TUC March and Rally on Saturday 18 October

Britain Needs a Pay Rise is the slogan for the march and rally tomorrow (Saturday 17 October) organised by the TUC. The assembly point is on the Embankment outside Temple Tube station. Look for the big red flag above the CP stall from around 10 am. Any help you can give in distributing the Morning Star and the CP’s special edition of Unity would be much appreciated. When the march moves off, probably around 1 pm, you can show your solidarity with the CP by walking behind our banner. The march will end at Hyde Park where there will be a rally addressed by big name speakers.

The Communist Party is giving its full support to this march and is encouraging everyone to join the London march. We should, however, be under no illusion that the government will change its policy on the strength of what has become, in effect, an annual carnival called by the TUC. The industrial action by health workers and civil servants this week and fire fighters earlier is likely to have more effect, but even these will need to be repeated on a larger scale and by other unions if the government’s strategy of favouring the 1% and making the rest of us pay for the financial crisis with cuts, austerity and public sector wage freezes is to be stopped. We also deserve a better slogan than the TUC has provided. Of course, Britain, excluding the 1%, needs a pay rise, but it also needs publicly owned services, real democracy, more jobs, free university education, an end to privatising the NHS – the list is immense. It would be unrealistic to expect the TUC to ask us to march tomorrow under the slogan Britain Needs a Revolution, but the time for this may be coming sooner than the rich and powerful now appreciate.

How to avoid the next banking crisis

Banks have been seen as at the heart of capitalism through their ability to create new purchasing power out of nothing and to direct funds into the most profitable areas. They can also be seen as machines for making money: every £1 deposited with them can be re-lent and re-deposited many times – provided the bank has the backing of a central bank or a government (i.e. taxpayers) to bail them out if, as in 2007, there is a run on the bank. This why the government resorted to quantitate easing following the banking crisis in 2007. Quantitative easing is a slightly more sophisticated version of printing money, the principal difference being that, instead of using this money to pay the government’s debts, it is given to the banks in the hope that the banks will use it to finance economic development. As if! It has been estimated that only 25% of bank lending in the UK is currently used to support businesses, and half of that is used to buy commercial real estate rather than support truly productive economic activity. Given that of the 12.5% going to businesses non-property investment, only a small proportion will be for truly productive investment, it’s clear that the sacrifices that ordinary working people have been required to make since 2007 in terms of cuts in services and wage freezes have yielded them a very poor return.

So what are the banks doing with ‘our’ money following their near collapse in 2007 and subsequent, and continuing bailout?

In addition to continuing to pay huge salaries and bonuses, much of it has been misused, as revealed in a series of post-2007 scandals such as:

• Fruitless speculation such as JP Morgan’s loss of $6 billion from trading activities of which CEO was blissfully unaware.

•Price fixing at LIBOR. The London Interbank Offered Rate has been manipulated by banks for their own profit.

• Market abuse by ‘flash trading’ underpinned by the big banks whereby security prices paid by ordinary investors have been manipulated using ultra-fast software and communications.

•Money laundering: Accusations of illegal, clandestine bank activities are also proliferating. Large global banks have been accused by U.S. government officials of helping Mexican drug dealers launder money (HSBC), and of funnelling cash to Iran (Standard Chartered).

•Tax evasion: In just one example, UBS helped 20,000 U.S. taxpayers with assets of about $20 billion hide their identities from US authorities. In the UK, the banks are unapologetic about being up to their necks in tax “avoidance”.

•Misleading clients with worthless securities: Only after the financial crisis of 2008 did people learn that banks routinely misled clients, sold them securities known to be garbage, and even, in some cases, secretly bet against them to profit from their ignorance.

The most serious abuse of all has, however, been that our banks continue to trade in derivatives in many of the same ways they did before the crash, but on a larger scale and with precisely the same unknown risks. Derivative trading now totals more than $700 trillion. That is more than ten times the size of the entire world economy.

