Banks Don’t Lend Money .. Do They?


Banks don’t lend money

Do They?

Previously published here from Mickanomics

Hat-tip – CJ Stone:

Professor Hyman Minsky once wrote “Banking is not money lending; to lend, a money lender must have money. The fundamental banking activity is accepting, that is, guaranteeing that some party is creditworthy. A bank, by accepting a debt instrument, agrees to make specified payments if the debtor will not or cannot”.

“Banking is not money lending”? Surely some mistake! Why would an economist as famous as Professor Minsky make such an outrageous sounding statement?… Well the answer is that its perfectly true. Crazy though it sounds, banks don’t lend money at all. To understand why this is the case we must understand some technicalities about money.

Most people imagine that money is simply a system of government-created
tokens (physical or electronic) that get passed form person to person as trade is carried out. Money of this kind does indeed exist, so called “central bank money” is of this type. However the vast majority of the money we spend day today is a second type, technically known as “broad money” or “cheque book money” which can best be described as “spendable bank IOUs”. The concept of a spendable IOU may sound rather strange, and in order to explain it, we must first consider some characteristics of an ordinary IOU, the kind you or I might use…

Say that Mick wanted to borrow £10 from Jim. Jim could give Mick a £10 note in return for a piece of paper with “I.O.U. £10, signed.. Mick” written on it. The IOU would then have some value to Jim as a legal record of the loan. At some later time Mick would repay the loan. At this point Jim should no longer keep the IOU because Mick would no longer owe Jim any money. The IOU has now done its job and may be disposed of. To summarise, the lifecycle of an ordinary IOU is as follows:


  • Creation (out of nothing. It did not exist previously)
  • It now has value as a legal record of the loan.
  • It expires (back out of existence) when the loan is repaid.

Note that even though the IOU has value during stage 2, it is not easily spendable. If Jim went into a grocery shop and said “I’d like to have £10 worth of food, here’s an IOU from Mick, he’ll pay you back later”, the shopkeeper would almost certainly refuse. This is because the shopkeeper has no idea if Mick is creditworthy, the shopkeeper would be worried he may never receive £10 from Mick. Now imagine for a moment that it could somehow be arranged to have a guarantee from a famous high street bank, that Mick would indeed pay £10 to the holder of the IOU. Then the shopkeepers fears would be allayed and he would have no reason not to accept Mick’s IOU as payment for food. To summarise, a bank guarantee could convert a non-spendable IOU into a spendable IOU.


So far this has all been hypothetical, but to see a non-spendable IOU get converted into a spendable one in the real world, look no further than the process of getting a “bank loan”. The term “bank loan” is in fact highly misleading. What is actually going on is not lending at all, it is in fact an IOU swapping arrangement. If Mick went to borrow £1000 from a bank, the first thing that would happen is that the bank would asses Mick’s creditworthiness. Assuming it was good enough, then the bank would ask Mick to sign a “loan agreement” which is essentially an IOU from Mick to the bank. What the bank would give Mick would generally not be “central bank money”, but instead its own IOUs (i.e. cheque book money). And just like ordinary IOUs, bank IOUs do not have to be obtained from anybody else. They are just created on the spot. No “lending” is going on. In order to “lend”, the bank would have had to have been in possession of the money beforehand, and they were not.

So there you have the layman’s explanation. But some people are still not convinced. Many people have heard a different explanation of the money creation process at university or from textbooks and so assume that this explanation is somehow wrong. But let me assure you that it is the textbook explanation that is wrong. I do realise that “extraordinary claims require extraordinary evidence”. So here goes…

The first thing to say is that the explanation given here is indeed a simplification of the money creation process as it occurs in the real world. The full details of which are so complex and so frequently changing that they are not taught to undergraduate students as part of economics degrees. What students are often taught instead is a toy model of reality. A not-actually-true teaching aid. The idea of using a not-actually-true teaching aid is not unique to economics, in the field of chemistry a similar thing occurs with regard the behaviour of electrons around atomic nuclei. The real world behaviour is too complex for undergraduate students, so they are taught a not-actually-true story of “electron shells”. Its in virtually all the textbooks.

The standard not-actually-true method for teaching students about the workings of our monetary system is an explanation called the “money multiplier model” in which banks appear to lend out money that has been deposited with them. When some economists finish their degrees and subsequently go on to specialise in the monetary system and finally learn the full details of the process, they occasionally have some choice words to say about the undergraduate textbook model:

  • “The way monetary economics and banking is taught in many, maybe most, universities is very misleading”. Professor David Miles, Monetary Policy Committee, Bank of England.
  • “It amounts to misinstruction”. Professor Charles Goodhart CBE, FBA, ex Monetary Policy Committee, Bank of England.
  • “The textbook treatment of money in the transmission mechanism can be rejected”. Michael Kumhof, Deputy Division Chief, Modelling Unit, Research Department, International Monetary Fund.
  • “Textbooks assume that money is exogenous.” … “In the United Kingdom, money is endogenous” Mervyn King, Governor of the Bank of England.

