Is Britain Short of Skills?

Is Britain Short of Skills?

By Liam R Carr

previously published here

We often hear that employers can’t find people with the right skills. This may be used as an excuse for not taking workers on. The alternative approach is to employ someone with potential then invest in their training. The austerity-only approach of the government has created a climate where even business owners who are making massive profits prefer to sit on reserves of cash rather than invest in training a future workforce.There is however, a real skills shortage. Here are a few examples where there is a need for workers.
Science and Engineering: 
Engineers are needed in the Nuclear, offshore and renewable energy industry. There is a need for geologists, geophysicists and environmental scientists. Specialist high integrity pipe welders and high voltage overhead line repairers are desperately needed to work on pylons and in the energy sector.
Creative Industries: 
2D and 3D animators for film, TV and the computer games industry are in short supply, as are skilled chefs, ballet dancers and classical musicians (even in a recession, the rich still need to eat expensive food, listen to the philharmonic and enjoy the ballet )
Medicine and Health:
There is a shortage of haematologists, psychiatrists specialising in care of the elderly, clinical neurophysiologists, radiographers and neonatal nurses.The real tragedy is that there is a skills shortage in regions of high unemployment. Skills need to be put on the agenda in schools and colleges but all we see are retrograde steps.
 Gove wants to see students doing more traditional subjects; vocational courses are seen as less valuable. This is not the case in other countries. In Germany for example vocational and academic courses are seen as equally valid. It is possible to provide students with a variety of opportunities without creating a two tier system. A Tory approach to a skills shortage is to do nothing. They wait in hope that ‘market forces’ will sort everything out. Tackling youth unemployment is far too important to be left to market forces. We need to change perceptions of vocational education and run courses in parallel to GCSEs and A-Levels. Level 4 apprenticeships which are taken after A-Levels, should be applied for through the UCAS system rather being something obscure and separate.

The reality is this: We are living in a country where the children of today will have fewer opportunities than their parents. It is our duty to equip the workers of tomorrow with the skills they need to get on. In refusing to address this issue the government is failing the next generation, they are a government of opportunity for the few and the scrapheap for many.    

 

The Mysterious Disappearance of Jobs and Skills

The Mysterious Disappearance of Jobs and Skills

When Norman Tebbit made a notorious comment that jobs could be easily found merely by hopping onto a bike, he made an assumption that it would solve unemployment because that’s father what his did, apparently. He repeated such advice this February by saying if Eastern Europeans migrate for work, why can’t the Brits?

How starkly this contrasts with what we are hearing Tory back benchers cry in the wake recent success of UKIP! Are we seeing a sudden surge to the extreme political right and 1930s divisions in society as ordinary people blame one another for high rates of unemployment, increasing poverty and unaffordable housing?

Deborah Orr (Guardian) comments: People are told EU migrants steal jobs – in truth bosses want cheap labour . People are told that immigrants stole their jobs. In truth, it was employers who wanted a ready supply of workers unused to the living conditions that it took the second world war for the ordinary people of Britain to achieve. The goal of neoliberal globalisation is supposedly a redistribution of wealth around the planet. It also, as the EU itself is discovering, redistributes poverty.

History has led to migrations of the workforce. In Cornwall, tin and copper had been mined for 4,000 years. Closure of the majority of Cornish tin mines forced whole communities to migrate in the 19th Century, leaving behind empty villages, graveyards surrounding them (Gwennap) the evidence that communities were once busy with industry.

tin_minerabove150Cornish tin miners faced

increasing competition

from alluvial mines abroad

Families were forced to move – or else starve. The simple fact was that the mine owners closed the mines, not because there was no longer a need for copper or tin. It’s because there was more money to be made elsewhere. Cheaper labour makes those looking to line their own pockets to ignore the plight on those who have come to depend on them – because they had the power to do so.

tin_mine203

In the 20th century a few mines survived, but the shortage of work put pressure on the working people. A row of differential pay rates resulted in a strike which pitched miner against miner, family against family, and only ended with the onset of WW2 and the greater demand for tin. Cornwall has never really recovered from the decline of this millennia old industry, and poverty exists there today.

