Wednesday, 27 April 2016

Kleptocracy UK?


The term "kleptocracy" was coined to define countries, often newly developing, in which the ruling elite creamed of the nation's wealth to the detriment of the welfare of ordinary people.  Something similar seems to be happening in Britain today, though the beneficiaries  are not exclusively the ruling elite as normally defined.

The demise of British Home Stores (BHS) is but the latest example.  This staple of the high street was bought by Philip Green (later "Sir" Philip and invited to be a minor member of Mr Cameron's government) for £200m, who put ownership of it in his non-dom wife's name (to avoid tax?), took at least around £500m out of it and then flogged it for £1 to Dominic Chappell, a former racing driver with no retail experience. Quite how much Mr Chappell has made out of it is not clear, though he appears to have moved £1.5million to his own advantage only days before BHS went "into administration" (ie bust) leaving a deficit in the pension fund of £571m.

Something similar happened earlier this century when what was left of  Britain's remaining motor company, British  Leyland, was bought of £10 by four businessmen calling themselves the Phoenix Corporation.  The company was relaunched as MG Rover and the government put in £16m to help it revive but to no avail. In 2005 it went bust, but not before the four businessmen had allegedly taken £42m out of it.  In this case the accounting firm Deloitte was fined ₤14 million for failing to recognise a conflict of interest. 

Who will be slapped on the wrist for the BHS deals?

This plundering of pension funds may not have been invented by the late newspaper publisher Robert Maxwell, but his raids on the pension fund of Mirror Group Newspapers caused the ploy to be well-publicised the early 1990s.  In this case Coopers &amp Lybrand Deloitte accountants “failed to report abuses” to pension fund trustees {Coopers & Lybrand Deloitte are now part of PricewaterhouseCoopers (PwC)}.


More recently was the part privatisation of our Royal Mail at a one third discount, but not before the lucky private buyers were relieved of the Royal Mail's  pension fund liabilities, maybe as much as £10bn, which were taken over by the public purse..

And perhaps it's unfair speculation, but one cannot help wondering if the government's determination to turn all remaining local authority schools into "academies" is not at least partly motivated by the opportunity  to grab ownership of their playing fields, ready for sale to the private sector.

These events do not strictly speaking make it legitimate to describe the UK as a kleptocracy, since private individuals rather than public or elected officials are involved, but it is clear that our laws make it too easy assets to be acquired, often with the connivance of politicians and with the indulgence of the major accounting firms, by ruthless individuals with the necessary  nous but without any sense of moral responsibility.

We do not have a fair society, we are not "all in this together," and our political system is singularly failing to put the matter right.

Thursday, 21 April 2016

Happy Birthday dear Que-een.


Ten years ago to the day I was living in France doing my "year abroad" as part of the language course I was following at Leeds University.  I was amazed that, on the French TV1  news at 7am the lead item was:  "Today the Queen of England is 80 years old."  Why, I teased my French colleagues, was this of any interest at all, never mind the lead item, in this staunchly Republican nation?  They replied that they were very interested in the British royal family, but pleased that we rather than they were paying for it.

So today  the Queen is 90.  Interestingly this was not the lead, but the third or fourth item on the Radio 4 news at 6am this morning.  The first was something about the funding of GP practices, the second about some alleged fudging  in the accounts of the Department of Defence in order to justify the claim that we spend 2% of GDP on it.

I'm well aware that, as a dedicated Liberal I should be a Republican and dismiss the concept of monarchy  and the flummery surrounding it as outdated superstition.  However, I take the view that, in the unlikely event of my doing something brave I'd rather receive my medal from one of the royal family rather than from some current or former politician such as Tony Blair,  Ed Miliband or even  Charles Kennedy - and if it were from Margaret Thatcher I should refuse it..

I would, however, like to see a scaled-down monarchy on the "bicycle" model, with fewer palaces (most could be opened to the public as museums), less invented ostentatious historicity  such as the State Opening of Parliament, and a less close relationship with the armed forces.  What a pity both William and Harry joined the army rather than VSO.

