contribution by Matthew Butcher

Yesterday’s report by the High Pay Commission revealed that the top 0.1% of UK earners will see their pay rise from 5% to an estimated 14% of national income by 2030.

Worse, the ratio between executive pay and the national median income is set to rise to 214:1 by 2020. But not only do Britain’s biggest companies employ some of the richest people in the country but their workforce includes some of the poorest too.

The working poor, many of whom work for FTSE 100 companies, make up an unsettling proportion of the workforce in this country. Over 3.5 million people over 22 survive on less than £7 an hour, with the proportion amongst young workers being even higher. And inflation, currently at 4% is expected to rise.

Growing up in families with low paid parents has effects on children for the rest of their lives. Of the 2.8 million children in the UK living in poverty in 2008/9, a shocking 59% of them have one or both parents in work.

Children who grow up in poor households are, according to the Marmot Review, more likely to be affected by obesity, heart disease and mental health problems. Parents on low pay also end up having less time to spend with their kids.

A cleaner at Marks and Spencers, working for a contractor, described her shifts: “I work 7 days a week and like many other cleaners I have to get up at 3 o’clock in the morning to get to work from Leytonstone where I live. We can’t afford the tube and I spend 2 hours one way to get to work. My morning shift is only 4 hours.”

FairPensions and its union partners are calling on Britain’s biggest listed companies to take action on low pay by implementing a Living Wage for all of their on site staff.

A Living Wage is the minimum hourly wage required for housing, food and other basic needs for an individual and their family. Within London it is set each year by the Mayor’s office and is currently £8.30. A single rate for the rest of the country is currently £7.20 per hour. The National Minimum Wage is £5.93 per hour (rising to £6.08 in October).

But the public can now help us take action by demanding that Britain’s top earning executives pay their staff a Living Wage.

FairPensions’ first Living Wage action is pressuring finance companies to become Living Wage employers. Anyone who has a financial product with a FTSE 100 company can take action – and that probably includes you.

Take action at www.activateyourmoney.org

A rotten sort of recovery

February 17, 2011 dnmufcLeave a comment

The coalition’s ‘flexible’ economic model relies on cripplingly low pay and rising job insecurity

John Harris | Comment is free | The Guardian.

A choice passage from the coalition agreement, to which not nearly enough attention has been paid: “We will review employment and workplace laws, for employers and employees, to ensure they maximise flexibility for both parties while protecting fairness and providing the competitive environment required for enterprise to thrive.” The warmer words in that sentence now seem flimsy, to say the least. If you want a more precise flavour of where things are headed, consider one of David Cameron’s recent prescriptions for economic success, lacking any such cuddliness, and echoed in an answer at yesterday’s prime minister’s questions: the righteous path, he reckons, is all about “reducing regulation and maintaining a flexible and dynamic labour market”.

What that means is obvious enough: for millions, the same deepening insecurity they experienced under the last government, and then some.

Vince Cable’s business department has plans to make access to employment tribunals more difficult, cheered on by such friends of the worker as Boris Johnson, lately heard decrying their “barminess”. The CBI howls, as ever, about other red tape. Meanwhile the pushing of more and more work from the public to private sector shreds plenty of protection, the growth of temporary and agency work continues apace, and rising unemployment pushes wages and conditions further downward.

The essential reality of our times is captured in a socio-economic term coined by the academic Guy Standing, and used for the title of his imminent new book, The Precariat: The New Dangerous Class. No wonder this week’s inflation figures showed prices rising twice as fast as average pay.

If the near-silent, gap-toothed street that leads from the station to the centre of town is anything to go by, Swansea is as threadbare an embodiment of hard times as you could imagine. Heavily reliant on the public sector, it faces a three-way knot of problems: the axe falling on government jobs, poor prospects for local business and the key consequence of the “flexibility” gospel – that any new jobs will be uncertain and insecure.

And the average local hourly rate? “Just above the minimum wage – not great at all,” one man tells me. “I’m sure there are jobs that pay higher,” offers a NHS staffer on £7 an hour, “but I can’t seem to find any.” A young woman who’s an office receptionist on around £6 an hour tells me her outgoings have lately increased by £100 a month, and her weekly budget leaves only £40 for anything more than travel to work, rent and bills – including food. To everyone I speak to, the combination of stagnating pay and rising cost of living seems cruel and increasingly unmanageable.