  • How and when did these mine owners come to own the land and mines?
  • Why did such a few people have power over the many?
  • Who benefited from metals extracted from mines?

Removal of workers’ autonomy, their rights to sell labour for a living wage leads not only to their downfall, but that of everyone. The very rich may have the power to determine who shall have work and who shall not, yet their own very existence requires the same basic needs, provided by those workers. The race to the bottom, the search for the cheapest, poorest labour is fundamentally flawed, only a fool will argue otherwise.

Mankind’s survival has always involved work or labour – growing food, making clothes, caring for the community. Much of this work did not involve payment. Because of a division of labour, we can trade our skills, each contributing and receiving. Having a tradeable skill empowers us. If we can no longer cook a meal without a ready meal or grow our own food, we become yet more dependent on the supermarkets and their global supplies and speculation.

If we can no longer make garments, we buy-in fashion produced cheaply and unethically, thousands of miles away. In Bangladesh, cheap clothes come at human cost as health and safety of workers has no importance resulting in a deadly fire where hundreds died.

Yet, even now, the ConDemNation Coalition government aim to return UK to Victorian conditions, and have already removed workers’ right to health safety in the UK workplaces, and abolished the agricultural workers wages board. (See 114 year workers’ rights scrapped by Coalition government) Then UKIP, clearly trading on fear of unemployment and poverty, do not speak for working people. They are no party, but a bundle of individuals with extreme, bizarre attitudes, for example, Geoffrey Bloom, who advocates that employers should not employ women of childbearing age.

Deskilling a population disempowers them, to say nothing of lack of self-respect, independence and the prospects of lives in poverty. Thatcherite policies of attacking trade unions, decimating British manufacturing, closure of coal mines, ship-building, car industries, clothing and so on, led to massive unemployment, and broken communities, just as in the Cornish tin mines. Even food is being imported unnecessarily, for cheapness, and recent the recent horse meat scandal exposed the dangers of lack on control and monitoring. Lack of investment in education and training will not create a skilled workforce.

The Labour Party are setting out plans for full employment

“For Labour, that goal of full employment has always been the foundation for getting our country back on its feet. It was for Atlee’s Labour. It was for New Labour. It will be once more for One Nation Labour. Today the goal of full employment is important for a very simple reason. The faster we return to full employment, the faster we can pay down our debt. And the faster we can put the “something for something” back in to social security.

The Tories’ problem isn’t just that they are failing, but that they lost a belief in full employment many years ago, and never rediscovered it. That means more money spent on unemployment, so there is less to go around for working people and less for care.

After three years of failure we’ve got to find new ways to break out of this viscous circle. Seventy years ago, we set out a new path to full employment. Just as the Beveridge Report is a still a good roadmap for today, so too is the 1944 White Paper on Full Employment. It teaches us to be radical reformers to bring down the costs of social security; building exports; supporting public investment; fanning consumer demand – and taking determined action on jobs. It is a long road, but tackling poor places would be a big first step to getting our country back to full employment.’

From the New Statesman

If the British electorate are concerned about unemployment, they also have a very clear sense of injustice. They see bankers’ bonuses, they see politicians benefit from lobbyists, seeking to line their own pockets rather than serving the people, as they were elected to do. This week Ed Miliband’s Labour Party has pledged to address the Tax Justice.

He’s specifically committed to:

■ Pursue a new global system where multinationals must publish their revenues, profits and other key corporate information useful to revenue authorities in each country in which they operate.

■ Force multinationals to publish such information in the UK even if international agreement cannot be found on the issue, as they do in Denmark.

■ Make it a legal requirement for multinationals operating in the UK to disclose details of any tax avoidance schemes they are using globally.

■ Seek reforms to “transfer pricing” rules to stop companies from shuffling money to other parts of their firm based in tax havens in return for spurious services.

■ Open up the ownership of companies sited in Britain’s tax havens to the UK revenue authorities, but also seek to allow developing countries access to such information.

