The two faces of Ed Balls

During the Labour leadership election, many people were impressed by Ed Balls' apparent conversion to a social democratic economic settlement as espoused in his Bloomberg speech.

But since then Balls has committed a Labour government in 2015 to sticking with Tory spending plans for at least the first year. He has also said that Labour will not promise to reverse Tory cuts, and that Labour would have to make more in office. He has supported the public sector pay freeze, while Ed Miliband somewhat contradictorily waxes on about the cost of living crisis.

This morning the media was filled with similar tough messages, briefing ahead of Balls' speech at the Fabian Society, including the parliamentary garbage that "Balls will promise to legislate for new fiscal rules within 12 months of the general election, including a commitment to a budget surplus by the end of the parliament". Legislate for it? Really? Will the chancellor be surcharged if the target is not met? Or will a technocrat be installed to make cuts? It really is nonsense. On the upside, it should be noted that Balls is committing to a current account surplus, which allows for borrowing for capital investment - see 'Borrowing for Growth - some advice for Ed'.

Nevertheless, like any wannabe chancellor, Balls knows how to pull a rabbit out of a hat. And so the tough, 'we'll enforce austerity too' message will be overshadowed by a debate about a modestly higher rate of income tax on a few high earners. It is very welcome that Balls has committed to restoring the 50% tax rate on those earning over £150,000. It was probably the most popular policy in Gordon Brown's premiership.

What is also welcome, and will hopefully be widely reported, is that Balls also said:

"The latest figures show that those earning over £150,000 paid almost £10 billion more in tax in the three years when the 50p top rate of tax was in place than when the government conducted its assessment of the tax back in 2012"

This corrects the crap put out by the Treasury in its dodgy dossier of the 2012 Budget. Both the move to pledge to restore the 50% rate and the analysis is welcome, and hints at a return to '
Bloomberg Balls'.

However, before Labour activists start getting weak at the knees about a return to some form of modest social democracy, Balls also told the Fabian conference that Labour supported the benefit cap, the public sector pay freeze, thought public utilities belonged in the open market, and that universal winter fuel payments for pensioners should be means-tested.

We've seen the two faces of Ed Balls today in one day. Capitulating to Osborne, the financial markets and the Murdoch media this morning, while throwing a modest redistributive morsel to the left at lunchtime. Bon appetit!

Ripped-off UK looks for radical solutions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But it's not just British Gas ... 

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

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

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

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

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

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

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

So what can you do? Support Fuel Poverty Action's day of action on Saturday

Preparing for an age of scarcity

The New Consumers: preparing for an age of scarcity by John Fisher begins with a warning from George Santayana, "those who fail to learn the lessons of history are doomed to repeat it".

Its central thesis is that our 'dominant social paradigm' in which "growth of any kind, in any section of our culture, is a social norm and probably a good thing" is fragile, on the verge of collapse. This is due mainly, but not exclusively it is argued, to the impending end of fossil fuels on which our societies have been so dependent. This may "bring about a rather sudden social paradigm shift which may be too compressed for our society to cope with without serious social consequences".

The fault for this is 'inherent in the system' which "encourages only individual solutions to collective problems". This is nowhere better illustrated than in Chapter 1 of the book called 'The Way We Live' an account of the lives of fictitious suburban middle class couple Philip and Amy Thornton as they go about their daily business with their children: working, eating, shopping, resting at home, pursuing leisure activties, etc. Although the Thorntons live in North America, their situation is not too distant from much of the UK.

This daily routine paves the way for the chapters that follow on Food, Shelter, Transportation and Energy. The rising cost of food has its root in global oil prices, but what cannot also be ignored is the extent to which prime farmland in North America has been concreted over for more lucrative commercial and residential use. Imports are often cheaper, and of course prime parts of African and Asian farmland are used to feed not themselves or even the West but to grow cut flowers, coffee, tea and tobacco. It quotes then environment minister Ben Bradshaw MP in a highly underpublicised speech, when he said that our "food production does just as much environmental damage as private transport and housing".

Community supported agriculture is positively promoted, alongside an exposure of the tactics of the marketing executives for their deceptive labeling and the politicians who permit such lax regulation - and the author should know as a former high-flyer in Canada's equivalent of Madison Avenue, exposed in his prior book The Plot to Make you Buy.

The housing chapter, 'Shelter' is begins with a fascinating history of the origins of North American suburbia, neatly summed up in the song Little Boxes. Like our food production and the prices we pay, this suburbia (far more widespread in, but not exclusive to, North America) is dependent on cheap fossil fuels - which provides a useful segue to the next chapter: Transportation.

Again, the reader is eased in with the absorbing battle for city transport - and how the automobile industry fought a dirty war against the public mass transit systems that existed in many North American cities: the streetcars and trolley systems. The behaviour of National City Lines in 1930s, 40s and 50s is not to dissimilar to that of Stagecoach in the UK (which has recently purchased Coach Canada) since the 1980s when bus services were deregulated under the Thatcher government. The public investment in interstate highways contrasted with the disinterest shown to rail systems - and they have largely withered in North America, leaving whole communities vulnerable should the private automobile become out of reach.

The quest for a solution to the car, takes the author and reader through a intrepid search for an alternative: the electric car, hybrids, hydrogen power, and railways, before contemplating the future for air transport.