Notice the extremely high calibre of the economists being quoted. These are all economists that specialise in the workings of our monetary system.

Is this issue controversial? Well yes and no (but mainly no)… let me explain. the issue is only controversial in as much as non-experts (that have just learned the textbook story) may say things that contradict the experts that have a detailed knowledge of the system in reality. But amongst the experts, it is not controversial at all.

I shall finish with a quote form Professor Victoria Chick, Emeritus Professor of Economics, University College London: “Banks do not lend money. It may feel like it when you get a ‘loan’, but that’s not what they are doing. They don’t have a pot of money which they are passing on. What they are doing is accepting your IOU… they simply write up your account”.

So there you have it, banks do not lend money. And if you want to argue against this on academic grounds, please only quote economists that specialise in the monetary system.

Malaise, Lost Democracy and the Disease of Defeatism, Depression and Doubt



By Julijuxtaposed

Some days, I think I’m ill. I feel ill.  Not the ill of my pained and exhausted body: the source of depletion and variability in my personal resources. That’s bad enough but I can cope. Mostly. For now. I’m afraid it’s all become very much dependent upon government policies and familial support.

No, I’m coming down with something else, I know it. It’s dis-ease. I’m battling with symptoms such as defeatism, depression and doubt. Oh, and bitter sarcasm. It functions like one of those irritating pop-up messages or a heavy, wet cloak; a would-be usurper of thought and emotion. That’s fear. Fear that the world’s and our domestic problems are too big and too numerous to surmount; that I’m too small to make a difference; that nothing will change because leadership and its ideas don’t; fear that the solutions – to nigh-on everything – are driving us towards ever more complex systems. Natural entropy, mutated. Things have gotten so ridiculous, so utterly convoluted; ‘the devil’ must be having a field day.

We’ve tried marching and petitions; we’ve emailed our MPs and complained to mainstream media about how they have ill-served us and little, if anything changes.

The whole world is at war – for it is a war – with the avarice of a few inordinately powerful bastards and it feels like we are just creating skirmishes. From ‘Arab Spring’ to Spain, Turkey, Brazil, I watch their passionate running battles and their courage and ingenuity with awe and a little envy – or maybe it’s wistfulness, because here in Britain, we just sit around moaning about what’s wrong, march a bit and put the kettle on. We practise the equivalent of petty skirmish. So much for ‘bulldog spirit’ – we’ve become more like abused Labradors.

Anger is justified in our current climate. It’s highly appropriate. Anger, like fear and pain, tells you something is wrong and, channelled well, it’s Anger’s best gift. But the anger, so consistently expressed until a few short days ago, is in danger of becoming the acceptance of victimhood. Like me, I’m sure you’ve noticed the creeping despondency on twitter lately and within the pages of our favoured bloggers and journalists. We know what’s wrong; we’ve identified that much. We even have some sound solutions between us all. And yet…

I don’t know about you, dear Reader, but I’m finding the idea of years filled with endless skirmish completely and utterly soul-destroying. I’d rather go out fighting – hard. But, like many of you, this old carcass would find the mischief of which my healthy self was capable, almost physically impossible. My own personal acts of dissent and my amateur efforts at blogging are not even a drop in the ocean and my circumstances inhibit my other impulses. Not to mention the fear of consequence that comes with lone protest – real or imagined. No wonder I feel impotent and no wonder I’m reading that same sentiment wherever I look.

In my dreams, I want to storm Parliament, take our MPs literally by the scruffs of their fattened necks and hurl them out into the street. I want dramatic change. For the better, obviously. But Nature, abhorring that vacuum cannot guarantee it.

Nevertheless, I want us all to demand a halt to current proceedings. I want one of those transitional government thingies to keep the country ticking over – doing nothing new – while we all decide what kind of a people we want to be and how that should best be reflected and enacted. Don’t tell me that’s naive or impossible. It’s essential if we want to make real, meaningful, sustainable and ethical change. Neither does it need to take very long.

None of our politicians from the main parties will achieve our notion of a better world and we all know the reasons for that. But, dear Reader… If I did have a magic wand; if I was as big as enough of us; if was organising a protest…? It would not take the form of a march, a carnival or a rampage.

I would go to Parliament or Downing Street. Or other pertinent places of Government. Please don’t bother to write and tell me all the reasons why I’m not allowed – I don’t care. In fact, the fact that I might need to request permission tells me all I need to know. I wouldn’t be seeking permission; I’d be exercising my right.

I would go to Parliament. I would take candles and a banner saying “Government, stand down. Now” and I would stay there in silent vigil until it did.