Whether the popularity of UKIP is a blip, a protest, or anger, it certainly represents an alienated electorate. Those in work feel they are working for the benefit of the rich and powerful. Those without work have little hope of finding work which pays a living wage. Women are hit hard by childcare costs, and equality with men has taken a backward step. Cuts hitting the disabled will make it more difficult, if not impossible for them to work, and those who are old or ill live in fear. It is time to do things differently, let us hope for a socialist Labour government, with policies which will unite people once again.

References and Further reading

Squeezing the Poor: The Economic Consequences of Mrs Thatcher

“Squeezing the poor”

This post by @Ramanan_V prompted me to seek out Nicholas Kaldor’s “The Economic Consequences of Mrs Thatcher”Kaldor was an eminent Cambridge economist and member of House of Lords at the time when Margaret Thatcher came to power in 1979, and this short book is a collection of speeches made during the first four years of Thatcher’s time as PM.

In ’79 when Thatcher rose to power, the UK economy was in trouble, with rampant inflation and low growth with rising unemployment. In the months preceding the ’79 election, Britain had experienced its “Winter of Discontent”. In his first budget in June 1979 Thatcher’s Chancellor, Geoffrey Howe increased VAT to 15%, reduced the top rate of income tax from 83% to 60% and announced reductions in public spending.

While there were many differences in both economic environment and policy between Thatcher’s early years and today, from Kaldor’s speeches, we can draw some interesting parallels between the justifications made for government budgetary decisions made then, and the justifications for austerity being made today. Here are a few examples from Thatcher’s first year in office.

On the incoming Conservative Government (13.6.79, p12):

“…up to now Conservative Governments in this country were predominantly pragmatist… This time it is different. This time we have a right-wing Government with a strong ideological commitment which is something new in this country…”

The new Thatcher broke with the post-war consensus and steered a different course, one which was continued through the Major, Blair and Brown years and a course which the present Government is now trying to accelerate before it’s too late.

On the tax changes in Howe’s ’79 Budget (19.6.79 p19):

“In this Budget the tax remission to a millionaire or to a man with £50,000 a year, is well over £6,000 a year – enough to allow him to get a second Rolls-Royce. Lord Boyd-Carter says that all this is small beer: a small price to pay for the enormous advantages which efficient entrepreneurship and risk-taking can bring us…

In 1979, the Tories cut the basic rate of tax slightly, while at the same time increasing VAT (on many items from 8% to 15%) and significantly cutting income tax for the highest earners. Sound familiar?

On ‘Squeezing the Poor’ (19.6.79 p21):

“The two main contentions of the Chancellor, that the economy must be ‘squeezed’ in order to get rid of inflation and that top people must be better off in order to induce them to work harder and become richer, in themselves imply that some people must be worse off. These people must be the poor people.

[The poor economic forecasts] will not reflect ‘a shortage in demand’ but a ‘growing series of failures on the supply side of the economy’.

Today we have tax cuts for the rich and bedroom taxes and real terms cuts to benefits and wages for everyone else, while poor growth is blamed on ‘the world economy’ and talk of the need for labour market reforms. The similarities to ’79 are unmistakable.

Here’s, Kaldor on ‘The Momentum of Decline’ (19.6.79 p23):

“These policies (in response to inflation in the 1920s) led to the unprecedented crisis of capitalism in the early 1930s, to Hitler and to the Second World War. We can only hope that on this occasion the outcome will not be so tragic. But the tone of the Chancellor’s speech was strongly reminiscent of what was said by Dr Bruning, by Herbert Hoover and by Philip Snowden in his Budget speech. There is one common theme in all those speeches: we must first suffer agony to be able to make a clean start.”

A bit dramatic perhaps, but the idea that austerity is something we must endure in order to renew our economy prevails.

Finally, here Kaldor on ‘An impotent government’ (7.11.79 p38):

“As far as output, employment and economic growth is concerned, the [Comprehensive Spending Review of its time] adopts a wholly fatalistic attitude. All it says is that ‘the prospects are poor… both in this country and the rest of the world’. This reminds me of a statement attributed to Neville Chamberlain during the Great Depression that the government is no more capable of regulating the general demand for labour than it is of regulating the weather. After a long circle, we now seem to have returned to the same point.”

