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Labor Day: it’s no picnic | Clancy Sigal

WPAdmin — Sun, 05 Sep 2010 17:20:02 +0000

Class struggle is an unfashionable term in modern America, but with millions jobless or impoverished, to me it’s relevant as ever

Don’t scab for the bosses
Don’t listen to their lies
Poor folks ain’t got a chance
Unless they organise.

– Which Side Are You on?, Florence Reece

If you’re a Chicago native as I am, “class warfare” is a homegrown idea. For decades in the late 19th and well into our last century, Chicago was for militant labour what Paris was for artists, a cool place to be. Unions were the city’s backbone. “Hog Butcher for the World, Tool Maker, Stacker of Wheat… Stormy, husky, brawling, City of the Big Shoulders,” in Carl Sandburg’s famous description.

Other cities have icons like Philadelphia’s Liberty Bell and Boston’s Paul Revere statue, but Chicago has monuments to labour martyrs like the hanged Haymarket Riot frameup victims, the Irish socialist James Connolly, and the A Philip Randolph (African American) Pullman Porter museum. (The police-sponsored statue honouring the slain cops at Haymarket Square had its head blown off so often by local anarchists that it’s currently hidden inside police headquarters.)

Labor Day parades and picnics, once Chicago’s most boisterous holiday, probably outnumbered the massive ethnic processions in a city created by its foreign-born, non-English speaking immigrants, the Poles, Germans and Balts, to name only a few. Blood and muscle, riots and strikes against cruel employers – class struggle – are as natural to Chicago as the wind coming off Lake Michigan. For example, the posh, condo-filled lakefront boulevard of Sheridan Drive originally was designed so that federal strikebreaking troops could move swiftly into the city to shoot down Harvester tractor workers. Class conflict was open and nakedly brutal.

That was then. Before the eight-hour day, New Deal labour laws, post-second world war social mobility, the end of child labour and the birth of the White House habit of banqueting union chiefs – “piecards“, to the rank and file. So today, class warfare is a stale, unhip, fusty way to describe our American world. Right?

Certainly, Labor Day parades and picnics are almost a thing of the past, and union membership from a postwar high of almost 40% is now whittled to 12%. And even within this shrunken movement, jurisdictional fights, labour’s civil wars, further reduce its strength. Union buttons, once ubiquitous, I hardly see any more.

But Labor Day may be a useful time to drag out of the attic a few old-time radical (even Marxist!) notions that, until fairly recently in our history, were common currency. Such as, Marx’s “reserve army of the unemployed”, as well as his ostensibly outdated “increasing immiseration of the proletariat” due to economic recession because workers cannot afford to buy the products of their labour. Sound familiar?

If you’re the son of union organisers, as I am – and actually born on a Labor Day – then it’s perfectly clear that, especially since the 2007 meltdown, but dating back to President Reagan’s 1981 breaking of the air traffic controllers’ strike, the capitalist class has, with government connivance, declared war on the working and middle classes.

This is not news to the (declining number of) blue collar workers on the production line, or to huge numbers of allegedly better-educated middle classes being systematically wiped out of existence. These people feel the truth of class warfare in their guts but don’t yet like the idea, which sounds so, well, foreign – but is as American as cherry pie since the first Philadelphia shoemakers struck in 1804 and were indicted (in a prosecution paid for by the bosses) as “irresponsible and dangerous”.

This Labor Day, when kids are getting ready for school and private end-of-summer backyard barbecues have replaced communal solidarity, long-term unemployment is at an 80-year high, not seen since the worst of the 1930s Great Depression.

At least 30 million Americans are jobless, or have been forced into part-time work or have given up looking for work altogether. At the same time, there’s an almost-Marxist downward pressure on employed workers’ wages due to freezes and wage cuts even at companies with healthy profits. Standard & Poor’s 500 index has surged 34% compared to last year, and companies are sitting on $1.8tn in cash. CEOs have figured out that, with improved productivity and fewer workers, they can post big profits while firing people, which spreads fear and panic among the rest of us too scared to squawk.

But resistance – the instinct to fight back – never dies. The big confrontations are mostly in countries where our businesses have moved, like China and Latin America. Here in America, class warfare takes on new forms. The whole fight over illegal immigration is really about class conflict in the same way that Sacco and Vanzetti and 1930s sitdown strikers were demonised. Class conflict is inescapable, especially since. nowadays. it’s pushed forward by employers and financiers – and Obama’s the-rich-come-first financial advisers.