[Now, just to reassure you: this post reflects a temporary and fluctuating state that I have observed in myself and others. Ultimately I am optimistic for the Human Race. I don’t know if I’ll live to see it and I’m not all that confident that my children will. But Humanity will. As to my preferred form of protest? Silence is golden ;-) ]

One Moment in Annihilation’s Waste,

One Moment of the Well of Life to taste –

The Stars are setting and the Caravan

Starts for the Dawn of Nothing – Oh, make haste!”

Omar Khayyám (1048 – 1131)

The Coming Tyranny and the Legal Aid Bill


The Coming Tyranny and the Legal Aid Bill

from KittySJones

legal Aid

“Ministers keep using the mantra that their proposals are to protect the most vulnerable when, quite obviously, they are the exact opposite. If implemented their measures would, far from protecting the most vulnerable, directly harm them. Whatever they do in the end, Her Majesty’s Government should stop this 1984 Orwellian-type misuse of language.”  – Lord Bach, discussing the Legal Aid Bill.

Source: Hansard, Column 1557, 19 May, 2011.  

The Ministry of Justice’s “reforms” (Tory-speak for cuts) to legal aid undermine the fundamental principle of legal  equality and breach Article 6(1of the European Convention of Human Rights: the right to a fair trial. They reflect a truly authoritarian agenda of legislative tyranny: the reforms effectively remove legal access for many, crucially that access ultimately safeguards individual liberty against intrusion by the State, and protects us from despotic abuses of authority.

The cuts will seriously undermine access to justice and sidestep the obligation of Government accountability. The cuts will affect the most disadvantaged and vulnerable in society and allow unlawful and unfair public body decision-making to go unchallenged.

The Equality and Human Rights Commission’s analysis in 2012 warned that reducing the scope of legal aid in a substantial number of areas in civil and family law will create serious practical barriers to access to justice, potentially in breach of Article 6(1) of the European Convention on Human Rights (ECHR).

The cuts to the civil legal aid budget, which came in to effect from April 2013, mean many cases, including those about debt, private family law, employment, welfare benefits, clinical negligence and housing problems are no longer eligible for funding.

This is at a time when the Government have implemented other radical, controversial and contentious cuts to health, education and welfare, and it is no coincidence that the legal aid Bill will curtail justice for those with legitimate needs at a time when draconian Tory policies such as the bedroom tax will most likely result in a massive increase of numbers of people needing and seeking redress.

This will mean the compounding of effects of other fundamental  human rights breaches, legally unchecked, because of the profound impact of multiple, grossly unfair and unjust Tory-led policies. Each policy hitting the same vulnerable citizens, to their detriment, over and over.

This sends out a truly horrific message to those of us who believed we lived in a first world liberal democracy  (one that has recognition of  individual rights and freedoms embedded in its’ Constitution, and one in which decisions from direct or representative processes prevail in State policies.)

The promotion of equal opportunity to legal justice is the bedrock of a free and democratic society. It ought to be inclusive of all who cannot afford to be tried fairly. The reality is only a few can afford the legal costs to enforce contracts and against criminal prosecution. This profoundly unjust inequality is not something we expect to see in a Country which was once a beacon of Western liberty.

The only way to wed the principle of a “pursuit of economic liberty” with wider justice is by a basic notion of equality before the law, through the equal access to justice. This means that the State must fund the means of contract enforcement and free and fair trial legal costs, for those who cannot afford it. If the State fails to fulfil this contingent function, then we simply cease to be free.

  • “Legal aid will continue to be provided to those who most need it, such as where domestic violence is involved, where people’s life or liberty is at stake or the loss of their home. But in cases like divorce, courts should be a last resort, not first. Evidence shows that mediation can often be more successful and less expensive for all involved.”  –  Chris Grayling.
  • Section 10 of LASPO (Legal Aid, Sentencing and Punishment of Offenders Act 2012) provides the new Director of legal aid casework with the power to provide ‘exceptional funding’ for cases that are out of scope.
  • Part 8 of the Civil Legal Aid (Procedure) Regulations 2012 indicates that providers of legal services will not have delegated powers to grant exceptional funding of the Human Rights Act 1998), or any rights of the individual to the provision of legal services that are enforceable EU rights, or that it is appropriate to do so, in the particular circumstances of the case, having regard to any risk that failure to do so would be such a breach.

This misses a very crucial point: it’s very dangerous to allow the State to decide which cases constitute the most need. In a free, democratic and fair Society, each and every single individual has equal legal worth and entitlement to opportunity to bring about legal justice.

The Government choosing which cases are most “worthwhile” undermines this very premise of legal equality which is so fundamental to the notion of liberty. Everybody has a right to take any grievances they have, which have invoked legal ramifications, to court. Everybody ought to have an absolute, inalienable right to free and fair trial in a free, democratic and liberal country.

Having cut the civil legal aid budget by £320m, the Ministry of Justice proposes to cut the criminal legal aid budget by a further £220m. Legal contracts are to be based on competitive tendering. One of the outcomes of the reform and cut to the budget is that defendants on legal aid will no longer be offered a choice of solicitor.