This is very reminiscent of the current Government’s desire to blame all ills on the Eurozone and to stand idle while unemployment remains high, incomes stagnate and the housing crisis worsens.

The point of quoting the above then is to demonstrate that we’ve been here before (and not so long ago). The likely effects were predicted before the policies were implemented (as with Cameron and Osborne’s austerity). While in Thatcher’s time, the result was three million unemployed and the destruction of British industry, today, unemployment has not gone so high, but only because now we have zero-hour contracts, part time work and working tax credit-supported self-employment instead. The long-term impacts though could be equally as damaging.

How much longer?

Quote

How much longer?

First posted on May 16, 2013

I look to the mainstream media for some honest reporting and perspective – Ha!

I look to the Opposition for some counter-arguments, some persuasive alternatives – Ha!

And I look to the Government – yeah, that body of representatives whose wages we pay to manage our common affairs and interests on our behalf. That bunch of cretins who fought tooth and nail for the chance to be in charge and will no doubt convince themselves to try again in 2015. Ha!

For how much longer do the good people of this country have to bang on about the need for repairs and new infrastructure? I shan’t patronise with a list, for it is endless – and the number of people ready, willing and able to participate in such large and essential projects is also becoming endless. But you don’t need me to explain about the scourge of unemployment, the reasons for underemployment, the plight of our untrained and despondent youth, the complete and utter waste of brain and brawn…

How many times do the good citizens of this country need to suggest the lowering of house prices – both for sale and rent? How many times do we need to explain that the landlords are the rentiers; that the surveyors and mortgage companies determine what a property is worth?

How many people need to be made homeless before it’s acknowledged that there are not enough affordable houses? How much longer will the Government get away with this bedroom tax abomination, given that for many, that bedroom is not an extra room at all and in light of there being no alternative housing for those who would be happy to downsize?

For how much longer are the lucky employers of this country going to have their wages bill subsidised by the government in the form of tax credits? For how much longer will the taxpayers put up with their hard-earned contributions going to this curious and very uncapitalist subsidisation of wages?

When is someone going to say that paying some poor sop a pittance to look after someone else’s kid so the parent can go and work for another pittance is just plain crazy and mostly serves a cold and futile ideology? Where on earth did this obsession come from that every single adult must work in some governmentally recognised capacity for it to even be considered a worthwhile occupation?

When is someone going to tell that Iain Dontcare Smith that a few disabled people aren’t going to save the economy by being made to work at some meaningless job which still requires loads of government subsidy because employers tend to have to be blackmailed into employing them? Whose needs is IDS serving?

When is someone going to ram this empty but plainly loaded “make work pay” phrase up the ivory towers of these disingenuous MPs? We all know it’s not about getting a wage you can live on, but about reducing benefits to a level on which you obviously can’t. Given the magnificent economic incompetence of this Coalition, this is a nasty attitude at best.

But then, when is the good British public going to tell this government that all their welfare reforms are cruel, given the economic climate? That if you want to weed out the genuinely feckless or lazy, you have to provide a climate in which they become self-evident rather than merely accused as such by carping government ministers and high-horsed media stenographers. Apparently “welfare’ shouldn’t be a lifestyle choice” but who is in charge and who hasn’t provided any real alternatives? When will the public ask whose “choice” it actually is?

When will the good people remind this government and media that Brits are perfectly happy to do the jobs immigrants do, that it’s not the nature of the job but the deliberately low wages these jobs come with? When will the public realise that it’s only possible to live on such poor wages when you’re single and prepared to share your accommodation with 20 other people because you imagine and hope that this will be temporary? When will government and media acknowledge that it is policy and slack stewardship which create the climate possible for both immigrants and British citizens to be exploited and undercut in their wages, working conditions and accommodation?

And when, oh when will the good people of this country stop blaming immigrants and Europe for all the ills which plague this nation? When will it realise that Europe doesn’t just hand down some edict which can’t be questioned or modified – that governments are largely free to interpret most EU guidelines in their own ways and that that is exactly what they do. It’s called expedient political gaming when a government claims its hands are tied by Europe.