And I'd also like to see new words to the national anthem.  Simply praying that  the monarch will live a long time seems pretty banal, and a bit unfair.  But not "Jerusalem" - that's superstitious myth as well. Maybe some suitable words about freedom, liberty and enfranchisement to the Archers' theme tune Barwick Green, by the Yorkshire composer Arthur Wood.

Quoi qu'il en soit ( a useful multi-purpose subjunctive for gaining a brownie point in French essays),  Happy Birthday dear Que-een, Happy birthday to you."

Monday, 18 April 2016

Political dissembling


I have just received the campaign leaflet from my local Conservative councillor, who is seeking re-election to our council, currently Labour led.

The leaflet has a large headline, in blue, in which he claims to be "PROTECTING [us] FROM LABOUR CUTS"

In his personal message to us he again refers to "Labour's cuts."

Surely there cannot be a single elector able to read and write who is not aware that the cuts are imposed on local government by the Conservative national government.  Even some Conservative  councillors, (including the prime minister's mother) are protesting.

This distortion of the truth in our councillor's leaflet (and maybe many more) does credit neither to the candidate nor the Conservative Party.  More seriously, it is damaging to politics itself.

Most people reading it will realise it is a bit of sharp practice, shrug,  and vote, or more likely in local government elections, not vote, for their usual party anyway.  All this distorted claim has done is  further discredit  the democratic political process and further reduce our faith in our politicians.

Saturday, 9 April 2016

Panama Papers: no surprise there, then.


I've read the revelations about tax havens in the Panama Papers  with a sensee of deja vu rather than shock or horror.  That's because back in 2012  I attended a talk  given by John Christensen, Director of the Tax Justice Network, which, he said, was ten years old a that time (and I think is partly meant to be an antidote to the  so-called Taxpayers' Alliance.)

Christensen argued that some time in 1956 "the authorities" (I think the Bank of England) took the deliberate decision that, since the days of Empire were over, Britain should expand into tax havens in order to keep us, or at least those at the top of the tree,  in the manner to which we'd become accustomed.  Thus Jersey, Guernsey, Bermuda, the British Virgin Islands etc are all satellites of the City of London.  Justification for this can be found in a book called " Treasure Islands" by Nicholas Shaxson,  published, in 2010, which tells us all we need to know, and more.

Christensen also argued that the City of London has long been a law unto itself, and that British politicians are in thrall to it. This is nothing new.  Since 1571 an official called The Remembrancer has sat and still sits in the Commons near the Speaker to ensure that the City's interests are taken into account when laws are made.

The City is in many ways, and has been for centuries,  a state within a state, with its own Lord Mayor (hardly democratically elected,) and police force.

What the publicity around the publication of the Panama Papers highlights for us  is not so much the existence of tax havens and their use by persons of varying degrees of wickedness, but that Britain is a major player in the schemes. Their present topicality exposes the hypocrisy of David Cameron, not so much  because he has  benefited from a tax free fund of £30 000 - given a person of his wealth and background that is pretty small beer - but by his pretence in trying in public to curb their activities whilst at the same time writing to the EU to try and prevent it doing that  very thing, as this  letter, written in 2013, shows.

Britain is, officially, up to its neck in facilitating  tax evasion and avoidance, and we ought to be ashamed of ourselves.

Tuesday, 5 April 2016

Deficit? Which deficit?


By an amazingly successful piece of perception management our government has succeeded, since 2010, in convincing us that the government's internal deficit, or excess of current expenditure over current income, is way out of control and that our most important political objective must be to reduce it and, indeed, run a surplus of £10bn year by 2020.  This is to be achieved by "austerity" which in practice seems to mean  cuts in expenditure, particularly to the poor, and cuts in grants to local government.

"Britain must pay its way," says Gorge Osborne, Chancellor of  the Exchequer, again and again and again.
It sounds common sense (especially when compared, as Mrs Thatcher so often did, to household economics) but is in fact nonsense.

First we need to distinguish between the government's current deficit and its accumulated deficit, otherwise known as the national debt.

