cuts. Our 70% stake in RBS has not saved jobs, but is now being used to pay one individual nearly 3000 times what ex-RBS staff will be receiving on the dole.

LEAP Chair, John McDonnell MP has tabled EDM 1721 'Banking Sector' calling on the Government to "intervene to control the banks in which it has a public stake and legislate to ensure the interests of bank workers and customers are prioritised by the banks rather than the bonuses, pay and dividends of executives and shareholders who caused the UK banking crisis."

The issue is well covered in today's Morning Star.

So Where's Our Bailout?

Andrew Fisher, Coordinator of the Left Economics Advisory Panel (LEAP) (This article first appeared in the Morning Star)

As Gordon Brown can verify, it is a fool’s game to forecast the economy. However, when in 2006 Brown as Chancellor was predicting growth as far ahead as 2011 – and an end to boom and bust – LEAP was highlighting the levels of personal debt in the UK (nearly 50% greater than in the US) and warning they were unsustainable.

Now we are in a recession that looks set to eclipse that of the early nineties and probably even that of the early-mid eighties. Unemployment has breached two million, with a consensus forming that by the end of this year it will reach three million. This same consensus expects the UK economy to contract by 4-5% in the same time period.

In response the Government has awarded lavish handouts to the banking sector without any conditionality around jobs or pay (let alone public control). It is clear that New Labour in recession operates as it did in boom time – in the interests of big business.

The effects of a recession on working people always lag behind the economic data of GDP growth. When the UK economy was notionally recovering by the mid-eighties, unemployment was reaching its peak. This highlights how we measure recession is skewed towards the dominant interests.

There are several contrasts that need to be made with that period – and, if we are to comprehend how harshly this recession will ravage working class communities, we need these contrasts to be understood. The last thirty years of neoliberal economic policy have stripped away many of the protections that still existed in the eighties.

In the workplace, trade union density has nearly halved from 55% when Thatcher came to power to just 28% today; the proportion of workers covered by collective bargaining has suffered even more gravely, down from 85% to less than 40% today. As New Labour has refused to restore trade union rights, UK workers are now the easiest to sack in western Europe. The legions of non-unionised workers who retain their jobs will also be hit with pay cuts as employers seek to insulate their profits.

Just last year Gordon Brown boasted to the CBI that we have "the most flexible labour market in Europe". So when transnational corporations are judging where to cut jobs, it is in their interests to choose UK workers who are less likely to be unionised, and where they have the lowest legal commitments to fulfil.

When these workers join the army of surplus labour in the dole queues – itself helping to further suppress wages, they will find a benefits system less generous than under Thatcher. If unemployment benefit had increased in line with earnings from 1980 it would be worth nearly £110 per week. Instead today's unemployed are expected to survive on just £60.50, or £47.95 if they are reckless enough to be under 25.

They will also be faced with an unemployment service that has shed 30,000 staff in the last five years and is insufficiently staffed to cope with the rising demand – and subject to increased conditionality, now including workfare for the long-term unemployed. While the Tebbit-era rhetoric may have been more stark, the practicalities of maintaining a claim under the New Labour regime are far harsher – and for barely half the level of benefit.

As increasing numbers find themselves jobless, or their pay frozen, they will struggle to pay housing costs. In 1980, over a third of people lived in the secure tenancies of council housing. Today it's just 10%. The rest are faced with paying a mortgage and if they fail to make the payments and are repossessed –as nearly 50,000 were last year – they will join nearly two million others on the sick joke that is council house waiting lists. For private tenants of buy-to-let landlords, tenancies are insecure as many landlords struggle to maintain their mortgages. There is little good news for first time buyers. House prices, which more than doubled between 1999 and 2007, have dropped only 15%. The chronic housing shortage is keeping prices high.

Thanks to Thatcher's break of the earnings link (maintained by Major, Blair and Brown), today's pensioners face a basic state pension worth just 14% of average male earnings. In 1979 it was worth 23%. Many of those who took out private pensions have seen its value decimated by the crashing stock market, while final salary occupational schemes are increasingly the preserve of only directors and MPs – the culprits of the destruction of UK pension security. Further cuts in occupational pensions will come as employers seek to maintain profitability.

The neoliberal dogma of the past thirty years has decimated the public services on which the poorest rely. As the poorest and most vulnerable workers face lengthy periods of unemployment the true legacy of New Labour is revealed.

