BREXIT and TAX

VAT was introduced in the UK in 1973 as a condition of joining the then European Economic Community, the predecessor of the EU. Changes to the VAT rules require the unanimous agreement of all 28 EU countries. Originally introduced in the UK at 10%, these rules now require a minimum standard rate of 15% with one or two reduced rates, no lower than 5%, for certain specified goods on a pre-approved list. Further reduction in the VAT rate, including the use of a zero rate, is only allowed under EU rules for goods that have been taxed at that lower rate continuously since 1991. It is, therefore, under continued EU membership, a highly inflexible tax, but one not without merits. By requiring firms to deduct VAT paid on purchases from suppliers, it avoids the double taxation problem that arose with its UK predecessor, Purchase Tax. It is, nevertheless, highly ‘regressive’, i.e. it falls disproportionately on those on low incomes and leaves capital essentially untaxed. It is therefore unsurprising that, following the financial crash in 2008, the government relied on VAT to bail out the banks under its austerity strategy. VAT now contributes 21% of all the tax raised, up from 18% in 2009, and the amount raised has increased by 60% since then[i]. VAT has also made no contribution to reducing carbon emissions to help halt global warming.

In its 2017 General Election manifesto, the Labour Party called for VAT to be restricted to its current range of goods and services. However, according to the Communist Party pamphlet on The EU and Brexit – questions and answers [ii] , even this very modest proposal would breach EU rules. The potential for a progressive tax policy after we leave the EU would, however, be considerable and VAT could play a useful part in this. As was argued in From Each According to Their Means[iii], free from the EU we could vary VAT rates to meet policy objectives and give workers rebates paid through National Insurance. VAT could thus be adapted to incorporate a carbon tax along the lines of the fee and dividend model proposed by James Hansen and endorsed by the Communist University on South London in its discussion paper on Global Warming.[iv].

The people have spoken in the EU Referendum. The only vote we need now is a General Election so that the opportunities it opens up, including the reform of VAT, can be seized.

 

Footnotes

[i] according to UHY Hacker Young, quoted in Economia, February 2019

[ii] Available from the Communist Party for £1 plus postage. http://www.communist-party.org.uk.

[iii] Available from the Communist Party for £2 plus postage https://www.communist-party.org.uk/shop/pamphlets/2025-from-each-according-to-their-means.

[iv] https://communistuniversity.wordpress.com

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Global Warming

The Croydon Branch of the Communist Party has enthusiastically supported the decision by Croydon TUC to invite Derek Wall to speak at a public meeting at 7.30 pm at Ruskin House on Thursday, 10 January. Derek Wall is a former Principal Speaker of the Green Party but, unlike many greens, he recognises that climate change  cannot be overcome without “challenging capitalism”.

Communists agree but would go further than merely “challenging” capitalism. We seek its replacement by socialism and recognise that the scientific evidence indicates that time is running out. Furthermore, as was argued in the recent discussion paper from the Communist University in South London (CUiSL), global warming is a class issue that can only be resolved by social revolution. The only viable remedy open to capitalism if mass extinction is to be avoided is the carbon tax model proposed by James Hansen in which the tax is set at a sufficiently high level to keep fossil fuels in the ground and the revenues are distributed to citizens, not corporations. As recent decisions on fracking, airport expansion and defending Saudi Arabia demonstrate, those who own capital will never tolerate this. Their strategy is

A programme of developing green energy and promoting energy saving while leaving fossil fuel consumption to market forces

Making workers pay for the resulting costs and unavoided environmental damage

Protecting the capitalist elite even if this means retiring them to protected, secure environments

It doesn’t, however, matter how many windmills we build. If there are profits to be made from oil and gas extraction, this will continue until CO2 levels reach a point where the oceans boil dry – or, more likely, a tipping point is reached and we tumble into mass extinction.

Socialism or death

The Paris Agreement (COP21) in December 2016 is intended to encourage fuel efficiency and develop non-fossil fuels so as to limit global warming to 1.50C above pre-industrial levels. Will it?

The USA has given notice that it will withdraw from COP21 by 2020. This will not help, but the strategy itself is flawed. As the discussion paper on Global Warming from the Communist University in South London (CUiSL), currently in the proof reading stage, argues, catastrophic climate change will only be avoided if fossil fuels are left in the ground. There is, however, no indication that this is happening. According to a forecast from the International Energy Agency, annual fossil fuel consumption is set to increase by the equivalent of 82 trillion barrels of oil by 2040[i]. This is 14% more than at present and is forecast despite a forecast increase in renewable and nuclear energy of 67% by 2040. These will still be contributing less than a quarter of our energy by 2040.