It is orthodoxy among macro-economists that wise governments  should not allow the national debt to exceed 60% of GDP.  Indeed that was the qualifying level of joining the Euro and Britain could have met it easily, since when the Euro was launched our national debt was about 40% of GDP, as indeed it remained, (under a Labour government, remember) until the world financial crisis of 2007/8.  Then it soared upwards to about 70% of GDP, through a combination of bailing our the banks and a fall in tax receipts as a result of the recession.

This level is higher than orthodoxy recommends, but not dangerously so. These were and are exceptional circumstances.  Indeed in even more serious exceptional circumstances,  the post 1945-50 period,  our national debt was nearly 250% of GDP, but somehow the then government managed to establish the NHS and do all sorts of other useful things..  (The Debt/GDP ratio  from 1945 to 2010 is clearly illustrated on an easy to read graph here)

Now to look at the current spending deficit, the one that George Osborne is so anxious to reduce.

It is well above the permitted maximum of 3% or GDP which orthodoxy recommends, and has been so since the crash.  However, a look at this graph here shows that until 2007 the Labour government's borrowing was well within this range, much less profligate than the previous Conservative government, and that from 1999 to 2003 the much pilloried Gordon Brown even ran a surplus (ie took in more  income than he spent.)

Now what has to be understood is that this national debt is largely "money we owe ourselves."  As rich individuals, savers, institutions such as pension funds, insurance companies and other financial institutions, we lend to the government and the interest the government pays us finances our pensions, income from "gilts," insurance policies, unit trusts and other investments.  Anyone who has some National Savings holds a part of the national debt.  When the "oh-so-anxious-to-be-seen-as-thrifty" George Osborne offered we pensioners a share in the debt at about four times the going rate of interest I was happy to buy a chunk of it.

Clearly the government's borrowing, currently about 5% of GDP, needs to come down to the 3% figure, and even below because that figure should be a long-run figure, less in the good times, but more in the bad times, such as now.

It may surprise some, but steady borrowing at a long run rate of 3% of GDP will actually, because of growth and inflation, reduce the Debt:/GDP ratio.   A permanent surplus, as envisaged by Osborne, is nonsense.

Now we come to the deficit that really matters, the Balance of Payments on Current Account. This is the difference between the value of the foreign currency we earn by exporting and what we spend by importing.  If there is a surplus then we are more than "paying our way" in the world. If there is a deficit than we are indeed "living beyond our means."

This "balance of payments" dominated the economic headlines from the post-war period up to the 1980s. It is widely believed that the publication  of some adverse figures, a flea-bite by today's standards,  just before the 1970 election  lost it for Harold Wilson., and Denis Healey's need to borrow from the IMF in 1976 for ever besmirched his reputation.  (As it happened all the borrowing was paid back before the next, 1979, election, but that didn't impinge on the public's perception, and Mrs Thatcher was elected..)

This balance of external payments account has been in permanent deficit since the present government and its predecessor took office in 2010, and the deficit is getting worse rather than better, as this article and its graph explain.  Last week' figures showed the largest deficit since records began in 1948.  For the whole of 2015 the deficit was 5.1% of GDP, and was running at a yawning 7% for the final quarter.

This, unlike the government's internal borrowing, is not money within the family, but money which someday has to be repaid to others  We are in increasing debt to the rest of the world.

Repaying this debt is the burden we are placing on future generations.  It can be done in several  ways. 

First we can continue to sell off the country's productive resources to foreigners.  This means that future generations will be deprived of the profits they make, which will go abroad rather than remain within the country. Or we can improve our productivity.  This means that future generations will have to work more efficiently in order for our products to become competitive abroad.  That's the hard way.  The easier and more likely way is to further devalue our currency.  One commentator, Brian Gould  recommends a devaluation of 20%.  That would mean  future generations will have to pay 20% more for their imports, which include the cost of foreign holidays, and work 20% harder or longer or more effectively to finance the same volume of imports.

Righting this Balance of Payments on Current Account (just to spell it out in full again so there's no mistake) is the true test of a government's economic competence and it is the measure on which the Cameron- Osborne partnership should be judged..  So far they are failing miserably.



Wednesday, 30 March 2016

Brexit hopes v some facts.