At the council refuse depot I meet Ian Alexander and his two colleagues. As litter pickers they get £6.30 an hour, with a £54 a week bonus. The latter may soon go, thanks to the council’s belated embrace of equal pay: as in many places, it looks like resulting in a levelling down for men rather than appreciable improvements for women. Meanwhile the workforce is made anxious by ever-increasing numbers of agency workers, employed on inferior terms, who come and go at speed. In rubbish collection, one man tells me, they may number 70% of employees. Among those on fixed contracts the impression is of privatisation by stealth. “There’s so much uncertainty – I dread to think where we’re going to be in three years’ time,” says Alexander, a former steelworker.

And this picture is not restricted to unskilled work, or the more blighted parts of the country. When we appealed for information and testimony about low pay, worsening conditions and ever-tightening budgets from readers of Comment is free, responses came back by the score, seemingly covering all corners of Britain, both public and private sectors, and most parts of the economy.

“I’ve not received a pay rise in nearly three years,” wrote one poster. “I earn a little above the minimum wage. On this I have to support myself and my chronically ill partner.” Another said: “We had our salaries reduced by 10% 18 months ago after two rounds of redundancies at my firm. I am lucky to have very little responsibility outside of looking after myself and my partner … a child or even a larger house would completely cripple us. Following rent, tax, bills and basic living costs, I am left with practically nothing to actually live life on. I have to claim housing benefit just to afford living in my one-bedroom flat.”

A set of telling numbers from another contributor, who has children, ran as follows: “My partner is facing a 5% pay cut, and for less money they are going to ask him to work an extra 15 hours a week so they can make redundancies. He already works 45, so he has to choose between 10 hours a day, six days a week, or eight-ish hour days, seven days a week.” And what about this: “My son is working fulltime as a painter on the Olympics site. He is paid £42 per day plus £5 daily “bonus” if he is on time. He loses the whole week’s bonus (£25) if he is late on one day.

“He has not received any pay rise since completing his apprenticeship, though he has repeatedly asked about his situation. He is expected to buy all his own painting equipment.

“To arrive at his place of work by 8am he leaves home every day at 6.30am. He has to take three different forms of transport to get to work, and I have to subsidise his living costs because he is so low-paid. I hardly need point out that this company is non-unionised.”

Such are the wonders of all that dynamism and flexibility, and an economic model with a rotten promise at its core. Work for less, with even fewer protections than before, but fear not – because that way lies recovery, and prosperity. For whom, exactly?

To watch the third film, and contribute ideas, visit: guardian.co.uk/anywherebutwestminster, or email anywherebutwestminster@gmail.com

How a bank like Barclays makes us pay

February 15, 2011February 17, 2011 dnmufcLeave a comment

Comment is free | guardian.co.uk.| Tony Greenham

Barclays avoided nationalisation during the crisis, but like other banks it profits from hidden subsidies

When Barclays turned to Qatar, Abu Dhabi and China in 2008 to shore up its balance sheet, rather than the UK government, did it have half a mind on future results announcements and bonus rounds such as the one we’ve just had? It would have been easy to guess that generous bonuses at taxpayer-owned banks would be controversial. Perhaps chief executive Bob Diamond thought it had avoided this potential bear trap by looking east for new capital instead of to Westminster, and that is why he was unwilling, under prompting from the Treasury select committee, to offer his thanks to UK taxpayers.

He did concede that Barclays benefited from the system as a whole being bailed out with taxpayer support. But is there more to the story than this? What if Barclays’ profits are propped up in other ways by taxpayers and swollen by lack of real competition?

Banks make too much money. Of course banks need earn a reasonable return, but we at Nef (the New Economics Foundation) have set out several ways in which banks profit excessively at the expense of taxpayers, customers, investors and corporate clients. Not only is this bad news for the broader economy, but it also calls into question whether the extraordinarily high levels of “performance-related” pay in the banking industry are quite so performance related.

The free-market theory is that excess profits are competed away, yet since the great neoliberal experiment of laissez-faire banking began in the 1970s,banks’ profitability has more than doubled and has outstripped non-financial sectors. Why?