One of the most unfair aspects of this system is that if you are charged, the State will select a prosecutor with specialist experience in that area of the law, funded by the taxpayer. Be it a sexual offences case, a road traffic death, a murder, a drugs case or a serious assault, in each case, a prosecutor will be picked to prosecute you from a specialist team.

But when it comes to your defending yourself, however, you will be given no choice. You will either have the defence lawyer allocated by the State or you will be on your own. This cannot be right. Many legal experts have voiced their alarm at this, because it will  invariably lead to gross injustices.

Large commercial firms who are going to be paid, win or lose, will have a vested interest to encourage their clients to plead guilty, whether they are or not. At a time when people are at their most vulnerable they need a local service that listens, not a business, whose goal will be to turn around the case as fast and cheaply as possible.

The scope for dangerous consequences due to vested interests in the justice system following Justice Secretary Chris Grayling’s “reforms” is considerable, and allows potential for further erosion of legal freedom. In some cases,  the sole choice of lawyer for a defendant via legal aid will also be a representative for the organisation with an interest in ensuring a prosecution.

The  tendering process – where the cheapest bid wins – would be run by companies with no record of providing legal services, resulting in a dumbing down of the profession and a race to the bottom that will mean  people being denied access to quality legal aid.

As is always the case when private companies that are driven solely by the  profit motive are involved in any service, cases will be run on the cheap by under-qualified, inexperienced, low-cost staff.  The company Serco, for example, provides prison security guards.

Serco is one company bidding for the legal contracts with the Legal Aid Agency. The Department of Justice has proposed to remove defendants’ automatic right to select their own solicitors to make the contracts to bidders more profitable.

I have no doubt that the Coalition wants to see access to justice removed for those affected by its nightmarish, dystopian policies. Those people affected most of all are our vulnerable citizens, as the cuts have been disproportionately aimed at sick and disabled people, and those who are unemployed.

We need look no further than Clause 99 of the welfare “reform” Act to see how silencing those seeking redress is a priority for this Government. This is also about hiding the evidence of the dire consequences of the  ”reforms”, since large numbers of successful appeal outcomes highlight, for example, that the Work Capability Assessment (WCA) is grossly unfair and widely inaccurate.

Yet despite almost 11,000 deaths that have been attributed to people being wrongfully assessed, the Government have not even instigated an inquiry into the WCA. Had an auto-mobile been associated with such a high number of deaths, it would have been withdrawn. Yet we still have the WCA, and incredibly, no willingness for an investigation from our perennially indifferent Tory-led Government.

Those wishing to appeal wrongful decisions by Atos/The Department of Work and Pensions (DWP) that they are “fit for work” after having their Employment Support Allowance (ESA) unfairly  removed will find that this will be an almost impossible task, since their right to legal aid has been removed. The introduction of the  Mandatory Review in Clause 99 will mean that they have to wait an indefinite period without any ESA sickness benefit, or claim Job Seekers Allowance (JSA), whilst waiting for the DWP to conduct the review, with no time limit imposed on the DWP to do so.

That means signing on and declaring that you are fit  for work, and people are being told by the DWP, unbelievably, that they don’t qualify because they are not fit, or fully available for work. Others have been told that to claim JSA they need to close their ESA claim which means they cannot appeal a review decision. Basic rate ESA is exactly the same amount of money as JSA, so the Government cannot even claim this is a cost-cutting move.

And we also know that Atos are contracted by the Government to make “wrongful” decisions.

The right to a lawyer of a persons’ choice, regardless of your income, race, gender or nationality, is an underpinning condition of a free and fair justice system. Having both a sense of, and access to choice, over one’s legal representative, who is there to fight for justice is paramount to basic legal equality and liberty. When this choice is removed and legal representation is essentially imposed on a passive defendant by the State (if a defendant can still access legal aid at all, that is,) our justice system becomes unacceptably authoritarian.

And it has.


A response to this article from the International Human Rights Commission: “The IHRC strongly condemned the Bill and asked the UK Government to consider this action, which is against the norm of human rights”.

7005_494073677328832_658777491_n (1)

Thanks to Robert Livingstone for his excellent artwork 

Further reading:

Guidance on the exceptional funding regime

The Public Law Project scheme to assist people with making exceptional funding applications

Government lawyers warn Justice Secretary Chris Grayling over proposed ‘unconscionable’ changes to legal aid

Cutting Legal Aid – the surest way to threaten Justice 

John Finnemore on The Now Show, discussing the injustice of the Legal Aid Bill

Building a Movement from Below: The People’s Assembly


The People’s Assembly: Building from Below:

  • What does this really mean?
  • What are the Implications?
  • Where does Labour Stand?