A fact: after the second world war, there were thousands of strikes, large and small, lawful and wildcat, that just happened to coincide with rising wages and earnings. In 2008, there were 15 big strikes. This decline in militancy has coincided with a decline in the earning power of the American worker and middle class. Cause and effect? At least it’s (barbecued) food for thought on this crazy-shopping Labor Day.

Clancy Sigal

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Indian workers at factory linked to Marks & Spencer say they were beaten

WPAdmin — Sun, 05 Sep 2010 07:00:05 +0000

M&S says it has stopped placing orders with Viva Global for ‘commercial’ reasons, but denies workers suffered intimidation

Workers at an Indian factory used by Marks & Spencer claim they have been beaten up while protesting about poor working conditions.

The Viva Global factory in Gurgaon, on the outskirts of Delhi, was exposed last month by an Observer investigation for paying workers as little as 26p an hour and forcing them to work excessive overtime.

Relations between workers and management have since deteriorated to the extent that one worker and union leader filed a complaint with police claiming he had been kidnapped and beaten up. Others have also claimed to have suffered mistreatment while protesting about working conditions.

M&S says it has now dropped the company for “commercial” reasons, but has remained in contact attempting to resolve the disputes. It denies that workers have suffered intimidation.

The Observer investigation focused on two factories in Gurgaon, one used by M&S and the other by Gap and Next, and found staff working up to 16 hours a day. All the retailers launched inquiries into the abuses and pledged to end excessive overtime.

M&S said it had found examples of excessive overtime being worked earlier in the year, but it had tackled the problem. Its own audits also flagged up other problems, which it described as “high-risk issues in documentation and conditions”. These are understood to include the provision of water and toilet facilities for workers.

Since the publication of the investigation, there have been a number of reports of clashes between workers and management. British campaign group Labour Behind the Label spoke to workers and claims that 16 women were hurt in clashes outside the gates.

In a statement the group said that the clashes followed “several months of campaigning by the Garment and Allied Workers Union to get improvements in conditions at Viva Global. Workers complained of excessive and forced overtime, low wages, a lack of water to drink and in the toilets”.

In a statement, M&S said it had conducted its own investigation into the allegations and could find no evidence to substantiate the claims being made against Viva Global.

A spokesman said: “M&S no longer sources from Viva Global. For commercial reasons only, we have not placed any orders with this factory since May and have no pending orders. All M&S production ended in August.”

Gethin Chamberlain

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Mozambique’s food riots – the true face of global warming | Raj Patel

WPAdmin — Sun, 05 Sep 2010 07:00:05 +0000

The violence in Maputo is just the latest manifestation of the crippling shortcomings of the global economy

It has been a summer of record temperatures – Japan had its hottest summer on record, as did South Florida and New York. Meanwhile, Pakistan and Niger are flooded and the eastern US is mopping up after hurricane Earl. None of these individual events can definitively be attributed to global warming. But to see how climate change will play out in the 21st century, you needn’t look to the Met Office. Look, instead, to the deaths and burning tyres in Mozambique’s “food riots” to see what happens when extreme natural phenomena interact with our unjust economic systems.

The immediate causes of the protests in Mozambique’s capital, Maputo, and Chimoio about 500 miles north, are a 30% price increase for bread, compounding a recent double-digit increase for water and energy. When nearly three-quarters of the household budget is spent on food, that’s a hike few Mozambicans can afford.

Deeper reasons for Mozambique’s price hike can be found a continent away. Wheat prices have soared on global markets over the summer in large part because Russia, the world’s third largest exporter, has suffered catastrophic fires in its main production areas. These blazes, in turn, find their origin both in poor firefighting infrastructure and Russia’s worst heatwave in over a century. On Thursday, Vladimir Putin extended an export ban in response to a new wave of wildfires in its grain belt, sending further signals to the markets that Russian wheat wouldn’t be available outside the country. With Mozambique importing over 60% of the wheat its people needs, the country has been held hostage by international markets.

