Budget 2014 Takes Doublespeak to New Depths

Casual readers of the budget might wonder whether it had been written by chancellor George Osborne or George Orwell. A garden city built in a quarry and growth built on a reinflated housing bubble are hardly reassuring evidence of the economy based on "more economic security and economic resilience" that Osborne claims to be his objective.

Most shockingly, the freezing of the carbon tax and the reduction in the rate of air passenger duty for long-haul flights makes it plain that the chancellor has no understanding of what resilience means, and how our failure to tackle climate change threatens it.

Resilience has followed hard on the heels of that much-abused concept 'sustainability' in helping to define the key characteristics of a sustainable society. Unlike the financial system, which cracked when it came under pressure, a resilient system would be able to bounce back even in the face of unexpected challenges; unlike the railway line at Dawlish, resilient infrastructure is based on built-in redundancy that means there is always an alternative when a system comes under pressure from an unpredictable event. It is exactly this sort of resilience that has been designed out of our economy and society by years of lean management and just-in-time production systems. From computer systems to food supply chains, the globalised market-place has left us less resilient than we have ever been.

So what would a budget for resilience and security actually look like? Let's start with finance. A resilient model for banking would insist on the breaking up of the consolidated megabanks so that banks were no longer 'too big to fail', and no one bank would be large enough to bring down the whole system. Mr Osborne could pop across to the Department for Business, Innovation & Skills (BIS) and have a word with his colleague Vince Cable who operates RBS on behalf of its owners, us, the citizens of the UK. He might subtly suggest that he break it up into a system of local community banks, which could be required to actually act like banks, building supportive relationships with the local businesses that a resilient economy requires, rather than acting like casinos.

While on the issue of finance, we should also tell George that his desperate attempt to reinflate the housing bubble through extending the life of Help to Buy is storing up exactly the sort of catastrophic financial collapse that put us in this economic mess. It also does nothing for those who are most in need of reasonably priced housing, since it will only support mortgages they cannot afford and encourage house prices to rise even further beyond their reach.

The most fundamental cause of social insecurity in modern Britain is the failure of the housing market to provide affordable, comfortable homes to those who need them. Here the chancellor could act swiftly to bring in rent controls which would simultaneously reduce the massive amount of public money being wasted on housing benefit. He could also raise the borrowing limits on local authorities to enable them to build houses for those on their lengthy and growing waiting lists.

The greatest source of insecurity we all face is the unpredictable consequences of climate change, and it is here that Osborne's words ring most hollow. Here we see clearly the government's back-tracking on this most vital issue, building on the earlier folly of reducing green levies on energy companies, now further decreasing incentives to business to reduce their carbon emissions by freezing the carbon price floor. He has learned nothing about resilience from the winter's devastating storms and floods, but the urgent need for a consistent policy on climate change is now more evident than ever.

Real energy security comes from demand reduction as a result of improved energy installation in homes, combined with local generation from renewable energy sources. This government's mixed messages on renewable tariffs and taxes has undermined several proposed investments in wind generation, destroying jobs in my own home region of the South West. A higher rate of feed-in tariff limited to small-scale and community-owned electricity generation projects would be the best policy in the budget to ensure real energy security.

With a budget that achieves the exact opposite of the objectives the chancellor has set himself we are all wondering what will come out of the Ministry of Truth next. A Localism Act that centralises planning perhaps; or a Big Society that cuts benefits for the poor and vulnerable?

Written by  Molly Scott Cato Professor of Green Economics at Roehampton University and Green candidate in the European Elections

First published at The Huffington Post

Follow Molly Scott Cato on Twitter: www.twitter.com/MollyScottCato

Using the Financial Crisis To Force Down Lower and Middle Wages

We have featured on this blog the way the Coalition government is blaming the recession on welfare benefits recipients, and using the current economic crisis to make cuts in welfare payments, but they have also taken the opportunity to cut wages, for the lower and middle section also. A recent report by the TUC highlights this policy.

