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economy

I have just read Gordon Prentice’s blog - The trouble with Billionaires.

Gordon lays out the extent to which the ratio of pay between the highest and lowest is out of control. According to Gordon, the High Pay Commission tells us “top pay has spiralled alarmingly to stratospheric levels in some of our biggest companies”.

Bankers and company directors are currently in the spotlight and quite rightly so, but what about the excessive salaries paid to football players, film and TV personalities? It is not just the bankers and company directors who are doing very nicely.

Coincidentally the latest TUC Touchstone Extra pamphlet “All In this Together?” looks at how the recession and ongoing economic weakness has had an impact on different parts of the workforce. According to the report “the falling proportion of national output that goes on wages has meant that UK workers today are taking home £60bn a year less (in today's money) than workers did 30 years ago”.

Therefore it doesn’t take a rocket scientist to work out that the yawning pay gap has arisen from the combination of increases at the top and decreases at the bottom. The theory of the market being that to maximise performance you pay the wealthy more and the poor less!

Pay is only part of the picture; the accrued national wealth is in the hands of a tiny majority. Should we dare to put this under the microscope, we are accused of “The Politics of Envy”. We should be vigorous in redefining this as the “Politics of Fairness”.

The Coalition Government is compounding this problem with their attacks on the benefit and welfare system. I guess that not many of us support benefit cheats and it is right that they are dealt with properly, but most of would want to retain the existing benefits that we have paid our taxes for in case we or our families need assistance.

Whilst other colleagues within the Labour Party seek a new utopia of “Responsible Capitalism” and pay restraint for the public sector, my view is that current thinking falls a long way short of achieving the “Dynamic Economy” set out in Clause Four of the Constitutional Rules of the Labour Party.

Of course we need growth, but it needs to be sustainable and we must plan which areas of the economy need to grow to deliver higher pay for the workers, and also consider who else should benefit from the proceeds of that growth.

Fairness means redistributing wealth through a just taxation system rather than the one that is currently tipped in favour of the rich.

We need that revenue to invest in our children’s education and training. We need it to invest in everyone’s future. We need it to get the country back to work.

 

I write in response to Coun. George Askew’s claims that Labour did Nothing (Leader Times 28th October). The first question is: what planet does he live on, never mind what ward he lives in? He says the UK was spending £170 billion more than it was receiving in tax, that it was a cheap shot to question the tax avoidance of non-doms who bankroll the Conservatives, and that it has been left up to George Osborne to sort out the financial mess left by Labour.

However, at best he appears to be misinformed and at worst blatantly ignorant of the facts. Labour spent less as a proportion of GDP than either of the governments of Thatcher or Major. When Labour came to power in 1997 national debt stood at 42% of GDP. By 2002 it was below 30%. Granted, it slowly increased to 36% between 2002 and 2008 (still lower than Thatcher or Major) as a result of the urgent need to rebuild our public services which had suffered from two decades of underinvestment. The increase, coupled with the windfall tax on utilities in 1997 to compensate for the cheap Tory sell off of public assets, allowed Labour to build new schools, reduce class sizes, build new hospitals, reduce waiting lists, reduce poverty levels amongst vulnerable groups such as children and pensioners and provide public servants with a living wage, along with many others as a result of the National Minimum Wage.

It wasn’t until the global banking sector crisis that the debt to GDP ratio hit 52% by the time Labour left office in 2010 - but this was still lower than those of Japan, the US, France and Germany.

So what response? George Osborne came to the dispatch box in 2010 and declared “Britain was on the verge of bankruptcy”. Despite his claims of economic woe he chose to cut corporation tax while imposing unprecedented cuts on welfare and other public spending, resulting in a return to Thatcherite levels of unemployment at 2.57 million and rising inflation which currently stands at 5.6%.

So in light of these inconvenient truths perhaps Mr Askew would like to revise his simplistic view, because if these are the results of the Tories doing something then I prefer Labour’s “nothing”.

Yours faithfully
Mark Porter

 

Last week the Bank of England’s monetary policy committee did a 180 degree turn in agreeing to spend £75billion of tax-payer’s money, called quantitative easing or QE2.
Could it be that this vast sum of money is being used to keep the Tory government backer’s, from the financial sector, afloat when the Euro zone finally allows Greece (and others!) to default on its unpayable debt’s? This will result in banks everywhere nursing huge losses on their loans to Greece.
QE2 is not going to help the two and a half million unemployed nor the growing number of young people who cannot find a job. George Osborne sits back and waits for the stagnant business sector to grow when household spending is being cut to the bone. Increased inflation is going to hit anyone on a fixed income for years to come.
Incidentally, £75billion is about twice Britain’s annual defence budget, or the same as the entire market value of BP.
It would be good to know what our Tory Member of Parliament’s views are on the issue and its likely effect on Pendle.