To start with, being “too big to fail” is profitable. Based on calculations by Andrew Haldane, the executive director of financial stability at the Bank of England, we estimate the value of this subsidy to UK banks to be around £30bn a year. The subsidy arises because banks, effectively guaranteed by the government, are able to access much cheaper wholesale funds than would otherwise be the case.

But this is far from the end of the matter. We also identified windfall profits to banks from the additional trading in gilts required by the Bank of England’s programme of quantitative easing. This is ironic to say the least, as QE was brought in to revive the economy after a banking crash.

Customers are proving a good source of profits, too. The interest spread – the difference between the interest rate that banks pay for funds and how much they charge us – has widened dramatically since 2008. Although arguably too narrow before the crash, this suggests that the burden of rebuilding banks’ balance sheets is falling disproportionately on customers instead of shareholders, executives and bondholders.

Institutional investors and corporate customers are also getting a raw deal from investment banks. In the case of rights issues we identify a near trebling of investment banking fees since 2000, having been at a steady level for decades. This has reaped an additional £1bn in fees just through a rise in commission rates.

The British Bankers’ Association likes to assert that banks create wealth. This is stretching the meaning of the phrase to breaking point. Banks are intermediaries between wealth creators and investors, and the higher their cut the bigger the drag on wealth creation in the real economy. This is far from underplaying the importance of banks; theirs is a vital role for economic health. But as with all other vital support services (including public services), we need them to offer high levels of customer service at the lowest possible cost, not the other way round. If these hidden subsidies and causes of excess profits were eliminated, not only might we find the UK more prosperous, but we would also be likely to find that the source of the lavish and contentious bonus culture suddenly dries up. Not so much tough on bonuses, as tough on the causes of bonuses.

Almost everyone condemns naked short selling. But not the British Treasury

February 15, 2011February 15, 2011 dnmufcLeave a comment

George Monbiot | Comment is free | The Guardian.

The refusal to back a ban on naked short selling, despite the risk to the economy, exposes the cynicism of the Conservatives

George Osborne listens during a session on a new global trade deal at the World Economic Forum in Davos, Switzerland in January. Photograph: Virginia Mayo/AP

You think you’ve seen the worst of it; you haven’t. Last week I wrote about how the British government, while imposing extra taxes and devastating cuts on ordinary mortals, has quietly engineered a new tax exemption for the banks and corporations, which also encourages these businesses to shift some of their operations overseas. I thought that was as bad as it got. I was wrong.

On the day I wrote that column the Conservatives were doing something just as repulsive, and far more dangerous. On Wednesday George Osborne told the House of Commons “we will make sure we learn every lesson that needs to be learned – so that this [the financial crisis] never happens again”. Two days before, his government demonstrated that nothing has been learned at all. Let me first explain the context.

Most people obtain shares or bonds or other securities in the hope that their value will rise. Short sellers hope their price will fall. They might borrow, for instance, 10,000 shares and sell them for £1 a piece. Then they pray that the value collapses. If they’re in luck, and the share price halves, for instance, they can buy the same number as they sold for 50p each. They return the shares to the broker who lent them, and pocket £5,000 (minus fees).

It’s a controversial practice. Some people say that it helps markets find the right price for their wares. Others maintain that it exacerbates risk, as the sellers are using assets they don’t possess to take on potentially unlimited liabilities (while share prices can’t fall below zero, there is no fixed limit to their increase in value). Short selling also creates an incentive to try to drive down the price of securities, amplifying or even creating economic crises. An example was the Asian financial crisis of 1997, triggered by a co-ordinated attack by short sellers on the Thai baht. It destituted tens of millions.

You don’t like the idea? Then take a look at naked short selling. In this case sellers not only don’t own the assets they’re selling, they haven’t even borrowed them. They sell a promise of shares, hope the price falls, then try to obtain the shares they’ve sold. In the surreal traditions of modern finance they’re effectively selling securities that don’t yet exist (perhaps they should be called insecurities). Naked shorting may grant short sellers golden opportunities to wreck companies and economies, by flooding the market with low-cost ghosts.