It is a myth to believe that under capitalism we can have responsible, honest and transparent banks. They wield too much power in a capitalist society to be tamed. The capitalist parties, including Labour, have no intention of interfering with them. If the next, inevitable financial crisis, which is likely to be far more damaging than that of 2007, is to be avoided, not only do we need to bring the banks under democratic, public control, but this reform has to be accompanied by fundamental changes to our entire economic and political structure if it is to succeed. What are these changes? In a word: socialism.

PUBLIC SERVICES AND HOMES FOR ALL

The National Audit office reported in April that the privatisation of Royal Mail short-changed taxpayers by £1 billion. If that were not bad enough, 16 institutional investors given priority by the government in the queue for shares sold them within weeks despite having led the government to believe that they would hold their investments for the ‘long term’. As if! Such is the culture of short termism pervading capitalism in general and the City of London in particular, such understandings are worthless. Nothing gets in the way of making a quick buck.

Given this blatant rip off at the time that ‘our’ Royal Mail was sold off, who can now be surprised to learn that one of the jewels in the crown of Royal Mail, the former Mount Pleasant sorting office, is to be sold for an estimated £1 billion for luxury housing. This helps explain some, but of course not all, the jump in share price immediately following the flotation. The flotation price was supposed to reflect property development value, but the ruthless way in which this asset is to be exploited could not have been fully reflected in this price.

At a time when Londoners are being priced out of the property market, the Mount Pleasant site could have made a small but significant contribution to London’s stock of genuinely affordable properties. Royal Mail has, however, as a public company, only one overriding objective, enshrined in statute, which is to maximise shareholder value. This means minimising the proportion of affordable homes in the development – fewer than a quarter of the homes fall into this category, reflecting the minimum needed to secure Mayor Boris Johnson’s approval of the development – and maximising the interpretation of what is meant by “affordable”. A two bedroom “affordable” home in this development is currently expected to cost around £1,700 a month, or £20,400 a year. Assuming renters/mortgage payers can afford to pay no more than a third of their pre-tax income on accommodation, a couple would need a combined income of £60,000 per year to afford this “affordable” home. A couple both working 40 hours a week for 50 weeks a year for £8.85 per hour, the London Living Wage, which is better than many earn on the statutory minimum wage of £6.50 per hour, would together earn only £35,400 a year. Their mortgage or rent would consume 58% of their combined income – clearly unaffordable.

The solution? Simple! Re-nationalise our public services at no more than the prices they were sold off for; and public investment in decent homes for all.

TRULY INSANE

The new bombing campaign in Iraq, which will inevitably be extended to Syria in due course, is expected, even by its advocates, to last at least two years. A much shorter bombing campaign, that of Libya in 2011, cost the UK between £500 million and one billion pounds. This was roughly the same as the savings made by ending the education maintenance allowance or three times the amount saved by scrapping the disability living allowance. Clearly, neither of these adventures was, or will be, affordable by a UK whose government is continuing to cut public services, hold down wages and refuses to address a housing crisis that is spiralling out of control. Even more significant, however, is that neither the bombing of Libya nor the earlier bombings of Iraq succeeded in stabilising the Middle East nor bringing to its diverse people security, harmony and democracy.

The complexities of the Middle East are huge due, in no small part, to our original colonial interventions, including the establishment and nurturing of the Gulf States, our involvement in Palestine and Israel and our meddling in Iraq, Iran, Libya, Syria and across the region. Albert Einstein defined insanity as doing the same thing over and over again and expecting a different result. Anyone who thinks that, this time, dropping bombs on the Middle East will help is, according to Einstein’s definition, truly insane.

BUSINESS AS USUAL IS NOT AN OPTION!