This failure to act to halt global warming should not surprise us. As the CUiSL discussion paper also argues, capitalism is simply incapable of addressing global warming. Its rationale is the accumulation of capital by generating profits. Due to market-based discounting, its time horizons are too near, leading it to under-estimate catastrophe in coming decades; there is simply too much profit to be made today and in future from fossil fuel extraction to leave it in the ground; and there is too much capital tied up in fossil fuel extraction to see it written off. Whether or not every apologist for capitalism recognises it, their mantra is “Pump, baby pump”. Ours should be borrowed from the Cubans: Socialismo o muerte (Socialism or death). Cubans use it to affirm their willingness to die to defend their system. We need to adopt it in recognition that our system, capitalism, will kill our grandchildren if we don’t begin to take steps now to replace it with socialism.

[i] https://www.eia.gov/todayinenergy/detail.php?id=26212

 

 

 

AFTER THE FALL

Writing in the London Review of Books earlier this month (Volume 40, number 13), John Lanchester reminds us how much the world has changed – and in some respects how little is different – ten years after the credit crunch and the beginning of the Great Recession.

Lanchester is one of our smarter contemporary thinkers. He’s the author of one of the best books on the credit crunch – Whoops! Why everyone owes everyone and no one can pay and the only novel i can recall about the resulting London property boom, Capital – you may have seen the television drama made from it even if you have not yet read the book. Although there is very little explicit Marxism in either book, Lanchester is one of the few contemporary writers who knows his Marx . This was apparent when he gave a talk to promote his book Capital to the London Review of Books – much of his talk was about the more famous book of this name.

Lanchester describes in the article the climate of intellectual over-confidence that preceded the crisis in 2007. He points out that most of the time, in conventional economic thinking, debt and credit don’t present a problem. Every credit is a debit, every debit is a credit. The problems arise when no one is sure who owns what. As he points out, on a global scale there are billions of pounds more credits than debits. Why? The rich have hidden their assets in off-shore tax havens to avoid paying tax.

Lanchester reminds us that, following the bail out of banks, no one has addressed the too big to fail problem. Furthermore, the risk of failing remains high. We have previously commented on how John Vickers fluffed the opportunity to ring fence banks’ more risky business from their socially useful activity of providing credit to businesses and consumers. Another problem Lanchester highlights is the failure to rein in shadow banking – all the things banks do but which are done by institutions that don’t have a formal banking licence.

Is another banking crisis on the way? Probably, but one thing is clear. Each new crisis in capitalism shows a different face, a different mix of problems. Into the mix sooner or later global warming is going to feature. This is why the Communist University in South London, CUiSL, is working on a discussion paper looking at how classical Marxist theories of crises and social revolution relate to this new threat. If you wish to see how this is progressing, and, even better, to join in, follow https://communistuniversity.wordpress.com/.

Criminal Irresponsibility

Interviewed on the Today Programme today, Transport Secretary Chris Grayling sought to defend the government’s decision to push through parliamentary approval for Heathrow expansion without waiting for the Climate Change Committee to report later this week on the UK’s progress on meeting CO2 emission targets. His reasoning was that

  • By 2050 aircraft would be much more efficient, thus generating much less CO2.
  • CO2 emissions by aircraft were an international responsibility and don’t affect UK targets.

Both arguments demonstrate the government’s criminal irresponsibility in this area. Basic physics demonstrates that, after more than one hundred years of development of aviation, the scope for further efficiency savings is vanishingly small. Don’t take my word for it – refer to the late Professor David MacKay’s book Sustainable Energy – without the hot air which he generously published as a free book which you can download here. The proof you need is in Part 111, section C

The argument that aviation’s CO2 emissions are none of the government’s business is simply risible.

Global warming and its consequences, including both the need and the potential for social revolution, is the subject of a discussion paper being researched and drafted by the Communist University in South London. Go to https://communistuniversity.wordpress.com/ to follow progress or, even better, to register your willingness to participate.

You Cannot Be Serious!

In December 2015 the government signed up to the UN Convention on Climate Change (COP 21), requiring net zero CO2 emissions by 2050 – a cut of 90 percent in the then prevailing level. If there is a new runway at Heathrow, aviation is projected to account for 50% of our carbon emissions by 2050. Does this make sense?

Global climate change is a class issue[i]. A world that ignores COP21 will be very different to the present one. The choices for the working class will not simply be between continued exploitation and social revolution. The risk of total subjugation and extinction could not then be ignored.