This may sound familiar. In 2008, the prices of oil, wheat, corn and rice peaked on international markets – corn prices almost tripled between 2005-2008. In the process, dozens of food-importing countries experienced food riots.

Behind the 2008 protests were, first, natural events that looked like an excerpt from the meteorological section of the Book of Revelation – drought in Australia, crop disease in central Asia, floods in south-east Asia. These were compounded by the social systems through which their effects were felt. Oil prices were sky-high, which meant higher transport costs and fossil fuel-based fertiliser prices. Biofuel policy, particularly in the US, shifted land and crops from food into ethanol production, diverting food from stomachs to fuel tanks. Longer term trends in population growth and meat consumption in developing countries also added to the stress. Financial speculators piled into food commodities, driving prices yet further beyond the reach of the poor. Finally, some retailers used the opportunity to raise prices still further, and while commodity prices have fallen back to pre-crisis levels, most of us have yet to see the savings.

Is this 2008 all over again? The weather has gone wild, meat prices have hit a 20-year high, groceries are being looted and heads of state are urging calm. The view from commodities desks, however, is that we’re not in quite as dire straits as two years ago. Fuel is relatively cheap and grain stores well stocked. We’re on track for the third-highest wheat crop ever, according to the Food and Agriculture Organisation of the United Nations (FAO). While all this is true, it misses the point: for most hungry people, 2008 isn’t over. The events of 2007-2008 tipped more than 100 million into hunger and the global recession has meant that they have stayed there. In 2006, the number of undernourished people was 854 million. In 2009, it was 1.02 billion – the highest level since records began. The hardest hit by these price rises, in the US and around the world, were female-headed households.

Not only are the hungry still around, but food riots have continued. In India, double-digit food price inflation was met by violent street protests at the end of 2009. The price rises were, again, the result of both extreme and unpredictable monsoons in 2009 and an increasingly faulty social safety net to prevent hunger. There have been frequent public protests about the price of wheat in Egypt this year, and Serbia and Pakistan have seen protests too.

Although commodity prices fell after 2008, the food system’s architecture has remained largely the same over the past two decades. Bill Clinton has offered several mea culpas for the international trade and development policies that spawned the food crisis. Earlier this year, he blamed himself for Haiti’s vulnerability to price fluctuations. “I did that,” he said in testimony to the US Senate. “I have to live every day with the consequences of the lost capacity to produce a rice crop in Haiti to feed those people, because of what I did. Nobody else.” More generally, Clinton suggested in 2008 that “food is not a commodity like others… it is crazy for us to think we can develop a lot of these countries [by] treating food like it was a colour television set.”

Yet global commodity speculators continue to treat food as if it were the same as television sets, with little end in sight to what the World Development Movement has called “gambling on hunger in financial markets”. The recent US Wall Street Reform Act contained some measures that might curb these speculative activities, but their full scope has yet to be clarified. Europe doesn’t have a mechanism to regulate these kinds of speculative trades at all. Agriculture in the global south is still subject to the “Washington consensus” model, driven by markets and with governments taking a back seat to the private sector. And the only reason biofuels aren’t more prominent is that the oil they’re designed to replace is currently cheap.

Clearly, neither grain speculation, nor forcing countries to rely on international markets for food, nor encouraging the use of agricultural resources for fuel instead of nourishment are natural phenomena. These are political decisions, taken and enforced not only by Bill Clinton, but legions of largely unaccountable international development professionals. The consequences of these decisions are ones with which people in the global south live everyday. Which brings us back to Mozambique.

Recall that Mozambique’s street protests coincided not only with a rise in the price of bread, but with electricity and water price hikes too. In an interview with Portugal’s Lusa news agency, Alice Mabota of the Mozambican League of Human Rights didn’t use the term “food riots”. In her words: “The government… can’t understand or doesn’t want to understand that this is a protest against the higher cost of living.” The action on the streets isn’t simply a protest about food, but a wider act of rebellion. Half of Mozambique’s poor already suffer from acute malnutrition, according to the FAO. The extreme weather behind the grain fires in Russia transformed a political context in which citizens were increasingly angry and frustrated with their own governments.

Yesterday, I reached Diamantino Nhampossa, the co-ordinator of Mozambique’s União Nacional de Camponeses (National Peasants Union of Mozambique). “These protests are going to end,” he told me. “But they will always come back. This is the gift that the development model we are following has to offer.” Like many Mozambicans, he knows full well which way the wind blows.