Following the result today of the Scottish Referendum – 55.3% against Independence on an 84.6% turnout – the government has reiterated its commitment to bringing forward draft legislation on more devolution for Scotland in January. If the government and the Labour opposition think that all that’s needed is transfer of some modest tax raising powers for Scotland and some restriction on Scottish MPs voting on English matters where these have been devolved to Scotland, they will be sadly disappointed. The list of constitutional and fiscal matters in the UK that need to be addressed as a matter of urgency is legion. Here are just a few of them:

• The EU. Powers continue to drain away to the unelected European Commission. The latest example of this is the secret negotiations now under way on a Transatlantic Trade and Investment Partnership (TTiP) which, when signed up to by the EU, will strip elected governments of the power to resist further privatisation of our public services.

• The unrepresentative nature of the Westminster Parliament. The House of Lords is a retirement home for clapped out politicians. The House of Commons is a sham of democracy, elected every five years (who agreed to that?) on a derisory turnout, peopled by over-paid party hacks and appointees who are elected on the strength of a barrage of propaganda from the capitalist press and a cowed BBC.

• Our enfeebled local government democracy. It’s stripped of revenue raising powers and run by over-paid apparatchiks. The relatively more democratic model provided by the Committee System is opposed by the large parties as it would not support the big salaries for councillors aproportion of which is diverted to financing future elections.

• The absence of democratic control of the NHS which is being privatised piece by piece and which, for us locally, is threatening the existence of Croydon University Hospital.

• The continuing attacks on trade union right and the almost total absence of workplace democracy. The government is even threatening to make illegal strikes and other industrial action that fails to secure a workplace majority of those entitled to vote. Even the decisive vote of No in the Scottish referendum only attained a 46.8% majority – i.e. it would have been inadequate for industrial action.

These and many other issues including education, housing and climate change will be discussed at the inaugural meeting of the Croydon Assembly convened by Croydon TUC on 15 November at Ruskin House, 23 Coombe Road, Croydon CR0 1BD. To register your place, go to http://www.eventbrite.co.uk/e/croydon-assembly-tickets-9351064285?aff=eac2 .

So what happens after the Scottish Referendum?

The principal reason for hoping that the Yes campaign will not prevail in the Scottish Referendum on Thursday is the need for the working class to stay united in the face of the attacks it is undergoing at the hands of those with wealth and power. The panic in Westminster following the YouGov poll putting Yes in front and the speciousness of many of the arguments clearly intended to frighten Scots into voting No does not engender much confidence that this will happen. One thing is, however, clear from the panicky responses of Cameron, Miliband, Brown and Clegg: very little thought has been given by our rulers about what happens after the referendum. If they think that we will all return to business as usual and that Rump-UK will sink back into a passive, Little England conservatism permanently electing a Conservative (or occasionally a New Labour) government, they are very much mistaken. Here are just a few of the issues that will have to be addressed following a Yes vote:

The inappropriateness of such a large military for so small a county.
The unsuitability of an unelected House of Lords at a time of constitutional change.
The need for a written constitution including adequate provision for workers’ and trade union rights.
The undemocratic nature of the current Westminster parliamentary system.
The likelihood that Wales will follow suit.
The unwillingness of local government in England to remain totally tied to Westminster apron strings.
The need for a stable tax base in R-UK, especially as an independent Scotland dominated by the SNP may well seek to compete in a tax race to the bottom.
The unaffordability of (and absence of a home for) the nuclear deterrent for R-UK.
The bloated size of the Royal Family when the Scots no longer contribute to their upkeep.

The only issues temporarily reprieved by Gordon Brown’s promised Devo-Max solution following a No vote would be the last two. All the others will remain to be dealt with.

None of these issues will, however, be resolved in our favour through the beneficence of the ruling class. They all require hard work from the bottom up, albeit with guidance and organisational expertise from the Communist Party, and it may well be best to start with more ‘bread and butter’ issues such as health, education, housing and opposition to further cuts in services. An excellent starting point will be the inaugural meeting of the Croydon Assembly on 15 November. Be there and help start to get the ball rolling.