When are the good people going to tell this government that they know who makes the rules by which HMRC must operate? The likes of Amazon and Google are doing what any business would be sensible to do: maximising their profits and paying out as little in tax and other overheads as they can get away with. Who sets the rules? Who decides what ‘evasion’ is and what is ‘avoidance’?

When are the good people of this country going to rail at the government for its bigotry and ineptitude? When are the rational citizens going to declare war on short-sighted, ignorant, crass and divisive policies?

I’m not looking for answers here. This is just a rant. Like you, I already know what I want most of the solutions to look like.

Robert Reich on the UK Economy

The debt and the deficit are reflections of the failing economy.  They are not the cause of the jobs and living standards crisis. We need to stop self-harming with ‘austerity’.

tradesunioncongress 

Published on May 17, 2013

Professor Robert Reich talks about what’s wrong with austerity and the current direction for the UK economy. Part of the After Austerity series from the TUC: http://www.afterausterity.org.uk

Bill Oddie’s Bankwatch

From Global Witness:  Bill Oddy tracks the most destructive species on earth – bankers.

Bill Oddie’s BankWatch

Published on May 13, 2013

Why was Bill Oddie evicted from HSBC’s London HQ? Watch the film to find out. Sign petition for change here:https://secure.38degrees.org.uk/page/…

The UK’s biggest bank has so far made around £100 million by providing loans and services to some of the most destructive logging companies in the world, often in violation of its own policies.

Please sign the public petition to HSBC CEO Stuart Gulliver calling for the bank to stop profiting from the disappearing rainforests of Borneo. We can stop this.


Read more here

The hidden welfare state

The UK has two welfare states.  There is one that is reported and endlessly discussed, and another, which is rarely mentioned.  Whilst the first is suffering enormous cuts under the Tory/LD coalition, the other just keeps expanding.

Comedian, author and activist Rob Newman explains to the New Internationalist magazine (May 2013):

Governments on the left and the right can always justify welfare cuts by pitting, for example, mobility scooters against needle exchanges, or the soft-play area in children’s playgrounds against an old people’s home.  Who deserves it most, they say, students or cleaners?  Old or young?  But when we’re running not one, but two welfare states, that’s a totally fake scenario.  The real choice is between playgrounds or gas rigs; between Meals on Wheels or The City of London Currency Speculators’ Maintenance Allowance.

There’s a connection – never mentioned – between, let’s say, Britain’s eight new deep-water gas rigs and its 200 new food banks.  The connection is that the $4.5 billion subsidy package being doled out to transnational gas corporations is a very big slice of the welfare pie.  And to keep the gas transnationals on the benefits to which they are addicted, hungry humans have to queue for tinned food that is too close to its sell-by date to be kept on the shelves of supermarkets, many of which are themselves massive recipients of corporate welfare.

Not only does the UK pay out unemployment benefits less generous than Romania, Albania and the US, but the wages of the employed have simply not kept pace with productivity over the last 30y.

Tory Ideology is all about Handouts to the Wealthy paid for by the Poor

Meanwhile, the corporate sector sits on a colossal cash surplus of £800bn but without investing because the real problem continues to be the lack of aggregate demand… and the richest 100 UK citizens, only 0.0003% of the electorate, now have wealth estimated at £257bn.

Nevertheless, George Osborne has been prepared to cut £18bn from benefits plus a further £81bn from public services in the name of unavoidable austerity, whilst at the same time providing huge subsidies, tax cuts and removing regulation for the hidden ‘welfare’ system that benefits the private sector.

No goods or services are directly returned to the government in exchange for these expenditures, although of course,  politicians will argue that they’re stimulating the economy, helping struggling industries, creating jobs or funding important research but actually this is just a corporate welfare system.