The report finds that almost 80% of the jobs created in the UK since June 2010 have been in low paid industries, i.e. paying less than £7.95 per hour. It goes onto say:

Retail has made the biggest contribution to rising employment levels, with the number of employee jobs in this sector increasing by 234,000. The average wage in retail is just £7.35 an hour. Residential care, where the average wage is £7.78 per hour, makes the second biggest contribution of 155,000 jobs.

Just over one in five (23 per cent) net new employee jobs created since June 2010 has been in the highly paid computer programming, consultancy and related services industry, where the average hourly wage is £18.40. The workforce in this sector has grown by 131,000.

In middle-paid industries, which account for nearly three-quarters of the UK workforce and where the average wage is between £7.95 and £17.40 per hour, there has been no net job creation since June 2010. While some industries, such as legal and accounting have created jobs (135,000), others such as public administration (-160,000) and social work (-68,000) have shed them.

High-paid industries were hardly affected by the recession, with the number of jobs falling by just 0.9 per cent. There are now a record 900,000 employee jobs in high-paid sectors.

On top of this, public sector workers, who are by and large low to middle earners, have had pay freezes and pension contribution increases over the last five years, with the increasing use of short term contract and agency staff at even lower wages. Private sector workers have also had pay freezes and reduced hours, as their employers piled huge amounts of cash reserves (over £300 billion at the last count, not including the banks).

Then as The Guardian reports we have one million workers employed on zero hours contracts across the country, meaning that they are paid when required like the casual hiring of dock workers in New York in the 1950’s, immortalised by Marlon Brando in the film On the Waterfront. No sick pay, no holidays, no pay when not required.

It should come as no surprise that most low paid workers are women, and are disproportionately affected by the forcing down of these wage rates, as this Coalition government is deeply misogynistic and so it is at best ambivalent to this outcome.

Wage rates have been falling though since 2003, under the previous Labour government, though not so sharply, but the gap then was taken up by increasing property prices, where people borrowed against their rising house value to fuel the economy in buying consumer goods. It appears that the current government is attempting to revive this approach with ‘help to buy’ guarantees on home loans, seemingly learning nothing from the debt ridden causes of the 2008 and continuing recession.

All of this while boardroom pay and bonuses rocket.

The future employment prospects for most UK workers will be of low pay, few benefits and generally insecure.  Further legal curbs on the trade unions, and a ‘loosening’ of employment law, with higher fees for employment tribunals thrown in.

A low waged economy where what can be outsourced to China or India cheaper will be and what by some necessity needs to be based in the UK, will be low paid and insecure for most workers, if they can find work at all.

A future where in the first generation since World War 2, the children will be poorer than their parents, rolling back all the social progress in living standards that was achieved in the last century.

Let’s not go down meekly; we can at least put up a fight.       

Public Sector Unions set to Strike on 30th November

On Wednesday 30th November, probably millions of public sector workers will take industrial action in opposition to the ConDem government’s attack on their pensions. From nurses to teachers, from local authority staff to civil servants, this promises to be a dramatic statement of rejection of the government’s plans to make public servants work longer, pay more into their pensions, and receive less when they retire.

The unions taking part, with the ballot results are as follows:

AEP 64% for strike action
ASPECT 75.1% for strike action
ATL (30 June ballot mandate still valid)
CSP 86% England & Wales for strike action (89.1% Scotland)
FDA 81% for strike action
GMB 83.7% for strike action
NAHT 75.8% for strike action
NASUWT 82% for strike action
NUT (30 June ballot mandate still valid)
PCS (30 June ballot mandate still valid)
Prospect 75% for strike action
SCP 85.3% for strike action
SOR 86% for strike action
UCATT 83% for strike action
UCU (30 June ballot mandate still valid)
Unison 82% for strike action
Unite 75% for strike action

The government spin has been all about ‘gold plated’ public sector pensions, but in reality, the average public sector pension (median, i.e. the one that 50% will receive) is a paltry £5,600 per year. Not even copper plated, let alone gold plated. The government is trying to divide and rule, by pointing to the private sector, where most workers are not in inflation linked pensions, as the model for the public sector. It has long been an attraction of public sector employment that although the pay is lower than in the private sector, at least the pensions were reliable. Indeed two in three private sector workers have no workplace pension at all. These workers without a pension should not direct their anger at public sector workers, but should be livid at the extraordinary costs of providing pensions' tax relief, with two-thirds of the £30 billion bill going to higher rate taxpayers.