Raj Patel

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International backing grows for ‘Robin Hood tax’ on banks

WPAdmin — Sun, 05 Sep 2010 07:00:04 +0000

EU ministers edge closer to financial transaction levy amid signs that International Monetary Fund is softening opposition to ‘Robin Hood tax’

European Union finance ministers will step up talks on raising extra money from banks this week amid signs that the International Monetary Fund is softening its opposition to a “Robin Hood tax” on financial transactions.

Treasury sources said the chancellor, George Osborne, was prepared to back a financial activities tax on bank profits and pay at the Brussels meeting provided it was universally introduced, but was wary of a broader Robin Hood tax. Campaigners said last night, however, that a leaked IMF report showed growing international backing for a broader tax and urged Osborne to look at the revenue-raising potential of a levy of transactions.

David Hillman, a Robin Hood Campaign spokesman, said: “The rug has been pulled from under critics who claim that a Robin Hood tax would damage the wider economy or is unworkable. The IMF, EC and Leading Group of 60 nations have all said it is feasible. The main losers would be those who make lots of money from socially useless trades but the winners would be millions of people at home and abroad pushed into poverty by the economic crisis or whose public services are under threat.”

An IMF paper, Taxing Financial Transactions: Issues and Evidence, said securities transactions taxes (STT) existed in many countries with little evidence that they distorted markets. It argued that a small levy on transactions might help to dampen the “herding behaviour” encouraged by computer-program trading. “Unilateral STTs, even if levied on fairly narrow bases, are certainly feasible as witnessed by their use in numerous developed countries. The fact that major financial centers such as the UK, Switzerland, Hong Kong, Singapore, and South Africa levy forms of STTs indicates that such taxes do not automatically drive out financial activity to an unacceptable extent,” it said.

The paper added: “The impact on financial markets from a low-rate (less than 5 basis points), broad-based STT would likely be fairly modest, beyond its reduction of very short-term trading.”

In its letter to Osborne, the Robin Hood campaign said a financial activities tax could, if combined with other measures, raise as much as £20bn a year in the UK. “We hope that the Ecofin meeting will provide a platform for taking this forward at the European level. Ultimately, we believe that a financial transaction tax has the greatest potential to raise revenue from the financial sector, as it offers a robust, simple to implement and fair mechanism.”

Larry Elliott

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The Prime Minister demonstrates how he will ’stand up to big business’

WPAdmin — Sun, 05 Sep 2010 07:00:04 +0000

David Cameron’s new advisory panel is full of corporate big shots. But didn’t he promise he would fight against the influence of special interests?

Just four months into the coalition and a prime minister who pledged to “stand up to big business” is instead sitting down with it. A cabal of corporate types has been signed up to provide wise counsel to David Cameron.

We have former BP chief Lord Browne, newly installed as senior non-executive director on the Cabinet Office board – whatever that means. Then there’s Topshop’s top dog, Sir Philip Green, as efficiency tsar, and on Friday another five were named: BT and easyJet chairman Sir Mike Rake, vacuum cleaner mogul Sir James Dyson, advertising boss Sir Martin Sorrell, CBI president Helen Alexander and Sainsbury chief executive Justin King. They will be joined by another seven big names in the coming weeks, plus a new trade minister, when someone can be persuaded to swap the chauffeur-driven company transport for one of the austerity government’s pool cars and an economy-class train ticket. Two captains of industry, a banker and a shopkeeper are understood to have been approached, but each has found the offer a tad underwhelming.

Ostensibly, they are all there to advise on where the axe will fall – but every one of them would fight tooth and nail to ensure it doesn’t land anywhere near their business. One of BT’s biggest customers is the government. How’s that going to work in practice? So much for Cameron’s pre-election spiel that he would fight against the influence of “special interests”.

The new panel will take over from the old one recruited by Gordon Brown, which met infrequently and produced nothing of note. One of those on the previous committee confided that the entire procedure was a charade, but a good networking opportunity.

Interestingly, one of the few businessmen who went into politics, Archie Norman, hasn’t been signed up. The fact is he found Westminster like wading through treacle.