By Luke Cooper on this Saturday’s People’s Assembly Against Austerity previously published here:

The People’s Assembly

The People’s Assembly has resulted in a considerable bout of energetic debate on the British left, ranging from the super-supportive, to the cynically-critical, and those, on the money perhaps, who are supportively critical. But no one is seriously downplaying the size or scope of the event. With over 3,500 people set to converge on Westminster Central Hall it is clearly going to be the biggest ever gathering against austerity in Britain. It would be foolish to not see this as a big step forward in its own right. Bringing together a grand coalition of trade unionists, grassroots campaigners, socialists, Greens, pensioners, disability rights activists, and maybe a fair few regular people who want to turn their anger into action, is a big step forward for the left and shouldn’t be sniffed at.

This is a particular achievement seen in the context of divisions that have blighted the anti-cuts movement since the Tories came to power. Those of you who have not yet experienced the fractured socialist left, will be shocked to hear that campaigners against austerity have had not one, not two, but three competing anti-cuts campaigns, none of which can seriously claim to have a strong, organic relationship to grassroots organisations.


It’s an all too familiar example of the infamous Life of Brian sketch that satirically depicts the infighting of the left. What makes that scene so farcical isn’t that people are arguing. The farce lies in how the myriad of groupuscules all have ostensibly the same ideas. In much the same way there has been barely a rizla paper to separate the competing anti-cuts campaigns politically. The People’s Assembly does create the possibility of unity, but it also poses sharply a question of how to unite in a way that maximises democracy and participation.

To kick off an argument about how to do this doesn’t mean doing yet another Life of Brian rendition. It’s not about ‘splitting’ for no good reason, or having huge rows over nothing, because debate is what the People’s Assembly should be about.

There is no shortage of things to discuss and there have been too many left wing conferences over the years when everyone says the same thing, no one dares disagree with one another, and the audience is left bored. Standing shoulder to shoulder with other constructive critics, here are three things that deserve some critical attention. The last one is the most important – what comes next and how it’s organised to maximise democratic participation – because it’s here that the opportunity to build a really powerful anti-austerity movement might be lost.

1. Unions

First off, there’s the unions. It’s excellent that the People’s Assembly has won the backing of the major public sector unions. They are an essential part of the fight against austerity. But there is no getting round the fact their existing leaderships have failed to deliver the action we need to start to the turn the tide on austerity.

When millions went on strike in November 2011 it testified to the enduring power of organised labour. But hopes that this might be a new dawn for workplace radicalism were soon dashed. The strikes were called off. And many of the union leaders who will grace the platforms of the People’s Assembly were central to delivering a rotten pension deal when there was still all to play for. The People’s Assembly will have failed the very people it is seeking to represent, if it doesn’t provide a platform for trade unionists that feel let down by leaders whose pay packets far exceed those of ordinary members and who, for this reason, don’t feel the pain of austerity.

Unison, as the biggest public sector union, has big questions to answer. Not only did it lead the retreat from the pensions fight, but, worse still, its leadership have for many years witch hunted activists out of the union on trumped up charges, with bullying, intimidation and bureaucratic measures becoming the norm. It’s a classic example of an entrenched bureaucracy not wanting an activist union and doing everything in their power to keep the membership atomised and passive.

And this at a time when the Tories are on the offensiveAs Labour MP John McDonnell has put it in admirably undiplomatic terms:

“… In order for free market policies to flourish, for wages to be held back, for privatisation to continue unopposed and for workers to be made to pay for the crisis in the economy then it is equally necessary for the organisations of the workers, our parties, our trade unions, to be made impotent. One way to do that is to clear out fighters and militants. That is what this is. Unison’s leadership are doing the bosses a favour.”

It is little wonder that many Unison activists find their blood boiling when their leaders talk the talk, as they no doubt will at the People’s Assembly, only to the very next day carrying on doing nothing to fight back. It’s right that the unions are involved, but there needs to be be a voice for the grassroots in the hall too.

2. Labour 

Secondly, the major union leaderships all have a strategy: to do everything in their power to ensure Labour wins the next election. If Labour were presenting a powerful and coherent alternative to austerity, this strategy might well look appealing. But what if – as is obviously the case – Labour have no intention of turning back the cuts and, in a stream of recent announcements, have even expressed their commitment to many of the Tory spending and welfare policies.

It’s tempting to see recent policy announcements on welfare as falling into line with Tony Blair, who back in April took a swipe at Miliband’s leadership and warned against Labour becoming a ‘party of protest’. But these announcements have been long prepared for. Labour are happy to vote against the government today, but everyday make it crystal clear they stand for austerity-lite tomorrow.

These facts pose big questions to all of us who want to see a real alternative to austerity. And its one recognised by many Labour Party supporters of the People’s Assembly. Independent columnist Owen Jones, who has gone up and down the country rallying support for Saturday’s meeting, is the first to admit that Labour has offered no alternative. He sees the Assembly as ‘giving Labour some real competition’ because ‘finally, the left is entering the ring’. Jones might sound convincing, but think it through for a moment and the logic starts to unravel.