The 2009 Budget will be New Labour's first during a recession. The usual environmental gimmicks and corporate tax break leaks have been touted, but for the rest its austerity, rumours of a public sector pay freeze and no increase in the minimum wage. Under the slogan Their Crisis Not Ours, the LRC and others will be protesting in Whitehall on Budget Day to demand 'Where's our bailout?'

Like the MacDonald government of 1931 and Callaghan in 1978-9, this Labour Government is choosing to attack working class communities to pay for a recession not of its making.

The LEAP conference on Saturday 25th April 'Capitalism Isn't Working' is an opportunity to share information and mobilise resistance against the policies that make the poorest pay.

Welfare for Banks, Cuts for the Poor

On Tuesday next week, MPs will vote to introduce workfare, slash lone parent benefits, and privatise more of the welfare state. There's a grubby alliance between Labour and the Tories on this, with investment banker David Freud the object of both parties' affections in a twisted menage a trois to screw the poor.

Meanwhile, the IMF reckons that the British government has spent nearly 20% of UK GDP - £285bn - in up-front support for the financial sector since the crisis began. That compares to a figure of 6.3% of GDP for the US and an average of 5.2% for the advanced economies within the G20.

It's socialism for the rich and capitalism for the poor.

Contact your MP before Tuesday and ask them to back amendments tabled by socialist MPs John McDonnell and Lynne Jones.

Who pays for the economic crisis?

The Prime Minister needs to realise that for the general public the Government's treatment of bankers' bonuses is the key test of who will pay for the economic crisis they have caused.

Allowing bonuses to be paid to the higher paid bankers who caused this crisis by their greed and recklessness will be seen as fundamentally unfair. Fumbling around with nothing more than ineffective warnings of inquiries is pointless. The Prime Minister needs to get a grip and take the decisive action needed to end the bonus culture and send a clear message that the binge banking party is over.

*John McDonnell MP has tabled EDM 353 'Banking Sector and City Bonuses' in the House of Commons. It calls for "the banking industry to be fully nationalised under public control so that finance is provided in the national interest."

5pm update: See Richard Murphy's take on Brown's hot air too.

Government failure could turn recession into depression

Official figures published today confirm that the UK is in a recession, following sequential quarters of negative growth in the UK economy. The economy shrank by 0.6% in the quarter to September, and by 1.5% in the quarter to the end of 2008. The latest figures represent the biggest quarterly fall in the UK economy since 1980.

John McDonnell MP, LEAP Chair, said:

"The Government has consistently failed to recognise the seriousness of the plight of the UK economy and has consistently failed to recognise the need for radical measures to tackle the crisis.

"Today's figures not only confirm a recession, but point to a depression - especially in light of the Government's failure."

Andrew Fisher, LEAP Co-ordinator, said:

"The UK economy is now in freefall. This is more than another recession, it is the collapse of the neoliberal capitalist model that Brown told us to be evangelical about only a few months ago.

"Simply bailing out the banks again and again shows that the Government has completely failed to appreciate the scale and the nature of the current crisis."

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No more bailouts, nationalise now!

Today the Government announced a further 'bank rescue plan' - yet there are pigeon steps towards a more interventionist role: 'nationalised' Northern Rock to expand lending, rather than winding down and repaying its loans. The Government has also now taken a 70% stake in RBS.

These are however minor moves, and the bailout will again risk public money without adequate controls, and there is still no intention to restructure the banking system. LEAP put out the following press release in response:

No more bailouts, nationalise now!

As the Government announces yet another rescue plan for the banking sector, LEAP makes one simple demand: nationalise the banks now and use them to help resolve the crisis, rather than continue exacerbating it.

John McDonnell MP, LEAP Chair, said:

"Again we see the Government pouring public money down the bottomless drain of the banks.

"Anger is mounting about the dithering and delays as the Government skirts around the only solution: to nationalise the banks in order to develop and impose a new banking strategy in the long-term interests of the country - rather than restoring the opportunity for another round of speculation and profiteering."

Andrew Fisher, LEAP Co-ordinator, said:

"The Government cannot continue to bailout the banks, while the banks continue to turf people out of their homes and out of their jobs. Restoring people to their jobs and housing is a more urgent priority than restoring bank profitability."

"The only solution is nationalisation of the banks and the Government seems only to be edging at a snail's pace towards this realisation."

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