The Cato Institute estimated that in the US, $93 billion were devoted to corporate welfare in 2002. This was about 5% of the federal budget… and nearly twice the amount spent on social welfare ie. feeding people, housing the homeless, raising children out of poverty…

There is no reason to think the situation is different in the UK.  However, overall statistics for the UK corporate welfare budget are hard to discover .. and the variety of different subsidies are staggering.  Needless to say, our MSM focuses its attention on fraud and waste in the social welfare budget.

Welfare fraud and waste is never far from the top of the UK’s news agenda – but the real figures often bear almost no resemblance to popular belief. The British public, for example, think around 27% of the welfare budget is lost of fraud, according to TUC research.

The Department for Work and Pensions’ latest data on fraud and error in the benefit system shows a very different reality: fraud exists, but at a far lower level than the public believes – and is outweighed by errors from claimants and officials alike.

The overall figures show fraud and error are largely unchanged from last year. The DWP estimates £3.5bn has been overpaid due to errors and fraud in the system; 2.1 per cent of the overall benefit expenditure.

http://www.guardian.co.uk/news/datablog/2013/may/13/welfare-fraud-error-universal-credit

The corporate welfare budget arises from four main sources:

Paying little or no tax – Tax havens

Tax breaks

Enjoying huge subsidies

Removal of employment and environmental protection regulations

The task of covering all these areas adequately is beyond the scope of this post so I offer these quotes which illustrate some of the ways in which the corporates are benefiting from political sponsorship of their welfare:

The UK’s 100 biggest public companies are running more than 8,000 subsidiaries or joint ventures in onshore and offshore tax havens, according to research published on Monday, raising fresh concerns about the full extent of corporate tax avoidance.

The figures, published by the charity ActionAid, show that only two of the companies listed on the UK’s FTSE 100 have no subsidiaries in tax havens – while companies such as Barclays and Tesco own hundreds. 

http://www.guardian.co.uk/uk/2013/may/12/uk-companies-condemned-tax-havens

Could this be the same Chancellor who in his 2012 budget offered multi-nationals which opened a finance subsidiary in a tax haven a reduction in corporation tax from the then rate of 23% to an eye-wateringly low level of just 5.5%?   It could be, and it was.   Is this the same Chancellor who, whilst ultimately controlling the UK Crown Dependencies and Overseas Territories which constitute up to half the world’s most frequently used tax havens, declined to take any action to close them down?    Yes, it was again.

http://www.michaelmeacher.info/weblog/2013/05/corporate-tax-scams-in-developing-countries-the-next-target/#more-5201

I say tax gap is £95bn

It was revealed recently that only one in four of the UK’s top companies pay their taxes, meanwhile they receive tax credits to the tune of hundreds of millions of pounds funded by people who did pay their taxes.

http://scriptonitedaily.wordpress.com/2013/05/12/corporate-giants-arent-wealth-creators-theyre-parasites/

 … vastly profitable large chains of supermarkets … get an enormous subsidy to help with one of their major overheads, staffing costs. This is because many employees in these large and successful companies are paid only the minimum wage. And because the current minimum wage is not a living wage, nearly everyone on it has to claim tax credits to be able to make ends meet. Those tax credits are funded by the taxpayer…. Let’s stop calling them “wealth creators” and start calling them state subsidised industries.

http://www.searchingfinance.com/news-and-views/teresa-pearce-mp-a-living-wage.html?goback=.gde_1211737_member_236208402

Currently, it is estimated that the government has already provided £43.5bn in various subsidies including the National Infrastructure Plan, the Equity Loan and Help to Buy schemes, the Enterprise Finance Guarantee and the Regional Growth Fund, with nothing to show for it.  Far greater sums are in the pipeline, up to £310bn.  

https://think-left.org/2013/05/11/despite-britains-new-thatcherites-only-the-state-sector-has-recovered/

It is more important to [the Tory/LD coalition] to privatise everything they can in pursuit of their real objective of a fully marketised State rather than to compel these banks, of which the taxpayers own 82% of RBS and 39% of Lloyds, to prioritise lending to industry to kickstart the economy and get growth going at last.   Even more significantly, an enforced sale before the election will at their current share value lose taxpayers £24 billions!   That is truly staggering when Osborne has been prepared to cut £18bn from benefits plus a further £81bn from public services in the name of unavoidable austerity.   Yet at the same time he is now disposing of assets which will gratuitously lose the public coffers £24bn.