The People’s Assembly might, hopefully, become a powerful social movement (more on which in a moment). But the Labour Party has long been unresponsive to those – remember the Iraq War when millions marched to say no to Bush and Blair’s crusade? Despite funding the party to the tune of millions, even the unions have no say over policy. But Labour is not entirely immune from pressure. Ultimately it is accountable to a working class electorate that it arrogantly takes for granted. What would start to shift Miliband and co is a party to the left of Labour eating away at their electoral support: a party doing the same to Labour as UKIP is doing to the Tories.

A debate has to take place at the assembly about Labour and the possibility of alternatives. Its one the unions aren’t keen on because it challenges the very heart of their strategy: to sit on their hands, wait for 2015 and hope for a Labour return. To go away from the Assembly having not talked about Labour, and having not had the opportunity to subject its leadership to trenchant criticism for not putting up an alternative, would be a terrible waste. This is especially so when an exciting call has been put out by filmmaker Ken Loach for a new party of the left, one that has already been signed by over 8,000 people. So, Labour has to be at the centre of the discussion. Loach, who is speaking at the Assembly, can use the platform to inspire a debate on a political alternative to the pro-austerity parties. There is far too much at stake for it to be otherwise.

3. Unity

Finally, there is the democratic deficit in how the People’s Assembly is organised that others have highlighted. A statement will be put to the Assembly that neatly side steps the first two big issues – Labour and the union leaders – and can’t be amended by conference participants.

This might seem reasonable. After all, with over 3,500 people set to turn out what if they allwanted to amend the statement? Chaos would indeed ensue.

Benefit-Justice-Campaign-BrumBut it’s not as simple as that. Imagine if the local people’s assemblies that took place all over the country had discussed the statement. Imagine too if they had been able to submit amendments that could then have been composited into the main debating points. Even then perhaps not all of them could have been taken but the most popular amendments could then have been put to a vote. The base at the bottom would have then had a genuine say about the outcome at the top.

Unfortunately, this isn’t set to happen – the statement will only be amendable by local people’s assemblies in the run up to a conference in… 2014. Not only that but it doesn’t appear that the organising group will be elected at the conference either. Despite the many workshops on excellent subjects – a refreshing difference from the day-long-rally-conference – the People’s Assembly risks being a top-down affair, when the movement we need has to be a bottom-up one.

This is intended as an entirely constructive criticism. Because at the very least it’s worth reflecting upon how this new People’s Assembly Movement – which I certainly hope is here to stay – can be organised democratically after Saturday.

A big problem with how the left in Britain does things can be summarised as ‘the cult of the next big thing’. The huge spectacle of the grand conference. The next major protest and demonstration. It is all too easy for activists on the left to jump from one thing to the next without laying down proper roots in communities.

If the People’s Assembly is to play the role that Owen Jones clearly wants it to play – a mass social movement, rooted in localities and built from the bottom up, promoting an alternative to austerity – then it needs to develop a democratic structure that grassroots groups can relate to.

There is no great mystery in how this might be organised. If the wide variety of local and national campaign groups and unions that will all be there on Saturday are able to affiliate to a People’s Assembly Movement, then they can send delegates to a conference to represent their views. The organising group can be elected by and accountable to this delegate conference. Delegation sizes can be suitably weighted from different organisations to make it appropriately democratic. Local People’s Assemblies can be convened to channel proposals into the next huge conference – which should should aim to be 10,000 strong. The People’s Assembly, with this structure, would soon be transformed from a meeting into a real movement.

It’s good that ‘building from below’ is becoming a new mantra on the left. It’s a sign of a cultural change in thinking we are only slowly coming to terms with. But it’s equally important that we start to take it more seriously. That we don’t just let it become a phrase divorced of all meaning. If the People’s Assembly kicks off a debate on what ‘building from below’ looks like in practice – as material prescriptions, and not just vague aspirations, then that will be really welcome. The People’s Assembly is already a success as a conference. The question is what comes next?

People’s Fight to save Local Hospital from The Moneymen


People’s fight to save their local hospital from the Moneymen: Campaign

I know I am not alone in wondering how Labour’s most precious achievement of the NHS is being wrenched away, whilst reassured that my late parents, like the great Aneurin Bevan himself are unaware that their NHS is being sold for profit, by a government without an overall majority. Cameron said, one lie among so many, that the NHS would be safe in their hands. Their mission accomplished, it is a while since we have heard those words, “we’re all in it together.” I fear an old age without an NHS. I fear for my children and my grandchildren. I am not alone.

Can you afford your local private school? Can you afford your local private hospital? Will you have confidence that they can deliver the service and support you need? You are not alone. There are more of us.

Fear is not enough. There is a fight on our hands, and this is class war. There are more of us – united we stand up the stronger, divided, we fall.