Aviation’s contribution to CO2 emission is also a class issue. As we pointed out on 29 October 2016, frequent flyers are predominately drawn from the wealthiest 10% of the population. 15% of the British population who fly three or more times a year account for 70% of all flights. More than half the UK population takes no flights at all.

The response of the Parliamentary Select Committee on Transport to Heathrow expansion which reported today is to call for tougher rules on night flights and a plea to keep costs to flyers down. They are silent on CO2 emission.

Have you noticed how the BBC invariably concludes reports of bad news for the government with an anodyne government rebuttal? Perhaps they will employ this one by a Department for Transport spokeswoman in response to the Select Committee’s report:

“Expansion [at Heathrow] will only proceed if it meets strict environmental obligations and offers a world-class package of compensation and mitigations for local communities.”

A more appropriate response to the Select Committee would be that of John McEnroe to a poor line decision:

“You cannot be serious”.

Footnote

[i] If you are interested in participating in research by the Communist University in South London into this, go to https://communistuniversity.wordpress.com/

Carillion and Marxist Economics

The collapse of Carillion is one of the largest insolvencies experienced in the UK and the biggest ever in the UK construction industry. It puts at risk the jobs of 19,000 employees and an unknown number of employees of its 30,000 subcontractors. In a classic example of the wisdom of hindsight, it will be investigated by the Financial Conduct Authority, who will ask how it happened, the Financial Reporting Council, who will enquire why the auditors, KPMG, failed to warn it would happen, and the Pension Regulator who will investigate how a pension deficit of at least £587m arose before it happened. What these watchdogs should be investigating, of course, is themselves –or rather, they should be investigated by someone else. Quis custodiet ipsos custodes who guards the guards? Parliament needs to face up to its responsibilities and the Parliamentary briefing paper here is a first step – but don’t hold your breath.

Labour’s call for a curtailment of subcontracting of public services and an end to PFI and privatisations is a welcome response to the collapse. It deserves support, but only addresses one aspect of the problem. The real cause of the collapse is capitalism itself, and events like this will continue to affect the lives of millions until the system is changed.

According to neo-classical economics – the only form of economics taught in our schools and universities  – the potential for businesses to fail is essential to ensure that they ‘innovate’. Furthermore, any government action to ameliorate the consequences of corporate failure will result in “moral hazard” – their jargon for the idea that, if businesses knew that governments would bail them out, they would take even bigger risks. The impact on workers is not considered relevant. We can all find other jobs following the collapse.

If economic theories were rejected, or at least modified, when they failed to explain the economy, neo-classical economics would not have survived the 2007 banking crisis. Where was the talk of stifling innovation and “moral hazard” then when the banks were bailed out? Neo-classical economics survived because capitalism survived, confirming that its real purpose is not to guide policy or explain the economy, it is to provide the intellectual basis and justification for capitalism. It remains intact today and still hugely influential amongst social democrats, greens and members of ‘the Labour Party.

Unlike neo-classical economics, Marxist economics has been, and continues to be, subject to rigorous testing and evaluation and this is how it is taught by, amongst others, the Communist University in South London (CUiSL). Teaching by “experts” is foregone and learning by debate and discussion is employed. Students are not seen as mere empty pots to be filled. Instead we learn from each other, always applying the principle “Question Everything”.

CUiSL holds its classes on the third Thursday of every month at 7.30 pm at Ruskin House, 23 Coombe Road, Croydon CR0 1BD. The next class is on 15 February when we will be discussing Marx and Darwin and how their theories continue to interact. There are no fees and no indoctrination. You enrol simply by turning up. If neo-classical economics were taught in this way, we might have avoided the Carillion debacle.

UNDERSTANDING THE WORLD – AND THEN CHANGING IT

The BBC is required under its new Charter to provide “impartial news and information to help people understand and engage with the world around them”. Its failure to do so renders BBC news coverage increasingly irrelevant. It’s now not only Question Time that leads so many of us immediately to reach for the off button. Much BBC news coverage is more likely to increase blood pressure than increase understanding and engagement.

The requirement to provide “impartial news and information to help people understand and engage with the world around them” has, however, prompted the BBC to propose in its Religion and Ethics Review published this week that its coverage of religious issues should be increased and “greater religious understanding” incorporated into its news reporting. Investigative reporting of the corrosive influence of religiously segregated schools in Northern Ireland and, increasingly, the UK mainland would assist this understanding, but that’s not quite what the authors of the Review had in mind.