 

A flustered Francis Maude today couldn't justify the Tory position that public sector pensions are "unaffordable". In an interview on BBC's Today Program with PCS general secretary Mark Serwotka, Maude was cornered on the "unaffordable" claim. He quickly U-turned on "unaffordable" with "untenable" - another undefined term to hide behind - he offered no explanation as to why the pensions are now "untenable". There's an interesting commentary on this debate by George Eaton over at New Statesman - if you look at the Hutton Report then, "The government's plan to ask employees to work longer and pay more is a political choice, not an economic necessity". As the Public Accounts Committee observed: "Officials appeared to define affordability on the basis of public perception rather than judgement on the cost in relation to either GDP or total public spending." In other words, the public have been misled and ministers are determined to keep misleading them.

At a rally in central London Sally Hunt, president of The University and College Union, had this to say about Nick Clegg's, "public sector pensions are gold-plated" comment: "The average pension of a female college lecturer is just £6,000 a year.  This is a government that has already presided over an increase in the income of the richest 1,000 people by 18%. How dare they call us gold-plated?"

 

The coalition’s economic policy to reduce the government debt as quickly as possible by reducing spending and so have to borrow less is a smokescreen for the real issue, the crippling Financial Services debt.

Analysis carried out by Price Waterhouse Coopers based on the Office for National Statistics' 2010 Blue Book elegantly challenges the myth.

The figures look like this:

 

Debt in cash (£ trillion)

Debt as % of GDP

Sector

2009

2015

2009

2015

Households

1.5

1.9

110

101

Government

0.9

1.4

67

77

Non-financial companies

1.7

2.2

122

116

Financial sector

3.4

4.5

245

242

Total UK Debt

7.5

10.2

543

536

 

The GDP (Gross Domestic Product) of Britain is effectively the country’s income.

So what conclusions can be drawn from these figures. Firstly that, overall, the country is borrowing five and a half times the amount it earns. Equivalent to a mortgage of £190,000 when your total household income is £35,000pa. Definitely a bit on the high side but not impossible.

Meanwhile the government’s share of that debt is 12%, that is its share of the ‘mortgage’ is approx £23,000. Household debt is 20% of the total.

While the Financial Sector has run up 45% of the debt, equivalent to £86,000 of our theoretical mortgage.

No wonder the banks are ‘too big to fail’ and so can carry on blatantly handing out huge bonuses and salaries. They have us by the short and curlys. The removal of more and more restrictions on the financial sector’s activities, starting with Margaret Thatcher’s “Big Bang”, has left Britain dangerously exposed. This coalition government is focussing on ordinary people and their jobs and services while ignoring the elephant in the room, the fact that the financial sector is out of control.

References:

www.guardian.co.uk/news/datablog/2010/nov/09/economicgrowth-debt-relief

www.guardian.co.uk/business/2011/may/24/government-borrowing-hits-record-figure-april

 

Its encouraging that a major group of economists have written to The Observer calling on the Government to move to a Plan B and abandon its cuts in public services and welfare.

Its discouraging but all too predictable that this Government has said that it is 'steady as she goes' with the cuts as our country's economy continues in stagnation.

We know the cuts are hurting but we also know they are not working.

Our country's problem is that we have two and a half million unemployed since the bankers collapsed the economy in 2008. The unemployed, and its not their fault, damage our tax base and cause our country to lose billions in tax and national insurance income, as well as cost billions in benefits. This problem is exacerbated by the billions (£120 billion to be precise) lost by tax avoidance by the very rich, including shamefully by the Chancellor of the Exchequer.

We should be investing to get people back to work as in the 1930's (remember Keynes?) and as after the second world war, and as in Japan (after a decade of cuts and stagnation) in the late 1990's.

Our country can, indeed must afford it. The UK's debt ratio indeed is the lowest of the advanced economies. You won't hear the Government say this, they will say that the country has 'maxed out' its credit card and is near bankrupt. That's a big spin to justify their small state approach, but the UK's debt ratio is 76%, Germany's is 79%, France's is 83%, Italy's is 118% and Japan's is 226% (source CIA Factbook)

So we must invest to get people back to work (one in five young people are unemployed).

In mid 2010 before the cuts the UK economy was recovering and growth was 2.5%, now as the cuts bite growth is down, and ongoing stagnation looms.

It quite simple and basic, people in work are productive economically, socially and morally.

If the Government won't go for Plan B, then this Government must go.

 

The BBC is reporting that members of the National Union of Teachers and the Associations of Teachers and Lecturers are expected to walk out on 30 June.  The seriousness of this action is reflected by this being the first time that the moderate ATL has ever taken national strike action. The unions say the pensions changes will leave them working longer, paying more and getting less when they retire.  I don't see any bonus-bulging bankers worrying about their pensions.

 

Looks like support for Labour has gone up a smigden in the latest Populus/Times Poll.  Sadly, however, less people think that the Eds are capable of running the economy better than the Tories.  This is a problem area that we need to address before the Tories run the country so far into the ground that it won't matter!

 
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