General Hospital Privatisation in Weston-super-Mare

Weston-super-Mare is a town in North Somerset with a population of  over 200,000. This was 202,566 according to Census 2011 records,  ( lower than the 2010 Office for National Statistics (ONS) Mid Year Estimates (212,000) for the area.) 20% of Weston’s population is over 65. Housing development has led to rapid growth. Since  1981  North Somerset’s population has increased by  24% and is estimated to be 234,000 by 2021.The town is represented by John Penrose (Conservative MP),  yet there is extreme poverty and deprivation in parts of Weston and poor health.

In terms of the Indices of Deprivation (ID) 2010, North Somerset has 15 areas in the most deprived quartile in the country. All of these areas are in Weston-super-Mare. For the first time in North Somerset we have areas within the most deprived 1% nationally, and the least deprived 1% nationally. This result in North Somerset having the 7th largest inequality gap.

Clearly, we are not all in it together. It has been acknowledged that action is required by the NHS and council to plan services for the predicted growth in the population, particularly in the older age groups. The story is looking very different. Modernisation and expansion in the town led to a new hospital being built in 1986  to replace the Victorian hospital which no longer met the needs of people.  While Bristol is some twenty-three miles away, Taunton is thirty-three. Weston needs its own hospital more than ever today, but rather than invest, and improve, Weston General Hospital now is planned to be sold off – all for profits, and A & E  closed down as too costly. With some of the poorest families in the country, and a higher than average elderly population, this is disastrous for the people of Weston-super-Mare.


But the people will not take this lying down. The fight is on for the people in Weston-super-Mare. There is an active campaign to save Weston Hospital:

  • Our aim is to protect and promote the principles of the NHS, which have enabled it to provide the world’s most efficient and comprehensive health service for almost 65 years.
  • Those principles are now under threat, as a result of the Coalition government’s fundamental reorganisation programme, and their decision to promote the interests of private health care providers, over the interests of the general public.
  • What local people need to realise is that putting Weston General Hospital ‘up for sale’, is just the start of a process which, unless we challenge it, will lead to us losing more and more local services, and having to travel to Bristol or Taunton for the treatment and care which is currently available here.
  • One in ten A & E units are now under threat nationally, as a massive £20bn is cut from the NHS budget – and many have already closed with devastating results. Statistics show that when people have to travel further for A & E treatment it doesn’t just cause inconvenience, it costs lives. At Newark, in Nottinghamshire, there was a 37% rise in death rates after the local A & E department was closed, and the pattern is being repeated up and down the country.
  • We need to warn Weston residents that there is a real risk that we could lose local children’s and maternity services, and even our A & E department, within the next few years. It ought to be unthinkable that a town with a population and catchment area the size of Weston could face such a fate, but this is what is happening to similar communities all over England.
  • Only 60 miles down the road, Cheltenham’s A & E department already has ‘urgent cases’ redirected to Gloucester between 8pm – 8am, and many local NHS staff there are predicting that it’s only a matter of time before the department is downgraded to a minor injury unit, or closes altogether. Children’s and maternity services there have already been downgraded, as cutbacks start to bite.
  • The first priority now is to ensure that Weston Hospital remains within the NHS – as a sale to a private company will mean that only those health services which make a profit will be retained locally. However, people should understand that whilst merging with another NHS organisation (where patients, not profit, are the priority) is better, it won’t remove the risk of the town’s hospital being significantly scaled down. Whatever happens now, people are going to have to work together and fight, if we are going to retain the services which we all need and rely on.

Weston TUC


Unison is holding a public meeting about Weston General on June 29 at Weston-super-Mare Football Club.   Weston-super-Mare  Labour Party is actively campaigning in the area, and has launched a  is  running an on-line campaign.  Please sign the petition. There is a FaceBook group Save our NHS. John Penrose has gone on record saying that he believes the people of Weston will not “care two hoots” who runs Weston Hospital.

While public money and taxes pay out, companies such as Circle could rake in profits. Their priority would be to their shareholders, not to quality patient care. As with other privatised public services, hospitals and care, private over public does not mean better care for patients, it means better profits for the rich. It will lead to a two tier service.
A & E services could be closed, and increased travel in emergencies would increase mortality risk. People will die for profit.. that’s the real ‘bottom line”.
It is well proven that the old line “Private Good:  Public Bad is a fallacy: ( see Public Service: Private Profit, Think Left). As with other privatizations, the government’s strategy is to brainwash people into believing that a service is falling, and private companies, are all out to rescue them like Batman and Robin… on reflection, perhaps “robbing’ is more in line with the truth, simple asset stripping with no care to consequences.
The NHS has said it will not refer patients to a private hospital following a scathing assessment of the chaotic and dangerous conditions that led it to suspend children’s surgery. The Mount Alvernia hospital in Surrey, run by BMI Healthcare, one of Britain’s biggest private healthcare providers, agreed to suspend surgery .. after the damning Care Quality Commission (CQC) report. Care failures cited by the CQC report included a surgeon who operated without gloves in blood-stained shirt sleeves, and a child who was not seen by a paediatrician for seven hours despite their condition deteriorating.
Do you recall Southern Cross’ closure of Care Homes because.. there was no money to be made. Profits are the Priority. Poorly paid staff working for a pittance. Dirty conditions, lack of dignity. Poverty. Care homes closed resulting in homeless, resulting in unnecessary deaths. And for what? So the rich can profit. As if they didn’t have it all already. (See The Ultimate Theft, Think Left).

