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)

No cuts! Introduce a Wealth Tax instead

LEAP met with Professor Greg Philo yesterday, who presented the case for a Wealth Tax to solve the deficit.

It certainly put things in perspective. The UK has a national debt of £800 billion. By comparison, the total personal wealth in the UK is £9,000bn. It is mostly concentrated at the top, so the richest 10% own £4,000bn (by contrast, the poorest half have less than one-tenth of the total UK personal wealth).

What Professor Philo proposes is a 20% wealth tax on the wealthiest 10%, which would pay off the national debt and dramatically reduce the deficit, since interest payments on the debt are a large part of government spending.

The richest 10% have only to assume liability for their small part of the debt. They can pay a low rate of interest on it and if they wish make it a charge on their property when they die. It would be akin to a student loan for the rich.

Polling suggests a Wealth Tax would be popular, a YouGov poll of over 2,000 people found very strong support, with 74% of the population approving (44% strongly approving). Only 10% did not approve.

Footage of Professor Philo propounding a Wealth Tax on the Politics Show, to a rather bemused Tory MP and Labour's Yvette Cooper, is embedded below:



You can also read more about the Wealth Tax on the Glasgow Media Group website.

Osbornomics unravels

Look beyond the big society rhetoric and there's a very flawed theory at the heart of George Osborne's chancellorship. It was outlined in the June 2010 Budget, when Osborne advoacted:

"An economy where the state does not take almost half of all our national income, crowding out private endeavour"

This 'crowding out' theory managed to infiltrate the independent Office for Budget Responsibility which stated in June that although the government's cuts would cost 600,000 public sector jobs, with a knock-on loss of 700,000 in the private sector, the private sector would also create 1.6 million jobs over the same four year period (a net gain of 300,000 jobs).

However, a report published by Pricewaterhousecoopers today shows in fact that the private sector will only create 1 million jobs over the four years, so that becomes a net loss of 0.3m jobs. It undermines Osborne's claim that cutting the public sector can be compensated by private sector growth (definitely not in a weak economy). I think the PWC report still might be a bit optimistic.

Data released since the Budget seem to be proving the PWC right and Osborne wrong. Both the IMF and the Bank of England have downgraded UK growth prospects. As the Morning Star points out, both the British Chamber of Commerce and British Retail Consortium have warned that growth in the service sector had been "slow" and was showing no signs of picking up before the VAT rise in January next year.

BCC chief economist David Kern said: "The dismal performance of the service sector is particularly disturbing since it occurs even before VAT is due to rise to 20 per cent."

It goes to show cutting the public sector won't 'make room' for the private sector, but will sap demand and weaken the private sector too.

For an excellent brief history and demolition of 'crowding out' theory see Aditya Chakrabortty's piece in the Guardian earlier this month.

Update: There's more on this story in the Morning Star, with quotes from Len McCluskey and Dave Prentis.

Perpetuating the myths on public sector pensions

There is no greater mythology than that surrounding public sector pensions. There second great mythology is that John Hutton (now Lord) was ever anything but a Tory - he was picked to write a report on public sector pensions (interim report published today) because he would write exactly what the Tories wanted to hear.

The infamous and ubiquitous “gold-plated” public sector pension is of course largely a myth. The average local government pension resides at just under £4,000 per year. Excluding the upper echelons of the senior civil service, the average civil service pension is only slightly higher at £4,200 per year (a positively tin-plated £80 per week). For teachers the average is a more healthy – yet far from gold-plated – £9,000 per year. Overall, the TUC suggests the average public sector pension is £5,500 per year.

Public sector pensions have already been attacked though by the indexation changes announced in George Osborne's Emergency Budget in June. According to TUC research, an eighty year old pensioner with an average public sector pension would be more than £650 a year worse off – equating to £12.50 per week.

The net cost of paying public sector pensions in 2009/10 was a little under £4 billion. The cost of providing tax relief to the one per cent of those earning more than £150,000 is more than twice as much. The cost of providing tax relief to all higher rate taxpayers, on their private pensions, is more than five times as much.

Ignoring all the facts, Hutton today said "This is a problem and we can't go on as we are."

So he recommended higher employee contributions, raising the retirement age, and ending final salary schemes.