Diplomats and confused retired generals

Innocent people are dying in Syria, Iraq, Libya and Gaza. Enough problems for world leaders to worry about? Yet when Britain’s former head of the Army, Lord Dannatt, gave his carers the slip this week and found himself in a BBC studio, he informed the startled interviewer that the current situation in Ukraine is not just a return to the Cold War, it’s a return to the 1930s with Putin playing the part of Hitler. Rather than being told by the interviewer to stay calm – the nice men in the white coats are on their way to take you back to the home, he was listened to in respectful silence. The BBC is, after all, adept at peddling nonsense to which its current paymasters subscribe – it’s been repeating ad nauseam this week the briefings emanating from the US government (or just the hawks in Washington?) that democratic governments in Europe need to cut their social spending and apply it to military spending and meeting their commitments to NATO. As if our social spending had not already taken a beating as a result of the financial crisis triggered by corrupt US banks!

Military spending in general and NATO in particular are not the solution to the problems in Ukraine, they are the problem. NATO ceased to have a purpose following the end of the Cold War and should have been wound up then as part of the peace dividend  – whatever happened to that?  Instead NATO has been allowed to grow, vacuuming up former soviet states as if there will be no tomorrow (as there may very well not be with this policy!) and is now threatening to put its tanks (sorry, our tanks) on the very borders of Russia. The best thing those attending the NATO summit this week could do would be, after reminding themselves that Russia is still a nuclear state, to wind up NATO and instruct our diplomats, not our confused retired generals, to broker a solution to the problems in Ukraine.

WHEN IT PAYS TO SETTLE

Earlier this month, Bernie Ecclestone was able to terminate the prosecution for bribery against him in a German court by agreeing to pay £60 million. His lawyers insisted, of course, that this payment was not an admission of guilt.

 

£60 million is a lot of money to pay when you are innocent. It is, however, considerably less than another out-of-court settlement this month:  that by Bank of America following a charge by the US Justice Department of “misconduct in the production of mortgage-backed securities”. This was for $16.65 billion. Like the settlement of the German court case, it is intended to ‘wipe the slate clean’ and forestall any further prosecutions or claims for damages. As in the Ecclestone settlement, there was no admission of guilt.

 

We will probably never know whether Bernie Ecclestone’s payment of £60 million represented value for money for him. As he risked a jail term if the prosecution was successful, perhaps, it did. After all, he is not a young man and he might have been required to serve his sentence in one of our grubby, under-funded and over-crowded prisons rather than in a more humane German lockup. We do know, however, that Bank of America’s settlement of $16.65 billion represented a real bargain for them. According to the US Government Accountability Office, the 2008 Financial Crisis triggered by the mortgage backed securities scam cost the US economy alone $22 trillion. The cost to the world economy must be a multiple of this huge sum.

 

Crises are endemic in capitalism. While Marxists have a good understanding of this phenomenon, capitalists and their advisers tend to ignore it until it happens. Even if they are interested in anything beyond mere personal and family accumulation, the economists to whom they listen fail to see beneath the surface of the economy and mistakenly conclude that the system can be managed and boom and bust avoided. The snake oil remedy they invariably peddle is ‘more competition’ as, for example, did John Vickers in his report on UK banking. It would be more honest to admit that capitalism is a casino for the rich who must get out of the market before the bubble bursts.

 

If the Bank of America had not decided to peddle worthless mortgage-backed securities, another trigger would eventually have kicked off the recession. Thus the real remedy is for ordinary working people to own the banks and all the other major undertakings in the economy, not the other way round. Until that day dawns, however, let’s kick up a fuss about the inadequacy of the fines and penalties, such as they are, on those banks whose reckless behaviour triggered the financial crisis.

BBC: jumping before being pushed?

The BBC has recently announced plans to scrap quotas for in-house production. John McVay, the Chief Executive of the independent producers’ trade body described it as an “historic moment” and said that the BBC had “jumped before it was pushed”. BBC insiders have commented (off the record) that it is “a short hop, skip and jump to the BBC becoming a publisher broadcaster.”