Julia Finch

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Ocado has been marked down but it’s still no bargain

WPAdmin — Sun, 05 Sep 2010 07:00:03 +0000

Ocado shares are trading well below the float price but the online grocery business is getting crowded

Don’t say you weren’t warned. On 11 July we set out a catalogue of reasons why investing in Ocado at the ambitious price of 200p-275p might not be such a bright idea. The price had to be slashed to 180p to enable the float to happen. One month after their debut, the shares are changing hands at 157p, though that is a sight better than the thoroughly miserable 131p they touched at one stage.

Last week three of the eight banks whose job it was to float the business produced their own analysts’ recommendations and target prices for would-be and existing investors.

The retail experts at HSBC have plumped for a target share price of 190p, while UBS reckons a fair value is just 167p – or 13p less than the eventual float price. Goldman Sachs is going for 200p – the very bottom of the range its investment banking flotation specialists first had in mind, before reality dawned. The potential the Goldman analysts have spotted is the growing market for online grocery sales together with Ocado’s “proprietary centralised, semi-automated distribution and delivery network” – ie, picking goods from a big warehouse rather than from a network of stores.

There is, however, an alternative view, also outlined last week, by veteran retail analyst Geoff Ruddell of Morgan Stanley. He thinks the online grocery market will grow far less rapidly than others have assumed, that warehouse picking makes sense only if deliveries average more than £100 (only one in eight Ocado orders do) and that there is no way Ocado will retain its current 14% market share, let alone increase it. As a result his target price is a paltry 80p, which has doubtless prompted a fresh blast of steam to emanate from the ears of Ocado chief executive Tim Steiner. Steiner was hopping mad that investors weren’t queuing up to pour cash into his business and still reckons they “don’t get it”.

Ruddell, though, makes a good point. From next year Waitrose will compete head-to-head with Ocado inside the key M25 region and next week Dalton Philips, the new boss at Morrisons, is expected to outline his own plans to start an online grocery service – using stores, not a warehouse – and probably offering a click-and-collect option for shoppers to send in an internet order and pick it up themselves.

Before that, however, we are set to hear from Steiner and his finance chief, Andrew Bracey, on their first public outing since the bungled flotation. On Tuesday they will deliver their first trading update as a listed company.

There should be no nasty surprises – but there is much work to do, and not just the spadework of building a new warehouse. Prior to the float Ocado had a reputation as an upmarket and reliable premium brand. It is a now a byword for a badly handled IPO.

In the run-up to the float, the information coming out of the Ocado camp was that the share offer was bound to be a huge success, that there were plenty of investors willing to dig deep for a piece of the action, and suggestions that journalists were trying to derail the entire process by expressing investors’ doubts. It is to be hoped that Tuesday’s update is a little more accurate.

Julia Finch

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Ben Bernanke’s monetary policy poverty | Chris Payne

WPAdmin — Sat, 04 Sep 2010 20:40:02 +0000

The White House is floating a new stimulus, though the Fed chief seemed to rule it out. But does he have any other tools?

Everyone was pretty glum about US GDP growth between March and June, when it was thought to be 2.4%. But due to the wonders of statistical revision, it now turns out that it was only 1.6%. Of course, those out of work do not care what the statistics say because they know exactly what the economy feels like to them now. All the same, these numbers are no doubt confirming people’s fears that the dreaded second dip (of on-going depression) is on the way.

Coinciding with the revised GDP numbers, though, Fed chairman Ben Bernanke has announced that he is going to do all that he can, using all the tricks available, to fight deflation. So, what are those tricks and how successful might they be?

Trick number one: continue with quantitative easing (QE). In layman’s terms, this means that he will continue to buy securities in the market place in order to keep their price up, and he will create funds (with the press of a button) at the Fed in order to pay for these purchases. This is good old-fashioned money-printing, and the Fed had already made it clear that it is what they intended to keep doing. Their aim with this policy is ensure that bond prices do not fall, because, if they do, private banks will find their asset base falling, their capital adequacy declining; and if one thing led to another, we would all find ourselves back in the financial maelstrom.

Necessary as this policy is, it is not a “stimulus”, for this “high-powered money”: that the Fed is creating is not, in fact, very high-powered at all; it does nothing to incentivise banks to lend and nothing to stimulate entrepreneurs and consumers to borrow and spend. It is a desperate policy to stop things getting worse.