Osborne will indicate government thinking on public sector pensions in the Comprehensive Spending Review on 20 October. When setting up the commission Osborne described public sector pensions as "unsustainable". Thing is they're not: the cost of public sector pensions today is 1.9% of GDP in 2010-11, but by 2060 that will have fallen to 1.4%.

Of course, the other calculation to make is that if public sector pensions are reduced, it will simply result in more people being entitled to means-tested benefits such as Pension Credit.

The final report will be published just prior to the March 2011 Budget - and then the attacks will start. Until then expect to hear lots more about 'gold-plated', 'unsustainable' public sector pensions. Just remember, it's bollocks.

Update: great article in the Morning Star on unions' responses to the report

Update 2: Great letter from Richard Murphy in today's Guardian: "in 2007-08, private pension funds in the UK received subsidies amounting to £37.6bn while paying pensions in that year of just £35bn to those in retirement. The result was that in that year every single penny of pensions paid in the UK were paid at direct cost to the UK taxpayer, and none in effect by anyone else. The question Hutton should therefore be asking is not whether pensions should be paid by taxpayers or not, but whether there is in fact any viable, working alternative to pensions being paid by taxpayers?"

International currency war under way

The Bank of Japan’s decision yesterday to further reduce its close to zero interest rate looks suspiciously like one of the opening shots in an exchange rate war that will intensify the problems besieging the already weakened major economies.

In dropping below its lower limit of 0.1%, and looking at a small programme of quantitative easing (QE) (aka printing more money), Japan managed to get the yen to fall on currency markets. This has the effect of making its exports cheaper.

But Tokyo didn’t start it. They just followed Brazil’s finance minister who, on Monday, took measures to hold down the value of the real. Guido Mantega warned:

'We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness.'

Both Japan and Brazil pre-empted the widely expected “return to QE2” – a sequel to the fading effects of the previous programme of money creation by the now struggling Obama administration. Washington wants the lower dollar to fall to give its exports an edge.

So the alarm bells are ringing at the International Monetary Fund, which is warning that the “recovery” has run out of steam. IMF head Dominique Strauss-Kahn told the Financial Times:

'There is clearly the idea beginning to circulate that currencies can be used as a policy weapon. Translated into action, such an idea would represent a very serious risk to the global recovery.'

It’s not long since world’s leaders in government, banking and finance came together to hammer out the agreements that enabled at least the semblance of a co-ordinated programme of measures designed to restart lending and bring about a return to growth.

Whilst the previous concerted action is credited with averting a financial and economic Armageddon, its effects are best described as a phony recovery. And that is now over. The optimism induced by unprecedented measures couldn’t and didn’t overcome the uncontrollable logic of the capitalist system of production.

The global crisis may have erupted in the financial system but its roots are elsewhere.

Throughout its short period of existence on the planet, the capitalist system has been racked by contradictory forces. Competitive pressures have obliged companies to invest in productivity enhancements which, whilst giving the front runners a temporary advantage, inevitably reduce costs, prices and profits for all.

To offset the tendency for profits to fall, greater volumes of every product have to be cranked out and sold, and the pressure for even more productivity accelerates and accentuates the growing economy.

This irresistible objective logic created the globalising corporations that came to dominate the world. And when the surging millions of cars, computers and mobile phones overwhelmed the market, a house of (credit) cards and mountains of debt were created so that consumers could buy them up. At least until we, and the rest of the economy found ourselves drowning in that very same debt.

Optimism is now being replaced with realism. Cuts in government spending to reduce the budget deficits they’ve accumulated over years of trying to keep growth on track are just one part of the story.

The phony recovery allowed manufacturers to restock their warehouses and showrooms, but there’s still not, and won’t be enough buyers. So the factories that restarted production after the 2008 collapse will go back onto short time and no time.

Competition for the remaining market will sharpen, and the intensification in the rate of exploitation will prove truly shocking, sparking social unrest to match. These are the objective laws which shape the decisions in the boardrooms and in government buildings.

Successful resistance will depend on individuals and communities creating new forms of democracy – People’s Assemblies with the power to terminate the web of contracts and property relationships that tie workers to capitalist employers and ensnare us all in debt. The system of profit-chasing growth must be torn up at its roots. Let’s compost capitalism!

Gerry Gold
Economics editor
A World to Win
http://www.aworldtowin.net/
6 October 2010

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.

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.