One problem for the Review was that it couldn’t avoid recognising that an increasing number of people in the UK do not affiliate to any traditional religion. It was in response to this awkward fact that it concluded that the extended coverage it recommends would also have to “reflect beliefs which aren’t founded on religion”. What “beliefs unfounded on religion” the review had in mind was not explained, so one has to speculate. Belief in creationism, that blood transfusion is impermissible  and (I suspect) that the world is flat are all endorsed by followers of some traditional religion. The Review will have to look to belief in flying saucers for truly independent beliefs – or have I missed its endorsement somewhere?  The Review did, however, identify the  target audience for unaffiliated believers: those not engaged with traditional religion who are “spiritual and interested in the big issues affecting them”.

As communists we are most certainly interested in the “big issues”, and not only those that affect us personally. Furthermore, communist philosophy, i.e. Marxism, provides, in our view, the best understanding there has ever been of the world around us. So can we expect to benefit from this envisaged extended coverage by the BBC? Of course not! We will be excluded, ostensibly because we are not “spiritual”. This is correct in the sense that we don’t rely on spirits to understand the world. However, the real reason we will be excluded is because, as Marx wrote, we not only seek to understand the world, we seek to change it. That is the reason the BBC will exclude us; but while it remains the mouthpiece of the ruling class, we would not have it any other way.

The BBC can do what it wants, but if you want to learn about Marxism and how it can help us to understand and change the world, you can join the Communist University of South London (CUiSL) which runs classes at 7.30 pm on the third Thursday of each month at Ruskin House, 23 Coombe Road, Croydon CR2 0BN. In the Spring Term we will be studying eco-socialism. For more details e-mail cuisl@communist-party.org.uk.

 

Open Universities?

The CUiSL class on 20 July on What comes after capitalism? was well attended and got the new term off to a lively start. The next class will be on 21 September, 7 pm at Ruskin House. The topic will then be Universal Basic Income – do we want it?

CUiSL is an open, free university which treats its students as a resource, not empty vessels to be filled by experts. It is therefore very different from what we have come to expect from commoditised university education. These differences have been highlighted by two items covered in news reports over the summer. The first is the report that I have personally had confirmed by the supposedly Open University: that it is refusing to accept students from Cuba on the grounds that the OU, a British institution funded by British taxpayers, lacks a license from the US Treasury Department’s Office for Foreign Assets Control to do so. Such supine acceptance of US extraterritorial jurisdiction is breath-taking and says much about the independence of thought we can now expect from that once noble institution. The second event is the ongoing debate on student fees and who should pay them. Writing in City AM today (23 August), Paul Omerod, Visiting Professor at the UCL Centre for Decision-Making Uncertainty, acknowledges that universities have no incentive to reduce their fees as to do so would signal that their degrees were less valuable than others. His half-baked solution is to offer discounts to students with higher grades. How this fits with the ethos that universities are businesses left free to charge “what the market will bear” defies logic. A better solution would be, as we have argued below, for universities to reassume their responsibilities for providing the nation with further education and research and for the state to pay fees and subsistance grants financed by progressive taxation, including that on graduate incomes. One useful saving that could, however, be made would be for future free university education to be confined to those educated in state schools. For as long as we tolerate private education, why should those wealthy enough to pay for private education (i.e. ‘public’ schools) for their kids be allowed once more to access state funded further education for free?

Student fees: putting the genie back in the bottle

The admission by Lord Adonis, the Blairite minister responsible for introducing them, that mushrooming tuition fees and student loans to pay for them were a terrible mistake is a long overdue admission. The Labour Manifesto contained a commitment to abolish student fees from this autumn. There was, however, no commitment to write off existing loans, although Jeremy Corbyn has publicly acknowledged here the problem and said he would deal with it if elected.

Putting the genie back in the bottle will not be easy. As restrictions on fees were progressively relaxed, the universities came to see themselves more and more as businesses competing with foreign universities, not public services. As businesses they felt entitled to pay their top executive whatever ‘the market’ would allow. Vice Chancellors now trouser £275,000 per annum on average and in some cases over £400,000. There will be tremendous resistance to returning universities to institutions whose purpose is to educate and support research, not businesses that sell degrees internationally and earn money from royalties.

Universities are not alone in being captured by ruling class interests and ignoring their social purpose. It will take more than the single term of a progressive, social democratic government to rid all our public services – education, health, social and infrastructural – of the corrupting influence of capital. Capitalism itself needs to be dismantled, but this cannot be achieved without a clear understanding of capitalism’s current trajectory, how we can influence it and (arguably) a clearer idea about what is to replace it.  What Comes After Capitalism will be the first subject we tackle in the new series of classes at the Communist University in South London (CUiSL) on 20 July. See link  for details.