The final chapter on energy looks at the oil industry: its relationship in particular with US governments, its dubious claims on new oil field finds, and the increasing lengths and ever more complex methodologies needed to exhume the dwindling supplies. The author quite rightly wonders "how we could all be so self-deluded as we pour billions of dollars, pounds and euros, into trying to recreate the very economic circumstances which got us into this mess". The answer of course is that alluded to in the introduction - the dominant social paradigm that mitigates against collective solutions.

For all the dynamic creativity of capitalism is the contradiction - it leads to monopoly power, the removal of democracy over key questions of our lives and the resources they depend upon.

How we get to this post-capitalist, post-oil dependent world is by no means clear, "the future is not some place we are going to but one we are creating. The paths are not to be found but made, and the activity of making them changes both the maker and the destination".

There are no out-of-the-box solutions to this crisis. Those of us who fear the prospects for our societies if the "compressed changes" referred to are forced upon us need to start building and promoting alternative solutions now. If socialists and environmentalists fail, then the space will be vacated for the sort of neo-fascist movements like the Tea Party in the US: nationalistic, violent and angry.

*Declaration: the author of The New Consumers, John Fisher, is also my uncle.

One Million Climate Jobs

Earlier this week I went to the launch of the new and expanded 'One Million Climate Jobs' pamphlet, which sets out a strategy to solved both the economic and environmental crises.

In 50 pages it sets out a comprehensive argument for funding one million climate jobs now. It argues that the jobs and investment can be funded by the reduced unemployment and extra tax revenue from getting one million people back into work, and from addressing the tax gap. The investment required is just £18 billion - a fraction of the £1.3 trillion that bailed out the banking system. As Jonathan Neale, the pamphlet's editor, said at the launch,

"if the planet was a bank they would save it"

It argues that the dangers of abrupt climate change require us to act now to reduce our polluting ways. It is estimated that the one million climate jobs, costing just £18 billion could cut UK emissions by 80% in just 20 years, but the pamphlet is realistic: "of course cuts in the UK on their own will make little difference to global climate change. But if we campaign for a million new jobs, and win them, people all over the world will see what we have done".

The jobs themselves cover our electricity and energy production; refitting homes, public buildings and businesses, and building new homes to strict environmental regulations; building new transport infrastructure; as well as other industries. As Philip Pearson from the TUC pointed out, we have lost over one million manufacturing jobs in the last decade. This is the industrial strategy we need.

The pamphlet concludes with a chapter on what you can do. As John McDonnell MP, speaking at the launch, said:

"we need greens and trade unionists campaigning alongside each other, and to become one another"

The pamphlet is produced by the Campaign against climate change trade union group and is sponsored by the CWU, PCS, TSSA and UCU trade unions. Free download here or order from Bookmarks (£2.50)

Watchdog warns of British energy crisis

From the Morning Star

Energy regulator Ofgem has warned that the current free-market model for the industry is not fit for purpose and could lead to supply shortages and spiralling fuel poverty.

Following an extensive consultation period, the watchdog unveiled a set of radical proposals for a "secure and sustainable" energy supply across Britain.

It acknowledged that sticking with the current market was "not an option" - barely two years after it declared privatisation was working - and hinted at nationalisation as a possible solution.

The report expressed "reasonable doubt" over the security and sustainability of the country's power supplies amid a perfect storm of the financial crisis, environmental targets, dependency on imported gas and the closure of ageing power stations.

It warned that failure to reform the energy system could mean power shortages after 2015, while inaction would lead to a "degree of crisis" in three or four years.

Ofgem has predicted that average household bills could jump as much as 25 per cent to nearly £2,000 without urgent action.

"The higher cost of gas and electricity may mean that increasing numbers of consumers are not able to afford adequate levels of energy to meet their requirements," the report stated.

Ofgem put forward a range of proposals it claimed would help release the estimated £200 billion Britain may need to invest by 2020 in order to ensure future supply.

The most far-reaching of these was a call for a "dramatic move away from competitive markets" and towards the creation of a central energy buyer that would set the amount and type of new power generation needed.

In short, the government could be forced to reverse Margaret Thatcher's privatisation of the energy market and renationalise the industry.

The report was endorsed by left economists, environmentalists and union leaders.

Left Economics Advisory Panel co-ordinator Andrew Fisher called for "renationalisation without compensation" and to use the surplus to secure the investment needed for publicly owned supplies that are sustainable and affordable.

"The major investment work needed has not happened despite years of massive profits and will not happen in the future," he stressed.

"The only solution is full nationalisation. The private energy companies have been ripping off consumers for long enough."

GMB national officer for utilities Gary Smith said that the report was "a death knell to the liberalised energy market. We now need the political courage to grasp this and look after people's needs."

And Friends of the Earth executive director Andy Atkins made the case for more substantial investment in renewable energy to protect the planet and our future.

"A commitment to radically reform the energy system must be a significant element of all the political party manifestos," he added.

Energy and Climate Change Secretary Ed Miliband insisted that the government was "confident" of meeting energy supply needs until 2020.

But he admitted that Britain would need more "interventionist energy policy" to deliver secure and sustainable supplies beyond 2020.