No, Mr. Penrose (Conservative MP), it’s not that we don’t care “two hoots” for our NHS. While you may have an eye on a ministerial position, you turn your back on ordinary people. They care more than you realise.

The Labour Party has pledged to scrap the NHS market. We will not wait until after the election. We need to stop it now. Please show solidarity, wherever you are, whether that’s in Weston, Nottingham  Mid Staffordshire, Lands’ End or John-o-Groats, it affects us all.
Campaign Updates:

On tax avoidance and the purpose of taxation


On Tax Avoidance and the Purpose of Taxation

From @alittleecon Previously published here:

A large section of the public get very worked up (rightly) about tax avoidance. Huge companies like Google or Vodafone seem to be getting away with paying very little tax despite turning over billions. At the same time, the Government are pursuing cuts to discretionary public spending. People often make a connection between the two and argue that if rich companies and individuals paid all the tax due, there would be no need for any cuts, so a ‘left’ solution to the economic crisis is to go after the tax avoiders/evaders in a big way, and all will be OK. I think this view is misguided. Here’s why.

Firstly, there is an implicit assumption that we need those taxes that have been avoided/evaded to pay for government spending, and if we don’t go after that money, then austerity is unavoidable as the Government doesn’t have enough money. As the UK has its own currency though, this cannot be true. It can create new currency at will and can never run out. There is a risk of inflation of course, as with any type of spending (public or private), but if you don’t think repatriating and taxing a sizeable chunk of money stashed offshore would be inflationary, how could creating a similar amount to spend into the economy be inflationary? The money sitting offshore is largely inert, sitting as excess savings. Money can only be inflationary if it is circulating.

This leads on to the other point I want to make which is about the reason we tax at all. If you ask most people why we have taxes, they will say “to pay for government spending on public services”, but as someone who finds myself in agreement with Modern Monetary Theory (MMT), I don’t think that is really the purpose of taxation at all.   So what is the real purpose of taxation? There are a number of, none of which are to pay for government spending (although confusingly, for a government to spend, it does need to tax):

1. A ‘Chartalist’ view of money (which MMT incorporates) argues that the imposition of a tax by a sovereign government creates a demand for a currency. So because people are required to pay tax in pounds, a minimum level of demand for pounds is assured and people will be willing to do business in pounds so they can obtain enough to pay their tax liabilities. Because pounds have value to those with a tax liability in pounds, they also have value to those who are not taxed in pounds, so it’s not necessary that all users of pounds are taxed.

2. While the government doesn’t need to collect tax before it spends, if it spends without taxing, this will almost certainly cause inflation. We can think of government spending as ‘printing’ money and taxation as ‘unprinting’ money. The tax ‘makes room’ for the government to spend without causing inflation.

3. To correct for ‘externalities’ and discourage ‘harmful’ behaviour. Externalities are costs or benefits generated by an activity which affects non-users of that activity. Examples could be pollution or second-hand smoking. So we might want to heavily tax polluting activities to the point the activity becomes unprofitable or the tax collected is equal to the cost of the clean-up. We might want to tax smoking heavily because it imposes a cost on the health services or gambling because it can lead to crime and contribute to social breakdown.

4. For redistributive purposes. This reason would be why we might wish to take on tax avoidance. Our economy is working as a giant hoover at the moment, sucking up money from the bottom to the top, increasing inequality and leading to more and more people becoming marginalised and stuck in unemployment or low-paid work. Tax is one way of trying to correct for this damaging process.

To sum up then, I am not saying we shouldn’t go after tax avoidance. We absolutely should (although overhauling and simplifying the whole tax system would be more effective in the long run). It’s just that I don’t think it’s an answer to our sluggish economy. Those who avoid/evade tax undermine the tax system by offending people’s sense of fair play. If some are seen to be ‘getting away with it’, it makes maintaining the legitimacy of tax more difficult, and a strong tax base with efficient collection is vital for a functioning mixed economy.

While we need to do something about tax avoidance (preferably through regulation rather than appealing to amoral companies’ morals), we should not oppose austerity by saying “tax the rich more” or “tackle tax avoidance”. Austerity should be opposed on its own terms i.e. the government is not running out of money; the markets can’t hold us to ransom, and cutting spending in a recession is a really, really stupid thing to do.

Government Debt and Deficits Are Not the Problem – Private Debt Is

Government Debt and Deficits Are Not the Problem – Private Debt Is

Published on Mar 24, 2013

Michael Hudson: Why do they call for governments to balance the budget by pushing the economy at large deeper into debt, while trying to save the banks from taking a loss?