http://www.michaelmeacher.info/weblog/2013/05/osbornes-smack-in-the-face-for-all-benefit-spending-cuts-victims/

 

It is arguable that without the state’s support the banking sector would have collapsed entirely.  But even on the most favourable comparison from the low-point of the recession the subsidy has been hugely inefficient.  A £1,020bn hand-out to the banks has yielded an increase in output over that time of approximately £40bn.  It would have been far more efficient if the state had directed its own capital into the production of banking services, via fully nationalised and controlled banks. 

https://think-left.org/2013/05/11/despite-britains-new-thatcherites-only-the-state-sector-has-recovered/

114 year Workers Rights Scrapped by Coalition Government.

For the Benefit of the Conservative Party – “FOR SALE – Local Hospital and Schools “

.. if you spend £100 on healthcare in the NHS you get one hundred quid’s worth of healthcare less about 5% management costs. In the private sector you’ll get a hundred quid’s worth less 3% management costs, 5% profit, 12% to pay bank loans and charges, plus a chunk for bonuses, dividends and return for investors. And, no provision for what happens if they go broke or get fed up.

http://www.hsj.co.uk/comment/opinion/andrew-lansley-competition-is-critical-for-nhs-reform/5041288.article

I will conclude with the 2011 nef briefing,  ‘Feather-bedding financial services’, which asked, in addition to the unprecedented public support for the financial sector over the past three years, how much are the big banks benefitting from hidden subsidies?  They identified at least three significant hidden subsidies:
  • The ‘Too Big to Fail’ subsidy: The government now provides a public guarantee, effectively insurance against banks going bust. This gives banks a huge commercial advantage over other firms in a market system. It means banks are able to borrow money much more cheaply than if they were not ultimately underwritten by the public. Exchanges with leading auditors in front of the House of Lords Select Committee on Economic Affairs in January 2011 confirm this. A conservative analysis reveals that this hidden subsidy could be worth £30 billion annually. It means that bonuses to senior staff for ‘performance’ and dividends to institutional investors are at least in part a straight transfer from the taxpayer.
  • The quantitative easing windfall subsidy: When it was decided that the economy needed more liquidity, the Bank of England pumped money in using the technique called ‘quantitative easing’. To meet various, and sometimes self-imposed, requirements, it did by purchasing government bonds through investment banks. Merely for being passive conduits for this ‘risk free’ arrangement the banks took a cut of every trade. Here nef analysts found that banks enjoyed a significant windfall, but that lack of transparency keeps the likely amount hidden.
  • The ‘make the customer pay’ subsidy: Looked at sympathetically, the banks have been put in a difficult position. At the same time as being required to rebuild their capital, they are also under pressure to lend. In response, the banks have tried to manage this by increasing the gap between what they have to pay to borrow money, and what they charge people to borrow from them. This is the so-called interest rate ‘spread’. But the banks have a choice. They could recapitalise by reducing or eliminating bonus and dividend payments until their capital base is rebuilt. As it is, the taxpayer is subsidising the banks twice over: once through taxpayer funded public support to the banks, and secondly through paying much higher interest to borrow than the banks do. This hidden subsidy to retail banking and one part of the investment banking world amounts to at least another £2.5 billion each year.

http://www.neweconomics.org/press/entry/are-british-banks-getting-billions-in-hidden-subsidies-asks-nef

As James Galbraith wrote:

The Predator State…. The state as monopoly collector of taxes and corrupt distributor of the spoils to the private sector…

There is no common good, no public purpose, no shareholder’s interest; we are the prey and governments as well as corporations are run by and for predators.

Furthermore, none of this is likely to get any better under the rules of the US-EU FTA (Free Trade Agreement) which the Tory/LDs are wanting to get signed by 2014.  Part of the secret negotiations are the transfer of sovereignty from nations to private corporate tribunals who will be empowered to compel governments to change their laws or pay unlimited fines.

Are we already in the post-democratic era?