This latest assault on public sector pensions comes after the government reduced the rate at which pension’s rise, by moving from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI), which excludes housing costs, and generally runs at about 1% less than RPI. Whilst at the same, the government refuses to do anything about pay, bonuses and the pension arrangements of those in boardrooms of private corporations, even the banks, some which are publically owned, and most of who received bail outs from the public purse.

But we are well used to this kind of hypocrisy from the government, where everything possible must be done to encourage the so called ‘wealth creators’, who are really responsible for creating chaos and poverty in our economy, but are revered rather like rock stars. I’ve never understood why rich people need to be paid more to encourage them to work harder, but poorer people need to be paid less.

The Green party supports public sector workers in this fight for fair treatment and our two London Assembly Members, Jenny Jones and Darren Johnston will not be going to work on 30th November, as a statement of solidarity with those taking action. There is a march in London, starting at 12.00 noon from Lincoln Inns Field to a rally at Victoria Embankment, plus a protest at the GLA building at 12 noon also. There are hundreds of events planned all over the country on the day, check here for details.

Locally, there will be a rally in support of the industrial action at the College Of North East London (CONEL) at 10am on the day and Haringey Alliance for Public Services (HAPS) is intending to visit picket lines around the borough, to give support to striking workers. Please join them as it is good for morale when the public shows support for their cause. There is also a protest at Haringey Civic Centre, beginning 12.00 noon.

The Great Pensions Robbery

The Conservative/Lib Dem coalition government have announced that all public sector pensions will in the future, be increased annually by the percentage figure as measured by the Consumer Prices Index (CPI), rather than has been the case for nearly 100 years, by the Retail Prices Index (RPI). It also seems that private sector pensions which have previously risen in line with RPI, will be allowed to move to the CPI measure.

The RPI and CPI have different ways of calculating the rate of inflation in the UK economy. They calculate inflation by using a ‘basket’ of products and services and tracking the price changes in these commodities, but the CPI uses a larger sample than the RPI . Crucially though, the CPI excludes housing costs, which by anyone’s definition is surely an essential indicator of the cost of living? Also, the CPI excludes rises in Council Tax, which is something that we all have to pay.

You can see from the diagram above, that for the past 21 years the CPI has invariably been running below the RPI rate, on average by about 2%, except in the early 1990’s and the current recession. The periods where CPI has run ahead of the RPI can be largely explained by collapsing house prices which has occurred in the last two recessions. When the economy has been growing, CPI has always been below RPI, and instead the talk was of a separate ‘house price inflation’, as though that was somehow a special case, when in truth it was what was growing the economy in the first place.

What all this represents, is a proposal to cut the amount of pension increase for everyone either paying into these pension schemes, when they come to retire, and for those drawing these pensions now.

The vast majority of people in these schemes are on modest incomes, which will over time become even more modest. Welcome to another chapter in the coalition government’s determination to make those least to blame and least able to pay, foot the bill for the present economic crisis.

There is though hope, that this proposal can be stopped in its tracks. The trade unions will be against it, as will pensioners groups, and there must be millions of people in pension schemes like these, both in public and private sector employment, as well as those who are now retired. We should remember, that at the time of the pension agreements being drawn up and agreed upon, it was a central point, that RPI would be used to calculate inflationary increases in the pensions. This was a contract made in good faith by members of pension schemes, and the present government wants to break that contract, which is grossly unfair. If people had known that they would be ripped off like this at the time, they might have made different financial choices.

A huge amount of people could be mobilised against the change to CPI, probably larger than that gathered for the successful challenge to the Poll Tax in the 1990’s which spelled the end for Margaret Thatcher as Prime Minister. Could this attack on pensions see the back of David Cameron as Prime Minister? It certainly has the potential.