Already we are being bombarded by both "remainers" and "outers" in the Europe debate by claims which may or may not be valid. There's a good deal of exaggeration and wishful thinking on both sides. In this post I shall try and distinguish between what is fact and what is speculation oropinion..  The facts quoted are based on the Springfield and Telford article summarised here and available in full in Prospect Magazine (January 2016).




The cost.

Brixit hope: we shall save our net contribution, which is generally agreed to be about £10bn per year.  Brexit likes to quote this daily outpouring, which I make to be about £2.7m a day.  (Oops!  Actually £27m a day.  Thanks to "Anonymous" - comment below - for this correction)

Fact: true, but Brexit also assume that we shall be able to continue trading with What  Remains of the EU (WREU) on favourable terms.  If we do so we shall have to pay, for the most favourable terms (the Norway option) about 90% of what we pay now, on less favourable terms (the Swiss option: tariff free access for goods but not for services) about 50%.

Opinion:   Being able to have  our cake and eat it seems rahter optimistic 

Trade with WREU after Brexit.

Brexit hope: the UK is an important market and WREU will be anxious to continue trading with us .

Fact: true, but they are a far more important market to us (45+% of our exports) than we are to them (c6% of their exports.)

Opinion:  WREU are likely to drive a hard bargain.  There is also a political factor: WREU will be anxious not to  encourage other countries which might be tempted to leave, so the bargain could be even harder that economics suggest pour encourager (or rather d├ęcourager) les autres.

Immigration.

Brexit hope:  Britain will reclaim control of its borders and be able to let in only those people we like.

Facts: 1) Both Norway and Switzerland have to allow freedom of movement  for EU citizens in order to obtain their favourable access to the market.  For reasons explained above WREU are unlikely to allow us favourable access without similar free movement.  So to close our borders to WREU citizens (other than those here already) we should have to trade with them on World Trade Organisation (WTO) terms – that is, over the external tariff barrier.  Some estimates of the loss of trade under these circumstances rise to £3 000 per household per year.
2)  We already have theoretical complete control over our borders for people from the rest of the world.  The fact that the control is a bit leaky is not due to the EU, but to the parsimony of the British government in starving the Border Force of both person-power and funds.
3)  The refugee and asylum seeker crisis will continue whether or not we remain in the EU, and we are required to play our part in caring for refugees and asylum seekers, both by international treaty obligations and for reasons of common humanity.
4)  Economic migrants, simply seeking a better life, will continue to try to come to the UK, again whether we remain in or leave the EU.

Opinion: 1)  Brexit  would  limit the freedom of  British  citizens to work in WREU as well as vice versa.  This is particularly serious for academics, highly qualified professionals  and students, but also for apprentices, artisans (remember Auf Wiedersehen pet?) and humble bar staff (Tony Blair). 
2)  For refugees and asylum seekers clearly an international response is essential and the EU as it exists should play a part in negotiating an equitable response with other safe and peaceful havens. 
3)  For economic migrations we need to adopt a 21st Century approach.  With modern communications and relatively cheap international transport the days of closed borders are long past, even if they ever existed.  We need a controlled but fair approach which will require international co-operation.

Trade with the Rest of the World.

Brexit hope:  freed from the shackles of the EU we shall be able to expand our trading relations with the rest of the world, especially the growing markets of India, China and South America.

Fact:  Britain would not inherit the existing terms the EU’s bilateral trade deals with the rest of the world: all would have to be individually renegotiated.

Opinion:  this could take years, adding considerably to uncertainty.  And it is difficult to see how the UK alone, with a market size of only 66 millions, could negotiate better deals that the EU with over half a billion.

Red Tape.

Brexit hope:  freed from regulations imposed by the EU British industry and commerce will  flourish and expand.

Fact: there are very few facts available.  “Red tape” is a very vague term.  As the great judge Lord Bingham said of the European convention on Human Rights (nothing to do with the EU of course):  “Which of these rights would we wish to discard?”  In relation to red tape, some EU directives are mythical (bent bananas and cucumbers), others relate to workers' health and safety and conditions of employment, others to our environment, pollution, condition of our rivers and beaches etc.  A list of what Brexit would like to discard would help the debate.