Trick number two: tell everyone that you intend to keep rates low for a long time. Well, everyone knows already that the Fed is committed to fighting deflation and ensuring that banks’ assets do not fall in value too much. A commitment by the Japanese to keeping their interest rates low (at almost zero) has not helped them in the past 10 years.

Trick number three: paying no interest on the private banks’ excess deposits of money at the Fed. Well, the Fed is already only paying 0.25%, so cutting to zero is not going to make much difference. If these low returns are not incentivising banks to lend at the moment, this “change” in policy is going to make no difference at all.

Trick number four: targeting higher inflation. The chance of higher inflation would be a fine thing! One can target any number one likes, but if the current policy of printing money and setting policy rates at near zero is having no effect on consumer prices (which are rapidly heading towards deflation territory), then what use is a new target going to be? In fact, I can only imagine that it would be counterproductive; after all, how better to signal the fact that essentially you have no new tools left and are unable to fight deflation than to demonstrate clearly that you have no ability to hit your own targets.

So what does all this mean? It means that unless the Fed plans to print money and actually start buying real housing stock and real goods and services (because that would be a sure way of bringing inflation; probably hyperinflation, in fact), there is nothing left for them to do. Except what they have been doing, which is helping to ensure that the banking system does not implode again.

In other words, monetary policy is, for the time being, over. Either you believe that the private sector will recover in due course of its own accord or you believe that what we really need is a proper fiscal stimulus, the likes of which we are yet to see.

Chris Payne

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Tax collection. Now there’s a moral crusade for the Tories | Polly Toynbee

WPAdmin — Sat, 04 Sep 2010 10:20:02 +0000

Misgivings about the ideological nature of Osborne’s cuts agenda could be dispelled by protecting the HMRC

The star chamber is in session. Any foot-draggers in the cabinet are due to be hauled before it if they fail to offer up 25% or even 40% cuts in time for the mass slaughter of the public sector next month. A wail of pleas for mercy has gone up to at least stop shortsighted purging that will end up costing the state more.

The recent cut in teenage pregnancy prevention programmes will add to future spending. Cuts in early mental health treatment will lead to more florid cases arriving in hospital. Cutting home care for the frail will send more into costly care homes. The arts can prove how every £1 the Arts Council spends generates another £2. Everywhere you turn, there are compelling arguments for upfront investment to save money later. But the Treasury is implacable, fingers in ears, sceptical about future savings that have a habit of vanishing into their departments. Myopia is part of Treasury DNA, pessimism about putative paybacks hardwired into its circuit board – now, more than ever.

But the Treasury should heed the voice in its own backyard, Revenue & Customs, which brings in the money, cash in hand, here and now: it could bring in enough to deal with the deficit. The World Bank estimates £70bn a year goes missing in Britain’s shadow economy – and its last report found tax evasion rising.

On average a senior tax inspector on £50,000 brings in about £1.5m, while lower-level inspectors on £25,000 bring in £300,000 each – in all 10 times more than is recouped by Department for Work and Pensions fraud-chasers. Yet Revenue staff have already been cut by a third to 68,000. How can they now lose another 25%? Top brass is fighting hard to resist it, suggesting a state-financed “investment plan” to recover lost funds.

Revenue has been accused of going soft on using the law: the Association of Revenue and Customs union reports HMRC brought 200 cases last year, while the DWP brought 9,000 for considerably less lucrative benefit fraud. Three huge firms recently settled out of court, but critics said all three would have paid more if these cases had proceeded. Each handed over at least £1.25bn in unpaid tax: one had set aside nearly twice as much as a contingency. HMRC settled these cases at the door of the court as they had each already drained £12m from its diminished resources. Now they say only high-risk big businesses are targeted. Overt organised crime such as VAT carousel fraud and carbon-trading fraud have “hoovered up our resources”, so most big evaders are under-scrutinised.

“There is a tipping point where without enough investigation, more of the fiddlers think they can fiddle more,” senior officials warn Osborne. A culture of honesty soon evaporates without the constant threat of arrest. HMRC tells how a recent crackdown on doctors spread the word fast: 10% came forward and confessed to cheating. Now the HMRC says bluntly: “We need to send more people to jail so people recognise that it is not worth cheating.” The honesty tipping-point comes when too many people know someone who is getting away with cheating: why pay if no one else does? Research shows the deterrent effect: every £1 detected deters another £1 in potential fraud.