Almost everyone condemns naked (also known as uncovered) short selling and wants it banned because of the huge risks it presents to the economy. It has been prohibited in the US, Japan, Hong Kong, Australia and Brazil: none of which are renowned for draconian regulation. The European parliament has drafted a directive to bring it to an end within the EU. I did say almost everyone, didn’t I? There’s one group frantically seeking to protect naked shorting and strangle the directive: the British Treasury, and Conservative MEPs acting on its instructions.

At a committee meeting in the European parliament last week, Tory MEPSyed Kamall inveighed against the ban. When I asked him how he justified this position, he claimed that ending naked short selling “will reduce liquidity, meaning that borrowers will insist on higher returns, pushing up the cost of borrowing. This will lead to governments spending more money on servicing debt and less on state-provided public services.” This, as far as I can determine, is rubbish: perhaps the polar opposite of the truth.

Kamall’s office told me his position “reflects that within the government”. The Treasury confirmed this: “The UK does not support permanent restrictions on the uncovered short sales of either equities or sovereign debt … we believe it will do much to impair liquidity.” Tory MEPs will be instructed by the whips to oppose the ban when they vote on 28 February. The UK government will then oppose it in the European council.

So here we have a government which claims to have learned the lessons of the financial crisis, opposing an obvious precaution against insanely risky speculation. How is this possible, when it knows what lax regulation does?

To understand its position, you must first understand that the government is not managing the economy for the people of this nation. It is managing it for a tiny transnational elite, a kind of global gated community. To the people inside the gates, who fund the Conservative party, who own our politics, the media and the banks, the rest of us are an inconvenience, to be bribed, threatened or fooled.

The politicians who get to the top in these circumstances don’t just present no threat to the gated community, they actively do its bidding. That is why Tony Blair succeeded where his Labour predecessors failed. Talent, hard work and intelligence all help, but only if they are harnessed to the interests of economic power.

Governments don’t ask themselves “what can we do that is good for the people?”. They ask themselves “how do we persuade people that what we want to do is good for them?”. The task of both politicians and the corporate press is to convince us that what is good for billionaires is good for everyone but billionaires. This was the thrust of Osborne’s statement to the Commons last week.

The social isolation of those now in power makes the task easier: they were born into the gated (or moated) economy, and they share its views. Theirs is a different challenge: to disguise their indifference towards the other 99%. They must kiss the babies of the electorate, listen to its complaints, drink its tea – and carry a handkerchief in which to spit. Their interests are not our interests. Their interests are the opposite of ours. If a measure enhances the wealth of the people inside the gates – even if only fleetingly – the government will back it, though it might beggar everyone else. The Treasury’s support of naked short selling is the homage it pays to naked greed.

An economic war is being fought here. Wealth is being transferred from the poor and middle to the rich at stupefying speed and on a stupefying scale. The financial sector seeks to wring every drop from the productive economy, heedless of the eventual impacts. The government is there to help.

So what do we do? Look to Cairo. I suspect that UK Uncut – the most coherent response so far to the economic transfer – could be the beginning of something very big: a mass citizens’ revolt against institutional theft. The point is not to overthrow the government: that must be done electorally in the UK. The point is to make it impossible to keep fleecing the nation to serve the elite. We go unarmed into this battle, but it’s the government that’s naked.

• A fully referenced version of this article can be found on George Monbiot’s website

To us, it’s an obscure shift of tax law. To the City, it’s the heist of the century

February 10, 2011February 10, 2011 dnmufcLeave a comment

To us, it’s an obscure shift of tax law. To the City, it’s the heist of the century | George Monbiot | Comment is free | The Guardian.

n David Cameron we have a leader whose job is to quietly legitimise a semi-criminal, money-laundering economy

- George Monbiot
- guardian.co.uk, Monday 7 February 2011 22.01 GMT
- Article history

‘I would love to see tax reductions,” David Cameron told the Sunday Telegraph at the weekend, “but when you’re borrowing 11% of your GDP, it’s not possible to make significant net tax cuts. It just isn’t.” Oh no? Then how come he’s planning the biggest and crudest corporate tax cut in living memory?

If you’ve heard nothing of it, you’re in good company. The obscure adjustments the government is planning to the tax acts of 1988 and 2009 have been missed by almost everyone – and are, anyway, almost impossible to understand without expert help. But as soon as you grasp the implications, you realise that a kind of corporate coup d’etat is taking place.