To assess the significance of this move, we need to ask ourselves what exactly the BBC is for. When founded, the first Director General, Lord Reith, considered that it was there to inform, educate and entertain. As the ‘weapons of mass destruction’ row between the government and the BBC demonstrated, frequent reviews of the Charter, the power to appoint the BBC Board and Director General and the dependence on the license fee give the government of the day tremendous influence when it comes how it ‘informs’. In a recent survey for the BBC by Ipsos MORI in February, the BBC scored an average 6.5 out of 10 in response to the question of how impartial it was. To give this scale some meaning, that great fabricator of misleading information, the Daily Mail, scored 4.1! The BBC’s pitiful ‘balanced’ reporting of the Israeli attacks on Gaza can only have further depressed the BBC’s impartiality rating. The contempt with which the BBC’s flagship political programme, Question Time, is now held by a significant proportion of its potential audience (just look at the tweets than accompany this pitiful programme) is tangible and demonstrates how our confidence in the BBC has slipped.

On education, the BBC continues to play a useful but minor role. Its nature programmes are generally good and its coverage of science is sound if uninspiring. But surveys show that even on information and education, it is now treated with less confidence than Wikipedia.

On entertainment, the role played by the BBC is essentially to set a minimum quality standard that commercial stations have to take into account. In this it has been quite successful, prompting both ITV and even Sky to raise their games in drama and comedy and not to rely exclusively in cheap imports from the USA. Whether this leadership can be retained when the BBC is no longer constrained by an in-house quota is problematical. The BBC could indeed be on its way to becoming a “publisher broadcaster” and, from there, oblivion.

What is the way forward for the BBC? Obviously, it should not be handed over to Murdoch or Sky as many on the right would like to see. Its modest independence from the government of the day needs to defended and strengthened. The license fee needs to be retained, but an element of progressivity included. While it is not realistic to think that a public broadcaster can be truly independent of the capitalist interests that control everything else in our society, we should continue to press for a fair hearing for the left and progressive causes. A good place to start would be for the BBC to respond at last to Early Day Motions in parliament calling on it to include the Morning Star in its coverage of the UK press.

Stern Stuff

In a significant but little reported letter published in the Financial Times last week (7 August), Lord Stern, Head of the Government Economic Service between 2003 and 2007, revealed that, in addition to his celebrated reports on climate change and for the Commission for Africa, he had been responsible for a report on tax reform. This report had, however, gathered dust in the Chancellor of the Exchequer’s in tray and even its existence has been kept secret. What did it contain that so scared the government?

Enquiries under the Freedom of Information Act may now enable the report to be extracted from the government. Whether the effort will be worthwhile remains to be seen. According to Lord Stern, his report called for:

a. value added tax to be applied at the standard rate to a wider range of goods, including food and energy. The poorest could (Stern’s word) be compensated;

b. higher taxes on congestion, pollution and greenhouse gas emissions – again with a suggestion that the poorest losers could be compensated;

c. more tax on the financial sector; and

d. reform of property taxes with a tentative endorsement of Land Value Tax.

Some of these proposals may be contained in the forthcoming report from the Communist Party on taxation, but it’s hard to believe that the Communist Party would endorse higher direct taxes without much firmer protection for workers and their families than Stern appears to think necessary. The surprising fact, however, is what the report does not contain. Stern makes no mention of the need for a return to progressive taxation of income and capital.

The recent book by Thomas Piketty, Capital in the 21st Century, has deservedly attracted much attention for demonstrating that inequality of income and wealth is even worse than we had suspected. His data show that we are returning to levels of inequality not seen since the early 1900s. While his analysis lacks the clarity of Marx, his conclusion echoes that of Marx in predicting that inequality will continue to grow under capitalism. We are rapidly heading for, or have already become, a plutocracy in which the bottom half of the population subsist and the top 1% are super-rich. Piketty sees a return to progressive taxation of income and wealth as essential if capitalism is to survive. Communists would support this but would conclude that capitalism won’t survive. It won’t, however, fall by itself. This will take organisation and political work.