HMRC says it needs resources for urgent scrutiny of the wealthy who are converting their income into capital to avoid the 50% income tax rate: City law partners are among the many awaiting investigation. The big four accountancy and consulting firms are still devising avoidance schemes, although they are required to register each new loophole. An honest rich man called a top tax inspector last month to report an approach by a big four firm offering a complex new capital gains tax wheeze involving “rescindable contracts”.

A brisk official call sent the firm into a “flat spin”; it subsequently withdrew it. But the dangerous impression is that the taxman is always a plod behind, short of resources, depending on tip-offs and settling out of court to save money. The National Audit Office’s report says “lack of funding” is preventing efficient debt recovery, with a 17m backlog of PAYE cases. Some £26.1bn is owed in back PAYE, according to tax expert Richard Murphy: “They haven’t enough people to get on the phone and knock on the door to get the money in.”

The Guardian’s Tax Gap report showed the vast scale of corporation tax avoidance. Meanwhile, a meagre 100 HMRC inspectors do their best to police the entire country’s employers for compliance with the minimum wage.

Britain is historically a nation of relatively compliant taxpayers, but that is changing. Lord Oakshott, the Lib Dem Treasury spokesman, told the Lords: “Tax-dodging in Britain is a deep-seated, pervasive, pernicious disease … Highly organised, aggressive, abusive tax avoidance which used to be a marginal and rather spivvy operation, that was frowned on by the main banks and shunned by top accountants and lawyers who were mainly concerned with reputational risk, has now mushroomed out of all recognition.”

He questions why the government is willing to give the big four and City law firms state contracts while they earn fortunes helping to deplete the Treasury. Until its last year Labour turned a blind eye to tax havens and other dodges; can the coalition do better? The BBC’s Robert Peston points out in his blog that the Conservative party is exceptionally beholden to donors from high finance and hedge funds. Sir Philip Green’s bizarre appointment as an anti-waste tsar undermined the coalition’s promise to “actively examine tax avoidance”.

HMRC top brass fear George Osborne needs to prove he is cutting his own department as savagely as all others. But cutting any further on tax collection would show beyond doubt that government cuts are ideological and totemic, and not based on sound economics.

After the Institute for Fiscal Studies showed cuts falling hardest on the poor, the coalition could restore some credibility by ensuring at least that taxes are collected fairly from all, and not just paid by Leona Helmsley’s “little people”. Why not deny state contracts to the consultants who help the wealthy drain the Treasury? And strengthen HMRC so inspectors can put the fear of jail into tax-dodgers. Conservatives could find it easier than Labour to launch an unflinching moral assault on the greedy culture of evasion, avoidance, off-shoring and cheating that has become poisonously socially acceptable.

Polly Toynbee

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US economy: The recovery that wasn’t | Editorial

WPAdmin — Sat, 04 Sep 2010 00:00:06 +0000

We have an anaemic recovery at best. And the housing market, where this crisis began, remains in terrible shape

Back in January, US vice-president Joe Biden offered up a huge hostage to fortune. Talking to fellow Democrats about the Obama plan for the economy, he promised: “You’re going to see, come the spring, net increase in jobs every month.” Yesterday figures showed that a net total of 54,000 workers lost their jobs in August, taking the official unemployment rate to 9.6%. A big dollop of gloomy news just in time for Labour Day weekend.

Not that you would have taken it as bad news, going by the immediate reaction. The Dow enjoyed a modest bounce, while Mr Obama described the non-farm payrolls report as “positive news”. Which is true, if what you really mean by positive is “not as awful as it might have been”. Oh sure, optimists can point out that the job losses were below analysts’ estimates. And they can also take heart from the report’s scaling down of job losses over June and July – so that a net total of 229,000 posts were lost, rather than the 352,000 previously reported. But consider this: over two and a half years after America’s recession officially began in December 2007 (according to the National Bureau of Economic Research), the economy is still only limping along. By this stage, one would normally expect the US to be surging ahead, with companies producing much more, bosses taking on droves of recruits and even the housing market picking up. Instead, we have an anaemic recovery at best. And the housing market, where this crisis began, remains in terrible shape. Sales of new and existing homes are cratering, and the numbers of foreclosures and borrowers falling way behind on their repayments are as bad as they were last summer.