Like the dismantling of the NHS and the sale of public forests, no one voted for this measure, as it wasn’t in the manifestos. While Cameron insists that he occupies the centre ground of British politics, that he shares our burdens and feels our pain, he has quietly been plotting with banks and businesses to engineer the greatest transfer of wealth from the poor and middle to the ultra-rich that this country has seen in a century. The latest heist has been explained to me by the former tax inspector, now a Private Eye journalist, Richard Brooks and current senior tax staff who can’t be named. Here’s how it works.

At the moment tax law ensures that companies based here, with branches in other countries, don’t get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.

Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to “large and medium companies”: it is not available for smaller firms. The government says it expects “large financial services companies to make the greatest use of the exemption regime”. The main beneficiaries, in other words, will be the banks.

But that’s not the end of it. While big business will be exempt from tax on its foreign branch earnings, it will, amazingly, still be able to claim the expense of funding its foreign branches against tax it pays in the UK. No other country does this. The new measures will, as we already know, accompany a rapid reduction in the official rate of corporation tax: from 28% to 24% by 2014. This, a Treasury minister has boasted, will be the lowest rate “of any major western economy”. By the time this government is done, we’ll be lucky if the banks and corporations pay anything at all. In the Sunday Telegraph, David Cameron said: “What I want is tax revenue from the banks into the exchequer, so we can help rebuild this economy.” He’s doing just the opposite.

These measures will drain not only wealth but also jobs from the UK. The new legislation will create a powerful incentive to shift business out of this country and into nations with lower corporate tax rates. Any UK business that doesn’t outsource its staff or funnel its earnings through a tax haven will find itself with an extra competitive disadvantage. The new rules also threaten to degrade the tax base everywhere, as companies with headquarters in other countries will demand similar measures from their own governments.

So how did this happen? You don’t have to look far to find out. Almost all the members of the seven committees the government set up “to provide strategic oversight of the development of corporate tax policy” are corporate executives. Among them are representatives of Vodafone, Tesco, BP, British American Tobacco and several of the major banks: HSBC, Santander, Standard Chartered, Citigroup, Schroders, RBS and Barclays.

I used to think of such processes as regulatory capture: government agencies being taken over by the companies they were supposed to restrain. But I’ve just read Nicholas Shaxson’s Treasure Islands – perhaps the most important book published in the UK so far this year – and now I’m not so sure. Shaxson shows how the world’s tax havens have not, as the OECD claims, been eliminated, but legitimised; how the City of London is itself a giant tax haven, which passes much of its business through its subsidiary havens in British dependencies, overseas territories and former colonies; how its operations mesh with and are often indistinguishable from the laundering of the proceeds of crime; and how the Corporation of the City of London in effect dictates to the government, while remaining exempt from democratic control. If Hosni Mubarak has passed his alleged $70bn through British banks, the Egyptians won’t see a piastre of it.

Reading Treasure Islands, I have realised that injustice of the kind described in this column is no perversion of the system; it is the system. Tony Blair came to power after assuring the City of his benign intentions. He then deregulated it and cut its taxes. Cameron didn’t have to assure it of anything: his party exists to turn its demands into public policy. Our ministers are not public servants. They work for the people who fund their parties, run the banks and own the newspapers, shielding them from their obligations to society, insulating them from democratic challenge.

Our political system protects and enriches a fantastically wealthy elite, much of whose money is, as a result of their interesting tax and transfer arrangements, in effect stolen from poorer countries, and poorer citizens of their own countries. Ours is a semi-criminal money-laundering economy, legitimised by the pomp of the lord mayor’s show and multiple layers of defence in government. Politically irrelevant, economically invisible, the rest of us inhabit the margins of the system. Governments ensure that we are thrown enough scraps to keep us quiet, while the ultra-rich get on with the serious business of looting the global economy and crushing attempts to hold them to account.

And this government? It has learned the lesson that Thatcher never grasped. If you want to turn this country into another Mexico, where the ruling elite wallows in unimaginable, state-facilitated wealth while the rest can go to hell, you don’t declare war on society, you don’t lambast single mothers or refuse to apologise for Bloody Sunday. You assuage, reassure, conciliate, emote. Then you shaft us.

• A fully referenced version of this article can be found on George Monbiot’s website