Opinion: not mine, but that of the still existing and relevant Ed Miliband who in a speech on 22nd March warned Labour voters that if they fail to turn out and vote to keep Britain in the European Union on 23 June, the country will become a laboratory for a rightwing, free market experiment. (my emphasis)

So working class voters lured by the siren call of UKIP, be careful what you wish for.

Inward investment.

Brexit hope: since they say little about it, presumably they think it will be unaffected.

Fact: at present Britain is by far the EU’s largest recipient of foreign investment.

Opinion:  many foreign companies invest here, or place their headquarters here, because of the language. The Japanese are also apparently attracted by what they regard as cheap and plentiful golf courses. But surely without the main attraction of tariff free access to the EU market the UK will become less of a lure.   Banks, and all other companies for that matter, will have to obey EU regulations if they wish to continue to trade with WREU.  The “advantages” of banks remaining in the city of London in order to profit by lighter regulation should, after 2007/8, fill us with horror.

Sovereignty.

Brexit hope: freed from the Brussels bureaucracy we British will subject only to our own laws made by our own freely elected political representatives.

Facts: again there are rather a lot.
1) The influence of the EU affects nowhere near the “majority” of Britain’s laws, still less 75%, as is the more extreme Brexit claim.  The true figure is about 13%, on matters both great and small.
2)  Only 4 out of 121 laws passed by the last parliament were exclusively to implement EU law.
3)  The EU's procedures may not be a model of democracy, but the parliament is democratically elected and we British  are represented according to the size of our population.  When regulations are made by the Council of Ministers our minister is there and until recently he/she had to agree as unanimity was required.  Today in the areas where Qualified Majority Voting (QMV) is permitted he/she has the opportunity to argue the British case and win over the others.

Opinion: 1) Given that “our laws” are made by a lower house where the party with an over-al majority has the support of less than a quarter of the electorate and only 36% of those who voted, and the upper house is a collection of hereditary aristocrats and appointees of the present and previous prime ministers, it is difficult to argue that that our democracy is all that superior to that of the EU.

2) Just as John Donne so memorably pointed out that “no man is an island,” but we are all both enriched and constrained by others, so no country is free to act independently.  All countries are entangled by a mesh of international and bilateral treaties and agreements.  Many of us feel that the loss of sovereignty to unelected and profit motivated national and international industrial and commercial conglomerates is a more unacceptable  loss of sovereignty than the voluntary and formal “pooling of sovereignty” entered  into by arrangements with other countries, the EU, WTO and UN.


Monday, 28 March 2016

The Easter Monday psalm


The psalm (62) set for Easter Monday in Thomas Cranmer's 1559 Prayer Book  contains the words (1559 spelling*)

". . .their delyght is in lyes; they geue good woordes with their mouth, but cursse with their harte."



The original psalm was probably composed  over a thousand years ago and written in Hebrew, but it could easily apply to our present government, so skilled in saying one thing and doing another. viz:

  • They say they believe in devolution to local government, but take away provision of  education, one of local government's main functions;
  •  they said there would be "no top down re-organisation" of the NHS, which would be "safe in  their hands" but they re-organise it, apparently in preparation for further privatisation, mismanage it and starve it of funds;

  • The say they want to maintain and even enhance Britain's international prestige, but but attack, starve and dismember the one institution, the BBC, which genuinely is "the best in the world and the envy of the world;"

  • and of course, they say "we're all in his together" yet take away from the poor, including the disabled, and cut taxes for the rich.

They and we should take heed of the warning given later in the same psalm:

"O trust not in wrong and robbery, geue not youreselues unto vanitie; yf ryches encrease, sette not your harte upon them."

* In the Prayer Book of 1662 (still in use in some enlightened churches) the spelling had become;

(v4). . .their delight is in lies; they give good words with their mouth, but curse with their heart.

and

(v10) O trust not in wrong and robbery, give not yourselves unto vanity : if riches increase, set not your heart upon them.

The latest version (Common Worship, 2000) has :


(v4) . .lies are their chief delight; they bless with their mouth but curse with their heart.

and

(v10) Put no trust in oppression; in robbery take not empty pride; though wealth increase set not your heart upon it.