Some economists, such as Carmen Reinhart and Ken Rogoff, pointed out years ago that this downturn was always going to be worse than a normal recession, simply because banking crises are more crippling and have worse aftermaths. But the White House underestimated the scale of this crash – which is why Christina Romer, the outgoing chair of Mr Obama’s council of economic advisers, admitted this week that she and her colleagues “failed to anticipate just how violent the recession would be”.

Mr Obama promised yesterday that he would unveil “a broader package of ideas” next week. Let us hope they are more action than ideas. Before November’s midterms, the president must bring in big measures to encourage job creation and stop the freefall in the housing market. That makes political as well as economic sense. Politicians tend not to win elections by pointing out that things are not as terrible as they might have been. If Mr Obama wants proof of that, he should ask Gordon Brown.

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David Cameron recruits business big hitters to advise on economic strategy

WPAdmin — Sat, 04 Sep 2010 00:00:05 +0000

• Justin King and Michael Rake agree to join PM’s advisory panel
• Group likely to influence debate over spending cuts

David Cameron has assembled an advisory committee of about a dozen business leaders, including Justin King, the chief executive of Sainsbury’s; the ad man Sir Martin Sorrell and Sir Michael Rake, chairman of BT and easyJet.

The group is expected to meet four times a year to discuss the most pressing issues affecting business and the economy, including the deficit and strategies for growth, providing the members with a potentially influential role on where cuts will fall. The panel will also include the inventor Sir James Dyson and Helen Alexander, president of the CBI and former chief executive of the Economist Group.

The advisory panel will replace the Business Council for Britain that was handpicked by Gordon Brown, which included the Virgin founder Sir Richard Branson, Tesco’s boss Sir Terry Leahy, Marks & Spencer’s chairman Sir Stuart Rose and Tony Hayward, the soon-to-depart boss of BP. The so-called “star chamber’ was one of Brown’s first acts as prime minister and was designed to demonstrate the support he had from the business community.

Brown’s council had a more formal structure, where individual members were asked to advise on specific parts of the economy, including transport and immigration, but it was widely regarded as ineffective. Letters were sent to members of the council in recent weeks telling them that it had been disbanded, after the first meeting scheduled under the new government was cancelled with little notice.

Cameron’s advisory group is expected to be a looser organisation.

The formation of the panel, which will be announced in the coming weeks, is the latest evidence of the coalition government’s eagerness to forge a close relationship with corporate Britain and to entrust industry leaders with senior policymaking roles, despite Cameron’s pre-election pledge to “stand up to big business”.

Cameron has already called in two senior business figures to play key roles over policy, both amid some controversy. Lord Browne, the former chief executive of BP, who quit the oil firm after being found to have lied in court in an attempt to protect his personal life, was in July named as the coalition’s new Whitehall “super-director” charged with injecting business ethos into the heart of government.

He had already been appointed by the previous government to lead an inquiry into tuition fees and as part of his super-director role will help to hire business leaders to the beefed-up boards of every government department as non-executive directors. Others said to have been approached as non-execs include Sir Chris Gent, chairman of GlaxoSmithKline; Sir Nigel Rudd, chairman of BAA, and John Gildersleeve, chairman of the fashion chain New Look. Cameron has suggested politicians should take a lead from supermarket bosses in seeking out efficiencies.

Last month, the billionaire Topshop owner Sir Philip Green was appointed to lead a review of government spending but was criticised by unions for having avoided tax by making his Monaco-based wife the owner of his Arcadia fashion group.

One key appointment still to be made by the coalition, however, is that of trade minister, after the former Standard Chartered chairman and Labour trade minister Mervyn Davies turned down an offer to remain in the job, stating a wish to return to the private sector. The role is considered to be crucial amid government hopes that exports will lift the manufacturing sector and help to rebalance the economy.

Cameron last month underlined the importance given to developing trade relations with key markets when he led a large delegation to India, including John Varley of Barclays, Richard Olver, chairman of Bae; andrew Moss,t he chairmna of Aviva and Vodafone chief executive Vittorio Colao.

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